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On August 16, 2022, President Biden signed the Inflation Reduction Act (IRA) of 2022. The IRA includes a 30% federal tax credit for those in private construction, alteration or repair of certain clan energy projects like solar, wind, geothermal, carbon sequestration, and electric vehicle charging stations. The tax credit can be taken by an owner/developer and their contractors and subcontractors. In order to take advantage of the tax credit, employers must comply with the federal prevailing wage provisions of the Davis-Bacon Act (Act).
The Act applies to contractors and subcontractors performing work on federally funded or assisted contracts and requires payment of wages set by the U.S. Department of Labor (DOL), depending on the worker’s classification. In addition to the prevailing wage, the IRA also requires employment of pre-set work hour percentages of apprentices participating in the DOL’s Registered Apprenticeship program or a state equivalent. Prior to the IRA, private sector construction had not been subject to the Act.
The U.S. Department of Treasury is in the process of issuing guidance, 60 days after which the IRA’s prevailing wage and apprenticeship requirements go into effect. Claiming tax credits without full compliance may lead to significant penalties. There is the ability to cure unintentional violations but only for a 60-day window of time after the Department of Treasury and IRS issue additional guidance. Employers unfamiliar with the Act’s requirements should review them carefully now before relying on qualifying for the tax credit.
- Review the IRA and the Davis-Bacon Act
- Monitor U.S. Department of Treasury website for additional guidance.
- Train appropriate personnel on prevailing wage and apprenticeship requirements.
- Subscribers can call our HR Hotline at (833) 268-5531 for further assistance.
Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2022 ManagEase