Final Regulations on Wage, Apprenticeship Under Inflation Act Released
TL/DR –
The US Department of Treasury and the Internal Revenue Service (IRS) have released final regulations on how taxpayers can get increased tax benefits by meeting prevailing wage and apprenticeship requirements for qualifying clean energy projects. The rules involve increased credit amounts for federal income tax credits and incentives, including the energy investment tax credit (ITC) and production tax credit (PTC). The PWA Transition Rule states that any work done before January 29, 2023, is not subjected to PWA requirements regardless of the beginning of construction exception and that the apprenticeship requirements do not apply once the project is in service.
US Treasury and IRS Release Final Regulations on Clean Energy Projects
The U.S. Treasury Department and Internal Revenue Service have issued final regulations specifying how taxpayers can gain increased tax benefits on qualifying clean energy projects by meeting prevailing wage and apprenticeship (PWA) requirements.
The regulations offer enhanced credit amounts for certain federal income tax credits, including the energy investment tax credit (ITC) and production tax credit (PTC). Taxpayers can qualify for these increased credits in one of three ways:
- Meeting the PWA requirements;
- Fulfilling the beginning of construction exception;
- Qualifying under the one megawatt exception.
A crucial provision, the PWA Transition Rule, dictates work performed before January 29, 2023, is exempt from PWA requirements, even with an applicable beginning of construction exception. Hence, taxpayers only need comply with PWA requirements for construction, alteration, or repair work occurring on or after this date.
This Transition Rule is valid even for taxpayers who commenced construction before the specified date but later fail to meet the beginning of construction exception, such as by not meeting the continuity safe harbor. These taxpayers are still required to satisfy PWA requirements for work performed on or after January 29, 2023.
The regulations also clarify that apprenticeship requirements cease to apply after the project is in service, applying only to alterations and repairs made during construction, not after the facility is operational.
The Orrick energy tax team is currently reviewing the final regulations, intending to provide further analysis.
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