Article
What investor-owned utilities need to know about prevailing wage and apprenticeship requirements
Multiplying credit value with compliance to prevailing wage and apprenticeship requirements
Aug. 27, 2024 · Authored by Laura Cataldo
Investor-owned utilities (IOUs) are poised to benefit from the game-changing clean energy credits within the Inflation Reduction Act (IRA). With their expansive portfolios, IOUs are likely to have projects that are eligible for IRA tax credits. To maximize the value of potential credits, it is vital that IOUs plan for how they and their contractors will comply with prevailing wage and apprenticeship requirements under the IRA. This isn’t Davis-Bacon. Read on to understand key considerations for IOUs pursuing IRA tax credits.
Complying with prevailing wage and apprenticeship (PW&A) can significantly enhance the value of tax credits with a five times multiplier. Contractors often assume PW&A is the same as Davis-Bacon, but compliance with PW&A requirements is complex and challenging to verify. While Davis-Bacon is a labor law, PW&A is a requirement of the IRA tax law, necessitating compliance submissions to the Internal Revenue Service (IRS) along with stringent, extended record-keeping requirements.
Some key considerations for IOUs seeking to comply with PW&A regulations include:
- Standardization across a large portfolio with many geographies: Many IOUs have projects spread across a wide area and will likely have different internal and external partners working on projects. This makes having a standardized approach across all facilities challenging and very important when it comes to PW&A compliance.
- Collecting and tracking payroll data: There is a delicate balance to strike between meeting the IRS requirements for record keeping and limiting the amount of employee personally identifiable information (PII) being stored. Sensitive personal data needs to be handled securely.
- Minimizing risk through a conservative tax approach: Protecting your business and bottom line is important. That’s why many IOUs will also seek to maximize tax credits on eligible projects and avoid penalties through the recapture period.
