Industry Coalition Expresses Support for Maintaining LIFO

NACS joined industry stakeholders in sending a letter to Senate Chairman Max Baucus in support of maintaining the LIFO accounting method.

December 13, 2013

WASHINGTON – This week NACS, along with a coalition of industry stakeholders, sent a letter to U.S. Senator Max Baucus (D-MT), chairman of both the Senate Finance Committee and the Joint Committee on Taxation, urging support for maintaining the LIFO (Last-In First-Out) accounting method.

The coalition wrote:

“The undersigned oil and natural gas associations endorse a pro-growth tax code that promotes domestic investment, job creation and energy production. While we respect and appreciate your efforts to make the tax code less complicated and more competitive, your recent discussion draft on cost recovery and tax accounting raises significant concern among our member companies.

“Throughout the economic downturn, America’s oil and natural gas industry has provided one of the few bright spots as the economy struggles toward recovery. The industry has invested hundreds of billions of dollars to develop our nation’s oil and natural gas reserves, expand our refining capacity and develop innovative new technologies to meet the energy demands of a growing economy. This investment has created tens of thousands of high paying jobs and billions of dollars in new revenue for the government.  This is exactly the type of investments tax policy should encourage and support. 

“Our concern is that the proposals in your discussion draft, such as extending the period during which businesses can recover their operating or labor costs — as in the case of drilling expenses — will take cash away from capital-intensive businesses like ours and significantly reduce future domestic investment. In addition, efforts to eliminate valid accounting methods, like LIFO, and changes to extending depreciable lives will hurt businesses by forcing them to pay tax on a deemed transaction otherwise diverting cash from current and future investments.

“While tax policy can indeed be complicated, it has always been a policy objective to support and encourage domestic investment and the jobs such investment creates. We believe, therefore, that shifting cash from robust private investment conflicts with that objective. Further, recent polling shows that voters broadly support domestic energy investment and disapprove of taxes that could increase their energy costs.  

“Our industry is poised to make even greater capital investments in domestic energy projects all across the United States, generating jobs and revenues for local communities throughout the country. We must have a tax code that not only encourages growth in such investments, but allows us to continue our track record of creating jobs, growing the economy and strengthening our energy security.”

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