Tucked deep into the tables of President Barack Obama’s proposed 2010 federal budget lies a line item sure to become a focal point of corporate tax policy debate—“repeal LIFO.”

LIFO is the tax-friendly “last in, first out” method of accounting for inventory that has become increasingly touchy in recent years. It keeps lower-priced inventory on the books and expenses more recently purchased, usually higher-priced inventory, which suppresses the immediate tax liability.

The proposed budget offers no discussion of a plan to repeal LIFO except to include it as a line item among planned federal receipts. The table suggests a LIFO repeal would have no impact on the federal budget until 2012. Then it projects revenue of up to $61 billion through 2019 that would help offset the federal deficit.

“LIFO has been around for 70 years,” said Mike Metz, executive vice president of tax services for RSM McGladrey. “Repealing it would have a negative impact on a lot of businesses, especially manufacturers, wholesalers, distributors, and retailers.”

The debate around LIFO has erupted in recent years in the context of a U.S. move to adopt International Financial Reporting Standards. While U.S. Generally Accepted Accounting Principles permit the use of LIFO in financial reporting, IFRS does not. That already has U.S. companies concerned they will have to give up their LIFO ways as the United States moves closer to adopting IFRS for financial reporting purposes.

The Obama budget blueprint seems to step up the pace of such a transition, Metz said. Based on the way numbers in the budget table progress, it appears the administration proposes to phase in a repeal of LIFO over at least a few years, said Metz, but there are no further details provided. He said the idea of repealing LIFO certainly isn’t new, but it’s hard to tell if it will remain in the budget as it proceeds through the debate and approval process.

Also significant, said Metz, is another line item in the budget plan to “implement international enforcement, reform deferral, and other tax reform policies.” Though offering no further detail on what those proposals mean, the plan provides for an additional $210 billion through 2019 as a result of them.

Metz said the administration apparently is planning increased enforcement of transfer pricing, or the tax related to inter-company transfer across international borders. “Reform deferral would result in pretty significant change to tax policies,” he said. “It could include taxing companies on profits earned outside the United States currently instead of when they are repatriated (or brought into the U.S. parent company).”

According to Metz, tinkering with international tax policy could erode U.S. competitiveness in the global economy. “We already have the second highest tax rate, and in some cases it’s significantly higher than a lot of countries,” he said. “Most countries have been lowering corporate tax rates to remain competitive. That’s not something we’ve been doing in the United States.”