Buying American Cotton Act of 2025

This bill creates a federal tax credit to encourage using and selling cotton in the United States. Businesses can get a credit based on how much qualified cotton is in a product they sell in a “first sale” to an unrelated buyer in the U.S. The credit equals the pounds of qualified cotton in the item multiplied by a market price and a set percentage. The percentage is higher when the cotton was processed only in the U.S. or in countries with U.S. free trade benefits (24%), and lower if any processing happened in other countries (18) . Sales for use outside the U.S. generally don’t count, unless the income is connected to a U.S. business .

There are extra boosts if the item includes cotton yarn or fabric made in the United States from qualified cotton. If elected, the yarn portion of the credit is multiplied by 1.6, and the fabric portion is multiplied by 6.5 . The market price used is the average international cotton price over the past three calendar years, set by the Treasury Department with input from the Department of Agriculture . The Treasury Department will also set rules to stop double-claiming, require digital tracing in the supply chain, and certify how much qualified cotton is in a product .

• Who is affected: Businesses that sell products containing qualified cotton in the U.S.; supply-chain companies may need to share tracing and certification data .
• What changes: A new tax credit based on cotton content and market price, with higher credit rates for U.S./free-trade processing (24% vs. 18%), plus optional multipliers for U.S.-made cotton yarn (1.6x) and fabric (6.5x) .
• When: Calculated by taxable year using a 3-year average market price from the prior period; more details will come through Treasury rules .