S. 1919

119th CONGRESS 1st Session

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 · Sponsor: Mrs. Hyde-Smith · Committee: Committee on Finance

Table of contents

• S. 1919
  • Sec. 45BB. Domestic cotton consumption credit.

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—
    • the documented volume of qualified cotton in an eligible article sold by the taxpayer in a qualifying sale during the taxable year,
    • the applicable percentage, and
    • 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—
      • 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
      • 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—
    • The term includes any possessions of the United States. United States
    • 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—
    • 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,
    • 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
    • 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.