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Donnelly, Enzi Urge Treasury Department to Preserve 'Last-In, First-Out' Accounting(Targeted News Service Via Acquire Media NewsEdge) WASHINGTON, Oct. 21 -- The office of Sen. Joe Donnelly, D-Ind., issued the following news release: U.S. Senators Joe Donnelly (D-IN) and Mike Enzi (R-WY) led a bipartisan group of 14 Senators today in sending a letter to U.S. Department of the Treasury Secretary Jack Lew expressing concern with recent proposals that would repeal the accounting method of "last-in, first-out" (LIFO), which is used by many American businesses. In the letter, the Senators argue that a repeal of LIFO could create undue burdens for American businesses and would run counter to the goal of a simple and efficient tax code that allows businesses to compete. The Senators wrote, "LIFO is a widely accepted inventory accounting method, and has been recognized in the U.S. tax code for more than 70 years. By allowing businesses to qualify their inventory under the LIFO standards, businesses report a fair tax liability that is both realistic and unoppressive to growth. "...If this reform is passed, the penalty to the businesses that used LIFO could extend decades into the past, forcing companies to pay off the "reserve" to which they had legally been entitled. This retroactive tax would place undue burden on companies that abided by an accepted standard... At worst, repeal could force cuts to employment or drive companies out of business altogether." LIFO is relied upon by many American manufacturers, retailers, distributors, and small businesses. LIFO repeal could result in retroactive tax increases for many of these companies--costs that could ultimately be passed on to employees and consumers, hindering future growth and job creation. A full copy of the letter is below. See a signed copy of the letter here.http://www.donnelly.senate.gov/download/lifo-letter-to-treasury October 21, 2014 The Honorable Jacob J. Lew Secretary U.S. Department of the Treasury 1500 Pennsylvania Avenue, NW Washington, D.C. 20220 We write to express our concerns with recent proposals to repeal the "last-in, first-out" (LIFO) accounting method. As Congress considers ways to reform our tax code, some have suggested eliminating this important provision. Although we share the goal of creating a simple and efficient tax code that allows American businesses to compete, we do not believe the elimination of LIFO would accomplish such a goal. LIFO is a widely accepted inventory accounting method, and has been recognized in the U.S. tax code for more than 70 years. By allowing businesses to qualify their inventory under the LIFO standards, businesses report a fair tax liability that is both realistic and unoppressive to growth. As you know, one of the most troubling effects of the proposed reform is the retroactive tax. If this reform is passed, the penalty to the businesses that used LIFO could extend decades into the past, forcing companies to pay off the "reserve" to which they had legally been entitled. This retroactive tax would place undue burden on companies that abided by an accepted standard. Furthermore, in many cases these deductions have long been reinvested or are in the form of illiquid assets. For companies with low levels of capitalization, repealing LIFO would divert funds from reinvestment toward paying taxes from which they had previously been exempt. At worst, repeal could force cuts to employment or drive companies out of business altogether. Clearly, repealing LIFO and enacting this retroactive tax would disrupt cash flow, investment, and result in negative economic consequences to small businesses, jobs, and growth. Undoubtedly, comprehensive tax reform is needed, but it should not include LIFO repeal. A repeal of LIFO runs counter to the goals of tax reform: we should empower businesses to be even more competitive, not saddle them with new tax burdens; we should incentivize the creation of jobs, not institute changes that threaten to leave Americans without employment. We are prepared to face the hard work of reforming an antiquated tax code, but we do not believe that should include repeal of LIFO. Sincerely, Senator Joe Donnelly Senator Mike Enzi Senator John Barrasso Senator Mark Begich Senator Roy Blunt Senator Kay Hagan Senator Heidi Heitkamp Senator Jim Inhofe Senator Mike Johanns Senator Amy Klobuchar Senator Jerry Moran Senator Rand Paul Senator Pat Roberts Senator David Vitter TNS 30TacordaCheng-141022-4907685 30TacordaCheng (c) 2014 Targeted News Service |