Article Summary –
The Treasury and the IRS have released the final rule for compliance with the Prevailing Wage and Apprenticeship (PWA) requirements as per the Inflation Reduction Act of 2022. The rule clarifies points including that original equipment manufacturers are largely exempt unless performing construction on site, the prevailing wage is determined at the time of contract execution, and specific records may help taxpayers prove compliance. The rule does not provide industry-specific guidance but emphasizes compliance will be ascertained on a case-by-case basis.
Final Rule for PWA Requirements Released by Treasury and IRS
On June 18, 2024, the Treasury and IRS published the final rule for compliance with prevailing wage and apprenticeship requirements (PWA), part of the Inflation Reduction Act of 2022 (IRA). This rule will be formally released on June 25, 2024.
Clarifications in the Final Rule
The rule confirms and explains further the prior Notice of Proposed Rulemaking from August 30, 2023. Here’s a brief summary of these explanations:
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- The PWA requirements, while distinct from the Davis-Bacon Act, borrows some definitions from it. They don’t necessitate certified payroll.
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- Original equipment manufacturers and suppliers might be largely exempt from PWA requirements, unless they are engaged in construction, alteration, or repair of the facility.
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- The prevailing wage for a construction contract is the wage in the active general wage determination when the contract is signed.
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- Supplemental wage determinations can be requested from the Department of Labor’s Wage and Hour Division, who will respond within 30 days.
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- Such determinations should be requested 90 days before the contract execution and remain valid for 180 days post-issuance.
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- Specific records might assist taxpayers in proving compliance with PWA requirements during an IRS examination.
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- When a registered apprenticeship program fails to reply or declines a request for apprentices, the Good Faith Effort Exception can be relied upon for a year before resubmitting requests.
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- Employer-sponsored registered apprenticeship programs alone don’t substantiate the Good Faith Effort Exception compliance. Requests must be sent to unrelated programs.
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- Steps to avoid intentional disregard for PWA compliance include keeping records and making correction and penalty payments before receiving an IRS examination notice.
Final Step in Rulemaking
This rule is the final step in rulemaking for the IRA’s PWA requirements. It offers clarity to renewable energy developers and contractors on PWA requirement compliance. However, it doesn’t provide industry-specific guidance and leaves certain questions unanswered, emphasizing that compliance will be determined by specific facts and circumstances.
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