IRS Publishes Critical Prevailing Wage and Apprenticeship Requirement Guidance for IRA Tax Credits | Chicago Popular


The Revenue Agency (IRS) publishes it. Notice 2022-61 (the Notice) on 30 November Federal Register provide guidance on the key prevailing wage and apprenticeship rules (W&A requirements) generally required to obtain the full amount of credit provided for tax credits issued, expanded or extended pursuant to the Inflation Reduction Act of 2022 (ANGER). The W&A Requirements must be met with respect to the construction of qualified structures, properties, designs or equipment (collectively, structures) and, to varying degrees, the alteration and repair of structures.


  1. All workers employed by the facility owner, any contractor or subcontractor are to be paid prevailing wages (based on the prevailing U.S. Department of Labor/Davis-Bacon Act published rates for such work in a particular location).
  2. A sufficient percentage of such workers must be enrolled in a registered apprenticeship program under the National Apprenticeship Act (under the rules of the Davis-Bacon Act).

Although expressed as a 5x credit multiplier in the Internal Revenue Code (the Code), the W&A requirements are best understood as standards that must be met in order for an individual to receive the full amount of IRA tax credits and not be subject to an 80% cut. For example, the Section 48 investment tax credit of 30% “full” otherwise understood (based on pre-IRA maximum credit rates) would be reduced to 6% if an eligible property subject to W&A requirements fails to meet those requirements .

The W&A requirements apply to IRA issued or modified tax credits as follows:

* Claims under sections 45, 48, 45Y and 48E are not subject to W&A requirements if the applicable installation has a maximum net wattage of less than 1 megawatt.


Due to a built-in 60 day delay under the IRA which is triggered by the release of applicable guidance, the publication of Notice 2022-61 means that the W&A Requirements will generally apply to any subject structure if construction on that structure commences on or after January 29, 2023.

As expected, the notice confirms that the long-standing “start of construction” standards set forth in a series of notices from the IRS under Section 45 of the Manufacturing Tax Credit, Section 48 of the Investment Tax Credit, and of Section 45Q of the Pre-IRA Tax Carbon Capture and Sequestration Credit Similarly, credit decrease and phase-out programs apply for the purpose of determining whether an applicable credit facility will be subject to the W&A Requirements under of the aforementioned rule of gradual introduction of the W&A Requirements.

At a high level, this long-standing guidance stipulates that construction “begins” through one of two methods: (1) the “Physical Work Test,” which establishes that construction has begun when work of a “significant nature” is performed, and ( 2) the “Five Percent Safe Harbor”, which provides that construction begins when a taxpayer has paid or incurred 5% of the total cost of a structure. Applying this long-standing “beginning of construction” guidance, the notice also requires that the “continuity requirement” of continued construction or continued efforts be met after construction of a structure has begun, but even with the current construction date. taxpayer-friendly commissioning -employee continuity safe havens (for example, the continuity requirement is deemed satisfied if a facility is eligible under the Section 45 Production Tax Credit or Section 48 Investment Tax Credit ( other than offshore wind) is commissioned by the end of the fourth calendar year after the construction start year).


Pursuant to the notice, prevailing wage requirements are met if (1) workers and mechanics employed in the construction, modification, or repair of structures received appropriate prevailing wages, and (2) the taxpayer maintained and maintained sufficient records to substantiate such information.

Prevailing wages are generally based on the “Prevailing Wage Determinations” for the appropriate geographic area and type of work, as determined by the Department of Labor and published in In the event that the appropriate prevailing wage is not available on the website, a taxpayer may email the Department of Labor at for a prevailing wage determination, noting in the correspondence the facility, facility location, proposed job classifications, proposed prevailing wages, job descriptions and duties, and any rationale for the proposed classifications.

The Notice clarifies that all persons receiving remuneration for taxpayer, contractor or subcontractor services are subject to prevailing salary requirements, regardless of their status as an employee or independent contractor.

The notice also provides that the apprenticeship requirement is met where the taxpayer (1) meets the hours of work requirements set forth by the IRA, subject to any federal or state apprenticeship ratios required thereunder; (2) meets the apprentice participation requirements under the IRA; and (3) meets certain record keeping requirements confirming that information. However, while the notice provides some additional details, specifics and examples relating to these apprenticeship requirements, it otherwise largely reiterates the requirements of the IRA provisions themselves.

The notice also includes helpful examples of the types of filings the IRS expects can be used to substantiate a taxpayer’s satisfaction of W&A requirements.


From a market perspective, the IRS guidance is in line with industry expectations. Consequently, the most important point is that the notice starts the clock on the IRA’s 60-day post-orientation deadline for a structure to “begin construction” to avoid being subject to W&A requirements. For developers and other market participants seeking to avoid being subject to W&A requirements, the notice provides a January 29, 2023 deadline to “begin construction” of an applicable facility by contracting or physical off-site or on-site work according to the identical pre-IRA rules participants had sought to meet in order to navigate pre-IRA schedules, calendar year-based tax credit reduction, and phase-out.

Taxpayers can expect further guidance on these matters, as the IRS and the US Department of the Treasury have signaled plans to issue proposed regulations and other guidance additional to W&A requirements.

For more information on green energy tax credits made into law with the IRA, see our previous LawFlash, Inflation Reduction Act Would Significantly Expand Federal Income Tax Benefits for Green Tech Industry.

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Written by Natalia Chi

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