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On Aug. 29, the U.S. Treasury Department’s Internal Revenue Service released a proposed rule and FAQs on provisions of the ABC-opposed Inflation Reduction Act, which will affect the developers, contractors and workers that are building clean energy projects eligible for more than $270 billion in federal tax credits.

The Treasury’s Notice of Proposed Rulemaking, Increased Credit or Deduction Amounts for Satisfying Certain Prevailing Wage and Apprenticeship Requirements, proposes regulations clarifying the applicability of tax credits for the construction of private clean energy projects funded by the IRA––including solar, wind, hydrogen, carbon sequestration, electric vehicle charging stations and more––conditioned on compliance with controversial prevailing wage and government-registered apprenticeship requirements.

ABC issued a press release on the proposed rule, stating:

“As is typical in the federal government’s ‘ready, fire, aim’ approach to issuing regulations, the initial IRS guidance and FAQs on the IRA’s prevailing wage and apprenticeship requirements left many unanswered questions and created confusion that has needlessly stalled the groundbreaking of clean energy projects this year,” said Ben Brubeck, ABC vice president of regulatory, labor and state affairs. “This NPRM is a key step, welcomed by developers, taxpayers, contractors and subcontractors, who for months have been asking for clear and specific guidance on how these new provisions will be implemented. Developers can then decide whether the tax credits are worth the new and significant risks and penalties, and large and small-business contractors and subcontractors can decide whether to bid on and perform such work.”

“Unfortunately, we are months away from a final rule and the industry is unlikely to receive the clarity and confidence it needs to fully leverage the tax credits to break ground on clean energy construction projects until then,” said Brubeck.

IRA Prevailing Wage and Apprenticeship Requirements

Signed into law in August 2022, the partisan IRA provides clean energy developers/taxpayers a bonus tax credit 500% greater than a baseline tax credit of 6%. However, this is conditioned on requirements that a developer ensures its construction contractors meet both prevailing wage and apprenticeship requirements.

To qualify for the enhanced tax credit, developers/taxpayers must ensure that contractors pay all construction workers prevailing wages and benefits established by the U.S. Department of Labor. Developers must also ensure that contractors utilize apprentices enrolled in government-registered apprenticeship programs for certain percentages of all construction hours worked on a project (12.5% of all work hours in 2023 and 15% of all work hours in 2024 and thereafter). All contractors with four or more employees on a jobsite must utilize at least one registered apprentice and comply with applicable apprenticeship ratios thereafter.

The developer/taxpayer faces considerable penalties if prevailing wage and registered apprenticeship requirements are not met, and those penalties increase if the IRS determines the failure was due to intentional disregard.

The IRS proposed rule comes on the heels of initial inadequate IRS guidance––required to be issued by the IRA statute––that went into effect on Jan. 30, 2023. The IRS guidance remains in effect until the final rule is published and takes effect at a date to be determined.

ABC submitted comments on Nov. 4, 2022, to the Treasury in response to its request for comments on future initial guidance implementing these tax credits. ABC outlined concerns with the IRA’s unprecedented expansion of inflationary prevailing wage and apprenticeship requirements and the lack of clear guidance from Treasury as a result of it failing to issue regulations through a traditional notice-and-comment rulemaking. On Nov. 29, ABC issued a statement on the IRS/Treasury’s inadequate initial guidance.

Following extensive feedback from ABC and industry stakeholders on the November 2022 guidance, this summer the Biden administration announced a formal rulemaking on the matter.

Highlights of the Treasury Proposal

The proposed rule specifies that clean energy projects can be exempt from prevailing wage and apprenticeship requirements only in the following cases:

  • Construction of facilities with a maximum output less than one megawatt
  • Projects that began installation or construction before Jan. 29, 2023

The proposed rule contains the following key provisions:

  • Outlines requirements for the “good faith effort” exception to apprenticeship requirements, while failing to provide clarity on how this exception impacts the total project’s apprenticeship labor hour requirement of 12.5% in 2023 and 15% in 2024 and thereafter.
  • Provides details on correction and penalty procedures related to failures to pay prevailing wage and maintain apprenticeship requirements.
  • Incentivizes the use of anti-competitive and inflationary union-favoring project labor agreements by exempting developers from increased willful penalties for noncompliance with prevailing wage and apprenticeship rules. Of note, controversial PLAs are not required to be mandated by developers via the proposed rule, the initial IRS guidance or in the underlying legislation and remain entirely optional.
  • Provides additional information on recordkeeping requirements, including payroll records, worker pay information, Davis-Bacon wage determinations and apprenticeship documentation.
  • Clarifies that developers will produce such recordkeeping when claiming the increased credit during the time of filing a return, “which will only occur after a qualified facility is placed in service.” Therefore, the proposed rule does not require submission to the IRS of weekly certified payrolls for prevailing wage requirements. However, developers must keep appropriate recordkeeping for PWA requirements to receive enhanced tax credits.

Separately, on Aug. 25, the Department of Labor’s Office of Apprenticeship issued a bulletin stating that solar panel installation occupations are not currently deemed “apprenticeable,” meaning the DOL and state apprenticeship agencies will not be able to approve government-registered apprenticeship programs specific to this occupation. The bulletin states that the work processes of this role fall under existing apprenticeable occupations such as electricians, iron workers, operating engineers, carpenters and laborers. This is expected to affect applicable solar installations receiving IRA funding.

Next Steps

ABC is conducting a thorough review of the 129-page rulemaking and plans to address concerns with the proposed rule in formal comments due to the IRS/Treasury by Oct. 29. ABC also encourages ABC members and stakeholders to participate in this rulemaking and comment on the proposed rule by Oct. 29. ABC will survey its members on key aspects of the proposed rule to help inform these comments.

In addition, ABC encourages ABC members and other contractors to connect with more than 450 government-registered apprenticeship programs offered by ABC chapters that can help contractors meet IRA apprenticeship requirements and win contracts for clean energy projects seeking the full IRA tax credits.

ABC will also host an ABC members-only webinar on Sept. 14 at 3:30 p.m. ET. Register here. 

Stakeholders can review ABC and government resources on the IRA tax credits for clean energy projects at

Please direct questions or comments to [email protected].