Many of the tax credits and deductions in the Inflation Reduction Act, including the Investment Tax Credit (ITC), have a prevailing wage and apprenticeship (PWA) requirement to be eligible or to maximize the credit. The complete list of tax credits with the PWA requirement are: 30C, 45, 45L, 45Q, 45U, 45V, 45Y, 45Z, 48, 48C, 48E and 179D.
Prevailing Wage Requirement
The prevailing wage requirement states that with respect to the qualified facility (e.g., renewable energy project), the taxpayer (or direct pay recipient) shall ensure that any laborers and mechanics employed by the taxpayer or contractor will be paid wages at rates not less than the prevailing rates, as determined by the U.S. Secretary of Labor. The prevailing wage varies by region, and it is the combination of the basic hourly rate and any fringe benefit rates. Wage determinations can be found here.
Apprenticeships are integral to the United States’ strategy to develop and enhance skilled labor. For new energy and transportation projects, apprenticeship programs can help link new infrastructure investments with job training and related partnerships. There are three parts to the apprenticeship requirement for these tax credits and deductions referenced above and throughout our Funding Guidance:
1. Labor Hours Requirement
Under the labor hours requirement, apprentices must perform a certain percentage of hours for the project based on when the project starts construction:
- Construction begins before January 1, 2023: 10%
- Construction begins after December 31, 2022 and before January 1, 2024: 12.5%
- Construction begins after December 31, 2023: 15%
2. Ratio Requirement
Under the ratio requirement, a taxpayer (or direct pay recipient) must ensure that any applicable apprenticeship-to-journeyworker ratio is satisfied. The applicable apprenticeship-to-journeyworker ratio is determined by reference to the ratios of the DOL or the applicable State apprenticeship agency. This rule requires a certain ratio of non-apprentices to apprentices to ensure adequate safety and supervision.
3. Participation Requirement
The participation requirement states that if the taxpayer (or direct pay recipient), contractors, or subcontractors employ more than four individuals for construction, alteration, or repair work, then they must employ at least one qualified apprentice.
There are a few exceptions to the PWA requirements. Notably, under the ITC and the PTC, if the project is less than 1 megawatt, the taxpayer (or direct pay recipient) does not have to meet the PWA. For the full list of exceptions, read the guidance here.
Note: as of October 30, 2023 the requirements set forth by the IRS are proposed rules and are open to public comment. While the guidance is not yet definitive, it is unlikely to change significantly. This page will be updated should guidance meaningfully change.