The Inflation Reduction Act of 2022 (IRA) amended and enacted various clean energy tax incentives that provide increased credit or deduction amounts if certain prevailing wage and registered apprenticeship (PWA) requirements are met. Treasury and the IRS published final regulations on June 25, 2024, providing rules and definitions for taxpayers seeking to satisfy the prevailing wage and apprenticeship requirements.
A prevailing wage is the combination of the basic hourly wage rate and any fringe benefits listed in an applicable wage determination, as determined by the Secretary of Labor.
The prevailing wage requirements of the IRA provide that taxpayers must ensure that all laborers and mechanics employed by the taxpayer (or any contractor or subcontractor) on the construction, alteration, or repair of a qualified facility are paid wages at rates that are not less than the prevailing rates determined by the Department of Labor in accordance with subchapter IV of chapter 31 of title 40 of the U.S. Code (the Davis-Bacon Act) for the type of work performed in the geographic area of the facility.
Prevailing wage and apprenticeship requirements differ between the §179D tax deduction and §45L tax credit:
§45L only requires that prevailing requirements are met for all multi family projects, no apprenticeship requirements are needed to qualify.
§179D requires that both prevailing wage and apprenticeship requirements are met to qualify.
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