Inflation Reduction Act of 2022 — Overview of Labor Requirements
Signed into law on August 16, 2022, the Inflation Reduction Act of 2022 (IRA) imposes new/modified tax incentives for clean energy projects (bonus tax credit) and energy efficient commercial buildings (179D tax deduction) that satisfy new labor mandates, to include prevailing wage and registered apprenticeship requirements. This tying of labor mandates to tax incentives for private sector construction projects at the federal level is unprecedented.
The IRA requires that at least 15% of total labor hours on a project must be performed by a “Qualified Apprentice” (i.e. a Registered Apprentice) by 2024. This is phased in over three years:
- 10% in 2022
- 5% in 2023
- 15% in 2024 and beyond
Projects must follow ratios determined by the Department of Labor or State Apprenticeship Councils. For eligible projects that require four or more laborers, each contractor and subcontractor must employ one or more qualified apprentices. Below are some exceptions to this requirement:
- Contractor pays a penalty of $50 multiplied by the total labor hours for which the requirement was not satisfied.
- Good faith effort – contractor requests qualified apprentices from a Registered Apprenticeship Program and the request is denied or the Registered Apprenticeship Program fails to respond to the request within 5 business days. Contactors must follow established standards and requirements of the Registered Apprenticeship Program. Financial penalty can increase to $500 per hour if the violation was deemed deliberate.
Prevailing wage requirements for bonus credit on eligible projects:
- To receive the bonus credit, workers must be paid wages not less than prevailing rates (Davis-Bacon wage rates) for the duration of the eligible credit. To satisfy noncompliance and maintain eligibility for the full credit, employers can provide back pay, plus interest and a penalty of $5,000 per worker or $10,000 per worker for violations due to intentional disregard. These appear to differ from penalties under Davis-Bacon and DOL could clarify through guidance. More Info Here