Please co-sponsor H.R. 7382/S.4105 – Dealership inventories remain at historic lows

Please co-sponsor H.R. 7382/S.4105 – Dealership inventories remain at historic lows

Franchised new car and truck dealerships are experiencing unprecedented low inventory levels due to COVID-related chip shortages and supply chain disruptions, leading to the threat of a substantial LIFO recapture before inventory levels can be restored. New car and truck dealers generally restock their inventory at the end of the year to roughly equal their costs at the beginning of the year, but remain unable to do so. For example:

Dwayne Lane’s Skagit Subaru: “Subaru typically will have 82-90 new on the ground. We currently have 3 new and one-quarter of our typical used.“
Rainier Dodge: “We normally stock 90-120 new vehicles and 75 used…We are currently at 14 new units.”
Toyota of Puyallup: “We typically have more than 500 new and used vehicles on the lot – as of today, we have a total of 113.”

Washington dealers and NADA first petitioned the Treasury Department to exercise its Sec. 473 authority in November 2020, which would allow dealers to replace their new-vehicle inventories over a three-year period. The LIFO Coalition and the American Institute of Certified Public Accountants also submitted similar petitions to Treasury.

Later, 92 House Members and 52 Senators signed bipartisan letters to Treasury supporting Sec. 473 relief for dealers facing severe inventory shortages caused by an unprecedented decline in auto production due to supply chain disruptions. However, Treasury declined to respond. The Department cited its belief that added legislative authority is needed.

H.R. 7382/S. 4105 would determine that the requirements of Sec. 473 have been met in the auto sector due to pandemic-related foreign trade interruptions that created inventory shortfalls of new vehicles. The bill would allow dealers to delay the recognition of income triggered by LIFO recapture for tax years 2020 and 2021. Given the ongoing supply chain disruptions, the bill also extends the period to replenish inventory and compute LIFO reserve/recapture until the end of 2025 to allow vehicle production to normalize.

Real life examples are pictured below — and note that dealerships are arranging remaining inventory so the lot looks as full as possible for passing customers:

Advantage Nissan (Bremerton)

: Normal inventory — 50 vehicles

Burien Toyota (Burien)

Carr Auto Group (Vancouver)

Dewey Griffin Subaru (Bellingham)

Dick Hannah Honda (Vancouver)

Dick Hannah Ram Truck Center (Vancouver)

Dick Hannah Volkswagen (Vancouver)

Doxon Toyota (Auburn)

Dwayne Lane’s Skagit Subaru

“Subaru typically will have 82-90 new on the ground. We currently have 3 new and one-quarter of our typical used.”

Dwayne Lane’s Skagit Mazda

“Mazda new inventory is usually 120+/-. We currently have 9 on ground and less than one-quarter our normal used inventory.”

Foothills Lincoln Mazda (Spokane)

Gilchrist Chevrolet Buick GMC (Tacoma)

Hanson Kia (Olympia)

“The front rows are zig-zagged just to look full. The back rows are completely empty.”

Harnish Chevrolet Buick GMC Puyallup (Puyallup)

Honda of Bellevue (Bellevue)

Honda of Kirkland (Kirkland)

Honda of Grays Harbor (Aberdeen)

Rainier Dodge (Olympia)

“We normally stock 90-120 new vehicles and 75 used…We are currently at 14 new units with 23 on the way. However, of the 23, 15 vehicles are pre-sold. We project 7 units in ground stock by the end of November with an additional 32 in transport.”