Repeal of accounting method would make reserves taxable
June 10, 2006
A common accounting method used by many distributors is gaining attention in Washington as a potential source of tax revenue. At end of April, Sen. Bill Frist of Tennessee incorporated the repeal of LIFO ﾖ a 70-year-old inventory accounting method ﾖ into a Republican energy bill to help pay for a $100 gas rebate for 100 million U.S. citizens.
After an uproar from businesses, the repeal was taken out of the bill. But the Senate Finance Committee, led by Chairman Charles Grassley of Iowa, is planning to further consider repeal of the accounting procedure. A committee hearing on the subject could happen as early as this month.
If LIFO is repealed, distributors who use the method would have to move their reserves to current inventory, which would then be subject to ...