Streamlining Inflation Reduction Act prevailing wage and apprenticeship compliance | Baker Tilly

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Streamlining Inflation Reduction Act prevailing wage and apprenticeship compliance | Baker Tilly

PW&A compliance management is critical and must be planned and managed throughout the project life cycle in order to protect the enhanced credit, minimize and avoid maximum penalties of intentional disregard, all paid by the credit seeker. Regardless of how compliant a project is, strict penalties could be incurred. Proactive management of compliance requires projects have efforts in place prior to construction to establish a plan and educate all contractors. During the construction phase it is important to monitor compliance, cure noncompliance and calculate penalties.

What makes the prevailing wage and apprenticeship retirement so complex?

Prevailing wage and apprenticeship compliance under the IRA is complex and goes beyond Davis-Bacon. While prevailing wage programs have historically aimed to bolster workforce diversity, the IRA introduces a new dimension by embedding these initiatives within tax law.

Unlike its predecessors, the IRA operates independently of labor laws such as Davis-Bacon, albeit with alignment on certain foundational principles. Davis-Bacon provides a framework for definitions of both laborer and mechanic and how wage determinations are established, however, the rules and regulations under the IRA diverge significantly. Notably, taxpayers assume a pivotal role as agents, responsible for establishing wage determinations, initiating construction and maintaining meticulous records which is based on long standing tax guidance.

Within the IRA, prevailing wage and apprenticeship compliance entails navigating three tiers of apprenticeship requirements and facing penalties for noncompliance, including post-construction alterations or repairs. The burden of record-keeping and potential IRS audits further underscores the criticality of taxpayer responsibility.

Dive deeper into the nuances of compliance requirements for contractors and project owners by watching our on-demand webinars and accessing downloadable slides.

Access the on-demand webinar and presentation for contractors Access the on-demand webinar and presentation for project owners