Under the Inflation Reduction Act, employers claiming the available tax credits must pay Davis-Bacon prevailing wages, and meet certain apprenticeship requirements, to claim enhanced tax credits. As eligible projects take shape and employers consider whether and how to take advantage of these available credits, Seyfarth provides an overview of relevant obligations, demonstrating how it can seamlessly blend its pre-existing government contract and prevailing-wage expertise with clients' evolving counseling needs.
More than a year has passed since the Inflation Reduction Act ("IRA") was signed into law and yet key aspects of its tax credit provisions remain unclear. With the inclusion in the IRA of prevailing wage and apprenticeship requirements previously applicable to only government contracts, private employers seeking to take advantage of enhanced credits will now have to familiarize themselves with complicated labor obligations. Issues such as enforcement and compliance still remain largely untested, as employers have yet to claim these enhanced credits on their annual tax returns.
To qualify for enhanced tax credits under the IRA, employers must comply with Davis-Bacon prevailing wage requirements. As we have discussed before, the Department of Labor ("DOL") recently reformed the manner in which prevailing wages are determined and applied under the Davis-Bacon and Related Acts. Since the Federal Register published DOL's final rule, "Updating the Davis-Bacon and Related Acts Regulations," on August 23, 2023, the regulatory changes imposed by the rule go into effect in 60 days (on October 23). Employers seeking to claim the IRA's enhanced tax credits must be aware of these updates because they will attach to relevant non-government, private contracts.
In addition to its prevailing wage requirements, the IRA includes apprenticeship obligations, such as employing the appropriate number of apprentices on each project. Beyond that, to receive enhanced tax credits, employers will need to ensure they are complying with the IRA's apprenticeship labor-hour requirements, apprentice-to-journeyman ratios, and other standards under DOL's regulated apprenticeship program.
At Seyfarth, we are currently counseling employers seeking these enhanced tax credits to ensure compliance with IRA obligations by helping navigate the murky regulatory waters of prevailing wage and apprenticeship programs. To request a two-page overview of prevailing wage and apprenticeship compliance requirements, click the Service Overview link in the side panel.
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