Buying American Cotton Act of 2025

This bill creates a tax credit for businesses that sell products made from domestically grown cotton, aiming to boost U.S. cotton consumption and ensure traceability through a digital supply chain system.

Sec. 2, Domestic cotton consumption credit: The bill adds a new section to the tax code allowing a credit equal to the documented volume of qualified cotton in an eligible article sold in a qualifying sale, multiplied by an applicable percentage and the average cotton market price. The applicable percentage is 24% if the cotton was processed only in the U.S. or in countries with a U.S. free trade agreement or unilateral preference program, and 18% if processed elsewhere. A qualifying sale is the first sale to an unrelated person, excluding most foreign sales unless income is effectively connected to a U.S. business. Qualified cotton must be grown in the U.S., have a permanent bale identification number or other proof of origin, and be digitally traced through the supply chain. Eligible articles are final products ready for retail sale, excluding components already claimed for credit. The credit can be increased by 1.6 times for qualified cotton yarn made in the U.S., and by 6.5 times for qualified cotton fabric made in the U.S. The credit is part of the general business credit and can be transferred. The bill applies to eligible articles sold on or after January 20, 2025.