On June 18, 2024, the IRS released final regulations and related guidance concerning enhanced credits and deductions for taxpayers who meet prevailing wage and apprenticeship (PW&A) requirements The final regulations are effective August 26, 2024.

In addition, the IRS released Publication 5983, IRA Prevailing Wage and Apprenticeship Requirements Fact Sheet, and revised Publication 5855, IRA Prevailing Wage & Registered Apprenticeship Overview, and the prevailing wage and apprenticeship “frequently asked questions” (FAQs).

The forementioned guidance impacts "green energy" tax provisions that were either modified or introduced by the Inflation Reduction Act of 2022 (IRA, P.L. 117-169) regarding the construction, alteration, and/or repair of certain clean energy facilities, or of energy properties and equipment.

Key Green Energy Tax Provisions Affected:

The PW&A requirements apply to most renewable energy tax incentives under the Internal Revenue Code (IRC) including among others:

1. IRC Code Sec. 30C - Alternative Fuel Refueling Property Credit:

• This credit is available for the installation of alternative fuel refueling property, such as electric vehicle charging stations.

2.  IRC Sec. 45 - Electricity Production Tax Credit (PTC):

• This credit supports the production of electricity from renewable resources like wind, solar, and geothermal energy.

3.  IRC Sec. 45L - New Energy Efficient Home Credit:

• This credit incentivizes the construction of new energy-efficient homes, providing a boost to builders who incorporate significant energy-saving measures.

4. IRC Sec. 179D – Energy Efficient Commercial Building Deduction

• This deduction incentivizes new construction and renovation of existing buildings to be energy efficient.  The deduction applies to energy-efficient commercial buildings and multifamily buildings that are at least four stories tall.

Implications of the Final Regulations:

The final regulations outline the requirements for taxpayers to qualify for increased green energy credits and deductions. Satisfying the requirements allows taxpayers to generally increase the amount of the credit or deduction by five times. The requirements include:

• Prevailing Wage Requirements:
  • Taxpayers must ensure that laborers and mechanics are paid wages at rates not less than those prevailing for similar work in the locality as determined by the Secretary of Labor.
• Apprenticeship Requirements:
  • Taxpayers must  comply with certain apprenticeship standards, including the employment of a specified number of apprentices and ensuring proper training and education programs are in place.
• Recordkeeping and Reporting Requirements:
  • Taxpayers must maintain detailed records to demonstrate compliance.

The prevailing wage, but not apprenticeship requirements apply to IRC Sec. 45L credit for new energy-efficient homes.

By satisfying these PW&A requirements, taxpayers can benefit from enhanced credits and deductions, promoting further investment in green energy projects and workforce development.

Next Steps for Taxpayers:

The final regulations and revised guidance provide detailed requirements not only for taxpayers who may claim the enhanced credits but also for contractors and subcontractors who may be requested by the taxpayer to comply with the prevailing wage and apprenticeship guidelines. Accordingly, taxpayers engaging in green energy projects should:

• Carefully review the regulations to maximize their potential tax benefits under the new guidelines.
• Develop record keeping procedures and maintain detailed records to demonstrate compliance.
• Coordinate with contractors and subcontractors to ensure PW&A requirements are satisfied.

For more information on the IRS's final regulations and guidance on prevailing wage and apprenticeship requirements impacting green energy tax provisions, contact us.