H.R. 6824

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6824 Introduced in House (IH)]

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119th CONGRESS
1st Session
H. R. 6824

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.

_______________________________________________________________________

IN THE HOUSE OF REPRESENTATIVES

December 17, 2025

Ms. Van Duyne (for herself and Mr. Kustoff) introduced the following 
bill; which was referred to the Committee on Ways and Means

_______________________________________________________________________

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.

Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. TAX CREDIT FOR QUALIFIED COMBINED HEAT AND POWER SYSTEM 
PROPERTY.

(a) Establishment of Credit.--
(1) In general.--Subpart E of part IV of subchapter A of 
chapter 1 of the Internal Revenue Code of 1986 is amended by 
inserting after section 48E the following new section:

``SEC. 48F. CREDIT FOR QUALIFIED COMBINED HEAT AND POWER SYSTEM 
PROPERTY.

``(a) Credit for Qualified Combined Heat and Power System 
Property.--
``(1) In general.--For purposes of section 46, except as 
provided in subsection (c)(1)(B), the credit for qualified 
combined heat and power system property for any taxable year is 
an amount equal to 10 percent of the basis of each qualified 
combined heat and power system property placed in service 
during such taxable year.
``(2) Coordination with rehabilitation credit.--The 
percentage specified in paragraph (1) shall not apply to that 
portion of the basis of any property which is attributable to 
qualified rehabilitation expenditures (as defined in section 
47(c)(2)).
``(3) Qualified combined heat and power system property.--
For purposes of this section, the term `qualified combined heat 
and power system property' means any property--
``(A) which is combined heat and power system 
property,
``(B)(i) the construction, reconstruction, or 
erection of which is completed by the taxpayer, or
``(ii) which is acquired by the taxpayer if the 
original use of such property commences with the 
taxpayer,
``(C) with respect to which depreciation (or 
amortization in lieu of depreciation) is allowable, and
``(D) which meets the performance and quality 
standards (if any) which--
``(i) have been prescribed by the Secretary 
by regulations (after consultation with the 
Secretary of Energy), and
``(ii) are in effect at the time of the 
acquisition of the property.
Such term shall not include any property which is part 
of a facility the production from which is allowed as a 
credit under section 45 for the taxable year or any 
prior taxable year.
``(4) Special rule for property financed by tax-exempt 
bonds.--Rules similar to the rule under section 45(b)(3) shall 
apply for purposes of this section.
``(5) Domestic content bonus credit amount.--
``(A) In general.--In the case of any energy 
project which satisfies the requirement under 
subparagraph (B), for purposes of applying paragraph 
(1) with respect to qualified combined heat and power 
system property that is part of such project, the 
percentage specified in paragraph (1) shall be 
increased by 10 percentage points.
``(B) Requirement.--Rules similar to the rules of 
section 45(b)(9)(B) shall apply.
``(6) Increase in credit rate for energy communities.--In 
the case of any energy project that is placed in service within 
an energy community (as defined in section 45(b)(11)(B), as 
applied by substituting `energy project' for `qualified 
facility' each place it appears), for purposes of applying 
paragraph (1) with respect to qualified combined heat and power 
system property which is part of such project, the percentage 
specified in paragraph (1) shall be increased by 10 percentage 
points.
``(7) Regulations and guidance.--The Secretary shall issue 
such regulations or other guidance as the Secretary determines 
necessary to carry out the purposes of this subsection, 
including regulations or other guidance which provides for 
requirements for recordkeeping or information reporting for 
purposes of administering the requirements of this subsection.
``(b) Certain Progress Expenditure Rules Made Applicable.--Rules 
similar to the rules of subsections (c)(4) and (d) of section 46 (as in 
effect on the day before the date of the enactment of the Revenue 
Reconciliation Act of 1990) shall apply for purposes of subsection (a).
``(c) Definitions.--For purposes of this section--
``(1) Combined heat and power system property.--
``(A) Combined heat and power system property.--The 
term `combined heat and power system property' means 
property comprising a system--
``(i) which uses the same energy source for 
the simultaneous or sequential generation of 
electrical power, mechanical shaft power, or 
both, in combination with the generation of 
steam or other forms of useful thermal energy 
(including heating and cooling applications),
``(ii) which produces--
``(I) at least 20 percent of its 
total useful energy in the form of 
thermal energy which is not used to 
produce electrical or mechanical power 
(or combination thereof), and
``(II) at least 20 percent of its 
total useful energy in the form of 
electrical or mechanical power (or 
combination thereof),
``(iii) the energy efficiency percentage of 
which exceeds 60 percent, and
``(iv) the construction of which begins on 
or after January 1, 2025.
``(B) Limitation.--
``(i) In general.--In the case of combined 
heat and power system property with an 
electrical capacity in excess of the applicable 
capacity placed in service during the taxable 
year, the credit under subsection (a)(1) 
(determined without regard to this paragraph) 
for such year shall be equal to the amount 
which bears the same ratio to such credit as 
the applicable capacity bears to the capacity 
of such property.
``(ii) Applicable capacity.--For purposes 
of clause (i), the term `applicable capacity' 
means 25 megawatts or a mechanical energy 
capacity of more than 33,500 horsepower, or an 
equivalent combination of electrical and 
mechanical energy capacities.
``(iii) Maximum capacity.--The term 
`combined heat and power system property' shall 
not include any property comprising a system if 
such system has a capacity in excess of 50 
megawatts or a mechanical energy capacity in 
excess of 67,000 horsepower, or an equivalent 
combination of electrical and mechanical energy 
capacities.
``(iv) Clarification regarding capacity 
determinations.--For purposes of this 
subparagraph, the determination of the 
electrical or mechanical energy capacity of any 
system shall be based on the normal operating 
rates of such system.
``(C) Special rules.--
``(i) Energy efficiency percentage.--For 
purposes of this paragraph, the energy 
efficiency percentage of a system is the 
fraction--
``(I) the numerator of which is the 
total useful electrical, thermal, and 
mechanical power produced by the system 
at normal operating rates, and expected 
to be consumed in its normal 
application, and
``(II) the denominator of which is 
the lower heating value of the fuel 
sources for the system.
``(ii) Determinations made on btu basis.--
The energy efficiency percentage and the 
percentages under subparagraph (A)(ii) shall be 
determined on a Btu basis.
``(iii) Input and output property not 
included.--The term `combined heat and power 
system property' does not include property used 
to transport the energy source to the facility 
or to distribute energy produced by the 
facility.
``(D) Systems using biomass.--If a system is 
designed to use biomass (within the meaning of 
paragraphs (2) and (3) of section 45(c) without regard 
to the last sentence of paragraph (3)(A)) for at least 
90 percent of the energy source--
``(i) subparagraph (A)(iii) shall not 
apply, but
``(ii) the amount of credit determined 
under subsection (a) with respect to such 
system shall not exceed the amount which bears 
the same ratio to such amount of credit 
(determined without regard to this 
subparagraph) as the energy efficiency 
percentage of such system bears to 60 percent.
``(2) Energy project.--The term `energy project' means a 
project consisting of one or more qualified combined heat and 
power system properties that are part of a single project.''.
(2) Clerical amendment.--The table of sections for subpart 
E of part IV of subchapter A of chapter 1 of such Code is 
amended by inserting after the item relating to section 48E the 
following new item:

``48F. Credit for qualified combined heat and power system property.''.
(b) Coordination With Energy Credit.--Section 48(c)(3)(B) of such 
Code is amended by adding at the end the following new clause:
``(iv) Clarification regarding capacity 
determinations.--For purposes of this 
subparagraph, the determination of the 
electrical or mechanical energy capacity of any 
system shall be based on the normal operating 
rates of such system.''.
(c) Conforming Amendments.--
(1) Section 38(c)(4)(B)(x) of such Code is amended by 
inserting ``or the credit for qualified combined heat and power 
system property determined under section 48F'' after ``section 
48''.
(2) Section 45L(f) of such Code is amended by striking ``47 
or 48(a)'' and inserting ``47, 48(a), or 48F(a)''.
(3) Section 46 of such Code is amended by striking ``and'' 
at the end of paragraph (6), by striking the period at the end 
of paragraph (7) and inserting ``, and'', and by adding at the 
end the following new paragraph:
``(8) the credit for qualified combined heat and power 
system property.''.
(4) Section 48C(f) of such Code is amended by inserting 
``48F,'' after ``48E,''.
(5) Section 50(a)(2)(E) of such Code is amended by striking 
``or 48E(e)'' and inserting ``48E(e), or 48F(b)''.
(6) Section 59A(b)(3)(C) of such Code is amended by 
inserting ``or the credit for qualified combined heat and power 
system property determined under section 48F'' after ``section 
48''.
(d) Effective Date.--
(1) In general.--Except as otherwise provided in this 
subsection, the amendments made by this section shall apply to 
property the construction of which begins after December 31, 
2024.
(2) Coordination with energy credit.--
(A) In general.--The amendment made by subsection 
(b) shall apply to property--
(i) the construction of which begins before 
January 1, 2025, and
(ii) which is placed in service during 
taxable years beginning after December 31, 
2024.
(B) No inference.--The amendment made by subsection 
(b) shall not be construed to create any inference with 
respect to the proper application of section 
48(c)(3)(B) of the Internal Revenue Code of 1986 with 
respect to taxable years beginning before January 1, 
2025.
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