The Oklahoma Bar Journal May 2024

N atural R esources L aw

Prevailing Wage and Apprenticeship Requirements of the Inflation Reduction Act: Compliance and Implementation By Crystal F. Lineberry T HE RENEWABLE ENERGY SECTOR IN OKLAHOMA and the entire United States is noticeably in a season of remarkable growth. State and federal governments continue to pass generous amounts in tax incentive legislation to advance these opportunities, bringing forth large-scale investments in clean power generation. Most taxpayers seeking to obtain these substantial tax credits must adhere to strict labor standards.

seeking to obtain this enhanced credit must ensure that contrac tors and all tiers of subcontractors comply and maintain sufficient records to receive the enhanced credit, with certain limited excep tions. In many instances, a failure to comply can result in a loss of millions of dollars in tax credits unless certain penalty and cure provisions are timely satisfied. For example, a PWA-compliant tax payer’s investment tax credit (ITC) will qualify for a 30% enhanced credit (6% base ITC plus the five times PWA multiplier 3 ), whereas a taxpayer’s ITC will be reduced to only the 6% base credit if the PWA requirements are not satisfied.

Such incentives will generate various apprenticeship opportu nities and well-paying jobs while fueling a renewable energy boom in the U.S.

IRS AND TREASURY’S GUIDANCE

On Nov. 30, 2022, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) published Notice 2022–61, 4 pro viding guidance and establishing a 60-day period for determining the applicability of the beginning of construction exception. Notice 2022-61 provides that taxpay ers seeking to obtain the PWA enhanced credit must have begun construction or installation of a facility before Jan. 29, 2023, to be considered grandfathered for purposes of complying with the PWA requirements. Further, on Aug. 30, 2023, the U.S. Department of the Treasury and the IRS published proposed regulations 5

THE INFLATION REDUCTION ACT

The Inflation Reduction Act of 2022 (IRA) enacted and amended a variety of federal clean energy tax incentives. 1 For most IRA tax credits, a five times multiplier bonus is added to the base amount of the tax credit and is available for certain projects 2 that satisfy certain prevailing wage and apprenticeship (PWA) require ments set forth in (26 CFR part 1) Section 45(b)(6), (7) and (8) of the Internal Revenue Code. Taxpayers

Statements or opinions expressed in the Oklahoma Bar Journal are those of the authors and do not necessarily reflect those of the Oklahoma Bar Association, its officers, Board of Governors, Board of Editors or staff.

24 | MAY 2024

THE OKLAHOMA BAR JOURNAL