Boost the benefit of the prevailing wage and apprenticeship credit multiplier

The prevailing wage and apprenticeship (PWA) multiplier for clean energy tax credits continues to be a significant incentive for taxpayers. By meeting standards published by the US Department of Labor (DOL), projects are eligible for a five times increase in the base amount for certain clean energy tax credits. However, navigating the complexities and nuances of PWA compliance is critical to fully unlocking these benefits.

Central to compliance is paying workers at least the local prevailing wage, which includes both base hourly rates and fringe benefits established by the DOL. For projects that began construction after January 29, 2023—other than facilities with a net output of less than one megawatt—apprentices generally must perform at least 15% of total labor hours and must work under the supervision ratios required by their registered apprenticeship programs. These measures not only help elevate labor standards but also promote broader workforce development goals.

Achieving compliance requires a detail-oriented approach and diligent tracking. Proper worker classification under DOL standards, accurate real-time tracking of labor hours and apprentice ratios, and meticulous recordkeeping are essential to meet these requirements. Failure to comply with any element risks the credit multiplier—and with it, a significant portion of the anticipated tax benefit. Furthermore, taxpayers are required to maintain these detailed records for years after project completion to demonstrate compliance during IRS audits, making early investment in systems and processes vital.

Building PWA compliance into your project from the start helps you make the most of your energy credits and reduce the risk of costly setbacks. Here are critical items to focus on early in the project life cycle.

Although based on Davis-Bacon standards established by the DOL, the pathway to PWA compliance is fraught with several common challenges to watch for.

Successfully avoiding these pitfalls requires a proactive compliance framework. Using digital labor tracking systems, standardizing reporting templates, and conducting regular internal reviews can help identify and address issues well before claiming credits. Equally important is maintaining clear communication with contractors and subcontractors about prevailing wage tracking and reporting obligations to avoid last-minute surprises.

With careful attention to the details of prevailing wage and apprenticeship rules, you can unlock meaningful credit multipliers to improve project economics. Given what’s at stake, a holistic strategy and experienced partners are key to realizing these benefits while safeguarding compliance.