Infant Formula Bill Offers $750 Million in Tax Credits to Boost U.S. Production and Prevent Future Shortages

The Infant Formula Made in America Act of 2025 is a direct legislative response to the supply chain nightmares that left shelves empty a few years ago. This bill doesn't mess around; it uses the tax code to incentivize companies to make more baby formula right here in the U.S., aiming to secure the supply chain for good.

This legislation introduces two major tax breaks. The first is a Domestic Infant Formula Manufacturing Investment Credit, which gives companies a huge 30% tax credit on investments they make in new or expanded U.S. manufacturing equipment. The second is an Infant Formula Production Credit, which hands out $2 for every pound of eligible formula they manufacture and sell domestically. Both incentives are primarily aimed at smaller to mid-sized players, as they are only available to companies with less than $750 million in worldwide revenue.

The 30% Investment Credit: Building the Infrastructure

Think of the Investment Credit as a down payment on new factories. If a company wants to build a new wing or buy a massive, specialized drying machine for formula production, the government will essentially cover 30% of that cost through a tax credit. This is a massive incentive for capital investment. The catch? The company has to promise that at least 50% of the formula made with that new equipment will be sold in the U.S. during the first year of operation. If they break that promise, the IRS will come calling for the credit back, plus interest—a process called 'recapture.'

There are hard limits here: no single project can claim more than $150 million in credit, and the total national allocation for this specific credit is capped at $750 million. This credit also has a 10-year expiration date for when construction must start, meaning companies need to move quickly if they want to take advantage.

The $2-Per-Pound Production Credit: Keeping the Lines Running

While the Investment Credit helps build the factory, the Production Credit helps keep the lights on and the product flowing. This is a straight-up $2 credit for every pound of formula sold in the U.S. It’s a powerful incentive to maximize output. However, it’s not a free-for-all: a company can only claim this credit for a maximum of 18 million pounds per year, and they can only claim it for a five-year period. This structure is designed to give manufacturers a strong financial boost to stabilize and scale their operations without creating a permanent dependency.

The Flexibility Factor: Cash Now

One detail that makes these credits particularly powerful for manufacturers is their flexibility. Both the Investment and Production Credits are made transferable and eligible for direct payment. This means a formula manufacturer doesn't have to wait until tax time to use the credit against their tax bill. They can either sell the credit to another taxpayer (like a bank) for immediate cash, or, in some cases, elect to receive the value of the credit as a direct cash payment from the government. For a smaller company trying to finance a multi-million dollar expansion, getting cash upfront instead of waiting for a tax reduction is a game-changer.

What This Means for the Supply Chain

If this bill works as intended, it should significantly reduce the risk of future formula shortages. By tying massive financial incentives to a requirement for domestic sales, the legislation is essentially buying insurance for the U.S. supply chain. The $750 million investment cap suggests a serious, but finite, commitment to retooling the industry. While the 'Secretary' (likely the Treasury Secretary) has a lot of administrative power in certifying which projects get the limited investment funds, the requirement for public disclosure of who gets the credit should keep the process transparent.