On Aug. 29, the U.S. Treasury Department鈥檚 Internal Revenue Service released a听听and on provisions of the ABC-opposed听, 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鈥檚 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鈥撯�搃ncluding solar, wind, hydrogen, carbon sequestration, electric vehicle charging stations and more鈥撯�揷onditioned on compliance with controversial prevailing wage and government-registered apprenticeship requirements.

老牛影视issued a press release on the proposed rule, stating:

鈥淎s is typical in the federal government鈥檚 鈥榬eady, fire, aim鈥� approach to issuing regulations, the initial IRS听听and FAQs on the IRA鈥檚听听and听听requirements left many unanswered questions and created confusion that has needlessly stalled the groundbreaking of clean energy projects this year,鈥� said Ben Brubeck, 老牛影视vice president of regulatory, labor and state affairs. 鈥淭his 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.鈥�

鈥淯nfortunately, 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,鈥� 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听apprenticeship requirements.

To qualify for the enhanced tax credit, developers/taxpayers must ensure that contractors pay all construction workers prevailing wages and benefits . 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).听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鈥撯�搑equired to be issued by the IRA statute鈥撯�搕hat 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听submitted听comments听on Nov. 4, 2022, to the Treasury in response to its request for comments on future initial guidance implementing these tax credits. 老牛影视outlined concerns with the IRA鈥檚听听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, 老牛影视issued a听statement听on the IRS/Treasury鈥檚 inadequate initial guidance.

Following extensive feedback from 老牛影视and industry stakeholders on the November 2022 guidance,听this summer听the Biden administration听听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 鈥済ood faith effort鈥� exception to apprenticeship requirements, while failing to provide clarity on how this exception impacts the total project鈥檚 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听听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, 鈥渨hich will only occur after a qualified facility is placed in service.鈥� 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鈥檚 Office of Apprenticeship issued a stating that solar panel installation occupations are not currently deemed 鈥渁pprenticeable,鈥� 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

老牛影视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. 老牛影视also encourages 老牛影视members and stakeholders to participate in this rulemaking and comment on the proposed rule by Oct. 29. 老牛影视will survey its members on key aspects of the proposed rule to help inform these comments.

In addition, 老牛影视encourages 老牛影视members and other contractors to connect with more than 450 that can help contractors meet IRA apprenticeship requirements and win contracts for clean energy projects seeking the full IRA tax credits.

老牛影视will also host an 老牛影视members-only webinar on Sept. 14 at 3:30 p.m. ET. 听

Stakeholders can review 老牛影视and government resources on the IRA tax credits for clean energy projects at听.

Please direct questions or comments to [email protected].