December 16 (Washington, D.C.) — Today the Combined Heat and Power Alliance published a detailed Frequently Asked Questions (FAQ) factsheet pertaining to CHP and WHP tax provisions in the Inflation Reduction Act (IRA).
The FAQ factsheet outlines that under the IRA, the full Sec. 48 Investment Tax Credit (ITC) will be available to qualifying CHP system property that begins construction before January 1, 2025 (please note there are capacity, efficiency, and other limitations that will continue to apply for CHP eligibility). The IRA defines CHP as an ‘energy property’ and WHP as ‘waste energy recovery property’ under paragraph (3)(A) and clause (v) of the Sec. 48 energy credit, respectively.
The Sec. 48 ITC base credit rate is 6%. Projects can increase the base rate by a 5x multiplier (30%) by meeting or being exempt from the prevailing wage and apprenticeship requirements.
The IRA provides a bonus credit of up to 10% for meeting requirements for domestic content, and a bonus credit of up to 10% for projects located in “energy communities.” These requirements cannot be used towards reaching the 30% bonus rate, which is only attained by satisfying (or being exempt from) the labor requirements (prevailing wage and apprenticeships).
CHP projects that begin construction after December 31, 2024, can qualify for renewable energy tax credits under the new technology-neutral Sec. 45Y PTC or Sec. 48E ITC, if the project yields zero greenhouse gas emissions.
The FAQ factsheet continues with several sections that address the above listed topics and covers Direct Pay, IRS Guidance, Hydrogen tax credits, the Advanced Manufacturing tax credit, and other areas of interest for our membership and the broader CHP industry.
Disclaimer: Please note this is a living document that CHPA intends to keep updated as new IRS guidance is released. We are also not tax advisors, and highly recommend consulting your accountant and/or tax professionals on tax-related matters.
To download our IRA FAQ Factsheet, click here.