The Treasury Dept. and Internal Revenue Service have announced guidance providing taxpayers information on how to satisfy the prevailing wage and apprenticeship requirements for enhanced tax benefits under the Inflation Reduction Act. The guidance was published in the Federal Register on November 30, 2022. The 60-day period in which taxpayers must begin construction of a facility to receive the enhanced tax benefits without satisfying the prevailing wage and apprenticeship requirements as described in this notice starts today and ends January 30, 2023.
Notice 2022-61 explains how taxpayers — generally builders, developers and owners of clean energy facilities — receive the increased tax credits or deduction amounts by satisfying the wage and apprenticeship requirements as provided for in this notice. For instance, the notice provides guidance on what constitutes a prevailing wage and the determination of qualified apprenticeships with accompanying examples.
This notice also provides guidance for determining the “beginning of construction” (and “installation” for purposes of the rules for deductions for the cost of energy efficient commercial building property placed in service during the tax year).
Prevailing wage requirement highlights
- Applies to any laborers and mechanics employed by the taxpayer or any contractor or subcontractor in construction or repair
- Requires taxpayer to maintain sufficient records showing prevailing wage is being paid
- Prevailing wage rates are listed on sam.gov
- If there is no listing that applies to the specific geographic area and type of construction, the taxpayer must contact the DOL to request one
Apprenticeship requirement highlights
- Each taxpayer, contractor or subcontractor who employs four or more people must employ one or more qualified apprentices to perform the work
- If construction begins before January 1, 2023, apprentices must perform at least 10% of the total labor hours of construction, alteration or repair work
- If construction begins after December 31, 2022, and before January 1, 2024, apprentices must perform 12.5%
- If construction begins after December 31, 2023, apprentices must perform 15%
- The taxpayer can satisfy the Good Faith Effort Exception if they have requested qualified apprentices from a registered apprenticeship program and the request has been denied or the program fails to respond within five business days
News item from the Treasury Dept. Updated at 9:09 a.m. ET with highlights.