Inclusion of WHP in the Sec. 48 investment tax credit (ITC) is a clarification of the original language establishing the ITC for combined heat and power (CHP).
Because the nuances between WHP and CHP were not well understood at the time (indeed, the industry was without a trade group then), the law used imprecise language to establish the credit for CHP. The result was an inadvertent and unintentional omission of WHP. Importantly, the IRS has confirmed to the Heat is Power Association that only a legislative fix can address this error and inequity in the tax code.
It is also important to note that the WHP clarification to Sec. 48 is consistent with previous action by the Senate Finance Committee. As you may recall, the Committee embraced the clarification when it reported a previous iteration of S. 1409 by voice vote in 2015.
The cost of the clarification is nominal. The Joint Committee on Taxation estimated in 2015 that it was approximately $60 million over 10 years.
Inclusion of WHP in the Tax Extender Act of 2017 is critically important to an industry that seeks simple parity—and a level playing field—in the tax code. The WHP industry wants urgently to develop more of these extremely clean power sources in the U.S., as they would enhance industrial efficiency and offer a boost to the economy.
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