LIFO (which stands for “last in, first out”) is an inventory accounting method used by companies throughout the U.S. economy to determine both book income and tax liability.  Book income is the amount of earnings shown on business financial statements.  Tax liability is the amount of income tax owed to the government. 

In late April 2006, Senate leaders proposed repealing the LIFO inventory accounting method to pay for a $100-per-family gas tax rebate. This repeal was apparently proposed due in part to a mistaken belief that LIFO is a “tax loophole” or that it is set to disappear from use, however the fact remains that LIFO is an established, widely-accepted inventory accounting method that has been used by large and small companies throughout the U.S. economy since the 1930s. Repealing LIFO would be a massive tax increase on hundreds of thousands of large and small American businesses, and could force many smaller ones to close.

Please review the below information, which further explains why Congress should reject any effort to repeal LIFO.

LIFO Briefing (33k)

LIFO Background (20k)

LIFO Issue Brief (106k)