Legislative outlook:

Neither house or Congress has moved meaningfully on a Congressional Budget Resolution beyond the Senate Committee action which we last reported to you, and Speaker Pelosi indicated this week that the House is unlikely to consider a budget this year. If that proves to be the case, the Senate will not be able to consider tax legislation under the filibuster-proof Reconciliation procedures this year, thereby creating a 60-vote threshold for any tax legislation which has serious opposition. That would be very good news for us.

While major tax legislation is expected at some point this year, thus far both houses remain focused on passing the tax extenders bill, extending expiring (or expired) tax provisions like the R&D tax credit, deductibility of state sales taxes, etc. There are a lot of additional issues that are wrapped up in the ongoing discussion of the extenders legislation, but for our purposes the concern is the “pay-fors” or tax increases that might be considered to help offset the revenue loss caused by extending the expiring provisions. LIFO has not been discussed as one of the pay-fors at this point, and Coalition meetings on Capitol Hill have provided no concrete suggestion that we are at risk in the extenders bill. We continue to watch and monitor those discussions closely, and Hill meetings continue, but so far the news has all been reassuring.

Once the extenders bill is finally enacted, we expect Congress to turn to other tax measures, in effect forced to that discussion because of the expiration at the end of this year of most of the tax cuts enacted in 2001 and 2003, including marginal tax rates at all levels and reduced rates on dividends and capital gains. The expiration at the end of last year of the “death tax” is also driving dicussion of tax legislation later this year. With many in Congress intent on extending some of the exipriring tax rate reductions beyond their scheduled exipration at the end of this year, Congress will need huge “pay-fors” to offset those continued reduced rates, and it is very possible that LIFO repeal will be discussed in that context. We remain committed to protecting LIFO, but we are by no means out of danger yet.

Home state meetings with Finance and Ways and Means members:

To that end, we would again encourage all of you to request and/or ask your members to request meetings with members of the Senate Finance and House Ways and Means Committees (or their key staff) while they are at home during the Memorial Day recess (May 21-31). There is no doubt that the many meetings you all scheduled and attended in home state offices last summer were critical in persuading key members of the House and Senate not to pursue LIFO repeal. Those meetings could make the difference again this year. You can find the list of state and district offices of all the relevant committee members at the links below. Please help with this effort, and please provide any feedback you get from calls or meetings you schedule/attend.