Article | Tax alert

Treasury issues guidance on wage and apprenticeship requirements for bonus energy credits

Dec. 2, 2022 · Authored by Michael Wronsky, Mike Schiavo, Chad Resner

This article has been updated to reflect an amendment made by the IRS to Notice 2022-61, which provides that to automatically satisfy the prevailing wage and apprenticeship requirements, construction or installation of a qualifying project must begin prior to Jan. 29, 2023. The Notice as originally issued indicated a date of Jan. 30, 2023.

In late November, the IRS issued Notice 2022-61 (Notice), providing guidance on the prevailing wage and apprenticeship requirements that must be met for taxpayers to qualify for the increased amount of various clean energy credits available under the Inflation Reduction Act (IRA).

Published Nov. 30, 2022, the Notice also starts the 60-day period within which a taxpayer can begin construction of a qualifying clean energy project and be deemed to automatically meet the aforementioned requirements, and thus be eligible for the additional credit amounts. To automatically satisfy the prevailing wage and apprenticeship requirements, construction or installation must begin prior to Jan. 29, 2023.

The Notice provides safe harbors for determining the start dates of (1) construction of a qualified facility, and (2) the installation of certain property eligible for the Internal Revenue Code (IRC) section 179D deduction.

Lastly, the Notice announces anticipated proposed regulations and further guidance on the prevailing wage and apprenticeship requirements.

Key takeaways

Prevailing wage requirement

• With respect to any qualified facility or energy-efficient commercial building property (EECBP), the taxpayer must ensure any laborers and mechanics employed by the taxpayer (or any contractor or subcontractor) both in the construction of the facility and the alteration or repair of the facility are paid the prevailing wages established by the Department of Labor (DOL) for construction, alteration or repair of a similar character in the locality in which the facility or building property is located.
• The Notice directs taxpayers to wage determinations to find the prevailing wages for the applicable work being performed for the taxpayer (or contractor or subcontractor) in the facility’s locale. In the event wages for the type of work performed or the geography in which it is performed are not listed, the taxpayer must contact the DOL to propose or request a wage determination or rate using procedures provided for by the Notice.