iOn June 18, 2024, Treasury and the IRS released the final rule for compliance with the prevailing wage and apprenticeship requirements (PWA requirements) pursuant to the Inflation Reduction Act of 2022 (IRA). This final rule is scheduled to be formally published on June 25, 2024.
The final rule includes important affirmations and clarifications of the prior Notice of Proposed Rulemaking, issued August 30, 2023. Below is a high-level summary of these clarifications:
- The PWA requirements are in harmony with, and borrow certain definitions from, the Davis-Bacon Act (40 U.S.C. § 3141 et. seq.); however, the PWA requirements are distinct from Davis-Bacon requirements and do not require certified payroll.
- Original equipment manufacturers and suppliers may be largely exempt from compliance with PWA requirements, unless they are performing construction, alteration or repair on the project site or a secondary location where a significant portion of the facility is constructed.
- The prevailing wage applicable to a construction contract is the wage listed in the general wage determination active at the time the construction contract is executed.
- Supplemental wage determinations may be requested as needed from the Department of Labor’s Wage and Hour Division, which will respond within 30 days of submission (or advise whether a longer period is needed).
- Supplemental wage determinations should be requested no earlier than 90 days prior to the expected execution date of the construction contract and remain valid for 180 days after issuance.
- A list of specific records may help taxpayers substantiate compliance with PWA requirements in the event of an IRS notice of examination.
- In the event a registered apprenticeship program fails to respond or denies a request for apprentices, a party may rely on that request to satisfy the Good Faith Effort Exception for a full calendar year before resubmitting requests.
- Employer-sponsored registered apprenticeship programs alone are not sufficient to substantiate compliance with the Good Faith Effort Exception, but requests must be submitted to unrelated registered apprenticeship programs.
- Taxpayers may take specific actions to avoid findings of intentional disregard for compliance with PWA requirements, including maintaining records and paying any required correction and penalty payments prior to receiving an IRS notice of examination.
The final rule is the final step in rulemaking for the IRA’s PWA requirements. It provides reassurance and certainty in many respects to renewable energy developers and contractors seeking to ensure their compliance with PWA requirements.
However, the final rule declines to provide industry-specific guidance, and indeed removes a solar industry-specific example used in the Notice of Proposed Rulemaking. It emphasizes that compliance with PWA requirements will be determined after review of specific facts and circumstances, and therefore leaves many of the detailed questions raised in comments to the Notice of Proposed Rulemaking unanswered.
