Sponsors
Introduced December 17, 2025 by Marsha Blackburn · Last progress December 17, 2025
The bill makes smaller and more efficient onsite combined heat-and-power systems more affordable and supports domestic supply chains and distressed communities via tax credits, but it limits or reduces benefits for very large projects and adds administrative and financing complexities that can complicate deployment.
Utilities, industrial energy users, and other CHP project developers: receive a base 10% investment tax credit for qualified CHP systems, with up to an additional 10 percentage points for meeting domestic content rules and another 10 percentage points for projects in designated energy communities, lowering upfront costs and encouraging deployment and domestic supply‑chain activity.
Owners and operators of on-site generation: projects that meet an efficiency threshold (>60% on a Btu basis) are incentivized and biomass CHP can qualify under special prorated rules, encouraging more efficient onsite energy use, lower fuel consumption and supporting bioenergy development.
Large utilities and large project owners: systems over 50 MW (67,000 HP) are excluded from the credit and systems above the applicable capacity threshold (25 MW / >33,500 HP) receive prorated credits, reducing or eliminating financial support for large-scale CHP projects.
Taxpayers and project developers: claiming the credit requires compliance with new performance standards, recordkeeping, and reporting rules (to be developed in consultation with Treasury/DOE), increasing administrative burden and compliance costs.
Projects financed with tax-exempt bonds and projects using other tax credits: tax-exempt bond–financed projects face special eligibility rules and coordination with rehabilitation/other Code cross-references may reduce the portion of project basis eligible for this credit, complicating financing and lowering net tax benefits.
Based on analysis of 2 sections of legislative text.
Establishes a new tax credit equal to 10% of the basis of qualified CHP systems, with domestic content and energy‑community bonus increases and capacity limits.
Creates a new tax credit equal to 10% of the basis of qualified combined heat and power (CHP) systems placed in service, with optional bonus percentage increases for domestic content and projects in designated energy communities. The credit includes technical performance and capacity rules, special biomass treatment, limits for very large systems, coordination with other tax credits and tax‑exempt bond financed projects, and requires Secretary regulation after consultation with the Department of Energy. The credit applies only to CHP projects whose construction begins on or after January 1, 2025, includes rules for progress expenditures, recordkeeping and reporting, and amends related Internal Revenue Code provisions to reference the new credit.