To grant relief, the Secretary of the Treasury would have to issue a notice in the Federal Register citing Section 473, followed by guidance on certain election and calculation procedures for those eligible – basically, guidance for accountants on how to do something that has never been done before.
As the income tax returns for many traders are due as early as 15. March are due, timing is critical.
"Affected small businesses need to know at the earliest possible time whether relief will be granted," wrote Sen. Sherrod Brown, D-Ohio, and the other senators in a follow-up letter to Yellen dated 4. February. Senators first sent a letter to the Secretary from 8. November.
Brown, in a statement to Automotive Newssaid he is confident the Biden administration "will recognize the challenges auto dealers face when it comes to global supply chain issues and grant this much-needed tax relief by Tuesday's deadline set by senators".
The Department of Finance declined to comment on this report.
After the government settled in, NADA sent another letter to the department in September, this time asking a Biden White House official to address the issue.
"We recognize that providing relief under Section 473 is unprecedented, but the dire situation currently affecting car 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 to seek relief.
Rep. Dan Kildee, a Michigan Democrat who co-chaired the bipartisan House letter to Yellen with Rep. Jodey Arrington, a Texas Republican, said, "Auto dealerships are an integral part of our community."
"Like many small businesses, auto dealerships and their operations have been affected by the pandemic," Kildee said in a statement. "That is why I am working with Republicans and Democrats to provide tax relief to these small businesses under current law."
Rep. Carol Miller, a West Virginia Republican, also signed the letter.
"Given the massive supply chain crisis we've had for all businesses in America, not just the automotive business, this is critical," Miller, whose family owns Dutch Miller Auto Group, said in a phone interview.
"The only thing business really depends on is continuity. … With this Section 473, I think it's very appropriate that we use whatever methods we can to help businesses move forward in this time of COVID," she said.
The Treasury Department responded on 29. November to both the Senate and House letters, arguing that despite domestic factory closures and production slowdowns during the pandemic, companies that primarily source and produce inventory in the U.S. Are not entitled to relief under Section 473.
The department said it would "continue to review reports that can demonstrate that the principal and primary reason for a taxpayer's inability to replace its inventory is due to an overseas failure".
NADA, which also received support from the National Association of Minority Automobile Dealers and the American Institute of Certified Public Accountants, next reached out to the Alliance for Automotive Innovation, a group representing most automakers in the U.S., to provide evidence of the impact of foreign supply chains disruptions from the pandemic.
In a letter sent to Yellen last month, the Alliance supported NADA's requests for relief under Section 473, arguing that "the well-documented global shortage of semiconductors – which rely heavily on international supply chains – is the primary reason for a unique but persistent disruption in automotive manufacturing."
Alliance CEO John Bozzella said in a statement, "These disruptions, particularly the semiconductor shortage, have made it difficult or impossible for our members' franchised dealers to inventory vehicles with a [LIFO] basis to procure sufficient replacement vehicles."
At press time, the Treasury Department had not issued a notice in the Federal Register granting relief under Section 473.
Will De Filipps, a CPA who specializes in merchant tax issues including LIFO calculations and consulting, argues that merchants don't have to wait for relief and advises them to work with their accountants on tax strategies that are available now.
That includes switching to the LIFO method of inventory price index calculation, which allows dealers to include used vehicles and parts inventory in their new vehicle pools. De Filipps said this could result in significantly lower LIFO reserve refunds.