Repealing LIFO Would Come With Devastating Costs

With support from the LIFO Coalition, PwC had completed a report that outlines the economic and budgetary effects of repeal of the last-in first-out (LIFO) method of inventory accounting for federal income tax purposes. The study is available at this link.

PwC found if the LIFO election were repealed, the tax effect would vary by company and industry based on the rate of inflation, the age of the company, the importance of inventories as a share of assets, and other characteristics. PwC said the sectors that would face an especially high tax burdens if the LIFO method were repealed include the manufacturing and metals sectors, as well as the retail and wholesale trade sectors.

For public companies with a LIFO reserve, PwC said the one-time recapture tax triggered by conversion from the LIFO method to the FIFO method of accounting would be 28 percent of reported current federal income tax liability for 2023. Additionally, the ongoing annual tax increase resulting from use of FIFO accounting rather than LIFO would be 2.6 percent of reported current federal income tax liability for 2023.

As U.S. lawmakers consider a 2025 tax bill, the Metals Service Center Institute will continue to work with the LIFO Coalition to oppose LIFO repeal. If your company would like to join these efforts and lawmakers that LIFO ensures businesses have adequate cash flow to continue replenishing inventory to meet demand, click this link for more information.