­­­­­IRS Proposes Prevailing Wage and Apprenticeship Requirements for Clean Energy Projects

On August 30, 2023, the Internal Revenue Service (IRS) published a long-awaited proposed rule on the prevailing wage and apprenticeship (PW&A) provisions attached to many of the clean energy tax incentives introduced by the Inflation Reduction Act, Pub. L. 117-169 (IRA). The IRA introduced a two-tier “base” rate and “increased” rate structure for its energy credits and deductions. To qualify for the increased rate structure, the IRA requires that taxpayers, contractors, and subcontractors ensure:

  • That laborers and mechanics are paid wages at rates not less than the prevailing rates.
  • That a percentage of the total labor hours spent to construct the facility are performed by qualified apprentices.

The proposed rule provides additional clarity on the PW&A provisions, which went into effect for projects that began construction on or after January 29, 2023, following the issuance of IRS Notice 2022-61. At that time, Advocacy submitted a letter to IRS, encouraging the agency to undergo a formal rulemaking on the PW&A requirements. The proposed rule seeks comment on the impact the regulations will have on small entities and regulatory alternatives that could potentially lesson the burden on small firms.

Comments are due by October 30, 2023. A public hearing is scheduled for November 21, 2023.