The prevailing wage and registered apprenticeship (PWA) requirements of the Inflation Reduction Act (IRA) are designed to ensure that clean energy projects support high-quality labor standards. To receive the full value of certain tax credits, including bonus amounts, taxpayers must pay construction workers wages at or above local prevailing rates and employ a minimum number of qualified apprentices during construction, alteration, or repair activities. On June 25, 2024, the U.S. Department of the Treasury and IRS released final regulations outlining the definitions, documentation standards, and compliance rules for meeting these labor requirements.
PWA bonus can be applied to:
Investment Tax Credit (ITC) – IRC §48
Without PWA compliance:
Base credit = 6%
With PWA compliance:
Bonus credit = 30% (5x multiplier)
Production Tax Credit (PTC) – IRC §45
Without PWA compliance:
Base credit = 0.3 ¢/kWh (2023 rate, adjusted annually)
With PWA compliance:
Bonus credit = 1.5 ¢/kWh (5x multiplier)
With our in-house team, Walker Blue can help you maximize this bonus by collecting documentation, auditing on-site, and providing the necessary reporting needed to ensure you meet the domestic content bonus.
What Is Prevailing Wage?
A prevailing wage includes:
- The basic hourly wage rate, plus any fringe benefits listed in the applicable wage determination
- Wage determinations are issued by the U.S. Department of Labor and are based on:
- Job classification
- Geographic location
- Type of work performed
To qualify for bonus tax credits under the Inflation Reduction Act (IRA), taxpayers must:
- Ensure that all laborers and mechanics on the project are paid at or above prevailing wage rates
- Apply this requirement to employees of the taxpayer, as well as any contractors or subcontractors
- Cover work performed during construction, alteration, or repair of a qualified facility
- The applicable wage rates must align with those set by the Department of Labor under the Davis-Bacon Act (subchapter IV, chapter 31, title 40 of the U.S. Code)
Apprenticeship Requirements
- Labor Hours Requirement:
- A minimum percentage of total labor hours must be performed by qualified apprentices from a registered apprenticeship program.
- Applicable percentages:
- 10% for construction beginning before 2023
- 12.5% for construction beginning in 2023
- 15% for construction beginning in 2024 or after
- 10% for construction beginning before 2023
- Ratio Requirement:
- The ratio of apprentices to journey-workers must meet the standards established by the registered apprenticeship program.
- Applies to apprentices working on the facility each day.
3. Participation Requirement:
- Any taxpayer, contractor, or subcontractor employing 4 or more individuals at any time during construction, alteration, or repair must hire at least one qualified apprentice.
The prevailing wage requirements do not apply to any work performed before January 29, 2023. This transition rule provides a clear cutoff for when the new requirements come into effect.
Why Choose Walker Blue?
In-house Team
Accuracy & Efficiency
Collaborative Partnerships
Client-Centered Approach
