To amend the Internal Revenue Code of 1986 to establish a tax credit for qualified combined heat and power system property, and for other purposes.

Tax credit for CHP projects

If enacted, this bill would create a federal investment tax credit for qualified combined heat and power (CHP) system property. The base credit would equal 10% of the system's eligible tax basis, excluding any portion attributable to qualified rehabilitation expenditures. The credit rate could increase by 10 percentage points if the project meets a domestic content test and by another 10 points if it is placed in an energy community. Systems must meet performance, quality, capacity, and efficiency rules: construction generally must begin after December 31, 2024, efficiency must exceed 60% (Btu basis) unless the system uses at least 90% biomass, and credits are prorated or disallowed for systems above the 25 MW applicable capacity or over the 50 MW maximum. The bill would apply progress-expenditure and tax-exempt bond rules similar to current energy tax rules and would let the Secretary write implementing regulations and reporting requirements.