The "Supply Chain Security and Growth Act of 2025" incentivizes domestic production of critical goods like pharmaceuticals, semiconductors, and aerospace equipment by offering a 40% tax credit for investments in facilities located in U.S. territories or Puerto Rico, while also increasing the tax credit for taxes paid to those possessions.
Nicole Malliotakis
Representative
NY-11
The "Supply Chain Security and Growth Act of 2025" introduces a 40% tax credit for investments in critical supply chain facilities located in U.S. possessions or Puerto Rico, aimed at encouraging reshoring. This credit applies to facilities manufacturing essential items like pharmaceuticals, semiconductors, aerospace equipment and artificial nanomaterials. The bill also increases the deemed credit for taxes paid to a U.S. possession from 80% to 100%. It allows taxpayers to elect to receive direct payments from the IRS for the credit or transfer the credit to unrelated parties.
New Tax Credit Aims to Bring Key Industries Back to US Soil: 40% Credit for Pharma, Semiconductors, Aerospace, and Nanomaterials Manufacturing in US Territories
The "Supply Chain Security and Growth Act of 2025" is all about making the U.S. less reliant on other countries for crucial stuff. The bill introduces a hefty 40% tax credit for companies that set up shop in Puerto Rico or other U.S. possessions to manufacture specific products deemed critical to national supply chains. Think pharmaceuticals, semiconductors, aerospace gear, and artificial nanomaterials.
Boosting Domestic Manufacturing
This bill's main goal is to incentivize companies to build or expand facilities in U.S. territories. If a company invests in a new factory making, say, semiconductors in Puerto Rico, they could get 40% of that investment back as a tax credit. (SEC. 2). It's not just about building new facilities; the credit also applies to equipment and other tangible property needed to run these operations. The idea is to boost American production of these essential goods. The bill also increases the deemed credit for taxes paid to a U.S. possession from 80% to 100% (SEC. 3), making investment in these places even more attractive.
Real-World Rollout
Imagine a pharmaceutical company that currently sources its active ingredients from overseas. This bill could make it financially attractive for them to build a new plant in Puerto Rico. Or, consider a small business that manufactures parts for airplanes. If they expand their operations into a designated "economically distressed zone" (a qualified opportunity zone with a poverty rate of at least 30%) in Puerto Rico, they, along with other companies in their affiliated group, could get this tax credit. (SEC.2). This bill also allows for flexibility – companies can choose to receive direct payments from the IRS instead of taking the credit, or they can even transfer the credit to another company. These provisions are designed to make the incentive as useful as possible. The changes kick in for property placed in service after December 31, 2024.
Keeping it Local
There's a catch, though. Companies with close ties to "prohibited foreign entities," basically entities controlled or significantly influenced by "covered nations" (as defined in title 10, United States Code, section 4872(d)), can't take advantage of this credit (SEC. 2). This is to prevent companies from countries like China, for example, from benefiting. While the bill aims to strengthen American supply chains, focusing solely on U.S. possessions might limit its impact. Also, defining exactly what counts as a "critical supply chain facility" could be tricky, potentially leading to some companies trying to game the system.