Sen. Gillibrand Plans to Bring Back Fashion Industry with FABRIC Act

We wrote last week about the America COMPETES Act designed to make American businesses more competitive internationally, particularly with China. Now, Senator Kirsten Gillibrand (D, NY) has introduced the Fashioning Accountability and Building Real Institutional Change (“FABRIC”) Act which, among other things, provides incentives to repatriate apparel manufacturing businesses.

The ostensible focus of the bill is to strengthen wage and other labor protections, eliminate piece rates, and establish a national registry of garment manufacturers. As the Senator put it, without a hint of irony, “the FABRIC Act will thread the needle of protecting workers’ rights, ensure seamless wage and hour enforcement, and promote an industry that is essential to the fabric of America.” If I tried, I don’t think I could have written a more Firesign Theater-like sentence.

That being said, there are two provisions in the bill designed to encourage garment manufacturers to “insource” their operations:

  • A 30% tax credit on all eligible insourcing expenses including:

    • expenses paid or incurred in connection with the elimination of any business unit located outside the United States
    • expenses paid or incurred in connection with the establishment of any business unit located within a Historically Underutilized Business Zone (“HUBZone” as defined by the SBA) or a low-income community

  • A grant of up to $5 million to fund training and workforce development, acquisition of tools and equipment, and facilities and capital improvements acquisitions

To qualify for the tax credit, businesses must have more full-time equivalent employees in the credit year than they did for the last taxable year ending before the first taxable year in which such eligible insourcing expenses were paid or incurred.

Priority among applicants for the National Domestic Garment Manufacturing Support Program Grants will be given to those businesses who:

  • Have a workforce covered by a collective bargaining agreement;
  • Be a minority-owned business, a women-owned business, or a veteran-owned business; gold
  • Have operated as a garment manufacturer within the United States for more than 5 years.

Count on Friedman

It is not clear if this bill will become law as stand-alone legislation, as part of another Act, or if it’s merely all dressed up with nowhere to go. Watch this space. You can always contact your Friedman LLP advisor with any questions.

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