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IRS Issues Proposed Guidance on Prevailing Wage, Apprenticeship Requirements to Receive Credit Boost Under Inflation Reduction Act

Published by Rob Bryant on Thursday, August 31, 2023 - 12:00AM

The Internal Revenue Service (IRS) this week released specifics on perhaps the biggest bonus provision for clean energy in the Inflation Reduction Act of 2022: Prevailing wage and apprenticeship requirements.

The IRS published a notice of proposed rulemaking in Wednesday’s Federal Register. The proposed regulations would govern how taxpayers meet prevailing wage and apprenticeship requirements to increase their tax credits or deductions by a factor of five. For instance, a 6% credit becomes 30% when meeting these requirements.

That bonus outstrips other significant bonus credits, including such provisions granting extra benefit for domestic content, projects in energy communities or being associated with federally subsidized housing.

In addition to the notice, the IRS published a frequently asked questions document on the proposed regulations and offered Publication 5855, which provides an overview of the guidance.

Following are key takeaways from the proposed regulations issued by the IRS:

Tax Incentives Covered

The IRA provides the five-times-multiplier bonus for taxpayers meeting prevailing wage and apprenticeship requirements for a variety of credits.

The bonus applies to the investment tax credit (ITC) for energy property found in Internal Revenue Code (IRC) Section 48. The ITC includes solar, fuel cell, geothermal, small wind, energy storage, biogas, microgrid controllers and combined heat and power system property.

The bonus also covers the IRC Section 45 production tax credit (PTC) for electricity produced from renewables, including wind, biomass, geothermal, solar, small irrigation, landfill, gas and trash, hydropower, marine and hydrokinetic energy.

Both of those incentives expire at the end of this year and will be replaced by IRC Section 45Y and IRC Section 48E, which will apply to facilities that begin construction and are placed in service after 2024. Those credits are also eligible for the five-times multiplier for properties that meet the prevailing wage and apprenticeship requirements.

Other credits covered include:

  • Carbon oxide sequestration credit (IRC Section 45Q).
  • Zero-emission nuclear power production credit (IRC Section 45U).
  • Advanced energy project credit (IRC Section 48C).
  • Alternative fuel vehicle refueling property credit (IRC Section 30C).
  • Clean hydrogen production tax credit (IRC Section 45V).
  • Clean fuel production credit (IRC Section 45Z, starting in 2025).
  • New energy efficient homes credit (IRC Section 45L).
  • Energy efficient commercial buildings deduction (IRC Section 179D).

The apprenticeship requirements do not apply to taxpayers who satisfy the prevailing wage requirements for IRC Section 45L and IRC Section 45U.


The five-times multiplier does not require taxpayers to meet the prevailing wage and apprenticeship requirements for certain small facilities that produce clean energy under 1 megawatt, alternating current (1MWac) and for facilities that began construction before Jan. 29, 2023.

Workers Covered by Requirements

The IRS proposed guidance covers laborers and mechanics employed in the construction, alteration or repair of clean energy facilities that qualify for tax incentives and ensures that they are paid no less than the applicable prevailing wage rates.

Prevailing Wage Rate

The IRS guidance specifies that the prevailing wage is determined by the Department of Labor for each classification of laborers and mechanics in a predetermined geographic area for a particular type of construction. Taxpayers must ensure that the laborers and mechanics employed by them or its contractors or subcontractors are paid the prevailing wage (which includes fringe benefits rate). Those wage rates are found here. In absence of an applicable general wage determination, taxpayers may request the Department of Labor to provide a supplemental wage determination.

Apprenticeship Requirements

The proposed guidance requires that any taxpayer (or contractor or subcontractor) who employs four or more workers must employ one or more apprentices to meet the requirements. The guidance sets the minimum percentage of total labor hours of construction, alteration or repair work to be done by qualified apprentices at 12.5% for properties beginning construction in 2023 and at 15% for properties beginning construction in 2024 or later. For more information finding apprentices, click here.


An exception to the apprenticeship requirements is allowed if a taxpayer, contractor or subcontractor has requested qualified apprentices from a qualified apprenticeship program and none are available.


Taxpayers who seek the extra tax incentive amount face specific recordkeeping requirements for laborers, mechanics and apprentices, including those working for any contractor or subcontractor. The IRS provides examples such as the hourly rate, hours worked, deduction from wages and actual wages paid, plus other records.

Corrections and Penalties

Taxpayers are eligible to claim the increased amounts despite failing to meet the requirements if they make correction and penalty payments. Those possibilities include making correction payments for underpaid or missing prevailing-wage income to any laborers and mechanics (plus interest), plus a penalty paid to the IRS. Taxpayers failing to meet the apprenticeship requirements must also make a penalty payment to the IRS under the proposed rules. Penalties do not apply to taxpayers who have a qualifying project labor agreement that meets certain requirements.

Next Steps

Written or electronic comments on the proposed guidance must be received by Oct. 30 and a hearing on the proposed regulations is scheduled for 10 a.m. ET Nov. 21. Requests to speak at the hearing and outline of the topics to be discussed must be received by the IRS by Oct. 30 and if none are received, the public hearings will be canceled.

Requests to attend the public hearing must be received by 5 p.m. ET Nov. 17.

Novogradac’s Renewable Energy Working Group will continue to study the guidance and provide feedback as warranted.


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