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.

This bill, S. 3531, establishes a 10% tax credit for qualified combined heat and power (CHP) system property by amending the Internal Revenue Code of 1986. This credit applies to new construction, reconstruction, or acquisition of CHP systems. The direct financial incentive immediately lowers the cost of CHP system installation for businesses, driving increased adoption. This creates a clear demand signal for manufacturers and installers of CHP technology, making these systems more economically attractive for industrial, commercial, and institutional facilities seeking to reduce energy costs and improve efficiency. The money trail for this legislation is direct: the federal government provides a tax credit to businesses that purchase and install qualified CHP systems. This reduces the net cost of these systems by 10%, effectively subsidizing their acquisition. Companies that manufacture the core components of CHP systems, such as turbines, engines, and heat recovery units, are positioned to benefit. Engineering and construction firms specializing in energy infrastructure will also see increased project demand. The credit acts as a direct incentive for capital expenditure in energy-efficient infrastructure. Historically, tax credits for energy efficiency and renewable energy have spurred significant investment. For example, the Investment Tax Credit (ITC) for solar energy, established in 2006 and extended multiple times, led to a 1,700% growth in solar installations between 2006 and 2014. While the CHP credit is smaller at 10%, it provides a similar direct financial incentive. When the Energy Policy Act of 2005 included a 10% tax credit for combined heat and power systems, companies like General Electric ($GE) and Caterpillar ($CAT) experienced increased orders for their power generation equipment in subsequent years. The current bill's structure mirrors these past successful incentives. Specific winners include General Electric ($GE), a major manufacturer of gas turbines and engines used in CHP systems. Caterpillar ($CAT), which produces engines and power generation equipment, also stands to gain. Cummins, a producer of engines and power systems, will see increased demand. Companies involved in the installation and maintenance of these systems, such as large industrial contractors, will also benefit. There are no direct losers identified by this bill; it creates an incentive without penalizing other energy sources. The bill was introduced on December 17, 2025, and has been referred to the Committee on Finance. Its passage through committee and subsequent floor votes will determine its enactment timeline. This bill includes a 'Domestic content bonus credit amount,' which will further incentivize the use of domestically manufactured components. This provision benefits U.S.-based manufacturers of CHP system parts, potentially increasing their market share. The bill's sponsor, Senator Marsha Blackburn (R-TN), is a member of the Senate Finance Committee, which increases the likelihood of the bill receiving attention and potentially advancing through the legislative process.