§ 474. Simplified dollar-value LIFO method for certain small businesses

Legislative history

Reconstructed from this section’s Code source credit and amendment notes, resolved against the local Statutes at Large. Editorial notes are evidence, not the law that made the change.

1. 1981

   Economic Recovery Tax Act of 1981

   Pub. L. 97–34 title II § 237(a) · 95 Stat. 175

   Enacted · 26 U.S.C. § 474

   Added Pub. L. 97–34, title II, § 237(a), Aug. 13, 1981, 95 Stat. 252

   Source evidence

   Code source credit
   Added Pub. L. 97–34, title II, § 237(a), Aug. 13, 1981, 95 Stat. 252

   Enacted provision · exact public law section
   (a) In General.— Subpart D of part II of subchapter E of chapter 1 (relating to inventories) is amended by adding at the end thereof the following new section: “SEC. 474. ELECTION BY CERTAIN SMALL BUSINESSES TO USE ONE INVENTORY POOL. “(a) In General.— A taxpayer which is an eligible small business and which uses the dollar-value method of pricing inventories under the method provided by section 472(b) may elect to use one inventory 26 USC 472. pool for any trade or business of such taxpayer. “(b) Eligible Small Business Defined.— For purposes of this section, a taxpayer is an eligible small business for any taxable year if the average annual gross receipts of the taxpayer do not exceed $2,000,000 for the 3-taxable-year period ending with the taxable year. “(c) Special Rules.— For purposes of this section— “(1) Controlled Groups.— “(A) In general.— In the case of a taxpayer which is a member of a controlled group, all persons which are component members of such group at any time during the calendar year shall be treated as one taxpayer for such year for purposes of determining the gross receipts of the taxpayer. “(B) Controlled group defined.— For purposes of subparagraph (A), persons shall be treated as being members of a controlled group if such persons would be treated as a single employer under the regulations prescribed under section 52(b). “(2) Election.— “(A) In general.— The election under this section may be made without the consent of the Secretary and shall be made at such time and in such manner as the Secretary may by regulations prescribe. “(B) Period to which election applies.— The election under this section shall apply— “(i) to the taxable year for which it is made, and “(ii) to all subsequent taxable years for which the taxpayer is an eligible small business, unless the taxpayer secures the consent of the Secretary to the revocation of such election. “(3) Transitional rules.— In the case of a taxpayer who changes the number of inventory pools maintained by him in a taxable year by reason of an election (or cessation thereof) under this section— “(A) the inventory pools combined or separated shall be combined or separated in the manner provided by regulations under section 472; “(B) the aggregate dollar value of the taxpayer’s inventory as of the beginning of the first taxable year— “(i) for which an election under this section is in effect, or “(ii) after such election ceases to apply, shall be the same as the aggregate dollar value as of the close of the taxable year preceding the taxable year described in clause (i) or (ii) (as the case may be), and “(C) the first taxable year for which an election under this section is in effect or after such election ceases to apply (as the case may be) shall be treated as a new base year in accordance with procedures provided by regulations under section 472.”

2. 1986

   Tax Reform Act of 1986

   Pub. L. 99–514 title VIII § 802(a) · 100 Stat. 2085

   1. Amended · 26 U.S.C. § 474

      Pub. L. 99–514 amended section generally

   2. Substituted · 26 U.S.C. § 474

      Pub. L. 99–514 substituting provisions relating to election by eligible small business to use simplified dollar-value method of pricing inventories for purposes of LIFO method for provisions relating to election by eligible small business which uses dollar-value method of pricing inventories under method provided by section 472(b) of this title to use one inventory pool for any trade or business of such eligible small business

   Source evidence

   Code amendment note
   Pub. L. 99–514 amended section generally, substituting provisions relating to election by eligible small business to use simplified dollar-value method of pricing inventories for purposes of LIFO method for provisions relating to election by eligible small business which uses dollar-value method of pricing inventories under method provided by section 472(b) of this title to use one inventory pool for any trade or business of such eligible small business.

   Enacted provision · exact public law section
   (a) General Rule.— Section 474 (relating to election by certain small businesses to use one inventory pool) is amended to read as follows: “SEC. 474. SIMPLIFIED DOLLAR-VALUE LIFO METHOD FOR CERTAIN SMALL BUSINESSES. “(a) General Rule.— An eligible small business may elect to use the simplified dollar-value method of pricing inventories for purposes of the LIFO method. “(b) Simplified Dollar-Value Method of Pricing Inventories.— For purposes of this section— “(1) In general.— The simplified dollar-value method of pricing inventories is a dollar-value method of pricing inventories under which— “(A) the taxpayer maintains a separate inventory pool for items in each major category in the applicable Government price index, and “(B) the adjustment for each such separate pool is based on the change from the preceding taxable year in the component of such index for the major category. “(2) Applicable government price index.— The term ‘applicable Government price index’ means— “(A) except as provided in subparagraph (B), the Producer Price Index published by the Bureau of Labor Statistics, or “(B) in the case of a retailer using the retail method, the Consumer Price Index published by the Bureau of Labor Statistics. “(3) Major category.— The term ‘major category’ means— “(A) in the case of the Producer Price Index, any of the 2-digit standard industrial classifications in the Producer Prices Data Report, or “(B) in the case of the Consumer Price Index, any of the general expenditure categories in the Consumer Price Index Detailed Report. “(c) Eligible Small Business.— For purposes of this section, a taxpayer is an eligible small business for any taxable year if the average annual gross receipts of the taxpayer for the 3 preceding taxable years do not exceed $5,000,000. For purposes of the preceding sentence, rules similar to the rules of section 448(c)(3) shall apply. “(d) Special Rules.— For purposes of this section— “(1) Controlled groups.— “(A) In general.— In the case of a taxpayer which is a member of a controlled group, all persons which are component members of such group shall be treated as 1 taxpayer for purposes of determining the gross receipts of the taxpayer. “(B) Controlled group defined.— For purposes of subparagraph (A), persons shall be treated as being component members of a controlled group if such persons would be treated as a single employer under section 52. “(2) Election.— “(A) In general.— The election under this section may be made without the consent of the Secretary. “(B) Period to which election applies.— The election under this section shall apply— “(i) to the taxable year for which it is made, and “(ii) to all subsequent taxable years for which the taxpayer is an eligible small business, unless the taxpayer secures the consent of the Secretary to the revocation of such election. “(3) LIFO method.— The term ‘LIFO method’ means the method provided by section 472(b). “(4) Transitional rules.— “(A) In general.— In the case of a year of change under this section— “(i) the inventory pools shall— “(I) in the case of the 1st taxable year to which such an election applies, be established in accordance with the major categories in the applicable Government price index, or “(II) in the case of the 1st taxable year after such election ceases to apply, be established in the manner provided by regulations under section 472; “(ii) the aggregate dollar amount of the taxpayer’s inventory as of the beginning of the year of change shall be the same as the aggregate dollar value as of the close of the taxable year preceding the year of change, and “(iii) the year of change shall be treated as a new base year in accordance with procedures provided by regulations under section 472. “(B) Year of change—For purposes of this paragraph, the year of change under this section is— “(i) the 1st taxable year to which an election under this section applies, or “(ii) in the case of a cessation of such an election, the 1st taxable year after such election ceases to apply.”

   Effective date note
   Pub. L. 99–514, title VIII, § 802(c), Oct. 22, 1986, 100 Stat. 2350, provided that:

3 of 3 references resolved to an enrolled provision