H.R. 7230

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 7230 Introduced in House (IH)]

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119th CONGRESS
2d Session
H. R. 7230

To amend the Internal Revenue Code of 1986 to establish a domestic 
cotton consumption credit.

_______________________________________________________________________

IN THE HOUSE OF REPRESENTATIVES

January 22, 2026

Mr. Murphy (for himself, Ms. Sewell, Mr. Rouzer, Mr. Espaillat, Mr. 
Kustoff, Mr. David Scott of Georgia, Mr. Carey, Mr. Davis of North 
Carolina, Mr. Thompson of Pennsylvania, Mr. Vicente Gonzalez of Texas, 
Mr. Moore of Alabama, Ms. Adams, Mr. Mann, Ms. Brown, Mr. Allen, Mr. 
Figures, Mr. Pfluger, Mr. Costa, Mr. Crawford, Mr. Bishop, Mr. Austin 
Scott of Georgia, Mr. Gray, Mr. Jackson of Texas, and Mr. Carbajal) 
introduced the following bill; which was referred to the Committee on 
Ways and Means

_______________________________________________________________________

A BILL

To amend the Internal Revenue Code of 1986 to establish a domestic 
cotton consumption credit.

Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Buying American Cotton Act of 
2026''.

SEC. 2. DOMESTIC COTTON CONSUMPTION CREDIT.

(a) Purpose.--The purposes of this section are--
(1) to encourage the consumption of cotton which originated 
in the United States, and products which are made from such 
cotton, and
(2) to document the processing of such cotton through a 
trustworthy supply chain tracing system.
(b) Allowance of Credit.--Subpart D of part IV of subchapter A of 
chapter 1 of the Internal Revenue Code of 1986 is amended by adding at 
the end the following new section:

``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--
``(1) the documented volume of qualified cotton in an 
eligible article sold by the taxpayer in a qualifying sale 
during the taxable year,
``(2) the applicable percentage, and
``(3) 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--
``(A) 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
``(B) 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--
``(1) Eligible article.--
``(A) In general.--The term `eligible article' 
means any product which--
``(i) is comprised in whole or in part of 
qualified cotton which is certified, under such 
regulations established by the Secretary in 
consultation with the Secretary of Agriculture, 
as meeting the requirements of paragraph 
(2)(B)(ii),
``(ii) is in its final condition, and
``(iii) is ready for retail sale to a 
consumer.
``(B) Exception.--Such term shall not include any 
product if--
``(i) any component of such product is an 
eligible article for which a credit has been 
allowed, or
``(ii) the taxpayer selling such product 
has been notified by the person from whom such 
a component was acquired that such person 
intended to claim such credit.
``(C) Final condition.--
``(i) In general.--For purposes of 
subparagraph (A)(ii), the term `final 
condition' means, with respect to any article, 
the physical state in which such article is 
presented for sale or sold for immediate resale 
to a consumer, determined--
``(I) without regard to any de 
minimis augmentation that could be 
performed on it by or on behalf of a 
retailer of the eligible article, and
``(II) without regard to packaging.
``(ii) De minimis augmentation.--For 
purposes of clause (i)(I), the term `de minimis 
augmentation' means any graphics or other 
adornment imposed on or attached to the 
article.
``(2) Qualified cotton.--
``(A) In general.--The term `qualified cotton' 
means extra long staple cotton (as defined in section 
1111 of the Agricultural Act of 2014) or upland cotton 
(within the meaning of section 1207(c) of such Act) 
which--
``(i) is grown in the United States, and
``(ii) meets the proof of origin 
requirements of subparagraph (B).
``(B) Proof of origin requirements.--Cotton meets 
the proof of origin requirements of this subparagraph 
if--
``(i) such cotton was--
``(I) assigned a permanent bale 
identification number, or
``(II) meets such other 
requirements as the Secretary, in 
consultation with the Secretary of 
Agriculture, determines is sufficient 
to prove that the cotton originated in 
the United States, and
``(ii) the movement and volume of such 
cotton is digitally traced, under such 
regulations established by the Secretary in 
consultation with the Secretary of Agriculture, 
through the supply chain from its United States 
origin through to the last stage of processing 
into an eligible article.
``(C) Permanent bale identification number.--The 
term `permanent bale identification number' means the 
autogenerated identification number assigned by the 
Secretary of Agriculture to a bale of qualified cotton 
that was grown and ginned in the United States.
``(3) Free trade agreement.--
``(A) In general.--Except as provided by 
subparagraph (B), the term `free trade agreement' means 
a comprehensive bilateral or regional agreement--
``(i) that covers substantially all trade 
between the parties to the agreement, and
``(ii) with respect to which an 
implementing bill (as defined in section 151 of 
the Trade Act of 1974 (19 U.S.C. 2191)) is 
enacted into law.
``(B) Exclusions.--The term `free trade agreement' 
does not include--
``(i) the WTO Agreement, as defined in 
section 2 of the Uruguay Round Agreements Act 
(19 U.S.C. 3501),
``(ii) the agreements specified in 101(d) 
of that Act (19 U.S.C. 3511(d)), or
``(iii) any other multilateral agreement of 
the World Trade Organization or any successor 
entity.
``(4) Unilateral preference program.--
``(A) In general.--Except as provided by 
subparagraph (B), the term `unilateral preference 
program'--
``(i) means a program of the United States 
that provides preferential duty treatment to 
textile or apparel articles imported from a 
foreign country that is designated as a 
beneficiary of the program, and
``(ii) includes--
``(I) the African Growth and 
Opportunity Act (19 U.S.C. 3701 et 
seq.) and section 506A of the Trade Act 
of 1974 (19 U.S.C. 2466a),
``(II) the Caribbean Basin Economic 
Recovery Act (19 U.S.C. 2701 et seq.),
``(III) section 915 of the Trade 
Facilitation and Trade Enforcement Act 
of 2015 (19 U.S.C. 4454), and
``(IV) any other provision of law--
``(aa) establishing a 
program that provides 
preferential duty treatment to 
textile or apparel articles 
imported from a foreign country 
that is designated as a 
beneficiary of the program, and
``(bb) that is enacted 
after the date of the enactment 
of this section.
``(B) Exclusion.--The term `unilateral preference 
program' does not include the Generalized System of 
Preferences under title V of the Trade Act of 1974 (19 
U.S.C. 2461 et seq.).
``(5) Processing.--
``(A) In general.--The term `processing' means any 
physical process, or any stage in such process, that 
contributes to the conversion of an item comprised in 
whole or in part of qualified cotton into an eligible 
article.
``(B) Exception.--Such term shall not include the 
mere physical possession, storage, movement, or 
packaging of cotton or any eligible article.
``(6) United states.--The term `United States' includes any 
possessions of the United States.
``(7) Volume.--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--
``(1) 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,
``(2) 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
``(3) 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.''.
(c) Credit Allowed as Part of General Business Credit.--Section 
38(b) of such Code is amended by striking ``plus'' at the end of 
paragraph (40), by striking the period at the end of paragraph (41), 
and by adding at the end the following new paragraph:
``(42) the domestic cotton consumption credit determined 
under section 45BB.''.
(d) Transfer of Credit.--Section 6418(f)(1)(A) of such Code is 
amended by adding at the end the following:
``(xii) The domestic cotton consumption 
credit determined under section 45BB(a).''.
(e) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of such Code is amended by adding 
at the end the following item:

``Sec. 45BB. Domestic cotton consumption credit.''.
(f) Effective Date.--The amendments made by this section shall 
apply to eligible articles (as defined in section 45BB of such Code, as 
added by subsection (b)) that are sold after the date of the enactment 
of this Act.
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