Departments Unveil PWA Requirements in Inflation Reduction Act

On Jun 20, 2024

TL/DR –

The Treasury and IRS released the final rule for compliance with prevailing wage and apprenticeship requirements (PWA) as per the Inflation Reduction Act of 2022, set to be formally published on June 25, 2024. The rule offers clarifications including that PWA requirements are in line with the Davis-Bacon Act but do not require certified payroll and that taxpayers can take actions to avoid findings of intentional disregard for PWA compliance. However, the final rule does not provide industry-specific guidance and leaves many detailed questions unanswered, determining compliance with PWA requirements will be based on review of specific facts and circumstances.

Final Rule for Prevailing Wage and Apprenticeship Compliance Released

The final rule to comply with the prevailing wage and apprenticeship requirements was released by the Treasury and IRS on June 18, 2024, as per the Inflation Reduction Act of 2022 (IRA). This rule is set to be officially published on June 25, 2024.

Key Points from the Final Rule

The final rule confirms and elucidates the precedingNotice of Proposed Rulemaking that was issued on August 30, 2023. Here’s a brief rundown of key points:

PWA requirements align with the Davis-Bacon Act but are distinct and don’t mandate certified payroll.
Original equipment manufacturers and suppliers are mostly exempt unless performing construction, modification, or repair on the project or at a significant secondary location.
The wage applicable to a contract is the one in the general wage determination at the time the contract is signed.
Supplemental wage determinations can be obtained from the Department of Labor’s Wage and Hour Division within 30 days of submission.
Wage determinations should be requested 90 days before contract execution and are valid for 180 days after issuance.
Records aid in validating compliance in case of an IRS notice of examination.
If an apprenticeship program fails to respond or declines a request, the Good Faith Effort Exception can be relied upon for a year.
Employer-sponsored apprenticeship programs alone don’t ensure compliance with the Good Faith Effort Exception, requests must also be submitted to unrelated registered programs.
Intentional disregard for compliance can be avoided by keeping records and paying required corrections and penalty payments before receiving an IRS notice.

Implications of the Final Rule

The enactment of this rule is crucial for IRA’s PWA requirements. It gives renewable energy developers and contractors assurance about compliance with these requirements. However, the rule refrains from providing sector-specific guidance and removes a solar industry-specific example used in the Proposed Rulemaking. It underlines that PWA compliance will be evaluated based on specific facts and circumstances, leaving many questions from the Proposed Rulemaking unanswered.

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