The United States Department of the Treasury announced a final rule regarding labor standards on Inflation Reduction Act (IRA) tax credits on Tuesday, June 18.
Since the passage of the Inflation Reduction Act in 2022, announced investments in clean energy projects have projected the creation of more than 270,000 jobs, and studies project that more than 1.5 million additional jobs will be created because of the law over the next decade.
“President Biden’s Inflation Reduction Act has driven an investment boom while ensuring that workers building the clean energy economy benefit from good pay and new opportunities to get ahead,” said Secretary of the Treasury Janet L. Yellen. “Treasury’s final rules ensure we have skilled workers ready to take advantage of the jobs being created by these historic investments.”
Under the final rules, if taxpayers pay prevailing wages to laborers and mechanics and hire registered apprentices for projects supported by most of the Inflation Reduction Act’s clean energy tax incentives, then taxpayers can claim an increased credit equal to five times the base incentive. This includes projects utilizing the investment and production tax credits that help finance utility-scale wind, solar, and battery storage projects, as well as for credits for carbon capture, utilization, and storage and clean hydrogen projects.
The IRS is also announcing that in the months ahead, they will be releasing a new Prevailing Wage and Apprenticeship (PWA) fact sheet that provides a summary of the PWA requirements and information for how to alert the IRS of suspected tax violations related to the PWA increase.
The prevailing wage and apprenticeship requirements took effect in January 2023. Today’s final rules follow consideration of more than 300 public comments in response to the proposed rule and will help streamline compliance. Details of the final rules include:
- Requiring that determinations of prevailing wage rates be made by DOL, consistent with the Davis-Bacon Act;
- Incentivizing practices that will encourage contemporaneous compliance;
- Implementing strong recordkeeping requirements;
- Guaranteeing that taxpayers with projects covered by qualifying project labor agreements do not need to pay penalties; and
- Clarifying apprenticeship requirements such as clearly defining what constitutes as a request for qualified apprentices, what constitutes as a response, and when the good faith effort exception applies.
SMART, the International Association of Sheet Metal, Air, Rail and Transportation Workers, released the following statement in response:
“There are laws that say good things to union members, and there are laws that do good things for union members. With the U.S. Treasury Department’s final rule on labor standards for Inflation Reduction Act tax credits, there is no doubt that the IRA is a law that concretely benefits SMART sheet metal workers. These precedent-setting tax credits provide up to five times the base credit to those who pay workers prevailing wages and employ registered apprentices on qualifying clean energy projects — making it a no-brainer to use union labor on those projects.
“We thank this administration for taking steps to ensure green jobs are union jobs, and our skilled tradespeople stand ready to build this nation’s sustainable future.”
