Inflation Reduction Act

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Resources and Guidance for Contractors and Developers

The Inflation Reduction Act was signed into law on Aug. 16, 2022, and provides over $270 billion in tax credits for the construction of solar, wind, hydrogen, carbon sequestration, electric vehicle charging stations and other clean energy projects.

1. What Are the IRA’s Prevailing Wage and Apprenticeship Requirements?

A new policy in Subtitle D-Energy Security of the IRA grants developers/taxpayers a bonus tax credit 500% greater than a baseline tax credit of 6%. However, this is conditioned on requirements that project contractors meet prevailing wage and apprenticeship requirements outlined in the legislation and IRS guidance. Developers/taxpayers must ensure that contractors pay all construction workers prevailing wages and benefits set by the U.S. Department of Labor via the Davis-Bacon Act. 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. This new policy is an unprecedented expansion of prevailing wage and government-registered apprenticeship requirements/enticements onto private construction projects via the federal tax code.

On Aug. 29, 2023, Treasury issued a proposed rule and FAQs to provide additional guidance regarding the IRA’s prevailing wage and apprenticeship requirements. For more information, see ABC’s Newsline and press release on the proposed rule. ABC will continue to thoroughly review the proposal and will be providing additional information. ABC will be submitting comments on the proposal and encourages members to participate in the Treasury’s 60-day comment period, which closes on Oct. 30.

2. Will ABC Member Contractors Be Able To Perform Work for Developers/Taxpayers Taking Advantage of the Full IRA Tax Credits?

ABC member contractors can build these projects for developers/taxpayers seeking the full tax credits as long as they meet the IRA’s prevailing wage and apprenticeship requirements. In fact, ABC contractors with experience complying with the prevailing wage and apprenticeship regulations may find new opportunities in the clean energy construction market as a result of this law. However, firms––in particular small businesses––with no experience in prevailing wage and apprenticeship regulations may face challenges in complying with these new regulations. In addition, IRS needs to provide additional clarity to the regulated community for developers and contractors to have certainty to finance and build these projects once rules are clearly defined.

3. When Will the Prevailing Wage and Apprenticeship Requirements Apply to Clean Energy Construction Projects?

Prevailing wage and apprenticeship requirements outlined in the IRA and the U.S. Department of the Treasury’s Nov. 30, 2022, guidance, prevailing wage FAQ and apprenticeship FAQ websites apply to projects that began construction on or after Jan. 30, 2023.

4. How Can ABC Chapters and Members Find Resources and Guidance on the New IRA Requirements?

ABC has collected ABC and government guidance and resources below to assist member contractors in maximizing the potential opportunities presented by the IRA while navigating the unique difficulties posed by its expansion of prevailing wage and government-registered apprenticeship program requirements onto private sector construction projects.

If you have questions about complying with the IRA’s prevailing wage and government-registered apprenticeship program requirements, ABC is here to help. Email us your questions at [email protected] and we will work to get you an answer via our subject matter experts, or reach out to IRS/Treasury for a response.

5.  Which Clean Energy Tax Credits Are Affected by the IRA’s Prevailing Wage and Apprenticeship Requirements?

The IRA’s prevailing wage and apprenticeship provisions apply to:

• Alternative Fuel Refueling Property Credit (Sec. 13404), 30C
• Production Tax Credit (Sec. 13101), 45
• Credit for Carbon Oxide Sequestration (Sec. 13104), 45Q
• Credit for Production of Clean Hydrogen (Sec. 13204), 45V
• Clean Fuel Production Credit (Sec. 13704), 45Z
• Investment Tax Credit (Sec. 13102), 48E
• Advanced Energy Project Credit (Sec. 13501), 48C
• Energy Efficient Commercial Buildings Deduction (Sec. 13303), 179D

In addition, only the IRA’s prevailing wage provisions apply to:

• New Energy Efficient Home Credit (Sec. 13304), 45L
• Zero-Emission Nuclear Power Production Credit (Sec. 13105), 45U

This page will be updated as new rulemakings, resources and information become available.

6.  What Other Tax Credits Are Contained in the IRA of Note to Stakeholders?

The IRA contains a number of tax credits and new programs of note in addition to the prevailing wage and government-registered apprenticeship requirements, such as tax credit programs for:

• Electric/Clean Vehicles
• Energy Communities
• Low-Income Communities
• Domestic Content
• Direct Pay/Transferability

On March 22, 2023, the IRS provided an update and rough timeline indicating additional guidance and regulations are forthcoming on these programs. On April 4, the IRS provided guidance on the energy communities tax credit, in advance of forthcoming proposed regulations. On May 12, the IRS released additional guidance on the domestic content bonus tax credits. Visit https://www.irs.gov/inflation-reduction-act-of-2022 to stay up to date on these programs.

IRA Guidance and Resources:

Learn About the IRS’s Guidance and News on All IRA Tax Programs:

• IRS’s Recent News, Guidance and Notices on the IRA
• IRS Guidance on Energy Communities Tax Credit
• IRS Proposed Rule on Clean Vehicle Tax Credit
• IRS Guidance on Low-Income Communities Tax Credit
  • Additional Guidance on Low-Income Communities Tax Credit
• IRS Guidance on Domestic Content Bonus Tax Credit
• IRS Guidance on Advanced Energy Project Tax Credit
  • Additional Guidance on Advanced Energy Project Tax Credit

Learn About the IRS’s IRA Guidance on Prevailing Wages and Government-Registered Apprenticeships:

• Aug. 29, 2023 Proposed Rule - Increased Credit or Deduction Amounts for Satisfying Certain Prevailing Wage and Registered Apprenticeship Requirements
• ABC Newsline on the Proposed Rule
• ABC’s Statement in Reaction to the Proposed Rule
• IRS FAQs on Prevailing Wage and GRAP Requirements
• IRS Fact Sheet on Prevailing Wage and GRAP Requirements
• Guidance Nov. 30, 2022, Notice 2022-61
• Public Law 117-369, 136 Stat. 1818, commonly known as the Inflation Reduction Act of 2022 (H.R. 5376)
• Subtitle D-Energy Security, summary of the IRA legislative text

Learn About Prevailing Wages Requirements in the IRA:

• DOL’s Frequently Asked Questions
• Look up DOL prevailing wage rates published at sam.gov
• Davis-Bacon Act/prevailing wage resources: abc.org/davisbacon

Learn About the Government-Registered Apprenticeship Requirements in the IRA:

• FAQs on apprenticeship.gov
• U.S. Department of Labor Circular 2021-02, Guidelines for Reviewing Apprenticeship to Journeyworker Ratio Requests, Jan. 12, 2021.
• Federal Office of Apprenticeship vs. State Apprenticeship Agency State Map
• U.S. Department of Labor Data on Government-Registered Apprenticeship Programs, Participants and Completers 2017-2022, provided Feb. 2023.
• ABC Chapter Government-Registered Apprenticeship Program Locator (GRAP Map)

Read ABC’s General Counsel’s Analysis of the New Requirements Under the IRA:

• Treasury Department Issues Guidance on the Inflation Reduction Act’s Prevailing Wage and Apprenticeship Requirements

View Webinars on the IRA’s Prevailing Wage and GRAP Requirements:

• ABC National March 1 webinar, available to ABC chapter staff and members only
• ABC National Dec. 12 webinar, available to ABC chapter staff and members only
• DOL Webinar and Presentation Slides on the IRA Prevailing Wage and Apprenticeship Requirements

Read ABC’S IRA Media:

• Treasury and IRS Release Unclear Guidance on IRA Tax Credits, Davis-Bacon and Apprenticeship Requirements, Nov. 30, 2022.
• ABC’s November 2022 news release and comments submitted to Treasury in response to its Oct. 5 request for comments.
• ABC Newsline article on passage of IRA, Democrats’ Reconciliation Package Is Signed Into Law With ABC-Opposed Wage, Labor Mandates, Aug. 16, 2022.
• ABC’s Washington Examiner op-ed, Biden’s Davis-Bacon bloat undermines taxpayer infrastructure investments, Sept. 6, 2022.
• ABC’s Fox Business op-ed, Sweetheart union deal will undermine Inflation Reduction Act’s clean energy agenda, Aug. 18, 2022.
• ABC’s Real Clear Policy op-ed, Sweetheart Union Deal Will Undermine Swift Transition to Clean Energy, Dec. 21, 2021.