Treasury Releases Final Rules for Energy Tax Credit Prevailing Wage, Apprenticeship Bonuses

The Inflation Reduction Act modified and extended many energy tax incentives used in residential construction, including requiring taxpayers to meet prevailing wage and/or apprenticeship requirements in order to claim the full value of the tax credit. The Treasury Department and Internal Revenue Service (IRS) have now released final regulations on these labor requirements.

To claim the full credit amount for certain incentives, taxpayers are required to pay workers the “prevailing wage,” and in other cases, also hire a certain number of registered apprentices.

The prevailing wage requirements apply to multifamily projects claiming the Section 45L New Energy Efficient Home Tax Credit.

The prevailing wage and apprenticeship requirements apply to the Section 45 Production Tax Credit, the Section 48 Investment Tax Credit, and the Section 179D Energy Efficient Commercial Buildings Deduction, among others.

In 2022, based on initial guidance from the IRS, the Department of Labor issued two Frequently Asked Question (FAQ) documents to help taxpayers comply with these requirements: one on prevailing wage and the other on apprenticeships. These webpages now note the FAQs will be updated soon to reflect changes in the final regulations.