We Have Less Than Two Months To Convince Senators To Oppose LIFO Repeal!
Congressional Quarterly Weekly (subscription required) reported today that the U.S. Senate Finance Committee plans to release a draft federal tax reform plan sometime in May. That means MSCI, its members and its allies in the LIFO Coalition have less than two months to convince members of the Finance committee to preserve the last-in, first-out (LIFO) accounting principle.
As Connecting the Dots reported last week, the LIFO Coalition has already sent a letter to committee members arguing against repeal and, additionally, Vice President of Finance and Government Affairs Jonathan Kalkwarf has met with members of the House Ways and Means Committee and with Senate staff. MSCI President and CEO Bob Weidner also sent an email to MSCI members whose senators serve on the Senate Finance Committee Working Group on Business Tax Reform asking them to contact these lawmakers over the spring Congressional recess to ask that they oppose LIFO repeal.
MSCI also needs you to tell your stories. You can do so by contacting Bob Weidner or Jonathan Kalkwarf to tell them how LIFO repeal would affect you and your business. MSCI also recently spoke with a U.S. senator who suggested submitting letters to the editor and opinion columns to local newspapers is an especially effective way to move lawmakers’ opinions on this issue and to tell them your stories. If you are interested in drafting a letter or column, watch your inboxes on Wednesday, April 15 for information about how to write your own letter and for information about other ways you can help MSCI in its anti-LIFO repeal efforts.
If you prefer to call your senator to tell them to preserve LIFO, you can find their information on MSCI’s website. Information for members of the Finance Committee working group on this issue can be found here. MSCI asks its members to tell their senators:
- LIFO and first-in, first-out (FIFO) are both appropriate inventory accounting methods; FIFO is not the acceptable “default” system and LIFO is not an exception;
- There is no one-size-fits-all inventory accounting system to suit all companies. If a company sells inventory that tends to rise in price, LIFO likely works best for them; if the product declines in price, FIFO is likely best. FIFO and LIFO accomplish the same purpose for the companies that use them: most closely matching the cost of goods sold with the cost of replacement inventory so the company can retain enough after-tax profit to purchase the replacement inventory it must have to remain in business.
- Repeal of LIFO would impose a retroactive tax increase that is punitive and unfair and could in fact put some companies out of business.
- Please provide information on how LIFO repeal would impact your company with as much specificity as possible: will you cut jobs, postpone hiring, cancel planned expansions, reduce contributions to health care or retirement plans, have to borrow money to pay the tax, etc.
- LIFO should not be repealed either retroactively or prospectively. To force companies currently on LIFO to start using FIFO would create distortions in the tax code, favoring companies which sell one type of inventory over others. There is no reason that companies selling technology that declines in price should be favored in the tax code and a company selling inventory that rises in price punished.
- There is no factually accurate substantive argument being made for LIFO repeal – those proposing repeal are simply trying to use LIFO repeal as a source of revenue to pay for other tax changes. Punishing LIFO users with a damaging retroactive tax increase to benefit some other taxpayers is an onerous and unfair misuse of the tax code.
MSCI also encourages its members to tell their senators to make sure tax reform tackles both the corporate and individual tax systems. CQ Weekly also reported, House Ways and Means Committee Chairman Paul Ryan (R-WI) indicated he is open to a plan that would focus on corporate taxes first and only promise to reform the individual tax system later.
MSCI has also signed onto a letter with the S Corporation Association and dozens of other business associations to the chairmen and ranking members of the Senate Finance and House Ways and Means committees on tax reform. The letter sets out principles for tax reform, including a call for comprehensive reform that lowers individual as well as corporate rates and that lowers rates for all types of businesses to a comparable level.