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.
- Bill Number
- H.R. 6824
- Origin Chamber
- House
- Congress
- 119th Congress, Session 1
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2025-12-17: Referred to the House Committee on Ways and Means.
- Last Updated
- 2026-01-26T15:13:34Z
AI-Generated Summary
Purpose
This bill aims to encourage the adoption of efficient energy systems by creating a new tax incentive under the Internal Revenue Code (IRC) of 1986. Specifically, it establishes a tax credit for investments in qualified combined heat and power (CHP) system property, which generates both electricity (or mechanical power) and useful thermal energy (like heat or cooling) from the same fuel source, promoting energy efficiency and reducing waste.
Key Provisions
- Credit Amount and Eligibility:
- Provides a 10% tax credit based on the cost (basis) of qualified CHP system property placed in service during the taxable year.
- Applies to new construction, reconstruction, or erection completed by the taxpayer, or property where the taxpayer is the first user.
- Property must be depreciable (meaning it qualifies for deductions over time as it wears out) and meet performance standards set by the Secretary of the Treasury (in consultation with the Secretary of Energy).
- Excludes property used in facilities that receive credits under section 45 of the IRC (related to certain renewable energy production).
- Definition of Qualified CHP System Property:
- Must use the same energy source to produce at least 20% thermal energy (not for power generation) and 20% electrical or mechanical power.
- Overall energy efficiency must exceed 60% (measured as useful output divided by fuel input on a British thermal unit or Btu basis).
- Construction must begin on or after January 1, 2025.
- Capacity limits: Credit phases out for systems over 25 megawatts (electrical) or 33,500 horsepower (mechanical), and is unavailable for systems over 50 megawatts or 67,000 horsepower.
- Special rules for biomass-fueled systems (using at least 90% biomass, like certain plant-based fuels): Efficiency requirement drops, but credit is capped proportionally.
- Excludes equipment for transporting fuel or distributing energy.
- Bonus Credits:
- Additional 10% for projects using sufficient domestic content (similar to rules in section 45 of the IRC).
- Additional 10% for projects in "energy communities" (areas like former coal regions, as defined in section 45(b)(11)(B) of the IRC).
- Other Rules:
- Coordinates with existing credits (e.g., no double-dipping with rehabilitation or energy credits).
- Applies progress expenditure rules for long-term projects.
- Special treatment for property financed by tax-exempt bonds (reducing the credit to avoid overlap).
- Requires regulations for recordkeeping and reporting to administer the credit.
Significant Changes to Existing Law
- Adds a new section 48F to the IRC, inserting it after section 48E (clean electricity investment credit), to create this dedicated CHP credit.
- Makes conforming amendments to multiple IRC sections (e.g., 38, 45L, 46, 48C, 50, 59A) to integrate the new credit into existing tax frameworks, ensuring it interacts properly with other energy and business incentives.
- Clarifies capacity determinations in section 48(c)(3)(B) based on normal operating rates, applying retroactively to certain pre-2025 constructions placed in service after 2024.
- Effective for property construction starting after December 31, 2024, with some provisions applying to earlier constructions if placed in service later.
Potential Impacts
- On Government Agencies: The IRS and Treasury Department will need to develop regulations, guidance, and oversight for claiming the credit, potentially increasing administrative workload. It may lead to reduced federal tax revenue due to credits claimed by taxpayers.
- On Citizens and Businesses: Encourages businesses and industries (e.g., manufacturing, hospitals) to invest in CHP systems, lowering energy costs and improving efficiency. Individuals may indirectly benefit from more reliable, greener energy supplies, though the credit primarily targets commercial installations.
- On International Relations: Minimal direct impact, but promoting domestic content could favor U.S. manufacturing over imports, potentially affecting trade in energy equipment.
Main Stakeholders Affected
- Taxpayers and Businesses: Primarily commercial entities installing CHP systems, who can claim the credit to offset installation costs.
- Energy Sector: Manufacturers of CHP equipment, utilities, and renewable fuel producers (especially biomass users) stand to gain from increased demand.
- Government Entities: U.S. Treasury and IRS for implementation; Department of Energy for consultation on standards.
- Communities: Residents in energy communities (e.g., fossil fuel-dependent areas) may see economic boosts from new projects.
Notable Legal, Constitutional, or Political Implications
- Legal: Strengthens the IRC's energy incentive framework without conflicting with existing tax principles; relies on Treasury rulemaking for flexibility, which could face challenges if standards are seen as overly burdensome. No apparent violations of tax uniformity under the Constitution.
- Constitutional: Aligns with Congress's taxing and spending powers (Article I, Section 8), promoting general welfare through energy efficiency without targeting specific groups discriminatorily.
- Political: Supports broader goals of energy independence and sustainability (e.g., reducing emissions via efficient systems), potentially bipartisan appeal in promoting domestic jobs, but could spark debate over tax expenditures favoring certain industries amid fiscal concerns.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Rep. Van Duyne, Beth [R-TX-24]
Cosponsors (1)
Recent Actions
- 2025-12-17: Referred to the House Committee on Ways and Means.
- 2025-12-17: Introduced in House
- 2025-12-17: Introduced in House
Bill Versions
- 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. — issued 2025-12-17 — PDF (11 pages)