The Buying American Cotton Act establishes a new federal tax credit to incentivize the purchase and use of domestically grown cotton and cotton products. Businesses that sell eligible cotton articles (final consumer products made wholly or partly from U.S.-grown cotton) can claim a credit based on the documented volume of American cotton in the product multiplied by the market price of cotton. The credit rate is 24 percent for products processed only in the United States or in countries with U.S. free trade agreements, and 18 percent for products processed in other countries. The bill provides enhanced credits of up to 6.5 times the standard rate for products made from qualified U.S.-grown cotton yarn or fabric, rewarding greater domestic processing. To qualify, cotton must be tracked digitally through the entire supply chain with permanent bale identification numbers to verify U.S. origin. The credit takes effect for articles sold on or after January 20, 2025, and applies to textile and apparel manufacturers, processors, and retailers selling cotton products to consumers.
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