A bill 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.

New CHP tax credit for businesses

If enacted, businesses that put combined heat and power (CHP) systems in service after December 31, 2024, would be able to claim a federal investment tax credit. The base credit would be 10% of the system's eligible tax basis. Projects meeting domestic content rules would get an extra 10 percentage points, and projects in a designated energy community would get another 10 points, for up to 30% total. The portion of project basis attributable to qualified rehabilitation expenditures would not count toward the 10% base. Systems must meet technical output and efficiency tests; biomass systems using at least 90% biomass would skip the >60% efficiency test but have the credit capped by their efficiency ratio. Credits are prorated if capacity placed in service in the year exceeds 25 megawatts, and systems over 50 megawatts are ineligible. The bill would add technical cross-references so the new credit works with other tax rules, and Treasury would issue regulations and reporting rules while the Treasury Secretary sets performance standards after consulting DOE.