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HDMA OPPOSES REPEAL OF LIFO INVENTORY ACCOUNTING METHOD
Repeal of LIFO and Resulting Increased Tax Liability Could Have
Devastating Impact on Businesses
Arlington, VA – May 18, 2009 –The Healthcare Distribution Management Association (HDMA) opposes proposals to repeal the last-in, first-out (LIFO) inventory accounting method, as mentioned in the Senate Finance Committee's list of healthcare financing options released today. Repealing LIFO would force companies currently using this accounting method to report their cumulative LIFO reserves as income, resulting in a massive retroactive tax increase for companies.
“HDMA urges members of the Senate Finance Committee not to repeal LIFO as a way to pay for healthcare reform. LIFO has been a well-established and recognized accounting method in the U.S. since the 1930s and is utilized for tax reporting purposes by a broad spectrum of business sectors that manufacture or sell a wide range of products,” said HDMA President and CEO John M. Gray. “While HDMA applauds efforts to reform the healthcare system and supports fiscal responsibility, eliminating LIFO would significantly raise business taxes, threatening economic growth and job creation. Repeal would be particularly punitive for distributors of prescription medicines and healthcare products across the nation.”
Many businesses, both large and small, public and private, use the LIFO accounting method to value their inventory and for tax reporting. This well-established practice has been recognized as valid under the Internal Revenue Code for decades. Its repeal would unfairly reverse long-standing tax policy and result in an unprecedented tax increase for businesses that use the LIFO method.
About HDMA
The Healthcare Distribution Management Association (HDMA) is the national association representing primary, full-service healthcare distributors. Each business day, the member companies of HDMA are responsible for ensuring that more than eight million prescription medicines and healthcare products are safely delivered to 145,000 pharmacies, hospitals, nursing homes, physician offices, clinics, government and other providers in all 50 states. This essential public health function is provided with tremendous efficiency, saving the nation’s healthcare system nearly $32 billion each year. HDMA and its members are the vital link in the healthcare system, working daily to provide value, remove costs and develop innovative solutions to deliver care safely and effectively.
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