Sponsors (103)
The bill boosts revenue and on‑shore processing for U.S. cotton producers and manufacturers and improves traceability, at the cost of added compliance and administrative burdens and likely higher input prices for downstream buyers.
Domestic cotton producers and U.S. textile manufacturers receive a per‑pound refundable tax credit, increasing their revenue and incentivizing on‑shore processing and investment.
Farmers and state regulators benefit from required digital tracing and permanent bale IDs, improving supply‑chain transparency and reducing opportunities for fraud in U.S. cotton markets.
Consumers and small businesses buying textile inputs may face higher costs because the credit favors U.S. origin and processing, shifting supply away from lower‑cost foreign inputs.
Taxpayers and small producers must bear additional compliance costs to implement digital tracing, permanent bale IDs, and certification systems required to claim the credit.
Taxpayers and financial institutions could face increased administrative complexity, enforcement disputes, and audits from IRS/USDA over origin, processing, and volume measurements, causing delays and unpredictability in credit claims.
Based on analysis of 2 sections of legislative text.
Creates a refundable tax credit for documented U.S.-origin cotton content with tracing, higher rates for domestic/FTA processing, and optional multipliers for yarn and fabric.
Official title: To amend the Internal Revenue Code of 1986 to establish a domestic cotton consumption credit.
Introduced January 22, 2026 by Gregory Francis Murphy · Last progress January 22, 2026
Creates a refundable tax credit that rewards use of U.S.-origin cotton in products when the cotton is documented and digitally traced through the supply chain. The credit amount is calculated from documented pounds of qualified cotton, an applicable percentage (higher when additional processing stays in the U.S. or in U.S. FTA/preference partners), and an average market price set by Treasury with USDA input. Establishes tracing and permanent bale identification requirements, authorizes Treasury (in consultation with USDA) to write implementing rules, allows higher multipliers if taxpayers elect to treat qualified cotton as yarn or fabric, prevents double claims, treats the credit as part of the general business credit, and permits transferability under existing transfer rules. The credit applies to eligible articles sold after enactment.