BACKGROUND The President's Budget proposes repeal of the "Last-In First-Out" (LIFO) accounting method beginning in 2012, and requiring companies with LIFO reserves to pay taxes on those reserves within 7 years. We manufacturers need to educate Members of Congress on the negative effects of repeal on manufacturers such as forgers. The common message has been one of "we need the money", i.e., the issue isn't one of whether they agree with the use of LIFO, it is simply one of needing additional revenues to pay for programs (such as healthcare reform), and LIFO repeal represents additional revenues.
The House Ways and Means Committee and the Senate Finance Committee are currently preparing legislation that could include LIFO repeal and they need to hear from manufacturers who oppose repeal of LIFO. Communicating with these Committees' members now could help prevent LIFO repeal from making it into legislation on which the full House and Senate would have to vote.
PLEASE CONSIDER SENDING THE SAMPLE LETTER BELOW (EDITED FOR YOUR SPECIFIC CIRCUMSTANCES) TO YOUR MEMBER OF CONGRESS THAT SITS ON THE HOUSE WAYS AND MEANS COMMITTEE AND/OR THE SENATE FINANCE COMMITTEE. Companies should also consider sending the draft letter to your Member of Congress as well if this issue is of importance to you.
Address and fax numbers for Members of Congress can be found at http://x.jtrk71.net/y.z?l=http%3A%2F%2Fwww.congress.org&e=185&j=235523999&t=h.
SAMPLE LETTER TO MEMBERS OF THE HOUSE WAYS AND MEANS COMMITTEE AND THE SENATE FINANCE COMMITTEE RE:
The Honorable (Representative or Senator’s Full Name)
United States Senate (or House of Representatives)
[Senate or House Office Building Address]
Dear Senator/Representative [LAST NAME]:
On behalf of [company name], I am writing to express my strong opposition to the repeal of the "Last-In First-Out" (LIFO) accounting method.
(INSERT: Description of individual company, i.e., where located, what type of business, how many employees, how long in business, family-owned and run, etc).
LIFO has been an established and recognized accounting method in the U.S. since the 1930's and is utilized by a broad cross-section of industries; particularly industries such as forging that are subject to fluctuations in raw materials costs. In those instances, LIFO is an accurate and appropriate means of evaluating inventory costs. Repeal of this long-established method of accounting would severely disadvantage basic American manufacturers at a time when the U.S. economy desperately needs the good jobs they provide.
LIFO “reserves” do not represent a pot of money sitting on deposit. Rather, they are a reflection of the cost of replacing inventories. If LIFO were repealed, [my company] would be required to pay $XXXXX in new taxes retroactively. The additional tax we would owe represents [insert company specific information as to percentage in terms of annual earnings, net worth, etc.], at a time when my company is already experiencing [insert any company specific information regarding economic downturn, such as loss of revenue, layoffs, etc.] Repeal of LIFO will impose profound economic harm on my company and others that rely on it to accurately reflect their income. That economic harm would be certain to result in job losses and reduced capital investment.
I urge you to oppose LIFO repeal in any form.