Lawmakers Call on Treasury to Provide LIFO Relief

November 9, 2021

The Honorable Janet Yellen
Secretary of the Treasury
U.S. Department of the Treasury
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220

Dear Secretary Yellen:

We are writing to urge you to exercise your authority as Treasury Secretary to grant temporary relief under Section 473 of the Internal Revenue Code (IRC) to businesses using the Last-In, First-Out (LIFO) inventory accounting method who cannot maintain inventory due to the current major foreign trade interruptions caused by the pandemic.

The COVID-19 pandemic, compounded by ongoing disruptions in global supply chains, has resulted in shortages of critical materials from lumber to semiconductors. This has made it difficult for many manufacturers, retailers and wholesalers to maintain inventory. According to the Biden Administration, while retailers had 43 days of inventory in February 2020 before the pandemic began, as of June 2021, they had just 33 days of inventory. This is an unprecedented situation, which could take many months to correct.

Businesses using the LIFO inventory method must maintain a minimum level of inventory at year-end or risk triggering a recapture tax. Absent further action by the U.S. Department of Treasury, businesses that already are facing uncertainty about cash flow, working capital and inventory levels due to the global supply chain disruptions will incur the additional burden of significant, unanticipated tax liabilities.

Section 473 of the IRC, “Qualified Liquidations of LIFO Inventories,” authorizes the Treasury Secretary to provide relief from the recapture tax if “any embargo, international boycott, or other major foreign trade interruption, has made difficult or impossible” to replace inventory for “any class of goods for any class of taxpayers.” It is our view that the widespread disruption of global supply chains is clearly the type of major foreign trade interruption Congress intended to address with Section 473. This relief would permit businesses to replace their inventory over a three-year period, giving them time to restock their inventory as production normalizes. Also, providing businesses relief from having to pay a LIFO inventory recapture tax liability will allow them to retain earnings as they recover from the pandemic, invest in their businesses and employees and replenish inventory.

Congress enacted Section 473 precisely for the type of situation occurring right now: the unforeseen and dire consequences of a worldwide pandemic, as well as a supply chain crisis, which is significantly interrupting global commerce. We urge you to grant Section 473 relief at the soonest opportunity to provide relief to businesses using LIFO, so that they can retain their employees and protect local communities from the harmful ripple effects of these problematic circumstances.

Sincerely,

Daniel T. Kildee
MEMBER OF CONGRESS

Jodey C. Arrington
MEMBER OF CONGRESS

Mark Amodei
MEMBER OF CONGRESS

Jake Auchincloss
MEMBER OF CONGRESS

Cindy Axne
MEMBER OF CONGRESS

Joyce Beatty
MEMBER OF CONGRESS

Don Beyer
MEMBER OF CONGRESS

Sanford D. Bishop, Jr.
MEMBER OF CONGRESS

Earl Blumenauer
MEMBER OF CONGRESS

Suzanne Bonamici
MEMBER OF CONGRESS

Brendan F. Boyle
MEMBER OF CONGRESS

Anthony G. Brown
MEMBER OF CONGRESS

Julia Brownley
MEMBER OF CONGRESS

Matt Cartwright
MEMBER OF CONGRESS

Jim Cooper
MEMBER OF CONGRESS

J. Luis Correa
MEMBER OF CONGRESS

Angie Craig
MEMBER OF CONGRESS

Charlie Crist
MEMBER OF CONGRESS

Madeleine Dean
MEMBER OF CONGRESS

Peter DeFazio
MEMBER OF CONGRESS

Antonio Delgado
MEMBER OF CONGRESS

Debbie Dingell
MEMBER OF CONGRESS

Mike Doyle
MEMBER OF CONGRESS

Tom Emmer
MEMBER OF CONGRESS

Ron Estes
MEMBER OF CONGRESS

Dwight Evans
MEMBER OF CONGRESS

A. Drew Ferguson, IV
MEMBER OF CONGRESS

Michelle Fischbach
MEMBER OF CONGRESS

Chuck Fleischmann
MEMBER OF CONGRESS

Vicente Gonzalez
MEMBER OF CONGRESS

Josh Gottheimer
MEMBER OF CONGRESS

Jim Hagedorn
MEMBER OF CONGRESS

Brian Higgins
MEMBER OF CONGRESS

Chrissy Houlahan
MEMBER OF CONGRESS

Bill Huizenga
MEMBER OF CONGRESS

Sara Jacobs
MEMBER OF CONGRESS

Chris Jacobs
MEMBER OF CONGRESS

David P. Joyce
MEMBER OF CONGRESS

John Joyce, M.D.
MEMBER OF CONGRESS

Marcy Kaptur
MEMBER OF CONGRESS

Mike Kelly
MEMBER OF CONGRESS

Derek Kilmer
MEMBER OF CONGRESS

Young Kim
MEMBER OF CONGRESS

Ron Kind
MEMBER OF CONGRESS

Raja Krishnamoorthi
MEMBER OF CONGRESS

Ann McLane Kuster
MEMBER OF CONGRESS

Darin LaHood
MEMBER OF CONGRESS

Doug LaMalfa
MEMBER OF CONGRESS

Doug Lamborn
MEMBER OF CONGRESS

Brenda L. Lawrence
MEMBER OF CONGRESS

Tracey Mann
MEMBER OF CONGRESS

Kathy Manning
MEMBER OF CONGRESS

Lucy McBath
MEMBER OF CONGRESS

Betty McCollum
MEMBER OF CONGRESS

David B. McKinley, P.E.
MEMBER OF CONGRESS

Carol D. Miller
MEMBER OF CONGRESS

John R. Moolenaar
MEMBER OF CONGRESS

Alex X. Mooney
MEMBER OF CONGRESS

Joseph D. Morelle
MEMBER OF CONGRESS

Frank J. Mrvan
MEMBER OF CONGRESS

Tom O'Halleran
MEMBER OF CONGRESS

Jimmy Panetta
MEMBER OF CONGRESS

Chris Pappas
MEMBER OF CONGRESS

Bill Pascrell, Jr.
MEMBER OF CONGRESS

Scott H. Peters
MEMBER OF CONGRESS

Dean Phillips
MEMBER OF CONGRESS

Kathleen M. Rice
MEMBER OF CONGRESS

Mike D. Rogers
MEMBER OF CONGRESS

Deborah K. Ross
MEMBER OF CONGRESS

C. A. Dutch Ruppersberger
MEMBER OF CONGRESS

Tim Ryan
MEMBER OF CONGRESS

Mary Gay Scanlon
MEMBER OF CONGRESS

Kurt Schrader
MEMBER OF CONGRESS

David Schweikert
MEMBER OF CONGRESS

David Scott
MEMBER OF CONGRESS

Brad Sherman
MEMBER OF CONGRESS

Jason Smith
MEMBER OF CONGRESS

Lloyd Smucker
MEMBER OF CONGRESS

Greg Stanton
MEMBER OF CONGRESS

Pete Stauber
MEMBER OF CONGRESS

Michelle Steel
MEMBER OF CONGRESS

Haley Stevens
MEMBER OF CONGRESS

Thomas R. Suozzi
MEMBER OF CONGRESS

Eric Swalwell
MEMBER OF CONGRESS

Dina Titus
MEMBER OF CONGRESS

Norma J. Torres
MEMBER OF CONGRESS

Lori Trahan
MEMBER OF CONGRESS

Juan Vargas
MEMBER OF CONGRESS

Marc Veasey
MEMBER OF CONGRESS

Jackie Walorski
MEMBER OF CONGRESS

Brad R. Wenstrup, D.P.M.
MEMBER OF CONGRESS

Roger Williams
MEMBER OF CONGRESS
Washington, D.C.

cc:
Lily Batchelder, Assistant Secretary, Office of Tax Policy
Brian Deese, Director, National Economic Council