Proposed Rules End Phase One of Inflation Reduction Act Implementation


To ensure clean energy jobs offer fair compensation and that a diverse pipeline of workers is being trained to capitalize on the opportunities created by the Inflation Reduction Act’s investments, the U.S. Treasury Department and the Internal Revenue Service (IRS) have released proposed rules and FAQs on some key act provisions.

The Inflation Reduction Act’s prevailing wage and registered apprenticeship requirements apply to many of the clean energy deployment tax incentives under the law, including for the clean energy investment and production tax credits that help finance utility-scale wind, solar and battery storage. A taxpayer can claim an enhanced credit or deduction equal to up to five times the value of the regular credit or deduction if the prevailing wage and registered apprenticeship requirements are satisfied. 

Although prevailing wage and apprenticeship requirements have existed for more than 100 years and have long applied to projects supported by federal contracts, the Inflation Reduction Act applied these requirements to clean energy tax incentives for the first time. The requirements have been in effect since January 29 – 60 days after Treasury and the IRS released initial guidance – but the proposed rules just published in the Notice of Proposed Rulemaking (NPRM) would provide employers and workers with more clarity and direction on proposed IRS guardrails, incentivize employers to adopt worker-centric practices and ensure compliance is streamlined.

Importantly, the Treasury Department’s guidance, which was developed in consultation with the U.S. Labor Department, contains new proposed rules regarding how to correct failures to meet the requirements and substantiate compliance to ensure workers are well-paid and expand the clean energy workforce. The proposed rules would also provide incentives for taxpayers to use qualifying Project Labor Agreements that meet certain criteria to fulfill the prevailing wage and apprenticeship requirements, enabling this well-established tool to be used more extensively in the clean energy industry. 

This guidance marks the end of the first phase of the Treasury Department’s implementation of the Inflation Reduction Act’s clean energy provisions, along with proposed rules and other guidance. These provisions represent the core elements needed to accelerate significant economic and climate benefits and to provide clarity and certainty to companies and other entities planning investments and projects.

White House Senior Advisor John Podesta says the proposed rules “show how we can build the clean energy economy and combat the climate crisis in a way that is good for workers, for communities and for the planet.” 

For most Inflation Reduction Act incentives, taxpayers will need to meet both prevailing wage and registered apprenticeship requirements to receive the increased credit or deduction amount.

The Treasury Department and the IRS will carefully consider public feedback before issuing final rules.

Photo by Karolina Grabowska

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