Buying American Cotton Act of 2025
- Bill Number
- S. 1919
- Origin Chamber
- Senate
- Congress
- 119th Congress, Session 1
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2025-05-22: Read twice and referred to the Committee on Finance.
- Last Updated
- 2026-06-19T11:03:24Z
AI-Generated Summary
Purpose
The "Buying American Cotton Act of 2025" aims to promote the use of cotton grown in the United States by providing tax incentives for businesses that sell products made from it. It also seeks to ensure the cotton's origin and processing are tracked reliably through the supply chain to verify its domestic roots.
Key Provisions
- Tax Credit Establishment: Introduces a new tax credit (Section 45BB of the Internal Revenue Code) for the "domestic cotton consumption credit." This credit is available to businesses for the first sale of eligible products containing U.S.-grown cotton to an unrelated buyer (a buyer not connected through ownership or control).
- Credit Calculation: The credit equals the volume (in pounds) of verified U.S. cotton in the product, multiplied by:
- An "applicable percentage": 24% if the cotton is processed only in the U.S. or in countries with U.S. free trade agreements (FTAs) or unilateral preference programs (e.g., benefits for certain developing countries like those under the African Growth and Opportunity Act); 18% otherwise.
- The "applicable cotton market price": An average price for U.S. cotton over the prior three years, set by the Treasury Secretary in consultation with the Agriculture Secretary.
- Qualified Cotton Definition: Refers to specific types of U.S.-grown cotton (extra long staple or upland varieties). It must have proof of U.S. origin, such as a permanent bale identification number from the Agriculture Department, and be digitally tracked from farm to final product.
- Eligible Products: Any finished consumer goods (e.g., clothing or fabrics) made partly or fully from qualified cotton, certified as ready for retail sale. Excludes products where the credit was already claimed on a component or if the seller knows a prior claim was intended.
- Enhanced Credits for U.S.-Made Intermediates: Businesses can elect higher multipliers—1.6 times for U.S.-made cotton yarn (threads suitable for weaving) and 6.5 times for U.S.-made cotton fabric (woven or knitted materials).
- Administration and Safeguards: The Treasury Secretary, with Agriculture Department input, will issue rules for certification, digital tracking (to identify supply chain participants), and preventing duplicate claims (e.g., notifying buyers of intent to claim). The credit integrates into the general business credit system and can be transferred to other entities (under existing tax rules). Applies to sales after January 20, 2025.
Significant Changes to Existing Law
- Adds a new Section 45BB to the Internal Revenue Code, creating the first dedicated tax credit for consuming U.S. cotton in products.
- Updates Section 38(b) to include this credit in the list of general business credits available to offset taxes.
- Amends Section 6418 to allow transfer of this credit, enabling smaller businesses to sell it to larger ones for cash.
- No direct changes to agricultural or trade laws, but it builds on existing definitions (e.g., from the Agricultural Act of 2014 for cotton types and Trade Act of 1974 for FTAs).
Potential Impacts
- On Government Agencies: The IRS will handle credit claims and audits, while the USDA will assist with origin verification, market pricing, and bale tracking. This could increase administrative workload and require new digital systems for supply chain monitoring.
- On Citizens and Businesses: U.S. cotton farmers and manufacturers may see boosted demand and sales due to the financial incentive, potentially lowering costs for domestic products. Consumers could benefit from more U.S.-made goods, though higher credit costs might indirectly affect tax revenues or prices. Textile and apparel companies gain flexibility with transferable credits but face compliance burdens for tracking.
- On International Relations: Encourages processing in FTA partner countries or U.S. preference programs, potentially strengthening ties with allies (e.g., in Africa or the Caribbean) while disadvantaging non-FTA nations, which could influence global trade dynamics in cotton and textiles.
Main Stakeholders Affected
- U.S. Cotton Producers: Farmers growing eligible cotton varieties, who gain from increased domestic demand.
- Textile and Apparel Manufacturers: Processors and sellers of cotton products, eligible for credits to offset costs.
- Supply Chain Participants: Ginners, yarn spinners, fabric makers, and retailers involved in tracking and certification.
- Government Entities: IRS (tax administration), USDA (origin and pricing support), and potentially the U.S. Trade Representative (for FTA implications).
- Consumers: End-users of cotton goods, who may see shifts in product availability or pricing.
- Foreign Entities: Exporters and processors in non-FTA countries could face competitive disadvantages.
Notable Legal, Constitutional, or Political Implications
- Legal: Relies on tax code authority to incentivize domestic production without direct subsidies, reducing risks of World Trade Organization challenges (as it excludes WTO agreements from FTAs). Digital tracking requirements may raise data privacy concerns under existing laws, addressed through regulations.
- Constitutional: Aligns with Congress's taxing and spending powers (Article I, Section 8); no apparent free speech or due process issues, as it's voluntary for businesses.
- Political: Supports agricultural interests in cotton-producing states (e.g., sponsors from Mississippi, Alabama, Kansas, Arkansas), promoting "Buy American" policies amid trade tensions. Could spark debates on fiscal costs (unquantified revenue loss) or favoritism toward specific crops, but remains neutral on broader environmental or labor standards.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (17)
Sen. Britt, Katie Boyd [R-AL], Sen. Marshall, Roger [R-KS], Sen. Boozman, John [R-AR], Sen. Wicker, Roger F. [R-MS], Sen. Budd, Ted [R-NC], Sen. Tuberville, Tommy [R-AL], Sen. Cornyn, John [R-TX], Sen. Tillis, Thomas [R-NC], Sen. Blackburn, Marsha [R-TN], Sen. Cotton, Tom [R-AR], Sen. Ossoff, Jon [D-GA], Sen. Hawley, Josh [R-MO], Sen. Graham, Lindsey [R-SC], Sen. Moran, Jerry [R-KS], Sen. Warnock, Raphael G. [D-GA], Sen. Schiff, Adam B. [D-CA], Sen. Justice, James C. [R-WV]
Recent Actions
- 2025-05-22: Read twice and referred to the Committee on Finance.
- 2025-05-22: Introduced in Senate
Bill Versions
- Buying American Cotton Act of 2025 — issued 2025-05-22 — PDF (14 pages)