Proposed regulations on wage and apprentice energy credit bonus

September 2023

In brief

Certain tax credits enacted or amended by the Inflation Reduction Act of 2022 provide for a base credit rate and a bonus credit. Taxpayers that meet certain requirements to pay prevailing wages to workers employed in constructing, repairing, or altering facilities and to hire workers from apprenticeship programs may be able to claim a bonus credit five times the base rate.

Notice 2022-61 provided preliminary guidance on the prevailing wage and apprenticeship (PWA) bonus. On August 30, the IRS and Treasury published proposed regulations superseding the notice.

The regulations are proposed to apply to property and equipment that begin construction or installation after, and are placed in service in tax years ending after, publication of final regulations in the Federal Register. The preamble states that taxpayers may rely on the proposed regulations for property and equipment that begin construction or installation on or after January 29, 2023, and on or before publication of final regulations, if they apply the proposed regulations in their entirety and consistently. Comments on the proposed regulations are due by October 30, 2023. A public hearing is scheduled for November 21, 2023.

The IRS also has provided general information on the PWA requirements in FAQs and Publication 5855.

For consideration: The proposed regulations highlight the need for careful monitoring and documentation of compliance with PWA requirements throughout the construction of facilities or property to qualify for the bonus credit. Taxpayers will need to know which activities are subject to the PWA requirements, both before and after the property is placed in service, to assess compliance, and should be familiar with the penalty provisions. Because the PWA requirements apply to both the taxpayer claiming the credit and contractors, taxpayers may want to consider incorporating language addressing PWA requirements, including permitting access to wage information, in their construction contracts.

Our Prevailing Wage and Apprenticeship (PWA) Compliance Services

Complying with PWA requirements drives the difference between a 30% and 6% credit - is your company capitalizing on the increased credit opportunity? Our specialists can provide in-depth education on the rules, establish highly effective compliance programs, and leverage cutting-edge technology to streamline the entire process.

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Ed Geils

Ed Geils

Global and US Tax Knowledge Management Leader, PwC US

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