Federal

Supply Chain Disruptions Relief Act

Source: Congress.gov · 1,105 words in original text

What This Bill Does

This bill allows certain new car dealers to treat vehicle inventory reductions as qualified liquidations under federal tax law. The bill gives dealers special tax treatment if they reduced their vehicle inventory during a specific time period, allowing them to defer (delay) reporting income from those sales.

Who It Affects

Dealers of new motor vehicles who track inventory using the LIFO method (Last In, First Out, a way of accounting for inventory costs).

Key Provisions

• Dealers can treat certain vehicle inventory reductions as qualified liquidations, which means they meet the technical requirements of federal tax law even if they might not normally qualify (Sec. 2(a)). • Dealers can elect to not report income in the year they sold off vehicles, pushing that income recognition to a later period (Sec. 2(b)(1)(A)). • The period to replace sold vehicles extends from the year after the sale through either the year the dealer stops using the LIFO method or December 31, 2025, whichever comes first (Sec. 2(b)(1)(B)). • If a dealer fails to replace all sold vehicles by the end of the replacement period, the dealer must report all the previously delayed income plus interest charges in the final year of the replacement period (Sec. 2(b)(2)). • Dealers must make this election by the tax filing deadline for that year, and once made, the election cannot be changed (Sec. 2(b)(3)(A)).

What Changes

If this becomes law, eligible new car dealers can delay paying taxes on income from vehicle sales that happened between March 13, 2020 and December 31, 2021. These dealers will have until the end of 2025 (or when they stop using the LIFO accounting method) to rebuild their inventory before they must report the delayed income.

Important Definitions

• Specified taxable year: Any year ending after March 12, 2020 and before January 1, 2022 (Sec. 2(c)(1)). • New motor vehicle: A vehicle that has never been used before and meets specific tax code requirements (Sec. 2(c)(2)). • LIFO method: A way of tracking inventory where the most recently purchased items are treated as sold first (mentioned in bill text but defined in referenced tax code sections).

II 118TH CONGRESS 1ST SESSION S. 443 To treat certain liquidations of new motor vehicle inventory as qualified liquidations of LIFO inventory for purposes of the Internal Revenue Code of 1986. IN THE SENATE OF THE UNITED STATES FEBRUARY 15, 2023 Mr. BROWN (for himself, Mr. SCOTT of South Carolina, Ms. BALDWIN, Mr. BLUMENTHAL, Mr. CARDIN, Mr. CARPER, Mr. COONS, Ms. CORTEZ MASTO, Ms. DUCKWORTH, Mrs. FEINSTEIN, Ms. HASSAN, Mr. KELLY, Mr. KING, Ms. KLOBUCHAR, Mr. MANCHIN, Mrs. MURRAY, Mr. PADILLA, Mr. PETERS, Mrs. SHAHEEN, Ms. SMITH, Ms. STABENOW, Mr. TESTER, Mr. VAN HOLLEN, Mr. WARNOCK, Mr. BARRASSO, Mrs. BLACKBURN, Mr. BOOZMAN, Mr. BRAUN, Mrs. CAPITO, Mr. CASSIDY, Mr. CORNYN, Mr. CRAMER, Mr. CRAPO, Mr. DAINES, Mr. GRASSLEY, Mr. HAGERTY, Mr. HOEVEN, Mrs. HYDE-SMITH, Mr. JOHNSON, Mr. LANKFORD, Ms. LUMMIS, Mr. MARSHALL, Mr. MORAN, Mr. RISCH, Mr. ROUNDS, Mr. RUBIO, Mr. SCOTT of Florida, Mr. THUNE, Mr. TILLIS, and Mr. WICKER) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To treat certain liquidations of new motor vehicle inventory as qualified liquidations of LIFO inventory for purposes of the Internal Revenue Code of 1986. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 VerDate Sep 11 2014 04:30 Mar 03, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S443.IS S443 kjohnson on DSK79L0C42PROD with BILLS 2 •S 443 IS SECTION 1. SHORT TITLE. 1 This Act may be cited as the ‘‘Supply Chain Disrup- 2 tions Relief Act’’. 3 SEC. 2. TREATMENT OF CERTAIN LIQUIDATIONS OF NEW 4 MOTOR VEHICLE INVENTORY AS QUALIFIED 5 LIQUIDATIONS OF LIFO INVENTORY. 6 (a) IN GENERAL.—In the case of any dealer of new 7 motor vehicles which inventories new motor vehicles under 8 the LIFO method for any specified taxable year, the re- 9 quirements of paragraphs (1)(B) and (2) of section 473(c) 10 of the Internal Revenue Code of 1986 shall be treated as 11 satisfied with respect to such inventory for such taxable 12 year. 13 (b) ADDITIONAL RELIEF.— 14 (1) IN GENERAL.—The Secretary shall, not 15 later than the date which is 90 days after the date 16 of the enactment of this Act, prescribe regulations or 17 other guidance under which dealers of new motor ve- 18 hicles with a qualified liquidation (determined after 19 application of subsection (a)) of new motor vehicles 20 for any specified taxable year may elect— 21 (A) to not recognize any income in the 22 specified taxable year which is solely attrib- 23 utable to such qualified liquidation, and 24 (B) to treat the replacement period with 25 respect to such liquidation as being the period 26 VerDate Sep 11 2014 04:30 Mar 03, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S443.IS S443 kjohnson on DSK79L0C42PROD with BILLS 3 •S 443 IS beginning with the first taxable year after such 1 specified taxable year and ending with the ear- 2 lier of— 3 (i) the first taxable year after such 4 liquidation with respect to which such deal- 5 er does not inventory new motor vehicles 6 under the LIFO method, or 7 (ii) the last taxable year ending before 8 January 1, 2026. 9 (2) FAILURE TO FULLY REPLACE LIQUIDATED 10 VEHICLES DURING REPLACEMENT PERIOD.—If, as of 11 the close of the replacement period, the taxpayer has 12 failed to replace all liquidated vehicles with respect 13 to a qualified liquidation to which paragraph (1) ap- 14 plies, the taxpayer shall increase gross income for 15 the last taxable year of the replacement period by 16 the sum of— 17 (A) the aggregate amount of income that 18 would have been required to be recognized in 19 the liquidation year had the taxpayer elected to 20 apply the provisions of section 473 of the Inter- 21 nal Revenue Code of 1986 and not made the 22 election in paragraph (1), plus 23 VerDate Sep 11 2014 04:30 Mar 03, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S443.IS S443 kjohnson on DSK79L0C42PROD with BILLS 4 •S 443 IS (B) interest thereon at the underpayment 1 rate established under section 6621 of such 2 Code. 3 (3) ELECTIONS.— 4 (A) IN GENERAL.—Except to the extent 5 provided in subparagraph (B), an election 6 under paragraph (1) with respect to any speci- 7 fied taxable year shall be made by the due date 8 (including extensions) for filing the taxpayer’s 9 return of tax for such taxable year and in such 10 manner as the Secretary may prescribe. Once 11 made, any such election shall be irrevocable. 12 (B) CERTAIN ELECTIONS TREATED AS 13 CHANGE IN METHOD OF ACCOUNTING.—In the 14 case of an election with respect to a specified 15 taxable year for which the return of tax has al- 16 ready been filed before the date of the enact- 17 ment of this Act, any election under paragraph 18 (1) for such specified taxable year may be made 19 on the return of tax for the first taxable year 20 ending after the date of the enactment of this 21 Act and shall be treated for purposes of section 22 481 of the Internal Revenue Code of 1986 as 23 a change in method of accounting initiated by 24 VerDate Sep 11 2014 04:30 Mar 03, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S443.IS S443 kjohnson on DSK79L0C42PROD with BILLS 5 •S 443 IS the taxpayer and made with the consent of the 1 Secretary. 2 (c) DEFINITIONS.—For purposes of this section— 3 (1) SPECIFIED TAXABLE YEAR.—The term 4 ‘‘specified taxable year’’ means any liquidation year 5 ending after March 12, 2020, and before January 1, 6 2022. 7 (2) NEW MOTOR VEHICLE.—The term ‘‘new 8 motor vehicle’’ means a motor vehicle— 9 (A) which is described in section 10 163(j)(9)(C)(i) of the Internal Revenue Code of 11 1986, and 12 (B) the original use of which has not com- 13 menced. 14 (3) SECRETARY.—The term ‘‘Secretary’’ means 15 the Secretary of the Treasury or the Secretary’s del- 16 egate. 17 (4) OTHER TERMS.—Except as otherwise pro- 18 vided in this section, terms used in this section 19 which are also used in section 473 of the Internal 20 Revenue Code of 1986 shall have the same meaning 21 as when used in such section 473. 22 Æ VerDate Sep 11 2014 04:30 Mar 03, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6301 E:\BILLS\S443.IS S443 kjohnson on DSK79L0C42PROD with BILLS

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