Prevailing Wage & Apprenticeship Bonus Credit Solutions

Maximizing the credit value is not easy. Contrary to what many in the construction industry think, substantiating PW&A is not simply compliance with Davis-Bacon and Related Acts prevailing wage provisions. Receiving the enhanced credit requires ongoing and prompt cure of noncompliance, payment of penalties and substantial record-keeping. Manual record keeping on Excel spreadsheets will not be enough.

Discover the full IRA prevailing wage and apprenticeship requirements.

The recent updates in PW&A regulations feature several key changes, including:

• Defining specific dates that influence wage determination and the timing for supplemental wage and additional classification requests
• Emphasizing that apprentice ratios and wages should align with the geographic area of the project if the qualified facility is located in a geographic area other than the area where the apprenticeship program is registered
• Providing additional context of the facts and circumstances considered when determining taxpayer intentional disregard
• Making tribal members working as laborers or mechanics on projects owned fully or jointly by tribal entities exempt from prevailing wage requirements
• Exempting activities from before Jan. 29, 2023, from prevailing wage and apprenticeship requirements
• Updating the Good Faith Effort procedures for contractors needing to request qualified apprentices to meet apprenticeship participation requirements

Explore the latest changes to the prevailing wage and apprenticeship requirements.

Under the IRA’s section 48 investment tax credits, eligible properties include sectors such as biogas, solar, wind, combined heat and power and geothermal. These projects usually qualify for a base credit of 6%. However, if they meet the prevailing wage and apprenticeship requirements, the credit increases fivefold to 30%. Additionally, fulfilling the domestic content bonus credit requirements and locating the project in an energy community can each add another 10%, potentially bringing the total benefit to 50%, or $50 million. Similarly, for section 45 production tax credits, meeting the prevailing wage and apprenticeship requirements results in a similar credit structure, though the base credit is calculated per kilowatt-hour (kWh).

See what else manufacturers need to know about the domestic content bonus credit.

Clean energy projects that comply with prevailing wage and apprenticeship requirements under the IRA are eligible for a 5x enhanced credit. While credits are limited to project owners, contractors and subcontractors who understand and adhere to the IRA prevailing wage and apprenticeship requirements have a significant competitive advantage in securing contracts and should educate themselves on the parameters and nuances.

PW&A is the most powerful bonus credit under the IRA. At a high level, to receive the enhanced PW&A credit, organizations are required to pay all skilled trade workers the federal prevailing wage, a combination of hourly pay and benefits, and employ qualified apprentices during construction. To put the significance of the 5x multiplier into perspective, consider a $5.4 million eligible property: This property could either receive a base credit of $324,000 or a $1.62 million credit if it meets the project prevailing wage and apprenticeship requirements.

Contractors who understand the fundamentals of eligible energy properties included in IRA have a prime business development opportunity.

Check out more of the details regarding the immense PW&A opportunity for contractors.

The IRA offers non-taxable entities groundbreaking opportunities to utilize direct payment provisions instead of energy incentives and tax credits. By adhering to prevailing wage and apprenticeship requirements under the IRA, entities can significantly increase their credit value. However, compliance is complex and challenging to verify.

Local governments and other entities with clean energy projects face significant risk and must rely heavily on contractors to ensure compliance and maximize credit value. Many contractors lack the ability to track daily wage and apprenticeship data accurately, risking penalties. PW&A programs are vital for supporting municipalities and ensuring fair labor practices. It is crucial for organizations to monitor compliance over time. Baker Tilly and LCPtracker provide a comprehensive solution for municipalities, offering complete data coverage and technology to establish, monitor and document all aspects of compliance: prevailing wage, apprenticeship and penalties.

We recently hosted a comprehensive webinar featuring detailed insights and practical steps that municipalities can take to navigate prevailing wage and apprenticeship requirements.

Within Baker Tilly’s end-to-end compliance program, we provide the following services connected with PW&A compliance:

• Contract language advisory: Advising on contract language to notify contractors of PW&A project requirements, ensuring clarity and compliance from the outset.
• Project plan analysis: Collaborating with client to analyze project plans and assess their impact on the credit amount. This includes identifying key action steps for preserving the tax credit through PW&A compliance.
• Pre-construction communication and training: Offering pre-construction communication and training sessions for contractors on prevailing wage and apprentice requirements and implementation, fostering an understanding of compliance throughout the project.
• Compliance dashboard monitoring: Real time project-level transparency of non-compliance, pending cures and projected penalties, minimizing the risk of incurring penalties or waiting until the end of the project when a cure is no longer possible.
• Templates and regulatory support: Assisting credit seekers and their contractors in navigating the process of submitting for Department of Labor wage determinations or Good Faith Effort exceptions, ensuring adherence to regulatory requirements.
• Work papers that substantiate the earned credit: Provide a summary memo and associated work papers to support the project’s ability to claim the enhanced tax credit and defend the credit in the event of an IRS audit.

Dig deeper into how Baker Tilly can help you comply with prevailing wage and apprenticeship requirements and maximize your IRA tax credits.