The IRS has published Notice 2022-61, which sets prevailing wage and apprenticeship requirements that apply to energy efficiency provisions, including the 179D deduction for energy efficient construction, enacted as part of the Inflation Reduction Act (IRA). The guidance also offers methods for establishing the date of when construction of a facility begins.
According to the notice, in order to meet the prevailing wage requirements of the IRA, a taxpayer must ensure that any workers employed by the institution are paid wages at rates not less than the prevailing rates for construction, alteration, or repair, in keeping with Department of Labor (DOL) rules and penalties. This also applies to any contractor or subcontractor working on construction of the facility, or who is working on alteration or repair of that facility within the 10-year period beginning when the facility is placed in service.
The notice requires that a percentage of the total labor hours of the construction, alteration, or repair work performed by any contractor or subcontractor be performed by apprentices. The percentage of work that must be performed by apprentices depends on the start date of performance of the work and is specified in the notice.
Determining Beginning of Construction
The notice describes two methods than can be used to establish that construction of a facility begins—
- By starting physical work of a significant nature, or
- By paying or incurring five percent or more of the total cost of the facility
Notice 2022-62 states that the labor standards apply to facilities where construction or installations eligible for IRA energy incentives begin on or after January 30, 2023. However, a December 7 correction changed the effective start date to January 29, 2023. The Treasury and the IRS anticipate issuing proposed rules with respect to the prevailing wage and apprenticeship requirements.
To further assist taxpayers, the DOL published an FAQ on the prevailing wage and apprenticeship requirements. The department also is hosting two public webinars focused on how to comply with the labor provisions of the IRA. The webinars will take place on Wednesday, December 14 at 1 pm ET and Thursday, December,15 at 1 pm ET.