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US Government To Address Accounting Issues For Auto Dealers

by Leroy Baker, Tax-News.com, New York

26 February 2007


The US Internal Revenue Service and the Treasury Department have announced that they will work to publish guidance for automobile wholesalers, manufacturers and dealers regarding the proper treatment of the dollar-value, last-in, first out (LIFO) inventory method for pooling purposes of crossover vehicles, which have characteristics of trucks and cars.

“The accounting issue confronting the automobile industry has been selected for the Industry Issue Resolution (IIR) Program, which provides guidance to help clarify complex tax issues. This program can provide a greater level of certainty for taxpayers, which is important in today's environment," stated Large and Midsize Business Commissioner Deborah M. Nolan. She continued: "By following the guidance in the IIR, taxpayers can avoid time consuming audits on this issue."

Federal courts in the 1980s ruled that the LIFO pooling rules require taxpayers to account for cars and trucks in different pools. Since these rulings were handed down, the line between trucks and cars offered for sale has blurred.

Crossover vehicles include sport-utility vehicles, minivans, and pick-up trucks used as substitutes for cars, and it is not clear how they should be treated for LIFO purposes. A request for guidance was submitted by the law firm of Miller & Chevalier Chartered and the National Automobile Dealers Assn. (NADA) on behalf of the automotive industry, to resolve the issue arising from vehicles that do not fit clearly into either a car or a truck pool.

Since its inception in 2000, the IIR program has resulted in resolution of many different tax issues cumulatively affecting thousands of taxpayers in many different lines of business. For each issue selected, a multi-functional team gathers and analyzes the relevant facts and recommends guidance.


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