IRS Notice on Prevailing Wage and Apprenticeship Requirements for Clean Energy Projects; Comments Due November 4
Published October 06, 2022
The Internal Revenue Service (IRS) and Treasury Department have issued Notice 2022-51 requesting comments on general as well as specific questions pertaining to the prevailing wage and apprenticeship requirements for increased or bonus credit (or deduction) amounts under the Inflation Reduction Act of 2022. Comments will aid the IRS in drafting the guidance items most reflective of the needs of taxpayers (e.g., construction companies) entitled to claim energy credits. Specific questions are listed below.
Internal Revenue Code Section Section 45(b)(7)(A) provides that a taxpayer must ensure that any laborers and mechanics employed by the taxpayer, or any contractor or subcontractor, are paid wages at rates not less than the prevailing wage rates for construction, alteration, or repair of a similar character in the locality in which such facility is located as most recently determined by the Secretary of Labor in accordance with the Davis-Bacon Act.
- Is guidance necessary to clarify how the Davis-Bacon prevailing wage requirements apply for purposes of § 45(b)(7)(A)?
Section 45(b)(7)(B)(i) generally provides a correction and penalty mechanism for failure to satisfy prevailing wage requirements.
- What should the Treasury Department and the IRS consider in developing rules for taxpayers to correct a deficiency for failure to satisfy prevailing wage requirements?
- What documentation or substantiation should be required to show compliance with the prevailing wage requirements?
Section 45(b)(8)(A)(i) provides that a taxpayer satisfies the apprenticeship requirements with respect to the construction of any qualified facility if the taxpayer ensures that not less than the applicable percentage of the total labor hours of the construction, alteration, or repair work (including such work performed by any contractor or subcontractor) with respect to such facility is, subject to § 45(b)(8)(B), performed by qualified apprentices.
- Is guidance for purposes of § 45(b)(7)(A) needed to clarify the treatment of a qualified facility that has been placed in service but does not undergo alteration or repair during a year in which the prevailing wage requirements apply?
Section 45(b)(8)(C) provides that each taxpayer, contractor, or subcontractor who employs four or more individuals to perform construction, alteration, or repair work with respect to a qualified facility must employ one or more qualified apprentices from a registered apprenticeship program to perform that work.
- What factors should the Treasury Department and the IRS consider regarding the appropriate duration of employment of individuals for construction, alteration, or repair work for purposes of this requirement?
Section 45(b)(8)(D)(ii) provides for a good faith effort exception to the apprenticeship requirement.
- What, if any, clarification is needed regarding the good faith effort exception?
- What factors should be considered in administering and promoting compliance with this good faith effort exception?
- Are there existing methods to facilitate reporting requirements, for example, through current Davis-Bacon reporting forms, current performance reporting requirements for contracts or grants, and/or through DOL’s Registered Apprenticeship Partners Information Management Data System (RAPIDS) database or a State Apprenticeship Agency’s database?
- What documentation or substantiation do taxpayers maintain or could they create to demonstrate compliance with the apprenticeship requirements, or the good faith effort exception?
Comments are due November 4, 2022.
Additional Information
Fact sheet: Treasury, IRS Open Public Comment on Implementing the Inflation Reduction Act’s Clean Energy Tax Incentives