On November 30th, 2022 the Internal Revenue Service Issued Notice 2022-61, Prevailing Wage and Apprenticeship Initial Guidance under Section 45(b)(6)(B)(ii) and Other Substantially Similar Provisions. This Notice is the first step in clarification of the major changes that came as part of the Inflation Reduction Act (IRA) of 2022 to §179D Tax Deduction and §45L Tax Credit. We are still waiting for the IRS to issue a Notice related to the other material changes to the §179D and §45L Energy Tax Incentives, which we are hoping to see come from the service early in 2023.

One of the important items to note is that any projects commenced prior to 1/29/2023 will not be required to comply with the prevailing wage requirements for the “Increased deduction amount” of up to $5.00/SqFt. It is our recommendation for clients who have projects that are to be started soon to make sure that you commence the facilities improvements/construction prior to 1/29/2023 in order to benefit from the maximum amount of §179D and §45L energy tax incentives.

The full text is available here for your review but some of the key points brought about as part of this notice are the following.

Any laborer or mechanic employed in the construction, alteration, or repair of a facility, property, project, or equipment by the taxpayer or any contractor or subcontractor of the taxpayer, shall meet the prevailing wage requirements.

• The taxpayer shall maintain and preserve sufficient records, that include proof that the laborers and mechanics of contractors and subcontractors were paid prevailing wages in accordance with the published rates by the secretary of labor.

• Secretary of Labor has published on www.sam.gov a prevailing wage determination for the geographic area and type or types of construction applicable to the facility, including all labor classifications for the construction, alteration, or repair work that will be done on the facility by laborers or mechanics.

• For Counties and Classifications of Labor that has not been determined, the taxpayer shall reach out to the department of Labor to determine the applicable wage rates.

• Apprentices shall cumulatively account for 12.5% of the total hours worked on the facility.

• The Prevailing Wage and Apprenticeship requirements will not be mandated for projects that began within 60 days of the date of publication of the notice, meaning that projects commencing prior to 1/29/2023 will be exempt from the requirements of the notice.

If your project will not meet the requirements of the Prevailing Wage and Apprenticeship requirements, no need to worry you will still be able to benefit from the §179D and §45L Energy Tax Incentives it will just be at a reduced rate click here for more information on the non-prevailing wage rates.

If you have any questions, or concerns, or would like to discuss how we can get your projects certified please contact us today to schedule a call.

About the Author;

David Diaz is a partner at Walker Reid Strategies, a licensed professional engineering firm specializing in performing §179D studies and §45L certifications. Mr. Diaz is an expert in energy efficiency and specialty tax services who shares his insights at www.walkerreid.com and online through webinars. For more information, contact him at ddiaz@walkerreid.com.