Steel Institute Expresses Concern About Cost Recovery

 Thomas J. Gibson, president and CEO of the American Iron and Steel Institute (AISI) said he has concerns with proposals in the tax reform discussion draft released today by Senate Finance Committee Chairman Max Baucus (D-MT) which recommends repeal of the current accelerated depreciation system (Modified Accelerated Cost Recovery System, MACRS), the “Last-In-First-Out” (LIFO) accounting method, and other tax provisions supported by the steel industry.

“Cost recovery is very important to domestic manufacturers given the continuous need for companies to invest in new plants and equipment to modernize, remain competitive and comply with environmental laws and regulations. Capital investments, like those made in the steel industry, require significant cash expenditures and take a number of years to yield a return. Any pro-growth tax reform plan must maintain a robust cost recovery system -- like the current accelerated depreciation system. We are concerned about any proposed repeal of this system and look forward to working with the Committee to provide input on this critical issue,” Gibson said.

He said AISI and its member companies are currently analyzing the proposal, just released this afternoon.

Gibson also said he has concerns about the proposal’s repeal of the LIFO accounting method, which has long been an acceptable accounting practice, as it would “levy a tax on increased income as if a company had sold part of its inventory, even though no real profit will be made.”