The US Treasury Department and the Internal Revenue Service (IRS) released this final rules today on the prevailing wage and registered apprenticeship (PWA) requirements in the Inflation Reduction Act. As part of the Biden-Harris Administration’s Investing in America agenda, the final rules will help build a strong pipeline of highly skilled workers to support the growth of the clean energy economy and ensure jobs in clean energy are well-paying jobs.
Since the passage of the Inflation Reduction Act in 2022, announced investments in clean energy projects have predicted the creation of more than 270,000 jobs, and studies predict that more than 1.5 million additional jobs will be created over the next decade as a result of the law.
“This rule will ensure that these tax breaks deliver real, tangible benefits to workers in communities across the country,” said Acting Secretary of Labor Julie Su. “From fair wages to worker training opportunities, this administration is doing everything we can to ensure working people share in the prosperity of a clean energy future.”
Today’s final regulations from the Treasury Department – developed in close collaboration with the Department of Labor (DOL) – provide clarity and certainty on PWA requirements to ensure the clean energy transition is focused on workers. In general, if taxpayers pay prevailing wages to workers and technicians and hire registered apprentices for projects supported by most of the Inflation Reduction Act’s clean energy tax incentives, taxpayers can claim an increased credit equal to five times the basic incentive. This includes projects that take advantage of the investment and production tax credits that help finance utility-scale wind, solar and battery storage projects, as well as carbon capture, use and storage credits and clean hydrogen projects.
“Meeting strong labor standards and building partnerships with labor unions will now be the norm for clean energy projects,” said John Podesta, senior adviser to the president for international climate policy. “Today’s final rules give developers and the workers they employ clarity and certainty that clean energy jobs will be good jobs.”
To help workers, unions and the public learn more about the jobs being created nationwide by more than 1,000 planned clean energy projects, DOL recently released a interactive map that estimates the number of employees on each project who will benefit from taxpayers meeting prevailing wage and apprenticeship requirements. Biden-Harris Administration officials and staff will hold webinars, briefings and other meetings in the coming months to educate employees about these rules and related tools and resources.
Ensuring that taxpayers claiming Clean Energy Credits have met their obligations – especially enforcing the PWA requirements for higher credits – is a top priority for the IRS. Today, the IRS is announcing that the IRS will devote significant resources in the coming months to promoting and enforcing compliance with the final clean energy rules. The tax authorities have one Overview of the new rules, Frequently Asked Questions, and a fact sheet which contains information on how to alert the IRS of suspected tax violations related to the PWA increase. The IRS takes referrals of alleged tax violations seriously and may use information received about possible violations in connection with any applicable audits.
To support the IRS’s efforts to ensure taxpayers meet applicable wage and apprenticeship requirements under the Inflation Reduction Act, DOL and the IRS are working on a Memorandum of Understanding (MOU) due by the end of the year are signed. Leveraging DOL’s extensive wages and registered apprenticeship expertise, the MOU will facilitate joint and cooperative education and public outreach and the development of training content for IRS examination personnel. The MOU will also facilitate DOL’s review and commentary as part of the development of PWA tax forms. Finally, the MOU will formalize a process in which DOL can share with the IRS any credible tips or information DOL receives regarding potential non-compliance with PWA requirements.
Treasury and DOL also encourage developers to consider this project employment contracts as a strategy to help ensure compliance with PWA requirements. The final rules include special provisions for project labor agreements, which may assist taxpayers in meeting PWA requirements.
The applicable wage and apprenticeship conditions came into effect in January 2023. Today’s final rules follow consideration of more than 300 public comments in response to the proposed rule and will help streamline compliance. Details of the final rules include:
- Require that determinations of prevailing wage rates be made by DOL, in accordance with the Davis-Bacon Act;
- Encouraging practices that will encourage concurrent compliance;
- Implementing strict record keeping requirements;
- Ensure that taxpayers with projects covered by qualifying project labor agreements do not have to pay penalties; And
- Clarifying the requirements for an apprenticeship, such as clearly defining what constitutes a request for qualified apprentices, what constitutes a response, and when the good faith effort exception applies.
