WASHINGTON — U.S. dealerships facing a significant tax burden this year triggered by global supply chain disruptions and subsequent inventory shortages related to COVID-19 could be one step closer to getting relief.
U.S. Sen. Sherrod Brown, D-Ohio, plans to introduce legislation Thursday that would provide relief to dealerships that use the "last in, first out" inventory accounting method and have struggled to maintain inventory levels because of the global semiconductor shortage.
The bill would provide a statutory determination that the requirements for a qualified liquidation under Section 473 of the Internal Revenue Code have been satisfied for new-vehicle dealers that have experienced a reduction of new vehicles held in LIFO inventory. The relief would give dealers up to three years to restore their inventories to more normal levels.
"Auto dealers continue to face dramatic and unprecedented inventory shortages as a result of pandemic-related foreign supply chain disruptions and, without support, recovery could be long and hard for Ohio's affected local businesses, employees and their customers," Brown said in a statement. "This legislation will grant much-needed tax relief to auto dealers facing unique supply chain challenges."
Brown's bill has the support of fellow Democratic Sens. Catherine Cortez Masto of Nevada and Patty Murray of Washington as well as Republican Sens. Tim Scott of South Carolina, Roger Marshall of Kansas and Cynthia Lummis of Wyoming.
The National Automobile Dealers Association, Ohio Automobile Dealers Association and the Ohio Society of Certified Public Accountants also support the effort.
"The bill would provide needed short-term relief to help the auto industry recover from severe inventory shortfalls due to the pandemic and supply chain and semiconductor shortages," NADA CEO Mike Stanton said in a statement. "NADA strongly supports this legislation to reaffirm existing federal law related to a 'major foreign trade interruption' and urges Congress to pass it as soon as possible."