Supply Chain Security and Growth Act of 2025

Bill Number

H.R. 1328

Origin Chamber

House

Congress

119th Congress, Session 1

Policy Area

Taxation

Status

Introduced

Latest Action

2025-02-13: Referred to the House Committee on Ways and Means.

Last Updated

2026-05-01T16:19:26Z

AI-Generated Summary

Purpose

The Supply Chain Security and Growth Act of 2025 aims to encourage U.S. businesses to invest in manufacturing facilities for critical goods—such as pharmaceuticals, semiconductors, and aerospace equipment—within U.S. possessions (like Guam or the U.S. Virgin Islands) or Puerto Rico. It does this by creating a new tax incentive to "reshore" (bring back) these supply chains from abroad, reducing reliance on foreign suppliers, especially those linked to national security risks.

Key Provisions

• New Tax Credit (Section 48F): Provides a 40% investment tax credit for "qualified investments" in "critical supply chain facilities" placed in service after December 31, 2024. This credit is part of the general business credit under the Internal Revenue Code.
• Eligible Facilities: Must primarily manufacture one or more of the following in a U.S. possession or Puerto Rico:
• Active pharmaceutical ingredients (key components in drugs).
• Drugs or biological products (as defined under federal health laws).
• Medical countermeasures (e.g., vaccines or treatments for public health emergencies).
• Medical diagnostic devices.
• Semiconductors or equipment to make them.
• Aerospace equipment (under specific industry codes).
• Artificial nanomaterials (engineered materials at the nanoscale).
• Qualified Property: Tangible, depreciable assets (e.g., machinery or buildings) that are newly constructed, reconstructed, or first used by the taxpayer and essential to the facility's operations.
• Qualifying Taxpayer: Any U.S. taxpayer not classified as a "prohibited foreign entity," which includes:
• Foreign entities of concern (as defined in prior infrastructure law).
• Entities controlled by "covered nations" (e.g., nations posing security risks, like China, per U.S. defense code).
• Entities where 25% or more ownership ties back to such nations or their citizens/residents.
• Aggregation Rule: Affiliated companies (groups under common control) can pool investments if at least one facility is in an "economically distressed zone" (a low-income area with at least 30% poverty rate, often overlapping with opportunity zones).
• Exemptions and Coordination:
• Ignores certain restrictions on credit eligibility (e.g., related to prior subsidies or asset basis adjustments).
• Prevents double-dipping with the clean electricity production credit.
• Flexibility Options:
• Taxpayers can elect to receive the credit as a direct payment from the IRS (even if not typically eligible, like certain nonprofits).
• The credit can be sold or transferred to other taxpayers for cash.
• Increase in Deemed Credit for Possessions (Section 960(d)): For U.S. multinational companies, taxes paid to U.S. possessions now qualify for a 100% deemed foreign tax credit (up from 80%), effective for taxes after December 31, 2024. This reduces double taxation on income earned in these areas.

Significant Changes to Existing Law

• Adds a new section (48F) to the Internal Revenue Code's investment tax credit rules, expanding incentives beyond energy and clean tech to national security-focused manufacturing.
• Amends coordination rules (e.g., Section 45) to avoid overlaps with other credits.
• Expands elective payment (Section 6417) and transferability (Section 6418) options to include this new credit, making it more accessible to smaller or non-taxable entities.
• Boosts the foreign tax credit rate for U.S. possessions from 80% to 100%, simplifying tax treatment for operations there and aligning it more closely with domestic incentives.

Potential Impacts

• On Government Agencies: The IRS will need to administer new credits, verify foreign entity status (potentially increasing audits), and process direct payments/transfers, which could strain resources but promote economic activity in underserved territories.
• On Citizens and Businesses: Encourages job creation and economic growth in U.S. possessions and Puerto Rico, particularly in distressed areas, by attracting manufacturing investments. Businesses in critical sectors may see reduced effective costs for building facilities, but only if they avoid foreign ties.
• On International Relations: Strengthens U.S. supply chain resilience by discouraging reliance on adversarial nations, potentially straining trade ties with "covered nations" while boosting domestic production of health and tech essentials.

Main Stakeholders Affected

• Businesses and Investors: Primarily U.S.-based companies in pharmaceuticals, biotech, semiconductors, aerospace, and nanomaterials manufacturing, who can claim the credit but must ensure no prohibited foreign ownership.
• Residents and Governments of U.S. Possessions/Puerto Rico: Benefit from potential influx of facilities, jobs, and tax revenue in economically challenged areas.
• Prohibited Foreign Entities: Excluded from benefits, which could limit their U.S. market access.
• U.S. Federal Government: Treasury and IRS handle implementation; broader economy gains from enhanced national security and reduced foreign dependency.

Notable Legal, Constitutional, or Political Implications

• Legal: Introduces compliance challenges, such as proving non-foreign control (e.g., via ownership audits), which may lead to disputes or litigation over "prohibited entity" definitions. Builds on existing laws like the Infrastructure Investment and Jobs Act without creating new regulatory bodies.
• Constitutional: Relies on Congress's taxing and spending powers (Article I) and commerce clause authority to incentivize interstate and territorial economic activity; no direct challenges anticipated, as it mirrors prior tax incentives.
• Political: Bipartisan sponsorship (from both parties) highlights consensus on supply chain security post-COVID and amid U.S.-China tensions. Could influence future trade policy by prioritizing domestic/territorial production, but may face debate over excluding foreign-linked firms or the fiscal cost (estimated revenue loss from credits).

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. Malliotakis, Nicole [R-NY-11]

Cosponsors (12)

Rep. Panetta, Jimmy [D-CA-19], Rep. Buchanan, Vern [R-FL-16], Rep. Velázquez, Nydia M. [D-NY-7], Rep. Kelly, Mike [R-PA-16], Rescom. Hernández, Pablo [D-PR-At Large], Rep. Lawler, Michael [R-NY-17], Rep. Ramirez, Delia C. [D-IL-3], Rep. Costa, Jim [D-CA-21], Rep. Soto, Darren [D-FL-9], Rep. Tenney, Claudia [R-NY-24], Rep. Fitzpatrick, Brian K. [R-PA-1], Rep. Vindman, Eugene Simon [D-VA-7]

Recent Actions

• 2025-02-13: Referred to the House Committee on Ways and Means.
• 2025-02-13: Introduced in House
• 2025-02-13: Introduced in House

Bill Versions

• Supply Chain Security and Growth Act of 2025 — issued 2025-02-13 — PDF (10 pages)