Inflation Reduction Act: Prevailing wage and apprenticeship guidance issued

The U.S. Department of the Treasury and Internal Revenue Service (IRS) officially released guidance on how to satisfy the prevailing wage and apprenticeship requirements under the Inflation Reduction Act of 2022.  

The guidance, the first under the Inflation Reduction Act, was issued in the form of a notice, Notice 2022-61, which explains how to receive the increased tax credits and, in the case of 179D, the deduction by satisfying the prevailing wage and apprenticeship requirements explained in the notice. 

The notice provides express instructions for verifying both wage and apprentice thresholds including guidance on what constitutes a prevailing wage and the determination of qualified apprenticeships along with accompanying examples.

Since the guidance is now published in the Federal Register, the notice triggers the 60-day period within which taxpayers must begin construction to receive the full tax benefit amount without also needing to satisfy the prevailing wage and apprenticeship requirements of the Inflation Reduction Act. However, there is a discrepancy between the dates listed in the notice and the publication date of the notice. Therefore, we believe it would be best to begin construction before Jan. 29, 2023, and err on the side of caution until the IRS clarifies this discrepancy.

Accordingly, until further clarification, for facilities beginning construction on or after Jan. 29, 2023, and to which the rules apply, each will need to meet the wage and apprenticeship requirements to obtain the bonus amounts. Both penalty, relief, and exemption rules are also set forth in the notice. 

Finally, the notice also provides clarity on determining the "beginning of construction" which, in general, shall follow existing established guidance on the beginning of construction.

Additional guidance and proposed Treasury regulations are also expected per the notice, with no timeline for additional guidance given.