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May 09, 2022

King Cosponsors Bill to Ease Supply Chain Pressures on Auto Industry

“This would give Dealers some time to recover,” says head of the Maine Auto Dealers Association

WASHINGTON, D.C. – U.S. Senator Angus King (I-Maine) is cosponsoring bipartisan legislation to ease the effects of supply chain challenges on Maine car dealerships facing higher costs and limited inventory. The Supply Chain Disruptions Relief Act would make a common-sense tax adjustment for dealerships that cannot maintain a minimum level of inventory, so that these small businesses don’t suffer costly penalties for supply chain shortages out of their control.

“The auto industry has been among the hardest hit by global supply chain issues, which have created extreme challenges for Maine’s car dealerships,” said Senator King. “As we work to address the pressing shortages facing both consumers and the industry, this bipartisan legislation will provide much needed temporary relief to the small auto businesses across our state that are working to keep their doors open and support their employees. Rising costs for car dealerships have contributed to high inflation, which is squeezing household budgets across Maine and the nation. Let’s pass this bill quickly, so we can ensure our local businesses aren’t subjected to unnecessary tax burdens that get passed on to consumers.

“From necessary production parts being unavailable to transportation systems that are jammed up, supply chain issues are making it difficult for Maine’s franchise auto Dealers to get and maintain inventory,” said John Emerson, Head of the Maine Auto Dealers Association. “Over half of the Dealers in Maine, including many smaller family run stores, are on Last In First Out (LIFO) methods, meaning when inventory drops drastically it creates a taxable phantom profit. Dealers are asking for three years of relief to let inventories rebuild – this is not a forever forgiveness, but this would give Dealers some time to recover.”

Auto dealerships often use the Last-In First-Out (LIFO) inventory method, which can result in a large tax bill for dealerships that don’t maintain a minimum level of inventory at the close of the year; unfortunately, the COVID pandemic has created a shortfall in available vehicles. The Supply Chain Disruptions Relief Act would provide a statutory determination that the requirements for a qualified liquidation under Section 473 have been satisfied for new motor vehicle dealers that have had a reduction of new vehicles held in LIFO inventory. 

Senator King has worked to address the causes and impacts of the global supply chain issues challenging Maine communities. He recently introduced a bipartisan bill to improve America’s access to the critical minerals required for technology production, and helped pass the U.S. Innovation and Competition Act which would invest in American technological production and innovation.

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