Federal

Supply Chain Disruptions Relief Act

Source: Congress.gov · 1,000 words in original text

What This Bill Does

This bill allows car dealers to treat certain sales of new vehicle inventory differently for tax purposes. The bill changes how these dealers report income when they sell through their inventory under a specific tax accounting method called LIFO.

Who It Affects

Car dealers who sell new motor vehicles and use the LIFO inventory method for tax purposes.

Key Provisions

• Car dealers can ignore certain tax requirements when reporting inventory liquidations for specified tax years (Sec. 2(a)) • The Secretary of the Treasury must write regulations within 90 days allowing dealers to delay recognizing income from qualified vehicle liquidations and set a replacement period (a time window to repurchase inventory) ending no later than January 1, 2026 (Sec. 2(b)(1)) • If dealers fail to replace all sold vehicles by the end of the replacement period, they must add back the delayed income plus interest charges to their final tax year (Sec. 2(b)(2)) • Elections to use these tax benefits must be made by the tax filing deadline and become permanent once chosen, except dealers can amend prior returns filed before this law passes (Sec. 2(b)(3))

What Changes

Dealers can postpone paying taxes on income from vehicle sales during supply shortages, provided they replace those vehicles within a specific time frame. If they fail to replace the vehicles, they must pay back the delayed taxes with interest.

Important Definitions

"Specified taxable year" means any tax year ending after March 12, 2020 and before January 1, 2022. "New motor vehicle" means a vehicle that has never been used and meets certain tax code requirements.

I 118TH CONGRESS 1ST SESSION H. R. 700 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 HOUSE OF REPRESENTATIVES FEBRUARY 1, 2023 Mr. ARRINGTON (for himself and Mr. KILDEE) introduced the following bill; which was referred to the Committee on Ways and Means 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 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Supply Chain Disrup- 4 tions Relief Act’’. 5 VerDate Sep 11 2014 01:28 Feb 18, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H700.IH H700 pbinns on DSKJLVW7X2PROD with $$_JOB 2 •HR 700 IH SEC. 2. TREATMENT OF CERTAIN LIQUIDATIONS OF NEW 1 MOTOR VEHICLE INVENTORY AS QUALIFIED 2 LIQUIDATIONS OF LIFO INVENTORY. 3 (a) IN GENERAL.—In the case of any dealer of new 4 motor vehicles which inventories new motor vehicles under 5 the LIFO method for any specified taxable year, the re- 6 quirements of paragraphs (1)(B) and (2) of section 473(c) 7 of the Internal Revenue Code of 1986 shall be treated as 8 satisfied with respect to such inventory for such taxable 9 year. 10 (b) ADDITIONAL RELIEF.— 11 (1) IN GENERAL.—The Secretary shall, not 12 later than the date which is 90 days after the date 13 of the enactment of this Act, prescribe regulations or 14 other guidance under which dealers of new motor ve- 15 hicles with a qualified liquidation (determined after 16 application of subsection (a)) of new motor vehicles 17 for any specified taxable year may elect— 18 (A) to not recognize any income in the 19 specified taxable year which is solely attrib- 20 utable to such qualified liquidation, and 21 (B) to treat the replacement period with 22 respect to such liquidation as being the period 23 beginning with the first taxable year after such 24 specified taxable year and ending with the ear- 25 lier of— 26 VerDate Sep 11 2014 01:28 Feb 18, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H700.IH H700 pbinns on DSKJLVW7X2PROD with $$_JOB 3 •HR 700 IH (i) the first taxable year after such 1 liquidation with respect to which such deal- 2 er does not inventory new motor vehicles 3 under the LIFO method, or 4 (ii) the last taxable year ending before 5 January 1, 2026. 6 (2) FAILURE TO FULLY REPLACE LIQUIDATED 7 VEHICLES DURING REPLACEMENT PERIOD.—If, as of 8 the close of the replacement period, the taxpayer has 9 failed to replace all liquidated vehicles with respect 10 to a qualified liquidation to which paragraph (1) ap- 11 plies, the taxpayer shall increase gross income for 12 the last taxable year of the replacement period by 13 the sum of— 14 (A) the aggregate amount of income that 15 would have been required to be recognized in 16 the liquidation year had the taxpayer elected to 17 apply the provisions of section 473 of the Inter- 18 nal Revenue Code of 1986 and not made the 19 election in paragraph (1), plus 20 (B) interest thereon at the underpayment 21 rate established under section 6621 of such 22 Code. 23 (3) ELECTIONS.— 24 VerDate Sep 11 2014 01:28 Feb 18, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H700.IH H700 pbinns on DSKJLVW7X2PROD with $$_JOB 4 •HR 700 IH (A) IN GENERAL.—Except to the extent 1 provided in subparagraph (B), an election 2 under paragraph (1) with respect to any speci- 3 fied taxable year shall be made by the due date 4 (including extensions) for filing the taxpayer’s 5 return of tax for such taxable year and in such 6 manner as the Secretary may prescribe. Once 7 made, any such election shall be irrevocable. 8 (B) CERTAIN ELECTIONS TREATED AS 9 CHANGE IN METHOD OF ACCOUNTING.—In the 10 case of an election with respect to a specified 11 taxable year for which the return of tax has al- 12 ready been filed before the date of the enact- 13 ment of this Act, any election under paragraph 14 (1) for such specified taxable year may be made 15 on the return of tax for the first taxable year 16 ending after the date of the enactment of this 17 Act and shall be treated for purposes of section 18 481 of the Internal Revenue Code of 1986 as 19 a change in method of accounting initiated by 20 the taxpayer and made with the consent of the 21 Secretary. 22 (c) DEFINITIONS.—For purposes of this section— 23 (1) SPECIFIED TAXABLE YEAR.—The term 24 ‘‘specified taxable year’’ means any liquidation year 25 VerDate Sep 11 2014 01:28 Feb 18, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H700.IH H700 pbinns on DSKJLVW7X2PROD with $$_JOB 5 •HR 700 IH ending after March 12, 2020, and before January 1, 1 2022. 2 (2) NEW MOTOR VEHICLE.—The term ‘‘new 3 motor vehicle’’ means a motor vehicle— 4 (A) which is described in section 5 163(j)(9)(C)(i) of the Internal Revenue Code of 6 1986, and 7 (B) the original use of which has not com- 8 menced. 9 (3) SECRETARY.—The term ‘‘Secretary’’ means 10 the Secretary of the Treasury or the Secretary’s del- 11 egate. 12 (4) OTHER TERMS.—Except as otherwise pro- 13 vided in this section, terms used in this section 14 which are also used in section 473 of the Internal 15 Revenue Code of 1986 shall have the same meaning 16 as when used in such section 473. 17 Æ VerDate Sep 11 2014 01:28 Feb 18, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6301 E:\BILLS\H700.IH H700 pbinns on DSKJLVW7X2PROD with $$_JOB

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