This bill creates a new tax credit to encourage businesses to invest in combined heat and power systems—equipment that generates electricity and useful heat from the same energy source. Here's what that means in practical terms: if a company builds or buys one of these systems, they can claim a 10% tax credit on the cost. For example, if a manufacturing facility installs a $1 million combined heat and power system, they could get a $100,000 tax credit. The credit is designed to reward efficiency—the systems must produce at least 20% of their energy as heat and at least 20% as electricity or mechanical power, with overall efficiency exceeding 60%. There are size limits: the systems can't exceed 50 megawatts of electrical capacity or 67,000 horsepower of mechanical capacity. The bill also includes bonus credits: companies get an extra 10% credit if they use domestically-made equipment, and another 10% if they build in economically distressed 'energy communities.' The credit applies to systems where construction begins on or after January 1, 2025, and the IRS will issue regulations to define technical standards and ensure compliance.

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.