How Will LIFO Affect The Metals Industry? MSCI Tells Capitol Hill
Last week, The Hill, a Washington, DC publication that has a print circulation of more than 24,000 and is widely read by opinion leaders, including 100 percent of Congressional offices, White House officials, political pundits, association executives, lobbyists and corporate leaders, published an op-ed by MSCI President and CEO Bob Weidner. In the column, Weidner argued that U.S. lawmakers working on federal tax reform must preserve the last-in, last-out (LIFO) accounting method.
Weidner explained LIFO has been used since the 1940s as a method to manage the cost of inflation. Weidner said ending LIFO “would seriously harm our nation’s manufacturing and metals industry,” in part, because it’s likely to be made retroactive. To learn more about the effects of ending LIFO, read Weidner’s full column, available here.
MSCI Vice President of Finance and Government Affairs Jonathan Kalkwarf also argued for LIFO preservation at a roundtable last week sponsored by the American Council on Capital Formation. Kalkwarf said, “To come up with the extra cash to cover the impacts of inflation and the retroactive tax assessment under LIFO repeal, our members would have to go to the bank to get a loan or they’d have to cut back on employee benefits, reduce inventory levels or forgo expansion.” Kalkwarf further explained, “Many of MSCI’s members who rely on LIFO run small businesses simply don’t have the resources to cover the cost of ending LIFO, especially if it is retroactive. For some of them, LIFO repeal could mean shutting their doors.”
Sen. Ben Cardin (D-MD), a member of the Senate Finance Committee and co-chair of the committee’s Business Income Tax Working Group, and staff members from both the Finance Committee and the House Ways and Means Committee (which together have jurisdiction over tax policy) also attended the roundtable and heard Kalkwarf’s testimony.
While Congress continues to consider LIFO repeal, there was some positive movement recently against ending the provision. For years the federal government has debated whether or not the U.S. Securities and Exchange Commission (SEC) should move forward with the adoption of the International Financial Reporting Standards (IFRS), which do not permit the use of LIFO.
It appears that debate ended two weeks ago. According to Accounting Today, SEC Chief Accountant James Schnurr will not recommend LIFO repeal to SEC commissioners. According to representatives from the LIFO Coalition, which MSCI is a member of, this announcement confirms what the coalition hoped for after a recent meeting with Mr. Schnurr: continued use of LIFO by U.S. companies is not threatened by possible action of the SEC. The LIFO Coalition wrote a letter to the Senate Finance Committee noting the SEC accountant’s recommendation. The coalition is hopeful this development will reduce momentum for LIFO repeal as part of federal tax reform.