Bill Summary
This legislation, known as the "Buying American Cotton Act of 2025", aims to amend the Internal Revenue Code of 1986 to establish a domestic cotton consumption credit. The purpose of this legislation is to encourage the consumption of cotton that is grown in the United States and products made from that cotton, and to document the processing of the cotton through a trustworthy supply chain tracing system. This credit would be allowed for the documented volume of qualified cotton in an eligible article sold by a taxpayer in a qualifying sale during the taxable year. The amount of the credit would be determined by multiplying the documented volume of cotton by the applicable percentage and the applicable cotton market price. The applicable percentage would be 24% for eligible articles that were only processed in the United States or in countries with which the US has a free trade agreement, and 18% for those processed in other countries. The applicable cotton market price would be determined by the Secretary of the Treasury in consultation with the Secretary of Agriculture. The legislation also includes definitions for terms such as "eligible article", "qualified cotton", and "processing", as well as provisions for increased credit for qualified cotton yarn and fabric. The Secretary of the Treasury is responsible for implementing regulations and guidelines to ensure the credit is not claimed more than once and to certify the origin and volume of qualified cotton. The credit would be allowed as part of the general business credit and can be transferred. The effective date for this legislation is January 20, 2025.
Possible Impacts
1. Potential tax benefits for consumers and businesses who purchase and sell eligible articles made from qualified cotton, as outlined in the Buying American Cotton Act of 2025. This could affect people by encouraging them to support US-grown cotton and ultimately boosting the domestic cotton industry.
2. The requirement for a trustworthy supply chain tracing system to document the processing of qualified cotton, which could impact companies that rely on imported cotton and do not have a reliable tracking system in place. This could affect people by potentially leading to job loss and a decrease in imported goods.
3. The exclusion of certain countries from the definition of a "free trade agreement" or "unilateral preference program" could affect people in those countries who may not have access to the same trade benefits as countries included in these agreements. This could potentially impact the economies of those countries and the livelihoods of individuals within them.
[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 1919 Introduced in Senate (IS)]
<DOC>
119th CONGRESS
1st Session
S. 1919
To amend the Internal Revenue Code of 1986 to establish a domestic
cotton consumption credit.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
May 22, 2025
Mrs. Hyde-Smith (for herself, Mrs. Britt, Mr. Marshall, and Mr.
Boozman) introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to establish a domestic
cotton consumption credit.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Buying American Cotton Act of
2025''.
SEC. 2. DOMESTIC COTTON CONSUMPTION CREDIT.
(a) Purpose.--The purposes of this section are--
(1) to encourage the consumption of cotton which originated
in the United States, and products which are made from such
cotton, and
(2) to document the processing of such cotton through a
trustworthy supply chain tracing system.
(b) Allowance of Credit.--Subpart D of part IV of subchapter A of
chapter 1 of the Internal Revenue Code of 1986 is amended by adding at
the end the following new section:
``SEC. 45BB. DOMESTIC COTTON CONSUMPTION CREDIT.
``(a) Credit Allowed.--For purposes of section 38, the domestic
cotton consumption credit determined under this section for any taxable
year is an amount equal to the product of--
``(1) the documented volume of qualified cotton in an
eligible article sold by the taxpayer in a qualifying sale
during the taxable year,
``(2) the applicable percentage, and
``(3) the applicable cotton market price.
``(b) Qualifying Sale; Applicable Percentage; Applicable Cotton
Market Price.--
``(1) Qualifying sale.--For purposes of this section--
``(A) In general.--The term `qualifying sale'
means, with respect to any eligible article, the first
sale of such eligible article to an unrelated person.
``(B) Exception.--Such term shall not include any
sale for use or consumption of an eligible article
outside of the United States unless such sale results
in income which is effectively connected with a trade
or business in the United States.
``(C) Related persons.--Persons shall be treated as
related to each other if such persons would be treated
as a single employer under the regulations prescribed
under section 52(b).
``(2) Applicable percentage.--For purposes of subsection
(a)(2), the applicable percentage is--
``(A) in the case of an eligible article consisting
of qualified cotton that--
``(i) was only subject to processing in the
United States, or
``(ii) in addition to any processing that
may have occurred within the United States, was
subject to additional processing only in a
country or countries with which the United
States has entered into a free trade agreement
or for which the United States has extended
benefits through a unilateral preference
program, 24 percent, and
``(B) in the case of an eligible article consisting
of qualified cotton that was subject to additional
processing at any stage of its processing in a country
with which the United States has not entered into a
free trade agreement or for which the United States has
not extended benefits through a unilateral preference
program, 18 percent.
``(3) Applicable cotton market price.--For purposes of this
section, the term `applicable cotton market price' means, with
respect to any eligible article, the average market price for
qualified cotton in a recognized international market (as
determined by the Secretary, in consultation with the Secretary
of Agriculture) for the 3-calendar year period ending with or
within the taxable year immediately preceding the taxable year
in which the eligible article is sold.
``(c) Other Definitions.--For purposes of this section--
``(1) Eligible article.--
``(A) In general.--The term `eligible article'
means any product which--
``(i) is comprised in whole or in part of
qualified cotton which is certified, under such
regulations established by the Secretary in
consultation with the Secretary of Agriculture,
as meeting the requirements of paragraph
(2)(B)(ii),
``(ii) is in its final condition, and
``(iii) is ready for retail sale to a
consumer.
``(B) Exception.--Such term shall not include any
product if--
``(i) any component of such product is an
eligible article for which a credit has been
allowed, or
``(ii) the taxpayer selling such product
has been notified by the person from whom such
a component was acquired that such person
intended to claim such credit.
``(C) Final condition.--
``(i) In general.--For purposes of
subparagraph (A)(ii), the term `final
condition' means, with respect to any article,
the physical state in which such article is
presented for sale or sold for immediate resale
to a consumer, determined--
``(I) without regard to any de
minimis augmentation that could be
performed on it by or on behalf of a
retailer of the eligible article, and
``(II) without regard to packaging.
``(ii) De minimis augmentation.--For
purposes of clause (i)(I), the term `de minimis
augmentation' means any graphics or other
adornment imposed on or attached to the
article.
``(2) Qualified cotton.--
``(A) In general.--The term `qualified cotton'
means extra long staple cotton (as defined in section
1111 of the Agricultural Act of 2014) or upland cotton
(within the meaning of section 1207(c) of such Act)
which--
``(i) is grown in the United States, and
``(ii) meets the proof of origin
requirements of subparagraph (B).
``(B) Proof of origin requirements.--Cotton meets
the proof of origin requirements of this subparagraph
if--
``(i) such cotton was--
``(I) assigned a permanent bale
identification number, or
``(II) meets such other
requirements as the Secretary, in
consultation with the Secretary of
Agriculture, determines is sufficient
to prove that the cotton originated in
the United States, and
``(ii) the movement and volume of such
cotton is digitally traced, under such
regulations established by the Secretary in
consultation with the Secretary of Agriculture,
through the supply chain from its United States
origin through to the last stage of processing
into an eligible article.
``(C) Permanent bale identification number.--The
term `permanent bale identification number' means the
autogenerated identification number assigned by the
Secretary of Agriculture to a bale of qualified cotton
that was grown and ginned in the United States.
``(3) Free trade agreement.--
``(A) In general.--Except as provided by
subparagraph (B), the term `free trade agreement' means
a comprehensive bilateral or regional agreement--
``(i) that covers substantially all trade
between the parties to the agreement, and
``(ii) with respect to which an
implementing bill (as defined in section 151 of
the Trade Act of 1974 (19 U.S.C. 2191)) is
enacted into law.
``(B) Exclusions.--The term `free trade agreement'
does not include--
``(i) the WTO Agreement, as defined in
section 2 of the Uruguay Round Agreements Act
(19 U.S.C. 3501),
``(ii) the agreements specified in 101(d)
of that Act (19 U.S.C. 3511(d)), or
``(iii) any other multilateral agreement of
the World Trade Organization or any successor
entity.
``(4) Unilateral preference program.--
``(A) In general.--Except as provided by
subparagraph (B), the term `unilateral preference
program'--
``(i) means a program of the United States
that provides preferential duty treatment to
textile or apparel articles imported from a
foreign country that is designated as a
beneficiary of the program, and
``(ii) includes--
``(I) the African Growth and
Opportunity Act (19 U.S.C. 3701 et
seq.) and section 506A of the Trade Act
of 1974 (19 U.S.C. 2466a),
``(II) the Caribbean Basin Economic
Recovery Act (19 U.S.C. 2701 et seq.),
``(III) section 915 of the Trade
Facilitation and Trade Enforcement Act
of 2015 (19 U.S.C. 4454), and
``(IV) any other provision of law--
``(aa) establishing a
program that provides
preferential duty treatment to
textile or apparel articles
imported from a foreign country
that is designated as a
beneficiary of the program, and
``(bb) that is enacted
after the date of the enactment
of this section.
``(B) Exclusion.--The term `unilateral preference
program' does not include the Generalized System of
Preferences under title V of the Trade Act of 1974 (19
U.S.C. 2461 et seq.).
``(5) Processing.--
``(A) In general.--The term `processing' means any
physical process, or any stage in such process, that
contributes to the conversion of an item comprised in
whole or in part of qualified cotton into an eligible
article.
``(B) Exception.--Such term shall not include the
mere physical possession, storage, movement, or
packaging of cotton or any eligible article.
``(6) United states.--The term `United States' includes any
possessions of the United States.
``(7) Volume.--The term `volume' means, with respect to any
eligible article, the amount of qualified cotton in such
article, as measured in pounds.
``(d) Increased Credit for Qualified Cotton Yarn and Qualified
Cotton Fabric.--
``(1) Qualified cotton yarn.--
``(A) In general.--At the election of the taxpayer,
in the case of any eligible article which is composed
in whole or in part of qualified cotton yarn--
``(i) this section shall be applied
separately with respect to such cotton yarn,
and
``(ii) the amount determined under
subsection (a) with respect to such cotton yarn
shall be equal to such amount (determined
without regard to this subsection) multiplied
by 1.6.
``(B) Qualified cotton yarn.--For purposes of this
subsection, the term `qualified cotton yarn' means a
strand of fiber made in the United States from
qualified cotton into a form suitable for weaving,
knitting, braiding, felting, webbing, or otherwise
fabricating into a fabric.
``(2) Qualified cotton fabric.--
``(A) In general.--At the election of the taxpayer,
in the case of any eligible article which is composed
in whole or in part of qualified cotton fabric--
``(i) this section shall be applied
separately with respect to such cotton fabric,
and
``(ii) the amount determined under
subsection (a) with respect to such cotton
fabric shall be equal to such amount
(determined without regard to this subsection)
multiplied by 6.5.
``(B) Qualified cotton fabric.--For purposes of
this subsection, the term `qualified cotton fabric'
means any material woven, knitted, felted, or otherwise
produced in the United States from, or in combination
with, any fiber, yarn, or substitute thereof that was
made in the United States from qualified cotton.
``(3) Election.--An election under this subsection shall be
made at such time and in such form as the Secretary may be
regulations provide.
``(e) Regulations.--The Secretary shall prescribe such regulations
and other guidance as may be necessary or appropriate to carry out this
section, including regulations or guidance--
``(1) to establish a system for preventing the credit
allowed under this subsection more than once with respect to
any amount of qualified cotton, which may include establishing
a requirement to notify purchasers of eligible articles of the
intent to claim the credit allowed under this section,
``(2) with respect to the digital tracing of cotton under
subsection (c)(2)(B)(ii), which may include requirements to
identify the taxpayers within the supply chain, and
``(3) with respect to the certification of qualified cotton
under subsection (c)(1)(A)(i), which may require reporting of
the specific volume of qualified cotton in the eligible
article.''.
(c) Credit Allowed as Part of General Business Credit.--Section
38(b) of such Code is amended by striking ``plus'' at the end of
paragraph (40), by striking the period at the end of paragraph (41),
and by adding at the end the following new paragraph:
``(42) the domestic cotton consumption credit determined
under section 45BB.''.
(d) Transfer of Credit.--Section 6418(f)(1)(A) of such Code is
amended by adding at the end the following:
``(xii) The domestic cotton consumption
credit determined under section 45BB(a).''.
(e) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1 of such Code is amended by adding
at the end the following item:
``Sec. 45BB. Domestic cotton consumption credit.''.
(f) Effective Date.--The amendments made by this section shall
apply to eligible articles (as defined in section 45BB of the Internal
Revenue Code of 1986, as added by subsection (b)) that are sold on or
after January 20, 2025.
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