Final Regulations Released by Treasury and IRS on Prevailing Wage and Apprenticeship Requirements in the Inflation Reduction Act


Increased Tax Benefits for clean energy Projects

Overview

The U.S. Department of the Treasury and the Internal Revenue Service have issued final regulations detailing how taxpayers can access enhanced tax benefits through prevailing wage and apprenticeship (PWA) compliance on eligible clean energy projects.

Key Changes

The regulations introduce higher credit amounts for specific federal income tax incentives, such as the energy investment tax credit (ITC) and production tax credit (PTC). Taxpayers can qualify for increased credits by meeting certain criteria:

  • PWA requirements
  • Beginning of construction exception
  • One megawatt exception

PWA Transition Rule

An essential aspect is the PWA Transition Rule, exempting work done before January 29, 2023, from PWA requirements, irrespective of meeting the beginning of construction exception. Hence, compliance with PWA criteria is necessary only for work conducted on or after January 29, 2023.

Compliance Details

Additionally, if taxpayers initiate construction pre-January 29, 2023, but subsequently fail to meet the beginning of construction exception (e.g., continuity safe harbor), they must adhere to PWA requirements for work post-January 29, 2023, excluding pre-existing work.

Apprenticeship Clarification

The final regulations specify that apprenticeship provisions cease to apply once a project is operational. These requirements are pertinent during construction for alterations and repairs, not post-commissioning activities.

Expert Analysis

The Orrick energy tax team is actively evaluating the final regulations and will furnish further insights and analysis.


Read More of this Story at www.orrick.com – 2024-06-25 20:50:22

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