To grant the relief, the Treasury secretary would need to issue a notice in the Federal Register invoking Section 473, followed by guidance on specific election and calculation procedures for those eligible — basically instructing accountants how to do something none has ever done before.
With income tax returns due as early as March 15 for many dealers, timing is critical.
"Affected small businesses need to know at the earliest possible date whether relief will be granted," Sen. Sherrod Brown, D-Ohio, and the other senators wrote in a follow-up letter to Yellen dated Feb. 4. The senators first sent a letter to the secretary Nov. 8.
Brown, in a statement to Automotive News, said he's confident the Biden administration "will recognize the challenges auto dealers are up against when it comes to global supply chain issues and grant this much needed tax relief" by the Tuesday deadline set by the senators.
The Treasury Department declined to comment for this report.
With the administration settling in, NADA sent another letter to the department in September, this time urging an official under the Biden White House to address the issue.
"We recognize that providing relief under Section 473 is unprecedented but the dire situation presently affecting auto and truck dealers on LIFO is similarly unprecedented," NADA wrote.
It was in November — nearly a year after NADA first petitioned the Treasury Department — that Congress joined the association in its push for relief.
Rep. Dan Kildee, a Michigan Democrat who led the bipartisan House letter to Yellen with Rep. Jodey Arrington, a Texas Republican, said "car dealerships are an integral part of our community."
"Like many small businesses, car dealerships and their operations have been impacted by the pandemic," Kildee said in a statement. "That's why I am working with Republicans and Democrats to provide tax relief under existing law to these small businesses."
Rep. Carol Miller, a West Virginia Republican, also signed the letter.
"It's vital considering the massive supply chain crisis that we've had for all businesses in America, not just the automobile business," Miller, whose family owns Dutch Miller Auto Group, said in a phone interview.
"The one thing business really depends upon is continuity. ... With this Section 473, I think it's very appropriate that we take whatever method we can to help businesses to continue on during this time from COVID," she said.
The Treasury Department responded Nov. 29 to both the Senate and House letters, arguing that businesses that primarily source and produce inventory in the U.S. are not eligible for Section 473 relief despite domestic closures of factories and production slowdowns during the pandemic.
The department said it will "continue to review reports that can demonstrate the major and primary reason for a taxpayer's inability to replace its inventory is due to a foreign disruption."
NADA, which also gained support from the National Association of Minority Automobile Dealers and the American Institute of Certified Public Accountants, next turned to the Alliance for Automotive Innovation, a group that represents most automakers in the U.S., to substantiate the impact of foreign supply chain disruptions caused by the pandemic.
In a letter sent last month to Yellen, the alliance wrote in support of NADA's requests for Section 473 relief and argued that "the well-documented global shortage of semiconductors — which are heavily dependent on international supply chains — has been the primary driver of a unique but prolonged disruption in auto manufacturing."
John Bozzella, CEO of the alliance, said in a statement: "These disruptions, especially the semiconductor shortage, have made it difficult or impossible for our members' franchised dealerships who inventory vehicles using a [LIFO] basis to obtain sufficient replacement vehicles."
The Treasury Department, as of press time, had not issued a notice in the Federal Register granting Section 473 relief.
Will De Filipps, a CPA who specializes in dealership tax issues including LIFO calculations and consulting, argues dealers don't need to wait for relief and advises them to work with their accountants on tax strategies that are available now.
That includes switching to the Inventory Price Index Computation LIFO method, which allows dealers to add used vehicles and parts inventories to their new-vehicle pool. De Filipps said doing so could result in significantly lower LIFO reserve paybacks.
"You see a bullet coming: Do you want to duck and get out of the way," De Filipps asked, "or do you want to take it?"