The IRS has issued its first major guidance under the Inflation Reduction Act’s new tax provisions. (IRS Notice 2022-61) Under the Inflation Reduction Act, taxpayers are eligible to claim an enhanced (aka, “bonus”) green energy credit or deduction under certain provisions of the Code if they meet certain wage and apprenticeship requirements.
The wage and apprenticeship requirements do not apply to the Energy Efficient Home Improvement Credit or Residential Clean Energy Credit available to individual taxpayers.
Notice 2022-61 makes clear that the burden of ensuring the wage and apprenticeship requirements are met falls on the taxpayer, not their contractors or subcontractors.
The wage and apprenticeship requirements under the Inflation Reduction Act apply to projects that begin construction 60 days after the issuance of this guidance. Therefore, the requirements apply to projects that begin construction (as defined in the IRS guidance) on or after January 30, 2023.
The term “wages” includes amounts paid to employees and independent contractors of the taxpayer, contractors, and subcontractors on the construction project at issue.
The prevailing wage requirement is met if workers performing work on the taxpayer’s project are paid at least the amount of wages published by the Department of Labor at www.sam.gov for the geographic area and type of construction for the facility under construction. When determining whether prevailing wages are paid, include bona fide fringe benefits in the calculation.
IRS Notice 2022-61 states specifically that the taxpayer (not the contractors) must maintain and preserve sufficient records, including books of account or records for work performed by contractors or subcontractors of the taxpayer, to establish that the laborers and mechanics were paid wages not less than the prevailing rates.
The guidance also details how taxpayers can satisfy the apprenticeship requirements, including a safe harbor where taxpayers or contractors are unable to find qualified apprentices.
To view the full text of the guidance, go to:
We will provide additional information on this guidance, and other important tax news at Spidell’s Federal and California Tax Update.