Article Summary –
The U.S. Department of the Treasury and the IRS have issued final regulations allowing taxpayers to receive increased tax benefits for qualifying clean energy projects by adhering to prevailing wage and apprenticeship (PWA) requirements, with exceptions for projects under construction before January 29, 2023. These regulations enhance federal income tax credits, such as the ITC and PTC, and specify that apprenticeship requirements apply only during the construction phase and not after a facility is operational. Taxpayers must comply with PWA requirements for any construction, alteration, or repair work performed on or after January 29, 2023, and further analysis of these regulations is ongoing.
The U.S. Department of the Treasury and the Internal Revenue Service have released final regulations detailing how taxpayers can maximize tax benefits by adhering to prevailing wage and apprenticeship (PWA) requirements on qualifying clean energy projects.
These regulations outline increased credit amounts for specific federal income tax credits, including the energy investment tax credit (ITC) and the production tax credit (PTC).
Taxpayers may qualify for increased credit amounts by meeting one of the following:
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- PWA requirements;
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- Beginning of construction exception;
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- The one megawatt exception.
The PWA Transition Rule specifies that work done before January 29, 2023, is not subject to PWA requirements, regardless of the beginning of construction exception. Consequently, taxpayers only need to comply with PWA requirements for construction, alteration, or repair work done on or after January 29, 2023.
Additionally, the PWA Transition Rule affects those who began construction before January 29, 2023, but don’t meet the beginning of construction exception, such as failing the continuity safe harbor. These taxpayers must meet PWA requirements for work performed on or after January 29, 2023, but not for prior work.
The final regulations also specify that apprenticeship requirements cease once the project is placed in service. Apprenticeship rules apply to alterations and repairs during construction, but not post-service.
The Orrick energy tax team continues to review the final regulations and will offer further analysis.
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