Oklahoma Bar Journal

Prevailing Wage and Apprenticeship Requirements of the Inflation Reduction Act: Compliance and Implementation

By Crystal F. Lineberry

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The 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.

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


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) requirements set forth in (26 CFR part 1) Section 45(b)(6), (7) and (8) of the Internal Revenue Code. Taxpayers seeking to obtain this enhanced credit must ensure that contractors and all tiers of subcontractors comply and maintain sufficient records to receive the enhanced credit, with certain limited exceptions. 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 taxpayer’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.


On Nov. 30, 2022, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) published Notice 2022–61,[4] providing guidance and establishing a 60-day period for determining the applicability of the beginning of construction exception. Notice 2022-61 provides that taxpayers 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] expanding on the prior guidance. Until the date the final regulations are published and “beginning after the date that is 60 days after August 29, 2023,” taxpayers must follow the proposed regulations with respect to the construction or installation of a facility or project in their entirety and in a consistent manner.[6] This means the PWA requirements within the proposed regulations are currently in effect and must be followed for taxpayers seeking the enhanced credit for renewable energy projects that began construction after Jan. 29, 2023.


The prevailing wage requirements provide that for any qualified facility, the taxpayer shall ensure that any laborers or mechanics employed by the taxpayer or any contractor or subcontractor in the construction of such facility and, with respect to any taxable year, the alteration or repair of such facility:

(A)(ii) ... shall be paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality in which such facility is located as most recently determined by the Secretary of Labor, in accordance with subchapter IV of chapter 31 of title 40, United States Code.[7]

Section 1.45-7 of the proposed regulations define the terms laborer and mechanic as meaning:

(d)(7) ... those individuals whose duties are manual or physical in nature (including those individuals who use tools or who are performing the work of a trade). The terms laborer and mechanic include apprentices and helpers. The terms do not apply to individuals whose duties are primarily administrative, executive, or clerical, rather than manual. Persons employed in a bona fide executive, administrative, or professional capacity as defined in 29 CFR part 541 are not deemed to be laborers or mechanics. Working forepersons who devote more than 20 percent of their time during a workweek to laborer or mechanic duties, and who do not meet the criteria for exemption of 29 CFR part 541, are considered laborers and mechanics for the time spent conducting laborer and mechanic duties.

The U.S. Department of Labor (DOL) approved website for obtaining general wage determinations is www.sam.gov. A taxpayer must ensure all laborers and mechanics performing “construction, alteration, or repair” of a renewable energy project are paid at rates not less than the most recently DOL-published rates for the specific geographic area, type of construction and precise labor classification. The applicable rates will generally apply throughout the duration of the construction of the project.

Owners and developers of renewable energy projects seeking to obtain these enhanced credits should take certain measures at the contract negotiation stage and on a continual basis to ensure the success of claiming the PWA bonus credit. In general, for prevailing wage compliance, the applicable wage determinations should be incorporated within the contract that is awarded to the contractor employing the laborers or mechanics. Further, taxpayers must maintain sufficient evidence demonstrating PWA compliance. The proposed regulations provide that contracts should include provisions requiring contractors to submit certified payroll records reflecting the hours worked in each classification, the location and type of facility, the hourly rates of wages paid to each laborer and mechanic (including any correction payments made) and the total wages paid to each worker. Limited exceptions are afforded in the regulations to allow for timely corrective payments to be made. Implementing procedures to maintain and preserve accurate records on a continual basis will enable taxpayers to evidence their compliance more efficiently with the PWA requirements during tax filing periods.


The IRA apprenticeship requirements include three components: 1) labor hours, 2) apprenticeship ratio and 3) participation.

The Labor Hours Requirement

Under the labor hours requirement, the taxpayer shall ensure that:

with respect to construction of any qualified facility, not less than the applicable percentage of the total labor hours of the construction, alteration, or repair work (including such work performed by any contractor or subcontractor) with respect to such facility shall, subject to [Section 45(b)(8)(B)] be performed by qualified apprentices.[8]

The IRA defines “labor hours” as:

the total number of hours devoted to the performance of construction, alteration, or repair work by any individual employed by the taxpayer or by any contractor or subcontractor and exclude[ing] any hours worked by foremen, superintendents, owners, or persons employed in a bona fide executive, administrative, or professional capacity (within the meaning of those terms in part 541 of title 29, Code of Federal Regulations).[9]

The IRA defines “qualified apprentices” as:

an individual who is employed by the taxpayer or by any contractor or subcontractor and who is participating in a registered apprenticeship program, as defined in section 3131(e)(3)(B). Section 3131(e)(3)(B) defines a registered apprenticeship program as an apprenticeship program registered under the Act of August 16, 1937 (commonly known as the National Apprenticeship Act, 50 Stat. 664, chapter 663, 29 U.S.C.  50 et seq.).[10]

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The total labor hours that must be performed by qualified apprentices is dependent upon when construction of a qualified facility has commenced. For construction beginning before Jan. 1, 2023, the requirement was that 10% of the total labor hours must be performed by qualified apprentices. Construction beginning after Dec. 31, 2022, and before Jan. 1, 2024, will be subject to a 12.5%-hour requirement. For any qualified facility that commences construction after Dec. 31, 2023, the labor hours requirement will be increased to 15%.[11]

The proposed regulations provide that the apprentice must be participating in a registered apprenticeship program as evidenced by a written apprenticeship agreement. Such agreement should set forth the terms and conditions of the employment, the apprentice pay rate and the training program of the apprentice. Qualified apprentices may be paid less than the prevailing wage rates in accordance with the registered apprenticeship program agreement; however, if an apprentice is working in a classification that is not prescribed in the registered apprenticeship program, then to satisfy the PWA requirements, the full prevailing wage for such laborers or mechanics must be paid.[12]

The Ratio Requirement

Under Section 45(b)(8)(B), the labor hours requirement is subject to an apprentice- to-journeyworker ratio requirement prescribed by the DOL or the applicable approved state apprenticeship agency. The DOL or state-approved apprenticeship programs are required to assign a numeric ratio of apprentices to journeyworkers in their occupational standards for apprenticeship training. This ratio is primarily intended to ensure there are adequate journeyworkers present on the jobsite to supervise the work of apprentices.

The proposed regulations require the ratio requirement to be met on a daily basis. This means the number of apprentices on any given day is not allowed to exceed the ratio standards. Any hours in excess of the ratio requirement are excluded from the total labor hours calculation for purposes of meeting the qualified apprentice’s applicable percentage. Implementing standards to meet the daily ratio requirement is crucial for a contractor or subcontractor who is seeking to comply with the PWA requirements.

The Participation Requirement

The participation requirement requires that each taxpayer, contractor or subcontractor who employs four or more individuals to perform construction, alteration or repair work with respect to the construction of a qualified facility must employ one or more qualified apprentices to perform such work. This requirement is not a daily requirement and will be met as long as the taxpayer, contractor or subcontractor employs at least one apprentice to perform work on a facility when four or more employees have been hired.[13]

Taxpayers, contractors and subcontractors should carefully review their scope of work and labor requirements for each job to proactively plan for the hiring of qualified apprentices. These apprenticeship requirements are more involved than the prevailing wage requirements. When applicable and required, taxpayers, owners, contractors and all tiers of subcontractors may be required to contact at least one DOL or state-approved apprenticeship program that has a presence in the geographic area of operation or that can be reasonably expected to transfer apprentices to the location of the facility and train apprentices in the specific occupation needed and has a “usual and customary business practice” of entering into apprenticeship agreements with employers.[14] The proposed regulations specifically require apprenticeship requests to be in writing and include information concerning the dates of employment, occupation or classification requested, location and type of work to be performed, number of apprentices needed, number of hours the apprentices will work, name and contact information of the person submitting the request and a statement that the request for apprentices is made with an intent to employ apprentices in the occupation for which they are being trained and in accordance with the registered apprenticeship program requirements. There are limited exceptions where a taxpayer will be treated to satisfy the apprenticeship requirements if the taxpayer satisfies the “Good Faith Effort Exception” or if the taxpayer makes certain penalty payments to the secretary of labor for the failure of satisfying the total qualified apprentice labor hours or participation requirements.[15]

Similar to the prevailing wage requirements, taxpayers must maintain sufficient records to demonstrate compliance with the apprenticeship requirements. Taxpayers, owners, contractors and all subcontractors should implement processes to obtain and maintain records, including, without limitation, the registered apprenticeship program agreements for each qualified apprentice, the hours worked and the rates paid to each apprentice, written requests made to registered apprenticeship programs, correspondence with registered apprenticeship programs, correction or penalty payments made, if any, and any other documentation that may substantiate or extend a good faith effort extension.


The final rule is expected to be published during 2024, and industry leaders are optimistic the final regulations will provide additional clarity relating to satisfying the PWA requirements. On Nov. 21, 2023, the IRS held a public hearing where 25 industry witnesses suggested improvements to provide further clarity for taxpayers seeking to satisfy these requirements. Namely, the concerns expressed centered on recordkeeping burdens and potential abuse with the good faith effort exceptions.


The primary goal of the PWA enhanced tax incentive is to increase clean energy production and ensure construction workers on renewable energy projects receive fair wages while stimulating local economies. Critics argue the PWA requirements will raise project costs by mandating payments of higher wages, onerous apprentice training programs and burdensome recordkeeping requirements; however, the benefits to the environment, the working class and the construction industry clearly outweigh the administrative burdens and higher project costs.


Crystal F. Lineberry is an Oklahoma attorney practicing as in-house counsel for a renewable natural gas corporation based out of California. She primarily practices in the areas of construction, business, energy and contract law. Ms. Lineberry is a member of the OBA Energy and Natural Resources Law Section.



[1] The Inflation Reduction Act of 2022, Public Law 117–169, 136 Stat. 1818 (Aug. 16, 2022), amended Sections 30C, 45, 45L, 45Q, 48, 48C and 179D.

[2] Internal Revenue Service (IRS) Publication 5855 (8-2023) (irs.gov), “Prevailing wage and apprenticeship requirements do not apply to certain projects, including those that began construction (or installation under § 179D) prior to January 29, 2023, or certain projects of less than 1 megawatt when claiming §§ 45, 45Y, 48, and 48E.”

[3] Section 48(a)(9)(B).

[4] Internal Revenue Service (IRS), Treasury, Prevailing Wage and Apprenticeship Initial Guidance Under Section 45(b)(6)(B)(ii) and Other Substantially Similar Provisions, Notice 2022-61 (Nov. 30, 2022).

[5] Increased Credit or Deduction Amounts for Satisfying Certain Prevailing Wage and Registered Apprenticeship Requirements, 88 Fed. Reg. 60,018 (Aug. 30, 2023) (Proposed Rules) (to be codified at 26 CFR Part 1).

[6] Id.

[7] 26 C.F.R. §1.45(b)(7)(A)(ii).

[8] 26 C.F.R. §1.45 (b)(8)(A)(i).

[9] 26 C.F.R. §1.45 (b)(8)(E)(i).

[10] 26 C.F.R. §1.45 (b)(8)(E)(ii).

[11] 26 C.F.R. §1.45 (b)(8)(A)(i).

[12] 88 Fed. Reg. 60,018 (Aug. 30, 2023) (Proposed Rules) (to be codified at 26 CFR Part 1).

[13] 26 C.F.R. §1.455(b)(8)(C).

[14] 88 Fed. Reg. 60,018 (Aug. 30, 2023) (Proposed Rules) (to be codified at 26 CFR Part 1).

[15] 26 C.F.R. §1.45(b)(8)(D)(ii).

Originally published in the Oklahoma Bar JournalOBJ 95 No. 5 (May 2024)

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.