Van Hollen, Brown Urge Treasury Department to Provide Covid-Related Tax Relief Due to Global Supply Chain Disruption of Vehicles

Today, U.S. Senator Chris Van Hollen (D-Md.) joined Sherrod Brown (D-Ohio) in a follow-up letter to U.S. Department of Treasury Secretary Janet Yellen, urging her to provide tax relief to auto dealers experiencing inventory shortages due to global supply chain issues. Pandemic-related supply chain disruptions have impacted businesses and consumers, with slow-downs and factory closures, particularly with semiconductors, leaving businesses with drastically lower inventories. These disruptions could leave auto dealers in Maryland and across the country with unexpected tax liability if not addressed. The senators’ letter is a follow-up to a letter they sent to Sec. Yellen in November.  

“The automotive industry continues to face dramatic and unprecedented inventory shortages due to the pandemic and foreign supply chain disruptions, and it will take many months for affected local businesses, employees, and their customers throughout our states and across the country to recover,” wrote the senators. “Granting Sec. 473 relief will help protect the auto industry and all its workers. Thank you again for your efforts to ensure a speedy economic and automotive recovery.” 

The letter led by Senator Brown was signed in addition to Senator Van Hollen by Senators Ron Wyden (D-Ore.), Amy Klobuchar (D-Minn.), Patty Murray (D-Wash.), Angus King (I-Maine), Catherine Cortez Masto (D-Nev.), Alex Padilla (D-Calif.), Ben Cardin (D-Md.), Tina Smith (D-Minn.), Richard Blumenthal (D-Conn.),  Jacky Rosen (D-Nev.), Dianne Feinstein (D-Calif.), Tim Kaine (D-Va.), Tammy Baldwin (D-Wis.), Raphael Warnock (D-Ga.), Debbie Stabenow (D-Mich.), Gary Peters (D-Mich.), and Bob Casey (D-Pa.). 

The full text of the senators’ letter can be found here and below.

Dear Secretary Yellen: 

Thank you for your prompt reply to our November 2021 letter urging you to exercise existing authority to grant tax relief to certain taxpayers using the last-in, first-out (LIFO) accounting method. We appreciate that consideration of this request requires additional examination of whether the direct and primary reason for a taxpayer’s inability to replace its inventory is due to a foreign trade interruption, and further analysis of which businesses and industries should be granted Sec. 473 relief. We write today to urgently reiterate our request, and ask that you grant this relief by February 15, 2022.

Enclosed you will find a letter from the Alliance for Automotive Innovation, which represents auto manufacturers that produce 99% of the cars and light trucks sold in the United States, along with automotive suppliers and technology companies. Their letter states: 

“This decreased inventory production is primarily a result of the foreign supply chain disruptions caused by actions related to the COVID pandemic, especially with respect to semiconductor shortages. For example, during the end of Q4 2020 and going into 2021, it became increasingly clear that a shortage of semiconductors used for a host of essential vehicle controls would reduce new vehicle production, further impeding the industry’s recovery from the supply and demand shock at the beginning of the COVID pandemic.”

Affected small businesses need to know at the earliest possible date whether relief will be granted. The taxpayers’ returns must include complex and time-consuming LIFO calculations. Therefore, we respectfully urge you to provide a response, including the required Sec. 473 determinations in the Federal Register, no later than February 15, 2022. 

The automotive industry continues to face dramatic and unprecedented inventory shortages due to the pandemic and foreign supply chain disruptions, and it will take many months for affected local businesses, employees, and their customers throughout our states and across the country to recover. Granting Sec. 473 relief will help protect the auto industry and all its workers. Thank you again for your efforts to ensure a speedy economic and automotive recovery.

Sincerely,