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DEPARTMENT OF THE TREASURY

Background

Internal Revenue Service

I. Overview
This document contains final
regulations that amend the Income Tax
Regulations (26 CFR part 1) under
sections 30C, 45, 45L, 45Q, 45U, 45V,
45Y, 45Z, 48C, and 179D of the Internal
Revenue Code (Code), as enacted or
amended by the Inflation Reduction Act
of 2022 (IRA), Public Law 117–169, 136
Stat. 1818 (August 16, 2022).
The IRA amended sections 30C, 45,
45L, 45Q, 48, 48C, and 179D to provide
increased amounts of credits or an
increased deduction, as applicable, for
taxpayers who satisfy certain
requirements and added sections 45U,
45V, 45Y, 45Z, and 48E to the Code to
provide new credits, which also contain
provisions for increased credit amounts
for taxpayers who satisfy certain
requirements. Increased credit amounts
are available under sections 30C, 45,
45Q, 45V, 45Y, 45Z, 48, 48C, and 48E,
and an increased deduction is available
under section 179D for taxpayers
satisfying certain PWA requirements.
Increased credit amounts are available
under sections 45L and 45U for
taxpayers satisfying certain prevailing
wage requirements.1 The IRA includes
correction and penalty provisions
available in certain situations for
taxpayers that have initially failed to
satisfy the PWA requirements and are
not otherwise eligible for the increased
amount of credit or deduction because
they do not qualify for an exception.
Increased amounts of credits or an
increased deduction are generally
available under sections 30C, 45, 45Q,
45V, 45Y, 48, 48E and 179D with
respect to certain facilities, properties,
projects, technologies, or equipment if
beginning of construction (or beginning
of installation for section 179D) of the
facility, property, project, technology, or
equipment, as applicable, occurs before
January 29, 2023 (BOC Exception).
Additionally, the increased credit
amounts generally are available under
sections 45, 45Y, 48, and 48E with
respect to certain facilities, projects, and
technologies, as applicable, with a
maximum net output (or capacity for
energy storage technology under section
48E) of less than one megawatt (One
Megawatt Exception). Generally, if a
taxpayer satisfies the PWA
requirements, meets the BOC Exception,

26 CFR Part 1
[TD 9998]
RIN 1545–BQ62

Increased Amounts of Credit or
Deduction for Satisfying Certain
Prevailing Wage and Registered
Apprenticeship Requirements
Internal Revenue Service (IRS),
Treasury.
ACTION: Final rule.
AGENCY:

This document sets forth final
regulations regarding the increased
credit amounts or the increased
deduction amount available for
taxpayers satisfying prevailing wage and
registered apprenticeship (collectively,
PWA) requirements established by the
Inflation Reduction Act of 2022. These
final regulations affect taxpayers
intending to satisfy the PWA
requirements to be eligible for increased
amounts of Federal income tax credits
or an increased deduction, including
those intending to make elective
payment elections for available credit
amounts, and those intending to transfer
increased credit amounts. These final
regulations also affect taxpayers
intending to satisfy the prevailing wage
requirements to be eligible for increased
amounts of those Federal income tax
credits that do not have associated
apprenticeship requirements.
Additionally, these final regulations
affect taxpayers who initially fail to
satisfy the PWA requirements (or
prevailing wage requirements, as
applicable) and subsequently comply
with the correction and penalty
procedures in order to be deemed to
satisfy the PWA requirements (or
prevailing wage requirements, as
applicable). Finally, these final
regulations address specific PWA and
prevailing wage recordkeeping and
reporting requirements.
DATES:
Effective date: These regulations are
effective August 26, 2024.
Applicability date: For date of
applicability, see §§ 1.30C–3(c), 1.45–
6(d), 1.45–7(e), 1.45–8(h), 1.45–12(f),
1.45L–3(c), 1.45Q–6(c), 1.45U–3(c),
1.45V–3(c), 1.45Y–3(c), 1.45Z–3(c),
1.48C–3(b), 1.179D–3(c).
FOR FURTHER INFORMATION CONTACT: The
Office of Associate Chief Counsel
(Passthroughs & Special Industries) at
(202) 317–6853 (not a toll-free number).
SUPPLEMENTARY INFORMATION:

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SUMMARY:

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1 The provisions in sections 45L and 45U relating
to increased credit amounts do not contain
apprenticeship requirements. For simplicity, where
possible, the preamble to these final regulations
uses the acronym PWA to refer to the prevailing
wage and apprenticeship requirements generally,
including the prevailing wage requirements in
sections 45L and 45U.

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or meets the One Megawatt Exception,
the amount of credit or deduction
determined is equal to the otherwise
determined amount of the underlying
credit or deduction multiplied by five.
II. PWA Provisions
A. In General
The principal PWA requirements are
set forth in section 45(b)(6), (7), and (8).
In general, section 45(b)(6) provides the
increased credit amount for taxpayers
satisfying the PWA requirements or
meeting one of the exceptions, section
45(b)(7) provides the prevailing wage
requirements (Prevailing Wage
Requirements),2 and section 45(b)(8)
provides the apprenticeship
requirements (Apprenticeship
Requirements).3
In general, section 45 provides a
credit for taxpayers producing
electricity from qualified energy
resources at a qualified facility during
the 10-year period beginning on the date
the facility was originally placed in
service, and selling that electricity to
unrelated persons during the taxable
year. Under section 45(a), the credit is
equal to 0.3 cents multiplied by the
kilowatt hours of electricity: (i)
produced by the taxpayer from qualified
energy resources and at a qualified
facility during the 10-year period
beginning on the date the facility was
originally placed in service, and (ii) sold
by the taxpayer to an unrelated person
during the taxable year. Under section
45(b)(6), with respect to a qualified
facility, if a taxpayer satisfies the PWA
requirements, meets the BOC Exception,
or meets the One Megawatt Exception,
then the amount of the credit
determined under section 45(a) is
multiplied by five.
B. Prevailing Wage Requirements
Section 45(b)(7)(A) provides that with
respect to any qualified facility, ‘‘the
taxpayer shall ensure that any laborers
2 The Prevailing Wage Requirements in sections
30C(g), 45L(g), 45Q(h), 45U(d), 45V(e), 48(a)(10),
48C(e), and 179D(b) are similar to the requirements
provided under section 45(b)(7). Sections 30C, 45L,
48C, and 179D, however, do not require the
payment of wages at rates not less than the
prevailing rates after construction, re-equipping,
expansion, establishment, or installation, as
applicable, ends. Sections 45Y(g)(9) and
45Z(f)(6)(A) adopt by cross-reference the Prevailing
Wage Requirements under section 45(b)(7). Section
48E(d)(3) adopts by cross-reference the Prevailing
Wage Requirements under section 48(a)(10). Section
48(a)(10)(C) provides for a special 5-year recapture
rule that applies for purposes of the Prevailing
Wage Requirements with respect to sections 48 and
48E.
3 Sections 30C(g)(3), 45Q(h)(4), 45V(e)(4),
45Y(g)(10), 45Z(f)(7), 48(a)(11), 48C(e)(6), 48E(d)(4),
and 179D(b)(5) cross-reference the Apprenticeship
Requirements in section 45(b)(8). Sections 45L and
45U do not have Apprenticeship Requirements.

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and mechanics employed by the
taxpayer or any contractor or
subcontractor in—(i) the construction of
such facility, and (ii) with respect to any
taxable year, for any portion of such
taxable year which is within the [10year period beginning on the date the
qualified facility was originally placed
in service], the alteration or repair of
such facility, 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 [Davis-Bacon Act or DBA].’’
The Davis-Bacon Act, enacted in
1931, requires the payment of minimum
prevailing wages determined by the
Department of Labor (DOL) for laborers
and mechanics working on contracts
entered into by Federal agencies and the
District of Columbia, if such contracts
are in excess of $2,000 and are for the
construction, alteration, or repair of
public buildings and public works.
Section 3142 of the DBA requires that
Federal agencies entering into contracts
covered by the DBA include the
requirements of the DBA in the contract,
including the requirement to
incorporate the applicable wage
determinations that set forth the
prevailing wages to be paid to laborers
and mechanics. The Copeland Act, 40
U.S.C. 3145, sets forth a requirement
that the contractor submit certified
weekly payroll records to the
contracting Federal agency. Congress
has included DBA requirements in other
laws, often referred to as the DavisBacon Related Acts, under which
Federal agencies provide assistance for
construction projects through grants,
loans, insurance, and other methods.
The DOL Wage and Hour Division
(WHD) administers the DBA prevailing
wage provisions.
C. Correction and Penalty Related to
Failure To Satisfy Prevailing Wage
Requirements
Under section 45(b)(7)(B) of the Code,
a taxpayer who is not eligible for the
BOC Exception or the One Megawatt
Exception and fails to satisfy the
Prevailing Wage Requirements under
section 45(b)(7)(A), is deemed to have
satisfied those requirements if the
taxpayer makes a correction payment to
any laborer or mechanic who was paid
wages at a rate below the required
prevailing rate for any period during
any year of the construction, alteration,
or repair of the qualified facility and
pays a penalty to the Internal Revenue
Service (IRS).

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Under section 45(b)(7)(B)(i)(I), the
amount of the correction payment is the
sum of: (i) the difference between the
amount of wages paid to the laborer or
mechanic during the period and the
amount of wages required to be paid to
the laborer or mechanic during that
period in order to meet the Prevailing
Wage Requirements; and (ii) interest on
the amount under (i) at the
underpayment rate established under
section 6621 (determined by
substituting six percentage points for
three percentage points in section
6621(a)(2)) for the applicable period.
Under section 45(b)(7)(B)(i)(II), the
amount of the penalty is $5,000
multiplied by the total number of
laborers and mechanics who were paid
wages at a rate below the prevailing
wage rate described in section
45(b)(7)(A) for any period during the
year. Deficiency procedures do not
apply with respect to the assessment or
collection of this penalty pursuant to
section 45(b)(7)(B)(ii).
Under section 45(b)(7)(B)(iii), if the
IRS determines that the failure to satisfy
the Prevailing Wage Requirements is
due to ‘‘intentional disregard’’ of those
requirements, then the correction
payment to the laborer or mechanic is
three times the amount that would
otherwise be determined under section
45(b)(7)(B)(i)(I), and $10,000 is
substituted for $5,000 in calculating the
penalty under section 45(b)(7)(B)(i)(II).
Section 45(b)(7)(B)(iv) provides that
once the IRS makes a final
determination that a taxpayer has failed
to satisfy the Prevailing Wage
Requirements, the taxpayer must make
the correction and penalty payments
within 180 days after the final
determination to be eligible for the
increased credit amount. If the taxpayer
does not make the required correction
and penalty payments, and therefore is
not allowed the increased credit
amount, no penalty is assessed under
section 45(b)(7)(B).
D. Apprenticeship Requirements
Under section 45(b)(8), with respect to
the construction of any qualified
facility, taxpayers must satisfy the
Apprenticeship Requirements. The
Apprenticeship Requirements impose
rules regarding labor hours, apprenticeto-journeyworker ratios, and
participation by qualified apprentices.
1. Labor Hours Requirement
Section 45(b)(8)(A)(i) provides that
‘‘[t]axpayers 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

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53185

(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’’ (Labor Hours
Requirement). For purposes of the Labor
Hours Requirement, section
45(b)(8)(A)(ii) provides that the
applicable percentage is: (i) in the case
of a qualified facility the construction of
which begins before January 1, 2023, 10
percent, (ii) in the case of a qualified
facility the construction of which begins
after December 31, 2022, and before
January 1, 2024, 12.5 percent, and (iii)
in the case of a qualified facility the
construction of which begins after
December 31, 2023, 15 percent.
Section 45(b)(8)(E)(i) 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 excluding 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).
Section 45(b)(8)(E)(ii) defines ‘‘qualified
apprentice’’ 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.) that
meets the standards of subpart A of part
29 and part 30 of title 29 of the Code
of Federal Regulations.4 The DOL Office
of Apprenticeship (OA) administers
provisions under the National
Apprenticeship Act related to registered
apprenticeship programs.
2. Ratio Requirement
Under section 45(b)(8)(B), the Labor
Hours Requirement is subject to any
applicable requirements for apprenticeto-journeyworker ratios of the DOL or
the applicable State apprenticeship
agency (Ratio Requirement).
4 Effective November 25, 2022, 29 CFR part 29 is
no longer divided into subparts A and B because
subpart B (Industry Recognized Apprenticeship
Programs) was rescinded in a final rule published
on September 26, 2022 (87 FR 58269). On January
17, 2024, the DOL released a notice of proposed
rulemaking that would once again place
apprenticeship standards in subpart A of part 29.
See 89 FR 3118.

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3. Participation Requirement
Under section 45(b)(8)(C), 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
(Participation Requirement).

on the qualified facility. Under section
45(b)(8)(D)(iii), if the IRS determines
that the failure was due to intentional
disregard of the Labor Hours
Requirement or Participation
Requirement, then the penalty amount
increases to $500 multiplied by the total
labor hours for which the Labor Hours
Requirement or Participation
Requirement was not satisfied.

E. Exceptions to Apprenticeship
Requirements

III. Other Increased Credit Amount
Provisions

1. In General
Under section 45(b)(8)(D)(i), a
taxpayer is not treated as failing to
satisfy the Apprenticeship
Requirements if: (i) the taxpayer
satisfies the requirements described in
section 45(b)(8)(D)(ii) (Good Faith Effort
Exception), or (ii) in the case of any
failure by the taxpayer to satisfy the
Labor Hours Requirement under section
45(b)(8)(A) and the Participation
Requirement under section 45(b)(8)(C),
the taxpayer makes a penalty payment
to the IRS (Apprenticeship Cure
Provision).

A. Beginning of Construction Exception
Under the BOC Exception in section
45(b)(6)(B)(ii), a qualified facility the
construction of which began prior to the
date that is 60 days after the IRS
publishes guidance with respect to the
requirements of section 45(b)(7)(A) and
(8) is a facility eligible for the increased
credit amount in section 45(b)(6). On
November 30, 2022, the Department of
the Treasury (Treasury Department) and
the IRS published Notice 2022–61 in the
Federal Register (87 FR 73580,
corrected in 87 FR 75141 (Dec. 7, 2022)),
providing guidance with respect to the
PWA requirements in section 45(b)(7)
and (8), including initial guidance for
determining the beginning of
construction under section 45 and other
credits and the beginning of installation
under section 179D. Therefore, if a
taxpayer began construction or
installation of a facility 5 before January
29, 2023, then the taxpayer is eligible
for the increased amount of credit or
deduction without satisfying the PWA
requirements, provided the taxpayer is
otherwise eligible for the credit or
deduction. Similar exceptions apply
under sections 30C, 45Q, 45V, 45Y, 48,
48E, and 179D.
For purposes of determining when
construction or installation begins,
Notice 2022–61 incorporates by
reference the notices issued under
sections 45,6 45Q,7 and 48 8
(collectively, IRS Notices). The IRS
Notices describe two methods of

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2. Good Faith Effort Exception
Under the Good Faith Effort
Exception provided by section
45(b)(8)(D)(ii), a taxpayer is deemed to
have satisfied the Apprenticeship
Requirements with respect to a qualified
facility if the taxpayer has requested
qualified apprentices from a registered
apprenticeship program, and (i) such
request has been denied, provided that
such denial is not the result of a refusal
by the taxpayer or any contractors or
subcontractors engaged in the
performance of construction, alteration,
or repair work with respect to such
qualified facility to comply with the
established standards and requirements
of the registered apprenticeship
program, or (ii) the registered
apprenticeship program fails to respond
to such request within five business
days after the date on which such
registered apprenticeship program
received such request.
3. Apprenticeship Cure Provision
Under section 45(b)(8)(D)(i)(II), if the
Good Faith Effort Exception does not
apply, then the taxpayer will not be
treated as failing to satisfy the Labor
Hours Requirement or the Participation
Requirement if the taxpayer makes a
penalty payment to the IRS in an
amount equal to the product of $50
multiplied by the total labor hours for
which the Labor Hours Requirement or
the Participation Requirement was not
satisfied with respect to the
construction, alteration, or repair work

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5 Notice 2022–61 defines facility as qualified
facility, property, project, or equipment.
6 Notice 2013–29, 2013–20 I.R.B. 1085; clarified
by Notice 2013–60, 2013–44 I.R.B. 431; clarified
and modified by Notice 2014–46, 2014–36 I.R.B.
520; updated by Notice 2015–25, 2015–13 I.R.B.
814; clarified and modified by Notice 2016–31,
2016–23 I.R.B. 1025; updated, clarified, and
modified by Notice 2017–04, 2017–4 I.R.B. 541;
Notice 2018–59, 2018–28 I.R.B. 196; modified by
Notice 2019–43, 2019–31 I.R.B. 487; modified by
Notice 2020–41, 2020–25 I.R.B. 954; clarified and
modified by Notice 2021–5, 2021–3 I.R.B. 479;
clarified and modified by Notice 2021–41, 2021–29
I.R.B. 17.
7 Notice 2020–12, 2020–11 I.R.B. 495.
8 Notice 2018–59; modified by Notice 2019–43;
modified by Notice 2020–41; clarified and modified
by Notice 2021–5; clarified and modified by Notice
2021–41.

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establishing that construction of a
facility has begun: (i) starting physical
work of a significant nature (Physical
Work Test), and (ii) paying or incurring
five percent or more of the total cost of
the facility (Five Percent Safe Harbor).
The IRS Notices provide that for
purposes of the Physical Work Test and
Five Percent Safe Harbor, taxpayers
must demonstrate either continuous
construction or continuous efforts
(Continuity Requirement) regardless of
whether the Physical Work Test or the
Five Percent Safe Harbor was used to
establish the beginning of construction.
Whether a taxpayer meets the
Continuity Requirement under either
test is determined by the relevant facts
and circumstances.
The IRS Notices also provide for a
Continuity Safe Harbor under which a
taxpayer will be deemed to satisfy the
Continuity Requirement provided a
qualified facility is placed in service no
more than four calendar years after the
calendar year during which
construction of the qualified facility
began for purposes of sections 45 and
48, and no more than six calendar years
after the calendar year during which
construction of the qualified facility or
carbon capture equipment began for
purposes of section 45Q. For purposes
of the Continuity Safe Harbor, certain
offshore projects and projects built on
Federal land under sections 45 and 48
satisfy the Continuity Requirement if
such a project is placed into service no
more than ten calendar years after the
calendar year during which
construction of the project began.
Until the Treasury Department and
the IRS issue further guidance on
determining when construction or
installation begins, taxpayers may
continue to rely on the guidance
provided in Notice 2022–61 and the IRS
Notices. Specifically, to determine when
construction begins for purposes of
sections 30C, 45V, 45Y, and 48E,
principles similar to those under Notice
2013–29 regarding the Physical Work
Test and Five Percent Safe Harbor
apply, and taxpayers satisfying either
test will be considered to have begun
construction. In addition, principles
similar to those provided in the IRS
Notices regarding the Continuity
Requirement for purposes of sections
30C, 45V, 45Y, and 48E apply. Whether
a taxpayer meets the Continuity
Requirement under either test is
determined by the relevant facts and
circumstances. Similar principles to
those under section 3 of Notice 2016–31
regarding the Continuity Safe Harbor
also apply for purposes of sections 30C,
45V, 45Y, and 48E. Taxpayers may rely
on the Continuity Safe Harbor with

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respect to those sections, provided the
facility is placed in service no more
than four calendar years after the
calendar year during which
construction began.
For purposes of section 179D,
installation of energy efficient
commercial building property, energy
efficient building retrofit property, or
property installed pursuant to a
qualified retrofit plan has begun if a
taxpayer generally satisfies principles
similar to the Physical Work Test and
the Five Percent Safe Harbor described
in section 2.02 of Notice 2022–61
regarding the beginning of construction
under Notice 2013–29. The relevant
facts and circumstances will ultimately
determine whether a taxpayer has begun
installation.
For purposes of sections 45, 45Q, and
48, the IRS Notices will continue to
apply under each respective Code
section, including application of the
Physical Work Test and Five Percent
Safe Harbor, and the rules regarding the
Continuity Requirement and Continuity
Safe Harbors.

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B. One Megawatt Exception
Under the One Megawatt Exception in
section 45(b)(6)(B)(i), a qualified facility
that has a maximum net output of less
than one megawatt (as measured in
alternating current) is a facility eligible
for the increased credit amount. Similar
exceptions apply for a qualified facility
with a maximum net output of less than
one megawatt (as measured in
alternating current) under sections
45Y(a)(2)(B)(i) and 48E(a)(2)(A)(ii)(I); an
energy project with a maximum net
output of less than one megawatt of
electrical (as measured in alternating
current) or thermal energy under section
48(a)(9)(B)(i); and energy storage
technology with a capacity of less than
one megawatt under section
48E(a)(2)(B)(ii)(I).
IV. Prior Guidance
On October 24, 2022, the Treasury
Department and the IRS published
Notice 2022–51, 2022–43 I.R.B. 331,
requesting comments on aspects of the
increased amounts of credits and
deduction enacted or amended by the
IRA, including the PWA provisions. On
November 30, 2022, the Treasury
Department and the IRS published
Notice 2022–61. Notice 2022–61
provided guidance on the PWA
requirements that generally apply under
sections 30C, 45, 45L, 45Q, 45U, 45V,
45Y, 45Z, 48, 48C, 48E, and 179D.
Additionally, as discussed in Section
III.A. of this Background, Notice 2022–
61 established the 60-day period
described in sections 30C(g)(1)(C)(i),

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45(b)(6)(B)(ii), 45Q(h)(2), 45V(e)(2)(A)(i),
45Y(a)(2)(B)(ii), 48(a)(9)(B)(ii),
48E(a)(2)(A)(ii)(II) and (a)(2)(B)(ii)(II),
and 179D(b)(3)(B)(i) for purposes of the
BOC Exception. Finally, Notice 2022–61
provided guidance for determining the
beginning of construction under
sections 30C, 45, 45Q, 45V, 45Y, 48, and
48E, and the beginning of installation
under section 179D.
On August 30, 2023, the Treasury
Department and the IRS published a
notice of proposed rulemaking and a
notice of public hearing (REG–100908–
23) in the Federal Register (88 FR
60018), corrected in 88 FR 73807 (Oct.
27, 2023), and 89 FR 25550 (April 11,
2024), providing guidance on the PWA
requirements under sections 30C, 45,
45L, 45Q, 45U, 45V, 45Y, 45Z, 48, 48C,
48E, and 179D (Proposed Regulations).
The provisions of the Proposed
Regulations are explained in greater
detail in the preamble to the Proposed
Regulations.
On November 22, 2023, the Treasury
Department and the IRS published a
notice of proposed rulemaking and a
notice of public hearing (REG- 132569–
17) in the Federal Register (88 FR
82188), providing guidance under
section 48. Among other matters, the
proposed regulations under section 48
(Section 48 Proposed Regulations)
withdrew and reproposed the
regulations in § 1.48–13 regarding the
PWA requirements under section 48, the
One Megawatt Exception under section
48(a)(9)(B)(i), and the recapture rules
under section 48(a)(10)(C) related to the
Prevailing Wage Requirements. These
final regulations do not include final
regulations under section 48.
Additionally, because proposed
§ 1.48E–3 would have incorporated the
rules of proposed § 1.48–13 by crossreference, these final regulations do not
include final regulations under section
48E. The Treasury Department and the
IRS intend to issue final regulations
with respect to the PWA Requirements
in proposed § 1.48–13 and proposed
§ 1.48E–3 in future Treasury decisions.
The Proposed Regulations provided
that taxpayers may rely on proposed
§ 1.48E–3 with respect to construction
of a qualified facility on or after January
29, 2023, and on or before the date
proposed § 1.48E–3 publishes as a final
regulation in the Federal Register,
provided, that beginning after the date
that is 60 days after August 29, 2023,
taxpayers follow the proposed
regulations in their entirety and in a
consistent manner. The Section 48
Proposed Regulations similarly
provided that taxpayers may rely on
proposed § 1.48–13 with respect to
construction of a property or project

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beginning on or after January 29, 2023,
and on or before the date proposed
§ 1.48–13 publishes as a final regulation
in the Federal Register, provided, that
beginning after the date that is 60 days
after August 29, 2023, taxpayers follow
proposed § 1.48–13 in its entirety and in
a consistent manner. These final
regulations do not change the reliance
provided with respect to proposed
§ 1.48–13 and proposed § 1.48E–3.
Comments received regarding the
specific PWA requirements under
sections 48 and 48E, the One Megawatt
Exception under sections 48 and 48E,
and the recapture rules contained in
section 48(a)(10)(C), all whether in
response to the Proposed Regulations or
the Section 48 Proposed Regulations,
will be addressed in the future Treasury
decision adopting those rules as final
regulations. Other comments on the
PWA requirements (including
comments that referenced section 48 or
section 48E, but addressed the PWA
requirements more generally) were
considered in the drafting of these final
regulations and are discussed herein.
On June 3, 2024, the Treasury
Department and the IRS published a
notice of proposed rulemaking and a
notice of public hearing (REG–119283–
23) in the Federal Register (89 FR
47792), proposing guidance under
sections 45Y and 48E (Section 45Y/48E
Proposed Regulations). In the Section
45Y/48E Proposed Regulations, the
Treasury Department and the IRS
requested comments on the proposed
definition of a qualified facility with a
maximum net output of less than one
megawatt (as measured in alternating
current) for purposes of the One
Megawatt Exception under section
45Y(a)(2)(B)(i). All comments received
pertaining to the One Megawatt
Exception under section 45Y(a)(2)(B)(i),
whether in response to the Proposed
Regulations or the Section 45Y/48E
Proposed Regulations, will be addressed
in future guidance under section 45Y
finalizing those rules. General PWA
comments that were received in
response to the Proposed Regulations
and that referenced section 45Y are
discussed throughout this Summary of
Comments and Explanation of Revisions
because they were considered in the
drafting of these final regulations.
Summary of Comments and
Explanation of Revisions
This Summary of Comments and
Explanation of Revisions summarizes
the Proposed Regulations, all the
substantive comments submitted in
response to the Proposed Regulations,
and revisions adopted by these final
regulations. The Treasury Department

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and the IRS received 342 written
comments in response to the Proposed
Regulations. The comments are
available for public inspection at
https://www.regulations.gov or upon
request. After full consideration of the
comments received, these final
regulations adopt the Proposed
Regulations with modifications in
response to such comments as described
in this Summary of Comments and
Explanation of Revisions.
Most comments addressed the PWA
requirements in general, without
identifying a specific Code section.
These comments are primarily
addressed in Sections I. through VIII. of
this Summary of Comments and
Explanation of Revisions, and revisions
that have been made in response to
these comments are also typically
described in general terms, or by
reference to section 45, which sets forth
the principal PWA requirements. Thus,
the terms qualified facility and facility
as used in Sections I. through VIII. of
this Summary of Comments and
Explanation of Revisions generally
includes qualified equipment, qualified
residence, qualified project, and
qualified property for purposes of
sections 30C, 45, 45L, 45Q, 45U, 45V,
45Y, 45Z, 48C, and 179D, as applicable.
References to an increased credit
amount in Sections I. through VIII. of
this Summary of Comments and
Explanation of Revisions include the
increased deduction amount available
under section 179D, as applicable.
Comments specifically addressing the
PWA requirements in sections 30C, 45L,
45Q, 45U, 45V, 45Y, 45Z, 48C, and
179D are described in Section IX. of this
Summary of Comments and Explanation
of Revisions.
Comments summarizing the statute or
the Proposed Regulations,
recommending statutory revisions, and
addressing issues that are outside the
scope of this rulemaking (such as
revising other Federal regulations and
recommending changes to IRS forms)
are generally not addressed in this
Summary of Comments and Explanation
of Revisions or adopted in these final
regulations. Some commenters
requested additional time to submit
comments. The Proposed Regulations
required all comments to be received by
October 30, 2023; however, comments
received by April 25, 2024, were
considered in drafting these final
regulations. In addition to addressing
the comments received in response to
the Proposed Regulations, the final
regulations also include non-substantive
grammatical or stylistic changes to the
Proposed Regulations.

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I. Pre-Filing Activities
A. Applicability of the Davis-Bacon Act
in General 9
Under section 45(b)(7)(A), the
increased credit amount provided by
section 45(b)(6) is available with respect
to a qualified facility if, among other
requirements, a taxpayer ensures that
laborers and mechanics are, ‘‘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’’ the DBA. As
explained in the preamble to the
Proposed Regulations, the phrase ‘‘in
accordance with’’ means ‘‘in agreement
or harmony with; in conformity to;
according to.’’ 10 In interpreting the ‘‘in
accordance with’’ language, the
preamble to the Proposed Regulations
explained that the Treasury Department
and the IRS proposed to incorporate
those requirements of the DBA that are
relevant for the purposes of section
45(b)(7)(A) and the intent of the IRA,
and that are necessary for, and
consistent with, sound tax
administration.
Under the DBA, the DOL determines
the wage rates that are ‘‘prevailing’’ for
each classification of covered laborers
and mechanics in the geographic area in
which work is to be performed and
publishes general wage determinations
providing that information to the public.
Under the DBA, Federal contracting
agencies follow specified procedures for
incorporating DBA requirements and
wage determinations into covered
contracts. Pursuant to the Copeland Act,
contractors are required to submit
certified weekly payroll records to the
contracting agency. Under the DBA
regulations, the contracting agency and
the DOL WHD have responsibility to
ensure compliance with prevailing wage
requirements by engaging in periodic
audits or investigations of contracts,
including examination of payroll data.
The Proposed Regulations would have
largely adopted DBA guidance relating
to applicable wage rates and wage
determinations and the meaning of
pertinent terms such as ‘‘laborer’’ and
‘‘mechanic’’; ‘‘construction, alteration,
9 All references to the DBA regulations
throughout this Summary of Comments and
Explanation of Revisions include updates to the
DBA regulations published in a final rule on August
23, 2023 (88 FR 57526).
10 In accordance with, Oxford English Dictionary,
https://www.oed.com/search/dictionary/?scope=
Entries&q=in+accordance+with (last visited Aug. 8,
2023); see Accordance, Merriam-Webster’s
Collegiate Dictionary (11th ed. 2006) (meaning
agreement, conformity).

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or repair’’; ‘‘wages’’; and ‘‘employed.’’
The Proposed Regulations would not
have incorporated the DBA (or
Copeland Act) guidance regarding
provisions required to be included in
contracts, those provisions related to the
reporting of certified weekly payroll
records by contractors to contracting
agencies, and the various enforcement
processes that are available to the DOL
and the contracting agencies to address
DBA noncompliance.
As explained in the preamble to the
Proposed Regulations, this approach
was intended to reflect the substantive
differences between the DBA and the
Code. Under the DBA, a contractor is
required to pay prevailing wages as a
condition of a Federal contract award.
Under section 45, although the
requirement to ensure the payment of
wages at rates not less than the
prevailing rates is generally triggered
when construction of a facility begins,
that requirement becomes legally
binding only if a tax return claiming the
increased credit amount is filed. The
Code does not require taxpayers who do
not seek an increased credit amount
under section 45(b)(6) to ensure the
payment of prevailing wages at the
beginning of construction, alteration, or
repair of a facility. Furthermore, under
the correction and penalty provisions in
section 45(b)(7)(B)(i)(I) and
45(b)(7)(B)(i)(II), taxpayers may remedy
prior failures to pay wages at rates not
less than the prevailing rates, even after
a return is filed, and still be eligible for
the increased credit amount. In
addition, a taxpayer that satisfies the
BOC Exception or the One Megawatt
Exception, if applicable, may generally
claim the increased credit amount
regardless of whether laborers and
mechanics were paid prevailing wages.
Several commenters suggested that
the final regulations should incorporate
additional requirements from the DBA,
instead of limiting the incorporation to
those that the Treasury Department and
the IRS determine are relevant for
purposes of claiming the increased
credit amount and that are necessary
for, and consistent with, sound tax
administration. Some commenters
asserted that not incorporating all
elements of the DBA framework was
arbitrary and capricious and contrary to
the statute. Some commenters alleged
that the Proposed Regulations failed to
adequately address the increased chance
of improperly claimed credits by relying
too heavily on post-filing enforcement.
One commenter stated that post-filing
enforcement by the IRS does not
guarantee workers’ rights, including
notice of entitlement to the prevailing
wage, a complaint procedure to report

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noncompliance, protections against
retaliation, or a requirement that
workers be guaranteed any wage by an
enforceable contract. The commenters
also stated that the reliance on postfiling compliance was inconsistent with
the DBA and would lead to fraud,
noncompliance, and evasion of the tax
rules. At least one commenter suggested
that incorporating all of the DBA
requirements is necessary to more
generally address issues of fraud in the
construction industry. One commenter
opined that although the IRA differed
from traditional Davis-Bacon Related
Acts that expressly adopt the DOL’s
existing implementation framework and
confer primary enforcement authority
upon the DOL, this was because the IRA
was enacted through reconciliation. The
commenter stated that this should not
impact the implementation of the
prevailing wage provisions.
Although several commenters
supported a more expansive
incorporation of the DBA, many other
commenters stated that the Proposed
Regulations took the correct approach
regarding incorporation of the DBA. One
commenter suggested that given the
unique challenges of applying a system
arising in Federal contracting to the
IRA’s tax credit regime, Congress did
not limit the Treasury Department and
the IRS to adopting the DBA
requirements and enforcement scheme
word-for-word and without
modification. Many commenters
acknowledged the need for the Treasury
Department and the IRS to take a
reasonable approach to interpret a Code
provision that references a Federal law
applicable to Federal contracts.
These final regulations do not alter
the general approach taken in the
Proposed Regulations of incorporating
DBA guidance for purposes of the PWA
requirements only if it is relevant for the
purposes of section 45(b)(7)(A) and the
intent of the IRA, and necessary for, and
consistent with, sound tax
administration. The Treasury
Department and the IRS recognize the
importance of ensuring compliance with
the statute such that workers benefit
from the payment of prevailing wages
on projects for which the increased
amount of credit is claimed and find
that the general approach in the
Proposed Regulations promotes that
goal within the constraints of the statute
and in furtherance of sound tax
administration. Consistent with this
framework, the final regulations
encourage taxpayers to adopt certain
practices for ensuring compliance in the
interest of fulfilling statutory intent and
furthering sound tax administration.

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The Treasury Department and the IRS
disagree with the assertion that the
Proposed Regulations were arbitrary and
capricious. This Summary of Comments
and Explanation of Revisions reiterates
and expands upon the rationale for
applying the DBA provisions that are
relevant for purposes of claiming the
increased tax credit and consistent with
sound tax administration. If Congress
intended for the same DBA
requirements to apply under the IRA, it
would have so provided. The Treasury
Department and the IRS are required to
implement statutory language as
enacted, regardless of the procedure
under which the legislation was passed
(for example, reconciliation). As
enacted, the statute does not indicate
that the regulations setting forth the
PWA requirements must mirror the DBA
in every instance. As noted in the
preamble to the Proposed Regulations,
‘‘in accordance with’’ means ‘‘in
agreement or harmony with; in
conformity to; according to.’’ This does
not require exact duplication or
incorporation. The differences in
statutory language and context reflect
the very significant differences between
the administration of the wage
provisions of Federal contracts and the
administration of the tax system, and
the statute provides flexibility for the
IRS to incorporate the requirements
from the DBA that are appropriate for
tax administration purposes.
The IRS’s authority to determine a
taxpayer’s compliance with the PWA
requirements generally arises after the
taxpayer files a claim for the increased
tax credit. Because taxpayers may
choose not to claim the increased credit
amount, the IRS cannot determine a
taxpayer’s compliance or engage in
enforcement activities before the
taxpayer files a tax return claiming the
increased credit amount. Imposing prefiling requirements through regulations
would not be a reasonable interpretation
of the statutory language and would not
permit the IRS to enforce the PWA
requirements in advance of filing. Many
of the DBA requirements (for example,
certified weekly payroll, public notice
of wage classifications and wage rates,
required contract provisions) are either
statutorily required under the DBA (or
a related act) or designed to apply to all
Federal construction contracts with
certainty at the time of contract award
(that is, in advance of work being
performed). Those same pre-filing
requirements are not prescribed in the
Code.
As acknowledged by many
commenters, the Treasury Department
and the IRS need to take a reasonable
approach to interpret a Code provision

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that references a Federal law applicable
to Federal contracts (a system that
applies with certainty in the case of a
Federal contracting agency that solicits
bids for a contract) in the context of
Federal taxes (a system designed to
function with a compliance and
enforcement framework that follows
only after the filing of tax returns).
Many commenters recognized that the
PWA requirements are not binding until
the tax return claiming the credit is
filed, yet they still requested that the
IRS impose several additional reporting,
notice, and other requirements in
advance of filing for the credit. As the
requirement to pay prevailing wages
does not become binding until a
taxpayer files a claim for the increased
amount of credit, and the IRS has a
well-established record of effective postfiling enforcement, the final regulations
do not adopt these requests. The
Treasury Department and the IRS have
also determined that imposing
additional pre-filing requirements on
taxpayers could discourage taxpayers
from seeking the increased amount of
credit available under the IRA, resulting
in fewer workers receiving prevailing
wages. The Treasury Department and
the IRS will not impose pre-filing
requirements that unnecessarily raise
compliance costs, especially for small
businesses, and provide no meaningful
benefit to the IRS in administering the
tax system.
In reviewing the public comments,
the Treasury Department and the IRS
have decided to adopt key aspects of the
Proposed Regulations and have also
determined that certain changes to the
Proposed Regulations would be
appropriate to support compliance with
the PWA requirements, and to
encourage taxpayers to adopt certain
practices. The Treasury Department and
the IRS have made these determinations
after consultation with the DOL WHD
and OA. Those changes are discussed
throughout this Summary of Comments
and Explanation of Revisions.
Accordingly, as discussed in Section
VII.D.3. of this Summary of Comments
and Explanation of Revisions, in cases
in which it is necessary for and
consistent with sound tax
administration, these final regulations
expand on the factors demonstrating
intentional disregard to reflect the value
of these practices. These additional
factors incorporate the spirit and
rationale of commenters’ suggestions by
addressing whether a taxpayer has
(among other actions): (i) conducted
regular reviews of the applicable
prevailing wage rate that must be paid
to laborers and mechanics and the
appropriate classification of such

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laborers and mechanics based on actual
job duties; (ii) investigated complaints
of retaliation or adverse action resulting
from reports of suspected failures to pay
prevailing wages and/or classify
workers in accordance with applicable
wage determinations, and taken
appropriate actions to remedy any
retaliation or adverse action and prevent
it from reoccurring; and (iii) provided
laborers and mechanics with paystubs
(or access to individual payroll records)
reflecting the amount being paid per pay
period (including the specific hourly
rate and all deductions from wages).

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B. Specific Pre-Filing Activities
Required Under the DBA
Some commenters requested that the
final regulations incorporate certain prefiling requirements in line with DBA
requirements, to prevent fraud and
ensure that workers are paid wages at
rates not less than the prevailing rates
to which they are entitled. Specifically,
commenters recommended that the final
regulations require: (i) the submission of
certified weekly or monthly payroll
records or other compliance reports and
the government’s regular review and
verification of those submitted records
through job site visits and interviews
with workers, and (ii) that taxpayers,
contractors, and subcontractors include
DBA provisions in contracts and post
applicable wage rates on job sites in
prominent and accessible locations.
1. Certified Payroll Records, Other
Compliance Reporting, and Government
Review of This Reporting
Some commenters suggested that
requiring the submission of weekly or
monthly certified payroll records to the
IRS or the DOL would allow the IRS to
monitor compliance with the PWA
requirements. Other commenters
similarly suggested that the final
regulations require the submission of
sworn monthly compliance reports to
the IRS to allow for effective monitoring
of compliance with the statute prior to
filing. One commenter suggested that
the IRS should regularly review the
certified payroll records submitted by
contractors and subcontractors, conduct
job site visits, and interview workers to
ensure that the information reported in
the certified payroll records is accurate,
and provides taxpayers with an
opportunity to correct any failures in
advance of filing. This commenter
acknowledged that the IRS would not be
able to withhold funds or assess
penalties in connection with any prefiling review, because the requirement
to pay prevailing wages is not binding
until the taxpayer files a tax return
claiming the increased credit amount.

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One commenter stated that a
requirement to regularly certify payroll
will deter bad actors and preclude
falsified payroll records.
Several commenters supported the
approach in the Proposed Regulations to
not require the regular submission of
payroll records. One commenter stated
that the submission of weekly certified
payroll records would not assist the IRS
with efficient administration of the
increased credit amount provisions.
Additionally, several other commenters
stated that the requirement to submit
certified weekly payroll records would
be burdensome on taxpayers. Finally,
one commenter agreed that submission
of certified weekly payroll to the IRS
would not be in furtherance of sound
tax administration, but the commenter
requested that contractors and
subcontractors be required to submit
certified weekly payroll to taxpayers.
The commenter asserted that this could
be a good way for taxpayers to monitor
the activities of contractors and
subcontractors.
Applying the principle outlined in
Section I.A. of this Summary of
Comments and Explanation of Revisions
to incorporate only the DBA
requirements that are relevant for
claiming the increased credit amount
and consistent with sound tax
administration, the comments
requesting that the final regulations
require the submission of pre-filing
certified payroll records or other sworn
reports, the pre-filing review of
submitted payroll records, job site visits
by the IRS, and interviews of workers
regarding the accuracy of submitted
information are not adopted. While
these comments are not adopted, in the
context of an examination, the IRS
routinely engages in activities such as
review of payroll records, site visits, and
taxpayer interviews.
The comments requesting that the
final regulations require the submission
of pre-filing payroll information or
sworn compliance reports appear to
assert that the IRS would be able to
easily discern noncompliance on the
face of payroll records or other sworn
reports submitted in advance of a
taxpayer filing any claim for a related
tax credit. To the contrary, the
requirement to pay prevailing wages
becomes binding only if a tax return
claiming the increased credit amount is
filed. Payroll records or other sworn
reports relating to the payment of wages
before a return claiming the actual
increased credit amount is filed would
provide minimal benefit to the IRS’s
enforcement actions, and would impose
considerable administrative work on
taxpayers, including those who may not

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eventually claim the increased credit
amount. Many commenters
acknowledge that this information
would not be used until the increased
credit amount is claimed. The Treasury
Department and the IRS decline to
impose these additional administrative
tasks on taxpayers because the
information would provide minimal
benefit to the IRS in advance of a
taxpayer filing a return claiming the
credit.
However, the Treasury Department
and the IRS agree that there may be
advantages in taxpayers obtaining
regular payroll records from contractors
and subcontractors. Accordingly, these
final regulations add as a factor for
intentional disregard whether a taxpayer
(or a third party acting on behalf of the
taxpayer) has regularly reviewed payroll
information of its contractors and
subcontractors or has required its
contractors or subcontractors to
regularly provide payroll information to
the taxpayer (or a third party acting on
behalf of the taxpayer). Furthermore, as
discussed in Section X.A. of this
Summary of Comments and Explanation
of Revisions, these final regulations
adopt and expand upon the
recordkeeping requirements in the
Proposed Regulations and clarify that
the DOL Form WH–347 may be used to
satisfy some of the recordkeeping
requirements.
2. Mandatory Incorporation of DBA
Contract Requirements and Posting of
Applicable Prevailing Wage
Determinations
The Proposed Regulations would have
encouraged certain behaviors that are
very similar to those required of
contractors under the DBA as factors
considered for intentional disregard.
These behaviors, which the Treasury
Department and the IRS view as
indicative of an intent to comply with
the Prevailing Wage Requirements,
would have included incorporating
provisions in any contracts entered with
contractors that require payment by the
contractors and any subcontractors of
wages at rates not less than the
prevailing rates and posting the
applicable prevailing wage rates in a
prominent place for the duration of the
construction, alteration, or repair of the
facility or otherwise notifying
employees of the applicable prevailing
wage rates.
Some commenters suggested that
taxpayers should be required to include
certain contract provisions required by
section 3142(c) of the DBA in their
contracts with contractors and
subcontractors. Some commenters
recommended the final regulations

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mandate specific contract terms,
including the taxpayer’s intent to claim
the credit, the expected wage
classifications of laborers and
mechanics who will work on the
project, estimates of apprenticeship
hours, and flow-down responsibility
clauses requiring compliance with the
PWA requirements by all contractors
and subcontractors. Additionally,
commenters suggested that all
solicitations, contracts, and subcontracts
include clauses committing to the
proper hiring and involvement of
qualified apprentices under the
Apprenticeship Requirements.
Commenters also recommended that
the final regulations adopt the
requirement in section 3142(c)(2) of the
DBA that prevailing wage rates must be
posted by employers on the job site in
a prominent and accessible location
where they can be easily seen by
workers. The Proposed Regulations
would have included as a factor to be
considered in the determination of
whether a failure to satisfy the
Prevailing Wage Requirements was due
to intentional disregard, whether the
taxpayer posted in a prominent place at
the facility or otherwise provided
written notice to laborers and
mechanics during the construction,
alteration, or repair of the facility, of the
applicable wage rate(s) as determined by
the DOL for all classifications of work
to be performed for the construction,
alteration, or repair of the facility, and
that in order to be eligible to claim
certain tax benefits, employers must
ensure that laborers and mechanics are
paid wages at rates not less than such
wage rates. Although commenters were
supportive of this factor, some
commenters were critical of the fact that
the information proposed for the notice
leaves open the question of whether the
worker is actually entitled to prevailing
wages because the worker may not
know whether an increased credit
amount is being claimed with respect to
the work they are performing. One
commenter further requested that the
poster include language regarding the
right to be properly classified as an
employee, the right to be free from
retaliation related to immigration status,
and information regarding how to
contact the IRS. One commenter
suggested requiring each contractor and
subcontractor employing workers on
projects for which an increased credit
amount could be claimed to provide
each worker with an individualized
written notice identifying their
respective classification and the
prevailing wage rate to which they are
entitled. The commenter suggested

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requiring notice to be made no later
than when construction, alteration, or
repair begins, and delivering the
suggested notice along with workers’
paychecks.
Although both contract language and
the posting of the applicable prevailing
wage rates is required by the DBA, no
similar provision exists in section
45(b)(7) of the Code that would require
taxpayers to include specific terms in a
contract or post prevailing wage rates
during construction. Applying the
principle outlined in Section I.A. of this
Summary of Comments and Explanation
of Revisions to incorporate only the
DBA requirements that are relevant for
claiming the increased credit amount
and consistent with sound tax
administration, the Treasury
Department and the IRS have decided
not to require specific DBA or other
PWA-related provisions in private
commercial contracts. These agreements
are executed well before a tax return
claiming the credit is filed. Similarly,
the final regulations do not require the
posting of applicable wage rates,
because a taxpayer may decide to claim
the increased credit amount after
construction has started. Requests
regarding the posting of information
related to general rights of workers
under State labor laws or other Federal
laws are outside the scope of these final
regulations. For these reasons, the
comments requesting that the final
regulations require the incorporation of
DBA-contract provisions and the
posting of applicable prevailing wage
rates are not adopted.
However, there is likely a benefit to
taxpayers seeking to comply with the
PWA requirements if the requirement to
pay prevailing wages and hire qualified
apprentices is incorporated in the terms
of any contract with respect to the
construction, alteration, or repair of a
facility, including lower-tier agreements
between contractors and subcontractors,
and if the laborers and mechanics who
are employed in the construction of a
facility are informed of the applicable
prevailing wage rates that would be
required if the taxpayer claims the
increased credit amount. The Proposed
Regulations would have encouraged this
behavior from taxpayers who know they
are going to claim the increased credit
amount, and the final regulations
incorporate and expand upon the list of
factors that may be considered by the
IRS for purposes of determining if a
failure to satisfy the PWA requirements
was due to intentional disregard.

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C. Including Other Conditions as a
Prerequisite for Claiming the Increased
Amount of Credit
Some commenters suggested that the
final regulations should require
taxpayers to provide advance notice to
the IRS, the DOL, potential employees,
and the general public of their intent to
claim the increased credit amount by
satisfying the PWA requirements to
provide clarity to workers. Specifically,
one commenter suggested requiring
taxpayers to file a statement of intent to
claim the increased credit amount with
the DOL WHD, which would then be
available for public review to enable
interested parties to monitor projects
that may be subject to the PWA
requirements. Another commenter
recommended requiring taxpayers to
provide notice to workers, before the
start of any project for which an
increased credit amount could be
claimed, of their intention to claim the
increased credit amount by satisfying
the PWA requirements.
Consistent with the principles
outlined in Section I.A. of this Summary
of Comments and Explanation of
Revisions, the final regulations do not
adopt these suggestions. Requiring
taxpayers to declare an intent to claim
an increased credit amount would
provide no meaningful benefit for the
IRS’s administration of the PWA
requirements, and would impose
additional pre-filing requirements on
taxpayers. Section 45(b)(6) does not
require taxpayers to declare an intent to
claim the increased credit amount.
However, as noted previously, posting
or otherwise providing general
information about applicable wage rates
is a good practice for taxpayers to
incorporate if the taxpayer is planning
to claim the increased credit amount.
The final regulations retain these
practices as a factor that may be
considered by the IRS for purposes of
determining if a failure to satisfy the
Prevailing Wage Requirements was due
to intentional disregard.
Commenters also asked that the final
regulations require a pre-filing
registration or reporting system, similar
to that provided for under sections 6417
and 6418, applicable to taxpayers
intending to claim the increased credit
amount for satisfying the PWA
requirements. Commenters alleged that
since many of the credits covered by
sections 6417 and 6418 also contain
PWA requirements, the language in
sections 6417 and 6418 requiring
information or registration can be
applied to require pre-filing registration
of the intent to claim the increased
credit amount.

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Section 6418(g)(1) provides that as a
‘‘condition of, and prior to, any transfer
of any portion of an eligible credit’’
under section 6418, the Secretary of the
Treasury or her delegate (Secretary)
‘‘may require such information
(including, in such form or manner as
is determined appropriate by the
Secretary, such information returns) or
registration as the Secretary deems
necessary for purposes of preventing
duplication, fraud, improper payments,
or excessive payments.’’ Section
6417(d)(5) provides the Secretary with
similar discretion to implement a
registration requirement. The authority
to implement a pre-filing registration
requirement provided in sections 6417
and 6418 is statutorily created and
intended to address different underlying
circumstances. Sections 6417(d)(5) and
6418(g) address the use of a registration
system as a condition of and prior to
certain events, specifically, prior to the
amounts being treated as payments
made by applicable entities or prior to
transferring a credit.
There is no analogous statutory
language in section 45 or elsewhere in
the Code related to the PWA
requirements. Moreover, the registration
requirements for sections 6417 and 6418
serve the specific purposes of
preventing duplication, fraud, improper
payments, or excessive payments. Those
concerns are largely unique to the
elective pay and credit transfer
opportunities created by sections 6417
and 6418. In the context of sections
6417 and 6418, the IRS implemented
the registration portal to prevent fraud
and duplicate or improper payments, by
providing the IRS with basic
information that will facilitate
processing and improve the
administration of the credits. A prefiling registration or reporting
mechanism in the PWA context would
not provide the IRS with actionable
information for purposes of enforcing
the PWA requirements. For these
reasons, the comments requesting that
the IRS establish a PWA registration
system similar to that used for sections
6417 and 6418 are not adopted.

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D. Other Comments Regarding PreFiling Activities and IRS Enforcement
Procedures
1. Organizational Changes to the IRS
and General Tax Administration
Several commenters suggested that
the final regulations implement
organizational changes to the IRS. For
example, one commenter recommended
that the regulations create a dedicated
office of labor standards enforcement to
enforce the PWA provisions. An

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additional commenter requested that the
Treasury Department establish a
dedicated compliance and enforcement
office. The commenter also encouraged
the Treasury Department to review State
requirements for disclosures, proof of
payment, and affirmation, and adopt
models that best effectuate compliance.
One commenter suggested that the
Treasury Department and the IRS create
an inter-agency office with the DOL to
facilitate the receipt of
contemporaneous reporting from
taxpayers.
Another commenter suggested the
creation of a digital platform to be used
by taxpayers to submit PWA
documentation that would be accessible
by businesses, the DOL, and local
apprenticeship programs. Several
commenters recommended that the
Treasury Department and the IRS
partner with the DOL and applicable
State agencies in the enforcement of
PWA requirements. Additional
commenters requested that the Treasury
Department and the IRS establish formal
partnerships with fair contracting
organizations, labor unions, and other
workers’ rights organizations in order to
expand the capacity to monitor jobsites.
A commenter stated that such thirdparty partnerships—known as Joint
Labor Compliance Monitoring
Programs—have been successfully
implemented across the country as a
method of improving working
conditions for workers and ensuring
that projects are completed responsibly
and on time.
A few commenters suggested the final
regulations prescribe specific actions
regarding IRS enforcement, compliance,
and general tax administration. For
example, one commenter recommended
that any IRS audit of increased credit
amounts verify and cross-reference State
labor materials to ensure prevailing
wage and apprenticeship standards are
met. A commenter stated that States
such as California, Washington, and
Wyoming have implemented State level
apprenticeship utilization provisions
and that the States have developed user
friendly systems for contractors to
report apprentice and journeyworker
hours. At least one commenter also
requested that the Treasury Department
ensure that audit processes and other
enforcement mechanisms are done in a
transparent, accessible manner and with
close engagement with other agencies.
Several commenters provided
recommendations regarding information
that should be reported on IRS forms
claiming the increased credit amount. A
commenter suggested that the IRS
implement a cross-withholding
mechanism, modeled after that used by

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the DOL under the DBA, whereby a
taxpayer engaged in two or more
separate projects who is found to violate
the PWA requirements on one project is
then denied the increased credit amount
with respect to any additional projects.
Comments regarding the IRS’s
organizational structure, coordination
with other agencies and States, how the
IRS conducts audits, and changes to IRS
forms are outside the scope of these
final regulations. Therefore, the changes
suggested by the comments are not
adopted. In developing the Proposed
Regulations and these final regulations,
the Treasury Department and the IRS
consulted extensively with the DOL and
will continue to consult with the DOL
as appropriate to assist in the
administration of the PWA
requirements.
2. Requests for Private Letter Rulings
One commenter recommended that
the IRS permit taxpayers to submit
requests for Private Letter Rulings
(PLRs) regarding compliance with the
PWA requirements. Whenever
appropriate in the interest of sound tax
administration, it is the policy of the
IRS to answer inquiries of individuals
and organizations regarding their status
for tax purposes and the tax effects of
their acts or transactions, prior to the
filing of returns or reports that are
required by the revenue laws. Revenue
Procedure 2024–1, 2024–01 I.R.B. 1, is
updated each year and contains the
general procedures for requests for
PLRs. There are, however, certain areas
in which the IRS will not issue rulings
or determination letters, including areas
in which the IRS is temporarily not
issuing rulings or determination letters
because those matters are under study.
These no-rule issues are set forth in
Revenue Procedure 2024–3, 2024–01
I.R.B. 143, which is also updated
annually. Issues pertaining to the
application of the IRA currently are
identified in Revenue Procedure 2024–
3 as matters under study by the IRS and
thus are not currently subject to PLRs,
but this position is subject to change.
Updates to the no-rule issues are outside
the scope of these final regulations.
3. Complaint Procedures for
Underpayment of Applicable Prevailing
Wage Rates and the Failure To Hire
Qualified Apprentices
The Proposed Regulations would have
included whether the taxpayer had in
place procedures whereby laborers and
mechanics could report suspected
failures to pay prevailing wages and/or
suspected failures to classify workers
correctly in accordance with the
applicable wage determination to

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Federal Register / Vol. 89, No. 122 / Tuesday, June 25, 2024 / Rules and Regulations
appropriate personnel departments or
managers without retaliation or other
adverse action as a factor to be
considered in the determination of
intentional disregard.
Many commenters requested that the
final regulations prescribe the process
through which a worker can complain
about being underpaid. Commenters
suggested that the process for
complaints should be available to all
interested parties, and that any person
should be able to submit complaints to
the government, preferably through the
IRS website, without fear of retaliation
by their employers or others. A
commenter urged the IRS to develop
and inform stakeholders and the public
on complaint and enforcement
procedures and provide contact
information for the IRS office that will
accept and investigate complaints.
Another commenter recommended that
the Treasury Department and the IRS
create a complaint mechanism with
both a telephone hotline and an online
portal, and available in English and
Spanish, to file complaints.
Commenters acknowledged that
unlike under the DBA, if the Treasury
Department and the IRS are informed of
violations or irregularities before the
increased credit is claimed, the agencies
would not be able to immediately assess
fines or mandate that taxpayers issue
corrective payments. A commenter
acknowledged that there are limitations
on the IRS’s remedial authority, but
suggested that the Treasury Department
and the IRS have a compelling interest
in instituting a complaint mechanism to
obtain vital information that they can
use in determining which taxpayers to
audit. One commenter suggested
permitting registered apprenticeship
programs to petition the Treasury
Department if they believe that a
taxpayer is falsely claiming that the
program is unable to meet the taxpayer’s
request for qualified apprentices.
While the IRS takes information it
receives regarding alleged tax violations
very seriously, the comments requesting
that the final regulations require a
specific process regarding complaints
are not adopted. Similar to the
comments addressed in Section I.D.1. of
this Summary of Comments and
Explanation of Revisions regarding
overall IRS administration, the
comments concerning how the IRS
should address reports of alleged tax
violations are outside the scope of these
final regulations. Additionally, the
commenters overstate the usefulness of
such information in the pre-filing
context with respect to the PWA
requirements. A laborer or mechanic
might be paid wages at rates less than

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the applicable prevailing wage rates
would require for such work, but that
does not mean the laborer or mechanic
was underpaid for purposes of section
45(b)(7)(A), unless and until a tax return
claiming the increased credit amount is
filed. The PWA requirements apply to
the taxpayer, and the taxpayer must
ensure that laborers and mechanics are
paid wages at rates not less than the
appliable prevailing wage rates for
construction, alteration, or repair of a
qualified facility. If a taxpayer,
contractor, or subcontractor underpays a
laborer or mechanic and does not
subsequently correct the underpayment
with the appropriate backpay and
interest and pay the penalty amount,
then the increased credit amount will be
disallowed by the IRS.
However, the Treasury Department
and the IRS acknowledge the value in
encouraging internal complaint and
anti-retaliation procedures on facilities
for which taxpayers acknowledge they
anticipate claiming an increased credit
amount by satisfying the PWA
requirements. As discussed in Section
VII.D.3. of this Summary of Comments
and Explanation of Revisions, the final
regulations include the existence of
these procedures as a factor in
determining whether a failure to satisfy
the PWA requirements was due to
intentional disregard. Further, these
final regulations add as factors in
determining intentional disregard
whether the taxpayer posted
information on how to contact the
appropriate office to report suspected
failures and whether in response to any
complaint, the taxpayer investigated the
complaint and took appropriate action
to remedy the situation.
Additional commenters proposed that
the Treasury Department and the IRS
clarify that workers who report PWA
violations are protected by the antiretaliation framework enacted under the
Taxpayer First Act (26 U.S.C. 7623 et
seq.) (TFA). Commenters raised that
section 7623(d)(1) states that no
employer, contractor, or subcontractor
may ‘‘discharge, demote, suspend,
threaten, harass, or in any other manner
discriminate’’ against an employee who
has provided information or assisted in
‘‘an investigation regarding
underpayment of tax or any conduct
which the employee reasonably believes
constitutes a violation of the Internal
Revenue laws or any provision of
Federal law relating to tax fraud.’’
Commenters stated that the TFA’s antiretaliation provisions under section
7623(d)(1) cover reporting to the
Treasury Department, IRS, and related
agencies, as well as internal reporting by
a worker to their supervisors.

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Commenters emphasized that section
7623(d)(2)(A) also provides the right to
file a complaint with the Secretary of
Labor with respect to any reprisals and
provides for a private right of action in
district court in the event that the
Secretary of Labor has not issued a final
decision within 180 days of the filing of
the complaint.
The application of section 7623,
including the anti-retaliation provision
enacted under the TFA, is outside the
scope of these final regulations.
However, whether laborers and
mechanics were provided with a written
notice of the rights conferred by the
TFA is included as a factor the IRS will
consider in determining if a failure to
comply with the PWA requirements was
due to intentional disregard.
Additionally, IRS Form 3949–A,
Information Referral, may be submitted
by anyone with information about an
alleged tax violation. The ability of any
individual or organization to notify the
IRS of specific and credible suspected
tax violations serves as a powerful
deterrent that supports voluntary
compliance and has the potential to
provide the IRS with information to
identify and address noncompliance.
Commenters acknowledge that at any
point before the tax return is filed, it is
within the taxpayer’s discretion to
refrain from claiming the increased
credit amount and avoid the
responsibility to make any related
payments. Even so, commenters stated
that the IRS is not limited in imposing
conditions that the taxpayer must meet
at the time of the construction,
alteration, or repair to later claim the
increased credit amount. The Treasury
Department and the IRS agree that for
those taxpayers that claim the increased
credit amount on a return, the obligation
to pay prevailing wages attaches as of
the time that the work was performed.
The final regulations prescribe
correction procedures that apply on a
retroactive basis, including interest
accruing on any correction amounts
from the date of the failure, to account
for past failures that occurred at the
time the construction, alteration, or
repair work was performed.
II. PWA Transition Rule
Under the BOC Exception in sections
30C, 45, 45Q, 45V, 45Y, and 179D,
taxpayers may claim the amount of the
increased credit or deduction without
satisfying the PWA requirements if
construction (or installation with
respect to section 179D) ‘‘begins prior to
the date that is 60 days after the
Secretary publishes guidance with
respect to the [PWA requirements].’’
The Treasury Department and the IRS

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published Notice 2022–61 on November
30, 2022, providing initial guidance
with respect to the PWA requirements
and starting the 60-day period described
in those sections. Unless the One
Megawatt Exception applies, taxpayers
who do not meet the BOC Exception
under these Code sections would need
to satisfy the applicable PWA
requirements to claim the increased
amount of credit or deduction. Under
sections 45L, 45U, 45Z, and 48C, there
is no BOC Exception or One Megawatt
Exception, so taxpayers need to satisfy
the applicable PWA requirements to
claim the increased credit amount
regardless of when construction began
or how small the facility (or respective
underlying creditable activity) may be.
As enacted or amended by the IRA,
the sections containing PWA provisions
have various statutory effective dates.
The PWA provisions in section 30C
apply to property placed in service after
December 31, 2022.11 The PWA
provisions in section 45 apply to
facilities placed in service after
December 31, 2021.12 The PWA
provisions in section 45L apply to
dwelling units acquired after December
31, 2022.13 The PWA provisions in
section 45Q apply to facilities or
equipment placed in service after
December 31, 2022.14 Section 45Y
applies to facilities placed in service
after December 31, 2024.15 In contrast,
the effective dates of the PWA
provisions in sections 45U, 45V, and
45Z are stated in relation to when the
respective electricity, hydrogen, or
transportation fuel is produced. Section
45U applies to electricity produced and
sold after December 31, 2023, in taxable
years beginning after such date.16
Section 45V applies to hydrogen
produced after December 31, 2022.17
And Section 45Z applies to
transportation fuel produced after
December 31, 2024,18 but includes a
special rule (described in Section IX.G.
of this Summary of Comments and
Explanation of Revisions) with respect
to the Prevailing Wage Requirements if
a facility is placed in service before
January 1, 2025. The new allocation
amounts available under section 48C(e)
11 IRA

§ 13404(f).
§ 13101(k).
13 IRA § 13304(f).
14 IRA § 13104(i)(1). The amendments made to the
definition of a qualified section 45Q facility apply
to facilities or equipment the construction of which
begins after the date of enactment of the IRA (that
is, after August 16, 2022).
15 IRA § 13701(c).
16 IRA § 13105(c).
17 IRA § 13204(a)(5).
18 IRA § 13704(c).

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12 IRA

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are effective on January 1, 2023.19 The
amendments to section 179D apply to
taxable years beginning after December
31, 2022.20
Several commenters requested that
the final regulations clarify whether the
PWA requirements apply to work
performed before January 29, 2023, both
with respect to Code sections with a
BOC Exception and those without a
BOC Exception. Commenters stated that
it would be unfair to require taxpayers
to comply with the PWA requirements
with respect to these activities. Several
commenters stated that the BOC
Exception was intended to ensure that
the PWA requirements are not applied
retroactively and asked for a uniform
rule applicable to all increased credit
amount provisions that the PWA
requirements do not apply before the
BOC Exception trigger date. Other
commenters asked that activities that
occurred before the IRS issued Notice
2022–61 (November 30, 2022) be
excluded from the PWA requirements.
Some commenters stated that significant
preliminary activities may have
occurred prior to the enactment of the
IRA, and they asked that the final
regulations clarify that the PWA
requirements do not apply to these
activities, regardless of whether a BOC
Exception may apply. One commenter
suggested that the PWA requirements
apply only after these final regulations
are issued.
The Treasury Department and the IRS
have determined that given the
complexity of the PWA requirements,
the uncertainty regarding the potential
retroactive effects of the PWA
requirements, and the benefits to tax
administration gained with consistency
across the various Code sections
containing PWA requirements, that a
transition rule is appropriate.
The final regulations provide that any
work performed before January 29, 2023
(the date that is 60 days after the
publication of Notice 2022–61) is not
subject to the PWA requirements,
regardless of whether there is an
applicable BOC Exception. Thus, with
respect to sections 45L, 45Z, and 48C,
although there is no applicable BOC
Exception and regardless of when
construction began, taxpayers must only
comply with the PWA requirements for
the construction, alteration, or repair
work (as applicable) occurring on or
after January 29, 2023. Section 45U is
not subject to the transition rule
because, as described in Section IX.D. of
this Summary of Comments and
Explanation of Revisions, the Prevailing
19 IRA

§ 13501(e).

20 IRA§ 13303(d).

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Wage Requirements of section 45U only
apply to alterations or repairs of a
qualified nuclear power facility that
occur after December 31, 2023.
The transition rule also applies for
taxpayers that may initially satisfy the
BOC Exception, but later fail to meet the
BOC Exception (for example, failing to
meet the Continuity Requirement).
These taxpayers must satisfy the PWA
requirements for construction,
alteration, or repair (as applicable) that
occurs on or after January 29, 2023, but
do not need to meet the PWA
requirements for work that occurred
prior to that date.
III. Beginning of Construction
A. Beginning of Construction Under the
IRS Notices
The IRS Notices describe two
methods of establishing that
construction of a facility has begun: (i)
starting physical work of a significant
nature (Physical Work Test), and (ii)
paying or incurring five percent or more
of the total cost of the facility (Five
Percent Safe Harbor).
Physical work of a significant nature
can include both on-site and offsite
work. Notice 2013–29 describes that in
the case of a wind turbine, on-site
physical work of a significant nature
begins with the beginning of the
excavation for the foundation, the
setting of anchor bolts into the ground,
or the pouring of the concrete pads of
the foundation. Physical work of a
significant nature does not include
preliminary activities such as planning
or designing, securing financing,
exploring, researching, obtaining
permits, licensing, conducting surveys,
environmental and engineering studies,
clearing a site, test drilling of a
geothermal deposit, test drilling to
determine soil condition, or excavation
to change the contour of the land.
Notice 2013–29 explains that removal of
existing turbines and towers is
considered preliminary work and not
physical work of a significant nature.
Under the Five Percent Safe Harbor, if
a taxpayer has paid or incurred five
percent or more of the total cost of the
facility and thereafter the taxpayer
makes continuous effort to advance
towards completion of the facility, then
the construction of the facility will be
considered to have begun. All costs
properly included in the depreciable
basis of the facility are taken into
account but the cost of land or any
property not integral to the facility is
not included. Taxpayers can generally
choose to structure their business affairs
to meet either the Physical Work Test or
the Five Percent Safe Harbor. However,

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once a taxpayer meets either method,
beginning of construction is established
and a taxpayer may not alternate
between methods.

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B. Beginning of Construction and the
BOC Exception Under Notice 2022–61
and the Proposed Regulations
Absent an exception, the PWA
requirements apply with respect to the
construction, alteration, or repair of a
qualified facility. For purposes of the
Prevailing Wage Requirements, section
45(b)(7)(A) provides that the taxpayer
must ensure the payment of prevailing
wages to laborers and mechanics
employed in: (i) the ‘‘construction’’ of
the qualified facility, and (ii) for ‘‘the
alteration or repair’’ of the qualified
facility during the 10-year period after
the facility is placed in service. For
purposes of the Apprenticeship
Requirements, section 45(b)(8) provides
that the taxpayer must satisfy the Labor
Hours Requirement ‘‘with respect to the
construction of any qualified facility.’’
For purposes of determining when
construction or installation begins
under the BOC Exception, Notice 2022–
61 incorporates by reference the IRS
Notices. While Notice 2022–61 served to
define the beginning of construction
under the BOC Exception, Notice 2022–
61 also states generally that it provides
‘‘guidance for determining the
beginning of construction’’ under
sections 30C, 45, 45Q, 45V, 45Y, 48, and
48E, and the beginning of installation
under section 179D solely for purposes
of section 179D(b)(3)(B)(i). The preamble
to the Proposed Regulations explained
that until further guidance is issued on
determining when construction begins
under the applicable Code sections,
taxpayers may continue to rely on the
guidance provided in Notice 2022–61
and principles similar to those under
the IRS Notices for purposes of
determining when construction begins.
Section 3 of Notice 2022–61 contains
guidance with respect to the Prevailing
Wage Requirements. Section 3.03(4) of
Notice 2022–61 provides that
‘‘‘construction, alteration, or repair’
means ‘construction, prosecution,
completion, or repair’ as defined under
29 CFR 5.2(j).’’ In proposing rules under
section 45(b)(7)(A), the Treasury
Department and the IRS sought to
incorporate those rules of the DBA
regime relevant to the intent of the PWA
requirements and useful for tax
administration. Thus, consistent with
Notice 2022–61, proposed § 1.45–
7(d)(2)(i) would have provided that the
‘‘term construction, alteration, or repair
generally means construction,
prosecution, completion, or repair as

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defined in 29 CFR 5.2’’ of the DBA
regulations.
In general, the DBA applies to
contracts for construction, alteration or
repair of public buildings and public
works and requires payment of
prevailing wages with respect to all
mechanics and laborers employed
directly on the site of the work.21 Under
29 CFR 5.2, construction, alteration, or
repair is defined expansively to include
all types of work done on a particular
building or work at the site of the work,
as defined in 29 CFR 5.2, by laborers
and mechanics employed by a
contractor or subcontractor. This work
includes, but is not limited to, altering,
remodeling, installing of items
fabricated offsite, painting and
decorating, manufacturing, or furnishing
of materials, articles, and supplies or
equipment on the site of the building or
work, and certain demolition or removal
activities.
Notice 2022–61 and proposed § 1.45–
7(d)(2)(i) would have defined
construction, alteration, or repair by
reference to the DBA. This means that
the activity triggering the PWA
requirements for a facility subject to the
PWA requirements is determined by
reference to activities that constitute
construction under the DBA. A taxpayer
must begin to satisfy the PWA
requirements once construction,
alteration, or repair activities occur if
those activities are described in 29 CFR
5.2. Under this definition, construction,
alteration, or repair would mean all
types of work performed at the location
of the qualified facility.
C. Comments on Determining the
Beginning of Construction for PWA
Purposes
Several commenters requested
clarification concerning when the
obligation to comply with the PWA
requirements arises in the lifespan of a
construction project apart from
satisfying the BOC Exception, including
what methods may be relied upon (the
Physical Work Test or Five Percent Safe
Harbor) and the Continuity
Requirement. Another commenter
suggested that the final regulations
incorporate the tests from the IRS
Notices into the final regulations.
Commenters indicated that there is
confusion regarding the precise scope of
the PWA requirements because the
word ‘‘construction’’ has different
meanings under the DBA and the IRS
Notices. One commenter stated that the
preamble’s use of both ‘‘beginning of
construction’’ and ‘‘start of
construction’’ was confusing.
21 40

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Several commenters requested
clarification on when construction
begins for purposes of the PWA
requirements, noting that initial
activities that constitute construction
under 29 CFR 5.2 and would be subject
to prevailing wage requirements under
the DBA may not be the same activities
that constitute the beginning of
construction under the IRS Notices. A
commenter also requested that the final
regulations provide an exception from
the PWA requirements for work subject
to an agreement entered into prior to
January 29, 2023, or give taxpayers who
are a party to such agreements one year
from the date the final regulations are
published to comply with the PWA
requirements. Further, commenters
requested that the final regulations
clarify that the beginning of
construction is determined under
existing tax principles and that
preliminary activities, such as
demolition or land clearing included
under the DBA as work, do not count as
the beginning of construction for PWA
purposes. A commenter requested that
the final regulations confirm that the
end of construction corresponds to
when an asset is placed in service and
that activities afterward are not subject
to the PWA requirements unless they
are a covered alteration or repair.
A commenter contended that the BOC
Exception is anti-competitive and places
an undue burden on new projects, as
compared to projects that meet the BOC
Exception, because projects meeting the
BOC Exception will receive all the
benefits of meeting Prevailing Wage
Requirements without having to incur
any of the associated costs. The
commenter emphasized the importance
of promoting a level playing field for all
taxpayers interested in qualifying for
increased credit amounts across clean
energy industries.
D. Beginning of Construction for
Purposes of the BOC Exception and the
PWA Requirements in General
The Treasury Department and the IRS
understand commenters’ concerns and
the potential for confusion in
determining the beginning of
construction for purposes of the BOC
Exception and the PWA requirements.
While the Physical Work Test is very
similar to the definition of construction
under the DBA, certain preliminary
activities are treated differently. Some
activities constituting construction
under the DBA definition would not
constitute construction activities under
the Physical Work Test. For instance,
under the Physical Work Test, the
demolition and removal of an existing
structure would be considered a

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preliminary activity, not the ‘‘beginning
of construction.’’ However, under the
DBA definition, the same activity would
constitute construction. The Five
Percent Safe Harbor, which has no
equivalent under DBA, looks solely at
incurred costs in determining whether
construction has begun. Under all three
tests, once construction begins a
taxpayer must satisfy the PWA
requirements with respect to all
construction, alteration, or repair as
defined in proposed § 1.45–7(d)(2) by
reference to 29 CFR 5.2.
The Treasury Department and the IRS
have determined that using the DBA
definition of construction to define the
activities that mark the start of the
obligation to comply with the PWA
requirements for a qualified facility
subject to the requirements provides a
uniform rule across all the relevant
Code sections. This is also consistent
with the general approach in the
Proposed Regulations and Section I.A.
of this Summary of Comments and
Explanation of Revisions of adopting
DBA concepts when they are relevant to
sound tax administration. Using the
DBA definition of construction as the
triggering activity provides a clear and
uniform rule for taxpayers to determine
when the obligation to comply with the
PWA requirements begins. Thus,
comments proposing use of the IRS
Notices to determine the beginning of
construction for purposes of the PWA
requirements are not adopted. Providing
a uniform rule that is generally
applicable across all of the PWA
provisions provides the necessary
clarity sought by commenters. The final
regulations provide that the activities
that mark the start of the obligation to
comply with the PWA requirements is
any activity that constitutes
construction (as defined in § 1.45–
7(d)(3)) of a qualified facility.
Unless an exception applies,
taxpayers are required to comply with
the PWA requirements once a laborer or
mechanic performs any work that is
considered construction, alteration, or
repair of the qualified facility (including
work on the qualified facility that
occurs at a secondary site). Thereafter,
all work with respect to the construction
(or alteration or repair), as defined in
§ 1.45–7(d)(3) (by cross-reference to 29
CFR 5.2), of the qualified facility is
subject to the applicable PWA
requirements. The beginning of
construction, for purposes of satisfying
the BOC Exception, will continue to be
determined under the IRS Notices.
In light of the differences between the
tests, and because Notice 2022–61 as
well as the Proposed Regulations
indicated that taxpayers could rely on

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the IRS Notices for determining when
construction begins, the final
regulations provide transition relief for
taxpayers who applied the definitions in
the IRS Notices for purposes of
determining those activities that were
considered construction, alteration, or
repair of the facility subject to the PWA
requirements in the initial stages of
construction. The final regulations
waive penalties for taxpayers who
applied the IRS Notices for determining
when the obligation to pay prevailing
wages began, provided the taxpayer
makes the appropriate correction
payments to the impacted workers
within 180 days of the publication of
the final regulations. As part of the
transition relief, the final regulations
also allow taxpayers to use the IRS
Notices for determining when
construction begins under section
45(b)(8)(A) to determine the applicable
percentage of labor hours performed by
qualified apprentices required in
satisfying the Labor Hours Requirement.
IV. One Megawatt Exception
Under the One Megawatt Exception in
section 45(b)(6)(B)(i), a qualified facility
that has a maximum net output of less
than one megawatt (as measured in
alternating current) is eligible for the
increased credit amount. The preamble
to the Proposed Regulations would have
provided that a qualified facility’s
nameplate capacity determines whether
the facility meets the One Megawatt
Exception. Similar exceptions apply for
a qualified facility with a maximum net
output of less than one megawatt (as
measured in alternating current) under
sections 45Y(a)(2)(B)(i) and
48E(a)(2)(A)(ii)(I); an energy project
with a maximum net output of less than
one megawatt of electrical (as measured
in alternating current) or thermal energy
under section 48(a)(9)(B)(i); and energy
storage technology with a capacity of
less than one megawatt under section
48E(a)(2)(B)(ii)(I).
Proposed § 1.45–6(c) would have
provided that nameplate capacity for an
electrical generating unit means the
maximum electrical generating output
in megawatts that the unit is capable of
producing on a steady state basis and
during continuous operation under
standard conditions, as measured by the
manufacturer and consistent with the
definition provided in 40 CFR 96.202. If
applicable, the International Standard
Organization (ISO) conditions are used
to measure the maximum electrical
generating output or usable energy
capacity.
Commenters stated that the term
‘‘maximum net output’’ is ambiguous
and that no method is provided for

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determining such output. A few
commenters also supported the
Proposed Regulation’s definition of
maximum net output and suggested
carrying the nameplate capacity
definition of maximum net output
forward into its final rule. One
commenter raised that for inverter-based
resources, like solar and storage
facilities, maximum net output could be
determined at different stages. For such
facilities, the commenter recommended
clarifying that only post-inverter
maximum electrical generating output
qualifies as maximum net output. The
final regulations do not adopt these
changes because the definition in
proposed § 1.45–6(c) contained testing
methodologies and conditions and the
statute already requires the
measurement be in alternating current.
The final regulations adopt the
definition without change.
Another commenter suggested
clarifying when multiple energy projects
constitute a single facility for purposes
of the One Megawatt Exception under
section 45. One commenter suggested
adopting the eight factors of a single
project determination listed in Notice
2013–29 and Notice 2018–59, to
determine when multiple energy
projects constitute a single facility for
purposes of the One Megawatt
Exception. The commenter stated that it
could be difficult, such as for solar
arrays constructed on multiple
buildings, to determine when multiple
projects may constitute a single facility.
Another commenter stated that
taxpayers should not be permitted to
subdivide projects and construction
contracts in an effort to evade the
Prevailing Wage Requirements using the
One Megawatt Exception. The
commenter stated that to prevent
taxpayers from manipulating the One
Megawatt Exception, the Treasury
Department should evaluate whether
facilities will be using the same
transmission lines or connecting to the
same powerhouse. One commenter
recommended using certain factors,
including ownership, proximity, and
connection to transmission lines or
powerhouse, to determine whether
multiple energy projects may be deemed
to constitute one facility.
The definition of a qualified facility,
energy project, or energy storage
technology under the respective Code
section controls for purposes of the One
Megawatt Exception. Therefore, the
definition of qualified facility under
section 45 governs for purposes of the
One Megawatt Exception under section
45(b)(6)(B)(i). Accordingly, the
application of the aggregation principles
issued under Notice 2013–29 and Notice

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2018–59 is outside the scope of these
final regulations. Further, the Section 48
Proposed Regulations would provide
guidance for taxpayers regarding the
definition of an energy project. The
Section 48 Proposed Regulations would
provide rules for purposes of the One
Megawatt Exception as well as other
IRA bonus provisions for domestic
content and energy communities. As
noted previously, comments pertaining
to the 48 Proposed Regulations will be
addressed in a future Treasury decision.
The applicable scope of the PWA
requirements is further discussed in
Section VI. of this Summary of
Comments and Explanation of
Revisions.

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V. Application to the Taxpayer
A. Definition of Taxpayer, Contractor,
and Subcontractor
Generally, the Proposed Regulations
would have defined the term taxpayer to
mean any taxpayer as defined in section
7701(a)(14), including applicable
entities described in section
6417(d)(1)(A). This generally will be the
entity that claims the credit (as
increased under section 45(b)(6)) or
makes an election under section 6417
with respect to such credit amount on
a Federal income tax return.
The Proposed Regulations would have
provided that in order to earn the
increased credit amount under section
45(b)(6) by satisfying the PWA
requirements, the taxpayer would be
solely responsible for: (i) ensuring that
the relevant laborers and mechanics are
paid wages not less than the prevailing
rate whether employed directly by the
taxpayer, or by a contractor, or a
subcontractor, and (ii) ensuring that the
Apprenticeship Requirements are
satisfied. The Proposed Regulations also
would have provided that the taxpayer
would be solely responsible for the
PWA recordkeeping requirements, the
correction and penalty provisions under
the Prevailing Wage Requirements, and
the Good Faith Effort Exception and
Apprenticeship Cure Provision under
the Apprenticeship Requirements.
However, nothing in the Proposed
Regulations was intended to supersede
requirements that might otherwise
apply to a taxpayer, contractor, or
subcontractor under State or Federal
law.
Commenters requested guidance
concerning whether the taxpayer is
responsible for ensuring the compliance
with the PWA requirements by
contractors and subcontractors if the
taxpayer may not be in privity of
contract with all contractors and
subcontractors. Commenters noted that

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proposed § 1.45–7(d)(3) would have
defined a contractor as any person that
enters into a contract with the taxpayer
for the construction, alteration, or repair
of a qualified facility. However,
commenters stated that the taxpayer is
not always in privity of contract with
each contractor and subcontractor.
Similarly, another commenter suggested
that the definition of contractor be
revised to address situations in which
the taxpayer is not in privity of contract
with the contractors, because the
sponsor or developer of the facility
assumes responsibility for construction
of the facility. The final regulations
clarify that the definition of contractor
applies to those situations.
Additionally, a commenter stated that
DOL guidance under 29 CFR 5.5(a)(6)
provides that prime contractors have the
responsibility for the compliance of all
the subcontractors on a covered prime
contract, whereas the Proposed
Regulations state that the taxpayer is
solely responsible for PWA compliance.
The final regulations retain the
requirements in the Proposed
Regulations that the taxpayer is solely
responsible for the PWA requirements,
including ensuring that the relevant
laborers and mechanics are paid wages
at rates not less than the prevailing rates
whether employed directly by the
taxpayer, a contractor, or a
subcontractor and ensuring that the
Apprenticeship Requirements are
satisfied.
A commenter suggested that the final
regulations adopt a safe harbor allowing
taxpayers to avoid corrections and
penalty payments if the taxpayer
contracted with a third party to ensure
compliance with relevant PWA
requirements. Section 45(b)(7)(A)
requires that the taxpayer ensures that
laborers and mechanics are paid wages
at rates not less than the applicable
prevailing wage rates with respect to the
construction, alteration, or repair of a
qualified facility and under section
45(b)(8)(A), that the required number of
labor hours with respect to the
construction of a qualified facility are
performed by qualified apprentices. The
burden to ensure that these
requirements are met falls with the
taxpayer. The final regulations do not
adopt the suggestion to incorporate a
safe harbor, but the penalty waiver in
§ 1.45–7(c)(6) and described in Section
VII.D.4. of this Summary of Comments
and Explanation of Revisions provides
an appropriately limited exception to
corrections and penalty payments in the
case of inadvertent errors.
Similarly, one commenter requested
that the final regulations permit
contractors or subcontractors to make

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53197

corrective payments on behalf of the
taxpayer directly to laborers or
mechanics. The correction and penalty
provision in section 45(b)(7)(B)(i)
requires that the taxpayer makes
payment to the laborer or mechanic of
the correction amount. The Treasury
Department and the IRS appreciate
commenters’ suggestions to encourage
methods that result in prompt
correction payments to laborers and
mechanics. Although the statute
requires that the correction payment be
made by the taxpayer to the laborers and
mechanics, it does not prescribe the
method by which the taxpayer must
make payment. The final regulations
similarly do not prescribe a specific
method of payment and adopt the
proposed rule without change.
Regardless of how payments are made,
taxpayers must maintain records
demonstrating when and how correction
payments were made.
A few commenters suggested that the
final regulations clarify the requirement
that the taxpayer ensure that all laborers
and mechanics employed by the
taxpayer, or any contractor or
subcontractor, are paid wages at rates
not less than the prevailing rates applies
to all subcontractors. Specifically,
taxpayers stated that the DBA definition
of subcontractor indicates that a
subcontractor includes subcontractors of
any tier, and suggested that the final
regulations use the same term in the
definition of subcontractor. The
definition of subcontractor in the final
regulations clarifies that the
requirement applies to all
subcontractors, including those who
contract with other subcontractors.
Another commenter suggested that
the use of subcontractor labor providers,
such as labor brokers, should be
explicitly discouraged because of the
risk of fraud. This suggestion is
overbroad and inconsistent with the
plain language of section 45, which
anticipates the use of contractors and
subcontractors. This suggestion is not
adopted.
B. Transferability Pursuant to Section
6418
The Treasury Department and the IRS
requested comments on the application
of the PWA correction and penalty
provisions in the context of transferred
credits. The credit available under
section 45, including the increased
credit amount available under section
45(b)(6), is an eligible credit subject to
section 6418. Proposed § 1.45–7(c)(1)(iv)
and proposed § 1.45–8(e)(2)(iv) would
have provided that to the extent an
eligible taxpayer, as defined in section
6418(f)(2), has determined an increased

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credit amount under section 45(b)(6)
and transferred such increased credit
amount as part of a specified credit
portion pursuant to section 6418(a), the
obligation to make correction and
penalty payments under proposed
§ 1.45–7(c)(1)(i) and (ii) and the penalty
payment under proposed § 1.45–
8(e)(2)(i) remains with the eligible
taxpayer. No commenters disagreed
with having the eligible taxpayer remain
responsible for the PWA correction and
penalty provisions under proposed
§ 1.45–7(c)(1)(iv) or proposed § 1.45–
8(e)(2)(iv). Consequently, these final
regulations adopt proposed § 1.45–
7(c)(1)(iv) and proposed § 1.45–
8(e)(2)(iv) without change. However,
commenters raised other issues related
to the PWA provisions in the context of
a transfer pursuant to section 6418,
which are addressed in the following
paragraphs.
Under proposed § 1.45–7(c)(1)(iv) and
proposed § 1.45–8(e)(2)(iv), to the extent
an eligible taxpayer transfers a credit
increased pursuant to the PWA
requirements, the obligation to satisfy
the PWA requirements becomes binding
upon the earlier of the filing of the
eligible taxpayer’s return for the taxable
year for which the specified credit
portion is determined with respect to
the eligible taxpayer or the filing of the
return of the transferee taxpayer for the
year in which the specified credit
portion is taken into account. One
commenter stated that if the eligible
taxpayer is a calendar year taxpayer and
the transferee taxpayer is a fiscal year
taxpayer, then the ability of the eligible
taxpayer to make any correction or
penalty payments may be shortened.
Section 6418 and the final regulations
thereunder (TD 9993) published in the
Federal Register (89 FR 34770) on April
30, 2024 (6418 Final Regulations),
provide that the transferee taxpayer
takes into account the transferred credit
in the first taxable year ending on or
after the taxable year of the eligible
taxpayer with respect to which the
credit was determined. Consequently, if
an eligible taxpayer has a calendar year
taxable year and the transferee taxpayer
has a fiscal year taxable year, the
transferee taxpayer’s return due date
generally will be after the eligible
taxpayer’s return due date. In the event
a transferee taxpayer files a return that
claims an increased credit amount
transferred from an eligible taxpayer
prior to the eligible taxpayer filing its
return, the obligation to have satisfied
the PWA requirements becomes legally
binding upon the filing of the return of
the transferee taxpayer. However, in any
scenario, eligible taxpayers will have
the ability to make any required

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correction and penalty payments as
provided under section 45(b)(7)(B)(iv),
which allows such payments to be made
within 180 days of a determination by
the IRS with respect to a failure
regarding prevailing wages, or under
section 45(b)(8)(D)(i) with respect to
apprenticeship failures. The transferee
taxpayer filing its tax return before the
eligible taxpayer does not shorten this
period. Further, the eligible taxpayer
and the transferee taxpayer are required
to attach a transfer election statement
describing specific details relating to the
transaction, including any increased
credit amounts, and prior to filing any
tax returns, the parties should have
verified eligibility under the PWA
provisions. Therefore, the Treasury
Department and the IRS did not revise
the proposed rule in these final
regulations.
Commenters recommended specifying
that if a credit amount increased
pursuant to the PWA requirements is
transferred to multiple transferee
taxpayers, the responsibility to make
correction and penalty payments
remains indivisible with the eligible
taxpayer. This comment is consistent
with the Proposed Regulations, which
did not distinguish between situations
with one or multiple transferee
taxpayers. These final regulations adopt
the proposed rule without change.
One commenter recommended that
transferee taxpayers being transferred an
eligible credit increased pursuant to the
PWA requirements should be
secondarily liable for any correction and
penalty payments. The commenter
stated that if the transferee taxpayer is
not secondarily liable, then the amounts
may not be paid because the eligible
taxpayer will have already received the
consideration from the transfer of the
tax credit. Further, the commenter
suggested that the transferee taxpayer
should be required to keep the same
records as the eligible taxpayer in order
to demonstrate reasonable cause with
respect to excessive credit transfers and
should also be required to contractually
bind the eligible taxpayer to meet the
PWA requirements, indemnifying the
transferee taxpayer for any such
payments it is secondarily required to
make.
The Treasury Department and the IRS
do not adopt these changes. As
explained in the preamble to the
Proposed Regulations, credit amounts
increased pursuant to the PWA
requirements are part of determining the
eligible credit by the eligible taxpayer.
The 6418 Final Regulations confirm that
any specified credit portion is a
proportionate share of the entire eligible
credit, including any increases pursuant

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to the PWA requirements. Therefore, it
is part of the eligible taxpayer’s
responsibility to satisfy the PWA
requirements and requiring the eligible
taxpayer to make any correction or
penalty payments remains appropriate.
Requiring the transferee taxpayer to be
secondarily liable may inappropriately
shift the responsibility to satisfy the
PWA requirements. It is the
responsibility of the transferee taxpayer
under section 6418 and the 6418 Final
Regulations to perform due diligence to
show reasonable cause in the event of
an excessive credit transfer, but changes
to those rules are outside the scope of
these final regulations. Additionally,
specific recordkeeping requirements for
the eligible taxpayer and transferee
taxpayer(s) under section 6418 are
addressed in the 6418 Final Regulations
and are outside the scope of these final
regulations.
A commenter recommended that a
transferee taxpayer should be able to
rely on assurances from the eligible
taxpayer that all covered work was
performed under the terms of a
qualifying project labor agreement
(discussed in Section V.D. of this
Summary of Comments and Explanation
of Revisions) to demonstrate
‘‘reasonable cause’’ in the context of an
excessive credit transfer relating to the
PWA requirements. These final
regulations do not adopt this suggestion
as excessive credit transfers are outside
the scope of these final regulations and
are addressed in the 6418 Final
Regulations.
C. Application to Indian Tribal
Governments and the Tennessee Valley
Authority
The preamble to the Proposed
Regulations explained that the statutory
language of the IRA does not reflect any
intent to include exceptions from the
PWA requirements other than the BOC
Exception and the One Megawatt
Exception. Consequently, the Proposed
Regulations would not have included a
rule that would exempt Indian Tribal
governments or the Tennessee Valley
Authority (TVA) from the PWA
requirements. The Treasury Department
and the IRS requested comments on the
need for any exceptions, including for
Indian Tribal governments or the TVA,
from the PWA requirements in addition
to those expressly described in the
statute.
1. Indian Tribal Governments
In accordance with Executive Order
13175 (Consultation and Coordination
with Indian Tribal governments) and
Executive Order 14112 (Reforming
Federal Funding and Support for Tribal

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Nations To Better Embrace Our Trust
Responsibilities and Promote the Next
Era of Tribal Self-Determination), the
Treasury Department and the IRS
support the right of Indian Tribes to
self-govern and recognize that Indian
Tribes exercise inherent sovereign
powers over their members and
territory. The Treasury Department and
the IRS are guided by the fundamental
principles in Executive Orders 13175
and 14112. Under those principles, the
Treasury Department and the IRS have
an obligation to consider the concerns
raised by Tribes and, to the extent
permitted by law, address those
concerns in the final regulations.
On September 25, 2023, the Treasury
Department and the IRS held a Tribal
consultation with Tribal leaders
requesting assistance in addressing
questions related to the PWA
requirements in the Proposed
Regulations. Through consultation and
in response to the Proposed Regulations,
the Treasury Department and the IRS
received numerous comments regarding
an exception to the PWA requirements
for projects constructed by Indian Tribal
governments. A number of commenters
recommended that Indian Tribal
governments should not be exempted
from the PWA requirements and cited to
the lack of statutory basis to grant an
exception. In contrast, other
commenters supported an exception to
the PWA requirements for Indian Tribal
governments.
A. Prevailing Wage Requirements and
Indian Tribal Governments
With respect to the Prevailing Wage
Requirements, commenters suggested
that requiring projects located on Tribal
lands to comply with wage standards set
by the DOL undermines Tribal
sovereignty. Some commenters stated
that the DOL provides an exception
from the DOL prevailing wage rates for
work done by Indian Tribal
governments using their own
employees, and advocated that the final
regulations, at a minimum, contain a
similar rule under the IRA.
Commenters also stated that the DOL
prevailing wage rates often are defined
at the county level, which may include
higher cost urban areas and could
negatively impact projects on Tribal
lands that often occur in the rural
portions of such counties. These
commenters stated that complying with
wage standards set by the DOL for IRA
projects could place additional
administrative burdens on Tribes by
requiring Tribes to administer two sets
of prevailing wages (DOL prevailing
wage standards for IRA projects and
Tribal prevailing wage standards for

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other projects). As an alternative to
permitting Indian Tribal governments to
set their own prevailing wage rates for
IRA projects, commenters suggested
defining the term locality to include
Tribal lands as a separate category to
allow Tribes to submit a request to the
DOL for a supplemental wage
determination for that specific Tribal
locality.
With respect to the Prevailing Wage
Requirements, the Treasury Department
and the IRS continue to understand the
statutory language of the Code as not
reflecting an intent to entirely exempt
Indian Tribal governments from the
PWA requirements. The statutory
language also does not reflect an intent
to allow Indian Tribal governments to
substitute their own prevailing wage
rates for those generally required under
the DBA.
However, in accordance with
Executive Order 14112, the final
regulations provide two special rules
that apply to Indian Tribal governments
(including a subdivision, agency, or
instrumentality of an Indian Tribal
government). First, the final regulations
provide that an Indian Tribal
government, as defined in section
30D(g)(9) of the Code, is excepted from
the Prevailing Wage Requirements
under the IRA with respect to laborers
and mechanics that are employees,
within the meaning of section
3121(d)(2), of the Indian Tribal
government. This rule also applies to
joint ownership arrangements that
involve an Indian Tribal government
(including a subdivision, agency, or
instrumentality of an Indian Tribal
government), but only with respect to
the employees, within the meaning of
section 3121(d)(2), of the Indian Tribal
government. As stated in some
comments from Tribes, the DOL
provides an exception from the DOL
prevailing wage rates for work done by
Tribal governments using their own
employees. Specifically, under the DBA,
a government agency may perform
construction work in-house with its
own employees rather than contract out
the work. Work performed by these
employees generally is not subject to the
DBA requirements because
governmental agencies are not
considered contractors or subcontractors
under the DBA. This is known as the
force account exception. The DOL has
explained that in cases in which an
Indian Tribal government performs
work with its own employees, the force
account exception to the DBA generally
applies and the Tribal government is not
required to pay DOL-determined
prevailing wages for work done by its
own employees. Tribes historically have

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relied on this exception. Under these
final regulations, Tribes may continue
that practice for purposes of the
Prevailing Wage Requirements under
the IRA.
Second, the Treasury Department and
the IRS recognize that Tribal lands
generally are not coextensive with a
single geographic area for which the
DOL may have made an applicable wage
determination. Comments from Tribes
requested that the final regulations
define the term ‘‘locality’’ to include
Tribal lands as a separate category to
allow Tribes to submit a request to the
DOL for a supplemental wage
determination for specified Tribal lands.
However, defining locality in this way
would require that the DOL establish a
new administrative process to
implement a unique wage determination
for Tribal lands; that process is outside
of the authority of the Treasury
Department and the IRS. Thus, these
final regulations do not change the
definition of locality to include Tribal
lands as a separate category.
However, recognizing that Tribal
lands are sovereign territories that may
encompass or overlap with numerous
geographic areas, the final regulations
provide a special rule for Indian Tribal
governments that perform construction,
alteration, or repair of a facility on
Indian land, as that term is defined in
25 U.S.C. 3501(2). Specifically, if the
Indian land encompasses or overlaps
more than one geographic area with
respect to which the DOL has made an
applicable wage determination, then the
Indian Tribal government may choose
the applicable wage determination for
any one of those geographical areas and
apply that applicable wage
determination for work performed on
any qualified facility that is located on
the Indian land. If the Indian Tribal
government chooses to use this
alternative applicable wage
determination, it must maintain and
preserve records sufficient to document
the applicable prevailing wage for each
laborer, contractor, or subcontractor
with respect to each qualified facility on
Indian land. This rule applies to a
qualified facility that is subject to joint
ownership arrangements that involve an
Indian Tribal government (including a
subdivision, agency, or instrumentality
of an Indian Tribal government). This
rule is intended to ease the
administrative burden on Indian Tribal
governments because they can use a
single applicable wage determination
for all projects on Indian land.

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b. Apprenticeship Requirements and
Indian Tribal Governments
Regarding the Apprenticeship
Requirements, some commenters
supported an exception for Indian
Tribal governments and stated that
Tribes may have limited access to
registered apprenticeship programs.
These commenters stated that Tribal
members may face burdens associated
with participating in existing State
registered apprenticeship programs that
are located many miles away. A
commenter requested clarification
regarding whether Tribes, like States,
have the sovereign and jurisdictional
authority to develop and certify their
own apprenticeship programs rather
than being required to use the DOL
approval process. The same commenter
requested that the Treasury Department
and the IRS review and report on any
barriers that may disproportionately
prevent Tribes from fulfilling the
Apprenticeship Requirements.
Commenters suggested that if Indian
Tribal governments do not have
authority to certify their own programs,
then the Apprenticeship Requirements
could force Tribal governments to rely
on State or Federal apprenticeship
programs, which may frustrate Indian
Tribal governments’ efforts to develop
their Tribal workforce.
Commenters supporting an Indian
Tribal government exception to the
Apprenticeship Requirements also
stated that the Good Faith Effort
Exception places too much onus on
Indian Tribal governments to obtain
qualified apprentices. These
commenters suggested that Indian
Tribal governments could need to
submit multiple requests to multiple
apprenticeship programs and that
Indian Tribal governments could need
to search across non-Tribal areas to meet
the Good Faith Effort Exception. These
commenters suggested that the statute
did not require this level of
apprenticeship coverage. Commenters
also stated that the Good Faith Effort
Exception may not be met if a registered
apprenticeship program can meet some,
but not all of requests for qualified
apprentices, and suggested that the
Good Faith Effort Exception should be
satisfied if a registered apprenticeship
program could not fulfill more than 50
percent of a taxpayer, contractor, or
subcontractor’s request. These
commenters also suggested that the
Good Faith Effort Exception should be
satisfied if a local registered
apprenticeship program cannot provide
more than 50 percent of the requested
qualified apprentices. Commenters also
stated that the Good Faith Effort

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Exception is unreasonable for Indian
Tribal governments in rural areas
because of the limited access to
registered apprenticeship programs.
Finally, another commenter suggested
creating a database for taxpayers to find
Tribal apprenticeship programs within
their State.
With respect to the Apprenticeship
Requirements, the Treasury Department
and the IRS recognize that there may be
a limited number of registered
apprenticeship programs with an area of
operation that includes the geographic
location of a facility located on Tribal
lands. As explained in Section
VIII.B.1.f. of this Summary of Comments
and Explanation of Revisions, the final
regulations clarify the scope of the Good
Faith Effort Exception with respect to
situations in which only part of the
request is denied. The final regulations
confirm that if there is no registered
apprenticeship program with a
geographic area of operation that
includes the location of the facility,
taxpayers will be deemed to satisfy the
Good Faith Effort Exception for the
qualified apprentices they (or the
contractor or subcontractor) would have
requested for that occupation and
location.
Indian Tribal governments may also
consider sponsoring their own
registered apprenticeship programs to
satisfy the Apprenticeship
Requirements. The National
Apprenticeship Act (NAA) of 1937 (29
U.S.C. 50) authorizes the Secretary of
Labor to formulate and promote the
furtherance of labor standards necessary
to safeguard the welfare of apprentices.
The Treasury Department and the IRS
have consulted with the DOL OA and
understand based on that discussion
that although neither the text of the
NAA, nor the content of the NAA’s
implementing regulations at 29 CFR
parts 29 and 30, explicitly addresses
Indian Tribes, Indian Tribal
governments may sponsor registered
apprenticeship programs and obtain
registration of such a Tribal
apprenticeship program by a State or
Federal governmental agency that has
been designated for that purpose.
Federal apprenticeship regulations
(see 29 CFR part 29) authorize the DOL
to grant recognition, for Federal
purposes, to State apprenticeship
agencies for the purpose of registering
and overseeing apprenticeship programs
that operate within their respective
jurisdictions, provided that such State
apprenticeship agencies operate in
accordance with the minimum
standards for State apprenticeship
agencies that are established by Federal
apprenticeship regulations.

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Nevertheless, the DOL retains the
authority under Federal apprenticeship
regulations to register any
apprenticeship program that operates
within the territory of the United States,
provided that, as a general matter, the
sponsor’s proposed program and
standards of apprenticeship satisfy the
minimum requirements stipulated in 29
CFR parts 29 and 30.
Accordingly, Indian Tribal
governments may register their own
apprenticeship programs through the
DOL OA or with a recognized State
apprenticeship agency. In recognition of
the unique trust and treaty
responsibilities of the Federal
Government to Tribal Nations, respect
for Tribal sovereignty, and the nation-tonation relationship between the Federal
Government and Indian Tribes, Indian
Tribal governments (including a
subdivision, agency, or instrumentality
of the Indian Tribal government) are
encouraged but not required to register
programs with the DOL OA. Taxpayers,
contractors, and subcontractors can find
more information on guidance issued by
the DOL OA at https://www.apprentice
ship.gov/about-us/legislationregulations-guidance. For an updated
map depicting the most recent
information regarding registration
agencies between the DOL OA and State
apprenticeship agencies, please visit:
https://www.apprenticeship.gov/aboutus/apprenticeship-system.
2. Tennessee Valley Authority
Several commenters requested that
the final regulations not provide an
exception from the PWA requirements
for the TVA, citing the lack of statutory
authority for such an exception. The
Treasury Department and the IRS agree.
The final regulations do not create an
exception to the PWA requirements for
the TVA.
D. Project Labor Agreements
The preamble to the Proposed
Regulations explained that pre-hire
project labor agreements (PLAs) may be
used to incentivize stronger labor
standards and worker protections in the
types of construction projects for which
taxpayers may seek the increased credit
amount, and having a PLA in place may
help ensure compliance with PWA
requirements. For these reasons, the
Proposed Regulations would have
provided that the penalty payment
requirements would not apply with
respect to a laborer or mechanic
employed under a ‘‘qualifying project
labor agreement’’ if any correction
payment owed to the laborer or
mechanic is paid on or before a return
is filed claiming an increased credit

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Federal Register / Vol. 89, No. 122 / Tuesday, June 25, 2024 / Rules and Regulations
amount. The Proposed Regulations
would have defined qualifying project
labor agreement as ‘‘a pre-hire collective
bargaining agreement with one or more
labor organizations that establishes the
terms and conditions of employment for
a specific construction project.’’
Proposed § 1.45–7(c)(6)(ii) would have
provided that in order to be considered
a qualifying project labor agreement,
such agreement must at a minimum: (i)
bind all contractors and subcontractors
on the construction project through the
inclusion of appropriate specifications
in all relevant solicitation provisions
and contract documents; (ii) contain
guarantees against strikes, lockouts, and
similar job disruptions; (iii) set forth
effective, prompt, and mutually binding
procedures for resolving labor disputes
arising during the term of the project
labor agreement; (iv) contain provisions
to pay prevailing wages; (v) contain
provisions for referring and using
qualified apprentices consistent with
section 45(b)(8)(A) through (C) and
guidance issued thereunder; and (vi) be
a collective bargaining agreement with
one or more labor organizations (as
defined in 29 U.S.C. 152(5)) of which
building and construction employees
are members, as described in 29 U.S.C.
158(f).
The Treasury Department and the IRS
requested comments on the proposed
treatment of PLAs, other ways taxpayers
might use PLAs to meet the PWA
requirements, and the proposed
definition of a qualifying project labor
agreement. Several comments were
received addressing the proposed
treatment of PLAs under the Proposed
Regulations.
Several commenters asserted that the
Treasury Department and the IRS
should not exempt taxpayers using
PLAs from the penalty payment
requirements. Commenters stated that
the proposed rule violates the plain text
of the IRA, which includes no PLA
provision and does not authorize the
waiver of intentional violations and
additional penalties based on a clean
energy project developer’s inclusion of
a PLA requirement in its solicitation for
construction services. Several
commenters stated that the IRS should
not incentivize or coerce the use of
PLAs through a penalty waiver or other
benefit. Commenters suggested that
PLAs will discourage taxpayers from
using their existing workforce.
Commenters were also concerned with
PLAs increasing the cost of
construction. Another commenter
suggested that PLA mandates would
likely lead to a decrease in hiring of
local, minority, women, veteran, and
other potentially disadvantaged groups.

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Other commenters stated that
encouraging labor unions was not the
intent of the IRA. A commenter also
asserted that PLAs force contractors to
replace employees with workers from
unions, undermine workforce
development strategies, force
contractors to follow inefficient union
work rules, expose workers to wage
theft, and expose employers to
multiemployer pension plan liabilities.
The commenter also asserted that PLA
mandates force employees to join a
union and pay dues and discourage
competition from nonunionized
contractors. The commenter claimed
that strikes have occurred on PLA
projects and that PLAs will not improve
efficiency in terms of safety, quality, or
project delivery.
In contrast, other commenters
asserted that PLAs help ensure
compliance with the PWA
requirements. Several commenters
requested that taxpayers certifying that
construction of a facility is subject to a
PLA or a collective bargaining
agreement should be entitled to a safe
harbor or a rebuttable presumption of
compliance with the PWA
requirements. Commenters asserted that
such a presumption would be warranted
because PLAs provide assurances of
compliance and contractors operating
under PLAs typically pay wages at rates
that are at or above the prevailing wage
rates. At least one commenter suggested
that the final regulations should clarify
that a taxpayer is deemed to have
satisfied the PWA requirements,
including recordkeeping requirements,
if the taxpayer can provide proof of a
valid PLA.
Other commenters suggested that the
final regulations create a two-tier
compliance structure under which
participants with PLAs are awarded a
presumption of compliance on several
requirements (or limited review by the
IRS on examination) while other
taxpayers not participating in PLAs
should be subjected to heightened
scrutiny by the IRS. A commenter stated
that, in the absence of a PLA, violations
of PWA requirements would be more
prevalent. Therefore, the commenter
suggested increasing the oversight and
noncompliance penalties for non-PLA
projects, mandating robust
recordkeeping requirements for nonPLA projects (including the filing of
certain documents with the DOL), and
creating flexible ratio requirements for
PLA projects. Another commenter
suggested that taxpayers who are parties
to both a collective bargaining
agreement and PLA should
automatically qualify for the Good Faith
Effort Exception.

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Some commenters stated that PLAs
can help taxpayers ensure payment of
prevailing wages, because PLAs will: (i)
require employers to provide workers
with notice of their pay rates; (ii)
include integrated, enforceable
grievance and dispute resolution
procedures; and (iii) be administered
and enforced by unions that are parties
to PLAs. Another commenter stated that
PLAs typically establish payments to
third-party benefit trusts, and that IRS
research shows that third-party
information can help promote tax
compliance. Additionally, another
commenter stated that entitling
taxpayers to a presumption of
compliance if their construction project
is subject to a PLA would mitigate
enforcement work and therefore
preserve IRS resources.
Further, several commenters stated
that PLAs help promote the IRA’s goals
by improving efficiency, coordination,
and consistency; reducing
administrative costs; preventing
increased costs and project delays;
providing a steady supply of highly
skilled labor; and preventing labor
disputes. Some commenters
recommended that taxpayers
implementing PLAs be exempt from a
determination that they intentionally
disregarded the PWA requirements.
The Treasury Department and the IRS
disagree with commenters asserting that
the Proposed Regulation’s provisions
regarding qualifying project labor
agreements are unwarranted, coercive,
and would increase costs. For example,
studies show that PLAs in general do
not lead to a statistically significant
increase in construction costs.22 If a
taxpayer believes that a particular PLA
would significantly raise the cost of
constructing a facility, a taxpayer may
choose not to enter into a PLA. In
response to concerns about hiring of
local, minority, women, veteran, and
other potentially disadvantaged groups,
the Treasury Department and the IRS
note that PLAs often include provisions
that create or strengthen equitable paths
to construction jobs for underserved
workers, including local hire
requirements, equitable recruitment
22 Emma Waitzman & Peter Philips, UC Berkeley
Labor Ctr., Project Labor Agreements and Bidding
Outcomes: The Case of Community College
Construction in California 3,51 (2017) ((finding no
statistically significant difference in costs between
PLA and non-PLA projects); Peter Philips & Scott
Littlehale, Did PLAs on LA Affordable Housing
Projects Raise Construction Costs? (Univ. of Utah
Dep’t of Econ., Working Paper No. 2015–03, 2015)
(finding no statistically significant difference in
costs between PLA projects and non-PLA projects);
Cong. Research Serv., R41310, Project Labor
Agreements at 9 (2012) (surveying the empirical
literature about the effects of PLAs on costs and
finding that it was inconclusive).

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goals, and community engagement
requirements. Contrary to some
commenters’ concerns, the final
regulations do not require non-union
employees to join a union or to pay
union dues. The National Labor
Relations Act permits employees to
choose not to join a union in their
workplace. 29 U.S.C. 157. Non-members
may choose not to pay union dues and
instead pay agency fees that cover only
the share of dues used directly for
representation, such as for collective
bargaining or grievance procedures.
Moreover, the final regulations do not
require any taxpayer to sign a PLA.
The Treasury Department and the IRS
agree with commenters that qualifying
project labor agreements can help
ensure compliance with the PWA
requirements. Under the final
regulations, qualifying project labor
agreements will be required to include
provisions requiring the payment of
wages at rates that are not less than the
prevailing rates, include contract
provisions complying with the
Apprenticeship Requirements, and
establish mechanisms for workers, labor
organizations, and taxpayers to correct
any underpayments. These
requirements will help ensure that
qualifying project labor agreements
support compliance with the PWA
requirements. The requirements in
PLAs, including ongoing monitoring
and administration by union officials,
enforceable grievance and dispute
resolution mechanisms, and notice of
pay rates, will also help ensure
compliance with the PWA requirements
for claiming the increased credit
amount. For example, the final
regulations require that qualifying
project labor agreements must include
effective grievance and dispute
resolution provisions that would
provide workers and unions an
independent mechanism for enforcing
the PWA requirements included in a
qualifying project labor agreement.
Grievance and dispute resolution
provisions allow workers to resolve
disputes about the payment of
prevailing wages and other violations of
the qualifying project labor agreement
before a taxpayer claims the increased
credit amount, assisting taxpayers in
complying with the final regulations.
Regarding commenters’ requests for
deemed compliance or a rebuttable
presumption of compliance, the final
regulations do not adopt these
comments. Tax jurisprudence requires
taxpayers claiming a tax credit to
demonstrate that they have met the
statutory requirements and can
substantiate their claim. The final
regulations provide that the penalties do

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not apply if a taxpayer uses a qualifying
project labor agreement and makes the
required correction payments before
filing a return claiming the credit. The
Treasury Department and the IRS have
determined that other safe harbors for
PLAs or an exemption from a finding of
intentional disregard with respect to
correction payments would not
strengthen compliance and understand
this approach to strike the appropriate
balance between recognizing PLA
benefits for improving compliance with
the PWA requirements and maintaining
long-standing tax principles.
As the Treasury Department and the
IRS noted in the preamble to the
Proposed Regulations, pre-hire project
labor agreements may be used by a
taxpayer to incentivize stronger labor
standards and worker protections on a
construction project, and having a PLA
in place may also help ensure
compliance with PWA requirements for
claiming the increased credit amount.
Accordingly, the IRS would take into
account on examination whether a
taxpayer has a qualifying project labor
agreement in place and would consider
books and records substantiating that a
qualifying project labor agreement is
being complied with as an indication of
compliance with the PWA
requirements. For example, records that
would support substantiating PWA
compliance could include attestations
by all counterparties that a taxpayer is
in compliance with the terms of the
qualifying project labor agreement,
including the provisions requiring the
payment of prevailing wages and the
provisions for referring and using
qualified apprentices consistent with
section 45(b)(8)(A) through (C) and
guidance issued thereunder.
Several commenters suggested
additions or revisions to the proposed
definition of a qualifying project labor
agreement and requested clarifications.
For instance, a commenter suggested
clarifying that proposed § 1.45–
7(c)(6)(ii) applies to both base penalty
amounts and any enhanced penalty due
to intentional disregard. Similarly,
commenters requested clarifying the
impact of using a PLA on any required
correction payments. Commenters also
asked for the final PWA rules to clarify
that the agreed-upon wages under a PLA
are prevailing wages for the purposes of
PWA requirements. At least one
commenter asked whether agreed-upon
wages under a PLA or a collective
bargaining agreement could be treated
as the prevailing wage for PWA
purposes. Another commenter
explained that generally, under a PLA,
the taxpayer must pay the wage rates
negotiated with the union, which are

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often higher than the prevailing wage
rates set forth in DOL wage
determinations, but under the Proposed
Regulations, taxpayers must pay the
prevailing wage rate, even if that is
lower. Another commenter stated that
asking contractors to comply with
prevailing wage rates, which may be
based on union work rates contained in
collective bargaining agreements not
publicly available, could add risk for
contractors and reduce competition,
especially from small businesses.
Additional commenters requested
permitting taxpayers to satisfy the
Apprenticeship Requirements in the
case of a PLA that includes a preference
to use qualified apprentices, even if the
PLA does not require compliance with
all the Apprenticeship Requirements
under section 45(b)(8). A commenter
asserted that the criteria that the PLA
must contain provisions for referring
and using qualified apprentices
consistent with section 45(b)(8)(A)
through (C) and guidance issued
thereunder was circular and did not
align with PLAs generally. The
commenter explained that the
requirement that the PLA incorporate
the IRA apprenticeship rules undercuts
the PLA exception and makes it
superfluous. An additional commenter
suggested clarifying that a PLA for PWA
purposes should allow taxpayers to use
both union and non-union registered
apprenticeship programs. A commenter
also suggested revising the definition of
a PLA to include a requirement for
referring and using qualified
journeyworkers. Similarly, a commenter
asked whether a taxpayer may use the
journeyworker-to-apprentice ratio under
a PLA or a collective bargaining
agreement for PWA purposes.
Some commenters requested that the
final regulations provide that PLA
provisions regarding hiring union
workers be optional and that exceptions
be explicitly provided for circumstances
in which union labor is not available.
Commenters suggested that the final
regulations should permit contractors
who sign a PLA to use their own work
rules independent of union collective
bargaining agreements. One commenter
stated that PLAs must not require
payment into union benefit funds as
long as contractors have bona fide
benefits and are satisfying DBA
standards. Similarly, a commenter
recommended that the final regulations
provide that PLAs can only require the
payment of union dues and fringe
benefits for the duration of the contract.
A commenter requested that the final
regulations adopt the definition for a
qualifying project labor organization,
largely based in Executive Order 14063

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(Use of Project Labor Agreements for
Federal Construction Projects), and
permit contractors and subcontractors to
compete for contracts and subcontracts
regardless of whether they are a party to
a collective bargaining agreement. The
commenter also suggested revising the
definition of labor organizations to
require some affiliation with a registered
apprenticeship program.
A commenter recommended
incentivizing taxpayers using a PLA to
comply with all of the PLA’s provisions,
not just PWA-related provisions. The
commenter stated that a subset of PLAs
(known as community workforce
agreements) include provisions beyond
the elements defined in the Proposed
Regulations. Additionally, a commenter
recommended requiring service
maintenance workers, like custodians,
be included and covered under PLAs
used for PWA purposes.
Further, a commenter suggested that
recordkeeping related to PLAs be
limited to producing a valid PLA
covering all laborers and mechanics at
the site of work. The commenter also
stated that it would be helpful to clarify
the role of collective bargaining
agreements and a master agreement, as
well as the eligible status, if any, of
PLAs entered and covering periods
before the publication of the proposed
rules in the Federal Register. The
commenter also requested guidance
concerning whether the PLA exception
still applies if some, but not all,
contractors are able to meet the PLA
requirements.
Additionally, a commenter suggested
that the PWA rules align the criteria for
PLAs with the provisions of commonly
used PLA templates or that the final
regulations adopt a new template. The
commenter stated that the proposed
rules presented six criteria for
qualifying PLAs, but many widely used
PLA templates do not meet all six
criteria.
The Treasury Department and the IRS
agree with the comment to clarify that
proposed § 1.45–7(c)(6)(ii) applies to
both the $5,000 penalty and the $10,000
enhanced penalty (for the Prevailing
Wage Requirements) and proposed
§ 1.45–8(e)(2)(v) applies to both the $50
penalty and the $500 enhanced penalty
(for the Apprenticeship Requirements)
due to intentional disregard. Under the
Proposed Regulations, the penalty
payment requirement would not have
applied with respect to a laborer or
mechanic employed under a qualifying
project labor agreement if any correction
payment owed to the laborer or
mechanic is paid on or before a return
is filed claiming an increased credit
amount. The proposed rule was

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intended to apply to both penalty
amounts and requires the taxpayer to
make any correction payment owed to
any laborer or mechanic on or before the
date on which the increased credit
amount is claimed. The final regulations
provide this clarification with respect to
both the Prevailing Wage Requirements
and the Apprenticeship Requirements.
The proposed definition of qualifying
project labor agreement contains six
requirements, including that it must
contain provisions to pay prevailing
wages. The Treasury Department and
the IRS agree with commenters that the
definition of the term prevailing wages,
for the purposes of a qualifying project
labor agreement, requires clarification.
The final regulations clarify the
definition of qualifying project labor
agreement to provide that it must
contain provisions to pay wages at rates
not less than the prevailing wage rates
in accordance with subchapter IV of
chapter 31 of title 40 of the United
States Code. This clarification aligns
with the statutory requirements
regarding prevailing wage rates and
maintains a clear standard for taxpayers
and tax administration. Commenters
raised that PLAs often require the
payment of wages higher than
prevailing wages under the DBA. A
qualifying project labor agreement may
require the payment of wages at rates
that are higher than the wage rates that
are required by section 45(b)(7)(A).
The proposed definition of qualifying
project labor agreement also would have
provided that it must contain provisions
for referring and using qualified
apprentices consistent with section
45(b)(8)(A) through (C) and guidance
issued thereunder. The statute defines
qualified apprentice and provides the
Apprenticeship Requirements.
Accordingly, the final regulations do not
adopt comments to modify the
Apprenticeship Requirements for a
qualifying project labor agreement.
Regarding additions to the proposed
definition of qualifying project labor
agreement, the Treasury Department
and the IRS considered these comments
and have not adopted these comments
in the final regulations. Specific
requirements or contractual language in
a PLA may arbitrarily exclude many
PLAs from the proposed definition of a
qualifying project labor agreement for
reasons unrelated to ensuring
compliance with the PWA
requirements. A PLA is a negotiated
contract and parties must have the
appropriate flexibility to negotiate
provisions. Nothing in the final
regulations precludes parties from
negotiating additional local hire, equity,
or community engagement provisions in

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a PLA. Since each PLA is negotiated in
response to unique project needs and
labor market conditions, the Treasury
Department and the IRS do not adopt
the comment to require a PLA template.
Specific to the nuclear industry, a few
commenters proposed that PLA
provisions in PWA rules be expanded to
include collective bargaining
agreements negotiated by nuclear
operators and unions covering their
direct employees. A commenter
suggested also recognizing that such
collective bargaining agreements
establish the prevailing wages for their
unique classification of nuclear
employees that perform alterations or
repairs. The commenter stated that there
are significant differences in the
collective bargaining and benefit
practices between the construction and
nuclear industries. A few commenters
suggested amending the rules to permit
wages paid pursuant to collective
bargaining agreements to qualify as
payment of prevailing wages under
section 45U(d)(2). One commenter
stated that at a minimum, wages paid
pursuant to already-existing collective
bargaining agreements should be
accepted as payment of prevailing
wages. Similarly, solely for purposes of
section 45U, one commenter requested
that wages and benefits paid to nonunionized direct employees be accepted
as payment of prevailing wages, if the
sum is equal to the collectivelybargained wages and benefits paid to
geographically proximate direct
employees of a qualified nuclear
facility. The commenter also suggested
that provisions regarding PLAs in the
Proposed Regulations be revised to
include taxpayers that have a collective
bargaining agreement covering their
own employees that perform alteration
and repair on facilities eligible for the
section 45U credit. The commenter also
suggested that existing collective
bargaining agreements be deemed to
satisfy section 45U(d)(2)(A). One
commenter requested that wages and
benefits paid pursuant to a collective
bargaining agreement negotiated
between a taxpayer and a union
recognized as the workers’ bargaining
representative by the National Labor
Relations Board, be deemed to comply
with prevailing wage rules under
section 45U.
A commenter requested a prevailing
wage safe harbor for section 45U to
recognize the unique characteristics of
nuclear power facilities. Another
commenter requested permitting, solely
for purposes of section 45U, qualified
nuclear power facilities that do not
directly employ collectively-bargained
laborers and mechanics to benchmark

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themselves against other similar
qualified nuclear power facilities that
do directly employ collectivelybargained laborers and mechanics for
purposes of determining whether the
facility is deemed to pay prevailing
wages to its directly employed
employees. The commenter stated that
even if not unionized, a nuclear
operator’s craft employees perform the
same work under the same conditions as
unionized employees and receive
generally equivalent wages, participate
in the same employer-sponsored benefit
plans, and receive benefits equivalent to
if not identical to unionized employees.
The Treasury Department and the IRS
recognize the nuclear power industry’s
unique circumstances and that nuclear
operators cannot enter into qualifying
project labor agreements as they would
have been defined under the Proposed
Regulations. The section 45U credit has
Prevailing Wage Requirements for
alteration or repair work of a qualified
nuclear power facility, but not during
construction. For taxpayers seeking the
section 45U credit, a collective
bargaining agreement provides workers
conducting an alteration or repair the
same assurances of up-front compliance
that a PLA would, including union
oversight and private enforcement. A
taxpayer that has a collective bargaining
agreement for a qualified nuclear facility
that meets minimum requirements
analogous to the minimum requirements
for a qualifying project labor agreement
should also benefit from the rule that
penalties do not apply if any correction
payment owed to a laborer or mechanic
is paid before the increased credit
amount is claimed. In response to the
comments, the final regulations modify
the definition of qualifying project labor
agreement for section 45U. For purposes
of section 45U, in order to be a
qualifying project labor agreement, such
agreement must, at a minimum: (i) be a
collective bargaining agreement with a
one or more labor organizations (as
defined in 29 U.S.C. 152(5)) of which
employees of the qualified nuclear
power facility are members and such
agreement establishes the terms and
conditions of employment at the
qualified nuclear power facility; (ii)
contain guarantees against strikes,
lockouts, and similar job disruptions;
(iii) set forth effective, prompt, and
mutually binding procedures for
resolving labor disputes arising during
the term of the collective bargaining
agreement; and (iv) contain provisions
to pay wages at rates not less than the
prevailing wages in accordance with
subchapter IV of chapter 31 of title 40
of the United States Code.

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VI. Applicable Scope of the PWA
Requirements
Section 45(b)(7)(A) provides that with
respect to any qualified facility, the
taxpayer must ensure that any laborers
and mechanics employed by the
taxpayer or any contractor or
subcontractor in ‘‘the construction of
such facility’’ and for the 10-year period
after the facility is placed in service,
‘‘the alteration or repair of such facility’’
are paid wages at rates not less than the
applicable prevailing wage rates. Under
section 45(b)(7)(A)(ii), the prevailing
wage rates that are required to be paid
with respect to such construction,
alteration, or repair are determined by
reference to the prevailing rates for
construction, alteration, or repair of a
similar character in the locality in
which such facility is located.
Section 45(b)(8) sets forth the
Apprenticeship Requirements that
apply ‘‘with respect to the construction
of any qualified facility.’’ Under the
Labor Hours Requirement, section
45(b)(8)(A)(i) provides that taxpayers
must ensure ‘‘with respect to the
construction of any qualified facility’’
that the applicable percentage of the
total labor hours is performed by
qualified apprentices. Under the
Participation Requirement, section
45(b)(8)(C) provides 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.
The Proposed Regulations would have
defined the scope of taxpayers’
obligation to comply with the PWA
requirements consistent with this
statutory language. Under the Proposed
Regulations, taxpayers would have been
required to comply generally with
respect to the construction of a qualified
facility. The Proposed Regulations did
not define the meaning of construction
of a qualified facility for purposes of
either the Prevailing Wage
Requirements or the Apprenticeship
Requirements.
Proposed § 1.45–7(d)(2)(i) would have
defined ‘‘construction, alteration, or
repair’’ to mean construction,
prosecution, completion, or repair as
defined in 29 CFR 5.2. Under 29 CFR
5.2, construction, prosecution,
completion, or repair is defined
expansively to include ‘‘all types of
work’’ done on a particular building or
work at the site of the work, as defined
in 29 CFR 5.2, by laborers and
mechanics employed by a contractor or
subcontractor. This work includes

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altering, remodeling, installing of items
fabricated offsite; painting and
decorating; manufacturing or furnishing
of materials, articles, and supplies or
equipment on the site of the work; and
certain demolition or removal activities.
Under the Proposed Regulations, the
scope of the requirement to pay wages
at rates not less than the prevailing rates
would be clarified by the ‘‘site of the
work’’ definition under the DBA. Under
the DBA, the requirement to pay
prevailing wages is limited by statute to
work performed ‘‘directly on the site of
the work.’’ 23 Under the DBA, secondary
construction sites are considered part of
the site of the work if a significant
portion of a building or work is
constructed at the secondary site for
specific use in the designated building
or work and the site either was
established specifically for the
performance of the covered contract or
project or dedicated exclusively, or
nearly so, to the covered contract or
project for a specific period of time. By
comparison, section 45(b)(7)(A)(i) and
(ii) requires the payment of prevailing
wages generally in the construction of a
qualified facility and the alteration or
repair of such facility. As explained in
the preamble to the Proposed
Regulations, the language of section
45(b)(7)(A) could be, but does not need
to be, interpreted to support an
expansive reading of construction such
that all construction of a qualified
facility, wherever located and however
small, would be subject to the Prevailing
Wage Requirements, resulting in a
significantly broader scope under
section 45(b)(7) than under the DBA.
The Proposed Regulations would have
taken a less expansive reading and
applied the scope of the Prevailing
Wage Requirements to the site of the
work, consistent with the DBA rules.
The Treasury Department and the IRS
understood the DBA approach to the
site of the work as providing useful
guidance for balancing the requirements
to pay wages at rates not less than
prevailing rates with respect to the
construction of a qualified facility and
existing construction practices in cases
in which some construction activities
related to a facility may occur in
multiple locations. This approach is
also consistent with the principle
outlined in Section I.A. of this Summary
of Comments and Explanation of
Revisions to incorporate the DBA
requirements that are relevant for
claiming the increased credit amount
and consistent with sound tax
administration. The Proposed
Regulations would have largely adopted
23 40

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Federal Register / Vol. 89, No. 122 / Tuesday, June 25, 2024 / Rules and Regulations
the DBA approach (including rules
relating to secondary sites) for purposes
of defining the scope of the Prevailing
Wage Requirements in proposed § 1.45–
7(d)(6). Under proposed § 1.45–7(d)(6),
taxpayers would have been subject to
the requirement to ensure that laborers
and mechanics are paid wages at rates
not less than prevailing wage rates with
respect to the construction, alteration, or
repair at the locality in which the
facility is located, which is defined to
include any secondary sites where a
significant portion of the construction,
alteration, or repair of the facility
occurs, provided that the secondary site
either was established specifically for,
or dedicated exclusively for a specific
period of time to, the construction,
alteration, or repair of the facility.
Many commenters requested
clarification of how the definition and
the site of the work DBA-concept
applies across the various Code sections
for purposes of determining what work
performed in the construction,
alteration, or repair of a qualified
facility is subject to the Prevailing Wage
Requirements. Commenters also
emphasized that the site of work
definition must reflect the expanded
realities of modern construction
practices, under which a large and
growing percentage of construction,
alteration, and repair work is performed
offsite through either prefabrication,
modularization, or both. A commenter
recommended that the site of work
definition account for recent
technological developments in which
the COVID–19 pandemic magnified the
need to build spaces that can be rapidly
adjusted. A commenter stated that a
number of legal challenges to newly
added provisions to the regulations
under the DBA are expected to be filed,
creating ambiguity and a lack of
reliability. Commenters also suggested
providing specific examples relevant to
clean energy projects.
Commenters requested that the site of
work for PWA purposes no longer
incorporate the DOL definition, based
on the DBA. Commenters opined that
site of the work for PWA purposes
should not be based on the scope of the
DBA and should not extend to offsite or
secondary construction sites, including
manufacturing sites, access roads,
substations, buildings, and similar
property. Commenters argued that
incorporating the DOL definition of site
of the work leads to an overly broad
application of the PWA requirements to
such activities as offsite manufacturing
facilities, dedicated production lines, or
modular facilities that service multiple
projects but that may service a single
large project for an extended period of

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time—which is not uncommon in the
clean energy industry. Commenters also
sought guidance concerning the
treatment of property such as access
roads and substations that may not be
eligible property associated with a
qualified facility resulting in a scope of
the PWA requirements reaching beyond
the qualified facility that is eligible for
the increased credit amount. One
commenter stated that the incorporation
of the site of work may subject some
taxpayers to different enforcement
schemes because the projects may be
subject to State or local prevailing wage
laws.
Commenters also suggested that if the
DBA approach is adopted in the final
rule, that any discussion of secondary
manufacturing facilities distinguish
with examples between genuine offsite
manufacturing activities and those that
the newly expanded DBA definition
would include. Commenters requested
that the Prevailing Wage Requirements
not apply to manufacturing facilities,
dedicated production lines,
prefabrication facilities, laydown yards,
or ‘‘mod-yard’’ locations that generally
service multiple projects and customers.
A commenter requested that the final
regulations clarify that structures
established prior to the start of
construction of the qualified facility are
not covered by the phrase ‘‘site of the
work’’ irrespective of their adjacency or
dedication to that site. The commenter
also suggested that adjacent or virtually
adjacent locations should not be
covered by the PWA requirements if
they exceed a 2-mile perimeter.
In contrast, other commenters urged
the Treasury Department and the IRS to
use the DBA site of work definition for
the PWA requirements, including
secondary sites that are established
specifically for the performance of the
covered contract or project or dedicated
exclusively, or nearly so, to the covered
contract or project for a specific period
of time. These commenters emphasized
the lack of statutory language in the IRA
limiting the application of prevailing
wage rules based on where work in
furtherance of the project is performed
and also suggested defining site of work
to cover all locations where
construction of a covered project is
performed. Another commenter claimed
that Congress deliberately chose to draft
section 45(b)(7)(A) in broader terms
than the DBA and recommended that
the final regulations apply to all
construction sites where integral
components of the facility are
constructed and dedicated support sites.
Commenters recommended that the IRS
follow DBA court decisions and mirror
the considerations of DBA regulations.

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53205

The Treasury Department and the IRS
agree with commenters that additional
clarity is warranted with respect to
defining the scope of the PWA
requirements. The Prevailing Wage
Requirements apply with respect to the
construction of a facility and with
respect to the alteration or repair of a
facility. The Apprenticeship
Requirements apply with respect to
construction of a facility. While the
terms construction, alteration, and
repair draw meaning from the DBA,
Congress did not qualify the scope of
such activities by the site of the work
rule found explicitly in the DBA in
defining the scope of the PWA
requirements under the IRA. Instead,
section 45(b)(7) and (8) limit the scope
of construction, alteration, or repair to
those activities occurring with respect to
a qualified facility. The term qualified
facility (as described in section 45 and
guidance thereunder) has specific
meaning for tax purposes.24
The final regulations clarify that the
PWA requirements apply with respect
to a qualified facility within the
meaning of section 45. The Treasury
Department and the IRS recognize that
only a portion of a construction project
may be used to produce energy covered
by the IRA tax credits. Under the
general rule provided for in the final
regulations, the PWA requirements
apply to the portion of the activity that
is creditable or deductible per the Code
under the respective underlying
section.25
24 See,

e.g., Rev. Rul. 94–31, 1994–1 C.B. 16.
as applicable, the PWA
requirements apply under section 30C with respect
to a qualified alternative fuel vehicle refueling
project described in section 30C(g)(1)(B) (consisting
of one or more qualified properties within the
meaning of section 30C(c) that are part of a single
project); under section 45L with respect to a
qualifying residence described in section
45L(a)(2)(B) (that meets the requirements of section
45L(c)(1)(A) or (B), as applicable); under section
45Q, with respect to a qualified facility and any
carbon capture equipment placed in service at that
facility within the meaning of section 45Q(d); under
section 45U with respect to a qualified nuclear
power facility within the meaning of section
45U(b); under section 45V with respect to a
qualified clean hydrogen production facility within
the meaning of section 45V(c)(3); under section 45Y
with respect to a qualified facility within the
meaning of section 45Y(b); under section 45Z, with
respect to a qualified facility within the meaning of
section 45Z(d)(4) producing transportation fuel (as
defined in section 45Z(d)(5)) or sustainable aviation
fuel (as defined in section 45Z(a)(3)(B)); under
section 48C, with respect to a qualified investment
(as defined in section 48C(b)) in a qualifying
advanced energy project within the meaning of
section 48C(c)(1)(A); and under section 179D, with
respect to energy efficient commercial building
property within the meaning of section 179D(c)(1),
and energy efficient building retrofit property
pursuant to a qualified retrofit within the meaning
of section 179(f); and in each case including any
25 Accordingly,

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As discussed elsewhere in this
preamble, the Treasury Department and
the IRS have incorporated DBA rules if
relevant and helpful for tax
administration. Despite the differing
statutory language with respect to scope,
the DOL approach to site of the work
under the DBA regulations is instructive
for application of the PWA requirements
with respect to activities that may occur
at locations other than the location of
the facility. Accordingly, the final
regulations continue to use the DBA
concept of site of the work with respect
to secondary sites to define the scope of
the PWA requirements for work that
occurs at secondary locations.
The Treasury Department and the IRS
also agree with the concerns raised by
the commenters on how the secondary
site rule could impact manufacturing
activities that occur at offsite locations
and are performed by unrelated parties.
The final regulations clarify that
adoption of the site of the work concept
is designed to define the scope of the
PWA requirements and prevent an
application of the rules that would
result in all work on a facility, wherever
performed and however small, being
subject to the requirements. Under the
final regulation, unrelated third-party
manufacturers who produce materials,
supplies, equipment, and prefabricated
components for multiple customers or
the general public would not be subject
to the PWA requirements.
VII. Prevailing Wage Requirements

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A. In General
Section 45(b)(7)(A)(i) requires that
with respect to a qualified facility,
taxpayers who are seeking an increased
credit amount ensure that laborers and
mechanics employed by the taxpayer, or
any contractor or subcontractor in the
construction of such facility are paid
wages at rates not less than the
prevailing rates determined by the DOL
in accordance with the DBA. Section
45(b)(7)(A)(ii) further requires that
prevailing wages are paid with respect
to alteration or repair of a qualified
facility for any portion of a taxable year
that is within the 10-year period
beginning on the date the qualified
facility was placed in service. Proposed
§ 1.45–7(a) generally would have
provided that a taxpayer claiming or
transferring (under section 6418) the
increased credit amount under section
45(b)(6)(B)(iii) with respect to any
qualified facility must satisfy the
requirements of section 45(b)(7) and
proposed § 1.45–7. Proposed § 1.45–
guidance issued thereunder the relevant Code
section.

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7(b)(1) would have provided that a
taxpayer needs to ensure that the wages
paid to laborers and mechanics
employed by the taxpayer, contractor, or
subcontractor in the construction,
alteration, or repair of the facility must
be not less than the prevailing rates in
the geographic area in which such
facility is located. Proposed § 1.45–
7(b)(6) would have provided that all
laborers and mechanics working on a
qualified facility must be paid in the
time and manner consistent with the
regular payroll practices of the taxpayer,
contractor, or subcontractor.
A few commenters requested that the
final regulations require taxpayers,
contractors, and subcontractors to adopt
weekly payroll practices, as is required
for DBA-covered contracts. The
commenters stated that requiring
weekly payroll would deter fraud and
enable taxpayers to ensure that
contractors and subcontractors comply
with PWA requirements. Many other
commenters supported the payment of
prevailing wages consistent with the
taxpayer’s regular payroll practices. The
commenters supported the flexibility of
the proposed rule and stated that a
weekly payroll requirement would not
assist the IRS in administering the PWA
requirements.
Section 45(b)(7) requires that laborers
and mechanics be paid wages at rates
not less than the prevailing rates; there
is no statutory requirement that laborers
and mechanics must be paid on a
weekly basis. As several commenters
stated, taxpayers, contractors, and
subcontractors should have the
flexibility to pay their workers in
accordance with their ordinary payroll
schedules. For these reasons, these final
regulations adopt the proposed rule
requiring payment in the time and
manner consistent with the regular
payroll practices without change.
A commenter requested that the final
regulations provide an exception for
effective compliance with the Prevailing
Wage Requirements. The limited
penalty waiver in § 1.45–7(c)(6) and
described in Section VII.D.4. of this
Summary of Comments and Explanation
of Revisions provides sufficient relief
for inadvertent, minor errors. Another
commenter suggested clarifying whether
a taxpayer would be deemed to satisfy
the Prevailing Wage Requirements for a
given year after a facility is placed in
service if neither alterations nor repairs
were performed during that year. The
final regulations clarify that after a
facility is placed in service, taxpayers
are only required to meet the Prevailing
Wage Requirements with respect to
alterations and repairs if alterations or
repairs are actually performed during

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the relevant period.26 The final
regulations also provide that if there is
no alteration or repair that occurs
during the relevant year, the taxpayer is
deemed to satisfy the Prevailing Wage
Requirements with respect to that year.
Commenters asked that the final
regulations clarify whether the
applicable prevailing wage rate is based
on where the project is being
constructed or where the contractor is
performing their work. Another
commenter stated that in most cases the
wages paid are based on the local
market where the contractor or
subcontractor obtains their labor.
Section 45(b)(7)(A) provides that the
prevailing wage rate is based on the
locality of the facility that is being
constructed. The Proposed Regulations
similarly would have provided that the
wage rates must be not less than the
prevailing rates in the geographic area
in which such facility is located. The
final regulations continue to use the
DBA concept of site of the work to
address construction of a qualified
facility that occurs at one or more
secondary locations. The applicable
prevailing wage rate that must be paid
to laborers and mechanics is determined
by the location of the work performed,
which may be the location of the
qualified facility or any secondary
locations.
The Proposed Regulations would have
provided a special rule for qualified
facilities located offshore so taxpayers
would not need to request a
supplemental wage determination for
offshore facilities. Under the Proposed
Regulations, in lieu of requesting a
supplemental wage determination for a
facility located in an offshore area
within the outer continental shelf of the
United States, a taxpayer, contractor, or
subcontractor would be permitted to
rely on the general wage determination
for the relevant category of construction
that is applicable in the geographic area
closest to the area in which the qualified
facility will be located. To the extent
that the PWA requirements apply to
onshore activities related to an offshore
wind facility, one commenter suggested
clarifying that the locality in which
such onshore activities occur, and not
where the offshore wind facility is
located, would determine prevailing
wage rates for those activities. A
commenter expressed their support for
permitting offshore facilities to use the
general wage determination applicable
26 This rule does not apply with respect to
sections 30C, 45L, 48C, and 179D as those Code
sections do not include a continuing obligation for
the payment of prevailing wages with respect to any
alterations or repairs that occur after the placed in
service date.

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Federal Register / Vol. 89, No. 122 / Tuesday, June 25, 2024 / Rules and Regulations
to the closest onshore area to the
facility. The proposed rule is adopted
without change. Onshore activities that
are also considered construction of a
facility within the scope of the PWA
requirements must pay wages at rates
not less than the applicable prevailing
rates for the location of the work
performed.
B. Determining the Applicable
Prevailing Wage Rate

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1. General Wage Determinations
Section 45(b)(7)(A) requires that with
respect to a qualified facility, taxpayers
who are seeking an increased credit
amount ensure that laborers and
mechanics employed by the taxpayer, or
any contractor or subcontractor, in the
construction, alteration, or repair of
such facility are paid wages at rates not
less than the prevailing rates as most
recently determined by the DOL in
accordance with the DBA. As stated in
the preamble to the Proposed
Regulations, prevailing wage rates are
those determined to be prevailing for
laborers and mechanics for the various
classifications of work performed with
respect to a specified type of
construction in a geographic area. Under
the Proposed Regulations, prevailing
wage rates would be determined by the
DOL in accordance with the DBA if they
are issued and published by the DOL as
a general wage determination or if
issued to a taxpayer as part of a
supplemental wage determination or
pursuant to a request for a wage rate for
an additional classification.
With respect to the proper timing of
a wage determination, proposed § 1.45–
7(b)(5) would have provided that the
applicable prevailing wage rates on a
general wage determination are those in
effect at the time construction,
alteration, or repair of the facility
begins, and generally remain valid for
the duration of the work performed with
respect to the construction, alteration, or
repair of the facility by the taxpayer,
contractor, or subcontractor. Taxpayers
who perform any alteration or repair of
a facility after the facility is placed in
service would have been required to use
the applicable wage determination in
effect at the time the alteration or repair
work begins.
Commenters suggested aligning the
timing of wage determinations with the
DOL regulations under the DBA,
including updates to the DBA
regulations released in August of 2023,
to minimize taxpayer confusion. Several
commenters requested that the final
regulations provide that prevailing wage
rates be established for the entire project
when construction contracts are

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executed, not when construction begins,
consistent with the DBA. Commenters
emphasized that prevailing wage
determinations are an important factor
in determining the cost of labor and that
project costs need to be known ahead of
time to accurately bid on contracts.
Commenters asserted that waiting until
construction begins to determine labor
costs will lead to financial uncertainty
and may discourage participation in
construction projects by many
contractors because contractors need to
know what the prevailing wage
obligations are prior to bidding for a
project. The commenter stated that the
need to apply new wage rates at the start
of construction would be disruptive and
create unnecessary financial risk for
contractors after they have entered into
a contract for construction of a facility.
Commenters stated that portions of
the Proposed Regulations refer to a
contract when referencing the timing of
a DBA wage determination, while others
refer to a facility, and requested
clarification. Another commenter stated
that the approach in the Proposed
Regulations conflicts with early
guidance issued by the DOL regarding
IRA prevailing wage compliance.27 A
few commenters requested that the final
regulations retain the rule that the wage
determination be determined at the
beginning of construction or revise the
rule to provide for the determination of
wage rates at the project level to avoid
multiple wage rates for the same work.
These commenters stated that because
there is no analogous prime contract
with a Federal agency as under the
DBA, connecting the wage
determination timing to the execution of
a contract could be challenging.
Commenters stated that determining
prevailing wage rates at the project level
would allow for greater consistency
between contractors and subcontractors.
Another commenter emphasized that
each taxpayer, contractor, and
subcontractor should be subject to the
same applicable wage determination. At
least one commenter suggested that the
final regulations should permit
taxpayers to use wage determinations at
the time contracts are executed or when
construction begins.
The DBA framework is predicated on
a Federal contract for the construction
of public buildings and public works
between the Federal Government and
contractors. Under the DBA, every
contract to perform construction,
alteration, or repair to which the Federal
27 U.S.

Dept. of Labor, Davis-Bacon and Related
Acts (DBRA) Frequently Asked Questions, § III.11,
https://www.dol.gov/agencies/whd/governmentcontracts/construction/faq.

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53207

Government is a party must contain a
provision stating the prevailing wage
rates to be paid to various classes of
laborers and mechanics. The DBA
regulations generally provide that the
applicable wage rates for a contract are
those in effect at the time the prime
contract is awarded by the Federal
contracting agency.28 By contrast, under
the PWA requirements, there is no
contracting party directly analogous to
the Federal Government. Under the
Prevailing Wage Requirements,
taxpayers are required to ensure the
payment of at least prevailing wages,
but they may do so through the
execution of multiple contracts and
subcontracts or may perform the work
with their own employees.
Because of the perceived difficulty in
assigning a fixed time to establish the
applicable prevailing wage rates based
on the execution of contracts, the
proposed rules would have provided
that the applicable prevailing rates are
determined at the beginning of
construction. However, the Treasury
Department and the IRS understand the
need for taxpayers to reduce uncertainty
and determine expected labor costs
prior to entering into contracts for the
construction of a facility. Additionally,
the Treasury Department and the IRS
agree that the ‘‘in accordance with’’
language in section 45(b)(7) supports
drawing from the DBA rules to
determine the appropriate timing for
establishing the applicable wage rates.
Accordingly, the final regulations are
revised to provide that the applicable
prevailing rates are determined at the
time the contract for the construction,
alteration, or repair of the facility is
executed by the taxpayer (or the
taxpayer’s designee, assignee, or agent)
and a contractor. The prevailing wage
rates at the time such contract is
executed apply to all subcontractors of
that contractor. In circumstances in
which a taxpayer (or the taxpayer’s
designee, assignee, or agent) executes
separate contracts with more than one
contractor, then for each such contract,
the applicable prevailing rates with
respect to any work performed by the
contractor (and all subcontractors of the
contractor) are determined at the time
the contract is executed by the taxpayer
(or the taxpayer’s designee, assignee, or
agent) and the contractor. In the absence
of a contract, or if a contractor or
subcontractor is unable to determine the
date of execution of the contract, the
28 Under 29 CFR 5.2, the term ‘‘contract’’ means
any prime contract that is subject wholly or in part
to the labor standards provisions of any of the laws
referenced by 29 CFR 5.1 and any subcontract of
any tier thereunder, let under the prime contract.

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final regulations provide that the
applicable wage determinations are
those in effect at the time construction
starts.
These revisions address commenters’
practical business concerns regarding
costs and financing and provide greater
consistency with how the applicable
wage rates are established under the
DBA. The final regulations address the
concern of commenters that various
wage rates would apply, or that costs
will not be able to be determined up
front, because they apply the rate at the
time the contract is executed between
the taxpayer and a contractor to all
subsequent contracts that flow from
such contract. Thus, consistent with the
DBA, the final regulations allow for
more than one wage determination to
apply with respect to the construction,
alteration, or repair of a facility in cases
in which a taxpayer executes separate
contracts with more than one contractor,
but nonetheless provide certainty for the
taxpayer, contractor, and subcontractor
with respect to any work performed
pursuant to that contract.
The final regulations also adopt a
similar framework for alterations or
repairs that occur after the facility is
placed in service with applicable wage
determinations applying when a
contract is executed between a taxpayer
and contractor for the alteration or
repair of a facility, or absent a contract,
when the repair or alteration starts. The
final regulations also add all contracts
for construction, alteration, or repair to
the list of records that may be necessary
to demonstrate compliance with the
applicable Prevailing Wage
Requirements.
Under the Proposed Regulations,
taxpayers generally would not have
been required to update the applicable
prevailing wage rates during
construction of the facility in the event
a new general wage determination was
published by the DOL after construction
of the facility begins. The preamble to
the Proposed Regulations stated that a
new wage determination would be
required if the contract is changed to
include additional, substantial
construction, alteration, or repair work
not within the scope of work of the
original contract, or to require work to
be performed for an additional time
period not originally obligated,
including in the case of an option to
extend the term of a contract for the
construction, alteration, or repair being
exercised. Proposed § 1.45–7(b)(5)
mirrored the language in the preamble,
but omitted the term substantial from
the rule. The Proposed Regulations also
would have provided that taxpayers
would need to update the applicable

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wage rate(s), as necessary, with respect
to any alteration or repair of a facility
that begins after the facility has been
placed in service. Taxpayers would do
this by ensuring that wages are paid for
such alteration or repair based on the
general wage determination in effect
when the alteration or repair begins.
Several commenters were concerned
about the requirement to update
prevailing wage rates during the
lifespan of a construction project.
Commenters suggested clarifying how to
determine when, under the Proposed
Regulations, an additional time period
not originally obligated has occurred
that necessitates obtaining a new wage
determination. The commenters stated
that the language with respect to an
additional time period is ambiguous and
could apply to ordinary delays and
extensions that are common in
construction projects. Commenters
requested that the terms substantial and
additional be defined, or a de minimis
value be set, to better clarify the
threshold of new work or additional
time above which taxpayers would be
required to seek a new wage
determination.
The commenters recommended
inclusion of language from the DBA
regulations to clarify that a new wage
determination is not required if
additional time is given to complete the
original commitment or if the additional
construction, alteration, and/or repair
work as part of the modification is
merely incidental. Other commenters
recommended the final regulations
include a substantiality threshold
consistent with DBA regulations. One
commenter suggested the final
regulations require new wage rates only
if there is a cardinal change to a covered
project. Another commenter suggested
limiting the need for additional wage
determinations to increases in the
project’s budget of at least 30 percent or
delays of at least 120 days to the
project’s expected completion date. One
commenter suggested that the wage
determination in effect at the beginning
of a taxpayer’s taxable year be used for
all alterations and repairs occurring in
the years after a facility is placed in
service.
The Treasury Department and the IRS
agree that clarifications are needed and
that the rules regarding when a new
wage determination is required should
be consistent with the rules under the
DBA. Under the DBA guidance in 29
CFR 1.6, if there is additional,
substantial construction, alteration, and/
or repair work not within the scope of
work of the original contract or order, or
changes to require the contractor to
perform work for an additional time

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period not originally obligated,
including cases in which an option to
extend the term of a contract is
exercised, the contracting agency must
include the most recent revision of any
wage determination(s) at the time the
contract is changed or the option is
exercised. This does not apply if the
contractor is simply given additional
time to complete its original
commitment or if the additional
construction, alteration, and/or repair
work in the modification is merely
incidental. The DBA regulations also
provide rules with respect to contracts
for construction, alteration, or repair
work over a period of time that is not
tied to the completion of any specific
work, such as indefinite operations and
maintenance or repair contracts. The
DBA regulations require contractors
who are parties to these types of
contracts to update the applicable wage
rates for such contracts on an annual
basis. The revised wage determination
then applies to any alteration or repair
work that begins under such a contract
during the 12 months following the
update until such construction work is
completed, even if the completion of
that work extends beyond the twelvemonth period.
Accordingly, the final regulations
update the proposed rule to include the
substantiality requirement discussed in
the preamble to the Proposed
Regulations, and further clarify that the
requirement to update the wage
determination does not apply if the
contractor is given more time to
complete its original commitment or if
the additional work is merely
incidental. The final regulations also
update the proposed rule to provide that
if a taxpayer enters into a contract for
alteration or repair work over an
indefinite period of time that is not tied
to the completion of any specific work,
the applicable wage rates must be
updated on an annual basis.
2. Applicable Prevailing Wage Rate for
General Wage Determinations
The Proposed Regulations would have
provided that a general wage
determination would be one issued and
published by the DOL that includes a
list of wage and bona fide fringe benefit
rates determined to be prevailing for
laborers and mechanics for the various
classifications of work performed with
respect to a specified type of
construction in a geographic area. As
stated in the preamble to the Proposed
Regulations, generally, the DOL
conducts surveys to determine the
prevailing rate based on wage rate data
submitted by contractors, contractors’
associations, labor organizations, public

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officials, and other interested parties. In
general, the Proposed Regulations
would have provided that to determine
the applicable prevailing wage rates,
taxpayers would need to use the general
wage determination(s) published by the
DOL under the DBA on a DOL approved
website. The current DOL approved
website for publishing general wage
determinations https://www.sam.gov.
Section 45(b)(7)(A) requires that
taxpayers ensure the payment of
prevailing wages at rates not less than
the prevailing rates determined in
accordance with the DBA. The Proposed
Regulations would have largely
incorporated the definition of wages
from 29 CFR 5.2 for the Prevailing Wage
Requirements. Under the Proposed
Regulations, wages would be defined as
the basic hourly rate of pay; any
contribution irrevocably made by a
contractor or subcontractor to a trustee
or to a third person pursuant to a bona
fide fringe benefit fund, plan, or
program; and the rate of costs to the
contractor or subcontractor that may be
reasonably anticipated in providing
bona fide fringe benefits to laborers and
mechanics pursuant to an enforceable
commitment to carry out a financially
responsible plan or program, which was
communicated in writing to the laborers
and mechanics affected. The Proposed
Regulations would have also
incorporated by reference the rules set
forth in 29 CFR 5.25 through 5.33 with
respect to the costs for bona fide fringe
benefits that may be credited for
purposes of the payment of wages. The
Proposed Regulations would have
prescribed rules with respect to the
payment of wages including that the
payment of wages be made without
deduction (except such payroll
deductions as are required by the law or
permitted by regulations issued by the
Secretary of Labor) and must consist of
the full amount of wages (including
bona fide fringe benefits or cash
equivalents thereof). Under the
Proposed Regulations, whether amounts
are wages for purposes of the Prevailing
Wage Requirements would not be
relevant in determining whether
amounts are wages or compensation for
other Federal tax purposes.
One commenter suggested that
prevailing wage rates established by the
DOL fail to take into account actual
compensation to workers, including
fringe benefits, in all cases. The
commenter suggested that to calculate
prevailing wage amounts, an employer
would not be able to take credit for the
cost to set up and offer medical
insurance if an employee opts out of
medical coverage. The commenter also
stated that taxpayers who enter into a

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collective bargaining agreement may be
disadvantaged, because the agreement
could set the wages and benefits below
the prevailing wage amounts for covered
employees. The commenter suggested
establishing a safe harbor whereby a
taxpayer would be deemed to satisfy
Prevailing Wage Requirements if a
substantial number—defined as 90
percent—of their employees are paid
prevailing wages.
This comment appears to misstate the
DBA requirements, and to the extent the
comment addresses the determination of
prevailing wage rates for purposes of the
DBA, the comment is outside the scope
of these regulations. The Proposed
Regulations would have largely
incorporated the definition of wages
from 29 CFR 5.2 for the Prevailing Wage
Requirements. Under 29 CFR 5.2 wages
include any contribution irrevocably
made by a contractor or subcontractor to
a trustee or to a third person pursuant
to a bona fide fringe benefit fund, plan,
or program; and the rate of costs to the
contractor or subcontractor that may be
reasonably anticipated in providing
bona fide fringe benefits to laborers and
mechanics pursuant to an enforceable
commitment to carry out a financially
responsible plan or program, which was
communicated in writing to the laborers
and mechanics affected. The Proposed
Regulations would have therefore
included in the payment of prevailing
wages, the rate of costs to an employer
to provide bona fide fringe benefits.
Additionally, the statute requires the
payment of prevailing wages in
accordance with the DBA and does not
allow lower wage rates because there is
a collective bargaining agreement or if
90 percent of workers have been paid
the applicable wage rates. Accordingly,
the changes suggested by the commenter
are not incorporated.
A commenter stated that the Proposed
Regulations impose no obligation on
taxpayers to confirm that fringe benefit
contributions by contractors are made to
bona fide entities. The commenter
suggested requiring taxpayers to: (i)
provide notice of an enforceable
commitment to provide bona fide fringe
benefits, and (ii) confirm that fringe
benefit contributions made on behalf of
laborers and mechanics by contractors
and subcontractors are made to a bona
fide fringe benefit fund, plan, or
program. Another commenter request
that the final regulations specifically
allow for the payment of non-required
forms of compensation, such as paying
for a portion of health insurance, to
make up for any wage payments that are
below the prevailing wage rate.
Consistent with the DBA, the final
regulations clarify that a taxpayer may

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discharge its wage obligations for the
payment of prevailing wages by paying
the full amount in cash, by making
payments to a bona fide fringe benefit
provider or incurring costs for bona fide
fringe benefits, or by a combination
thereof. As discussed previously, wages
are defined to include contributions
irrevocably made by a contractor or
subcontractor to a trustee or to a third
person pursuant to a bona fide fringe
benefit fund, plan, or program. Failures
by contractors or subcontractors to make
payments to bona fide plans or
programs may result in laborers and
mechanics being paid wages at rates less
than the required prevailing wage rates.
However, there is flexibility because the
taxpayer, contractor, or subcontractor
can pay the entire prevailing wage
amount through the basic hourly rate,
including the cash equivalent of fringe
benefits. They are permitted, but not
required, to provide bona fide fringe
benefits. If they do provide bona fide
fringe benefits, the cost of those benefits
is included in the prevailing wage rate.
It is ultimately the taxpayer’s
responsibility to ensure compliance
with the Prevailing Wage Requirements.
These final regulations do not require
any specific method for the taxpayer to
ensure compliance; however, taxpayers
must maintain records reflecting that
compliance.
Other commenters opined that the
DOL prevailing wage rates are based on
unreliable methodologies and are
flawed and inaccurate. A commenter
stated that existing prevailing wage laws
have an inflationary impact on
construction costs. Similarly, a
commenter suggested that the rates used
for the wages are generally drawn from
the nearest urban center and don’t
necessarily reflect local market
conditions. A commenter expressed that
the prevailing wage rates published by
the DOL are subject to change and can
vary greatly by location, category, and
job type. The commenter suggested the
uncertainty of prevailing wage rates will
inhibit investment in clean energy
projects and raise the cost and risk of
such projects.
Under section 45(b)(7)(A), the
increased credit amount provided by
section 45(b)(6) is available with respect
to a qualified facility if a taxpayer
ensures that laborers and mechanics are
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 the DBA. The statute
mandates the use of prevailing wage
rates determined by the DOL. The DOL

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wage determination survey process and
data sufficiency are outside the scope of
these final regulations.
Commenters also stated that union
classifications are complex and
confusing and that nonunion
contractors may struggle to classify
certain jobs with descriptions contained
in collective bargaining agreements that
are not shared publicly. The commenter
raised that the DOL has applied union
work rules and job descriptions to any
classification for which the union rate
prevails. A commenter recommended
that taxpayers, contractors, and
subcontractors should not be penalized
for failing to conform to job descriptions
that are not published by the DOL and/
or the unions whose wage scales are
found to be prevailing. The commenter
suggested that, at a minimum, no
intentional violation penalty should be
assessed in the absence of publication of
the job descriptions for each trade,
which can be readily accomplished by
posting hyperlinks to union collective
bargaining agreements, or the DOL
dictionary of occupation definitions.
Commenters also encouraged the
Treasury Department and the IRS to
recognize that new clean energy
technologies require new labor
classifications and suggested providing
additional guidance regarding other
types of professional workers unique to
clean energy that should be considered
distinct from laborers or mechanics.
Commenters also requested that the
DOL FAQs be amended to no longer
preemptively declare that clean
technology workers will generally be
deemed covered and classified under
so-called established trades, particularly
with regard to solar and wind turbine
industries. Commenters stated that
standardization and definition regarding
multiple labor categories is necessary to
avoid protracted delays and confusion.
Similarly, a commenter suggested that
taxpayers should not be penalized for
misclassifications arising from delays in
the DOL determinations. Another
commenter stated that no clear labor
classifications exist for workers directly
employed by nuclear power plant
operators.
Other commenters recommended
implementing the DOL system of trade
and craft classifications under the DBA,
including updates to the DBA
regulations released in August of 2023.
A commenter stated that the update
contained specific recommendations for
prevailing wage classifications,
including new definitions of geographic
localities and broader definitions of
construction to better reflect work on
clean energy projects.

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The Treasury Department and the IRS
appreciate commenters’ concerns and
suggestions regarding emerging
technologies and the need for
consistency and transparency in the
classification process. However,
revisions to the DOL regulations and
other guidance regarding worker
classifications for DBA purposes are
outside the scope of these final
regulations.
Commenters also requested that the
final regulations clarify the types of
construction subject to wage
determinations. For purposes of
determining the applicable general wage
determination, the Proposed
Regulations would have provided that
the types of construction for which
wage determinations may be issued
include, but are not limited to, building,
residential, heavy, and highway, which
are the types of construction for which
the DOL issues general wage
determinations under the DBA.29
A commenter recommended
clarifying that the DOL definition and
interpretation of the types of
construction should control for PWA
purposes and that only those types of
construction designated by the DOL as
of a similar character in the locality
should be permitted for IRA projects.
Other commenters supported only
recognizing the DOL’s four major
categories of construction.
The language in the Proposed
Regulations was intended to align with
the types of construction for which the
DOL currently issues wage
determinations and allow for additional
or different classifications should the
DOL designate additional classifications
in the future. The final regulations
clarify that the types of construction are
those identified by the DOL and provide
the flexibility for the DOL to add to or
modify those categories as necessary
within the DOL’s existing authorities.
Any decision by the DOL to add to or
modify those categories is outside of the
scope of these final regulations.
A commenter requested that the final
regulations clarify whether the
definition of wages as used in sections
45(b)(7)(A) and 45Q(h)(3) has the same
meaning as wages provided by 48 CFR
22.401 and whether such wages should
be computed according to 48 CFR
22.406–2. The final regulations do not
adopt this comment because section
45(b)(7)(A) requires taxpayers to ensure
that wages are paid at rates not less than
the prevailing rates in accordance with
the DBA and not the Federal
29 Dep’t of Labor, ALL AGENCY MEMORANDUM
NO. 130 (March 17, 1978).

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Acquisition Regulations in Title 48 of
the Code of Federal Regulations.
One commenter recommended
expressly adopting the DBA’s ‘‘30percent rule,’’ whereby the prevailing
wage rate is defined as the rate paid to
the greatest number or laborers or
mechanics in the classification on
similar projects in the area during the
period in question, provided that the
wage is paid to at least 30 percent of
those employed in the classification.
Section 45(b)(7)(A)(ii) requires
taxpayers who are seeking an increased
credit amount to ensure that laborers
and mechanics are paid wages at rates
that are not less than the prevailing rates
‘‘as most recently determined’’ by the
DOL in accordance with the DBA. The
Proposed Regulations would have
provided for incorporation of DBA rules
for determining prevailing wage rates by
defining prevailing wage rates as those
rates most recently determined by the
DOL. Consistent with section
45(b)(7)(A)(ii), the final regulations
retain the rule from the Proposed
Regulations; they do not incorporate the
comment to expressly adopt the 30percent rule.
3. Supplemental Wage Determinations
and Rates for Additional Classification
Requests
The Proposed Regulations would have
provided special procedures for the
limited circumstances in which a
general wage determination does not
provide an applicable wage rate(s) for
the work to be performed on the facility
or if there is no applicable general wage
determination. These circumstances
would include cases in which no
general wage determination has been
issued for the geographic area or for the
specified type of construction, or in
which the DOL has issued a general
wage determination for the relevant
geographic area and type of
construction, but one or more labor
classifications necessary for the
construction, alteration, or repair work
that will be done on the facility is not
listed as part of that determination.
The Proposed Regulations would have
provided that under these
circumstances, a taxpayer, contractor, or
subcontractor would need to request a
supplemental wage determination or
request a prevailing wage rate for an
additional classification from the DOL.
Under the Proposed Regulations, a
taxpayer, contractor, or subcontractor
could have also requested a
supplemental wage determination if the
location of the facility involves work by
covered laborers and mechanics that
spans more than one contiguous
geographic area. The procedures for

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requesting a supplemental wage
determination or a prevailing wage rate
for an additional classification from the
DOL were intended to correspond to the
provisions under the DBA that allow
contracting agencies to seek a project
wage determination or a conformance
under 29 CFR 1.5(b) and 5.5(a)(1)(iii),
respectively.
With respect to supplemental wage
determination requests and requests for
additional classifications and wage
rates, proposed § 1.45–7(b)(3)(ii)(A)
would have provided that a taxpayer,
contractor, or subcontractor should
make such requests no more than 90
days before the beginning of
construction, alteration, or repair, as
appropriate. While the procedures for
requesting a supplemental wage
determination or rates for additional
classifications would have generally
been consistent with DBA rules, there is
no similar timing requirement under
DBA rules with respect to project wage
determinations or conformances that are
requested by the contracting agency.
The 90-day limitation was proposed to
limit requests for hypothetical wage
determinations that were not tied to
actual construction projects in the final
planning stages. According to the DOL,
this concern is addressed in the DBA
context through the involvement of the
contracting agency, but there is no
contracting agency involved in the
construction of facilities for PWA
purposes that would help avoid
unnecessary and hypothetical requests.
Commenters generally expressed
support of the supplemental wage
determination and additional
classification process. Commenters
stated that the procedures were largely
consistent with processes under the
DBA and were necessary given the
constant transformational nature of the
construction industry. One commenter
expressed support for the requirement
that any requests for additional wage
determinations bear a reasonable
relationship to the established wage
rates, consistent with the DBA rules.
The commenter also supported the IRS’s
recognition that a request for a
prevailing wage rate for an additional
classification would not be permitted to
be used to split, subdivide, or otherwise
avoid application of classifications
listed in a general wage determination.
In addition, commenters supported
adopting the DOL test for determining
whether to approve a taxpayer or
contractor’s request to add a missing
classification to a DBA wage
determination. Some commenters
requested that the final regulations
expressly adopt the DOL three-part
conformance test for adding missing

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classifications to wage determinations.
Commenters claimed that adopting DOL
regulations governing conformance
requests would help protect
multiskilled occupations from
unscrupulous contractors inventing
unnecessary subclassifications for the
purpose of paying workers less. The
commenters also suggested clarifying
that the DOL will consider the views of
construction workers to be employed in
the requested classification and
stakeholders, including labor unions in
the affected area, with respect to the
adequacy of the requested classification
and/or proposed wage and fringe
benefits rates.
The Treasury Department and the IRS
coordinated extensively with the DOL
in drafting the supplemental wage
determination and additional
classification process outlined in the
Proposed Regulations. The procedures
in proposed § 1.45–7(b)(3) for requesting
a supplemental wage determination or a
rate for an additional classification from
the DOL would have corresponded to
the provisions under the DBA that allow
contracting agencies to seek a project
wage determination or a conformance
under 29 CFR 1.5(b) and 5.5(a)(1)(iii),
respectively. They would have included
certain minor differences from the
conformance process to account for the
absence of a Federal contracting agency.
The comments suggesting that the DOL
should alter its underlying process and
methodology for determining prevailing
wages (both in the DBA and the PWA
context) are not adopted. Additionally,
changes to DOL procedures regarding
the DBA are outside the scope of these
final regulations as the DOL administers
those DBA provisions.
Several commenters shared concerns
with the wage determination process
administered by the DOL. One
commenter stated that numerous
occupations in the clean energy
industry are unrepresented in the
general wage determinations currently
offered by the DOL, such as wind
technicians often relied upon for the
installation and assembly of onshore
and offshore wind turbines. One
commenter stated that nuclear power
generating facilities are different than
other construction projects, including
other electric generating facilities, and
that the specialized roles performed by
employees at nuclear facilities are not
always covered by existing DOL
classifications. A commenter also asked
for guidance on how to categorize
specific repairs or alterations of an
existing nuclear facility for purposes of
DOL general wage determinations.
Similarly, commenters recommended
providing additional guidance about

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multi-category projects, such as who
will make the final determination on the
classification of a project (for example,
building or heavy), and the category a
contractor should follow.
Comments requesting additional
classifications and additional guidance
from the DOL on the application of
appropriate classifications are outside
the scope of these final regulations. The
procedures for requesting a
supplemental wage determination or a
prevailing wage rate for an additional
classification from the DOL continue to
apply.
Some commenters were critical of the
proposed rule requiring that a taxpayer,
contractor, or subcontractor request a
supplemental wage determination no
more than 90 days before the beginning
of construction of a facility.
Commenters stated that the 90-day
period is too short because of the high
importance of the prevailing wage
determination on the cost of labor.
Similar to general wage determinations,
commenters stated that it is necessary to
know project costs at the bidding stage,
and bidding on contracts to construct a
facility takes place far more than 90
days before the beginning of
construction, often more than one year
prior to construction beginning. Some
commenters suggested the time be
extended to a year before a bid is due
or 24 months before the beginning of
construction, asserting that this would
provide all potential bidders with
sufficient clarity on wage
determinations and job classifications in
sufficient time to make informed bids
on solar and other clean energy projects.
The commenter also stated that this
would reduce the number of requests to
the DOL, which will mitigate the burden
on government regulators and allow
them to process requests more
efficiently.
The Treasury Department and the IRS
agree with the comments seeking
additional time to request supplemental
wage determinations and rates for
additional classifications. The
commenters persuasively argued that
wage determinations issued at or near
the beginning of construction are not
helpful for taxpayers who will likely
seek to enter contracts well in advance
of construction starting. Taxpayers and
their contractors need certainty
regarding the labor costs of a project at
the time of entering contracts for work
to be performed rather than when
construction begins. Moreover, the 90day period prior to construction starting
lacks consistency with the rules under
the DBA. The final regulations revise
the Proposed Regulations to align the
timing of requests for supplemental

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wage determinations or rates for
additional classification with the
contract framework adopted for general
wage determinations. The final
regulations update when taxpayers must
request a supplemental wage
determination or rate for additional
classification from the DOL to provide
greater certainty for taxpayers and better
align with the rules under the DBA,
while also preventing an influx of
hypothetical requests for supplemental
wage determinations or additional
classifications that would be
administratively burdensome to the
DOL.
Under the final regulations, requests
for supplemental wage determinations
cannot be made more than 90 days
before the date the contract between the
taxpayer (or the taxpayer’s designee,
assignee, or agent) and a contractor for
construction, alteration, or repair of the
facility is expected to be executed. The
final regulations further prescribe that
any supplemental wage determinations
are required to be incorporated into the
contract between the taxpayer and
contractor within 180 days of issuance.
The 180-day period for incorporation
into a contract provides consistency
with the DBA rules under 29 CFR
1.6(a)(3)(i).
Under the final regulations, requests
for prevailing wage rates for additional
classifications can be made any time
after a contract for the construction,
alteration, or repair of a facility has been
executed between the taxpayer and a
contractor. The final regulations balance
the need of taxpayers for increased
certainty regarding labor costs at or near
the time of entering a contract with the
need to limit hypothetical requests that
are not tied to actual construction
projects. The DOL WHD has advised the
Treasury Department and the IRS that
most taxpayers will likely not need to
use the process for requesting a
supplemental wage determination or
request a rate for an additional
classification because of the availability
of general wage determinations.
Commenters requested that the final
regulations provide that if a response
from the DOL for an additional wage
rate is not provided within a specific
time period, such as 60 days, the
prevailing wage rate requirement for
that role should no longer apply. Under
the Proposed Regulations, the
procedures for requesting a prevailing
wage rate for an additional classification
from the DOL were intended to
correspond to the provisions under the
DBA that allow contracting agencies to
seek a conformance under 29 CFR
5.5(a)(1)(iii). Section 5.5(a)(1)(iii) of the
DBA regulations provides that the DOL

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will approve, modify, or disapprove any
classification action within 30 days of
receipt or advise the requesting
contracting agency within the 30-day
period that additional time is necessary.
To retain consistency with the DBA and
address the valid taxpayer and
contractor concerns regarding cost
certainty and preventing unreasonable
delays, the final regulations adopt
similar language that the DOL will
resolve requests for a prevailing wage
rate for an additional classification
within 30 days of receipt or advise the
requester within the 30-day period that
additional time is necessary. The final
regulations do not, however, adopt the
commenters suggestion that a delay in
receiving an additional wage rate
excepts a taxpayer from the requirement
to pay wages at rates not less than the
prevailing rates for that role.
An additional commenter
recommended that, in instances in
which taxpayers receive a supplemental
wage determination or a prevailing wage
rate for an additional classification,
taxpayers be provided a 30-day grace
period during which to pay the affected
employees the difference between the
wage determination and previous wage
rates. A commenter also proposed a 30day grace period following a denial or
partial-relief from an appeal with
respect to wage determinations
generally.
The Treasury Department and the IRS
recognize the possibility that the DOL
response to a request for a supplemental
wage determination or additional
classifications may not be issued until
after laborers and mechanics have
started working on the facility or
project. The Proposed Regulations
would have provided that the taxpayer
would not be considered to have failed
to meet the Prevailing Wage
Requirements with respect to any
mechanics or laborers whose wage rate
was subject to the request and who were
paid less than the prevailing wage rate
before the determination by the DOL if
the taxpayer requests the supplemental
wage determination or prevailing wage
rate for an additional classification
before the beginning of construction (or
as soon as practicable after the start of
construction) and makes a correction
payment within 30 days of the
determination to each laborer or
mechanic equal to the difference
between the amount of wages paid to
such laborer or mechanic before the
determination and the amount of wages
required by the Prevailing Wage
Requirements to be paid to such laborer
or mechanic during such period. This
exception is intended to mitigate a rule
that would require taxpayers to make

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correction and penalty payments for
failures to pay a prevailing wage rate
that could not be timely determined by
the taxpayer. The same considerations
do not apply to the request for
additional time while an appeal with
respect to a wage determination is
pending. Therefore, the final regulations
adopt the proposed rule without change.
Commenters also requested that the
final regulations require consistency
between who can request supplemental
wage determinations or additional
classifications and who can seek
reconsideration of such a decision. A
commenter stated that proposed § 1.45–
7(b)(3)(ii)(A) would have provided that
a taxpayer, contractor, or subcontractor
request a supplemental wage
determination or additional
classification and wage rate and after
review, the DOL WHD will notify the
taxpayer, contractor, or subcontractor as
to the supplemental wage determination
or the labor classifications and wage
rates to be used for the type of work in
question in the geographic area in
which the facility is located. However,
proposed § 1.45–7(b)(4) would have
provided that, in connection with
seeking a reconsideration of a wage
determination, a ‘‘taxpayer may seek
reconsideration and review by the
Administrator of the Wage and Hour
Division of a general wage
determination, or a determination
issued with respect to a request for a
supplemental wage determination or
additional classification and wage rate.’’
In contrast, one commenter requested
that only taxpayers be permitted to
request supplemental wage
determinations. Under 29 CFR 1.8(a),
any interested party may seek
reconsideration of a wage
determination.
The final regulations clarify that any
supplemental wage determination or
rate for additional classification request
may be made by the taxpayer,
contractor, or subcontractor. With
respect to seeking a reconsideration of a
general wage determination, or a
determination issued with respect to a
request for a supplemental wage
determination or rate for additional
classification request, the final
regulations further clarify that the
taxpayer, contractor, or subcontractor
may seek the reconsideration.
Ultimately, the taxpayer must ensure
that the PWA requirements are satisfied
regardless of whether a contractor or
subcontractor requested a supplemental
wage determination or requested an
additional classification.

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Federal Register / Vol. 89, No. 122 / Tuesday, June 25, 2024 / Rules and Regulations
4. Applicable Prevailing Wage Rate for
Apprentices
With respect to the prevailing wage
rates for apprentices, the Proposed
Regulations would have adopted 29 CFR
5.5(a)(4)(i), allowing the payment of
wages that differ from the applicable
prevailing wage rate to apprentices who
are participating in a registered
apprenticeship program. The Proposed
Regulations would have also provided
that taxpayers and contractors or
subcontractors who employ individuals
who are not in a registered
apprenticeship program or who employ
apprentices in excess of applicable
ratios permitted by the registered
apprenticeship program would need to
pay those individuals the full prevailing
wage rate listed for the classification of
the work performed in the applicable
wage determination.
A commenter recommended
increasing the rate of pay for
apprentices, given the frequency at
which apprentices travel for work. This
comment is not adopted as the
prevailing rate of pay for work
performed by apprentices is determined
by the DOL and is outside the scope of
these final regulations. Comments
concerning employing apprentices in
excess of the applicable ratios are
discussed in Section VIII.A.2. and
employing individuals who are not
apprentices because they are not
participating in a registered
apprenticeship program are discussed in
Section VIII.A.5., of this Summary of
Comments and Explanation of
Revisions.
The Proposed Regulations would have
provided a reciprocity rule. Under the
proposed reciprocity rule, if the
construction is occurring in a
geographic area other than the
geographic area in which an
apprenticeship program is registered,
the ratio applicable within the
geographic area where the construction
is being performed would apply. If there
is no applicable ratio for the geographic
area of the facility, the ratio specified in
the registered apprenticeship program
standard would apply.
Commenters requested clarification
on the applicable apprentice-tojourneyworker ratio if work is
performed outside of the geographic
area in which the apprenticeship
program typically operates. A few
commenters suggested that the final
regulations adopt a reciprocity standard
that would permit taxpayers to apply
either the apprenticeship-tojourneyworker ratio set by the registered
apprenticeship program or the State
where the construction is being

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performed. Another commenter
recommended giving taxpayers
flexibility to determine the appropriate
ratio and wage rates if the taxpayer,
contractor, or subcontractor is
performing covered work in a
geographic area other than that in which
the apprenticeship program is
registered.
The Treasury Department and the IRS
appreciate commenters’ requested
clarification on the proposed reciprocity
rule and work that is performed outside
of the geographic area in which the
apprenticeship program is registered.
The proposed reciprocity rule would
have largely followed the rule in 29 CFR
5.5(a)(4)(i)(D) regarding the payment of
prevailing wages to apprentices. Based
on consultations with the DOL, the
Treasury Department and the IRS
understand that this rule is intended to
apply in cases in which the ratio
requirement of the State where the
construction occurs is stricter than that
of the registered apprenticeship
program. The final regulations largely
adopt the proposed rule, and also clarify
that if more than one apprentice-tojourneyworker ratio could apply
because the construction work is
occurring in a geographic area where the
registered apprenticeship program is not
registered, the taxpayer must comply
with the apprentice-to-journeyworker
ratio set for the geographic area where
the construction occurs. Thus, if the
geographic area in which the
construction is occurring requires a
higher number of journeyworkers per
apprentices than the ratio required by
the registered apprenticeship program,
then the taxpayer, contractor, or
subcontractor must follow the stricter
ratio. The final regulations also adopt
the proposed rule that the wage rates
(expressed in percentage of the
journeyworker hourly rate) applicable in
the geographic area in which the
construction, alteration, or repair work
is performed must be observed.
A commenter requested guidance for
determining the apprentice or
apprentices that must be paid not less
than the full prevailing wage rate for
their hours if the daily ratio requirement
is not satisfied. The final regulations
clarify that the taxpayer, contractor, or
subcontractor, as applicable, has the
discretion to determine which
apprentice(s) must receive the full
prevailing wage rate for hours worked if
there is a failure to satisfy the Ratio
Requirement.
At least one commenter
recommended that the final regulations
not require taxpayers to pay at least the
full prevailing wage rate to apprentices
in excess of the applicable ratio. Under

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53213

the DBA, any apprentice performing
work on the job site in excess of the
ratio permitted under the registered
program or the ratio applicable to the
geographic area of the facility pursuant
to 29 CFR 5.5(a)(4)(i) must be paid not
less than the full applicable prevailing
wage rate on the wage determination for
the work actually performed. The
Proposed Regulations would have
provided that the calculation of the
prevailing wage rate for the work of
apprentices would be in accordance
with the DBA rules. The proposed rule
is adopted as final.
A commenter raised that the Proposed
Regulations appear to limit the number
of apprentices that can be paid the
apprenticeship rate to the number of
apprenticeships required by the
regulation. The commenter stated that
limiting the number of apprentices that
can be paid the apprenticeship rate to
the number of apprentices required by
the regulation discourages the use of a
larger number of apprentices and would
seem to violate the policy objectives of
the requirements to use apprentices. On
the other hand, a commenter
recommended adopting the DOL
oversight and quality control standards,
including apprentice-to-journeyworker
ratios, to help ensure safe training of
apprentices.
Apprentice-to-journeyworker ratios
prescribe the minimum number of
journeyworkers required for each
apprentice that is on a job site on a
given day to ensure the appropriate
training and supervision of apprentices
and to maintain workplace safety. The
apprentice-to-journeyworker ratio does
not impose a cap on the total number of
apprentices that can be paid the
apprentice rate. For example, a taxpayer
may satisfy a 1:1 ratio by hiring one
journeyworker and one apprentice or by
hiring 20 journeyworkers and 20
apprentices. The prescribed ratio does
not restrict the total number of
individuals that are hired.
C. Definitions
Commenters suggested clarifying the
extent to which the relevant definitions
under proposed § 1.45–7(d) for the
Prevailing Wage Requirements apply to
the proposed § 1.45–8(f) definitions for
the Apprenticeship Requirements. The
final regulations align the relevant
definitions for the Prevailing Wage
Requirements in § 1.45–7(d) with the
Apprenticeship Requirements in § 1.45–
8(g).
1. Laborer and Mechanic
Proposed § 1.45–7(d)(7) would have
defined the terms laborer and mechanic
consistent with the definition under the

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DBA as 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). Under the Proposed
Regulations, laborers and mechanics
would not have included 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 would not be deemed to
be laborers or mechanics. These
individuals are generally exempt under
the Fair Labor Standards Act and are not
labors or mechanics for purposes of the
DBA. Consistent with the DBA, 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
under 29 CFR part 541, also would be
considered laborers and mechanics for
the time spent conducting laborer and
mechanic duties. Under the Proposed
Regulations, laborers and mechanics
would have included apprentices and
helpers. The Treasury Department and
the IRS requested comments on the
treatment of working forepersons or
owners performing the duties of laborers
and mechanics under certain
circumstances, and other executive or
administrative personnel who also
perform duties of a manual or physical
nature, in the construction, alteration, or
repair of a qualified facility.
At least one commenter requested that
the Treasury Department and the IRS
confirm that the terms laborer and
mechanic are defined as under the DBA
to include individuals whose duties are
manual or physical in nature rather than
primarily administrative, executive, or
clerical. Commenters also requested that
the final regulations exclude certain
owners and specialized employees from
the definitions of laborer and mechanic,
such as engineers, architects, inspectors,
testers, and troubleshooters; wind or
solar commissioning technicians;
workers involved in tie-ins and other
commissioning, testing, and
troubleshooting of grid-connected
facilities after mechanical completion;
workers associated with initial
energization, testing, and
synchronization of installed equipment;
wind turbine commissioners; and other
similar professionals. In requesting
these exclusions from the definition of
laborer or mechanic, commenters
analogized work described in the DOL
Field Operations Handbook (FOH) 30

that is not covered under the DBA
unless those individuals are performing
the duties of a laborer or mechanic.
Commenters generally supported the
working foreperson rule, but some
sought additional guidance regarding
whether the 20-percent threshold
applies to professional workers other
than working forepersons. Some
commenters requested clarifying that
any foreperson, owner, or
administrative, executive, or clerical
personnel contributing more than 20
percent of their time during a workweek
to laborer or mechanic duties be
considered laborers and mechanics for
the time spent conducting laborer and
mechanic duties, even if they are
exempt under 29 CFR part 541. Other
commenters suggested limiting the
application of the 20-percent threshold
to these other individuals, but only if
they are not exempt under 29 CFR part
541. A few commenters suggested that
individuals who own at least a 20
percent equity interest and work on a
construction project, should also be
excluded from the PWA requirements,
because they are not subject to DBA
requirements to receive prevailing
wages. One commenter asked if nonexempt individuals (other than working
forepersons) who devote 20 percent or
less of their time to laborer and
mechanic duties are laborers and
mechanics. One commenter stated that
it would be difficult for taxpayers and
contractors to bifurcate supervisory and
direct time for a working foreperson in
determining the 20-percent threshold.
The final regulations incorporate the
definitions of laborer and mechanic
from the Proposed Regulations, which is
largely consistent with the definition of
those terms for DBA purposes. The
Treasury Department and the IRS have
determined that providing an
exhaustive list of those specialized
employees who are not laborers or
mechanics or defining laborers and
mechanics on an industry-by-industry
basis is not practical and does not
provide the necessary flexibility for
future industry developments. Although
the DOL FOH may provide some
guidance to taxpayers, whether an
individual is a laborer or mechanic will
depend on the specific job duties and
the relevant facts and circumstances.
The final regulations also adopt the rule
that 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 and the working
foreperson rule as proposed. The final

30 The DOL Field Operations Handbook for
administering the DBA can be found at https://

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regulations do not extend the working
forepersons rule to other working
professionals or adopt any exceptions
from the proposed rule for owners.
2. Employed
Consistent with the DBA, proposed
§ 1.45–7(d)(4) would have provided that
the definition of employed means
‘‘performing the duties of a laborer or
mechanic for the taxpayer, contractor, or
subcontractor (as applicable), regardless
of whether the individual would be
characterized as an employee or an
independent contractor for other
Federal tax purposes.’’ For purposes of
the Prevailing Wage Requirements, this
definition would generally be different
and broader than the definition used
elsewhere in the Code, for example with
respect to employment taxes, as well as
the associated reporting and
withholding obligations. Laborers and
mechanics who are independent
contractors for employment tax
purposes may be considered employed
for purposes of the Prevailing Wage
Requirements.
Commenters supported the Proposed
Regulation’s definition of ‘‘employed.’’
The commenters stated that the
application of prevailing wages to all
workers, even if they are nonemployees, aligns with the DBA. The
Treasury Department and the IRS agree,
and the proposed definition is adopted
without change.
3. Construction, Alteration, or Repair
Proposed § 1.45–7(d)(2)(i) would have
provided that the term construction,
alteration, or repair generally means
‘‘construction, prosecution, completion,
or repair’’ as defined in 29 CFR 5.2 of
the DBA regulations. In general, 29 CFR
5.2 defines construction, prosecution,
completion, or repair as all types of
work done on a particular building or
work at the site of the work. Proposed
§ 1.45–7(d)(2)(i) would have also
clarified that construction, alteration, or
repair for purposes of the PWA
requirements has no bearing on any
other sections of the Code, including
any determination of construction,
alteration, repair, or maintenance under
section 162 or 263 of the Code.
Some commenters requested
clarification on the definition of
construction, alteration, or repair of a
facility. Commenters also requested
clarification that alteration or repair
means construction-like or constructiontype activities. One commenter
suggested clarifying the differences
between construction and alteration or
repair so that a taxpayer may determine
those activities that constitute
construction and those that are

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alteration or repair. Commenters also
recommended clarifying whether, as
under the DBA, the PWA requirements
do not apply to installation work related
to supply or service contracts, unless
such installation involves substantial
construction work distinct and
separable from the non-construction
aspects of the contract. One commenter
requested clarifying that the work of
material suppliers is not considered
construction consistent with the DBA.
Another commenter requested that the
final regulations clarify that certain
preliminary work that is not considered
construction for DBA purposes (such as
exploratory drilling), is not considered
construction for PWA purposes.
In response to comments the final
regulations clarify that ‘‘construction,
alteration, or repair’’ means the same
activities that are covered by the DBA
definition of construction, prosecution,
completion, or repair under 29 CFR 5.2
that are performed with respect to a
facility. Activities that are excluded
from the DBA definition of construction,
prosecution, completion, or repair
under 29 CFR 5.2 are similarly excluded
under the final regulations. This
definition of construction, alteration, or
repair covers some activities that occur
during the construction of a facility
before it is placed in service as well as
activities that take place after placed in
service as alterations or repairs. Further,
specific installation work (as applicable)
that occurs during the construction of a
facility would be subject to PWA
requirements consistent with 29 CFR
5.2. As discussed in Section VI. of this
Summary of Comments and Explanation
of Revisions, the final regulations clarify
that construction of a facility is
interpreted consistent with the
underlying definition of a facility for tax
purposes.
4. Maintenance
Proposed § 1.45–7(d)(2)(i) would have
provided that the term construction,
alteration, or repair generally excludes
maintenance work that occurs after a
facility is placed in service. The
preamble to the Proposed Regulations
stated that maintenance would be work
that is ordinary and regular in nature
and designed to maintain existing
functionality of a facility as opposed to
an isolated or infrequent repair of a
facility to restore specific functionality
or adapt the facility for a different or
improved use.
Under the Proposed Regulations,
work designed to maintain and preserve
functionality of a facility after it is
placed in service would have included
basic maintenance such as regular
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cleaning and janitorial work, replacing
materials with limited lifespans such as
filters and light bulbs, and the
calibration of any equipment. Proposed
§ 1.45–7(d)(2)(i) would have provided
that maintenance work that occurs
before the facility is placed in service
may constitute construction for which
prevailing wages must be paid in order
to claim the increased credit amount.
Under the Proposed Regulations,
maintenance would not have included
work that improves a facility, adapts it
for a different use, or restores
functionality as a result of inoperability.
Proposed § 1.45–7(d)(2)(ii) would have
also included an example.
Commenters requested additional
guidance on how to determine whether
work performed after a facility is placed
in service is alteration or repair work or
maintenance work. One commenter
requested clarification on how to
distinguish between work that restores
functionality and work designed to
maintain and preserve existing
functionalities. Commenters also
suggested clarifying whether work
performed before or after a facility is
placed in service impacts whether it
would be considered maintenance work.
One commenter suggested that the
final regulations provide that
maintenance work includes the
standard replacement of equipment and
parts (including with functionally
similar, yet improved parts), minor or
incidental repair or installation work,
and routine tasks preventing failure or
decline. Another commenter requested
that the final regulations define
maintenance to exclude work that is
extended in nature, involves a major
replacement, or is otherwise not regular
and customary for the applicable type of
project. Several commenters also
requested that the final regulations
define maintenance to include reactive
maintenance, isolated or infrequent
repair to restore specific functionality;
troubleshooting; activities related to
operations (operations and maintenance
or O&M work); and work performed by
welders, winders, or machinists to
address a customer service outage.
Another commenter suggested that work
performed under a construction contract
warranty after a facility is placed in
service should be treated as
maintenance work.
A few commenters suggested that the
final regulations incorporate a de
minimis threshold to distinguish
between maintenance and alteration or
repair work based on either a specified
dollar amount and/or a percentage of
the original capitalized cost of the
qualified facility. Other commenters
suggested that the term maintenance in

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the Proposed Regulations be revised to
mirror descriptions of maintenance
work in DBA sub-regulatory guidance,
the Service Contract Act (SCA), nuclear
industry maintenance standards, or
regulations and case law related to
sections 162 and 263.
Commenters stated that the example
provided under proposed § 1.45–
7(d)(2)(ii) may have unintentionally
suggested a broader definition of
alteration or repair than anticipated,
because the example described the
replacement of a part in an inverter as
a rare occurrence although it may be a
regular occurrence at a solar farm. A few
commenters suggested that the final
regulations incorporate additional
examples of basic maintenance, and
alteration or repair activities, as applied
to specific facilities or properties,
including alternative fuel infrastructure,
solar farms, biogas systems, ethanol
facilities, nuclear facilities, and offshore
wind facilities.
In the Proposed Regulations, the
Treasury Department and the IRS sought
to distinguish between alteration and
repair work (for which payment of
prevailing wages is required whether
the work occurs before or after the
qualified facility is placed in service)
and maintenance work (for which
payment of prevailing wages is required
only if the work occurs before a
qualified facility is placed in service),
consistent with the DBA and DOL subregulatory guidance contained in the
Prevailing Wage Resource Book
(PWRB).31
While 29 CFR 5.2 includes various
activities that fall within the definition
of construction, including altering,
remodeling, some installation work, and
painting and decorating, it does not
specifically address maintenance work.
However, the DOL PWRB compares
servicing and maintenance work
typically covered by the SCA and
construction activities of all types that
are covered by the DBA.
The DOL PWRB describes
maintenance work that would be
covered by the SCA, and not the DBA,
as work that is routinely scheduled and
continuous or recurring. According to
the PWRB, SCA-covered maintenance
work typically includes: (i) work that is
needed to keep the building or work in
its current condition so that it may
continue to be used; (ii) work that does
not improve the current condition or
function of the building or work; or (iii)
work that may be completed relatively
31 The DOL Prevailing Wage Resource Book can
be found at https://www.dol.gov/agencies/whd/
government-contracts/prevailing-wage-resourcebook/determining-which-labor-standards-apply#_
SCA-covered_maintenance_work.

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quickly. Additionally, according to the
PWRB, SCA-covered maintenance work
uses skills that are not typical of the
construction trade. By contrast, the
PWRB states that DBA-covered repair
work typically includes activities such
as the restoration or improvement of a
building or work by replacement,
overhaul, or reprocessing of constituent
parts or materials. According to the
PWRB, DBA-covered repair work
includes an activity that: (i) generally
improves the building or work, either by
fixing something that is not functioning
properly or by improving upon the
building or work’s existing condition;
(ii) is not continuous or recurring, but
involves the correction of individual
problems or defects as separate and
segregable incidents; (iii) improves the
building or work’s structural strength,
stability, safety, capacity, efficiency, or
usefulness; or (iv) takes more time to
complete. Finally, according to the
PWRB, DBA-covered repair work uses
skills that are typical of the construction
trades.
The DOL PWRB also states that an
important factor in determining
coverage under the SCA or the DBA is
whether the activity is undertaken as
part of a construction project prior to its
completion. For example, the DBA
applies if cleanup, landscaping, carpet
laying, and drapery installation
activities are undertaken as an integral
part of or in conjunction with new
construction, such as under a
construction contract under which such
activities preceded and are conditional
to acceptance of a building or public
work by the owner. The SCA, however,
applies if the same activities are
performed after construction and after
contractors and subcontractors have
finished and left the site, and after the
contracting agency has accepted the
building.
The Proposed Regulations would have
distilled the guidance in 29 CFR 5.2 and
the guidance in the DOL PWRB 32 to
provide that work designed to maintain
and preserve functionality of a facility
after it is placed in service would not be
subject to the Prevailing Wage
Requirements. Work designed to
maintain and preserve functionality of a
facility after it is placed in service
would have included basic maintenance
such as regular inspections of the
facility, regular cleaning and janitorial
work, replacing materials with limited
lifespans such as filters and light bulbs,
and the calibration of any equipment.
However, paying prevailing wages
32 The Proposed Regulations relied on a prior
version of the PWRB. These final regulations reflect
updates to the PWRB made in April of 2024.

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would be required for work that
improves a facility, adapts it for a
different use, or restores functionality as
a result of inoperability.
The Treasury Department and the IRS
agree that additional clarification on the
distinction between alteration and
repair work and maintenance work is
needed. Accordingly, the final
regulations revise the Proposed
Regulations to more closely align with
29 CFR 5.2 and DOL sub-regulatory
guidance in the PWRB.
Specifically, the final regulations
provide that maintenance work is work
that is routinely scheduled and
continuous or recurring. The final
regulations explain that maintenance
normally involves the activity of
keeping the facility in its current
condition so that it may continue to be
used. The final regulations include
additional clarifying criteria that repair
work normally includes an activity that:
(i) improves the facility, either by fixing
something that is not functioning
properly or by improving upon the
facility’s existing condition; (ii) involves
the correction of individual problems or
defects as separate and segregable
incidents and is not continuous or
recurring; or (iii) improves the facility’s
structural strength, stability, safety,
capacity, efficiency, or usefulness. The
final regulations retain the proposed
rule that maintenance work that occurs
before the qualified facility is placed in
service generally constitutes
construction work for which wages at
rates not less than the prevailing rates
must be paid.
As stated by many commenters, and
several administrative decisions
involving the application of the DBA or
the SCA,33 the determination of whether
work is properly viewed as maintenance
or as an alteration or repair is dependent
on the specific facts and circumstances
of the work. The final regulations clarify
that the facts and circumstances are
ultimately determinative.
33 See Norsaire Systems Inc., WAB Case No. 94–
06, 1995 WL 90009 (Feb. 28, 1995) (explaining that
the distinction between covered construction work
and non-covered service and maintenance work
depended on using a number of nondeterminative
factors to closely examine actual work performed);
see also ITT Base Services, Inc., B–220518.2 (Nov.
10, 1986) (noting that distinguishing between
construction and maintenance activities may be
difficult, and some repair activities could
reasonably be categorized as either Davis-Bacon Act
or Service Contract Act repair work depending
upon the context in which they are performed);
Four Star Maintenance, B–229703 (Apr. 7, 1988)
(noting that the determination of whether items of
work involve basic maintenance within the
coverage of the Service Contract Act, or are more
in the nature of construction, alteration, or repair
within the scope of the Davis–Bacon Act, is largely
a matter of judgment).

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Because of the highly factual nature of
the determination regarding whether an
activity is maintenance or alteration or
repair work, the final regulations do not
adopt suggestions to include additional
examples distinguishing between
maintenance and alteration or repair.
Additionally, the example in proposed
§ 1.45–7(d)(2)(ii) has been removed.
Providing industry-by-industry
examples is not practicable and may
imply an inconsistent application of the
general rule. As stated in the comments,
for example, the proposed example was
not indicative of ordinary practices in
the solar industry. The Treasury
Department and the IRS understand that
taxpayers may encounter difficulties in
distinguishing maintenance from
alterations or repairs; however, the
additional information contained in the
final regulations provides taxpayers
with sufficient guidance to help
differentiate their activities based on the
taxpayer’s relevant facts and
circumstances. Additionally, the
Treasury Department and the IRS
decline, at this time, to provide a de
minimis threshold or safe harbor
distinguishing between maintenance
work and alteration or repair work.
D. Correction and Penalty Procedures
1. In General
Section 45(b)(7)(B)(i) provides that if
a taxpayer fails to satisfy the Prevailing
Wage requirements, the taxpayer ‘‘shall
be deemed to have satisfied such
requirement under such subparagraph
with respect to such facility for any year
if, with respect to any laborer or
mechanic who was paid wages at a rate
below the [prevailing rate] for any
period during such year,’’ the taxpayer
makes the applicable correction
payments and pays the penalty. Under
section 45(b)(7)(B)(i)(II), the amount of
the penalty is $5,000 multiplied by the
total number of laborers and mechanics
who were paid wages at a rate below the
required prevailing rates. Section
45(b)(7)(B)(iii) provides that if the
failure to ensure that the laborers and
mechanics are paid wages at rates not
less than the prevailing rates is found to
be due to intentional disregard, then the
amount of the correction payment is
tripled and the amount of the penalty
payment is doubled.
The Proposed Regulations would have
required the payment of wages at rates
not less than the prevailing wage rates
at the time work is performed with
respect to the construction, alteration, or
repair of a facility in order to claim the
increased credit amount. The Proposed
Regulations would have also provided
that the requirement to pay not less than

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the prevailing wage rates becomes
binding only if the increased credit
amount is claimed on a return, and that
the obligation to make correction
payments and pay the penalty would
not become binding until a return is
filed claiming the increased credit
amount.
The preamble to the Proposed
Regulations stated that, in general,
taxpayers would be obligated to make
any necessary correction payments to
any laborer and mechanic on or before
the date a return is filed claiming an
increased credit amount. Under the
Proposed Regulations, the earliest time
that a taxpayer can make a penalty
payment to the IRS would have been at
the time of filing a tax return claiming
the increased credit amount. However,
taxpayers would retain the option of
making correction payments to laborers
and mechanics at any time after the
initial wage payments were made and in
advance of the filing of a tax return
claiming the increased credit amount in
order to limit the amount of additional
interest the taxpayer would have to pay
at the elevated rates set forth in section
45(b)(7)(B)(i)(I)(bb). The Proposed
Regulations would have provided that
whether taxpayers make the necessary
correction payments and pay the
penalty amounts promptly is one of the
facts and circumstances that would be
considered for purposes of the enhanced
penalties for intentional disregard.
Under section 45(b)(7)(B)(iv), once the
IRS makes a final determination that a
taxpayer has failed to satisfy the
Prevailing Wage Requirements, the
taxpayer must make the correction and
penalty payments within 180 days after
the final determination to be eligible for
the increased credit. The Proposed
Regulations would have also provided a
deadline for a taxpayer’s ability to use
the correction and penalty provisions to
rectify a failure to comply with the
Prevailing Wage Requirements once the
IRS makes a final determination that a
taxpayer has failed to satisfy the
Prevailing Wage Requirements. The
Proposed Regulations would have
clarified that this final determination
would come in the form of a notice sent
by the IRS.
One commenter argued that it is
inequitable to permit taxpayers to
receive the benefit of increased credit
amounts before workers received their
rightful compensation. The commenter
stated that the penalty and cure
provisions allow corrections after the
filing of a tax return, when the credit is
already claimed. The commenter
suggested that the final regulations
require correction no later than the
earlier of the tax return filing or when

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the taxpayer receives an economic
benefit. Another commenter
recommended that corrective payments
be required to be paid within 90 days
following the year in which the original
compensation should have been paid.
One commenter suggested that if the
taxpayer’s failure to pay prevailing
wages was unintentional, the taxpayer
should be given 90 days to make
correction and penalty payments, but if
the taxpayer acted intentionally then the
taxpayer should be given 30 days to pay
the penalty and two weeks to make
correction payments. An additional
commenter suggested extending the
cure period to permit taxpayers to cure
further mistakes once they become
known.
The comments requesting changes to
the timing of correction and penalty
payments are not adopted. The
prevailing wage provisions generally
require compliance with the payment of
applicable prevailing wage rates at the
time work is performed. The final
regulations reiterate the position in the
Proposed Regulations that the correction
and penalty provisions relate back to the
time of the failure. For example, the
final regulations provide that interest
accrues on back wages to the time of the
failure to pay wages at rates not less
than the applicable prevailing rates.
However, section 45(b)(7)(B)(iv) permits
taxpayers to make correction and
penalty payments up to 180 days after
a final determination and remain
eligible for the increased credit amount.
These final regulations encourage the
taxpayer to make correction payments
sooner by waiving the penalty payment
requirement if the taxpayer makes the
required correction payment in a timely
manner and meets additional
requirements. Further, taxpayers may
avoid some of the challenges in making
correction payments, such as locating
former employees, by addressing any
failures immediately after discovering
them.
Consistent with section 45(b)(7)(B)(ii),
the Proposed Regulations would have
provided that deficiency procedures do
not apply to the assessment or
collection of any penalty payment
required to be made in connection with
a failure to meet the Prevailing Wage
Requirements. The Proposed
Regulations would have clarified that
although deficiency procedures would
not apply to the penalty payment,
deficiency procedures would apply to
any determination by the IRS
disallowing a taxpayer’s claim for the
increased credit amount (for example,
because of a failure to pay prevailing
wages and the correction and penalty
amounts). Under the Proposed

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53217

Regulations, if the taxpayer does not
correct, and therefore is not
subsequently granted the increased
credit amount, no penalty would have
been assessed under section 45(b)(7)(B).
Commenters requested that the final
regulations provide guidance regarding
a taxpayer’s ability to contest an IRS
determination that a taxpayer failed to
pay prevailing wages. Commenters
suggested that deficiency procedures be
made available to challenge correction
payment amounts due to laborers and
mechanics once a final determination is
made. A commenter suggested that
taxpayers be provided a forum to
expeditiously resolve any disputes
regarding disallowed credits and all
appeals of IRS determinations before
such decisions become final.
Commenters stated that, other than a
failure to make the required correction
and penalty payments, the Proposed
Regulations do not specify under what
circumstances there would be a
determination by the IRS disallowing a
claim for the increased credit amount.
The deficiency procedures are
statutorily precluded and providing
taxpayers prepayment forums to resolve
disputes would cause unreasonable
delays to workers who were entitled to
correction payments from receiving the
full amount of underpaid wages.
Additionally, the statutory 180-day
period taxpayers are allowed to cure a
failure after receiving a final
determination does not toll the general
three-year statute of limitations for
assessment under section 6501. Thus,
the final regulations do not provide any
additional forum for taxpayers to
challenge an IRS determination.
However, if a taxpayer refuses to make
correction and penalty payments, the
increased credit amount will be
disallowed. Any disallowance of a
credit, including disallowance of
increased credit amounts, would be
subject to deficiency procedures
(including the opportunity to seek
review by the IRS Independent Office of
Appeals) and a taxpayer would be able
to petition the U.S. Tax Court to review
the underlying deficiency determination
on a de novo basis.
A commenter appreciated the
Treasury Department and the IRS’s
consideration of waivers for penalties
and provisions for curing wage
deficiencies but recommended that the
taxpayer be given the opportunity to
review and cure mistakes. The
commenter explained that due to the
complexity of the PWA requirements,
the logistics of projects, and the
management of people, there will be
instances in which the taxpayer will not
meet all of the PWA requirements

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perfectly. The Treasury Department and
the IRS agree and have provided for a
limited penalty waiver to address such
circumstances as discussed in Section
VII.D.4. of this Summary of Comments
and Explanation of Revisions.
One commenter stated that a failure to
maintain records by one or more
subcontractors or a subsequent
determination by the IRS that additional
work, additional laborers or mechanics,
or secondary construction sites are
covered by the PWA requirements may
create a circumstance in which the
curative payment cannot be calculated
because of the absence of records. The
commenter suggested that the taxpayer
not be disallowed the increased credit
amount under such circumstances if the
taxpayer is willing to make a curative
payment based on a reasonable estimate
of the wages that should have been paid.
Commenters also suggested that the
final regulations waive penalties and the
requirement to make correction
payments if the taxpayer hires a thirdparty reviewer, such as a certified
public accountant, to review payroll
records for compliance with the
Prevailing Wage Requirements.
Permitting taxpayers to rely on a
third-party reviewer to demonstrate
compliance is inconsistent with the
statutory requirement that the taxpayer
ensure that laborers and mechanics are
paid prevailing wages. Maintaining
adequate records is the taxpayer’s
responsibility under section 6001 as
explained in Section X.A. of this
Summary of Comments and Explanation
of Revisions. A failure to maintain
adequate records, even those of lower
tier subcontractors, does not excuse
taxpayers from their obligations to
comply with the PWA requirements.
One commenter requested that the
final regulations provide that corrective
payments are neither taxable income to
the workers nor deductible by the
payors. The commenter stated that
taxing corrective payments is unfair to
the workers and argued that a taxpayer
or transferee who receives the benefit of
the tax credits should not be able to
‘‘double dip’’ and take a tax deduction
for the payment of the penalty or the
increased corrective payments. The
determination of whether correction
payments are taxable to a laborer or
mechanic or deductible by the payor is
governed by Federal tax law that is
outside the scope of these final
regulations.
Commenters stated that the preamble
to the Proposed Regulations explained
that the regulations would adopt, by
cross-reference, the review and appeal
procedures available to any interested
party under the DBA with respect to

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wage determinations generally.
Commenters explained that a DBA
determination can be appealed to the
DOL, a process that could take longer
than the 180-day cure period under
section 45(b)(7)(B)(iv). Commenters also
sought clarification that the 180-day
cure period would be tolled until a
taxpayer has exhausted the appellate
remedies with the DOL. From a
practical standpoint, the commenter
emphasized that once wages are paid it
would be harmful to both employees
and employers to attempt to claw back
such payments if there is a subsequent
determination by the DOL that results in
the correction and penalty payments not
being owed.
The final regulations do not adopt this
comment to provide for tolling of the
180-day cure period if a wage
determination has been appealed to the
DOL. With respect to the commenter’s
comparison to the review and appeal
procedures for wage determinations,
that process is distinct from the 180-day
period after an IRS determination
during which a taxpayer may make
correction and penalty payments to be
deemed to have complied with the
Prevailing Wage Requirements. The
review and appeal procedures available
to a taxpayer under the Proposed
Regulations regarding wage
determinations are with respect to the
DOL’s determination of an applicable
prevailing wage rate. The IRS’s
determination of a failure to pay
prevailing wage rates triggering the 180day cure period is not subject to appeal,
and thus not subject to tolling. Section
45(b)(7)(B)(ii) provides that the
deficiency procedures for income,
estate, gift, and certain excise taxes do
not apply with respect to the assessment
or collection of any penalty imposed by
section 45(b)(7)(B). A taxpayer would,
however, be able to appeal any
disallowance of the increased credit
amount after the expiration of the 180day cure period.
Regarding the commenter’s practical
concern, if a taxpayer believes that the
IRS incorrectly issued a final
determination that the taxpayer failed to
pay prevailing wages, then the taxpayer
may decline to make correction and
penalty payments and wait to petition
an IRS deficiency determination to the
U.S. Tax Court following the end of the
180-day cure period. Alternatively, after
the IRS issues a final determination, the
taxpayer could make correction and
penalty payments and remain eligible
for the increased credit amount. The
taxpayer in this scenario would retain
the ability to seek a refund of the
penalty payments paid to the IRS.

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One commenter observed that the cost
of penalties is steep, given the reliance
that most taxpayers will have to place
on contractors and subcontractors to
comply with the PWA requirements.
The Treasury Department and the IRS
recognize that taxpayers will have to
oversee and rely on contractors and
subcontractors to comply with the PWA
requirements. However, the statutory
text of the IRA puts the responsibility
on the taxpayer to ensure that
contractors and subcontractors comply
with the PWA requirements, including
section 45(b)(7)(B)(i)(ll), which
prescribes the amount of penalty
payment. Through the factors
considered for purposes of intentional
disregard, these regulations create a
framework that encourages taxpayer
practices, such as quarterly compliance
reviews and flow-down contract
provisions, that will assist taxpayers in
complying with the Prevailing Wage
Requirements. Further, these regulations
reflect the Treasury Department’s and
the IRS’s waiver authority with respect
to the penalty if the failures were small
in amount or occurred in a limited
number of pay periods.
Additionally, a commenter requested
that, specifically for the initial years
following the application of the PWA
requirements to the section 45Z credit,
taxpayers be exempted from penalties if
they make correction payments. The
commenter stated that any
noncompliance during initial years will
more likely be a result of inexperience
than intentional disregard. The Treasury
Department and the IRS understand
commenters’ concerns regarding how
the correction and penalty procedures
affect each relevant industry or
taxpayers claiming the increased
amount of credit. A transition rule is
provided for section 45Z, described in
Section IX.G. of this Summary of
Comments and Explanation of
Revisions. The penalty waiver for
inadvertent errors is described in
Section VII.D.4. of this Summary of
Comments and Explanation of
Revisions.
2. Laborers or Mechanics Who Cannot
Be Located
Under section 45(b)(7)(B)(i), a
taxpayer is deemed to satisfy the
Prevailing Wage Requirements if, with
respect to any laborer or mechanic who
was paid wages at rates less than the
prevailing rates for any period during
that year, the taxpayer makes a
correction payment to the affected
laborer or mechanic and the required
penalty payment to the IRS. Section
45(b)(7)(B)(i) does not except taxpayers
from the requirement to make the

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correction payment, even if the taxpayer
is unable to locate the laborer or
mechanic.
The preamble to the Proposed
Regulations explained that the Treasury
Department and the IRS expect that
taxpayers will be able to establish
having made correction payments even
if a former laborer or mechanic cannot
be located and provided examples of
how such payments could be made,
such as compliance with State
unclaimed property rules and
withholding and information reporting
obligations as means of substantiating
the payments. The Treasury Department
and the IRS requested comments
concerning appropriate rules for
situations in which laborers and
mechanics who are owed wages cannot
be located and how taxpayers may
establish that they have made the
required correction payment described
in section 45(b)(7)(B)(i)(I).
A few commenters suggested that the
final regulations provide additional
guidance regarding situations in which
correction payments are due to affected
laborers or mechanics who cannot be
located. A commenter suggested the
formalization of specific procedures by
the Treasury Department for such
circumstances and asked the Treasury
Department to solicit further comments
from stakeholders on this issue. One
commenter suggested requiring the
taxpayer to send the corrective payment
amount to the State where the missing
worker performed the work along with
payroll information validating the
payment amount, and records of
attempts by the taxpayer to reach the
former laborer or mechanic. One
commenter stated that the final
regulations should not rely on State
unclaimed property laws. A commenter
stated that State unclaimed property
laws may impose additional burdens
and complexities on taxpayers (such as
requirements that due diligence efforts
be undertaken by a holder of unclaimed
property to find the rightful owner of
such property before the property can be
delivered to the State). Other
commenters asked that the final
regulations provide that a payment
made to a State pursuant to the State’s
unclaimed property rules be deemed to
satisfy the correction payment
requirement for purposes of section
45(b)(7)(B)(i)(I).
The Treasury Department and the IRS
recognize that the construction of a
qualified facility may occur over the
course of several years and some
taxpayers who fail to meet the
Prevailing Wage Requirements may be
unable to locate all laborers and
mechanics to which correction

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payments must be made. However,
section 45(b)(7)(B)(i) does not excuse
taxpayers from the requirement to make
the correction payment, even if the
taxpayer is unable to locate the laborer
or mechanic. Unless another exception
applies, if a taxpayer fails to make and
substantiate all necessary correction
payments, the taxpayer will not be
eligible for the increased credit amount.
Although the statute and final
regulations permit corrections,
contemporaneous compliance with the
Prevailing Wage Requirements will
likely be easier for taxpayers to
administer and substantiate, because
locating workers after a project has
ended may be difficult and time
consuming. The final regulations
confirm that a taxpayer is not excused
from the requirement to make the
correction payment even if the taxpayer
is unable to locate a laborer or
mechanic.
As provided for under the Proposed
Regulations, the Treasury Department
and the IRS continue to expect that
taxpayers will be able to substantiate
having made all necessary correction
payments even if a former laborer or
mechanic cannot be located. In general,
States have developed specific rules for
the payment of wages to former laborers
and mechanics who cannot be located.
These rules can include diligence
requirements to locate the laborer or
mechanic, information reporting
obligations to relevant State agencies on
the unclaimed wage amounts, and
requirements to remit any unclaimed
wage amounts to State control as
unclaimed property after defined
holding periods. A taxpayer will be
deemed to have paid a correction
payment to a laborer or mechanic who
cannot be located if the taxpayer can
establish that correction payments have
been made. A taxpayer may establish
that correction payments have been
made by demonstrating compliance
with the applicable State unclaimed
property law and all Federal and State
withholding and information reporting
requirements with respect to the
payments.
3. Intentional Disregard
Section 45(b)(7)(B)(iii) provides that if
the failure to ensure that the laborers
and mechanics are paid wages at rates
not less than the applicable prevailing
wage rates is found to be due to
intentional disregard, then the amount
of the correction payment is tripled and
the amount of the penalty payment is
doubled. The Proposed Regulations
would have provided that failures to
meet the Prevailing Wage Requirements
would be due to intentional disregard if

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53219

they are knowing or willful, which is a
determination that must be made by
considering all relevant facts and
circumstances. The Proposed
Regulations would have provided a nonexhaustive list of factors that may be
relevant to this determination.
Proposed § 1.45–7(c)(3)(iii) provided
that the relevant facts and
circumstances in weighing intentional
disregard would include whether a
failure to satisfy the Prevailing Wage
Requirements was part of a pattern of
conduct that includes repeated or
systemic failures to ensure that the
laborers and mechanics were paid
wages at or above the applicable
prevailing wage rate and whether the
taxpayer: (i) failed to take steps to
determine the applicable classifications
of laborers and mechanics; (ii) failed to
take steps to determine the applicable
prevailing wage rate(s) for laborers and
mechanics; (iii) promptly cured any
failures to ensure that laborers and
mechanics were paid wages not less
than the applicable prevailing rates; (iv)
has been required to make a penalty
payment in previous years; (v)
undertook a quarterly, or more frequent,
review of wages paid to mechanics and
laborers to ensure that wages not less
than the applicable prevailing wage rate
were paid; (vi) included provisions in
any contracts entered into with
contractors that required the contractors
and any subcontractors retained by the
contractors to pay laborers and
mechanics at or above the prevailing
wage rates and maintain records to
ensure the taxpayer’s compliance with
the recordkeeping requirements; (vii)
posted in a prominent place at the
facility or otherwise provided written
notice to laborers and mechanics during
the construction, alteration, or repair of
the facility: (a) of the applicable wage
rate(s) as determined by the DOL for all
classifications of work to be performed
for the construction, alteration, or repair
of the facility, and (b) that in order to
be eligible to claim certain tax benefits,
employers must ensure that laborers and
mechanics are paid wages at rates not
less than such wage rates; and (viii) had
in place procedures whereby laborers
and mechanics could report suspected
failures to pay prevailing wages and/or
suspected failures to classify workers in
accordance with the wage determination
of workers to appropriate personnel
departments or managers without
retaliation or adverse action. The
Treasury Department and the IRS
requested comments on additional
criteria that might be used as part of a
facts and circumstances analysis of
intentional disregard in this context.

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Many commenters generally
expressed support for enhanced
penalties for intentional failures to
comply with the PWA requirements and
the factors that would be considered in
the Proposed Regulations. One
commenter suggested that the Treasury
Department and the IRS engage in
outreach to educate taxpayers about
distinguishing between intentional and
unintentional violations of the PWA
requirements. Some commenters
recommended that the final regulations
provide an inclusive and exhaustive list
of practices for taxpayers to follow in
order to show they acted with proper
diligence and in good faith in trying to
meet the PWA requirements. The final
regulations do not incorporate this
suggestion. Although the final
regulations provide a detailed list of
factors for determining intentional
disregard, the list remains nonexhaustive. There may be additional
factors that the IRS will consider based
on the specific facts and circumstances
of the failure. These final regulations
provide guidance to taxpayers about the
application of the PWA requirements to
assist with compliance, including the
numerous factors that the IRS will
consider in determining whether
failures to comply were the result of
intentional disregard.
Commenters had the following
suggestions for additional factors or
modifications to the proposed factors.
Several commenters suggested that the
final regulations include intentional
disregard factors relating to pre-filing
activities that are not applicable to
taxpayers claiming the increased credit
amount (for example, whether a
taxpayer regularly submitted certified
weekly payroll records to the IRS or
publicly declared the intent to claim the
credit). Because those underlying prefiling activities are not applicable, the
comments suggesting factors relating to
those specific actions are not included
as factors demonstrating intentional
disregard. However, several other
commenters suggested additional factors
or modifications to the proposed factors
relating to other pre-filing activities, that
while not required, could be relevant to
a determination of intentional disregard.
Specifically, with respect to the
factors in proposed § 1.45–7(c)(3)(iii)(A)
through (C) commenters suggested that
the final regulations clarify what would
constitute a pattern of conduct and a
failure to take steps to determine
applicable classifications and wage
rates. One commenter suggested that a
taxpayer’s pattern of conduct include
the taxpayer’s conduct on non-IRA
projects and violations unrelated to
prevailing wage rules (including

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violations under DBA). Another
commenter recommended that the final
regulations consider the taxpayer’s
history of violations of any Federal,
State, or local laws. The Treasury
Department and the IRS agree that some
additional clarification would be
helpful for taxpayers and the IRS. The
final regulations clarify that taking steps
to determine applicable classifications
and wage rates could include a quarterly
or more frequent review of these actions
by the taxpayer (or a third party acting
on behalf of the taxpayer). The final
regulations retain the factor describing a
pattern of conduct and clarify that the
pattern of conduct could include
failures to pay prevailing wages as
required under other laws. The final
regulations do not specifically include
all possible violations of law; although
certain violations may be relevant
depending on the facts and
circumstances. What constitutes a
pattern will depend on the facts and
circumstances.
Commenters also suggested
modifications to the factors in proposed
§ 1.45–7(c)(3)(iii)(H) and (I).
Specifically, commenters stated that
proof, via signatures of laborers and
mechanics, that covered employees
have been given notice of the taxpayer’s
intent to pay prevailing wages should be
a factor. The final regulations retain the
factor from the Proposed Regulations
regarding written notice to laborers and
mechanics. However, this factor relates
to the notice that in order to claim
certain tax benefits, employers must
ensure that laborers and mechanics are
paid wages at rates not less than
prevailing wage rates. It does not
consider whether a taxpayer disclosed
their intent to claim a tax benefit. In
response to the comment, the final
regulations further clarify that
acknowledgement of the notice by the
laborer or mechanic is an additional
factor.
Commenters also suggested that the
poster or notice to employees described
in proposed § 1.45–7(c)(3)(iii)(H)
include instructions on how laborers
and mechanics may contact the
taxpayers’ personnel departments or
taxpayers’ managers to report suspected
failures to pay prevailing wages and/or
suspected failures to classify workers
without retaliation or adverse action.
The final regulations include this
additional information. At least one
commenter suggested that the factor in
proposed § 1.45–7(c)(3)(iii)(I) regarding
whether a taxpayer had in place a
procedure to report suspected failures to
pay prevailing wages without retaliation
or adverse action be expanded to
include employment tax violations or

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workplace standards laws. The
commenter also suggested the factor be
revised to also require that no actual
retaliation or adverse action occurred.
The final regulations incorporate the
comments regarding employment tax
and workplace standards violations. The
final regulations also consider whether
the taxpayer investigated complaints
and took appropriate action.
A commenter suggested adding a
factor addressing the use of debarred
contractors. The commenter stated that
contractors who are debarred from
working on publicly funded projects for
serious violations of DBA prevailing
wage requirements are more likely to
violate the Prevailing Wage
Requirements on IRA projects. The
Treasury Department and the IRS agree
that knowingly contracting with
debarred contractors could be a factor
demonstrating intentional disregard.
The final regulations reflect this
comment.
Several commenters made general
suggestions that the intentional
disregard factors should be strengthened
to encourage behaviors that will help
ensure that laborers and mechanics
working on projects for which an
increased credit amount may be claimed
are paid prevailing wages. As stated
elsewhere in this preamble, the
Treasury Department and the IRS agree
that adding factors to encourage certain
practices will further compliance with
the Prevailing Wage Requirements.
Accordingly, the final regulations add
new factors that consider whether the
taxpayer has: (i) provided or otherwise
made available to laborers and
mechanics paystubs or other individual
payroll records reflecting the amount
being paid per pay period (including the
specific hourly rate and any deductions
from wages); (ii) conducted
investigations or otherwise reviewed
complaints of retaliation or adverse
actions against workers for reporting the
underpayment of wages and took
appropriate corrective action; (iii)
provided notice regarding possible
rights under the Taxpayer First Act; and
(iv) whether the taxpayer failed to
maintain and preserve records in
accordance with § 1.45–12.
Some commenters stated that
considering all relevant facts and
circumstances in determining whether a
failure to comply with the PWA
requirements was intentional would be
burdensome to taxpayers who would
have to investigate their contractors and
subcontractors about possible failures.
One commenter suggested that
additional guidance consider the
degrees of separation between
contractual parties responsible for

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fulfilling the PWA requirements. The
final regulations do not incorporate this
suggestion. Under section 45(b)(7)(A),
the taxpayer must ensure that any
laborers and mechanics employed by
the taxpayer, contractor, or
subcontractor are paid wages at rates not
less than the prevailing rates. If the
taxpayer fails to do so, and that failure
is due to intentional disregard, the
enhanced correction and penalty
payments apply. It is the obligation of
the taxpayer to ensure that its
contractors and subcontractors pay
wages at rates not less than the
applicable prevailing wage rates if the
taxpayer claims the increased credit
amount, regardless of the number of
contracts separating the taxpayer and
the subcontractor. This responsibility of
the taxpayer is one reason why the final
regulations include factors that help
demonstrate whether a taxpayer’s
failure was due to intentional disregard.
One commenter requested that
intentional disregard penalties be solely
limited to those taxpayers who admit to
intentionally failing to pay prevailing
wages. The final regulations do not
adopt this suggestion, as the statute does
not limit the application of intentional
disregard penalties to only those who
admit to intentionally failing to pay
prevailing wages.
The Proposed Regulations would have
also provided a rebuttable presumption
against a finding of intentional disregard
if the taxpayer made the correction and
penalty payments before receiving a
notice of an examination with respect to
a return that claimed the underlying
increased amount of credit. This
presumption of no intentional disregard
is intended to encourage taxpayers who
discover a failure to meet the Prevailing
Wage Requirements after filing a return
to promptly use the correction and
penalty procedures to remedy that
failure.
Some commenters supported the
rebuttable presumption against
intentional disregard and agreed that it
would encourage taxpayers to make
timely curative payments. Other
commenters were critical of the
presumption and suggested that it might
encourage taxpayers to avoid promptly
curing failures or allow taxpayers who
knowingly or willfully violate the PWA
requirements to avoid penalties. A few
commenters suggested that the final
regulations modify the presumption to
apply only if the taxpayer makes the
required correction and penalty
payments before: (i) the earlier of the
filing of the tax return claiming the
credit or one year after discovering the
failure, or (ii) the earlier of receiving

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notice of an examination from the IRS
or one year after discovering the failure.
The final regulations adopt the
rebuttable presumption of no
intentional disregard as proposed. The
Treasury Department and the IRS
appreciate the concerns of commenters.
However, the presumption of no
intentional disregard as proposed
provides a valuable incentive to
encourage taxpayers to regularly review
and confirm that they are complying
with the PWA requirements.
Additionally, the rebuttable
presumption requires all correction
payments (including correction
payments if a former laborer or
mechanic cannot be located as
described in Section VII.D.2. of this
Summary of Comments and Explanation
of Revisions) and penalty amounts be
paid before the taxpayer receives a
notice of examination. If the taxpayer
does not correct the failure to ensure
that prevailing wages are paid (either as
a precursor to the application of the
rebuttable presumption or otherwise in
response to an IRS determination of a
failure), the taxpayer is not eligible for
the increased credit amount. Taxpayers
are encouraged to regularly review
payroll records to ensure that workers
are paid prevailing wages. Conducting
reviews and curing discovered failures
to pay prevailing wages several years
after payments were made may be
difficult, particularly if multiple
contractors and subcontractors were
involved in the project.
A few commenters suggested
including a presumption of intentional
disregard if a labor union or other
worker representative reaches out to a
taxpayer, project developer, or
contractor and raises concerns about the
PWA requirements and the project
developer or taxpayer chooses to move
forward without making any changes
regardless of the concern that was
raised. Commenters also suggested
finding that taxpayers acted with
intentional disregard if they did not
diligently investigate their contractor
and subcontractor practices. For the
reasons noted herein regarding the
factors for intentional disregard, the
suggestions to include a new
presumption of intentional disregard are
not adopted. The final regulations retain
the approach of providing factors that
will be considered in determining
whether a failure was due to intentional
disregard based on all relevant facts and
circumstances.
4. Penalty Waiver
In general, the IRS may exercise its
discretion to waive or decline to assert
penalties in the interest of sound tax

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53221

administration. The Proposed
Regulations would have provided
limited penalty waivers for instances in
which the failures to pay prevailing
wages to laborers and mechanics for the
construction, alteration, or repair of a
facility were small in amount or
occurred in a limited number of pay
periods. The Proposed Regulations
would have also provided that the
penalty waiver cannot be used after a
return has been filed claiming the
increased credit amount. Finally, the
Proposed Regulations would have
applied the waiver authority in a
manner that assists taxpayers seeking to
be eligible for the increased credit
amount while remaining consistent with
the statutory requirement to ensure that
laborers and mechanics are paid
applicable prevailing wage rates. As
noted in the preamble to the Proposed
Regulations, the Treasury Department
and the IRS understand that taxpayers
intending to pay prevailing wage rates
may make payroll errors or
classification errors with respect to
work that is performed by laborers or
mechanics. The Proposed Regulations
sought to account for these
circumstances while continuing to
ensure that laborers and mechanics are
paid according to the applicable
prevailing wage rates.
Proposed § 1.45–7(c)(6)(i) provided
that the penalty payment requirement
would be waived with respect to the
construction, alteration, or repair
performed by a laborer or mechanic
during a calendar year if: (i) the
taxpayer makes the required correction
payment (back wages and interest) by
the earlier of: (a) 30 days after the
taxpayer became aware of the error, or
(b) the date on which the tax return
claiming the increased credit amount is
filed; and (ii) either: (a) the laborer or
mechanic is paid below the prevailing
wage rate for not more than 10 percent
of all pay periods of the calendar year
(or part thereof) during which the
laborer or mechanic worked on the
construction, alteration, or repair of the
facility, or (b) the difference between the
amount the laborer or mechanic was
paid for the calendar year (or part
thereof) during which the laborer or
mechanic worked on the construction,
alteration, or repair of the facility and
the amount required to be paid by the
Prevailing Wage Requirements for the
calendar year is not greater than 2.5
percent of the amount required under
the Prevailing Wage Requirements. The
Proposed Regulations would have used
calendar years to measure any failures
because taxpayers, contractors, and
subcontractors performing construction

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may have different taxable years and
laborers and mechanics are generally
paid on a calendar year basis. The
Treasury Department and the IRS
requested comments on the proposed
use of calendar years in place of taxable
years for this purpose.
Many commenters were supportive of
the penalty waiver, but they provided
practical concerns with the 30-day
correction period and the maximum
underpayment period and amount due
to the short-term nature of some
construction work, as well as the
logistical difficulties involving multiple
payroll periods and/or payroll
processors used by different contractors
and subcontractors. Commenters
suggested increasing both the correction
period and maximum underpayment
period and amount to provide more
time to account for these practical
difficulties. Some commenters
suggested increasing the correction
period to 60 or 90 days. Others
suggested raising the maximum
underpayment period to the greater of
three pay periods or 20 percent of all
pay periods in a calendar year, and the
maximum underpayment amount to the
greater of $5,000 or five percent of all
amounts required to be paid in a
calendar year. Another commenter
suggested removing the maximum
underpayment amounts entirely. At
least one commenter supported
finalizing the rule as is in the Proposed
Regulations, because it is sufficient to
address de minimis payroll errors. A
few commenters suggested that the
waiver should not be available to a
taxpayer who did not provide their
workers notice of their wage rate,
maintained poor records, exercised no
contemporaneous monitoring or due
diligence, or retaliated against workers
who complained of not being paid the
prevailing wage. Given the complexity
of the PWA requirements, one
commenter recommended limiting
penalties that apply to businesses with
fewer than 50 employees.
In recognition of the comments that
the proposed correction period is too
short to be useful, the final regulations
revise the proposed penalty waiver to
provide that corrections must be made
by the last day of the first month
following the end of the calendar
quarter in which the failure occurred.
The final regulations clarify that the
correction must be made within the
relevant time period after the failure
occurred, not when the taxpayer
becomes aware of the failure. This
revised correction period is intended to
coincide with the due date for the filing
of Federal employment tax returns. The
Treasury Department and the IRS expect

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that most employers will have
conducted a review of payroll for each
quarter in connection with the filing of
their quarterly employment tax return,
and they should be aware of failures at
this time. This change will result in a
correction period that generally ranges
from one to three months depending on
when the failure occurred.
The final regulations also modify the
proposed waiver provision by
increasing the maximum underpayment
amount to underpayments that do not
exceed five percent of all amounts
required to be paid in a calendar year.
The final regulations retain the
maximum underpayment period as
proposed to reflect the intent that this
waiver provision apply only to minor
errors that occur infrequently. The
change to the correction period provides
additional time, more certainty, and
aligns with filing of the majority of
employment tax returns. This change
also removes the knowledge
requirement, providing a more
definitive correction period for taxpayer
certainty and aiding IRS administration.
A few commenters indicated support
of the use of calendar years for purposes
of the waiver provision. No commenters
suggested a different time period. Thus,
the final regulations adopt calendar
years as the appropriate period to
measure failures for purposes of the
waiver provisions.
VIII. Apprenticeship Requirements
A. In General
1. Scope
Under section 45(b)(8), in order to
satisfy the Apprenticeship
Requirements, certain requirements
with respect to the construction of any
qualified facility relating to labor hours,
apprentice-to-journeyworker ratios, and
participation by qualified apprentices
must be satisfied. Under section
45(b)(8)(D)(i), a taxpayer is not treated
as failing to satisfy the Apprenticeship
Requirements in section 45(b)(8) if: (i)
the taxpayer satisfies the Good Faith
Effort Exception, or (ii) in the case of
any failure by the taxpayer to satisfy the
Labor Hours Requirement under section
45(b)(8)(A) and the Participation
Requirement under section 45(b)(8)(C),
the taxpayer makes a penalty payment
to the IRS under the Apprenticeship
Cure Provision.
Proposed § 1.45–8(a) generally would
have provided that a taxpayer claiming
or transferring (under section 6418) the
increased credit amount under section
45(b)(6)(B)(iii) with respect to any
qualified facility must satisfy the
requirements of section 45(b)(8) and
proposed § 1.45–8. Proposed § 1.45–

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8(b), (c), and (d) would have provided
the Labor Hours Requirement, the Ratio
Requirement, and the Participation
Requirement, respectively. Proposed
§ 1.45–8(e) would have detailed
exceptions to the Apprenticeship
Requirements, enabling the taxpayer to
be deemed to have satisfied the
Apprenticeship Requirements if the
taxpayer has either made a good faith
effort to meet the Apprenticeship
Requirements as described in proposed
§ 1.45–8(e)(1) or made the penalty
payment provided in proposed § 1.45–
8(e)(2) for any failures to which the
Good Faith Effort Exception does not
apply. Proposed § 1.45–8(f) would have
provided additional definitions
applicable to the Apprenticeship
Requirements.
Section 45(b)(8) imposes the
Apprenticeship Requirements with
respect to the construction of any
qualified facility. As discussed in
Section VI. of this Summary of
Comments and Explanation of
Revisions, the final regulations clarify
that the qualified facility for both the
Prevailing Wage Requirements and the
Apprenticeship Requirements is defined
as a qualified facility under section 45.
Commenters asked whether the
Apprenticeship Requirements applied
to work performed on a qualified facility
after the facility is placed in service.
Commenters asserted that the statutory
text supports limiting the
Apprenticeship Requirements to the
construction of the qualified facility.
Many commenters pointed to the
explicit language in section
45(b)(7)(A)(ii) applying the Prevailing
Wage Requirements to alteration and
repair activities in the 10-year period
after a facility is placed in service, and
they stated that there is no similar
language in section 45(b)(8) applying
the Apprenticeship Requirements to
alteration and repair activities for the
period after a facility is placed in
service. Commenters also pointed out
the impracticality of applying the
Apprenticeship Requirements to
alteration and repair activities after a
facility is placed in service. Commenters
emphasized that repairs to facilities
already in service usually must be made
as quickly as possible. They indicated
that such repairs are often a short-term
project, and requesting, hiring, and
onboarding qualified apprentices
consistent with the Labor Hours
Requirement would cause costly delays.
Commenters stated that during large
power outages and other emergencies,
energy-production facilities are
primarily focused on returning power to
customers in as timely and efficient a
manner as possible.

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While there is some ambiguity in the
statutory text regarding whether the
Apprenticeship Requirements apply to
the alteration or repair of a qualified
facility after it is placed in service, the
more natural reading of section 45(b)(8)
supports the interpretation of the
commenters that the Apprenticeship
Requirements only apply to the
construction of a qualified facility.
Under this reading, alterations and
repairs occurring while a facility is
being constructed would be subject to
the Apprenticeship Requirements, but
those occurring after the facility is
placed in service would not.
Section 45(b)(7) is clear that the
Prevailing Wage Requirements apply to
two distinct periods with respect to the
construction, alteration, or repair of a
qualified facility: (i) construction under
section 45(b)(7)(A)(i); and (ii) alteration
or repair for any portion of a taxable
year that is within the 10-year period
beginning on the date the qualified
facility is placed in service under
section 45(b)(7)(A)(ii). Conversely,
section 45(b)(8) provides requirements
that apply only with respect to the
construction of any qualified facility.
The lack of any explicit language in
section 45(b)(8) with respect to
alterations or repairs during the 10-year
period after a facility is placed in
service, as is seen in section 45(b)(7),
suggests that the Apprenticeship
Requirements do not apply after a
facility is placed in service.
This conclusion is also supported by
the specific language in the
Apprenticeship Requirements. The
applicable percentage under the Labor
Hours Requirement in section
45(b)(8)(A) applies to the total labor
hours of the construction, alteration, or
repair work performed with respect to
construction of the qualified facility.
This language suggests that although
hours spent on alteration and repair
work can be part of the calculation used
to determine whether the Labor Hours
Requirement is satisfied, the
requirement only applies to the
construction of the qualified facility and
not after it is placed in service. Similar
language is used in section 45(b)(8)(C)
in which the Participation Requirement
is limited by the phrase ‘‘with respect to
the construction of the facility.’’
Together, the language of these
provisions suggests that taxpayers,
contractors, and subcontractors may
perform alteration and repair work that
would be subject to the Apprenticeship
Requirements, but that obligation only
applies during construction and not
after the facility is placed in service.
The final regulations have been
amended to confirm that the

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Apprenticeship Requirements apply
only to the construction of the qualified
facility including alteration and repair
work that is performed prior to the
facility being placed in service, and not
to alteration or repair work occurring
after the facility is placed in service.
2. Labor Hours Requirement
Section 45(b)(8)(A)(i) provides that
‘‘[t]axpayers shall ensure that, with
respect to the 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.’’ This rule is referred to as
the Labor Hours Requirement.
For purposes of the Labor Hours
Requirement, section 45(b)(8)(A)(ii)
provides that the applicable percentage
is: (i) 10 percent in the case of a
qualified facility the construction of
which begins before January 1, 2023; (ii)
12.5 percent in the case of a qualified
facility the construction of which begins
after December 31, 2022, and before
January 1, 2024; and (iii) 15 percent in
the case of a qualified facility the
construction of which begins after
December 31, 2023. Section
45(b)(8)(E)(i) provides that the term
‘‘labor hours’’ means 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 excludes 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).
Commenters recommended that the
final regulations clarify that there is no
minimum amount of time that a
qualified apprentice must be registered
or employed in order to count the
qualified apprentice’s work towards the
labor hours requirement. The statute
does not impose a minimum time
period, and the Treasury Department
and the IRS have determined that any
additional requirement would not be in
furtherance of the IRA or in the interest
of sound tax administration. Thus, the
final regulations do not require a
minimum number of hours worked
before labor hours count toward the
total labor hours performed by a
qualified apprentice.
Commenters requested that the final
regulations provide additional guidance
regarding how to calculate the total

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53223

labor hours and the applicable
percentage. Specifically, a few
commenters requested guidance on the
period of time the total labor hours
requirement encompasses and when the
applicable percentage should be
calculated. Similarly, another
commenter asked whether total labor
hours should be calculated on a tradeby-trade basis or by aggregating all
contractors’ labor hours. A commenter
stated that one of the examples in the
Proposed Regulations seemed to imply
that the Labor Hour Requirement apply
to each contractor and subcontractor
involved in the construction, alteration,
or repair of a covered facility, rather
than the aggregate labor hours for the
construction project. One commenter
requested that the final regulations
clarify that the labor hours calculation
does not include hours worked by
contractors with fewer than four
employees. Another commenter asked
whether on-the-job training hours
worked by qualified apprentices at
locations other than the location of the
facility count for purposes of the Labor
Hours Requirement.
Consistent with the statutory language
in section 45(b)(8)(A)(i), the final
regulations clarify that the Labor Hours
Requirement applies to the construction
of a facility, not on a contractor-bycontractor or trade-by-trade basis. The
final regulations further clarify that
taxpayers determine whether the Labor
Hours Requirement has been satisfied
by aggregating all labor hours worked by
laborers and mechanics on the
construction of the facility (including
those hours worked by contractors with
fewer than four employees), from the
beginning of construction through the
time the facility is placed in service and
calculating whether the applicable
percentage of those labor hours was
worked by qualified apprentices.
Accordingly, taxpayers, contractors, and
subcontractors will need to keep track of
labor hours from the beginning of the
construction of the facility until the
project or facility is placed in service.
Additionally, since the statute requires
not less than the applicable percentage
of total labor hours of construction,
alteration, or repair work with respect to
the qualified facility be performed by
qualified apprentices, on-the-job
training hours worked by qualified
apprentices at a location other than the
location of the facility do not count for
purposes of the Labor Hours
Requirement. Training hours of
qualified apprentices at the location of
the facility that involve the performance
of construction, alteration, or repair
work with respect to the qualified

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facility count towards the labor hours
performed by qualified apprentices for
purposes of the Labor Hours
Requirement. The final regulations
provide examples to illustrate these
calculations.
One commenter asked whether the
hours worked by a working foreperson
are included in the total number of labor
hours in calculating the applicable
percentage for purposes of the Labor
Hours Requirement. One commenter
requested guidance on whether a
subcontractor, who only had working
foremen on site to complete a project,
and no qualified apprentices, would be
considered to have worked zero labor
hours and would not be subject to any
penalties. The Proposed Regulations
would have provided that 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 for purposes of the Prevailing
Wage Requirements. As discussed in
Section VII.C.1. of this Summary of
Comments and Explanation of
Revisions, the final regulations retain
this rule. The Proposed Regulations also
would have provided that the hours
worked by forepersons, regardless of
whether they are considered working
forepersons for purposes of the
Prevailing Wage Requirements are
excluded from labor hours for purposes
of the Labor Hours Requirement. The
final regulations also retain this rule.
Commenters suggested that the
regulations clarify whether the Labor
Hours Requirement applies to projects
with three or fewer employees. The
comment seems to be asking whether
the Labor Hours Requirement applies if
the Participation Requirement does not
apply. The two requirements are
separate. Under the Participation
Requirement in section 45(b)(8)(C), 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. There is no similar
minimum threshold in the Labor Hours
Requirement. To satisfy the
Apprenticeship Requirements, a
taxpayer needs to satisfy the Labor
Hours Requirement, the Ratio
Requirement, and the Participation
Requirement. If the Participation
Requirement does not apply, the
taxpayer will still need to satisfy the
Labor Hours Requirement and the Ratio
Requirement.

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Commenters also requested guidance
on the effect of the Good Faith Effort
Exception with respect to the Labor
Hours Requirement. The Proposed
Regulations would have provided that if
a taxpayer, contractor, or subcontractor
qualifies for the Good Faith Effort
Exception, the number of hours that the
qualified apprentices would have
performed had a registered
apprenticeship program supplied those
qualified apprentices, would have
counted towards the number of labor
hours performed by qualified
apprentices. The Proposed Regulations
included an example illustrating the
interaction between the Labor Hours
Requirement and the Good Faith Effort
Exception. The final regulations retain
this rule and example.
Commenters also inquired whether
total labor hours continue to be
aggregated for all work in subsequent
tax years after construction has ended,
or only for those labor hours resulting
from covered alteration or repair work.
Another commenter requested further
examples illustrating the proper
calculation of labor hours for the 10year period beginning on the date the
facility was originally placed in service.
Because the final regulations clarify that
the Apprenticeship Requirements apply
only to the construction (including
alterations and repairs during
construction) of the qualified facility,
and not to alteration or repair work
occurring after the facility is placed in
service, the Labor Hours Requirement
does not apply after the qualified
facility has been placed in service. The
final regulations incorporate additional
examples clarifying this rule.
Another commenter suggested that
the final regulations clarify whether the
hours qualified apprentices are paid as
journeyworkers as a result of failing the
daily Ratio Requirement count towards
the Labor Hours Requirement as
qualified apprentice hours or as
journeyworker hours. Proposed § 1.45–
8(c)(3) would have provided that any
labor hours performed by any qualified
apprentice in excess of the applicable
apprentice-to-journeyworker ratio may
not be counted as hours performed by
qualified apprentices for purpose of the
Labor Hours Requirement. The final
regulations retain this rule and clarify
that these labor hours performed by
qualified apprentices in excess of the
apprentice-to-journeyworker ratio will
count towards the total labor hours but
will not count as hours performed by
qualified apprentices for the purposes of
calculating the applicable percentage.
A commenter requested additional
examples addressing work performed in
years after the initial year of

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construction. The final regulations
address this comment by providing an
example illustrating the calculation of
the Labor Hours Requirement after the
initial year of construction.
3. Ratio Requirement
Under section 45(b)(8)(B), the Labor
Hours Requirement is subject to any
applicable requirements for apprenticeto-journeyworker ratios of the DOL or
the applicable State apprenticeship
agency. Under 29 CFR part 29,
registered apprenticeship programs
prescribe a numeric ratio of apprentices
to journeyworkers in their standards of
apprenticeship.34 This ratio is intended
to ensure that there are enough
journeyworkers to oversee the work of
qualified apprentices, provide
appropriate training, and maintain
workplace safety. The Treasury
Department and the IRS understand that
the DOL and State apprenticeship
agencies review and approve the
prescribed ratio requirements. Proposed
§ 1.45–8(c)(2), would have provided that
the allowable ratio of apprentices to
journeyworkers on the job site in any
occupation and its corresponding
classification on any day must comply
with the applicable apprentice-tojourneyworker ratio of the registered
apprenticeship program in accordance
with 29 CFR part 29. The Treasury
Department and the IRS requested
comments on the application of the
Ratio Requirement for purposes of
satisfying the Apprenticeship
Requirements. Commenters generally
supported the Ratio Requirement
aligning with ratio requirements set by
registered apprenticeship programs.
As discussed in section VII.B.4. of this
Summary of Comments and Explanation
of Revisions, the Proposed Regulations
would have provided a reciprocity rule
for purposes of the payment of
applicable prevailing wage rates for
qualified apprentices. The final
regulations adopt the reciprocity rule
under the Prevailing Wage
Requirements as proposed. The
comments with respect to the
reciprocity rule and the need for clarity
on the ratio requirement if registered
apprenticeship programs supply
qualified apprentices outside of the
geographic area in which the program is
34 On January 17, 2024, the DOL published a
notice of proposed rulemaking (ETA–2023–0004) in
the Federal Register (89 FR 3118), to revise the
regulations for registered apprenticeships. Under
proposed 29 CFR 29.8(a)(19) each registered
apprenticeship program must have a written set of
standards of apprenticeship that includes the
program’s specific numeric ratio of apprentices to
journeyworkers. National Apprenticeship System
Enhancements, 89 FR 3118, 3279 (proposed Jan. 17,
2024).

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Federal Register / Vol. 89, No. 122 / Tuesday, June 25, 2024 / Rules and Regulations
registered applies equally with respect
to the Ratio Requirement under the
Apprenticeship Requirements.
Accordingly, the final regulations adopt
the reciprocity rule for purposes of
determining the applicable ratio of
apprentices to journeyworkers under the
Ratio Requirement. The final regulations
clarify that if more than one apprenticeto-journeyworker ratio could apply
because the construction work is
occurring in a geographic area where the
registered apprenticeship program is not
registered, the taxpayer must comply
with the apprentice-to-journeyworker
ratio set for the geographic area where
the construction occurs.
One commenter recommended that
the final regulations clarify whether
taxpayers, contractors, or subcontractors
must only follow the ratio requirement
of a registered apprenticeship program
in those States and localities that
prescribe ratio requirements for private
sector projects. There is no such
exception under the Ratio Requirement,
and therefore the final regulations do
not adopt this suggestion.
One commenter suggested that
registered apprenticeship programs in
some States may have a difficult time
supplying enough qualified apprentices
to meet the applicable apprentice-tojourneyworker ratios. The comment is
inconsistent with the general
application of apprenticeship ratio
requirements. The Treasury Department
and the IRS understand from the DOL
that ratio requirements of registered
apprenticeship programs that are
reviewed and approved by the DOL and
State apprenticeship agencies do not
prescribe a certain number of qualified
apprentices at a job site. Instead, they
prescribe the number of journeyworkers
required for each qualified apprentice
that is on a job site on a given day. If
on a particular day there are no
qualified apprentices scheduled to
work, there is no ratio requirement to
adhere to. Additionally, comments
regarding substantive ratio requirements
set by registered apprenticeship
programs and reviewed and approved
by the DOL and State apprenticeship
agencies are outside the scope of these
final regulations.
One commenter suggested that the
final regulations should incorporate the
DOL regulations at 29 CFR part 29 to
account for the fact that collective
bargaining agreements may prohibit
employers from abiding by the Ratio
Requirement. The commenter was
concerned that contractors may be faced
with conflicting obligations and that
taxpayers may be required to pay
penalties as a result of negotiations
outside of the taxpayer’s control. The

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Treasury Department and the IRS
understand that collective bargaining
agreements may have terms that
prohibit the use of apprentice-tojourneyworker ratios established as part
of a registered apprenticeship program;
however, section 45(b)(8)(B) provides
that the Labor Hours Requirement is
subject to the apprentice-tojourneyworker ratios of the DOL or the
applicable State apprenticeship agency.
The Treasury Department and the IRS
decline to provide a rule in the final
regulations that is contrary to this
statutory requirement. Changes to the
ratio requirements that are approved by
the DOL OA or applicable State
apprenticeship agencies as part of the
standards for registered apprenticeship
programs under 29 CFR part 29 are
outside the scope of these final
regulations.
The Proposed Regulations would have
provided that the applicable ratio
established by the registered
apprenticeship program would need to
be satisfied each day during
construction, alteration, or repair of the
qualified facility for which qualified
apprentice labor hours are being
claimed. Some commenters stated that it
would be administratively challenging
to comply with the Ratio Requirement
each day. One commenter suggested
that the apprenticeship-tojourneyworker ratio be measured over a
30-day time period. One commenter
suggested providing a safe harbor for
taxpayers who are able to meet the
relevant apprenticeship-tojourneyworker ratio requirement for at
least 90 percent of the working days of
a construction project. Additionally, a
commenter requested guidance on the
effect on taxpayers’ responsibility to
meet applicable apprenticeship-tojourneyworker ratios if a registered
apprenticeship program is unable to
supply the necessary qualified
apprentices requested by the taxpayer.
At least one commenter stated that
applying the Ratio Requirement on a
daily basis aligns with industry custom.
The Treasury Department and the IRS
recognize that there may be scheduling
conflicts or other issues that may make
it difficult to meet the Ratio
Requirement. Under 29 CFR 29.5,
registered apprenticeship programs
must have a ratio requirement as part of
their program standards. According to
the DOL, it is industry practice for
registered apprenticeship programs to
set daily ratio requirements to ensure
the safety and welfare of the apprentices
and properly oversee the work of
apprentices, and requiring different
ratios under the final regulations could
be administratively challenging and

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confusing. Additionally, a daily
requirement is needed to determine
whether a qualified apprentice may be
paid at a rate less than the prevailing
rate for work performed that day as
explained in Section VII.B.4. of this
Summary of Comments and Explanation
of Revisions. Accordingly, the final
regulations confirm that the Ratio
Requirement applies each day.
One commenter requested that the
final regulations require that registered
apprenticeship programs identify and
publish their apprentice-tojourneyworker ratios. Based on
consultations with the DOL, the
Treasury Department and the IRS
understand that apprentice-tojourneyworker ratios of individual
registered apprenticeship programs are
not publicly available. However, under
29 CFR 29.5(b)(7), the ratio of
apprentices to journeyworkers is a part
of a registered apprenticeship program’s
standards of apprenticeship. A
registered apprenticeship program’s
apprentice-to-journeyworker ratio is
provided to an employer when the
employer joins a registered
apprenticeship program and agrees to
abide by the standards of apprenticeship
under 29 CFR part 29. The DOL
regulates registered apprenticeship
programs, and requests to impose
requirements on registered
apprenticeship programs is outside the
scope of these final regulations.
4. Participation Requirement
Under section 45(b)(8)(C), 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 that work. The
Proposed Regulations would have
provided that the Participation
Requirement would be satisfied as long
as the taxpayer, contractor, or
subcontractor employs one or more
qualified apprentices to perform work
on the facility and this requirement
would not be a daily requirement.
Additionally, the Proposed Regulations
would have clarified that it would be
the responsibility of the taxpayer to
ensure that any contractor or
subcontractor with four or more
employees who perform work on the
facility has hired one or more qualified
apprentices. The preamble to the
Proposed Regulations explained that the
Treasury Department and the IRS
proposed to interpret the Participation
Requirement as designed to prevent
taxpayers from satisfying the Labor
Hours Requirement by only hiring

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qualified apprentices to perform one
type of work and instead encourages
taxpayers to use qualified apprentices
across the full range of work performed
with respect to the facility.
Commenters requested clarification
on how to determine whether a
taxpayer, contractor, or subcontractor
employs four or more individuals to
perform construction, alteration, or
repair work with respect to the
construction of a qualified facility. One
commenter sought confirmation that the
Participation Requirement does not
apply on a daily basis. Commenters
specifically requested clarification on
whether the number of employees
counted in determining whether the
Participation Requirement applies are
only those employed in the construction
of the facility at the same time and at
the same location.
Under section 45(b)(8)(C), the
Participation Requirement applies if the
taxpayer, contractor, or subcontractor
employs four or more individuals to
perform construction, alteration, or
repair work with respect to the
construction of a qualified facility. It
does not require employment of four
individuals in the construction of the
qualified facility at the same time or at
the same location. The final regulations
clarify that the Participation
Requirement applies if the taxpayer,
contractor, or subcontractor employ four
individuals in the construction of the
qualified facility at any time during the
construction, regardless of whether they
are employed at the same location or at
the same time.
Commenters suggested raising the
number of employees that are required
for the Participation Requirement to
apply so that qualified apprentices will
only need to be employed on larger
projects with more resources. Section
45(b)(8)(C) provides 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. The
final regulations adhere to the statutory
requirement under section 45(b)(8)(C).
5. Other General Apprenticeship Issues
Section 45(b)(8)(A) provides, in
relevant part, that taxpayers must
ensure that not less than the applicable
percentage of the total labor hours of the
construction, alteration, or repair work
with respect to such facility are
performed by qualified apprentices.
Consistent with this statutory provision,
the Proposed Regulations would have
provided that the taxpayer would be

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solely responsible for ensuring that the
Apprenticeship Requirements are
satisfied. Some commenters stated that
this provision is burdensome on
taxpayers because it makes them
responsible for the hiring decisions of
contractors and subcontractors.
Specifically, commenters were
concerned that taxpayers may fail to
satisfy the Apprenticeship
Requirements if a contractor does not
hire a sufficient number of qualified
apprentices.
The statute requires that the taxpayer
ensure that the applicable percentage of
total labor hours are performed by
qualified apprentices, irrespective of
which entity employs the qualified
apprentices. If a contractor or
subcontractor does not comply with the
Labor Hours Requirement, the taxpayer
retains the opportunity to cure that
failure by paying the penalty described
under section 45(b)(8)(D)(i)(II). Thus,
subject to the Participation
Requirement, the taxpayer retains some
flexibility in ensuring that the
Apprenticeship Requirements are
satisfied.
One commenter suggested that the
final regulations require taxpayers to
collect and audit their contractor and
subcontractors’ requests for qualified
apprentices. Taxpayers may establish
procedures to help ensure their
compliance with the Apprenticeship
Requirements. Those procedures may
include regularly reviewing the
qualified apprentice hiring practices of
contractors and subcontractors or
including requirements to hire qualified
apprentices in contracts. Whether a
taxpayer regularly reviewed contractors’
and subcontractors’ use of qualified
apprentices is a factor in determining
intentional disregard.
A commenter stated that depending
on a construction project’s geographic
access to registered apprenticeship
programs, it could be impractical for
some smaller contractors to maintain
the relatively high percentage of
qualified apprentices necessary to meet
each of the Apprenticeship
Requirements. The Participation
Requirement, which does not require
the hiring of qualified apprentices if a
contractor does not employ four or more
individuals, provides limited relief for
smaller businesses and addresses
potential burdens. Further, the Good
Faith Effort Exception discussed in
Section VIII.B.1. of this Summary of
Comments and Explanation of Revisions
may provide relief in those
circumstances raised by commenters.
Accordingly, the final regulations do not
provide any additional exceptions.

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Section 45(b)(8)(E)(ii) defines a
qualified apprentice 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). For purposes of
the Apprenticeship Requirements, the
Proposed Regulations would have
defined a qualified apprentice, in part,
as an individual who is employed by
the taxpayer or by any contractor or
subcontractor who is participating in a
registered apprenticeship program.
Under the Proposed Regulations,
participating in a registered
apprenticeship program would have
included entering into a written
agreement with a registered
apprenticeship program. The Proposed
Regulations would have also provided
that for purposes of the Prevailing Wage
Requirements, an apprentice includes
an individual in the first 90 days of
probationary employment who has been
certified by the DOL OA or a State
apprenticeship agency (if appropriate)
to be eligible for probationary
employment as an apprentice. One
commenter asked for the final
regulations to clarify whether the term
qualified apprentice includes those
individuals in the first 90 days of
probationary employment with the
registered apprenticeship program,
similar to how such individuals are
treated as apprentices under 29 CFR
22.401. The final regulations clarify that
a qualified apprentice includes those
individuals in the first 90 days of
probationary employment with the
registered apprenticeship program
because they are participating in the
registered apprenticeship program.
The Proposed Regulations would have
provided that pre-apprenticeship
programs do not qualify as registered
apprenticeship programs for purposes of
section 45(b)(8) and hours worked as
part of a pre-apprenticeship program
would not count towards the Labor
Hours Requirement. Commenters
recommended that the Treasury
Department and the IRS permit other
programs, such as trade schools,
colleges, programs run by local high
schools and school districts, and other
privately run, non-registered
apprenticeship or workforce
development programs to supply
apprentices to taxpayers, contactors, or
subcontractors to satisfy the
Apprenticeship Requirements.
Commenters asserted that permitting
programs in addition to registered
apprenticeship programs to supply
apprentices will help ease the expected
short supply of qualified apprentices

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due to high demand. A commenter also
explained that biogas systems are
usually co-located at farms and some
members in the biogas industry rely on
apprenticeship programs run through
local high schools and school districts,
that help provide hands-on experience
and develop interest for agricultural
careers. The commenter suggested
including those school-based
apprenticeship programs if they meet
certain criteria.
Although the Treasury Department
and the IRS understand there may be
advantages to hiring individuals
through programs other than registered
apprenticeship programs, the statute
requires that qualified apprentices be
employed by the taxpayer, contractor, or
subcontractor and be participating in a
registered apprenticeship program for
purposes of the Apprenticeship
Requirements. The final regulations
adhere to the statutory requirements and
the proposed rule is adopted without
change.
Several commenters indicated a
general concern with the lack of
qualified apprentices to staff
construction projects. One commenter
stated that in the next five to ten years,
the construction industry is bracing for
hundreds of billions of dollars of
additional infrastructure spending and
tax incentives. The commenter was
skeptical that there are sufficient
registered apprenticeship programs and
qualified apprentices available to meet
the Apprenticeship Requirements. An
additional commenter shared survey
data indicating that the necessary
registered apprenticeship programs have
not been established in their geographic
area. The same commenter also opined
that there are not enough qualified
apprentices currently enrolled in
registered apprenticeship programs to
supply a workforce capable of meeting
the Labor Hour Requirements.
Comments discussing the possible
shortage of qualified apprentices or
registered apprenticeship programs are
outside the scope of these final
regulations. However, the Treasury
Department and the IRS appreciate that
the commenters raised these concerns
and have consulted with the DOL OA
regarding them. The DOL OA explained
that group registered apprenticeship
programs that typically place qualified
apprentices with multiple employers for
on-the-job training are designed to
expand with demand because they
typically only admit as many qualified
apprentices as they have guaranteed
placements for. If there are additional
employers, they can admit additional
qualified apprentices to their programs.
The DOL OA also indicated that over

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the last several years the DOL has made
significant investments in the registered
apprenticeship space to prepare and
expand access to qualified apprentices.
The DOL OA is ready to assist in the
creation of new registered programs that
may be needed to meet the increased
demand for apprentices. Taxpayers,
contractors, and subcontractors are
encouraged to start their own registered
apprenticeship programs to help
increase the supply of qualified
apprentices.
Additionally, the Good Faith Effort
Exception contemplates that the supply
of available qualified apprentices may
not always match the demand necessary
to meet the Apprenticeship
Requirements and provides relief in
those cases as explained in Section
VIII.B.1. of this Summary of Comments
and Explanation of Revisions. However,
use of the Good Faith Effort Exception
if there is no registered apprenticeship
program that operates in the geographic
location of the facility is expected to be
rare because registered apprenticeship
programs can operate across State and
county lines and are expected to expand
according to demands.
A commenter requested that the final
regulations clarify that a registered
apprenticeship program may only
provide qualified apprentices for the
specific classification(s) requested by
the taxpayer. The regulation of
registered apprenticeship programs is
outside the scope of these final
regulations. Taxpayers, contractors, and
subcontractors retain flexibility in their
hiring decisions, including with respect
to qualified apprentices. Under these
final regulations, the hours that are
worked by a qualified apprentice only
qualify towards the Labor Hours
Requirement and the Participation
Requirement to the extent the qualified
apprentice is performing construction,
alteration, or repair work with respect to
the construction of a facility consistent
with the occupation in which the
qualified apprentice is training.
Another commenter claimed that the
Proposed Regulations would place the
responsibility to provide qualified
apprentices on group sponsors of
registered apprenticeship programs,
thereby limiting taxpayer incentives to
launch their own programs and hire
qualified apprentices in other
circumstances. The Proposed
Regulations did not intend to restrict
taxpayers, contractors, or subcontractors
from developing their own registered
apprenticeship programs. The final
regulations clarify that taxpayers,
contractors, and subcontractors have the
flexibility to create their own registered
apprenticeship program (within the

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53227

meaning of section 3131(e)(3)(B)) or
partner with existing registered
apprenticeship programs to satisfy the
Apprenticeship Requirements.
Another commenter requested that
the final regulations require that any
funds contributed to a registered
apprenticeship program must be used to
train qualified apprentices. While the
Treasury Department and the IRS
understand that commenters want to
ensure funds contributed to a registered
apprenticeship program are used
appropriately, this is outside the scope
of the final regulations.
Several commenters requested
assistance in finding registered
apprenticeship programs to provide
qualified apprentices to a project. The
DOL OA, in collaboration with
participating State apprenticeship
agencies, has created an online search
tool to assist taxpayers, contractors, and
subcontractors in finding registered
apprenticeship programs (currently
https://www.apprenticeship.gov/
partner-finder). Taxpayers, contractors,
and subcontractors can search for
registered apprenticeship programs by
occupation or industry in a certain
State, city, or zip code. Taxpayers,
contractors, and subcontractors can also
contact the DOL OA or their State
apprenticeship agency for assistance in
locating registered apprenticeship
programs.
A commenter also stated that the
Apprenticeship Requirements could
create new challenges for taxpayers who
depend on labor from other countries to
help install equipment. The commenter
explained that foreign contractors and
subcontractors will be unable to meet
the Apprenticeship Requirements
because they are not permitted to hire
qualified apprentices from registered
apprenticeship programs. The
commenter suggested that the final
regulations expand the Good Faith
Effort Exception to provide reasonable
accommodations for taxpayers who rely
on foreign companies for specific work.
The Treasury Department and the IRS
understand from the DOL OA that DOL
regulations governing registered
apprenticeship programs do not prohibit
foreign employers from hiring qualified
apprentices from registered
apprenticeship programs or registering
an apprenticeship program, provided
certain requirements are satisfied (for
example, the foreign employer must
have a physical presence in the United
States and be legally authorized to
conduct business in the United States).
The DOL OA confirmed that there are
several registered apprenticeship
programs sponsored by foreign
employers. Accordingly, the Treasury

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Department and the IRS decline to
provide special exceptions for taxpayers
who use foreign contractors or
subcontractors for specific work as the
statute does not contemplate such an
exception.
A commenter requested that the final
regulations clarify the effect of the DOL
deregistering a registered apprenticeship
program. The commenter recommended
that the final regulations permit
taxpayers, contractors, and
subcontractors to continue to pay the
applicable apprenticeship prevailing
wage rate if a registered apprenticeship
program is deregistered, provided the
taxpayer, contractor, or subcontractor
can find a new registered
apprenticeship program for the
apprentices already employed within 90
days from the date the taxpayer,
contractor, or subcontractor is notified
in writing that the program was
deregistered. The commenter also
requested that the Treasury Department
and the IRS provide an option for
enrolling apprentices in registered
apprenticeship programs that offer
remote learning in the event a registered
apprenticeship program is deregistered.
The Treasury Department and the IRS
understand that programs may be
deregistered by the DOL OA or the State
apprenticeship agency as a result of the
program’s failure to follow the
requirements in 29 CFR parts 29 and 30.
When an apprenticeship program is
deregistered, the DOL OA or State
apprenticeship agency assists with
transferring the apprentices to other
registered apprenticeship programs. The
DOL OA has indicated that
deregistration is rare and the process
leading up to deregistration involves
ample opportunities for programs to
take corrective action prior to
deregistration such that there will be
time for taxpayers, contractors, and
subcontractors to find new registered
apprenticeship programs or qualified
apprentices if a program is at risk of
deregistration.
The final regulations do not adopt this
comment. Section 45(b)(8) requires the
use of qualified apprentices
participating in a registered
apprenticeship program. An individual
registered in an apprenticeship program
that has been deregistered is no longer
a qualified apprentice and the hours
worked by the individual after
deregistration of the program will not
qualify towards the Apprenticeship
Requirements. The Treasury Department
and the IRS also decline to permit
taxpayers, contractors, or subcontractors
to pay the reduced applicable
apprenticeship prevailing wage rate in

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the event of deregistration as doing so
would be inconsistent with the statute.
A commenter recommended that the
final regulations provide guidance for
situations in which the construction
work outlasts the qualified apprentice’s
tenure with a registered apprenticeship
program, because the qualified
apprentice is promoted, graduates, or
otherwise leaves the program. The
employment of individuals who are no
longer qualified apprentices for any
reason will not qualify for purposes of
the Apprenticeship Requirements.
Similarly, a few commenters
requested guidance regarding the impact
to the Apprenticeship Requirements if
circumstances change in the middle of
construction of a facility, such as
qualified apprentice labor becoming
unavailable. The Treasury Department
and the IRS understand there might be
situations in which qualified apprentice
labor becomes unavailable, which may
affect a taxpayer’s ability to comply
with the Labor Hours Requirement. In
this situation, taxpayers may be eligible
for the Good Faith Effort Exception (if
those requirements are satisfied) or may
cure the failure to meet the
Apprenticeship Requirements by paying
the prescribed penalty under section
45(b)(8)(D)(i)(II). The Good Faith Effort
Exception and the Apprenticeship Cure
Provision are discussed in Section
VIII.B. of this Summary of Comments
and Explanation of Revisions.
A commenter also suggested that in
order to ensure high quality on-the-job
training in registered apprenticeship
programs, the final regulations should
either support or require employers
seeking the increased amounts of credit
to be registered training agents and
demonstrate their proof of status with a
registered apprenticeship program.
Because registered apprenticeship
programs must provide supervised work
experience and training on the job, the
use of qualified apprentices already
ensures quality on-the-job training, and
the final regulations do not require
taxpayers, contractors, or subcontractors
to register as training agents.
B. Exceptions to the Apprenticeship
Requirements
Under section 45(b)(8)(D)(i), a
taxpayer is not treated as failing to
satisfy the Apprenticeship
Requirements in section 45(b)(8) if: (i)
the taxpayer satisfies the Good Faith
Effort Exception in section
45(b)(8)(D)(ii), or (ii) in the case of any
failure by the taxpayer to satisfy the
Labor Hours Requirement under section
45(b)(8)(A) and the Participation
Requirement under section 45(b)(8)(C),

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the taxpayer makes a penalty payment
to the IRS.
1. Good Faith Effort Exception
Under the Good Faith Effort
Exception, a taxpayer is deemed to have
satisfied the Apprenticeship
Requirements with respect to a qualified
facility if the taxpayer has requested
qualified apprentices from a registered
apprenticeship program and: (i) such
request has been denied, provided that
such denial is not the result of a refusal
by the taxpayer or any contractors or
subcontractors engaged in the
performance of construction, alteration,
or repair work with respect to such
qualified facility to comply with the
established standards and requirements
of the registered apprenticeship
program, or (ii) the registered
apprenticeship program fails to respond
to such request within five business
days after the date on which such
registered apprenticeship program
received the request.
The Proposed Regulations would have
provided that, generally, a taxpayer is
deemed to have satisfied the
Apprenticeship Requirements with
respect to a request for qualified
apprentices if the taxpayer, contractor,
or subcontractor submitted a written
request for qualified apprentices to at
least one registered apprenticeship
program that: (i) has a geographic area
of operation that includes the location
of the facility, or that can reasonably be
expected to provide apprentices to the
location of the facility; (ii) trains
apprentices in the occupation(s) needed
to perform construction, alteration, or
repair with respect to the facility; and
(iii) has a usual and customary business
practice of entering into agreements
with employers for the placement of
apprentices in the occupation for which
they are training, pursuant to its
standards and requirements. The
Proposed Regulations would have
further required that the request be in
writing and sent electronically or by
registered mail. The Proposed
Regulations would have defined a
registered apprenticeship program to
mean a program that has been registered
by the DOL OA or a recognized State
apprenticeship agency pursuant 29 CFR
parts 29 and 30, as meeting the basic
standards and requirements of the DOL
(DOL Apprenticeship Standards).
The Proposed Regulations would have
provided that the Good Faith Effort
Exception is specific to the request for
qualified apprentices made by the
taxpayer, contractor, or subcontractor,
including the number of apprentice
hours for which the request for
apprentices has been made to a

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registered apprenticeship program.
Thus, the Good Faith Effort Exception
would have applied to the specific
portion of the request for qualified
apprentices that was not responded to
or denied. The Proposed Regulations
would also have provided that the
denial of a request for qualified
apprentices would qualify for the Good
Faith Effort Exception for a period of
120 days after the denial and that
taxpayers, contractors, or subcontractors
would be required to submit an
additional request for apprentices every
120 days after a denial to continue to
qualify for the Good Faith Effort
Exception. The Treasury Department
and the IRS requested comments on the
duration of requests for qualified
apprentices under the Good Faith Effort
Exception.
The Treasury Department and the IRS
are aware that the DOL OA, as well as
State apprenticeship agencies, routinely
provide technical expertise on
registered apprenticeship program
matters, including identifying registered
apprenticeship programs and assisting
employers seeking to register their own
programs. The Treasury Department and
the IRS requested comments on whether
and how the proposed Good Faith Effort
Exception might account for a situation
in which a taxpayer contacts the DOL
OA or the appropriate State
apprenticeship agency regarding their
apprenticeship request, in addition to
contacting a specific registered
apprenticeship program(s).
The Treasury Department and the IRS
also requested comments on how the
proposed Good Faith Effort Exception
would align with current practices with
respect to use of apprentices in the
construction, alteration, or repair of
facilities. In particular, the Treasury
Department and the IRS requested
comments on the role of collective
bargaining agreements, PLAs, and other
agreements to satisfy the request for
apprentices under the Good Faith Effort
Exception. The following sections
summarize the comments received. The
final regulations provide further
guidance regarding the Good Faith
Effort Exception and revise the
Proposed Regulations in response to the
comments received.
a. Content and Scope of a Request
The Proposed Regulations would have
required that a request for qualified
apprentices must include the proposed
dates of employment, occupation of
apprentices needed, location of the
work to be performed, number of
apprentices needed, the expected
number of labor hours to be performed
by the apprentices, and the name and

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contact information of the taxpayer,
contractor, or subcontractor requesting
employment of apprentices from the
registered apprenticeship program. The
Proposed Regulations would have also
required that the request state that the
request for qualified apprentices is
made with an intent to employ
apprentices in the occupation for which
they are being trained and in accordance
with the requirements and standards of
the registered apprenticeship program.
Several commenters requested that
the final regulations further clarify what
information must be included in the
request for qualified apprentices for
purposes of the Good Faith Effort
Exception. At least one commenter
asked whether the request could
estimate the dates of employment and
the number of qualified apprentices
needed. Commenters suggested that the
final regulations require requests to
explain the need for qualified
apprentices and provide the exact
number of qualified apprentices needed.
Other commenters specifically asked
that the request be required to include
the name and contact information of the
entity that will employ the qualified
apprentices.
The final regulations retain the
proposed rule requiring taxpayers,
contractors, and subcontractors to
include specific and detailed
information concerning the qualified
apprentices that are requested and the
work to be performed with certain
revisions to provide greater clarity for
taxpayers and to strengthen the Good
Faith Effort Exception. The final
regulations further require that a request
must identify who will employ the
qualified apprentices. The Treasury
Department and the IRS understand that
requests for qualified apprentices will
be based on projections or estimates of
the work to be performed including the
duration of the work and the number of
hours. Nonetheless, the estimates must
be consistent with the requester’s intent
to employ the qualified apprentices.
Accordingly, the final regulations
provide that requests may include
reasonable estimates, and also require
that the request include a statement of
intent to employ qualified apprentices
consistent with the hours and dates of
employment included in the request.
The Treasury Department and the IRS
are aware of the concerns about
potential abuse of the Good Faith Effort
Exception. Taxpayers, contractors, and
subcontractors should be mindful that
requests that lack specific details of
employment or do not reflect reasonable
estimates will not be considered valid
requests under the final regulations.
Consistent with the general rule in

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53229

§ 1.45–12 that taxpayers must maintain
and preserve records sufficient to
demonstrate compliance with the
applicable PWA requirements,
taxpayers need to keep records
demonstrating the estimates included in
the request were reasonable, such as
projected and actual labor needs (both
for journeyworkers and qualified
apprentices) during the construction of
the qualified facility, and any factors
impacting those needs, such as
apprentice utilization plans or contract
requirements, as applicable.
b. Required Format of a Request
Commenters recommended that the
final regulations require taxpayers to
make requests for qualified apprentices
in writing and by telephone.
Commenters argued that adding the
requirement to contact registered
apprenticeship programs by telephone
would ensure taxpayers, contractors,
and subcontractors use forms of
communication that are reasonably
calculated to properly and timely notify
registered apprenticeship programs of
their requests.
The Treasury Department and the IRS
recognize that some taxpayers,
contractors, and subcontractors have
ongoing relationships with registered
apprenticeship programs and may
request qualified apprentices from the
program informally, such as by
telephone. However, in administering
the Good Faith Effort Exception the IRS
needs to be able to verify and evaluate
the request for qualified apprentices,
including if the request was received by
the registered apprenticeship program
and whether the request included the
necessary details to be considered a
valid request. Accordingly, the final
regulations retain the rule that a request
to a registered apprenticeship program
must be a written request, sent
electronically or by registered mail, for
purposes of the Good Faith Effort
Exception. Taxpayers, contractors, or
subcontractors are permitted and
encouraged to contact registered
apprenticeship programs in writing and
by telephone, but in order to satisfy the
Good Faith Effort Exception, the request
must be in writing.
c. Required Recipients of a Request
A commenter stated that many
employers who are signatories to
collective bargaining agreements with
building trades labor unions request
qualified apprentices from the labor
union and not from a registered
apprenticeship program. The
commenters indicated that this is the
common practice because the labor
union will have a list of qualified

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apprentices who will be dispatched to
the employer’s job site. The commenter
suggested the final regulations revise the
Good Faith Effort Exception to reflect
this practice. The Treasury Department
and the IRS understand that this
practice may occur; however, section
45(b)(8)(D)(ii) provides that requests for
qualified apprentices must be made to a
registered apprenticeship program.
Accordingly, the Treasury Department
and the IRS decline to amend the Good
Faith Effort Exception to allow this
alternative procedure.
The Proposed Regulations would have
provided that in order to qualify for the
Good Faith Effort Exception, taxpayers,
contractors, or subcontractors must
submit a written request for qualified
apprentices to at least one registered
apprenticeship program, which has a
geographic area of operation that
includes the location of the facility, or
to a registered apprenticeship program
that can reasonably be expected to
provide apprentices to the location of
the facility. In the preamble to the
Proposed Regulations, the Treasury
Department and the IRS explained that
although a taxpayer only needs to
submit a request to one registered
apprenticeship program, depending on
the size of the facility and the likelihood
of multiple occupations involved in the
construction of the facility, a taxpayer
may need to submit a request to more
than one apprenticeship program in
order to meet the Good Faith Effort
Exception.
Several commenters suggested that
the final regulations require taxpayers to
request qualified apprentices from all
available registered apprenticeship
programs. Other commenters requested
the final regulations retain the
requirement to contact at least one
available registered apprenticeship
program in order to meet the Good Faith
Effort Exception. Given that the statute
does not impose this requirement, it
would be unreasonable to require
taxpayers to contact all possible
apprenticeship programs. The final
regulations adopt the proposed rule
without change. In order to qualify for
the Good Faith Effort Exception,
taxpayers, contractors, or subcontractors
must submit a written request for
qualified apprentices to at least one
registered apprenticeship program. The
Good Faith Effort Exception is limited to
the number of qualified apprentice labor
hours that are requested as part of a
valid request for qualified apprentices.
A commenter requested that the final
regulations clarify that taxpayers are not
required to request apprentices from the
same geographic area as the project. The
final regulations do not require

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taxpayers to use qualified apprentices
from a program located in the same
geographic area as the project to meet
the Labor Hours Requirement.
Taxpayers, contractors, or
subcontractors have the flexibility to
request and use qualified apprentices
from any location so long as the
apprentices are part of a registered
apprenticeship program. However, as
provided herein, in order to qualify for
the Good Faith Effort Exception,
taxpayers are required to request
qualified apprentices from at least one
apprenticeship program with a
geographic area of operation that
includes the geographic location of the
facility.
Commenters requested additional
guidance regarding how to determine
those apprenticeship programs that
would reasonably be expected to
provide apprentices to the location of a
facility. Some commenters suggested
making this requirement less ambiguous
by requiring taxpayers, contractors, and
subcontractors to contact all registered
apprenticeship programs within a
certain distance from the project
location. One commenter suggested that
taxpayers should be required to accept
apprentices from a ‘‘sister’’ program
either from within the same State or
from one or more States adjacent to the
State in which the construction is
occurring. Other commenters
recommended being able to
unconditionally use local registered
apprenticeship programs. A commenter
also recommended clarifying the
expectations for nonunion contractors to
use apprentices from union-affiliated
programs if nonunion programs are not
locally available.
The Treasury Department and the IRS
agree that additional clarification is
needed on which registered
apprenticeship program must be
contacted to satisfy the Good Faith
Effort Exception. The proposed rule was
intended to require sending the request
to a registered apprenticeship program
that would ordinarily provide
apprentices to the area where the
facility is located. The Treasury
Department and the IRS have
determined that this prerequisite is
sufficiently addressed in the
requirement that the registered
apprenticeship program have a
geographic area of operation that
includes the location of the facility,
because those registered apprenticeship
programs can reasonably be expected to
provide apprentices to the area where
the facility is located. Accordingly, the
proposed requirement to contact a
registered apprenticeship program that
can reasonably be expected to provide

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apprentices to the location of the facility
is not retained in the final regulations.
The final regulations clarify that the
geographic area of operation of a
registered apprenticeship program has
the same meaning as geographic area
and locality for purposes of the
Prevailing Wage Requirements. In most
cases, this will mean that the registered
apprenticeship program operates in the
county, independent city, or other civil
subdivision of the State in which the
facility is located, regardless of where
the registered apprenticeship program is
physically located.
Commenters requested guidance with
respect to the application of the Good
Faith Effort Exception if there is no
registered apprenticeship program with
a geographic area of operation that
includes the location of the facility or
that can be reasonably expected to
provide apprentices to a project. A
commenter also requested guidance in
situations in which certain trades lacked
qualified apprentices either locally or
nationally. Commenters also requested
clarification on how to determine that
there are no registered apprenticeship
programs in the geographic area or that
can be reasonably expected to provide
apprentices to a project. Other
commenters recommended requiring
taxpayers, contractors, or subcontractors
to seek assistance from the DOL OA or
State apprenticeship agency if the
taxpayer is having trouble locating a
registered apprenticeship program with
a geographic area of operation that
includes the location of the facility in
order to qualify for the Good Faith Effort
Exception.
Although the Treasury Department
and the IRS expect this situation to be
rare, the final regulations address the
application of the Good Faith Effort
Exception in the absence of a registered
apprenticeship program with an area of
operation that includes the location of
the facility. The final regulations
provide that if there is no registered
apprenticeship program with a
geographic area of operation that
includes the location of the facility,
taxpayers will be deemed to satisfy the
Good Faith Effort Exception for the
apprentices they (or the contractor or
subcontractor) would have requested for
that occupation.
Taxpayers, contractors, and
subcontractors should keep records
sufficient to substantiate that there are
no existing registered apprenticeship
programs with a geographic area of
operation that includes the facility at
the time the request would have been
made, as well as documentation of the
requests for apprentices that would have
been made, including the specific work

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Federal Register / Vol. 89, No. 122 / Tuesday, June 25, 2024 / Rules and Regulations
and hours that would have been
performed by the apprentices if a
registered apprenticeship program were
available. Taxpayers are also able, but
not required for the purposes of the
Good Faith Effort Exception, to create
their own registered apprenticeship
programs.
Because registered apprenticeship
programs can operate across State and
county lines, determining that a
registered apprenticeship program does
not have a geographic area of operation
that includes the location of the facility
may necessitate contacting the
registered apprenticeship program to
determine its geographic area of
operation. Taxpayers should also
consider contacting the DOL OA or
relevant State apprenticeship agency for
assistance in locating registered
apprenticeship programs and
documenting that no registered
apprenticeship programs are available.
Examples of evidence that no registered
apprenticeship programs were available
could include written confirmation from
registered apprenticeship programs that
they do not have a geographic area of
operation that includes the location of
the facility or confirmation from the
DOL OA or the relevant State
apprenticeship agency that there are no
existing registered apprenticeship
programs with a geographic area of
operation that includes the facility.
Commenters also requested guidance
on how a taxpayer, contractor, or
subcontractor who sponsors its own
registered apprenticeship program and
employs qualified apprentices would
qualify for the Good Faith Effort
Exception. The final regulations clarify
that if a taxpayer, contractor, or
subcontractor is a registered
apprenticeship program sponsor and
there are no available qualified
apprentices in the registered
apprenticeship program sponsored by
the taxpayer, contractor, or
subcontractor, the taxpayer, contractor,
or subcontractor may qualify for the
Good Faith Effort Exception by
demonstrating that it made a request to
another registered apprenticeship
program (and such request was denied
or not responded to within five business
days) or by establishing that there are no
other registered apprenticeship
programs with an area of operation that
includes the location of the facility.
One commenter stated that it is
customary for some employers who are
signatories to collective bargaining
agreements to hire qualified apprentices
through the union instead of by
contacting a registered apprenticeship
program. The commenter requested the
final rule clarify that this practice is

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permissible. The final regulations do not
adopt this suggestion. The Treasury
Department and the IRS recognize that
an employer may not directly contact a
registered apprenticeship program for
qualified apprentices if the employer is
a signatory to a collective bargaining
agreement with a labor organization.
However, for purposes of satisfying the
Good Faith Effort Exception, the
taxpayer must have requested qualified
apprentices from a registered
apprenticeship program and not a labor
organization.
In the preamble to the Proposed
Regulations, the Treasury Department
and the IRS requested comments on
whether and how the proposed Good
Faith Effort Exception might take into
account a situation in which a taxpayer
contacts the DOL OA or the appropriate
State apprenticeship agency regarding
their apprenticeship request, in addition
to contacting a specific registered
apprenticeship program or programs.
Some commenters requested that the
final regulations clarify that a taxpayer’s
outreach to the DOL OA or a State
apprenticeship agency has no bearing
on whether a taxpayer qualifies for a
Good Faith Effort Exception. The
Treasury Department and the IRS have
determined that taxpayers, contractors,
or subcontractors are not required to
contact the DOL OA or State
apprenticeship agency to satisfy the
Good Faith Effort Exception. However,
as noted previously, it is recommended
that taxpayers, contractors, and
subcontractors contact the DOL OA or a
State apprenticeship agency if they have
difficulty locating a registered
apprenticeship program. Additionally,
the final regulations provide that
evidence that the taxpayer, contractor,
or subcontractor contacted the DOL OA
or a State apprenticeship agency for
assistance will be considered in
determining whether taxpayers,
contractors, or subcontractors acted
with intentional disregard if the Good
Faith Effort Exception does not apply.
d. Timing of a Request
Commenters asked that the final
regulations clarify when a request must
be made in order to satisfy the Good
Faith Effort Exception. Several
commenters recommended that requests
should be made within a certain time
before the requested qualified
apprentices are needed. Some
commenters indicated that in the
absence of a temporal requirement,
some taxpayers, contractors, or
subcontractors may make last-minute
requests for qualified apprentices. The
commenters asserted that it may be very
difficult or impossible for a registered

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53231

apprenticeship program to respond to a
request for qualified apprentices
without adequate time to staff the
request. Some commenters suggested
that there may be a loophole allowing
for the application of the Good Faith
Effort Exception in situations in which
it was not intended to apply if the final
regulations do not impose a temporal
requirement. Commenters proposed
time periods that ranged from five days
before qualified apprentices are needed
(if a taxpayer, contractor, or
subcontractor has a pre-existing
relationship with the registered
apprenticeship program) to 90 days
before qualified apprentices are needed
in the absence of a pre-existing
relationship. Several commenters
suggested that requests should be
required 10 to 14 days before qualified
apprentices are expected to start work
on the project.
The DOL OA has indicated that
typical apprenticeship cycles in
construction involve at least 2,000 hours
of on-the-job training and at least 144
hours of related instruction for each
year of the apprenticeship program.
According to the DOL OA, registered
apprenticeship programs in the
construction industry typically hire
qualified apprentices in cohorts, and
advance notice is needed to allow the
registered apprenticeship program
adequate time to supply the requested
qualified apprentices within the
timeframe needed.
The Treasury Department and the IRS
agree that in order to satisfy the Good
Faith Effort Exception, the initial
request for qualified apprentices must
be made with enough advance notice to
allow registered apprenticeship
programs time to respond. The Treasury
Department and the IRS also recognize
that given the nature of construction
projects, and the desire to complete
projects on time, a shorter timeframe
may be appropriate for any subsequent
requests once construction is underway.
Accordingly, the final regulations
require that taxpayers, contractors, and
subcontractors must make an initial
request for qualified apprentice(s) from
a registered apprenticeship program at
least 45 days before the qualified
apprentice is requested to begin work on
the facility so that registered
apprenticeship programs have adequate
time to plan for the anticipated need.
The final regulations also clarify that to
satisfy the Good Faith Effort Exception,
any subsequent requests to the same
registered apprenticeship program must
be made no later than 14 days before
qualified apprentices are requested to
begin work on the facility.

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The Treasury Department and the IRS
received numerous comments regarding
the 120-day period for which the denial
or nonresponse of a request for qualified
apprentices is considered to satisfy the
Good Faith Effort Exception and the
requirement for taxpayers to submit
additional requests for qualified
apprentices to continue to satisfy the
Good Faith Effort Exception at the end
of the 120-day period. Some
commenters suggested eliminating the
requirement to submit additional
requests or extending the time before an
additional request needs to be made
from 120 days to one year, noting that
the 120-day period could be impractical
or burdensome, create uncertainty, and
that it might not increase the hiring of
qualified apprentices. Several
commenters asserted that the 120-day
period and the requirement to submit
additional requests lacked a statutory
basis, because the statutory text of the
Good Faith Effort Exception in section
45(b)(8)(D) does not prescribe or
mention any 120-day period and does
not require any renewal by the taxpayer
of its request for a qualified apprentice
in order to be deemed to satisfy the
Apprenticeship Requirements. Other
commenters suggested that the 120-day
period be shortened to better align with
project timelines for subcontractors who
typically conclude their work on a
project well within the 120-day
window.
Commenters also asked that the final
regulations clarify if subsequent
requests have to be made to the same
registered apprenticeship program and
if there is a limit on the number of times
an additional request needed to be made
in order to satisfy the Good Faith Effort
Exception. Additionally, a commenter
suggested that the final regulations
require follow-up requests for qualified
apprentices to include the names of any
registered apprenticeship programs the
taxpayer previously contacted for
qualified apprentices. Commenters also
asked whether the Labor Hours
Requirement applied if taxpayers,
contractors, or subcontractors met the
Good Faith Effort Exception for 120
days, and subsequently obtained
qualified apprentices in response to an
additional request made after the
expiration of the 120-day period. If the
Labor Hours Requirement applied in
this scenario, the commenter requested
guidance on how to determine if a
taxpayer satisfied the Labor Hours
Requirement under these circumstances.
The Treasury Department and the IRS
agree with the comments indicating that
the 120-day period introduces
unnecessary uncertainty with respect to
labor supply and costs. A request that is

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initially denied for lack of available
qualified apprentices that is later
accepted pursuant to a renewed request
after only 120 days could disrupt
staffing decisions. Moreover, the
Treasury Department and the IRS
acknowledge that a requirement to
submit additional requests after 120
days could increase burdens in cases in
which businesses may not have the staff
or staffing flexibility to comply with a
requirement for multiple, ongoing
requests. However, the Treasury
Department and the IRS also recognize
the value in prescribing the duration of
requests to prevent the Good Faith Effort
Exception from allowing the
Apprenticeship Requirements to be
avoided in their entirety if qualified
apprentices will likely be available for
work at some time during the lifespan
of a construction project as the supply
adjusts to demands.
Based on the comments received and
in consultation with the DOL, the
Treasury Department and the IRS have
determined that the maximum duration
of a request for qualified apprentices is
365 days (366 days in case of a leap
year). The final regulations have been
revised to provide that taxpayers must
submit additional requests 365 days
(366 days in case of a leap year) after the
denial of a previous request to continue
to satisfy the Good Faith Effort
Exception. The final regulations also
clarify that the annual duration applies
if a taxpayer, contractor, or
subcontractor is not able to locate a
registered apprenticeship program with
an area of operation that includes the
location of the facility.
Extending the maximum duration of
requests for qualified apprentices to an
annual period will allow employers
sufficient time to assess future work
needs appropriate for qualified
apprentices without causing uncertainty
for existing staff and unexpected costs
that might otherwise result if requests
were required on a more frequent basis.
It also allows sufficient time for the
supply of qualified apprentices to adjust
to the construction demands of the
location of the facility through the
registration of new apprenticeship
programs and recruitment of qualified
apprentices into those programs. The
final regulations retain the rule that
requests for purposes of the Good Faith
Effort Exception must be specific as to
the dates of employment and the
expected number of hours the qualified
apprentices are needed with the intent
to employ the qualified apprentices
consistent with the request. Taxpayers,
contractors, or subcontractors making
general requests that lack an intent to
employ the qualified apprentices

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consistent with the request would not
satisfy the Good Faith Effort Exception.
The final regulations also clarify that
requests for qualified apprentices do not
need to be made to the same registered
apprenticeship program that received
and denied an earlier request.
The final regulations also include an
example in response to the request for
clarification on how the Labor Hours
Requirement applies if a taxpayer
satisfies the Good Faith Effort Exception
for one 365-day period (or 366-day
period in the case of a leap year), and
then obtains qualified apprentices in
response to an additional request for
qualified apprentices that is made later.
e. Definition of a Response
The Proposed Regulations would have
provided that an acknowledgement,
whether in writing or otherwise by a
registered apprenticeship program, of
receipt of the request is a sufficient
response for purposes of the Good Faith
Effort Exception. Several commenters
requested that the final regulations
modify this proposed requirement and
provide that open-ended and nonsubstantive replies do not constitute a
response for purposes of satisfying the
Good Faith Effort Exception.
Commenters were concerned that if a
non-substantive acknowledgement is
treated as a response, taxpayers could be
foreclosed from relying on the Good
Faith Effort Exception and be unable to
satisfy the Apprenticeship
Requirements despite legitimate
attempts to do so. They also stated that
the proposed rule could lead to
uncertainty for taxpayers and
indefinitely delay construction while
taxpayers attempt to comply with the
Apprenticeship Requirements. Another
commenter requested that the final
regulations require the acknowledgment
to be in writing, consistent with the
requirement that the request must be in
writing.
The Treasury Department and the IRS
agree with the concerns raised by the
commenters. Accordingly, the final
regulations provide that a response is a
substantive written reply that agrees, in
part or in whole, to the specific
requirements in the taxpayer’s,
contractor’s, or subcontractor’s request.
Automated or other non-substantive
responses or acknowledgments are not
responses for purposes of the Good
Faith Effort Exception.
One commenter suggested the final
regulations clarify that if a program
replies with a non-substantive response,
the taxpayer is not required to follow up
with the registered apprenticeship
program for a more specific response.
The Treasury Department and the IRS

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agree that additional guidance is needed
on the procedures after a taxpayer,
contractor, or subcontractor makes an
initial request to a registered
apprenticeship program. The final
regulations clarify that, for purposes of
the Good Faith Effort Exception and
subject to the annual duration of a
request, a taxpayer, contractor, or
subcontractor does not need to follow
up with the registered apprenticeship
program after an initial request is made
or after receipt of a non-substantive
response.
Although follow-up requests are not
required for purposes of the Good Faith
Effort Exception, the Treasury
Department and the IRS encourage
taxpayers, contractors, and
subcontractors to regularly follow up
with registered apprenticeship programs
regarding requests for qualified
apprentices, and the final regulations
clarify that evidence that this occurred
is a factor the IRS will consider in
determining whether there is intentional
disregard of the Apprenticeship
Requirements if the Good Faith Effort
Exception does not apply.
f. Denial of a Request
The Proposed Regulations would have
provided that a denial of a request
means that the registered apprenticeship
program denied the request in its
entirety. The Proposed Regulations
would have further provided that a
registered apprenticeship program’s
response that it could partially fulfill a
request in the occupation(s) for which it
trains apprentices would not constitute
a denial of the request with respect to
the parts of the request that could be
fulfilled. Commenters suggested that the
final regulations require taxpayers to
accept all qualified apprentices offered
by a registered apprenticeship program,
even if a registered apprenticeship
program is only partially able to meet a
request. The final regulations clarify
that partial denials may also serve as a
valid basis for the Good Faith Effort
Exception with respect to the portion
denied, provided that the taxpayer,
contractor, or subcontractor hires the
qualified apprentices that are available
for the construction as provided by the
registered apprenticeship program in its
response. The final regulations also
clarify through an example that a denial
that follows an initial acceptance and is
received prior to the start of the
requested work (for example, if a
registered apprenticeship program
indicates it can provide qualified
apprentices to a project and is
subsequently unable to fulfill the
request) may also serve as a valid basis
for the Good Faith Effort Exception.

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Commenters also asked if the Labor
Hours Requirement is proportionately
reduced in the event of a partial denial.
The Treasury Department and the IRS
understand the need for clarification on
the interaction between the Labor Hours
Requirement and the Good Faith Effort
Exception. An example in proposed
§ 1.45–8(e)(1)(ii)(F) illustrates that if a
request is partially denied, the part of
the request that was denied would
qualify for the Good Faith Effort
Exception. As proposed, the example
would have stated the number of
qualified apprentice labor hours that
would qualify for the Good Faith Effort
Exception, but it did not clearly indicate
how these hours are treated. The final
regulations contain a revised example
clarifying that there is no proportionate
reduction of the Labor Hours
Requirement. Instead, the qualified
apprentice labor hours that qualify for
the Good Faith Effort Exception are
treated as labor hours performed by
qualified apprentices.
Commenters requested that the final
regulations clarify how to determine the
date on which a registered
apprenticeship program received a
request for purposes of the Good Faith
Effort Exception. One commenter
suggested that the date of receipt should
be determined by a proof of receipt from
a delivery service. As explained in
Section VIII.B.1.b. of this Summary of
Comments and Explanation of
Revisions, for purposes of the Good
Faith Effort Exception, requests for
qualified apprentices must be in writing
and sent electronically or by registered
mail. The final regulations provide that
date of receipt of the request is the date
an email request is sent to the registered
apprenticeship program, or the date of
delivery shown on a receipt from the
registered mail delivery.
Under section 45(b)(8)(D)(ii)(I), in
order to satisfy the Good Faith Effort
Exception, a denial of a request for
qualified apprentices cannot be ‘‘the
result of a refusal by the taxpayer or any
contractors or subcontractors engaged in
the performance of construction,
alteration or repair work with respect to
such qualified facility to comply with
the established standards and
requirements of the registered
apprenticeship program.’’ The Proposed
Regulations reiterated this requirement.
The preamble to the Proposed
Regulations provided further that ‘‘if a
registered apprenticeship program
requires a requesting employer to enter
into an agreement with the registered
apprenticeship program, then a denial
of the request because the employer
refused to enter into the agreement

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would not be a valid denial for purposes
of the Good Faith Effort Exception.’’
A few commenters requested that the
final regulations confirm that the
established standards and requirements
of the registered apprenticeship program
refer to those requirements included in
the DOL Apprenticeship Standards.
Commenters asserted that requiring
taxpayers to comply with requirements
other than those necessary to comply
with the DOL Apprenticeship Standards
would unfairly restrict a taxpayer’s
ability to negotiate contract terms with
a registered apprenticeship program.
Some commenters were also concerned
that the proposed rule would require
taxpayers, contractors, and
subcontractors who are not parties to
collective bargaining agreements or
PLAs to enter into these agreements in
order to comply with a union registered
apprenticeship program’s standards and
requirements. Commenters stated that
non-union contractors generally do not
employ qualified apprentices enrolled
in union sponsored registered
apprenticeship programs, and they
requested confirmation that this rule
would not require them to do so. A
commenter also requested guidance
concerning what remedies are available
to taxpayers if there is a conflict
between standards imposed by an
apprenticeship program registered by
the DOL OA and an apprenticeship
program registered by a State
apprenticeship agency. The commenter
requested clarification that taxpayers
may choose to request and employ
qualified apprentices from either
registered apprenticeship program.
The Treasury Department and the IRS
agree that the final regulations should
further clarify what established
standards and requirements means.
Under section 45(b)(8)(D)(ii) the denial
cannot be a result of a failure to comply
with the ‘‘established standards and
requirements’’ of a registered
apprenticeship program (as defined in
section 3131(e)(3)(B)). Section
3131(e)(3)(B) requires a registered
apprenticeship program to satisfy the
DOL Apprenticeship Standards.
Section 29.5 of the current DOL
Apprenticeship Standards provides the
standards of apprenticeship that an
apprenticeship program must satisfy to
be eligible for approval and registration
by the DOL OA or a State
apprenticeship agency.35 Under 29 CFR
29.5(a), the apprenticeship program
must have ‘‘an organized, written plan
35 On January 17, 2024, the DOL released an
NPRM proposing to update the DOL
Apprenticeship Standards contained in 29 CFR part
29. See 89 FR 3118.

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(program standards) embodying the
terms and conditions of employment,
training, and supervision of one or more
apprentices in an apprenticeable
occupation, as defined in this part, and
subscribed to by a sponsor who has
undertaken to carry out the apprentice
training program.’’ Section 29.5(b) lists
23 different provisions that the program
standards must address, including the
employment and training of the
apprentice, the term of apprenticeship
and the minimum qualifications
required by a sponsor for persons
entering the apprenticeship program.
The Treasury Department and the IRS
have determined that the use of the
phrase ‘‘established standards’’ in
section 45(b)(8)(D)(ii)(l) of the Code
should be construed as a reference to
the DOL Apprenticeship Standards
referenced by section 3131(e)(3)(B) of
the Code and contained in 29 CFR parts
29 and 30. Based on consultation with
the DOL OA, the Treasury Department
and the IRS understand that the DOL
also refers to the established standards
as the DOL Apprenticeship Standards
that are applicable to—and required
of—all employers who wish to join the
registered apprenticeship program for
the purpose of employing apprentices.
However, Congress’s use of the phrase
‘‘established standards and
requirements’’ captures more than the
DOL Apprenticeship Standards. In order
to give meaning to the words ‘‘and
requirements,’’ terms and conditions
beyond those contained in the DOL
Apprenticeship Standards (those that
are necessary for DOL approval) must
not be rejected by taxpayers,
contractors, and subcontractors for
purposes of the Good Faith Effort
Exception. Whether additional
requirements may be imposed by the
registered apprenticeship program will
depend, in part, on what the DOL
allows the registered apprenticeship
program to require. The DOL is the
agency responsible for regulating
registered apprenticeship programs, and
the DOL determines the permissible
standards and requirements of a
registered apprenticeship program. The
DOL OA has indicated it is important
for efficient oversight and
administration of registered
apprenticeship programs that these
programs not be required to establish
separate standards and requirements for
the purposes of the IRA.
The Treasury Department and the IRS
appreciate the importance of the DOL’s
management of the registered
apprenticeship program and the DOL’s
well-established understanding of what
constitutes established standards and
requirements for the registered

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apprenticeship programs that the DOL is
responsible for overseeing and
approving. Based on consultation with
the DOL OA, the Treasury Department
and the IRS also understand that
registered apprenticeship programs are
expected to provide prospective
employers with the program’s
established standards and requirements,
including those reviewed by the DOL or
the State apprenticeship agency.
The Treasury department and the IRS
have determined that the final
regulations must interpret the statutory
language in a way that gives meaning to
the entire phrase, and also appropriately
recognize procedures implemented by
the DOL OA. Accordingly, the final
regulations provide that the
requirements referenced as part of the
established standards and requirements
are those additional requirements that
are established by the registered
apprenticeship program for the
placement of apprentices, applicable to
all employers participating in the
registered apprenticeship program, and
not found by the DOL OA or a State
apprenticeship agency to be contrary to
the DOL guidance regarding the
administration of registered
apprenticeship programs.
Consistent with this explanation and
in response to comments, the final
regulations revise the proposed rule
with respect to the established
standards and requirements that must
not be rejected by taxpayers,
contractors, or subcontractors for
purposes of satisfying the Good Faith
Effort Exception. For example, if a
registered apprenticeship program
requires all employers who request
qualified apprentices to enter into an
agreement with the registered
apprenticeship program, sign a
collective bargaining agreement, and
pay user fees, and these requirements
have not been found by the DOL OA or
a State apprenticeship agency to be
contrary to DOL guidance regarding the
administration of registered
apprenticeship programs, then a denial
of the request because the employer
refused to enter into the agreement, sign
the collective bargaining agreement, or
pay the user fees would not qualify as
a valid denial for purposes of the Good
Faith Effort Exception. In order to
substantiate the Good Faith Effort
Exception, a taxpayer will be expected
to document that a denial of a request
was not because of the taxpayer’s refusal
to comply with the established
standards and requirements of the
registered apprenticeship program.
Taxpayers, contractors, and
subcontractors also retain the ability to
contact other registered apprenticeship

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programs that do not have similar
requirements in an effort to satisfy the
Apprenticeship Requirements or the
Good Faith Effort Exception. Because of
the requirement that taxpayers,
contractors, and subcontractors contact
registered apprenticeship programs with
a geographic area of operation that
includes the location of the facility, the
Treasury Department and the IRS do not
anticipate that the established standards
and requirements of the registered
apprenticeship program will conflict
with those required by State law. In the
unlikely event that they do, the
taxpayer, contractor, or subcontractor
should contact the DOL OA for
assistance.
g. Other Good Faith Effort Exception
Issues
A commenter asked the Treasury
Department and the IRS to consider
limiting the number of Good Faith Effort
Exceptions available per trade to
encourage taxpayers to individually
sponsor new registered apprenticeship
programs. The Treasury Department and
the IRS acknowledge that there is
interest in developing new registered
apprenticeship programs to meet the
anticipated need for additional qualified
apprentices. The final regulations
already impose some limits on the Good
Faith Effort Exception through the
requirement to submit additional
requests following the denial of a
request and other requirements relating
to the required contents and scope of a
request. The final regulations do not
otherwise impose a limit on the
availability of using the Good Faith
Effort Exception.
Under section 45(b)(8)(D)(ii), to satisfy
the Good Faith Effort Exception,
requests must be made for qualified
apprentices from a registered
apprenticeship program as defined in
section 3131(e)(3)(B). One commenter
was concerned that employers would
fund apprenticeship programs and
request qualified apprentices from those
programs in an effort to manufacture
denials. To reduce abuse of the Good
Faith Effort Exception, the commenter
recommended requiring apprenticeship
requests to be sent only to registered
programs with a prior record of
operation and prior record of meeting
certain graduation rates. A few other
commenters were concerned with the
proliferation of new registered
apprenticeship programs that are
registered with the DOL but do not
provide training to a meaningful
number of workers.
As discussed in Section VIII.B.1.c.,
the final regulations clarify that a
taxpayer cannot satisfy the Good Faith

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Effort Exception through a denial from
a registered apprenticeship program it
sponsors. If the program sponsored by
the taxpayer has no available qualified
apprentices, the taxpayer must contact
other registered apprenticeship
programs for qualified apprentices to
satisfy the Apprenticeship
Requirements or the Good Faith Effort
Exception. Additionally, while the
Treasury Department and the IRS
recognize that there are concerns that
the Good Faith Effort Exception may be
abused, the statute requires requests of
qualified apprentices from registered
apprenticeship programs. Registered
apprenticeship programs are registered
by the DOL OA or a recognized State
apprenticeship agency, pursuant to the
standards in 29 CFR parts 29 and 30. As
indicated in Section II.D.1. of this
Background, the DOL is responsible for
regulating the registered apprenticeship
programs, and the extent to which
operational history, graduation rates,
and training are relevant to registration
is more appropriate for the DOL to
determine. Comments suggesting that
the final regulations impose
requirements on registered
apprenticeship programs beyond those
required by the DOL are outside the
scope of these final regulations and are
not adopted.36
Another commenter suggested that
taxpayers make requests solely to the
DOL registered apprenticeship
programs. Under 45(b)(8)(D)(ii), to
qualify for the Good Faith Effort
Exception, a taxpayer is required to
make a request for a qualified
apprentice from a registered
apprenticeship program, as defined in
section 3131(e)(3)(B). Under
3131(e)(3)(B), a registered
apprenticeship program means an
apprenticeship 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.) that meets the standards of subpart
36 Under 29 CFR 29.5(a), registered
apprenticeship programs must have an organized,
written plan embodying the terms and conditions
of employment, training, and supervision of one or
more apprentices in an apprenticeable occupation,
as defined in 29 CFR part 29, and subscribed to by
a sponsor who has undertaken to carry out the
apprentice training program. Additionally, under 29
CFR 29.5(b)(3), a registered apprenticeship
program’s program standards must contain
provisions that outline the work process in which
the apprentice will receive supervised work
experience and training on the job. Accordingly,
taxpayers are required to make requests to programs
that provide meaningful training to qualified
apprentices. The DOL’s proposed 29 CFR 29.8(a)
provides that each registered apprenticeship
program must have a written set of standards of
apprenticeship that will govern the conduct and
operation of that program. 89 FR 3118, 3278.

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A of part 29 and part 30 of title 29, Code
of Federal Regulations.
29 CFR 29.3(a) provides that
eligibility for registration of an
apprenticeship program is conditioned
upon a program’s conformity with the
apprenticeship program standards of 29
CFR part 29. For a program to be
determined by the DOL as conforming
with the standards under 29 CFR part
29, the program must apply for
registration and be registered with the
DOL OA or with a State apprenticeship
agency recognized by the DOL OA. 29
CFR 29.2 defines a State apprenticeship
agency to mean an agency of a State
government that has responsibility and
accountability for apprenticeship within
the State. 29 CFR 29.2 specifies that
only a State apprenticeship agency may
seek recognition by the DOL OA as an
agency that has been properly
constituted under an acceptable law or
Executive order, and authorized by the
DOL OA to register and oversee
apprenticeship programs. Thus, the
final regulations provide that a request
may be made to a registered
apprenticeship program that is either
registered by the DOL OA or a State
apprenticeship agency. Regardless of
whether the program is registered by the
DOL OA or a State apprenticeship
agency, the registered apprenticeship
program must meet the standards of 29
CFR parts 29 and 30.
A commenter recommended
expanding the Good Faith Effort
Exception to make allowances for
emergency circumstances during which
it may not be practicable or in the
public interest to ensure compliance
with the Apprenticeship Requirements,
such as during an unexpected outage
due to severe weather or operational
issues. The commenter explained that in
these circumstances, companies must be
able to restore service quickly to provide
critical fuel supplies.
The Treasury Department and the IRS
acknowledge that there may be
circumstances in which it will be
impractical to have qualified
apprentices perform work on the
qualified facility. However, the
Apprenticeship Requirements do not
require qualified apprentices to work at
all times. The Participation Requirement
only requires 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 to employ one or more
qualified apprentices to perform such
work. The Labor Hours Requirement
only requires taxpayers to ensure that
not less than a certain percentage (10
percent, 12.5 percent, or 15 percent,

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53235

depending on the date on which
construction began) of total labor hours
of the construction, alteration, or repair
work (including such work performed
by any contractor or subcontractor) with
respect to such facility, be performed by
qualified apprentices.
In other words, taxpayers have
flexibility in satisfying the Labor Hours
Requirement. Additionally, the
Apprenticeship Requirements apply
only to the construction of the qualified
facility (including alteration and repair
performed during construction), and not
to alteration or repair work conducted
after the facility is placed in service.
Because the Apprenticeship
Requirements do not apply to the
alteration or repair work after a facility
is placed in service and because the
Labor Hours Requirement only requires
qualified apprentices to perform a
certain percentage of work, the Treasury
Department and the IRS have
determined that the Good Faith Effort
Exception does not need to be expanded
to make allowances for emergency
circumstances contemplated by the
commenter.
One commenter requested that the
Treasury Department and the IRS grant
a Good Faith Effort Exception in
situations in which taxpayers are denied
qualified apprentices because States
have illegally and unjustifiably delayed
or denied registration of apprenticeship
programs. The Good Faith Effort
Exception requires a request to a
registered apprenticeship program. If
the apprenticeship program is not
registered, the denial of or nonresponse
to that request is irrelevant for purposes
of the Good Faith Effort Exception. The
Treasury Department and the IRS
decline to adopt an exception from that
rule based on the reasons an
apprenticeship program is denied
registration.
Commenters asked for clarification
regarding the operation of the Good
Faith Effort Exception for employers
that do not participate in registered
apprenticeship programs that share a
‘‘pool’’ of qualified apprentices. The
Treasury Department and the IRS are
interpreting these comment letters as
referring to group registered
apprenticeship programs, under which
the registered apprenticeship program
places qualified apprentices with
multiple-employer participants. One
commenter stated that many
construction firms typically sponsor an
existing employee’s apprenticeship
through an association, communitybased, or employer-run registered
apprenticeship programs and the
commenter was concerned that the

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Good Faith Effort Exception would not
align with those existing practices.
Section 45(b)(8)(D)(ii) provides that
taxpayers are deemed to satisfy the
Apprenticeship Requirements if they
have requested qualified apprentices
from a registered apprenticeship
program and such request has been
denied or if the registered
apprenticeship program fails to respond
within five business days of receiving a
request. The Proposed Regulations
would have provided that a taxpayer,
contractor, or subcontractor must
submit a written request to at least one
registered apprenticeship program that
has a usual and customary business
practice of entering into agreements
with employers for the placement of
qualified apprentices in the occupation
for which they are training.
The Treasury Department and the IRS
recognize that many contractors
currently sponsor existing employees
through registered apprenticeship
programs, and hours worked by those
employees may satisfy the
Apprenticeship Requirements, provided
all requirements are met. However, as
discussed in Section VII.B.1.c. of this
Summary of Explanations and
Revisions, if a taxpayer, contractor, or
subcontractor is a registered
apprenticeship program sponsor and
there are no available qualified
apprentices in the registered
apprenticeship program sponsored by
the taxpayer, contractor, or
subcontractor, then the taxpayer,
contractor, or subcontractor may only
qualify for the Good Faith Effort
Exception by demonstrating that it made
a request to another registered
apprenticeship program (and such
request was denied or not responded to
within five business days) or by
establishing that there are no other
registered apprenticeship programs with
an area of operation that includes the
location of the facility. The final
regulations clarify this requirement.
A commenter asked the Treasury
Department and the IRS to consider
requiring the DOL OA or the
appropriate State apprenticeship agency
representative to sign off on a taxpayer’s
satisfaction of the Good Faith Effort
Exception. As discussed in Section V.A.
of this Summary of Comments and
Explanation of Revisions, the taxpayer
is ultimately responsible for ensuring
compliance with the PWA
requirements, including exceptions to
the requirements such as the Good Faith
Effort Exception, and may not rely on
other parties, the DOL OA, or State
apprenticeship agencies to certify
compliance. Consequently, the final
regulations do not adopt this suggestion.

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The final regulations provide that
contacting the DOL OA or a State
apprenticeship agency for assistance in
locating a registered apprenticeship
program may be a factor for purposes of
determining intentional disregard.
A commenter suggested requiring
taxpayers relying on the Good Faith
Effort Exception to summarize their
good faith efforts as part of their
reporting to the IRS. As an example, the
commenter stated that taxpayers could
list the registered apprenticeship
programs from which they requested
qualified apprentices, the dates of their
requests, and any reasons that their
requests were denied. The final
regulations retain the requirement from
the Proposed Regulations that taxpayers
must maintain and preserve sufficient
records to demonstrate compliance with
the PWA requirements, and if the
taxpayer is relying on the Good Faith
Effort Exception, this includes any
written requests for the employment of
qualified apprentices from registered
apprenticeship programs and all
correspondence with the registered
apprenticeship program regarding the
request, including denials of such
requests. Whether, and to what extent
information must be provided to the IRS
at filing will be addressed in IRS forms,
instructions, and publications.
Some commenters suggested that to
qualify for the Good Faith Effort
Exception, taxpayers, contactors, or
subcontractors should develop and
submit apprenticeship utilization plans
to the Treasury Department. The
Treasury Department and the IRS
decline to include this requirement in
the final regulations because such rules
would not further tax administration
and are not required by the statute.
While an apprenticeship utilization
plan is not required for the Good Faith
Effort Exception, the existence of a
utilization plan may assist taxpayers in
requesting qualified apprentices from a
registered apprenticeship program and
the final regulations provide that the
development and use of an
apprenticeship utilization plan is a
factor the IRS will consider in
determining whether the failure to
satisfy the Apprenticeship
Requirements is due to intentional
disregard.
2. Apprenticeship Cure Provision
a. General Procedures
Commenters requested additional
guidance concerning the
Apprenticeship Cure Provision.
Specifically, comments asked if there is
a deadline for the penalty payment
provided by section 45(b)(8)(D)(i)(II) to

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cure any failure to satisfy the Labor
Hours Requirement and Participation
Requirement, and whether, for such
penalties, the IRS would issue a final
determination consistent with the
Prevailing Wage Requirements, a
statutory notice of deficiency, or other
notice to the taxpayer regarding this
penalty. The Treasury Department and
the IRS understand the need for
clarification regarding the deadline to
make the penalty payment required by
the Apprenticeship Cure Provision.
With respect to failures to pay wages
at rates not less than the prevailing
rates, section 45(b)(7)(B)(iv) provides
that the taxpayer must make required
correction and penalty payments within
180 days after a final determination to
be eligible for the increased credit
amount. There is no similar statutory
requirement in the Apprenticeship Cure
Provision. Further, section
45(b)(7)(B)(ii) provides that Subchapter
B of chapter 63 (relating to deficiency
procedures for income, estate, gift, and
certain excise taxes) does not apply with
respect to the assessment or collection
of any penalty imposed by section
45(b)(7) with respect to the Prevailing
Wage Requirements. Section 45(b)(8)
does not provide a similar exception to
the deficiency procedures with respect
to the Apprenticeship Cure Provision.
The final regulations clarify that there is
no specific deadline for payment of the
penalty required by the Apprenticeship
Cure Provision. The deficiency
procedures apply to the penalty
payments for the failure to satisfy the
Apprenticeship Requirements. Although
there is no specific statutory deadline
for payment of the penalty, as discussed
in Section VII.D.3. of this Summary of
Comments and Explanation of
Revisions, if a taxpayer makes the
necessary penalty payments before the
taxpayer receives notice of an
examination from the IRS with respect
to a claim for the increased credit
amount under section 45(b)(6), the
taxpayer will be presumed not to have
intentionally disregarded the
Apprenticeship Requirements.
At least one commenter suggested
clarifying whether the Treasury
Department and the IRS intended to
double-count the penalty with respect to
any given labor hour if the taxpayer fails
to meet both the Labor Hours
Requirement and Participation
Requirement. The Proposed Regulations
would have provided that if a taxpayer
fails both the Labor Hours Requirement
and the Participation Requirement the
penalty would equal the sum of the
penalty for the failure to meet the Labor
Hours Requirement plus the penalty for
failure to meet the Participation

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Requirement. The penalty provision of
section 45(b)(8)(D)(i)(II) provides that
the penalty applies to any failure by the
taxpayer to satisfy the Labor Hours
Requirement under section 45(b)(8)(A)
and the Participation Requirement
under section 45(b)(8)(C). The use of
‘‘any failure’’ reflects a broad scope such
that taxpayers may be subject to
penalties for failure to meet the Labor
Hours Requirement and the
Participation Requirement with respect
to the same facility.
One commenter requested that the
Treasury Department and the IRS
exercise discretion to decline to impose
penalties for any failure to satisfy the
Participation Requirement with respect
to any contractor or subcontractor that
qualifies as a small business under the
U.S. Small Business Administration’s
guidance. Although the Treasury
Department and the IRS appreciate the
concern for small businesses, the
Participation Requirement in section
45(b)(8)(C) applies to 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. The
final regulations retain the proposed
rule consistent with this statutory
language.
b. Intentional Disregard
The Proposed Regulations would have
provided that failures to meet the
Apprenticeship Requirements would be
due to intentional disregard, and subject
to enhanced penalty amounts, if the
failure is knowing or willful,
considering all relevant facts and
circumstances. The Proposed
Regulations would have provided a nonexhaustive list of facts and
circumstances that may be relevant to
determining whether the failure was
knowing or willful.
In assessing intentional disregard,
commenters recommended considering
whether the taxpayer: (i) used and
complied with an apprenticeship
utilization plan; (ii) failed to require
contractors and subcontractors to
forward to the taxpayer all requests to
registered apprenticeship programs for
qualified apprentices within five
business days of when the requests were
made; (iii) failed to audit requests to
registered apprenticeship programs for
qualified apprentices to ensure
compliance with the labor hours,
participation, and ratio obligations in
the Apprenticeship Requirements; and
(iv) abided by anti-retaliation
procedures. The Proposed Regulations
would have provided that the failure to
meet the Labor Hours Requirement or

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the Participation Requirement would be
due to intentional disregard if the
failure was knowing or willful. The
determination that a failure was
knowing or willful will be made by
considering all the relevant facts and
circumstances.
The final regulations provide a nonexhaustive list of facts and
circumstances that may be relevant to
determine whether the failure was
knowing or willful. The Treasury
Department and the IRS agree that the
following factors are relevant and may
be considered in determining whether a
failure was due to intentional disregard:
(i) the taxpayer’s use of and compliance
with an apprenticeship utilization plan;
(ii) the taxpayer requiring contractors
and subcontractors to forward to the
taxpayer requests to registered
apprenticeship programs within five
business days of when requests are
made; (iii) whether taxpayers regularly
reviewed contractors’ and
subcontractors’ use of qualified
apprentices; and (iv) investigating
complaints concerning failures to
comply with the Apprenticeship
Requirements and complaints
concerning retaliation. The final
regulations incorporate these additional
factors and other clarifying edits
consistent with the intentional disregard
factors in § 1.45–7(c)(3) that are
applicable to the Prevailing Wage
Requirements. Intentional disregard for
purposes of the Prevailing Wage
Requirements is discussed in Section
VII.D.3. of this Summary of Comments
and Explanation of Revisions.
A commenter recommended that a
taxpayer who is found to have failed the
Good Faith Effort Exception, be
presumed to have done so with
intentional disregard. The Good Faith
Effort Exception is intended to provide
relief for taxpayers, contractors, and
subcontractors who were unable to
employ qualified apprentices despite
making valid requests for qualified
apprentices to registered apprenticeship
programs. The failure to qualify for the
Good Faith Effort Exception does not
create a presumption of intentional
disregard because the intentional
disregard provisions are only relevant if
the taxpayer has otherwise failed to
meet the Apprenticeship Requirements.
Thus, the Treasury Department and the
IRS decline to adopt the commenter’s
suggestion.
A commenter suggested that the
Treasury Department and the IRS adopt
a presumption that the taxpayer did not
act in good faith if a labor union or
representative of a registered
apprenticeship program contacted the
taxpayer, contractor, or subcontractor

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and made them aware of the
apprenticeship requirement and the
availability of qualified apprentices and
was ignored. The Treasury Department
and the IRS decline to adopt this
recommendation. The Proposed
Regulations would have provided a nonexhaustive list of facts and
circumstances considered to determine
whether a failure to satisfy the
Apprenticeship Requirements is due to
intentional disregard. If a taxpayer
makes a request for qualified
apprentices to a registered
apprenticeship program and the
registered apprenticeship program
informs the taxpayer of available
qualified apprentices, but the taxpayer
does not employ the available qualified
apprentices and fails to satisfy the
Apprenticeship Requirements, then the
taxpayer’s refusal to employ the
available qualified apprentices could be
considered in determining whether the
taxpayer’s failure was due to intentional
disregard. However, if labor unions or
representatives of registered
apprenticeship programs are reaching
out to taxpayers regarding the
Apprenticeship Requirements and the
availability of qualified apprentices and
taxpayers ignore these solicitations,
taxpayers will not automatically be
deemed to have acted with intentional
disregard.
IX. Applying the PWA Provisions for
Increased Amounts of Credit and
Deduction Under Other Code Sections
The majority of the comments the
Treasury Department and the IRS
received relate to the general
application of the PWA requirements
across multiple Code sections, and those
comments have been addressed in
Sections I. through VIII. of this
Summary of Comments and Explanation
of Revisions. Additional comments that
relate solely to specific Code sections
are discussed in this Section IX. of this
Summary of Comments and Explanation
of Revisions.
A. Section 30C
Section 30C provides a credit for the
cost of any qualified alternative fuel
vehicle refueling property placed in
service during the taxable year. For
properties placed in service before
January 1, 2023, the credit is equal to 30
percent. For properties placed in service
after December 31, 2022, the credit is
equal to 30 percent (6 percent for
property of a character subject to
depreciation). If a taxpayer satisfies the
PWA requirements in sections 30C(g)(2)
and (3) or meets the BOC Exception
with respect to a qualified alternative
fuel vehicle refueling project, then the

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credit determined under section 30C(a)
for any qualified alternative fuel vehicle
refueling property of a character subject
to an allowance for depreciation that is
part of such project is multiplied by
five. For purposes of the PWA
requirements, section 30C(g)(1)(B)
defines a qualified alternative fuel
vehicle refueling project as a project
consisting of one or more properties that
are part of a single project. The
Prevailing Wage Requirements in
section 30C(g)(2)(A) are that the
taxpayer ensure that laborers and
mechanics employed by the taxpayer or
any contractor or subcontractor in the
construction of any qualified alternative
fuel vehicle refueling property that is
part of a qualified alternative fuel
vehicle refueling project are paid wages
at rates not less than prevailing rates.
Under section 30(c)(g)(3), rules similar
to the rules in section 45(b)(8) apply
regarding the Apprenticeship
Requirements.
Proposed § 1.30C–3(b) would have
provided that a qualified alternative fuel
vehicle refueling project would satisfy
the PWA requirements for the increased
credit amount if the project either
begins construction prior to January 29,
2023, or meets the Prevailing Wage
Requirements of section 45(b)(7) and
proposed § 1.45–7, the Apprenticeship
Requirements of section 45(b)(8) and
proposed § 1.45–8, and the
recordkeeping and reporting
requirements of proposed § 1.45–12.
Commenters asked whether crossreferences in proposed § 1.30C–3(b)(2)
to sections 45(b)(7) and 45(b)(8) meant
that PWA requirements apply to
alteration or repair work after a
qualified property is placed in service
under section 30C. Commenters asserted
that the statutory text of section
30C(g)(2)(A) limits the PWA
requirements only to the construction of
any qualified alternative fuel vehicle
refueling property. Commenters also
stated the impracticality of imposing
PWA requirements under section 30C
after qualified alternative fuel vehicle
refueling property is placed in service.
Commenters emphasized that alteration
or repair work of such property often
requires a trained technician due to the
necessary skill sets for both the
hardware and software characteristics of
the charging property. Commenters
further stated that requesting and
waiting for qualified apprentices in
order to complete alteration or repair
work could imperil a taxpayer’s ability
to comply with national uptime
requirements implemented by the
Department of Transportation through
the National Electric Vehicle
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Section 30C(g)(2)(A) states that the
Prevailing Wage Requirements apply in
the construction of any qualified
alternative fuel vehicle refueling
property that is part of a qualified
alternative fuel vehicle refueling project.
Nothing in section 30C requires the
payment of prevailing wages with
respect to alterations or repairs after the
property is placed in service. By
contrast, section 45(b)(7)(A) provides
that the Prevailing Wage Requirements
apply in the construction of a facility
and to the alteration and repair of the
facility in the 10-year period after
placed in service. The final regulations
clarify that the Prevailing Wage
Requirements do not apply after a
section 30C project is placed in service.
The applicable scope of the PWA
requirements is explained in Section VI.
of this Summary of Comments and
Explanation of Revisions. As explained
in Section VIII.A.1. of this Summary of
Comments and Explanation of
Revisions, the Apprenticeship
Requirements apply only during the
construction of the qualified alternative
fuel vehicle refueling property that is
part of a qualified alternative fuel
vehicle refueling project (including
alterations and repairs that occur during
construction) and not with respect to
any alteration or repair after a section
30C project is placed in service. Under
the transition rule described in Section
II. of this Summary of Comments and
Explanation of Revisions, the PWA
requirements do not apply to any work
performed before January 29, 2023.
Another commenter suggested that
the Treasury Department and the IRS
consider aligning the implementation of
PWA requirements for section 30C
projects with forthcoming guidance on
section 30C eligible census tracts. On
January 19, 2024, the Treasury
Department and the IRS issued Notice
2024–20 providing notice of intent to
propose regulations on eligible census
tracts under section 30C. Notice 2024–
20 does not address the application of
PWA requirements under section 30C.
Guidance concerning eligible census
tracts under section 30C is outside the
scope of these final regulations.
B. Section 45L
Section 45L provides a credit for a
qualified new energy efficient home
(qualified home) that is constructed by
an eligible contractor and acquired by a
person from that eligible contractor for
use as a residence during the taxable
year. In the case of a qualifying
residence that meets the Prevailing
Wage Requirements, section 45L(g)(1)
provides an increased credit amount.
The Prevailing Wage Requirements in

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section 45L(g)(2)(A) are that the
taxpayer must ensure that laborers and
mechanics employed by the taxpayer or
any contractor or subcontractor in the
construction of any qualified residence
are paid wages at rates not less than
prevailing rates.
Proposed § 1.45L–3(a) would have
provided that with respect to a qualified
home, the credit determined under
section 45L(a)(2)(B)(i) is $2,500 and the
credit determined under section
45L(a)(2)(B)(ii) is $5,000 if the qualified
home meets the requirements under
section 45L(c)(1)(A) or 45L(c)(1)(B), as
applicable; is constructed by an eligible
contractor; is acquired by a person for
use as a residence during the taxable
year; and satisfies the Prevailing Wage
Requirements of section 45(b)(7) and
proposed § 1.45–7, and the
recordkeeping and reporting
requirements of proposed § 1.45–12.
One commenter stated that the
Proposed Regulations may have
erroneously incorporated the
requirement in proposed § 1.45–7(a) to
pay prevailing wages during the 10-year
period after a facility is placed in
service and requested that the final
regulations specify whether the PWA
requirements apply after a facility is
placed in service.
Section 45L(g)(2)(A) provides that the
Prevailing Wage Requirements apply
‘‘in the construction of such residence.’’
Nothing in section 45L requires the
payment of prevailing wages with
respect to alterations or repairs after
construction of a qualified residence
ends. For the reasons described in
Section IX.A. of this Summary of
Comments and Explanation of
Revisions, the final regulations clarify
that the Prevailing Wage Requirements
under section 45L do not apply after
construction of a qualified residence
ends. The applicable scope of the
Prevailing Wage Requirements is
explained in Section VI. of this
Summary of Comments and Explanation
of Revisions. Under the transition rule
described in Section II. of this Summary
of Comments and Explanation of
Revisions, the Prevailing Wage
Requirements do not apply to any work
performed before January 29, 2023.
C. Section 45Q
Section 45Q provides a credit for the
capture and sequestration of qualified
carbon oxide using equipment placed in
service at a qualified facility. Section
45Q(h) provides an increased credit
amount for qualified facilities or any
carbon capture equipment placed in
service or installed at such facilities that
satisfies the PWA requirements.

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Proposed § 1.45Q–6(b)(1) would have
provided that to claim the increased
credit amount with respect to a
qualified facility the construction of
which begins on or after January 29,
2023, and any carbon capture
equipment placed in service at such
facility, the taxpayer must meet the
Prevailing Wage Requirements of
section 45(b)(7) and proposed § 1.45–7
with respect to such facility and
equipment, the Apprenticeship
Requirements of section 45(b)(8) and
proposed § 1.45–8 with respect to the
construction of such facility and
equipment, and the recordkeeping and
reporting requirements of proposed
§ 1.45–12.
Proposed § 1.45Q–6(b)(2) would have
provided that to claim the increased
credit amount with respect to any
carbon capture equipment the
construction of which begins on or after
January 29, 2023, and that is installed at
a qualified facility the construction of
which began prior to such date, the
taxpayer must meet the Prevailing Wage
Requirements of section 45(b)(7) and
proposed § 1.45–7 with respect to such
equipment, the Apprenticeship
Requirements of section 45(b)(8) and
proposed § 1.45–8 with respect to the
construction of such equipment, and the
recordkeeping and reporting
requirements of proposed § 1.45–12.
Proposed § 1.45Q–6(b)(3) would have
provided that to claim the increased
credit amount a taxpayer does not need
to meet the PWA requirements with
respect to the construction of carbon
capture equipment the construction of
which begins prior to January 29, 2023,
provided that such equipment is
installed at a qualified facility the
construction of which also begins prior
to January 29, 2023.
Commenters sought clarification
regarding the application of PWA
requirements to construction of a
qualified facility the construction of
which begins on or after January 29,
2023. Commenters opined that section
45Q(h)(2)(A) could be interpreted to
apply the PWA requirements with
respect to construction of a facility
before it is known or even expected to
be within the definition of a qualified
facility. Commenters argued that this
would equate to a retroactive
application of the PWA requirements
and may have a negative impact on the
construction of these facilities.
Commenters stated that facilities may be
built in 2023, but the decision to
construct and install carbon capture
equipment can come later as
technologies develop. Commenters
argued that a retroactive application of
PWA requirements would put an end to

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investment in this area. At least one
commenter also contended that the
penalty and cure provisions built into
the PWA requirements would be a far
from certain means to secure the
increased credit amount under section
45Q. The commenter stated that
construction contracts for facilities with
no plans for carbon capture would have
no reason to require contractors to retain
and disclose wage and apprenticeship
information to the taxpayer. Without
such information, the taxpayer would be
unable to later determine the applicable
correction and penalty payments.
Section 45Q(h)(2)(A) states that to
qualify for the increased credit amount,
the taxpayer must satisfy the PWA
requirements with respect to the
construction of any qualified facility the
construction of which begins on or after
January 29, 2023, as well as any carbon
capture equipment placed in service at
such facility. Under section 45Q(d), a
facility may be a qualified facility, even
if carbon capture equipment was not
included in its original planning and
design, so long as construction of the
facility and carbon capture equipment
begins before January 1, 2033. There is
no exception from the PWA
requirements if the construction of the
qualified facility begins on or after
January 29, 2023. The commenters’
suggestions are not adopted in the final
regulations.
One commenter stated that the
definition of a qualified facility could be
construed as requiring taxpayers to
satisfy the PWA requirements with
respect to the entire facility even if only
a small portion of the facility is
responsible for the carbon oxide
emission stream. Similarly, a
commenter recommended clarifying
that the scope of construction,
alteration, or repair work only applies to
the single process train of carbon
capture equipment as defined in
§ 1.45Q–2(c)(3), and is not inclusive of
any other construction, alteration, or
repair work performed at the facility or
plant. The applicable scope of the PWA
requirements is explained in Section VI.
of this Summary of Comments and
Explanation of Revisions.
Another commenter stated that
proposed § 1.45Q–6(b) would have
erroneously incorporated the
requirement in section 45(b)(7) and
proposed § 1.45–7 to pay prevailing
wages for the alteration or repair of a
facility during the 10-year period after a
facility is placed in service, even though
section 45Q(h)(3)(A)(ii) prescribes the
payment of prevailing wages for
alteration or repair during the 12-year
period beginning on the date the
equipment was originally placed in

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service. The final regulations clarify that
the Prevailing Wage Requirements
under section 45Q apply with respect to
the alteration or repair of a qualified
facility or carbon capture equipment
placed in service at such facility during
the applicable 12-year period. As
explained in Section VIII.A.1. of this
Summary of Comments and Explanation
of Revisions, the Apprenticeship
Requirements apply only during the
construction of the facility and not with
respect to any alteration or repair after
a facility is placed in service. Under the
transition rule described in Section II. of
this Summary of Comments and
Explanation of Revisions, the PWA
requirements do not apply to any work
performed before January 29, 2023.
D. Section 45U
Section 45U provides a credit for
electricity produced by the taxpayer at
a qualified nuclear power facility (as
defined in section 45U(b)(1)) and sold
by the taxpayer to an unrelated person
during the taxable year. Generally, for
taxable years beginning after December
31, 2023, the credit is equal to the
amount by which the product of 0.3
cents multiplied by the kilowatt hours
of electricity produced by the taxpayer
at a qualified nuclear power facility and
sold by the taxpayer to an unrelated
person during the taxable year exceeds
the reduction amount (as determined
under section 45(b)(2)) for such taxable
year. Under section 45U(d), if a taxpayer
satisfies the Prevailing Wage
Requirements with respect to a qualified
nuclear power facility, then the credit
determined under section 45U(a) for the
qualified nuclear power facility is
multiplied by five. Under section
45U(d)(2)(A), the Prevailing Wage
Requirements apply to the alteration or
repair of any qualified nuclear power
facility.
Proposed § 1.45U–3(a) would have
provided that the amount of the zeroemission nuclear power production
credit for the taxable year is equal to the
credit amount determined under section
45U(a) multiplied by five, if a qualified
nuclear power facility satisfies the
Prevailing Wage Requirements of
section 45(b)(7) and proposed § 1.45–7
in the alteration or repair of such
facility, and the recordkeeping and
reporting requirements of proposed
§ 1.45–12.
One commenter suggested that the
final regulations create an exception
from the Prevailing Wage Requirements
under section 45U for taxpayers,
contractors, and subcontractors who
have fewer than 25 employees. There is
no statutory exception for employers of
less than 25 individuals and, consistent

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with the statute, the final regulations do
not adopt one.
The applicable scope of the Prevailing
Wage Requirements is explained in
Section VI. of this Summary of
Comments and Explanation of
Revisions. As discussed in Section II. of
this Summary of Comments and
Explanation of Revisions, a transition
rule is unnecessary because the
Prevailing Wage Requirements under
section 45U apply to electricity
produced and sold after December 31,
2023, in taxable years beginning after
such date. The Treasury Department
and the IRS interpret section 13105(c) of
the IRA as providing that the Prevailing
Wage Requirements only apply to
alterations or repairs of a qualified
nuclear power facility occurring in
taxable years beginning after December
31, 2023. The final regulations are
clarified to reflect the statutory effective
date under section 45U of the Code for
alteration and repairs. Finally, as
explained in Section V.D. of this
Summary of Comments and Explanation
of Revisions, the final rules include a
definition of ‘‘qualifying project labor
agreement’’ that is modified specifically
for the purposes of section 45U.
E. Section 45V
Section 45V provides a credit for the
production of qualified clean hydrogen
by the taxpayer during the taxable year
at a qualified clean hydrogen
production facility during the 10-year
period beginning on the date the facility
was originally placed in service.
Proposed § 1.45V–3(b)(1) would have
provided that with respect to a facility
the construction of which began prior to
January 29, 2023, the taxpayer must
meet the Prevailing Wage Requirements
of section 45(b)(7) and proposed § 1.45–
7 with respect to an alteration or repair
of the facility that occurs after January
29, 2023 (to the extent applicable), and
must meet the recordkeeping and
reporting requirements of proposed
§ 1.45–12, in order to claim the
increased credit amount. Proposed
§ 1.45V–3(b)(2) would have provided
that with respect to a facility, a taxpayer
must meet the Prevailing Wage
Requirements of section 45(b)(7) and
proposed § 1.45–7, the Apprenticeship
Requirements of section 45(b)(8) and
proposed § 1.45–8, and the
recordkeeping and reporting
requirements of proposed § 1.45–12 in
order to claim the increased credit
amount.
No comments were received
specifically pertaining to proposed
§ 1.45V–3. The applicable scope of the
PWA requirements is explained in
Section VI. of this Summary of

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Comments and Explanation of
Revisions. As explained in Section
VIII.A.1. of this Summary of Comments
and Explanation of Revisions, the
Apprenticeship Requirements apply
only during the construction of the
facility and not with respect to any
alteration or repair after a facility is
placed in service. Under the transition
rule described in Section II. of this
Summary of Comments and Explanation
of Revisions, the PWA requirements do
not apply to any work performed before
January 29, 2023. Proposed § 1.45V–3 is
otherwise adopted without change.
F. Section 45Y
Section 45Y provides a credit for
clean electricity produced by the
taxpayer at a qualified facility and sold
to an unrelated person, or in the case of
a qualified facility that is equipped with
a metering device that is owned and
operated by an unrelated person, sold,
consumed, or stored by the taxpayer
during the taxable year, for facilities
placed in service after December 31,
2024. Generally, the credit for any
taxable year is the product of the
kilowatt hours of electricity multiplied
by either: (i) 0.3 cents (the base amount
under section 45Y(a)(2)(A)); or (ii) 1.5
cents (the alternative amount under
section 45Y(a)(2)(B)) for certain
qualified facilities. Under section
45Y(c), both the base amount and the
alternative amount are adjusted for
inflation in years beginning after 2024.
Proposed § 1.45Y–3(a) would have
provided that the amount of the credit
for producing clean electricity
determined under section 45Y(a)(2)
equals 1.5 cents if any qualified clean
electricity production facility satisfies
the requirements of proposed § 1.45Y–
3(b). Proposed § 1.45Y–3(b) would have
provided that a qualified facility
satisfies the PWA requirements by
having a maximum net output of less
than one megawatt (as measured in
alternating current), or beginning
construction prior to January 29, 2023,
or meeting the Prevailing Wage
Requirements of section 45(b)(7) and
proposed § 1.45–7, the Apprenticeship
Requirements of section 45(b)(8) and
proposed § 1.45–8, and the
recordkeeping and reporting
requirements of proposed § 1.45–12.
Commenters suggested definitions
regarding the One Megawatt Exception
for purposes of section 45Y and
requested clarifications with respect to
determining nameplate capacity. A few
commenters suggested testing
methodologies for purposes of the
greenhouse gas emissions rate under
section 45Y(b)(2) and specific
approaches for publishing those

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emissions rates under section
45Y(b)(2)(C)(i). Comments regarding the
One Megawatt Exception for the
purposes of section 45Y will be
addressed in future guidance under
section 45Y finalizing those rules.
The applicable scope of the PWA
requirements is explained in Section VI.
of this Summary of Comments and
Explanation of Revisions. As explained
in Section VIII.A.1. of this Summary of
Comments and Explanation of
Revisions, the Apprenticeship
Requirements apply only during the
construction of the facility (including
alterations and repairs that occur during
construction) and not with respect to
any alteration or repair after a facility is
placed in service. Under the transition
rule described in Section II. of this
Summary of Comments and Explanation
of Revisions, the PWA requirements do
not apply to any work performed before
January 29, 2023. The final regulations
also clarify that for certain facilities, the
applicable amount determined under
section 45Y(a)(2) is the alternative
amount described in section
45Y(a)(2)(B), subject to adjustment for
inflation as provided by section 45Y(c).
Proposed § 1.45Y–3 is otherwise
adopted without change.
G. Section 45Z
Section 45Z provides a credit for
clean transportation fuel produced by
the taxpayer at a qualified facility after
December 31, 2024, and sold to an
unrelated person in a manner described
in section 45Z(a)(4). Generally, the
credit is the product of the applicable
amount (determined under section
45Z(a)(2) and (3)) per gallon (or gallon
equivalent) of transportation fuel
multiplied by the emissions factor for
the fuel (determined under section
45Z(b)). If a taxpayer satisfies the PWA
requirements in sections 45Z(f)(6) and
(7), then the applicable amount is $1.00
for transportation fuel that is not a
sustainable aviation fuel (non-SAF)
(determined under section 45Z(a)(2)(B))
and $1.75 for transportation fuel that is
a sustainable aviation fuel (SAF)
(determined under section
45Z(a)(3)(A)(ii)). If the taxpayer does not
satisfy the PWA requirements in section
45Z(f)(6) and (7), the applicable amount
is 20 cents for non-SAF and 35 cents for
SAF. Under section 45Z(c), the
applicable amounts are adjusted for
inflation in years beginning after 2024.
In general, section 45Z(f)(6)(A)
provides that rules similar to section
45(b)(7) apply for purposes of the
Prevailing Wage Requirements. Section
45Z(f)(7) provides that rules similar to
section 45(b)(8) apply for purposes of
the Apprenticeship Requirements.

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Section 45Z(f)(6)(B) provides a special
rule for a facility placed in service
before January 1, 2025. Under this rule,
if a facility is placed in service before
January 1, 2025, the taxpayer is not
subject to the Prevailing Wage
Requirements with respect to the
construction of the facility but is subject
to the Prevailing Wage Requirements for
the alteration or repair of the facility
with respect to any taxable year
beginning after December 31, 2024, for
which the section 45Z credit is allowed.
Section 13704(c) of the IRA provides
that these provisions are effective for
transportation fuel produced after
December 31, 2024.
Proposed § 1.45Z–3(b)(1) would have
provided that a qualified facility that
begins construction on or after January
29, 2023, and is placed in service after
December 31, 2024, satisfies the
requirements for the increased credit
under section 45Z of the Code if it meets
the Prevailing Wage Requirements of
section 45(b)(7) and proposed § 1.45–7,
the Apprenticeship Requirements of
section 45(b)(8) and proposed § 1.45–8,
and the recordkeeping and reporting
requirements of proposed § 1.45–12.
Proposed § 1.45Z–3(b)(2) would have
provided that a qualified facility that is
placed in service before January 1, 2025,
satisfies the requirements for the
increased credit amount under section
45Z if it meets the Prevailing Wage
Requirements of section 45(b)(7) and
proposed § 1.45–7, the Apprenticeship
Requirements of section 45(b)(8) and
proposed § 1.45–8, and the
recordkeeping and reporting
requirements of proposed § 1.45–12,
with respect to any alteration or repair
of the facility with respect to any
taxable year beginning after December
31, 2024, for which the credit is allowed
under section 45Z.
With respect to the proposed rule in
§ 1.45Z–3(b)(1), commenters asked that
the final regulations clarify the
requirements for the increased credit
amount with respect to facilities that
begin construction before January 29,
2023, but are not placed in service until
after December 31, 2024. Commenters
asked whether the Proposed Regulations
intended to create a BOC Exception for
section 45Z. Some commenters
indicated support for a BOC Exception
for consistency with other increased
credit provisions, while others argued
that there is no statutory support for a
BOC Exception. Other commenters
generally requested transition relief
from the PWA requirements and
suggested that the final regulations
clarify proposed § 1.45Z–3(b)(1) to
remove the clause requiring

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construction on or after January 29,
2023.
In response to comments, the final
regulations modify the Proposed
Regulations in several respects. With
respect to the rule in proposed § 1.45Z–
3(b)(1) for facilities placed in service
after December 31, 2024, the final
regulations remove the clause requiring
construction on or after January 29,
2023. The Treasury Department and the
IRS agree that this language, which was
intended to provide transition relief
similar to that described in Section II. of
this Summary of Comments and
Explanation of Revisions, was
confusing. Taxpayers can satisfy the
requirements for the increased credit
amount regardless of whether
construction began before or after
January 29, 2023. The Treasury
Department and the IRS decline to
prescribe a BOC Exception through
regulation because Congress did not
statutorily provide for one. Under the
transition rule described in Section II. of
this Summary of Comments and
Explanation of Revisions, the PWA
requirements do not apply for any work
performed before January 29, 2023.
Thus, the final regulations provide that
for facilities placed in service on or after
January 1, 2025, taxpayers must meet
the Prevailing Wage Requirements, but
only for construction, alteration, and
repair work performed on or after
January 29, 2023.
Regarding the special rule proposed
in § 1.45Z–3(b)(2) for facilities placed in
service before January 1, 2025,
commenters requested that the final
regulations clarify that the special rule
in section 45Z(f)(6)(B) applies to all
facilities placed in service before
January 1, 2025, regardless of whether
construction began before January 29,
2023. The final regulations confirm that
with respect to all facilities placed in
service before January 1, 2025
(regardless of when construction began),
the Prevailing Wage Requirements do
not apply with respect to construction,
but taxpayers must satisfy the Prevailing
Wage Requirements with respect to any
alteration or repair of the facility for
taxable years beginning after December
31, 2024, for which the credit is
allowed.
At least one commenter asserted that
the special rule in section 45Z(f)(6)(B)
also includes an exception from the
Apprenticeship Requirements for
facilities placed in service before
January 1, 2025. Section 45Z(f)(6)(A)
provides that, ‘‘[s]ubject to [the special
rule of] subparagraph (B), rules similar
to the [prevailing wage] rules of section
45(b)(7) shall apply.’’ Section 45Z(f)(7)
provides that ‘‘[r]ules similar to the

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apprenticeship requirement rules of
section 45(b)(8) shall apply.’’ Under
section 13101(k) of the IRA, the rules of
section 45(b)(7) and 45(b)(8) apply with
respect to facilities that are placed in
service after December 31, 2021. Thus,
the Treasury Department and the IRS
interpret the PWA requirements of
sections 45Z(f)(6) and 45Z(f)(7)
generally as applying to any qualified
facility that is placed in service after
December 31, 2021, subject to the
transition rule described in Section II. of
this Summary of Comments and
Explanation of Revisions. There is no
exception to the Apprenticeship
Requirements in section 45Z(f)(7),
regardless of whether a facility is placed
in service before, on, or after January 1,
2025. In the absence of a statutory basis,
the Treasury Department and the IRS do
not provide an exception to the
Apprenticeship Requirements in the
final regulations.
While there is no statutory basis to
except taxpayers from the
Apprenticeship Requirements in section
45Z, the Treasury Department and the
IRS agree that the proposed rule caused
confusion for taxpayers that intend to
place a qualified facility in service
before January 1, 2025. The Proposed
Regulations suggested that taxpayers
that placed a qualified facility in service
before January 1, 2025, must only satisfy
the Prevailing Wage Requirements and
the Apprenticeship Requirements with
respect to alterations and repairs that
occur in taxable years beginning after
December 31, 2024. This incorrectly
suggested that there was an
Apprenticeship Requirement with
respect to alterations and repairs to a
facility after it is placed in service and
did not address whether the
construction of a qualified facility is
subject to the Apprenticeship
Requirements prior to the facility being
placed in service.
In recognition of the confusion
created by the Proposed Regulations, the
final regulations provide additional
transition relief under section 45Z for
taxpayers who relied on the Proposed
Regulations with respect to the
Apprenticeship Requirements for
facilities placed in service before
January 1, 2025. In general, the final
regulations allow taxpayers to continue
to rely on the Proposed Regulations up
to the date these regulations are
published in the Federal Register. The
final regulations provide that taxpayers
may rely on proposed § 1.45Z–3(b)(2)
for an additional 90 days from the date
these regulations are published in the
Federal Register as transition relief from
the Apprenticeship Requirements. This
90-day period will provide taxpayers

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with time to locate and request qualified
apprentices from registered
apprenticeship programs for any
remaining construction work that occurs
after 90 days after the date these
regulations are published in the Federal
Register and before the facility is placed
in service. This transition relief does not
apply to facilities that are placed in
service after December 31, 2024. Such
facilities must comply with the
Prevailing Wage Requirements and the
Apprenticeship Requirements with
respect to construction, alteration, or
repair work beginning on or after
January 29, 2023.
A commenter asked for clarification
regarding the applicable amount used to
calculate the increased credit amount
under section 45Z if the PWA
requirements are satisfied. The
commenter requested that the
description of the credit amount in
proposed § 1.45Z–3(a) be amended to
clarify that the alternative applicable
amount of the credit is $1.00 per gallon
for non-SAF (and $1.75 for SAF) and
not $5.00 per gallon for non-SAF ($8.75
for SAF).
Section 45Z generally provides a base
applicable amount, and if the PWA
requirements are satisfied, an alternative
applicable amount that is five times the
base amount. The Treasury Department
and the IRS recognize that proposed
§ 1.45Z–3(a) could have been
interpreted to mean that the entire
increased credit amount determined
under section 45Z(a) should be
multiplied by five, rather than just the
base applicable amount. The final
regulations clarify that if the PWA
requirements are satisfied, then the
applicable amount is the alternative
applicable amount determined under
section 45Z(a)(2)(B) for non-SAF or
section 45Z(a)(3)(A)(ii) for SAF, each
subject to adjustments for inflation
under section 45Z(c).
H. Section 48C
Section 48C provides a credit for a
qualified investment in a qualifying
advanced energy project for that taxable
year (section 48C Credit). The IRA
added section 48C(e) to the Code,
extending the section 48C Credit to
provide an additional section 48C Credit
allocation of $10 billion. Generally, the
credit amount for section 48C Credits
allocated pursuant to section 48C(e) is
equal to six percent of the basis of the
eligible property. Under section
48C(e)(4), if a taxpayer satisfies the
PWA Requirements in section 48C(e)(5)
and (6) with respect to a qualifying
advance energy project, then the credit
amount determined under section
48C(a) is 30 percent.

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To satisfy the Prevailing Wage
Requirements under section
48C(e)(5)(A), a taxpayer must ensure
that with respect to a qualifying
advanced energy project, any laborers
and mechanics employed by the
taxpayer or any contractor or
subcontractor in the re-equipping,
expansion, or establishment of a
manufacturing facility are paid wages at
rates not less than the prevailing rates
for construction, alteration, or repair of
a similar character in the locality in
which the project is located. Section
48C(e)(5)(B) provides that rules similar
to section 45(b)(7)(B) apply for purposes
of the correction and penalty related to
the failure to satisfy the Prevailing Wage
Requirements. Section 48C(e)(6)
provides that rules similar to section
45(b)(8) apply for purposes of the
Apprenticeship Requirements.
A section 48C Credit allocation is
made after an application and project
certification. The extension of section
48C and the additional allocations
under section 48C(e) are effective on
January 1, 2023. The Treasury
Department and the IRS issued Notice
2023–18, 2023–10 I.R.B. 508, Notice
2023–44, 2023–25 I.R.B. 924, and Notice
2024–36, 2024–24 I.R.B. 1479, to
provide guidance under section 48C(e).
These notices provide a process for the
IRS to allocate section 48C Credits. To
prevent an overallocation of section 48C
Credits, section 5.07 of Notice 2023–18
requires a taxpayer that applies for a
section 48C Credit allocation at the 30
percent credit amount to confirm that
the taxpayer intends to satisfy the PWA
requirements. Section 5.07 of Notice
2023–18 additionally requires that if the
taxpayer provides notification that it
placed the project in service, the
taxpayer must also confirm that it
satisfied the PWA requirements.
The Proposed Regulations would have
provided that if a taxpayer satisfies both
the PWA requirements and the PWA
confirmation requirements provided in
Notice 2023–18 (or any subsequent
guidance), then the credit amount for
section 48C Credits allocated pursuant
to section 48C(e) of the Code would be
equal to 30 percent. Notice 2023–44
provides that a property placed in
service prior to being awarded a section
48C Credit under the section 48C(e)
program is not eligible to receive such
an allocation. It is possible that a
taxpayer will have performed work after
January 1, 2023, with respect to the
construction, alteration, or repair of a
qualifying advanced energy project and
before being awarded an allocation
under section 48C.
Proposed § 1.48C–3 would have
provided that the increased credit

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amount is available for any qualifying
advanced energy project that satisfies
the Prevailing Wage Requirements of
section 45(b)(7) and proposed § 1.45–7,
the Apprenticeship Requirements of
section 45(b)(8) and proposed § 1.45–8,
and the recordkeeping and reporting
requirements of proposed § 1.45–12.
One commenter stated that the
Proposed Regulations may have
erroneously incorporated the
requirement in proposed § 1.45–7(a) to
pay prevailing wages during the 10-year
period after a facility is placed in
service and requested that the final
regulations specify whether the PWA
requirements apply after a facility is
placed in service. Section 48C provides
that the Prevailing Wage Requirements
apply in the ‘‘re-equipping, expansion,
or establishment of a manufacturing
facility.’’ Nothing in section 48C
requires the payment of prevailing
wages with respect to alterations or
repairs after a qualifying advanced
energy project is placed in service. For
the reasons described in Sections
VIII.A.1. and IX.A. of this Summary of
Comments and Explanation of
Revisions, the final regulations amend
the Proposed Regulations to confirm
that the PWA requirements under
section 48C apply only during the reequipping, expansion, or establishment
of a qualifying advanced energy project
and not with respect to any alteration or
repair after a qualifying advanced
energy project is placed in service.
Under the transition rule described in
Section II. of this Summary of
Comments and Explanation of
Revisions, the PWA requirements do not
apply to any work performed before
January 29, 2023.
Additionally, a commenter requested
guidance concerning whether for
purposes of section 48C projects the
PWA requirements are similarly limited
to the same eligible property defined by
48C(c)(2). The commenter asked for
PWA requirements to be limited to this
same eligible property and any costs
integral to that eligible property—
excluding any work related to the
building or its structural components.
The applicable scope of the PWA
requirements is explained in Section VI.
of this Summary of Comments and
Explanation of Revisions.
I. Section 179D
Section 179D(a) generally allows a
deduction in an amount equal to the
cost of energy efficient commercial
building property placed in service
during the taxable year. Section 179D(f)
generally allows as a deduction for the
taxable year the amount of the aggregate
adjusted basis of energy efficient

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building retrofit property placed in
service by the taxpayer pursuant to a
qualified retrofit plan. Under section
179D(b)(3), (4), and (5), an increased
deduction amount is allowed if the
taxpayer ensures that laborers and
mechanics employed by the taxpayer or
any contractor or subcontractor in the
installation of any energy efficient
commercial building property, energy
efficient building retrofit property, or
property installed pursuant to a
qualified retrofit plan (collectively,
179D qualified property) are paid wages
at rates not less than the prevailing rates
and satisfies the Apprenticeship
Requirements. Under section 179D(g),
the increased deduction amount in
179D(b) is subject to an adjustment for
inflation in taxable years beginning after
2022.
Proposed § 1.179D–3(b) would have
provided that the increased deduction is
available for any 179D qualified
property that either began installation
prior to January 29, 2023, or meets the
Prevailing Wage Requirements of
section 45(b)(7) and proposed § 1.45–7,
the Apprenticeship Requirements of
section 45(b)(8) and proposed § 1.45–8,
and the recordkeeping and reporting
requirements of proposed § 1.45–12.
One commenter stated that the
Proposed Regulations may have
erroneously incorporated the
requirement in proposed § 1.45–7(a) to
pay prevailing wages during the 10-year
period after a property is placed in
service and requested that the final
regulations specify whether the PWA
requirements apply after a property is
placed in service. Section 179D
provides that the Prevailing Wage
Requirements apply ‘‘in the installation
of any property.’’ Nothing in section
179D requires the payment of prevailing
wages with respect to alterations or
repairs after such installation. For the
reasons described more fully in Sections
VIII.A.1. and IX.A. of this Summary of
Comments and Explanation of
Revisions, the final regulations amend
the Proposed Regulations to confirm
that the PWA requirements under
section 179D apply only during the
installation of the 179D qualified
property and not with respect to any
alteration or repair after the 179D
qualified property is placed in service.
The applicable scope of the PWA
requirements is explained in Section VI.
of this Summary of Comments and
Explanation of Revisions. Under the
transition rule described in Section II. of
this Summary of Comments and
Explanation of Revisions, the PWA
requirements do not apply to any work
performed before January 29, 2023. The
final regulations also clarify that the

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deduction amounts are increased for
inflation.
On October 5, 2022, the IRS issued
Notice 2022–48 and requested
comments with respect to the allocation
of the section 179D deduction and the
criteria that the Treasury Department
and the IRS should consider in drafting
rules to determine the person that is
primarily responsible for designing the
property under section 179D(d)(3)(A).
The Proposed Regulations would have
provided general rules for satisfying the
PWA requirements for purposes of
section 179D, but the Proposed
Regulations would not have addressed
the allocation of the deduction in the
case of 179D qualified property installed
on, or in property owned by, a specified
tax-exempt entity as described in
section 179D(d)(3)(B).
A few commenters suggested that the
Treasury Department and the IRS
provide an exception to meeting PWA
requirements for primary designers who
are allocated the deduction under
section 179D(d)(3)(A). For example, the
commenters explained that because
designers do not directly employ
laborers, mechanics, contractors, or
subcontractors and because the
allocating tax-exempt entity has little
interest in undertaking the compliance
burden for an allocated deduction, the
designer will have difficulty ensuring
compliance with the PWA
requirements. Another commenter
suggested that the regulations require
the contractor to consult with all other
contractors and subcontractors on the
project and certify that they are not also
seeking the allocation of the deduction,
similar to an approach developed by the
General Services Administration.
The Proposed Regulations would not
have provided rules regarding the
allocation of the deduction in the case
of 179D qualified property installed on
or in property owned by a specified taxexempt entity. After reviewing
comments, the Treasury Department
and the IRS determined that the section
179D allocation is outside the scope of
these final regulations and rules for the
section 179D allocation will be
addressed in future guidance.
One commenter asked whether
architects and engineers who do not
employ laborers, mechanics,
contractors, or subcontractors
automatically qualify for the increased
section 179D deductions. Generally
applicable rules for laborers and
mechanics are discussed in Section
VII.C.1. of this Summary of Comments
and Explanation of Revisions. Another
commenter stated that without a de
minimis threshold for noncompliance,
small, accidental deviations may

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53243

prevent earning the increased section
179D deduction. The limited penalty
waiver is discussed in Section VII.D.4.
of this Summary of Comments and
Explanation of Revisions.
Additionally, a commenter requested
that section 179D be modified so that
the relevant property’s basis is not
reduced by the amount of the claimed
deduction under section 179D. The
commenter stated that reducing the
property’s basis by the received
deduction amount may actually place
the taxpayer worse off financially.
Statutory revisions are outside the scope
of these final regulations.
X. Recordkeeping and Reporting
Requirements
A. In General
Section 45(b)(12) authorizes the
Secretary to issue such regulations or
other guidance as the Secretary
determines necessary to carry out the
purposes of section 45(b), including
regulations or other guidance that
provide requirements for recordkeeping
or information reporting for purposes of
administering the requirements of
section 45(b). Section 6001 provides
that every person liable for any tax
imposed by the Code, or for the
collection thereof, must keep such
records as the Secretary may from time
to time prescribe. Section 1.6001–1(a)
provides that any person subject to
income tax must keep such permanent
books of account or records, including
inventories, as are sufficient to establish
the amount of gross income, deductions,
credits, or other matters required to be
shown by such person in any return of
such tax. Section 1.6001–1(e) provides
that the books and records required by
§ 1.6001–1 must be retained so long as
the contents thereof may become
material in the administration of any
Internal Revenue law.
Proposed § 1.45–12(a) would have
provided that the increased credit
amount must be claimed in such form
and manner as may be prescribed in IRS
forms or instructions or in publications
or guidance published in the Internal
Revenue Bulletin. The preamble to the
Proposed Regulations also stated that
the Proposed Regulations would require
taxpayers to provide a statement with
the tax return that claims an increased
amount of credit or deduction that
includes aggregate information as
detailed in proposed § 1.45–12.
The Proposed Regulations would have
imposed recordkeeping requirements
that are generally consistent with the
recordkeeping requirements under the
DBA regime for purposes of the PWA
requirements. Proposed § 1.45–12(b)

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would have provided that with respect
to each qualified facility for which a
taxpayer is claiming or transferring
(under section 6418) an increased credit
amount under section 45(b)(6)(A),
unless section 45(b)(6)(B)(i) or
45(b)(6)(B)(ii) applies, the taxpayer
would be required to maintain and
preserve records sufficient to
demonstrate compliance with the
applicable PWA requirements in
proposed §§ 1.45–7 and 1.45–8,
respectively. Under the Proposed
Regulations, at a minimum, those
records would have included payroll
records for each laborer and mechanic
(including each qualified apprentice)
employed by the taxpayer, contractor, or
subcontractor in the construction,
alteration, or repair of the qualified
facility.
Proposed § 1.45–12(c) would have
provided an enumerated list of records,
in addition to payroll records otherwise
maintained by the taxpayer, that may be
sufficient to establish compliance with
the Prevailing Wage Requirements. The
list in proposed § 1.45–12(c) included
the following information for each
laborer or mechanic (including each
qualified apprentice) employed by the
taxpayer, a contractor, or subcontractor
with respect to each qualified facility: (i)
identifying information, including the
name, social security or tax
identification number, address,
telephone number, and email address;
(ii) the location and type of qualified
facility; (iii) the labor classification(s)
the taxpayer applied to the laborer or
mechanic for determining the prevailing
wage rate and documentation
supporting the applicable classification,
including the applicable wage
determination; (iv) the hourly rate(s) of
wages paid (including rates of
contributions or costs for bona fide
fringe benefits or cash equivalents
thereof) for each applicable labor
classification; (v) records to support any
contribution irrevocably made on behalf
of a laborer or mechanic to a trustee or
other third person pursuant to a bona
fide fringe benefit program, and the rate
of costs that were reasonably anticipated
in providing bona fide fringe benefits to
laborers and mechanics pursuant to an
enforceable commitment to carry out a
plan or program described in 40 U.S.C.
3141(2)(B), including records
demonstrating that the enforceable
commitment was provided in writing to
the laborers and mechanics affected; (vi)
the total number of labor hours worked
per pay period; (vii) the total wages paid
for each pay period (including
identifying any deductions from wages);
(viii) records to support wages paid to

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any apprentices at less than the
applicable prevailing wage rates,
including records reflecting the
registration of the apprentices with a
registered apprenticeship program and
the applicable wage rates and
apprentice-to-journeyworker ratios
prescribed by the apprenticeship
program; and (ix) the amount and
timing of any correction payments and
documentation reflecting the calculation
of the correction payments.
Proposed § 1.45–12(d) would have
required taxpayers subject to the
Apprenticeship Requirements to
maintain sufficient records to establish
compliance with the Labor Hours
Requirement, Ratio Requirement, and
Participation Requirement. Under the
Proposed Regulations, records that may
be sufficient to demonstrate compliance
with the applicable Apprenticeship
Requirements in § 1.45–8 would have
included the following information for
each apprentice employed by the
taxpayer, a contractor, or subcontractor
with respect to each qualified facility: (i)
any written requests for the employment
of apprentices from registered
apprenticeship programs, including any
contacts with the DOL OA or a State
apprenticeship agency regarding
requests for apprentices from registered
apprenticeship programs; (ii) any
agreements entered into with registered
apprenticeship programs with respect to
the construction, alteration, or repair of
the facility; (iii) documents reflecting
the standards and requirements of any
registered apprenticeship program,
including the applicable ratio
requirement prescribed by each
registered apprenticeship program from
which taxpayers, contractors, or
subcontractors employ apprentices; (iv)
the total number of labor hours worked
by apprentices; and (v) records
reflecting the daily ratio of apprentices
to journeyworkers.
The Proposed Regulations under
sections 30C, 45L, 45Q, 45U, 45V, 45Y,
45Z, 48C, and 179D would have
provided similar recordkeeping
requirements as described in proposed
§ 1.45–12.
As discussed in Section I. of this
Summary of Comments and Explanation
of Revisions, several commenters
suggested that that final regulations
should impose additional reporting and
recordkeeping requirements, including
many pre-filing reporting requirements
such as certified weekly payroll and
monthly apprenticeship hours
reporting. However, other commenters
stated that having to comply with the
recordkeeping and reporting
requirements as proposed would be
burdensome and create costly

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administrative work for business
owners. These commenters requested
that documentation and reporting
requirements be as streamlined and
minimal as possible.
As explained in greater detail in
Section I. of this Summary of Comments
and Explanation of Revisions, the final
regulations strike an appropriate
balance between imposing requirements
intended to encourage the timely and
correct payment of prevailing wages and
the hiring of qualified apprentices while
recognizing the prospective nature
inherent in the increased amount of
credit and deduction. The Treasury
Department and the IRS want to avoid
imposing unnecessary administrative
work on taxpayers, especially small
businesses. However, the IRS must be
able to determine taxpayer compliance
with the PWA requirements once a
return is filed claiming an increased
amount of credit or deduction. For this
reason, the final regulations do not
incorporate the suggestions regarding
pre-filing activities, although many
comments are incorporated as factors for
determining intentional disregard, and
instead adopt the robust recordkeeping
and reporting requirements from the
Proposed Regulations. The final
regulations provide recordkeeping and
reporting requirements that are
consistent with the DBA, relevant for
the purposes of the increased amount of
credit and deduction and the intent of
the IRA, and that are necessary for, and
consistent with, sound tax
administration.
Many commenters stated that the
proposed regulations struck an
appropriate balance between ensuring
there is significant documentation to
ensure compliance without adding
unnecessary burden. Some commenters
requested that taxpayers be provided
flexibility related to the recordkeeping
requirements, while others asked for
guidance on how to demonstrate
compliance with the recordkeeping
requirements and whether specific
records would satisfy the recordkeeping
requirement. A few commenters
suggested that the final regulations
incorporate or require specific forms or
reporting methods similar to those used
in other contexts (for example, the IRS
Form 1099). Some commenters
suggested taxpayers could use the DOL’s
Registered Apprenticeship Partners
Information Data System (commonly
referred to as RAPIDS) to assist in
reporting compliance with the
Participation Requirement. Another
commenter suggested the final
regulations require taxpayer to report
evidence of compliance with the Good
Faith Effort Exception at filing.

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Federal Register / Vol. 89, No. 122 / Tuesday, June 25, 2024 / Rules and Regulations
The final regulations largely follow
the approach in the Proposed
Regulations. Consistent with IRS
practice, the final regulations adopt the
rule from the Proposed Regulations that
the increased credit amount must be
claimed in such form and manner as
may be prescribed in IRS forms,
instructions, publications, or guidance
published in the Internal Revenue
Bulletin. Comments suggesting specific
forms or reporting methods are not
incorporated. It is critical that the IRS
retain the ability to prescribe the
required reporting requirements in
relevant forms and instructions to allow
for modifications as necessary. Draft
forms and instructions are typically
made available for public comment on
https://www.irs.gov.
To provide flexibility to taxpayers, the
final regulations do not prescribe a
specific form or manner in which
records must be kept. In response to
comments that asked whether certain
records would be sufficient, the final
regulations indicate that an accurately
completed DOL Form WH–347 may
constitute a sufficient record reflecting
the payment of prevailing wages to the
individuals identified on the form for
the period identified on the form for
purposes of § 1.45–12. The final
regulations also add copies of contracts
for construction, alteration, or repair of
the facility with any contractor or
subcontractor to the list of records that
may be sufficient to demonstrate
compliance with the Prevailing Wage
Requirements. In most cases, payroll
records alone will not demonstrate a
taxpayer’s compliance with the totality
of the PWA requirements. Nothing in
these regulations is intended to restrict
the IRS’s authority to request additional
records to determine whether the
taxpayer has complied with the PWA
requirements. For example, during an
examination, the IRS may request
information and documents with
respect to the taxpayer’s process for the
proper identification, classification, and
payment of wages to laborers and
mechanics performing construction on
the qualified facility and for
determining labor needs on a
construction project, including specific
apprenticeship needs.
Commenters requested guidance on
the length of time records need to be
maintained. A commenter stated that
once a construction project is
completed, the taxpayer would no
longer have access to competitively
sensitive data, such as wage
information, stored by contractors and
subcontractors. One commenter
suggested that records should be
retained for at least three years after all

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work on the construction project is
completed. Another commenter
suggested requiring taxpayers to retain
adequate payroll records for at least five
years from the projected end of the tax
credit period. At least one commenter
suggested that not retaining adequate
records should be considered evidence
of intentional disregard. The commenter
emphasized that maintaining such
records would not be burdensome
because records are now kept digitally.
The final regulations clarify that
taxpayers are required to maintain and
preserve records sufficient to establish
compliance with the PWA requirements
for relevant tax years as provided for
under section 6001 and § 1.6001–1(e).
The final regulations also add the failure
to maintain records to the intentional
disregard factors.
Some commenters stated that it might
be difficult for taxpayers to obtain
records of wages paid by contractors
and subcontractors. Commenters
suggested permitting taxpayers to rely
on written certifications from
contractors and subcontractors that the
contractor or subcontractor is complying
with the PWA requirements, including
recordkeeping. One commenter
suggested that the final regulations
permit taxpayers to rely on contractual
provisions that require strict adherence
to IRS goals and standards. Another
commenter was concerned that despite
contractual agreements between the
taxpayer and a general contractor
detailing the PWA requirements,
taxpayers would be subject to the
subcontractors’ recordkeeping abilities,
over which they have no control.
Commenters also claimed that the
proposed recordkeeping requirements
raise privacy and antitrust concerns.
Specifically, commenters argued that
requiring taxpayers to maintain the
payroll records of contractors and
subcontractors could violate Federal or
State privacy laws or company policies
on the proper handling of personally
identifiable information (PII) such as
social security numbers and dates of
birth. Commenters suggested: (i)
allowing the direct employer (whether
that is the taxpayer, contractor, or
subcontractor) to maintain required
payroll records and confidential
employee information subject to
contractual provisions requiring the
maintenance and preservation of the
records and permitting access to such
records by the IRS as part of a duly
issued audit request; (ii) allowing the
taxpayer to collect and maintain the
payroll records and data specified in
proposed § 1.45–12 with a third-party
vendor subject to similar contractual
provisions and access to the IRS audit

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function; (iii) allowing taxpayers,
transferee taxpayers, and/or their agents
to inspect payroll records and data
under a nondisclosure arrangement as
part of proper due diligence without
taking physical custody or control of
such payroll records or data; (iv)
allowing payroll records and data to be
collected and maintained by the
taxpayer or any contractor in a manner
that redacts certain sensitive
information as long as the information
is maintained by the direct employer
pursuant to contractual arrangements;
and (v) allowing alternative forms of
validation for hourly wage rates and
other payroll data to avoid antitrust and
confidentiality concerns among
taxpayers, contractors, and
subcontractors. A commenter
recommended that for recordkeeping of
fringe benefits, the final regulations
should accept sworn statements of
contributions as sufficient. The
commenter stated that it is exceedingly
difficult for entities to monitor and
verify subcontractor contributions to
fringe benefit programs.
Consistent with the requirements in
section 45(b)(7) and (8) that the taxpayer
ensure that the Prevailing Wage
Requirements and Apprenticeship
Requirements are satisfied, the final
regulations adopt the rule as proposed
that the taxpayer is required to maintain
all relevant records, regardless of
whether the laborers and mechanics are
employed by the taxpayer, a contractor,
or a subcontractor. In response to
comments regarding privacy concerns
and data sensitivity, the final
regulations amend the proposed rule to
clarify that records need only contain
the last four digits of a social security
number. The final regulations also
provide three alternatives that taxpayers
may use to satisfy the recordkeeping
requirements in § 1.45–12. These
alternatives are intended to assist
taxpayers in satisfying the
recordkeeping requirements while also
complying with applicable law. Under
the final regulations: (i) taxpayers may
collect and physically retain redacted
records from every relevant contractor
and subcontractor; (ii) taxpayers may
use a third-party vendor to collect and
physically retain records from every
relevant contractor and subcontractor on
behalf of the taxpayer, and the records
may have PII redacted to comply with
applicable privacy laws; or (iii)
taxpayers, contractors, and
subcontractors may physically retain
unredacted records for their own
employees. Under all three alternatives,
unredacted records must be made
available to the IRS upon request.

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Although retaining records consistent
with one or more of these options will
constitute satisfaction of the
recordkeeping requirements in § 1.45–
12 of these final regulations, the
Prevailing Wage Requirements in
§ 1.45–7 and the Apprenticeship
Requirements in § 1.45–8 of these final
regulations must be satisfied (as
applicable) in order for the taxpayer to
obtain the increased amount of credit or
deduction. The taxpayer is ultimately
responsible for compliance with the
PWA requirements and may not rely on
certifications from contractors and
subcontractors that they are complying
with PWA requirements (including
recordkeeping). Taxpayers may delegate
certain recordkeeping activities to
comply with applicable laws; however,
the ultimate responsibility to ensure
compliance with the PWA requirements
remains with the taxpayer, and
taxpayers may not rely on a contractual
provision to delegate that responsibility
to contractors and subcontractors for
purposes of satisfying the PWA
requirements. Additionally, taxpayers
should consider the impact that a
recordkeeping approach may have on
their ability to demonstrate the facts and
circumstances listed in §§ 1.45–
7(c)(3)(iii) and 1.45–8(f)(2)(ii) pertaining
to intentional disregard.
The preamble to the Proposed
Regulations would have provided that
to demonstrate that a failure was not
due to intentional disregard, taxpayers
must maintain and preserve records
sufficient to document any failures to
satisfy the Prevailing Wage
Requirements or the Apprenticeship
Requirements, and the actions taken to
prevent, mitigate, or remedy the failure
(for example, records demonstrating that
the taxpayer regularly reviewed payroll
practices, included requirements to pay
prevailing wages in contracts with
contractors, and posted prevailing wage
rates in a prominent place on the job
site). The preamble to the Proposed
Regulations also indicated that the
Proposed Regulations would have
imposed recordkeeping requirements
related to correction and penalty
payments, penalty waiver provisions,
and the Good Faith Effort Exception.
The final regulations incorporate these
provisions as described in the preamble
to the Proposed Regulations and clarify
that any failures to satisfy the Prevailing
Wage Requirements and the actions
taken to prevent, mitigate, or remedy the
failure may be documented with records
demonstrating that the taxpayer engaged
an independent third party to aid in the
review of payroll information.

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B. Recordkeeping for Credits
Transferred Pursuant to Section 6418
The Proposed Regulations would have
provided that because an eligible
taxpayer determines any increased
credit amount applicable to the PWA
requirements, the general recordkeeping
requirements would remain with an
eligible taxpayer who transfers a
specified credit portion that includes an
increased credit amount. The increased
credit amount that is determined by an
eligible taxpayer would be reported on
the return of the eligible taxpayer. The
minimum required documentation to be
provided to the transferee taxpayer is a
separate requirement under the 6418
Final Regulations that does not impact
the requirements in these final
regulations. Comments received relating
to section 6418 and responses by the
Treasury Department and the IRS are
discussed in Section V.B. of this
Summary of Comments and Explanation
of Revisions.
XI. Applicability Date
The Proposed Regulations would have
provided that the final regulations apply
to facilities, property, projects, or
equipment placed in service in taxable
years ending after the date these final
regulations are published in the Federal
Register and the construction, or
installation, of which begins after the
date these final regulations are
published in the Federal Register. The
Proposed Regulations would have
provided that taxpayers could rely on
the Proposed Regulations with respect
to construction or installation of a
facility, property, project, or equipment
beginning on or after January 29, 2023,
and on or before the date these final
regulations are published, provided,
that beginning after the date that is 60
days after August 29, 2023, taxpayers
follow the Proposed Regulations in their
entirety and in a consistent manner. The
Proposed Regulations would have also
provided that the provisions of sections
3 and 4 of Notice 2022–61 would be
obsoleted for facilities, property,
projects, or equipment the construction,
or installation of which begins after the
date these final regulations are
published. The Proposed Regulations
would not have otherwise affected
Notice 2022–61.
Several commenters requested
transition relief with respect to the
applicability date of these final
regulations. One commenter suggested
that because Notice 2022–61 was used
to justify the application of PWA
requirements to projects that started
after January 29, 2023, the IRS should
establish a new effective date for the

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IRA’s PWA requirements. The
commenter argued that, at a minimum,
additional guidance set forth in the
Proposed Regulations and the final
regulations should be applied only
prospectively. The commenter raised
that the rescission of guidance issued in
Notice 2022–61, if done on a retroactive
basis, would be arbitrary and capricious
and a violation of the Administrative
Procedure Act, 5 U.S.C. 702, unless the
IRS provides much greater explanation
for its actions.
As stated in Section II. of this
Summary of Comments and Explanation
of Revisions, the final regulations
provide a transition rule under which
the PWA requirements do not apply to
construction, alteration, and repair
activities occurring before January 29,
2023. Further, the final regulations
generally apply to qualified facilities
placed in service in taxable years ending
after June 25, 2024 and the construction
of which begins after June 25, 2024.
Additionally, taxpayers may choose to
apply the final regulations to qualified
facilities placed in service in taxable
years ending on or before June 25, 2024,
and qualified facilities placed in service
in taxable years ending after June 25,
2024, the construction of which begins
before June 25, 2024, provided that
taxpayers follow the final regulations in
their entirety and in a consistent
manner. Taxpayers may also rely on the
Proposed Regulations with respect to
construction of a qualified facility
beginning on or after January 29, 2023,
and on or before June 25, 2024,
provided, that beginning after the date
that is 60 days after August 29, 2023,
taxpayers follow the Proposed
Regulations in their entirety and in a
consistent manner.
Consistent with the Proposed
Regulations, the final regulations
confirm that the obsoletion of sections
3 and 4 of Notice 2022–61 is prospective
as it applies facilities, property, projects,
or equipment the construction, or
installation, of which begins after June
25, 2024. The final regulations do not
otherwise affect Notice 2022–61.
XII. Severability
If any provision in this rulemaking is
held to be invalid or unenforceable
facially, or as applied to any person or
circumstance, it shall be severable from
the remainder of this rulemaking, and
shall not affect the remainder thereof, or
the application of the provision to other
persons not similarly situated or to
other dissimilar circumstances.
Applicability Dates
These regulations apply to qualified
facilities placed in service in taxable

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Federal Register / Vol. 89, No. 122 / Tuesday, June 25, 2024 / Rules and Regulations
years ending after June 25, 2024 and the
construction of which begins after June
25, 2024. Taxpayers may choose to
apply these regulations to qualified
facilities placed in service in taxable
years ending on or before June 25, 2024,
and qualified facilities placed in service
in taxable years ending after June 25,
2024, the construction of which begins
before June 25, 2024, provided that
taxpayers follow these regulations in
their entirety and in a consistent
manner. Taxpayers may also continue to
rely on the Proposed Regulations with
respect to construction of a qualified
facility beginning on or after January 29,
2023, and on or before June 25, 2024,
provided, that beginning after the date
that is 60 days after August 29, 2023,
taxpayers follow the Proposed
Regulations in their entirety and in a
consistent manner.
Effect on Other Documents
Sections 3 and 4 of Notice 2022–61
are obsoleted for facilities, property,
projects, or equipment the construction,
or installation, of which begins after
August 26, 2024.
Special Analyses
I. Regulatory Planning and Review
Pursuant to the Memorandum of
Agreement, Review of Treasury
Regulations under Executive Order
12866 (June 9, 2023), tax regulatory
actions issued by the IRS are not subject
to the requirements of section 6(b) of
Executive Order 12866, as amended.
Therefore, a regulatory impact
assessment is not required.

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II. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(44 U.S.C. 3501–3520) (PRA) generally
requires that a Federal agency obtain the
approval of the Office of Management
and Budget (OMB) before collecting
information from the public, whether
such collection of information is
mandatory, voluntary, or required to
obtain or retain a benefit.
The collections of information in
these final regulations contain reporting,
recordkeeping, and third-party
disclosure requirements, each of which
is described below. These collections
are required for purposes of claiming an
increased amount of credit or
deduction; and are necessary for the IRS
to validate that taxpayers have met the
regulatory requirements and are eligible
to claim the increased credit amounts.
The likely respondents are individual,
business, trust and estate filers, and taxexempt organizations.
These final regulations set forth
procedures for requesting supplemental

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wage determinations and wage rates for
additional classifications from the DOL.
This collection is approved by the OMB
under DOL Control Number 1235–0034.
These final regulations do not alter any
of the DOL collections approved under
this control number.
These final regulations include
requirements to keep records sufficient
to demonstrate that the PWA
requirements have been met as detailed
in § 1.45–12. For purposes of the PRA,
the records required to be kept pursuant
to § 1.45–12 are considered general tax
records. The collection of these general
tax records is approved annually under
1545–0074 for individuals/sole
proprietors, 1545–0123 for business
entities, and 1545–0047 for tax-exempt
organizations. The IRS received from
the OMB a new OMB Control number
(1545–2315) for trust and estate filers.
These final regulations also include
reporting requirements that taxpayers
provide a statement with the tax return
that claims an increased amount of
credit or deduction that includes
aggregate information as detailed in
§ 1.45–12. The IRS may issue forms and
instructions in future guidance for the
purpose of meeting these reporting
requirements. These reporting
requirements will be covered under
1545–0074 for individuals/sole
proprietors and 1545–0123 for business
entities. These reporting requirements
are covered under the new OMB Control
Number (1545–2315) for trust and estate
filers.
These final regulations include thirdparty disclosures that include notifying
laborers and mechanics of the
applicable prevailing wage rates as
detailed in § 1.45–7. These final
regulations also include third-party
disclosures for taxpayers requesting the
dispatch of qualified apprentices from a
registered apprenticeship program as
detailed in § 1.45–8. The third-party
disclosures apply to all filers. The thirdparty disclosures applicable to all filers
are also covered under the new OMB
Control Number (1545–2315).
In the Notice of Proposed
Rulemaking, the Treasury Department
and the IRS requested public comments
on the proposed collections of
information including: (i) whether the
proposed collection of information is
necessary for the proper performance of
the functions of the IRS; (ii) the
accuracy of the estimated burden
associated with the proposed collection
of information; (iii) how the quality,
utility, and clarity of the information to
be collected may be enhanced; (iv) how
the burden of complying with the
proposed collection of information may
be minimized; and (v) estimates of

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capital or start-up costs and costs of
operation, maintenance, and purchase
of services to provide information.
One commenter suggested the
Treasury Department and the IRS
provide additional clarification
regarding the estimated time for filers to
find and display the prevailing wage
rates and to request qualified
apprentices from registered
apprenticeship programs. One
commenter suggested that the estimate
failed to consider additional actions
related to complying with PWA rules,
such as tracking the payment of
prevailing wages and usage of qualified
apprentices. Commenters stated that it
may take some taxpayers more than two
hours annually to find and display the
prevailing wage rates and to request
qualified apprentices from registered
apprenticeship programs. Another
commenter expressed confusion over
the difference in the proposed
compliance time required by trusts and
estate in comparison to all other filers.
The Treasury Department and the IRS
agree that the estimated annual burden
with respect to the reporting and
recordkeeping requirements of these
final regulations can be clarified. The
preamble to the NPRM estimated these
recordkeeping and reporting obligations
necessary for compliance with the PWA
Requirements will take 40 hours
annually. This estimate was submitted
as part of seeking a new OMB control
number with respect to trust and estate
filers. The estimate will also be
submitted to OMB as part of the annual
approval process with respect to the
OMB control numbers that already exist
for other filers.37 This estimate includes
time necessary for taxpayers to become
familiar with the obligations set forth in
these regulations. Much of the data
taxpayers will be required to maintain,
such as the applicable prevailing wage
rates, is readily available from DOL
websites. Additionally, the
recordkeeping requirements with
respect to amounts paid to laborers and
mechanics are similar to existing
requirements imposed by other law.
While exact data is not available to
estimate the additional burden imposed
by these regulations, the Treasury
Department and the IRS have retained
the estimate of 40 hours.
The commenters also suggested that
the two hours estimated for all filers
with respect to the third-party
disclosures did not properly account for
the expected burdens. The Treasury
37 Additional information on taxpayer
compliance burdens can be found in Publication
5743, IRS Taxpayer Compliance Burden, https://
www.irs.gov/pub/irs-pdf/p5743.pdf.

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Department and the IRS agree with this
comment and have revised the estimate
to account for the burden of complying
with the Apprenticeship Requirements.
The final regulations require taxpayers
to request qualified apprentices from an
apprenticeship program with an area of
operation that includes the location of
the facility and may require taxpayers to
submit additional requests on an annual
basis if requests have been denied.
Further, the final regulations will
require taxpayers to review the
standards and requirements of the
registered apprenticeship program as
part of making a request, which will
likely take more than the two hours
estimated as part of the preamble to the
proposed regulations. Accordingly, the
Treasury Department and the IRS have
determined that the estimated burden to
comply with the third-party disclosures
is four hours instead of two hours.
No other public comments were
received by the IRS directed specifically
at the PRA or on the collection
requirements, but commenters generally
articulated the burdens associated with
the documentation requirements
contained in the Proposed Regulations.
As described in the relevant portions of
this preamble, the Treasury Department
and the IRS believe that the
documentation requirements are
necessary to administer the increased
credit amounts resulting from
compliance with the PWA
requirements.
III. Regulatory Flexibility Act
The Regulatory Flexibility Act (5
U.S.C. 601 et seq.) (RFA) imposes
certain requirements with respect to
Federal rules that are subject to the
notice and comment requirements of
section 553(b) of the Administrative
Procedure Act (5 U.S.C. 551 et seq.) and
that are likely to have a significant
economic impact on a substantial
number of small entities. Unless an
agency determines that a proposal is not
likely to have a significant economic
impact on a substantial number of small
entities, section 603 of the RFA requires
the agency to present a final regulatory
flexibility analysis (FRFA) of the final
regulations. The Treasury Department
and the IRS have not determined
whether the final regulations will likely
have a significant economic impact on
a substantial number of small entities.
This determination requires further
study. Because there is a possibility of
significant economic impact on a
substantial number of small entities, a
FRFA is provided in these final
regulations.
Pursuant to section 7805(f) of the
Code, the Proposed Regulations were

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submitted to the Chief Counsel of the
Office of Advocacy of the Small
Business Administration for comment
on its impact on small business. The
Treasury Department and the IRS also
requested comments generally with
respect to the number of entities
affected by the Proposed Regulations
and the economic impact on small
entities.
A. Need for and Objectives of the Rule
The final regulations provide
clarifying guidance for taxpayers
intending to satisfy the PWA
requirements to qualify for the increased
amounts of credit or deduction under
sections 30C, 45, 45Q, 45V, 45Y, 45Z,
48C, and 179D and for those taxpayers
intending to satisfy the Prevailing Wage
Requirements to qualify for the
increased credit amounts under sections
45L and 45U. These final regulations
provide needed guidance for taxpayers
on obtaining and using applicable wage
determinations issued by the DOL, on
the time and manner for reporting
compliance with the PWA
requirements, as well as needed
definitions. The final regulations also
provide guidance concerning correction
and penalty payments that can be made
by taxpayers who initially fail to satisfy
the PWA requirements in order to
qualify for the increased amounts of
credit and deduction.
The Treasury Department and the IRS
expect that the increased amounts of
credit and deduction of five times the
base amount of credit or deduction for
taxpayers that ensure the payment of
paying prevailing wages and hiring
qualified apprentices in the
construction, alteration, or repair of
qualified facilities provides financial
incentives that will beneficially impact
various industries involved in the
investment in and production of clean
energy. These final regulations provide
clarifying guidance that will assist
taxpayers seeking to comply with the
statutory PWA requirements in order to
take advantage of the financial
incentives. In the absence of this
clarifying guidance, taxpayers would be
required to rely solely upon the
language of the Code in determining
how to comply with the PWA
requirements, which would likely deter
many taxpayers from seeking the
increased amounts of credit and
deduction and would otherwise greatly
increase the costs of compliance for
taxpayers choosing to pursue the
credits. The Treasury Department and
the IRS expect that the increased credit
and deduction amounts available to
taxpayers as financial incentives will
exceed the costs of the additional

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recordkeeping and reporting obligations
imposed on taxpayers by these
regulations beyond those otherwise be
required by the statute.
The Treasury Department and the IRS
also expect the financial incentives of
the increased amounts of credit and
deduction for taxpayers that ensure
payment of prevailing wage rates and
use of qualified apprentices will deliver
benefits across the economy by creating
increased opportunities for contractors
and subcontractors as well as laborers
and mechanics to become involved in
clean energy production. Allowing these
increased amounts of credits and
deduction for taxpayers who satisfy the
PWA requirements will incentivize
expansion of clean energy resources and
will reduce economy wide greenhouse
gas emissions.
B. Significant Issues Raised by Public
Comments in Response to the Initial
Regulatory Flexibility Analysis
The Small Business Administration’s
Office of Advocacy provided comments
on the initial regulatory flexibility
analysis (IRFA) set forth in the Proposed
Regulations. Specifically, the Office of
Advocacy commented that the IRFA did
not adequately describe regulated small
entities, that the IRFA did not
adequately estimate potential impacts to
regulated small entities, and that the
IRFA did not adequately discuss
specific alternatives that might reduce
the impact on small entities.
Other comments were received on the
burdens associated with the PWA
requirements, including burdens on
small businesses. One commenter
requested that the process for obtaining
wage determinations from the DOL be
streamlined to avoid delays that might
increase uncertainty and costs for
contractors. Another commenter
suggested that because prevailing wage
rates are subject to change, the PWA
requirements create uncertainty and risk
that will increase costs for construction
projects. One commenter suggested
reducing the burden on small
businesses to qualify for the Good Faith
Effort Exception. Another commenter
proposed that the Treasury Department
and the IRS decline to impose penalties
for any failure to satisfy the
Participation Requirement with respect
to any contractor or subcontractor that
qualifies as a ‘‘small business’’ under
the U.S. Small Business
Administration’s ‘‘Table of Size
Standards’’.
The Treasury Department and the IRS
have made a number of revisions to
these final regulations to assist
taxpayers, including small businesses,
and reduce the burdens associated with

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complying with the PWA requirements.
These revisions are discussed in this
Summary of Comments and Explanation
of Revisions of the preamble to these
regulations and in this FRFA.
C. Affected Small Entities
The RFA directs agencies to provide
a description of, and if feasible, an
estimate of, the number of small entities
that may be affected by the proposed
rules, if adopted. The Small Business
Administration’s (SBA) Office of
Advocacy estimates in its 2023
Frequently Asked Questions that 99.9
percent of American businesses meet its
definition of a small business. The
applicability of these Proposed
Regulations does not depend on the size
of the business, as defined by the SBA.
These final regulations may affect a
variety of different entities across
several different green energy industries
as they prescribe rules with respect to
ten different sections of the Code with
provisions related to increased amounts
of credit and deduction.
The Office of Advocacy commented
that the IRFA did not describe or
estimate the number of impacted small
entities and did not provide information
related to such entities such as the
North American Industry Classification
System (NAICS) classifications. The
Office of Advocacy also commented that
because the regulation requires
taxpayers to verify compliance for
contracted work, that the Proposed
Regulations were directly regulating the
contractors hired to perform the work
and that the IRFA failed to consider the
impact of the proposed rules on these
contractors and subcontractors, many of
which are likely small businesses. The
Treasury Department and the IRS utilize
tax data as the basis for its Regulatory
Flexibility Act analysis. Tax entities
supply information on tax forms, which
information is processed and recorded
by the IRS. This data is then available
to the IRS office of Research, Applied
Analytics and Statistics and to the
Treasury Department’s Office of Tax
Policy for use in estimating the impact
of tax regulation on businesses.
Tax data is the more appropriate data
as it provides nearly universal coverage
of the entities that are affected by these
tax regulations. All taxpayers and many
potential taxpayers are represented in
the universe of tax data. Second, the tax
data more accurately reflect the level of
organization to which tax regulations
are applicable because tax data is
collected on the entity rather than the
enterprise level. Overwhelmingly,
business tax regulations apply to the
entity level making tax data a natural fit
for the analysis of regulatory impact.

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Further, with limited exceptions, tax
regulations apply to all entities
organized in a particular manner
regardless of industry or size. Finally,
analysis of the implications of tax
regulations for the purposes of the
Paperwork Reduction Act and any
Special Analyses, including the
Regulatory Impact Analysis, are carried
out using tax data. Generally, restricting
analysis for the RFA to tax data prevents
difficulties in reconciling the different
analyses within a given regulation.
Reliance on tax data has some
drawbacks. In general, tax forms do not
collect information unless it is directly
relevant to the calculation of tax
liability. The NAICS codes referenced
by the Office of Advocacy are included
on tax forms for informational purposes
and may not be reliable. For example,
past the first two-digits of the NAICS
code, economic sector level, entries may
be left blank in the raw data. In
addition, for a tax entity that is
comprised of multiple different
enterprises that each operate in a
different industry, the NAICS code
reported on a tax form may not reflect
the appropriate industry for the
regulation under analysis. Furthermore,
most tax returns have no independent
verification of the accuracy of NAICS
codes. Notwithstanding this concern,
tax data remains the most appropriate
data for analysis of the implications of
tax regulations.
The Treasury Department and the IRS
have considered other data alternatives
including Census data sources, such as
the Statistics of U.S. Businesses (SUSB)
suggested by SBA’s Office of Advocacy.
The 2020 SUSB includes only six
million firms and eight million
establishments while the proposed tax
data include approximately 18 million
business entities. Unlike the SUSB data,
the tax data include more small
businesses, not only ones with at least
one employee. Tax data provide a more
inclusive estimate of businesses affected
by tax regulations. In conclusion, while
tax data are an appropriate resource for
evaluating the impact of tax regulations,
this data does not permit some of the
usual analysis presented to the SBA.
Furthermore, since the NAICS codes
reported on the tax return may not
accurately reflect the industry of the
entity, applying separate standards by
industry is inadvisable.
Thus, the Treasury Department and
the IRS have determined that reliance
on NAICS codes would not accurately
reflect the entities affected by these
regulations. Further, the Treasury
Department and the IRS currently do
not have useable tax data that reflects
the entities that will be affected by these

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53249

regulations. While there is uncertainty
as to the exact number of small
businesses within this group, the
Treasury Department and the IRS
continue to estimate that approximately
70,000 taxpayers will be impacted as
described in the preamble to the
Proposed Regulations.
With respect to the Office of
Advocacy’s comments regarding the
regulation of contractors and
subcontractors, these regulations
provide guidance for taxpayers that seek
the increased amounts of credit and
deduction provided under the IRA by
ensuring the payment of prevailing
wage rates and the use of qualified
apprentices with respect to the
construction of qualified facilities. The
regulations do not directly regulate the
contractors and subcontractors who may
be hired by taxpayers. The taxpayers
claiming the increased amounts of
credit and deduction are the entities
responsible for compliance with the
PWA requirements. While the final
regulations set forth and incentivize
various practices, taxpayers retain
flexibility to determine how best to
ensure compliance with the statutory
requirements and the recordkeeping and
reporting obligations imposed as part of
these final regulations.
D. Impact of the Rules
These final regulations provide rules
for how taxpayers can satisfy the PWA
requirements in order to seek the
increased credit amounts under section
45 as well as the increased amounts of
credit or deduction available under
sections 30C, 45L, 45Q, 45U, 45V, 45Y,
45Z, 48C, and 179D. Taxpayers that seek
to claim the increased amount of credit
or deduction will have administrative
costs related to reading and
understanding these final regulations, as
well as increased costs for the
recordkeeping and reporting
requirements necessary to establish
compliance with the PWA
requirements. The costs will vary across
different-sized taxpayers and across the
type of facilities and projects in which
such taxpayers are engaged.
The Prevailing Wage Requirements
require the taxpayer to obtain the
published wage determination issued by
the DOL for the county in which the
facility is located. To the extent a wage
determination does not include a
required classification, or if no wage
determination has been published, the
taxpayer is required to contact the DOL
to obtain a supplemental wage
determination or a wage rate for an
additional classification. The taxpayer is
required to ensure that any contractor or
subcontractor that works on the

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Federal Register / Vol. 89, No. 122 / Tuesday, June 25, 2024 / Rules and Regulations

construction, alteration, or repair of a
facility has paid hourly wages in
accordance with the applicable wage
determination for each classification
required to complete such work. In
order to be eligible for certain cure
provisions, the taxpayer is required to
know or be able to determine whether
the laborers and mechanics employed
for construction, alteration, or repair of
the facility were paid in accordance
with the applicable wage determination.
Additionally, the taxpayer is required to
retain records sufficient to establish
compliance for as long as may be
relevant. The Treasury Department and
the IRS expect that some of the
recordkeeping that is required under
these rules will be consistent with
recordkeeping requirements already
imposed under the DBA and the Fair
Labor Standards Act, 29 U.S.C. 201 et
seq.
In adopting these final regulations,
the Treasury Department and the IRS
have made several revisions that will
ease burdens for taxpayers. A few
commenters commented on the time
that will be required for taxpayers and
contractors to read and understand
these regulations. In a number of
instances, the final regulations have
been revised in response to comments to
assist taxpayers with understanding the
rules, including through clarifying
explanations in the preamble, edits to
the regulatory text, and additional
examples.
Other changes have been made
throughout these regulations that will
reduce burdens on taxpayers. The
Proposed Regulations would have
established the time that construction
starts as the applicable time for
taxpayers and contractors to determine
applicable wage rates. Commenters
stated this would be burdensome for
taxpayers to determine labor costs and
could require the renegotiation of
contracts that have been executed. In
response to these comments, the final
regulations provide that generally the
applicable prevailing wage rates are
determined at the time a taxpayer (or
the taxpayer’s designee, assignee, or
agent) executes the contract for the
construction, alteration, or repair of the
facility with a contractor. The final
regulations also provide transition rules
that delay the start of the PWA
Requirements to assist taxpayers with
complying with the PWA requirements.
Under the transition rules, the PWA
requirements only apply for work
performed on or after January 29, 2023,
which follows the issuance of the initial
guidance on the PWA requirements by
the Treasury Department and the IRS.
The final regulations also prescribe

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penalty waivers for taxpayers who make
limited errors in compliance with the
Prevailing Wage Requirements. In
response to comments, the threshold to
qualify for the penalty waivers has been
increased to underpayments that do not
exceed five percent of all amounts
required to be paid in a calendar year
to make the penalty waiver more
accessible to taxpayers with small
failures.
For the Apprenticeship Requirements,
the taxpayer, contractor, or
subcontractor, is required to contact a
registered apprenticeship program for
purposes of requesting the dispatch of
qualified apprentices to work on the
construction, alteration, or repair of the
facility. Whether or not the registered
apprenticeship program dispatches
qualified apprentices, the taxpayer is
required to maintain and preserve
records to establish compliance for as
long as may be relevant.
The Apprenticeship Requirements
have also been revised in these final
regulations that will reduce burdens for
taxpayers. In response to several
comments, the final regulations clarify
that the requirement to use qualified
apprentices only applies with respect to
the construction of a facility prior to the
facility being placed in service, and
does not apply to alterations or repairs
after the facility is placed in service.
Several comments were received on the
burden of the Proposed Regulations that
would have required the renewal of
requests for qualified apprentices every
120 days for taxpayers to continue to
qualify for the Good Faith Effort
Exception. These final regulations have
extended the 120-day period to provide
that qualified apprentices only need to
be requested on an annual basis to
qualify for the Good Faith Effort
Exception. This revision reduces
burdens for taxpayers and contractors
who would have been required to
evaluate labor needs on a frequent basis
and provides taxpayers and their
contractors with flexibility to make
hiring decisions over a longer period of
time.
The taxpayer claiming the increased
credit or deduction amount is required
to report the payment of prevailing
wages and the utilization of qualified
apprentices consistent with the forms
and instructions of the IRS. Although
the Treasury Department and the IRS do
not have sufficient data to precisely
determine the likely extent of the
increased costs of compliance, the
estimated burden of complying with the
recordkeeping and reporting
requirements are described in Section II.
of this Special Analyses pertaining to
the Paperwork Reduction Act.

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E. Alternatives Considered
The Treasury Department and the IRS
considered alternatives to these final
regulations. The Office of Advocacy
commented that the recordkeeping and
reporting requirements of the Proposed
Regulations would likely discourage
small entities from bidding on clean
energy projects because they will incur
heightened compliance costs without
sharing in the financial benefits of the
increased amounts of credit and
deduction. In contrast, several
commenters recommended that the
Treasury Department and the IRS adopt
additional pre-filing enforcement
processes to ensure that laborers and
mechanics are paid wages at rates not
less than the applicable prevailing wage
rates. Commenters suggested that that
final regulations impose significant
additional reporting and recordkeeping
requirements, including many pre-filing
reporting requirements such as certified
weekly payroll and monthly
apprenticeship hours reporting.
The final regulations strike an
appropriate balance between these
alternatives that minimizes burdens for
taxpayers and their contractors while
also ensuring that laborers and
mechanics are paid wages at rates not
less than the applicable prevailing wage
rates, and ultimately that the IRS has
sufficient information to administer the
provisions related to increased amounts
of credit and deduction that are claimed
on returns filed by taxpayers. Thus, the
final regulations do not adopt the prefiling alternatives urged by the
commenters, including the DBA
requirement of submitting weekly
certified payroll records to the IRS. The
submission of weekly payroll records to
the IRS by taxpayers would not assist
the IRS with the efficient administration
of the increased credit amount
provisions and would increase burdens
for taxpayers. The Treasury Department
and the IRS also considered an
alternative requirement that taxpayers
submit payroll records for all laborers
and mechanics at the time of filing a
return that claims an increased credit
amount. The Treasury Department and
the IRS determined that per-laborer and
per-mechanic payroll records would not
provide the IRS with useful information
and would also involve substantial
burdens for taxpayers to report such
information.
The Office of Advocacy also
commented that the IRFA did not
analyze how the Proposed Regulations
treatment of PLAs would increase the
compliance costs of the regulation to
small construction firms because they
primarily use non-union labor. As

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discussed in Section V.D. of this
Summary of Comments and Explanation
of Revisions, the Treasury Department
and the IRS have determined that PLAs
may help taxpayers comply with the
PWA requirements. Further, studies
show that PLAs do not necessarily
increase construction costs. Lastly, a
taxpayer may choose to use a PLA for
construction of its facility; it is not a
mandate.
A few commenters expressed concern
regarding the potential of the PWA
requirements to inflate construction
costs, increase the time to complete
clean energy projects, and lessen the
participation of small businesses in
such projects. Commenters opined that
by using the DBA prevailing wage rates,
the Treasury Department and the IRS
were setting wage standards using a
process that is flawed and inaccurate,
and that will have inflationary impacts
on construction costs. The Prevailing
Wage Requirements for an increased
credit (or deduction) amount are set
forth in the various provisions of the
IRA that direct the use of prevailing
wage rates as determined by the
Secretary of Labor in accordance with
the DBA. Thus, alternatives to using the
DBA prevailing rates were not adopted
in the final regulations as they would
lack a statutory basis. Further, DOL
processes for setting wage standards is
within the DOL’s jurisdiction and thus
outside the scope of these final
regulations.
F. Duplicative, Overlapping, or
Conflicting Federal Rules
For facilities built under contracts
with the Federal Government, or with
Federal financial or other assistance
provided under a Davis-Bacon Related
Act, the final regulations may overlap
with the rules under the DBA, 29 CFR
parts 1, 5, and 7. In all other instances,
the final regulations do not duplicate,
overlap, or conflict with any relevant
Federal rules.

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IV. Unfunded Mandates Reform Act
Section 202 of the Unfunded
Mandates Reform Act of 1995 requires
that agencies assess anticipated costs
and benefits and take certain other
actions before issuing a final rule that
includes any Federal mandate that may
result in expenditures in any one year
by a State, local, or Tribal government,
in the aggregate, or by the private sector,
of $100 million (updated annually for
inflation). These final regulations do not
include any Federal mandate that may
result in expenditures by State, local, or
Tribal governments, or by the private
sector in excess of that threshold.

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V. Executive Order 13132: Federalism

List of Subjects in 26 CFR Part 1

Executive Order 13132 (Federalism)
prohibits an agency from publishing any
rule that has federalism implications if
the rule either imposes substantial,
direct compliance costs on State and
local governments, and is not required
by statute, or preempts State law, unless
the agency meets the consultation and
funding requirements of section 6 of the
Executive order. These final regulations
do not have federalism implications and
do not impose substantial direct
compliance costs on State and local
governments or preempt State law
within the meaning of the Executive
order.

Income taxes, Reporting and
recordkeeping requirements.

VI. Executive Order 13175: Consultation
and Coordination With Indian Tribal
Governments
Executive Order 13175 (Consultation
and Coordination with Indian Tribal
governments) prohibits an agency from
publishing any rule that has Tribal
implications if the rule either imposes
substantial, direct compliance costs on
Indian Tribal governments, and is not
required by statute, or preempts Tribal
law, unless the agency meets the
consultation and funding requirements
of section 5 of the Executive order. On
September 25, 2023, the Treasury
Department and the IRS held a
consultation with Tribal leaders
requesting assistance in addressing
questions related to the Proposed
Regulations, which informed the
development of these final regulations.
VII. Congressional Review Act
Pursuant to the Congressional Review
Act (5 U.S.C. 801 et seq.), the Office of
Information and Regulatory Affairs
designated this rule as a major rule as
defined by 5 U.S.C. 804(2).

Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is
amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 is amended by adding entries
for §§ 1.30C–3, 1.45–6 through 1.45–8,
1.45–12, 1.45L–3, 1.45Q–6, 1.45U–3,
1.45V–3, 1.45Y–3, 1.45Z–3, 1.48C–3,
and 1.179D–3 in numerical order to read
in part as follows:

■

Authority: 26 U.S.C. 7805 * * *
Section 1.30C–3 also issued under 26
U.S.C. 30.

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

Fmt 4701

Sfmt 4700

*

Section 1.179D–3 also issued under 26
U.S.C. 179D.

*

*

*

*

*

Par. 2. Sections 1.30C–1 through
1.30C–3 are added to read as follows:

§§ 1.30C–1—1.30C–2

Frm 00069

*

Section 1.45Q–6 also issued under 26
U.S.C. 45Q.
Section 1.45U–3 also issued under 26
U.S.C. 45U.
Section 1.45V–3 also issued under 26
U.S.C. 45V.
Section 1.45Y–3 also issued under 26
U.S.C. 45Y.
Section 1.45Z–3 also issued under 26
U.S.C. 45Z.

IRS notices and other guidance cited
in this preamble are published in the
Internal Revenue Bulletin (or
Cumulative Bulletin) and are available
from the Superintendent of Documents,
U.S. Government Publishing Office,
Washington, DC 20402, or by visiting
the IRS website at https://www.irs.gov.

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*

Section 1.45L–3 also issued under 26
U.S.C. 45L.

■

The principal author of these final
regulations is the Office of the Associate
Chief Counsel (Passthroughs and
Special Industries). However, other
personnel from the Office of Chief
Counsel, the Treasury Department, and
the IRS participated in the development
of these regulations.

*

Section 1.45–6 also issued under 26 U.S.C.
45.
Section 1.45–7 also issued under 26 U.S.C.
45.
Section 1.45–8 also issued under 26 U.S.C.
45.
Section 1.45–12 also issued under 26
U.S.C. 45.

Statement of Availability of IRS
Documents

Drafting Information

53251

[Reserved]

§ 1.30C–3 Rules relating to the increased
credit amount for prevailing wage and
apprenticeship.

(a) In general. If any qualified
alternative fuel vehicle refueling project
(as defined by section 30C(g)(1)(B))
placed in service during the taxable year
satisfies the requirements in paragraph
(b) of this section, the credit determined
under section 30C(a) for any qualified
alternative fuel vehicle refueling
property of a character subject to an
allowance for depreciation that is part of
such project is multiplied by five.
(b) Qualified alternative fuel vehicle
refueling project requirements. A
qualified alternative fuel vehicle

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Federal Register / Vol. 89, No. 122 / Tuesday, June 25, 2024 / Rules and Regulations

refueling project satisfies the
requirements of this paragraph (b) if it
is one of the following—
(1) A project the construction of
which began prior to January 29, 2023;
or
(2) A project that meets the prevailing
wage requirements of section 45(b)(7)
and § 1.45–7, the apprenticeship
requirements of section 45(b)(8) and
§ 1.45–8, and the recordkeeping and
reporting requirements of § 1.45–12, all
with respect to the construction of any
qualified alternative fuel refueling
property within the meaning of section
30C before such project is placed in
service.
(c) Applicability date. This section
applies to qualified alternative fuel
vehicle refueling projects placed in
service in taxable years ending after
June 25, 2024, and the construction of
which begins after June 25, 2024.
Taxpayers may apply this section to
qualified alternative fuel vehicle
refueling projects placed in service in
taxable years ending on or before June
25, 2024, and qualified alternative fuel
vehicle refueling projects placed in
service in taxable years ending after
June 25, 2024, the construction of which
begins before June 25, 2024, provided
that taxpayers follow this section in its
entirety and in a consistent manner.
■ Par. 3. Sections 1.45–0 through 1.45–
12 are added to read as follows:
Sec.

*

*

*

*

*

1.45–0 Table of contents.
1.45–1—1.45–5 [Reserved]
1.45–6 Increased credit amount.
1.45–7 Prevailing wage requirements.
1.45–8 Apprenticeship requirements.
1.45–9—1.45.11 [Reserved]
1.45–12 Recordkeeping and reporting.

*

*

§ 1.45–0

*

*

*

Table of contents.

This section lists the table of contents
for §§ 1.45–1 through 1.45–12.

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§§ 1.45–1—1.45–5

[Reserved]

§ 1.45–6 Increased credit amount.
(a) In general.
(b) Qualified facility requirements.
(c) Definition of nameplate capacity
for purposes of determining maximum
net output under section 45(b)(6)(B)(i).
(d) Applicability date.
§ 1.45–7 Prevailing wage requirements.
(a) Prevailing wage requirements.
(b) Wage determinations.
(c) Curing a failure to satisfy the
prevailing wage requirements.
(d) Definitions.
(e) Applicability date.
§ 1.45–8 Apprenticeship requirements.
(a) Apprenticeship requirements.

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(b) Labor hours requirement.
(c) Ratio requirement.
(d) Participation requirement.
(e) Examples.
(f) Exceptions to the apprenticeship
requirements.
(g) Definitions.
(h) Applicability date.
§§ 1.45–9—1.45–11

[Reserved]

§ 1.45–12 Recordkeeping and
reporting.
(a) In general.
(b) Recordkeeping for the prevailing
wage and apprenticeship requirements.
(c) Recordkeeping for the prevailing
wage requirements.
(d) Recordkeeping for the
apprenticeship requirements.
(e) Satisfaction of the recordkeeping
requirements.
(f) Applicability date.
§§ 1.45–1—1.45–5
§ 1.45–6

[Reserved]

Increased credit amount.

(a) In general. If a qualified facility (as
defined in section 45) satisfies the
requirements in paragraph (b) of this
section, the amount of the renewable
electricity production credit determined
under section 45(a) (after the
application of section 45(b)(1) through
(5)) is equal to the credit determined
under section 45(a) multiplied by five.
(b) Qualified facility requirements. A
qualified facility satisfies the
requirements of this paragraph (b) if it
is one of the following—
(1) A facility with a maximum net
output (as determined under paragraph
(c) of this section) of less than one
megawatt (as measured in alternating
current);
(2) A facility the construction of
which began prior to January 29, 2023;
or
(3) A facility that meets the prevailing
wage requirements of section 45(b)(7)
and § 1.45–7, the apprenticeship
requirements of section 45(b)(8) and
§ 1.45–8, and the recordkeeping and
reporting requirements of § 1.45–12.
(c) Definition of nameplate capacity
for purposes of determining maximum
net output under section 45(b)(6)(B)(i).
For purposes of determining whether a
facility has a maximum net output of
less than one megawatt (as measured in
alternating current) for purposes of
section 45(b)(6)(B)(i), nameplate
capacity is determinative. Nameplate
capacity for an electrical generating unit
means the maximum electrical
generating output in megawatts that the
unit is capable of producing on a steady
state basis and during continuous
operation under standard conditions, as
measured by the manufacturer and

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consistent with the definition provided
in 40 CFR 96.202. If applicable, the
International Standard Organization
(ISO) conditions are used to measure the
maximum electrical generating output
or usable energy capacity.
(d) Applicability date. This section
applies to qualified facilities placed in
service in taxable years ending after
June 25, 2024, and the construction of
which begins after June 25, 2024.
Taxpayers may apply this section to
qualified facilities placed in service in
taxable years ending on or before June
25, 2024, and qualified facilities placed
in service in taxable years ending after
June 25, 2024, the construction of which
begins before June 25, 2024, provided
that taxpayers follow this section in its
entirety and in a consistent manner.
§ 1.45–7

Prevailing wage requirements.

(a) Prevailing wage requirements—(1)
In general. Except as provided in
paragraphs (a)(2), (3), and (c) of this
section, a taxpayer claiming or
transferring (under section 6418) the
increased credit amount under section
45(b)(6)(B)(iii) with respect to any
qualified facility must satisfy the
requirements of section 45(b)(7) and this
section by ensuring that all laborers and
mechanics employed by the taxpayer or
any contractor or subcontractor in the
construction of such facility, and with
respect to any taxable year, for any
portion of such taxable year that is
within the 10-year period beginning on
the date the qualified facility was placed
in service, the alteration or repair of
such facility, are 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
(Prevailing Wage Requirements). If
alteration or repair of a qualified facility
occurs during any portion of such
taxable year(s) within the 10-year period
after the qualified facility was placed in
service, the Prevailing Wage
Requirements apply with respect to
such taxable year(s) in which that
alteration or repair occurs. If no
alteration or repair work occurs during
the taxable year(s) with respect to the
qualified facility after the facility is
placed in service, the taxpayer is
deemed to satisfy the Prevailing Wage
Requirements with respect to such
taxable year. Prevailing rates are those
rates most recently determined by the
Secretary of Labor in accordance with
40 U.S.C. chapter 31, subchapter IV
(Davis-Bacon Act), and as set forth in
paragraph (b) of this section. See
paragraph (d) of this section for
definitions of terms used in this section.

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(2) Transition relief. Taxpayers are
excepted from the Prevailing Wage
Requirements with respect to any
activities that would be considered
construction, alteration, or repair of the
qualified facility and that occurred prior
to January 29, 2023.
(3) Relief for Indian Tribal
governments. An Indian Tribal
government, as defined in section
30D(g)(9), and including any
subdivision, agency, or instrumentality
of the Indian Tribal government, is
excepted from the Prevailing Wage
Requirements with respect to laborers
and mechanics that are employees,
within the meaning of section
3121(d)(2), of the Indian Tribal
government. This paragraph (a)(3) also
applies to a qualified facility that is
subject to joint ownership arrangements
that involve an Indian Tribal
government, including any subdivision,
agency, or instrumentality of the Indian
Tribal government. However, any
activity that would be considered
construction, alteration, or repair of the
qualified facility that is not performed
by Indian Tribal government employees
(within the meaning of section
3121(d)(2)), but that is instead
performed by or through a contractor or
subcontractor, is subject to the
Prevailing Wage Requirements
described in this paragraph (a).
(b) Wage determinations—(1) In
general. A taxpayer satisfies the
Prevailing Wage Requirements with
respect to a qualified facility, if the
taxpayer ensures that laborers and
mechanics employed by the taxpayer or
any contractor or subcontractor in the
construction, alteration, or repair of the
facility are paid wages at rates not less
than those set forth in the applicable
wage determination issued by the
Secretary of Labor pursuant to 40 U.S.C.
3142, 29 CFR part 1, and other
implementing guidance for the specified
type of construction in the geographic
area where that facility is located. If the
construction, alteration, or repair of a
facility occurs in more than one
geographic area, the taxpayer,
contractor, or subcontractor must use
the applicable wage determination for
the work performed in each geographic
area. Subject to the requirements of this
section, the applicable wage
determination is a general wage
determination described in paragraph
(b)(2) of this section (including any
additional classifications and wage rates
described in paragraph (b)(3) of this
section), or a supplemental wage
determination described in paragraph
(b)(3) of this section.
(2) General wage determinations—(i)
In general. Except as provided in

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paragraph (b)(3) of this section, to
satisfy the Prevailing Wage
Requirements described in paragraph (a)
of this section with respect to a
qualified facility, taxpayers must ensure
that laborers and mechanics employed
by the taxpayer or any contractor or
subcontractor in the construction,
alteration, or repair of the facility are
paid wages at rates not less than those
set forth in the applicable general wage
determination(s) published by the U.S.
Department of Labor on the approved
website. The applicable general wage
determination is the general wage
determination in effect for the specified
type of construction in the geographic
area at the time a contract for the
construction, alteration, or repair of the
facility is executed by the taxpayer (or
the taxpayer’s designee, assignee, or
agent) and any contractor. The
applicable general wage determination
will continue in effect for any additional
contracts executed by such contractor
with any subcontractors with respect to
the construction, alteration, or repair of
the facility. In the absence of a contract
(or if the date of execution of the
contract cannot be reasonably
determined), the applicable general
wage determination is the general wage
determination in effect for the specified
type of construction in the geographic
area when the construction, alteration,
or repair of the facility starts.
(ii) Wage determinations applicable to
Indian Tribal governments. If the
taxpayer is an Indian Tribal
government, as defined in section
30D(g)(9), including any subdivision,
agency, or instrumentality of the Indian
Tribal government, and the
construction, alteration, or repair of a
qualified facility occurs on Indian land,
as defined in 25 U.S.C. 3501(2), that
encompasses or overlaps with more
than one geographic area with respect to
which the U.S. Department of Labor has
issued a general wage determination,
the Indian Tribal government may
choose the general wage determination
applicable for any one of those
geographic areas and apply that general
wage determination for work performed
on any qualified facility that is located
on the Indian land. This paragraph
(b)(2)(ii) also applies to a qualified
facility that is subject to joint ownership
arrangements that involve an Indian
Tribal government, including any
subdivision, agency, or instrumentality
of the Indian Tribal government. If the
Indian Tribal government chooses to use
a single general wage determination
under this paragraph (b)(2)(ii), it must
maintain and preserve records sufficient
to document the applicable prevailing

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wage rates for each laborer and
mechanic employed by the Indian
Tribal government or any contractor or
subcontractor with respect to each
qualified facility on Indian land.
(3) Supplemental wage
determinations and additional
classifications and rates—(i) Use of
supplemental wage determinations and
additional classifications and rates. In
the event the Secretary of Labor has not
issued a general wage determination for
the relevant geographic area and type of
construction for the facility, or the
Secretary of Labor has issued a general
wage determination for the relevant
geographic area and type of
construction, but one or more labor
classifications for the construction,
alteration, or repair work that will be
done on the facility by laborers or
mechanics is not listed, the taxpayer
must ensure that laborers and
mechanics employed by the taxpayer or
any contractor or subcontractor in the
construction, alteration, or repair of a
facility are paid wages at rates not less
than those set forth in a supplemental
wage determination or in an additional
classification and wage rate issued to
the taxpayer by the U.S. Department of
Labor upon request by the taxpayer,
contractor, or subcontractor in
accordance with paragraph (b)(3)(ii) of
this section. A taxpayer, contractor, or
subcontractor may also request a
supplemental wage determination if the
location of the facility involves work by
covered laborers and mechanics that
spans more than one contiguous
geographic area.
(ii) Request for supplemental wage
determinations and additional
classifications and rates—(A) Manner of
making request. A taxpayer, contractor,
or subcontractor requesting a
supplemental wage determination or
additional classification and wage rate
under paragraph (b)(3)(i) of this section
must submit the request to the U.S.
Department of Labor at, U.S.
Department of Labor, Wage and Hour
Division, Branch of Construction Wage
Determinations, Washington, DC 20210,
by email at [email protected],
or such other address as may be
prescribed in guidance and instructions
issued by the Administrator of the Wage
and Hour Division of the U.S.
Department of Labor (Wage and Hour
Division).
(B) Timing of supplemental wage
determination requests. A taxpayer,
contractor, or subcontractor should
make requests for a supplemental wage
determination no more than 90 days
before the taxpayer (or the taxpayer’s
designee, assignee, or agent) expects to
execute the contract for the

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construction, alteration, or repair of the
facility with a contractor. In the absence
of a contract, the taxpayer, contractor, or
subcontractor should make such
requests no more than 90 days before
construction, alteration, or repair of the
facility starts.
(C) Timing of requests for prevailing
wage rates for additional classifications.
A request for prevailing wage rates for
additional classifications can be made
any time after a contract for the
construction, alteration, or repair of a
facility has been executed between the
taxpayer (or the taxpayer’s designee,
assignee, or agent) and a contractor. In
the absence of a contract, the taxpayer,
contractor, or subcontractor should
make such requests no more than 90
days before construction, alteration, or
repair of the facility starts. If the
taxpayer, contractor, or subcontractor
cannot reasonably determine prior to
execution of the contract between the
taxpayer (or the taxpayer’s designee,
assignee, or agent) and the contractor or
prior to the start of the construction,
alteration, or repair work that an
additional classification and wage rate
is necessary, the taxpayer, contractor, or
subcontractor should make such request
as soon as practicable after determining
that an additional classification and
wage rate is necessary.
(D) Required information. The request
for a supplemental wage determination
or additional classification and wage
rate must include the following
information:
(1) The name of the taxpayer,
contractor, or subcontractor requesting
the supplemental wage determination or
wage rate;
(2) The general wage determination(s),
if any, applicable to construction,
alteration, or repair of the facility;
(3) A description of the work to be
performed, including the type(s) of
construction involved and, if the project
involves multiple types of construction,
information indicating the expected cost
breakdown by type of construction;
(4) The geographic area in which the
facility is being constructed, altered, or
repaired, including the name and
address of the facility (if known);
(5) The date the taxpayer (or the
taxpayer’s designee, assignee, or agent)
expects to enter into a contract with a
contractor for which a supplemental
wage determination is needed or the
date of execution of the contract with a
contractor for which a prevailing wage
rate for an additional classification is
needed;
(6) The start date of construction,
alteration, or repair at the facility;
(7) The labor classification(s) needed
for performance of the work on the

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facility (excluding those for which wage
rates are available on an applicable
general wage determination);
(8) The duties to be performed by
each such labor classification on the
facility;
(9) The proposed wage rate, including
any bona fide fringe benefits, for each
such labor classification;
(10) Any pertinent wage payment
information that may be available;
(11) Any additional relevant
information otherwise required by forms
and instructions published by the U.S.
Department of Labor; and
(12) Any additional information the
taxpayer, contractor, or subcontractor
wants the U.S. Department of Labor to
consider.
(iii) Issuance of supplemental wage
determinations and additional
classifications and wage rates. After
review, the Wage and Hour Division
will notify the taxpayer, contractor, or
subcontractor as to the supplemental
wage determination or the labor
classifications and wage rates to be used
for the type of work in question in the
geographic area in which the facility is
located. Supplemental wage
determinations issued by the Wage and
Hour Division are effective for 180
calendar days from the date such
determinations are issued. If a
supplemental wage determination is not
incorporated into the contract (or, in the
absence of a contract, if construction has
not started) during the 180-day period,
the determination is no longer effective,
and a new supplemental wage
determination will need to be requested.
The Wage and Hour Division will
resolve requests for a prevailing wage
rate for an additional classification
within 30 days of receipt of the request
or will advise the requester within the
30-day period that additional time is
necessary.
(iv) Special rule for qualified facilities
located offshore. If a general wage
determination is not available, in lieu of
requesting a supplemental wage
determination for a qualified facility
located in an offshore area within the
outer continental shelf of the United
States, a taxpayer, contractor, or
subcontractor may rely on the general
wage determination for the relevant
category of construction that is
applicable in the geographic area closest
to the area in which the qualified
facility will be located.
(4) Reconsideration and review. A
taxpayer, contractor, or subcontractor
may seek reconsideration and review by
the Administrator of the Wage and Hour
Division of a general wage
determination, or a determination
issued with respect to a request for a

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supplemental wage determination or
additional classification and wage rate
in accordance with the procedures set
forth in 29 CFR 1.8 and 5.13 and any
subsequent guidance issued by the U.S.
Department of Labor. A taxpayer,
contractor, or subcontractor may appeal
the decision of the Administrator of the
Wage and Hour Division to the U.S.
Department of Labor’s Administrative
Review Board in accordance with the
procedures set forth in 29 CFR part 7
and any subsequent guidance issued by
the U.S. Department of Labor. Questions
regarding wage determinations and rates
may be referred to the Administrator of
the Wage and Hour Division.
(5) Timing of wage determination. The
applicable prevailing wage rates on a
general wage determination are those in
effect at the time a contract for the
construction, alteration, or repair of the
qualified facility is executed by the
taxpayer (or the taxpayer’s designee,
assignee, or agent) and a contractor.
After the qualified facility is placed in
service, the applicable prevailing wage
rates on a general wage determination
for the alteration or repair of a qualified
facility are those in effect at the time the
contract for the alteration or repair work
is executed by the taxpayer (or the
taxpayer’s designee, assignee, or agent)
and a contractor. The applicable
prevailing wage rates on a general wage
determination at the time such contract
is executed apply to all subcontractors
of that contractor. If a taxpayer (or the
taxpayer’s designee, assignee, or agent)
executes separate contracts with more
than one contractor with respect to the
construction, alteration, or repair of the
qualified facility, then, for each such
contract, the applicable prevailing wage
rates with respect to any work
performed by the contractor (and all
subcontractors of the contractor) are
determined at the time the contract is
executed by the taxpayer (or the
taxpayer’s designee, assignee, or agent).
If no contract exists with respect to the
construction, alteration, or repair of the
qualified facility (or if the date of
execution of the relevant contract
cannot be reasonably determined), the
applicable prevailing wage rates on a
general wage determination are those in
effect at the time the construction,
alteration, or repair work starts. The
applicable prevailing wage rates of a
general wage determination generally
remain valid for the duration of the
work performed with respect to the
construction, alteration, or repair of the
qualified facility by the taxpayer,
contractor, or subcontractor. A new
general wage determination is required
to be used if the contract between the

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Federal Register / Vol. 89, No. 122 / Tuesday, June 25, 2024 / Rules and Regulations
taxpayer (or the taxpayer’s designee,
assignee, or agent) and the contractor for
work on a facility is modified to include
additional substantial construction,
alteration, or repair work not within the
scope of work of the original contract,
or to require work to be performed for
an additional time period not originally
obligated, including if an option to
extend the term of a contract for the
construction, alteration, or repair is
exercised. A new general wage
determination is not required if the
contractor is simply given additional
time to complete its original
commitment or if the additional
construction, alteration, and/or repair
work in the modification of the contract
is merely incidental. In circumstances
in which a new general wage
determination is required, the
applicable prevailing wage rates on a
general wage determination are those in
effect at the time the additional
substantial work is agreed to or at the
time when an option to extend the term
of the contract is executed. If a taxpayer
enters into a contract for alteration or
repair work over an indefinite period of
time that is not tied to the completion
of any specific work, the applicable
prevailing wage rates must be updated
on an annual basis on the anniversary
date of such contract. General wage
determinations published on the U.S.
Department of Labor approved website
contain no expiration date and remain
valid until revised, superseded, or
canceled. Any supplemental wage
determination issued under paragraph
(b)(3) of this section applies without
expiration from the time the taxpayer
incorporates the supplemental wage
determination into the contract
provided that the supplemental wage
determination is incorporated into the
contract within 180 days of issuance of
the supplemental wage determination. If
there is no contract, any supplemental
wage determination issued under
paragraph (b)(3) of this section applies
without expiration from the time
construction, alteration, or repair starts
provided the construction, alteration, or
repairs starts within 180 days of
issuance of the supplemental
determination. Any additional
classification and wage rate issued
under paragraph (b)(3) of this section
applies without expiration from the
earlier of the date of issuance or the first
day in which work in the additional
classification was performed. If a
supplemental wage determination or
additional classification and wage rate
is issued after construction, alteration,
or repair of the facility has started, the
applicable prevailing rates apply

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retroactively to the date construction
started.
(6) Payment of wages. All laborers and
mechanics working on a qualified
facility must be paid in the time and
manner consistent with the regular
payroll practices of the taxpayer,
contractor, or subcontractor, as
applicable. The payment of wages must
be made without subsequent deduction
or rebate on any account (except such
payroll deductions as are required by
the law or permitted by regulations
issued by the Secretary of Labor), and
must consist of the full amount of wages
(including bona fide fringe benefits or
cash equivalents thereof) due at the time
of payment computed at rates not less
than those contained in the applicable
wage determination of the Secretary of
Labor. A taxpayer may discharge its
wage obligations for the payment of
wages by paying the full amount in
cash, by making payments to a bona fide
fringe benefit provider or incurring costs
for bona fide fringe benefits, or by a
combination thereof. The taxpayer is
solely responsible for ensuring that
laborers and mechanics are paid wages
not less than the prevailing rate whether
employed directly by the taxpayer, a
contractor, or a subcontractor in the
construction, alteration, or repair of the
qualified facility for purposes of
claiming the increased credit amount
under section 45(b)(6)(B)(iii). The rules
set forth in 29 CFR 5.25 through 5.33,
and any subsequent guidance issued by
the U.S. Department of Labor apply with
respect to costs for bona fide fringe
benefits that may be credited for
purposes of the payment of wages.
(7) Apprentices—(i) Rate of pay.
Apprentices who perform work with
respect to the construction, alteration, or
repair of a qualified facility consistent
with the requirements of section
45(b)(8) and § 1.45–8 may be paid wages
at rates that are less than the rates that
would otherwise apply under paragraph
(a) of this section. Every apprentice
must be paid wages at rates not less than
the rates specified by the registered
apprenticeship program for the
apprentice’s level of progress, expressed
as a percentage of the journeyworker
hourly rate specified for the apprentice’s
classification in the applicable wage
determination. If the apprentice is
working in a classification that is not
part of the occupation of the registered
apprenticeship program, the apprentice
must be paid not less than the
applicable wage rate on the wage
determination for laborers or mechanics
working in that classification. Any
individual listed on payroll at an
apprenticeship wage, who is not
participating in a registered

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53255

apprenticeship program, must be paid
not less than the applicable wage rate on
the wage determination for the
classification of work actually
performed to satisfy the Prevailing Wage
Requirements. In the event the U.S.
Department of Labor’s Office of
Apprenticeship or a State
apprenticeship agency recognized by
the U.S. Department of Labor’s Office of
Apprenticeship withdraws approval of
an apprenticeship program, the
taxpayer, contractor, or subcontractor
will no longer satisfy the Prevailing
wage Requirements by paying
apprentices less than the applicable
predetermined rate for the work
performed until an acceptable program
is approved.
(ii) Bona fide fringe benefits. To
satisfy the Prevailing Wage
Requirements, apprentices must be paid
bona fide fringe benefits in accordance
with the provisions of the registered
apprenticeship program. If the
apprenticeship program does not
specify the payment of bona fide fringe
benefits, apprentices must be paid the
full amount of bona fide fringe benefits
listed on the wage determination for the
applicable classification in cash or in
kind.
(iii) Apprenticeship ratio. The
allowance for payment of wages to
apprentices at rates less than the
applicable prevailing wage rates
determined by the U.S. Department of
Labor is subject to any applicable ratio
of apprentices to journeyworkers
required under the registered
apprenticeship program and consistent
with section 45(b)(8)(B) and § 1.45–8.
Any apprentice performing
construction, alteration, or repair work
on the job site in excess of the ratio
permitted under the registered program
or the ratio applicable to the geographic
area of the facility pursuant to 29 CFR
5.5(a)(4)(i) must be paid not less than
the applicable wage rate on the wage
determination for the work actually
performed to satisfy the Prevailing Wage
Requirements. Taxpayers, contractors,
or subcontractors have the discretion to
determine which apprentice(s) must
receive the full prevailing wage rate for
hours worked if the applicable ratio of
apprentices to journeyworkers has not
been met.
(iv) Reciprocity of ratios and wage
rates. If a taxpayer, contractor, or
subcontractor is performing
construction, alteration, or repair work
on a facility in a geographic area other
than the geographic area in which an
apprenticeship program is registered,
the taxpayer, contractor, or
subcontractor must comply with the
apprentice-to-journeyworker ratios

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applicable within the geographic area in
which the construction, alteration, or
repair work is being performed. If there
is no applicable ratio for the geographic
area of the facility, the ratio specified in
the registered apprenticeship program
standard must be observed. The wage
rates (expressed in percentages of the
journeyworker’s hourly rate) applicable
within the geographic area in which the
construction, alteration, or repair work
is being performed must be observed.
(c) Curing a failure to satisfy the
prevailing wage requirements—(1) In
general. If a taxpayer fails to ensure that
all laborers and mechanics employed by
the taxpayer or any contractor or
subcontractor in the construction,
alteration, or repair of a qualified
facility are paid wages at rates not less
than those set forth in the applicable
wage determination(s), such taxpayer
will be deemed to have satisfied the
Prevailing Wage Requirements with
respect to such facility for any year if
the taxpayer makes the correction and
penalty payments provided in
paragraphs (c)(1)(i) and (ii) of this
section.
(i) Correction payment. The taxpayer
must pay any laborer or mechanic who
was paid wages at a rate below the rate
described in paragraph (b) of this
section for any pay period during such
year an amount equal to the sum of:
(A) The difference between the
amount of wages paid to such laborer or
mechanic for all hours worked during
such period and the amount of wages
required to be paid to such laborer or
mechanic pursuant to paragraph (a) of
this section for all hours worked during
such period; and
(B) Interest on the amount determined
under paragraph (c)(1)(i)(A) of this
section at the Federal short-term rate as
determined under section 6621 but
substituting ‘‘6 percentage points’’ for
‘‘3 percentage points’’ in section
6621(a)(2).
(ii) Penalty payment. The taxpayer
must pay a penalty equal to $5,000
multiplied by the total number of
laborers and mechanics who were paid
wages at a rate below the rate described
in paragraph (b) of this section for any
period during such year.
(iii) Correction and penalty payments
not required if taxpayer ineligible for
increased credit amount under section
45(b)(6)(B)(iii). If the taxpayer claims the
increased credit amount under section
45(b)(6)(B)(iii) and does not satisfy the
Prevailing Wage Requirements for the
claimed increased credit amount, then
the obligation to make correction and
penalty payments under paragraphs
(c)(1)(i) and (ii) of this section applies in
order for the taxpayer to retain the

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credit. If the IRS determines that a
taxpayer claiming the increased credit
amount under section 45(b)(6)(B)(iii)
failed to meet the Prevailing Wage
Requirements and the taxpayer does not
make the correction and penalty
payments provided in paragraphs
(c)(1)(i) and (ii) of this section, then no
penalty is assessed under paragraph
(c)(1)(ii) of this section, and the taxpayer
is not eligible for the increased credit
amount under section 45(b)(6)(B)(iii).
Taxpayers that are not eligible to claim
the increased credit amount may still be
eligible to claim the base amount of the
renewable electricity production credit
under section 45(a) if they meet the
requirements to claim the credit.
(iv) Correction and penalty payments
in the event of a transfer pursuant to
section 6418. To the extent an eligible
taxpayer, as defined in section
6418(f)(2), has determined an increased
credit amount under section 45(b)(6)
and transferred such increased credit
amount as part of a specified credit
portion, the obligation to make
correction and penalty payments under
paragraphs (c)(1)(i) and (ii) of this
section remains with the eligible
taxpayer. The obligation for an eligible
taxpayer to satisfy the Prevailing Wage
Requirements becomes binding upon
the earlier of the filing of the eligible
taxpayer’s return for the taxable year for
which the specified credit portion is
determined with respect to the eligible
taxpayer, or the filing of the return of
the transferee taxpayer for the year in
which the specified credit portion is
taken into account. If the IRS
determines that the eligible taxpayer
failed to meet the Prevailing Wage
Requirements and the eligible taxpayer
does not then make the correction and
penalty payments provided in
paragraphs (c)(1)(i) and (ii) of this
section, then no penalty is assessed
under paragraph (c)(1)(ii) of this section,
and the eligible taxpayer is not eligible
for the increased credit amount
determined under section
45(b)(6)(B)(iii). Section 6418 and the
regulations under section 6418 control
for determining the impact of an eligible
taxpayer’s failure to cure on any
transferee taxpayer. The eligible
taxpayer that is not eligible to claim the
increased credit amount may still be
eligible to claim the base amount of the
renewable electricity production credit
under section 45(a) if they meet the
requirements to claim the credit.
(v) Special rule for laborers and
mechanics who cannot be located. A
taxpayer will be deemed to have paid a
correction payment, under this
paragraph (c)(1), to a laborer or
mechanic who cannot be located if the

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taxpayer can establish that correction
payments have been made. A taxpayer
may establish that correction payments
have been made by demonstrating
compliance with the applicable State
unclaimed property law and all Federal
and State withholding and information
reporting requirements with respect to
the payments.
(vi) Examples. The provisions of this
paragraph (c)(1) are illustrated by the
following examples, which do not take
into account any possible application of
the enhanced correction and penalty
payment requirements in the case of
intentional disregard under paragraph
(c)(3) of this section, the exception for
wages paid before a determination by
the U.S. Department of Labor under
paragraph (c)(5) of this section, or the
penalty waiver under paragraph (c)(6) of
this section. In each example, assume
that the taxpayer uses the calendar year
as the taxpayer’s taxable year.
(A) Example 1. Taxpayer A starts
construction of a qualified facility on
February 3, 2023. The facility is placed
in service on October 10, 2023, and
Taxpayer A claims the increased credit
amount under section 45(b)(6)(B)(iii) on
its 2023 tax return. Laborer X was
employed in the construction,
alteration, or repair of the facility in
calendar year 2023 for 20 weeks and
was paid on a weekly basis. Laborer X
was paid wages below the prevailing
wage rate for all pay periods in calendar
year 2023. All other laborers and
mechanics were paid wages at the
prevailing wage rate. The aggregate
difference between the amount of wages
Laborer X was paid and the amount
required to be paid under paragraph (a)
of this section is $400 (that is, Laborer
X worked 20 weeks during the year and
was underpaid by $20 in each of those
weeks). The amount of the correction
payment Taxpayer A must make to
Laborer X is equal to $400 plus interest
from the date of each underpayment at
the rate as determined under section
6621 but substituting ‘‘6 percentage
points’’ for ‘‘3 percentage points’’ in
section 6621(a)(2). The total number of
laborers underpaid for any period in
2023 was one, so the total amount of the
penalty payment that Taxpayer A must
pay to the IRS to retain the increased
credit amount is $5,000.
(B) Example 2. Taxpayer B starts
construction of a qualified facility on
January 30, 2023. The facility is placed
in service on February 2, 2024.
Taxpayer B claims the increased credit
amount under section 45(b)(6)(B)(iii) on
its 2024 tax return. Taxpayer B paid
workers on a biweekly basis. Five
laborers employed in the construction of
the facility were paid wages at rates

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below the prevailing wage rates in 2023,
with the difference between the amount
they were paid and the amount of wages
required to be paid under paragraph (a)
of this section being $500 per laborer.
One of those laborers remained
employed in the construction of the
facility in 2024 and was paid wages
below the prevailing wage rate in 2024,
with the difference between the amount
the laborer was paid and the amount of
wages required to be paid under
paragraph (a) of this section being $100.
All other laborers and mechanics
involved in the construction, alteration,
or repair of the facility were paid wages
at the prevailing wage rates. Taxpayer B
must make correction payments of $500
plus interest from the date of each
underpayment at the rate as determined
under section 6621 but substituting ‘‘6
percentage points’’ for ‘‘3 percentage
points’’ in section 6621(a)(2) to each of
the five laborers that were underpaid in
2023, and a correction payment of $100
plus interest from the date of each
underpayment at the rate as determined
under section 6621 but substituting ‘‘6
percentage points’’ for ‘‘3 percentage
points’’ in section 6621(a)(2) to the
laborer that was underpaid in 2024. The
total amount of the penalty payment
that Taxpayer B must pay to the IRS to
retain the increased credit amount is
$30,000, which includes $5,000 for each
laborer underpaid in 2023 and $5,000
for the laborer underpaid in 2024.
(C) Example 3. Taxpayer C starts
construction of a qualified facility on
January 30, 2023. The facility is placed
in service on February 2, 2024.
Taxpayer C claims the increased credit
amount under section 45(b)(6)(B)(iii) on
its 2024 tax return. Taxpayer C paid
workers on a biweekly basis. Laborer Y
was employed in the construction of the
facility for 22 weeks in 2023 was paid
wages at rates below the prevailing wage
rates for the first 20 weeks of her
employment in the amount of $500 (that
is, Laborer Y was underpaid $50 in each
of the 10 biweekly periods). For the last
biweekly pay period, Taxpayer C paid
Laborer Y the correct prevailing rate for
the work performed during the period,
plus $500 for the amounts that were
underpaid in the first 10 periods. All
other laborers and mechanics involved
in the construction, alteration, or repair
of the facility were paid at the
prevailing wage rates. Taxpayer C is
required to make a correction payment
to Laborer Y in the amount of the
interest from the date of each
underpayment at the rate as determined
under section 6221 but substituting ‘‘6
percentage points’’ for ‘‘3 percentage
points’’ in section 6221(a)(2) to the

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laborer that was underpaid in 2023. To
retain the increased credit amount,
Taxpayer C must make a penalty
payment of $5,000 to the IRS with
respect to Laborer Y.
(2) Deficiency procedures not to
apply. The penalty payment required by
paragraph (c)(1)(ii) of this section may
be assessed and collected without
regard to the deficiency procedures
provided by subchapter B of chapter 63
of the Code. Any determination by the
IRS disallowing a claim for the
increased credit amount under section
45(b)(6) will be subject to the deficiency
procedures of subchapter B of chapter
63.
(3) Intentional disregard—(i)
Application of section 45 (b)(7)(B)(iii). If
the IRS determines that any failure to
satisfy the Prevailing Wage
Requirements in paragraph (a) of this
section is due to intentional disregard of
the requirement—
(A) The correction payment under
paragraph (c)(1)(i) of this section is
increased to three times the sum
determined in paragraph (c)(1)(i) of this
section; and
(B) The penalty payment under
paragraph (c)(1)(ii) of this section is
increased to $10,000 multiplied by the
total number of laborers and mechanics
who were paid wages at a rate below the
rate described in paragraph (b) of this
section for any period during such year.
(ii) Meaning of intentional disregard.
A failure to ensure that any laborer or
mechanic employed in the construction,
alteration, or repair of a qualified
facility is paid wages at the prevailing
wage rate is due to intentional disregard
if it is knowing or willful.
(iii) Facts and circumstances
considered. The facts and circumstances
that are considered in determining
whether a failure to satisfy the
Prevailing Wage Requirements is due to
intentional disregard include, but are
not limited to—
(A) Whether the failure was part of a
pattern of conduct that includes
repeated or systemic failures to ensure
that the laborers and mechanics were
paid wages at rates not less than the
applicable prevailing wage rate,
including failures to pay prevailing
wages as required under other
applicable laws;
(B) Whether the taxpayer took steps to
determine or review the applicable
classifications of laborers and
mechanics, such as through a quarterly,
or more frequent, review of the
applicable classifications of laborers and
mechanics according to the actual
duties performed by those laborers and
mechanics;

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(C) Whether the taxpayer took steps to
determine or review the applicable
prevailing wage rate(s) for laborers and
mechanics to ensure usage of correct
rates by all contractors and
subcontractors, such as through a
quarterly, or more frequent, review of
the prevailing wage rates;
(D) Whether the taxpayer promptly
cured any failures to ensure that
laborers and mechanics were paid
wages at rates not less than the
applicable prevailing rates;
(E) Whether the taxpayer has been
required to make a penalty payment
under paragraph (c)(1)(ii) of this section
in previous years;
(F) Whether the taxpayer undertook
(or engaged an independent third party
to aid in conducting) a quarterly, or
more frequent, review of wages paid to
mechanics and laborers to ensure that
wages at rates not less than the
applicable prevailing wage rates were
paid (including by reviewing payroll
information of contractors and
subcontractors or by requiring
contractors and subcontractors to
regularly provide payroll information to
the taxpayer or a third party acting on
behalf of the taxpayer);
(G) Whether the taxpayer included
provisions in any contracts entered into
with contractors that required the
contractors and any subcontractors
retained by the contractors to pay
laborers and mechanics wages at rates
not less than the prevailing wage rates
and maintain records to ensure the
taxpayer’s compliance with
recordkeeping requirements set forth in
§ 1.45–12;
(H) Whether the taxpayer posted in a
prominent place at the qualified facility
or otherwise provided written notice to
laborers and mechanics during the
construction, alteration, or repair of the
qualified facility, the applicable wage
rate(s) as determined by the U.S.
Department of Labor for all
classifications of work to be performed
for the construction, alteration, or repair
of the facility, that in order to be eligible
to claim certain tax benefits, employers
must ensure that laborers and
mechanics are paid wages at rates not
less than such wage rates, and
instructions on how laborers and
mechanics may contact the taxpayers’
personnel departments or taxpayers’
managers to report suspected failures to
pay prevailing wages and/or suspected
failures to classify workers in
accordance with applicable wage
determinations, employment tax
violations, or violations of workplace
standard laws without retaliation or
adverse action;

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(I) Whether laborers and mechanics
were given the opportunity to
acknowledge notice provided by the
taxpayer, contractor, or subcontractor
that in order to be eligible to claim
certain tax benefits, taxpayers must
ensure that laborers and mechanics
employed by the taxpayer, contractor, or
subcontractor in the construction of a
qualified facility are paid wages at rates
not less than prevailing wage rates;
(J) Whether the taxpayer had in place
procedures whereby laborers and
mechanics could report suspected
failures to pay prevailing wages and/or
suspected failures to classify workers in
accordance with the wage determination
of workers, employment tax violations,
or violations of workplace standard laws
to appropriate personnel departments or
managers without retaliation or adverse
action, and whether taxpayer
investigated such reports by laborers
and mechanics and had internal
controls to prevent failures to pay
prevailing wages and classify workers in
accordance with the wage determination
of workers, employment tax violations,
and violations of workplace standard
laws;
(K) Whether all laborers and
mechanics were provided with a written
notice of the rights conferred by the
whistleblower provisions of the
Taxpayer First Act in section 7623(d);
(L) Whether all laborers and
mechanics were provided with paystubs
(or access to individual payroll records)
reflecting the amount they were paid
per pay period (including the specific
hourly rate and all deductions from
wages);
(M) Whether the taxpayer investigated
any complaints of retaliation or adverse
action resulting from, reports of
suspected failures to pay prevailing
wages and/or classify workers in
accordance with applicable wage
determinations, employment tax
violations, or violations of workplace
standard laws and took appropriate
actions to remedy any retaliation or
adverse action and prevent it from
reoccurring;
(N) Whether the taxpayer, contractor,
or subcontractor contracted with
contractors who, at the time the work
was performed, was known by the
taxpayer, contractor, or subcontractor to
be debarred by a municipality, State, or
the U.S. Department of Labor for
violations related to the underpayment
of local, State, or Federal prevailing
wages; and
(O) Whether the taxpayer failed to
maintain and preserve records in
accordance with § 1.45–12 sufficient to
establish compliance with the

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prevailing wage requirements for
relevant tax years.
(iv) Examples. The provisions of this
paragraph (c)(3) are illustrated by the
following examples, which take into
account certain facts and circumstances
described in paragraph (c)(3)(iii) of this
section, that are considered in applying
the enhanced correction and penalty
payment requirements in the case of
intentional disregard. These examples
do not take into account any possible
application of the exception for wages
paid before a determination by the U.S.
Department of Labor under paragraph
(c)(5) of this section, or the penalty
waiver under paragraph (c)(6) of this
section. In each example, assume that
the taxpayer uses the calendar year as
the taxpayer’s taxable year.
(A) Example 1. Taxpayer D failed to
satisfy the Prevailing Wage
Requirements with respect to the
construction of a qualified facility.
Taxpayer D did not include contract
language that requires the payment of
prevailing wages in the contract
executed with the contractor nor did it
require similar contract provisions in
any subcontracts. Taxpayer D did not
post in a prominent place at the
qualified facility or otherwise notify any
laborers or mechanics that in order to
claim certain tax benefits (the increased
credit amount described in section
45(b)(6)(B)(iii)) taxpayers must ensure
that laborers and mechanics are paid
wages at rates not less than prevailing
wage rates for construction of the
qualified facility. Taxpayer D did not
have a process for laborers and
mechanics to report suspected failures
to pay prevailing wages and/or
suspected failures to classify workers in
accordance with applicable wage
determinations. Additionally, Taxpayer
D did not have a procedure for the
review of wages paid to laborers and
mechanics to ensure that wages at rates
not less than the applicable prevailing
wage rate were paid, nor did Taxpayer
D undertake any actual review of the
wages paid to any laborers or and
mechanics employed in the
construction of the qualified facility.
Taxpayer D failed to maintain any
records documenting wages paid to
laborers and mechanics in connection
with the construction of the facility.
Considering all of the facts and
circumstances, Taxpayer D’s failure to
satisfy the Prevailing Wage
Requirements would be considered due
to intentional disregard for purposes of
this paragraph (c)(3) and Taxpayer D
would be subject to the enhanced
correction and penalty payments
described in paragraph (c)(3)(i) of this
section.

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(B) Example 2. Taxpayer E failed to
satisfy the Prevailing Wage
Requirements with respect to the
construction of a qualified facility.
Taxpayer E included contract language
that requires the payment of prevailing
wages in the contract executed with the
contractor and required similar language
be included in all subcontracts.
Taxpayer E posted in a prominent place
at the qualified facility that in order to
claim tax benefits (that is, the increased
credit amount described in section
45(b)(6)(B)(iii)) employers must ensure
that laborers and mechanics are paid
wages at rates not less than prevailing
wage rates for the construction of the
qualified facility. Additionally,
Taxpayer E created procedures for a
quarterly review of the applicable
classifications of laborers and
mechanics according to the actual
duties performed by those laborers and
mechanics and the actual wages paid to
laborers and mechanics. In cases in
which reviews found any instance that
a laborer or mechanic was paid wages
at rates less than the applicable
prevailing wage rates, Taxpayer E
promptly cured the failure. Considering
all of the facts and circumstances,
Taxpayer E’s failure to satisfy the
Prevailing Wage Requirements would
not be considered due to intentional
disregard for purposes of this paragraph
(c)(3) and Taxpayer E would not be
subject to the enhanced correction and
penalty payments described in
paragraph (c)(3)(i) of this section.
Taxpayer E would be subject to the
normal correction and penalty payments
described in paragraph (c)(1)(i) of this
section.
(v) Rebuttable presumption of no
intentional disregard. If a taxpayer
makes the correction and penalty
payments required by paragraphs
(c)(1)(i) and (ii) of this section before
receiving notice of an examination from
the IRS with respect to a claim for the
increased credit amount under section
45(b)(6), the taxpayer will be presumed
not to have intentionally disregarded
the Prevailing Wage Requirements in
paragraph (a) of this section. The IRS
may rebut this presumption based on
the relevant facts and circumstances.
(4) Limitation on the availability of
cure—(i) 180-day limit. In the case of a
final determination by the IRS with
respect to any failure by the taxpayer to
satisfy the Prevailing Wage
Requirements in paragraph (a) of this
section, the cure provision in paragraph
(c)(1) of this section does not apply
unless the correction and penalty
payments described in paragraphs
(c)(1)(i) and (ii) of this section are made
by the taxpayer on or before the date

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that is 180 days after the date of such
determination.
(ii) Final determination. For purposes
of paragraph (c)(4)(i) of this section, a
final determination occurs on the date
the IRS sends to the taxpayer a notice
stating that the taxpayer has failed to
satisfy the Prevailing Wage
Requirements under paragraph (a) of
this section.
(5) Exception for wages paid before a
supplemental wage determination or
additional classification and wage rate
is issued by the U.S. Department of
Labor Wage and Hour Division. If a
taxpayer has requested a supplemental
wage determination or an additional
classification and wage rate from the
Wage and Hour Division in accordance
with paragraph (b)(3)(ii) of this section
and the Wage and Hour Division makes
a wage determination or issues an
additional classification and wage rate
determination after the construction,
alteration, or repair of a qualified
facility has started, the taxpayer will not
be considered to have failed to meet the
Prevailing Wage Requirements under
paragraph (a) of this section with
respect to wages paid to any mechanic
or laborer whose wage rate was subject
to the request and who was paid below
the prevailing wage rate before the
determination by the Wage and Hour
Division if the taxpayer makes a
payment within 30 days of the
determination to each laborer or
mechanic equal to the difference
between the amount of wages paid to
such laborer or mechanic before the
determination and the amount of wages
required to be paid to such laborer or
mechanic pursuant to paragraph (a) of
this section during such period.
(6) Waiver of the penalty—(i)
Availability of waiver. The penalty
payment required by paragraph (c)(1)(ii)
of this section to cure a failure to satisfy
the Prevailing Wage Requirements in
paragraph (a) of this section is waived
with respect to a laborer or mechanic
employed in the construction,
alteration, or repair of a qualified
facility during a calendar year if the
taxpayer makes the correction payment
required by paragraph (c)(1)(i) of this
section by the last day of the first month
that follows the end of the calendar
quarter in which the failure occurred,
and:
(A) The laborer or mechanic is paid
wages at rates less than the amount
required to be paid under paragraph (b)
of this section for not more than 10
percent of all pay periods of the
calendar year (or part thereof) during
which the laborer or mechanic was
employed in the construction,

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alteration, or repair of the qualified
facility; or
(B) The difference between the
amount the laborer or mechanic was
paid during the calendar year (or part
thereof) and the amount required to be
paid under paragraph (b) of this section
is not greater than 5 percent of the
amount required to be paid under
paragraph (b) of this section.
(ii) Project labor agreements. The
penalty payments required by
paragraphs (c)(1)(ii) and (c)(3)(i)(B) of
this section to cure a failure to satisfy
the Prevailing Wage Requirements in
paragraph (a) of this section do not
apply with respect to a laborer or
mechanic employed in the construction,
alteration, or repair work of a qualified
facility if the work is done pursuant to
a pre-hire collective bargaining
agreement with one or more labor
organizations that establishes the terms
and conditions of employment for a
specific construction project (Qualifying
Project Labor Agreement) and any
correction payment owed to any laborer
or mechanic is paid on or before the
date on which the increased credit
amount is claimed under section
45(b)(6). In order to be considered a
Qualifying Project Labor Agreement,
such agreement must at a minimum:
(A) Bind all contractors and
subcontractors on the construction
project through the inclusion of
appropriate specifications in all relevant
solicitation provisions and contract
documents;
(B) Contain guarantees against strikes,
lockouts, and similar job disruptions;
(C) Set forth effective, prompt, and
mutually binding procedures for
resolving labor disputes arising during
the term of the project labor agreement;
(D) Contain provisions to pay wages at
rates not less than the prevailing rates
in accordance with subchapter IV of
chapter 31 of title 40 of the United
States Code;
(E) Contain provisions for referring
and using qualified apprentices
consistent with section 45(b)(8)(A)
through (C) and guidance issued
thereunder; and
(F) Be a collective bargaining
agreement with one or more labor
organizations (as defined in 29 U.S.C.
152(5)) of which building and
construction employees are members, as
described in 29 U.S.C. 158(f).
(iii) Transition Waiver. The penalty
payment required by paragraph (c)(1)(ii)
of this section to cure a failure to satisfy
the Prevailing Wage Requirements in
paragraph (a) of this section is waived
with respect to a laborer or mechanic
who performed work in the
construction, alteration, or repair of a

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qualified facility on or after January 29,
2023, and prior to June 25, 2024, if the
taxpayer relied upon Notice 2022–61,
2022–52 I.R.B. 560, or the Proposed
Regulations (REG–100908–23) (88 FR
60018), corrected in 88 FR 73807 (Oct.
27, 2023), corrected in 89 FR 25550
(April 11, 2024), to determine when the
activities of any laborer or mechanic
became subject to the Prevailing Wage
Requirements, and the taxpayer makes
the correction payments required by
paragraph (c)(1)(i) of this section with
respect to such laborer and mechanics
within 180 days of June 25, 2024.
(iv) Examples. The provisions of this
paragraph (c)(6) are illustrated by the
following examples, which do not take
into account any possible application of
the enhanced correction and penalty
payment requirements in the case of
intentional disregard under paragraph
(c)(3) of this section or the exception for
wages paid before a determination by
the U.S. Department of Labor under
paragraph (c)(5) of this section. In each
example, assume that the taxpayer uses
the calendar year as the taxpayer’s
taxable year.
(A) Example 1. Taxpayer F starts
construction of a qualified facility on
February 1, 2023. The facility is placed
in service on October 10, 2023, and
Taxpayer F claims the increased credit
amount under section 45(b)(6)(B)(iii) on
its 2023 tax return filed on April 15,
2024. Taxpayer F employs Laborer Z in
the construction of the facility for a total
of 36 weekly pay periods. Taxpayer F
pays Laborer Z wages at the prevailing
wage rate for all pay periods except for
the pay periods ending on April 8, April
22, and May 20. Under the applicable
prevailing wage rate, Laborer Z should
have been paid a total of $35,000 in
2023, but was instead paid only
$30,000. Taxpayer F ensures that all
other laborers and mechanics employed
in the construction, alteration, or repair
of the facility are paid wages at the
prevailing wage rate. Taxpayer F
becomes aware of the failure on June 1,
2023. On June 19, 2023, Taxpayer F
pays Laborer Z the correction payment
required by paragraph (c)(1)(i) of this
section. The penalty waiver applies to
Taxpayer F. Although the difference
between the amount Laborer Z was paid
in 2023 and the amount required to be
paid under the applicable prevailing
wage rate was greater than five percent
($5,000/$35,000 = 14.29%), Laborer Z
was paid below the prevailing wage rate
for only three out of 36 pay periods, or
8.3% of the applicable pay periods.
Furthermore, Taxpayer F made the
correction payment before the last day
of the first month that follows the end

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of the calendar quarter in which the
failure occurred.
(B) Example 2. Taxpayer G starts
construction of a qualified facility on
February 1, 2024. The facility is placed
in service on October 10, 2024, and
Taxpayer G claims the increased credit
under section 45(b)(6)(B)(iii) on its 2024
tax return filed on April 15, 2025.
Taxpayer G hires Contractor M to assist
in the construction, and Contractor M
employs Laborer Y in the construction
of the facility for a total of 36 pay
periods. Contractor M pays Laborer Y
wages at the prevailing wage rate for all
pay periods except for the pay periods
ending on February 24 and March 2 of
2024. Under the applicable prevailing
wage rate, Laborer Y should have been
paid a total of $50,000 in 2024, but was
instead paid only $49,000. All other
laborers and mechanics employed in the
construction, alteration, or repair of the
facility are paid wages at the prevailing
wage rate. Taxpayer G learns on January
1, 2025, that Laborer Y was paid wages
at rates that were less than the
prevailing wage rates, and on January
19, 2025, Taxpayer G pays Laborer Y the
correction payment required by
paragraph (c)(1)(i) of this section. The
penalty waiver does not apply to
Taxpayer G. Laborer Y was paid wages
at rates below the prevailing wage rate
for two out of 36 pay periods, or 5.5%
of the applicable pay periods, and the
difference between the amount Laborer
Y was paid in 2024 and the amount
required to be paid under the applicable
prevailing wage rate was $1,000, which
is only 2% of the amount required to be
paid under the applicable prevailing
wage rate. However, because Taxpayer
G did not make the correction payments
until January 19, 2025, which was later
than the last day of the first month that
followed the end of the calendar quarter
in which the failure occurred, Taxpayer
G does not qualify for the penalty
waiver. Taxpayer G must pay a penalty
of $5,000 with respect to the failure.
(C) Example 3. Taxpayer H starts the
construction of a qualified facility on
April 8, 2024. The facility is placed in
service on December 1, 2024, and
Taxpayer H claims the increased credit
amount under section 45(b)(6)(B)(iii) on
its 2024 tax return filed on April 15,
2025. Taxpayer H employs Laborer X in
the construction of the facility for a total
of 34 pay periods. Due to a failure to
classify workers in accordance with the
wage determination, Taxpayer H pays
Laborer X wages at rates below the
prevailing wage rates for the first 12 pay
periods. Under the applicable prevailing
wage rate, Laborer X should have been
paid $20,000 during those 12 pay
periods, but was instead paid only

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$17,000. All other laborers and
mechanics employed in the
construction, alteration, or repair of the
facility were paid wages at the
prevailing wage rates. Taxpayer H
becomes aware of the failure on July 15,
2024, and on July 30, 2024, Taxpayer H
pays Laborer X the correction payments
required by paragraph (c)(1)(i) of this
section. For the 22 pay periods from
July 1, 2024, through December 1, 2024,
Taxpayer H pays Laborer X the correct
prevailing wage rate in amounts that
total $41,000. The penalty waiver
applies to Taxpayer H. Taxpayer H
made the correction payment on July 30,
2024, which was before the last day of
the first month that followed the end of
the quarter in which the failures
occurred. Although Laborer X was paid
wages at a rate below the prevailing
wage rate for 35% (12 pay periods with
underpayments/34 total pay periods) of
the applicable pay periods, the
difference between the total amount
Laborer X was paid in 2024 and the
amount required to be paid under the
applicable prevailing wage rate was
$3,000, which is only 4.9% of the total
amount required to be paid to Laborer
X under the applicable prevailing wage
rate ($3,000/$61,000).
(D) Example 4. Taxpayer I begins
construction of a qualified facility on
August 29, 2024. The facility is placed
in service on June 30, 2025, and
Taxpayer I claims the increased credit
amount under section 45(b)(6)(B)(iii) on
its 2025 tax return. Taxpayer I employs
Laborer W in the construction of the
facility for a total of 25 weekly pay
periods in 2025. Taxpayer I pays
Laborer W wages at or above the
prevailing wage rate for all pay periods
except for the pay periods ending on
April 12, May 10, and June 14. Under
the applicable prevailing wage rate,
Laborer W should have been paid
$25,000 in 2025, but was instead paid
only $20,000. Taxpayer I ensures that all
other laborers and mechanics employed
in the construction, alteration, or repair
of the facility are paid at the prevailing
wage rate. Taxpayer I has in place a prehire collective bargaining agreement,
but the agreement does not contain a
provision for referring and using
qualified apprentices. Taxpayer I
becomes aware of the failure to pay
Laborer W at the prevailing wage rate on
June 30, 2025, and on July 4, 2025,
Taxpayer I pays Laborer W the
correction payment required by
paragraph (c)(1)(i) of this section. The
penalty waiver does not apply to
Taxpayer I. The difference between the
amount Laborer W was paid in 2025 and
the amount required to be paid under

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the applicable prevailing wage rate was
$5,000, which is 20% of the amount
required to be paid under the applicable
prevailing wage rate. Laborer W was
paid below the prevailing wage rate for
three out of 25 pay periods, or 12% of
the applicable pay periods. Taxpayer I
does not have in place a Qualifying
Project Labor Agreement because the
pre-hire collective bargaining agreement
does not contain a provision for
referring and using qualified
apprentices as required by paragraph
(c)(6)(ii)(E) of this section.
(E) Example 5. Taxpayer J intends to
construct a qualified facility and claim
the increased credit amount under
section 45(b)(6)(B)(iii). Taxpayer J
executes a contract for the construction
of the facility and engages in
construction activities as defined in
paragraph (d)(3) of this section starting
August 1, 2023. Taxpayer J began
construction as of September 1, 2023,
pursuant to the Physical Work Test in
Notice 2022–61. During the period of
August 1 to September 1 of 2023,
Taxpayer J paid all laborers and
mechanics wages at rates below the
applicable prevailing wage rates in
reliance on Notice 2022–61 regarding
when construction began for purposes
of satisfying the requirements of section
45(b)(7). After September 1, 2023,
Taxpayer J paid all laborers and
mechanics wages at the prevailing wage
rate for the appropriate classification for
work performed on the facility. Within
180 days of June 25, 2024, Taxpayer J
makes correction payments to all
affected laborers and mechanics for the
period of August 1, 2023. to September
1, 2023, equal to the amount described
in paragraph (c)(1)(i) of this section.
Pursuant to paragraph (c)(6)(iii) of this
section, the penalty under paragraph
(c)(1)(ii) of this section is waived.
(d) Definitions. Solely for purposes of
this section, the following definitions
apply:
(1) Apprentice. The term apprentice
has the same meaning as qualified
apprentice in § 1.45–8(g)(8).
(2) Bona fide fringe benefits. The term
bona fide fringe benefits means fringe
benefits described in 29 CFR part 5.
Bona fide fringe benefits include
medical or hospital care, pensions on
retirement or death, compensation for
injuries or illness resulting from
occupational activity, or insurance to
provide any of the foregoing;
unemployment benefits; life insurance,
disability insurance, sickness insurance,
or accident insurance; vacation or
holiday pay; defraying costs of
apprenticeship or other similar
programs; or other bona fide fringe
benefits (each as described in 29 CFR

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part 5 and other U.S. Department of
Labor guidance). Consistent with 29
CFR 5.29, bona fide fringe benefits do
not include benefits required by other
Federal, State, or local law.
(3) Construction, alteration, or repair.
The term construction, alteration, or
repair generally means those activities,
described in 29 CFR 5.2 as being
construction, prosecution, completion,
or repair that are performed with respect
to a qualified facility as defined under
section 45. Construction, alteration, or
repair does not include any activities
that are excluded from the requirement
to pay prevailing wages under the
definitions described in 29 CFR 5.2.
Repair work normally includes an
activity that improves the facility, either
by fixing something that is not
functioning properly or by improving
upon the facility’s existing condition;
involves the correction of individual
problems or defects as separate and
segregable incidents and is not
continuous or recurring; or improves the
facility’s structural strength, stability,
safety, capacity, efficiency, or
usefulness. Construction, alteration, or
repair does not include work that is
ordinary and regular in nature that is
designed to maintain and preserve
existing functionalities of a facility after
it is placed in service. Work designed to
maintain and preserve functionality of a
facility after it is placed in service
includes basic maintenance such as
regular inspections of the facility,
regular cleaning and janitorial work,
regular replacement of materials with
limited lifespans such as filters and
light bulbs, and the regular calibration
of equipment. However, such work that
occurs before the facility is placed in
service may constitute construction for
which prevailing wages must be paid in
order to claim the increased credit
amount. Maintenance generally
includes work that is needed to keep the
facility in its current condition so that
it may continue to be used and work
that does not improve the current
condition or function of a facility.
Maintenance is routinely scheduled and
continuous or recurring. Ultimately, the
determination of whether an activity
can be categorized as construction,
alteration, or repair is dependent on the
facts and circumstances. This definition
has no bearing on any other sections of
the Code, including any determination
of construction, alteration, repair, or
maintenance under sections 162 or 263
of the Code, unless specified otherwise
in the Code or in this chapter.
(4) Contractor. The term contractor
means any person that enters into a
contract directly with the taxpayer (or
the taxpayer’s designee, assignee, or

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agent) for the construction, alteration, or
repair of a qualified facility.
(5) Employed. The term employed
means performing the duties of a laborer
or mechanic for the taxpayer, contractor,
or subcontractor (as applicable),
regardless of whether the individual
would be characterized as an employee
or an independent contractor for other
Federal tax purposes.
(6) General wage determination. The
term general wage determination means
a wage determination issued by the U.S.
Department of Labor and published on
the approved website. A general wage
determination provides the minimum
hourly wage rates (both the basic hourly
rate of pay and bona fide fringe benefit
rates) that the U.S. Department of Labor
has determined are prevailing for
laborers and mechanics in specified
types of construction in a given
geographic area.
(7) Geographic area and locality. The
terms geographic area and locality mean
the county, independent city, or other
civil subdivision of the State in which
a qualified facility is located. The terms
geographic area and locality also
include areas located offshore of the
United States and within the outer
continental shelf of the United States
and the U.S. territories. If construction,
alteration, or repair work is performed
in multiple counties, independent
cities, or other civil subdivisions, the
geographic area may include all
counties, independent cities, or other
civil subdivisions in which the work
will be performed. The locality in which
a facility is located is defined as the
physical place or places where the
facility will be placed in service and
remain. The locality of the facility also
includes secondary locations where a
significant portion of the facility is
constructed, altered, or repaired
provided that such construction is for
specific use at that facility and does not
simply reflect the manufacture or
construction of a product made
available to the general public, and
provided further that the site is either
established specifically for, or dedicated
exclusively for a specific period of time
to, the construction, alteration, or repair
of the facility. A significant portion
means one or more entire portion(s) or
module(s) of the facility, such as a
completed room or structure, with
minimal construction work remaining
other than the installation and/or final
assembly of the portions or modules at
the place where the facility will be
placed in service and remain. A
significant portion does not include
materials or prefabricated component
parts delivered to the location of a
facility. A specific period of time means

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53261

a period of weeks, months, or more, and
does not include circumstances in
which a site at which multiple facilities
are in progress is shifted exclusively to
a single facility for a few hours or days
in order to meet a deadline. The locality
of the facility also includes any adjacent
or virtually adjacent dedicated support
sites, including job headquarters, tool
yards, batch plants, borrow pits, and
similar facilities of a taxpayer,
contractor, or subcontractor that are
established specifically for or dedicated
exclusively to the construction,
alteration, or repair of the facility, and
adjacent or virtually adjacent to either a
primary construction site or a secondary
construction site.
(8) Laborer and mechanic—(i) In
general. The terms laborer and
mechanic mean 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.
(ii) Examples—(A) Individual working
in professional capacity. Taxpayer hires
an architect (Architect) to design a
qualified facility and general layout of
the site including access roads and
ancillary buildings to support the
facility. Taxpayer engages a general
contractor (Contractor) to construct the
qualified facility based on the drafting
plans of Architect. Contractor hires an
electrical engineer (Engineer) to assist
Architect and Contractor with design
and placement of the electrical systems
necessary to support the qualified
facility. Engineer oversees and inspects
construction of the electrical systems to
ensure the systems conform to the
facility’s specifications and Architect’s
drafting plans. Architect and Engineer
do not perform any actual duties of a
laborer or mechanic during their
employment with Taxpayer and
Contractor. Architect and Engineer are
working in a professional capacity as
defined under 29 CFR part 541 and are
exempt employees under the DBA.
Architect and Engineer are not

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considered laborers and mechanics for
the duration of their employment for
purposes of this section and Taxpayer
does not need to ensure they are paid
wages at rates not less than the
prevailing wage rates for purposes of
claiming the increased credit amount
under section 45(b)(6)(B)(iii).
(B) Working foreperson. A supervisory
employee who is a working foreperson
(Foreperson) spends 60% of the time
during the workweek (24 hours of a 40
hour workweek) performing
administrative functions such as
preparing timecards, supervising work
on the qualified facility and arranging
for deliveries. Foreperson spends the
remaining 40% (16 hours) of the time
performing the duties of an electrician
with respect to construction of a
qualified facility. Because Foreperson
devoted more than 20% of their time
during the workweek to laborer or
mechanic duties, Foreperson must be
paid wages at rates not less than the
electrician’s applicable prevailing wage
rate for the 16 hours spent doing the
duties of an electrician for purposes of
the Prevailing Wage Requirements.
(9) Subcontractor. The term
subcontractor means any person that
enters into a contract with a contractor
for the construction, alteration, or repair
of a qualified facility. The term
subcontractor also includes any person
that agrees to perform or be responsible
for the performance of any part of a
contract entered into between the
taxpayer (or the taxpayer’s designee,
assignee, or agent) and a contractor (or
between a contractor and another
subcontractor) with respect to the
construction, alteration, or repair of a
qualified facility.
(10) Taxpayer. The term taxpayer
means any taxpayer as defined in
section 7701(a)(14), including
applicable entities described in section
6417(d)(1)(A). In the case of a credit
transferred under section 6418, the term
taxpayer means the eligible taxpayer
that determines the eligible credit to be
transferred and makes a transfer election
under section 6418 to transfer any
specified credit portion (including 100
percent) of an eligible credit determined
with respect to any eligible credit
property of such eligible taxpayer for
any taxable year.
(11) Type of construction. The type of
construction is the general category of
construction as established by the U.S.
Department of Labor for the publication
of general wage determinations as
defined in 29 CFR 1.2.
(12) Wages. The term wages generally
means wages as defined in 29 CFR 5.2.
In general, wages means the basic
hourly rate of pay; any contribution

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irrevocably made by a taxpayer,
contractor, or subcontractor to a trustee
or to a third person pursuant to a bona
fide fringe benefit fund, plan, or
program; and the rate of costs to the
taxpayer, contractor, or subcontractor
that may be reasonably anticipated in
providing bona fide fringe benefits to
laborers and mechanics pursuant to an
enforceable commitment to carry out a
financially responsible plan or program,
provided the commitment was
communicated in writing to the laborers
and mechanics affected. Whether
amounts are wages for prevailing wage
purposes is not relevant in determining
whether amounts are wages or
compensation for other Federal tax
purposes.
(e) Applicability date. This section
applies to qualified facilities placed in
service in taxable years ending after
June 25, 2024, and the construction of
which begins after June 25, 2024.
Taxpayers may apply this section to
qualified facilities placed in service in
taxable years ending on or before June
25, 2024, and qualified facilities placed
in service in taxable years ending after
June 25, 2024, the construction of which
begins before June 25, 2024, provided
that taxpayers follow this section in its
entirety and in a consistent manner.
§ 1.45–8

Apprenticeship requirements.

(a) Apprenticeship requirements—(1)
In general. Except as provided in
paragraphs (a)(2) and (f) of this section,
a taxpayer claiming or transferring
(under section 6418) the increased
credit amount under section
45(b)(6)(B)(iii) with respect to any
qualified facility must satisfy the
requirements of section 45(b)(8) and this
section with respect to the construction
of such facility (Apprenticeship
Requirements). The taxpayer is solely
responsible for ensuring that the
Apprenticeship Requirements are
satisfied. See paragraph (g) of this
section for definitions of terms used in
this section.
(2) Transition relief. Taxpayers are
excepted from the Apprenticeship
Requirements with respect to any
activities that would be considered
construction, alteration, or repair of the
qualified facility and that occurred prior
to January 29, 2023.
(b) Labor hours requirement—(1)
Percentage of total labor hours. A
taxpayer claiming or transferring (under
section 6418) the increased credit
amount under section 45(b)(6) must
ensure that qualified apprentices (hired
by the taxpayer, contractor, or
subcontractor) perform not less than the
applicable percentage of the total labor
hours of the construction, alteration, or

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repair work (including work performed
by any contractor or subcontractor) with
respect to any qualified facility prior to
the facility being placed in service,
subject to the apprentice-tojourneyworker ratio described in
paragraph (c) of this section. The
percentage of total labor hours is
calculated on a per qualified facility
basis, aggregating all hours worked by
all laborers and mechanics (including
the hours of qualified apprentices)
during construction of the facility and
dividing the total hours work by all
laborers and mechanics by the hours of
the qualified apprentices.
(2) Applicable percentage. For
purposes of paragraph (b)(1) of this
section, and subject to paragraph (b)(3)
of this section, the applicable
percentage is—
(i) 10 percent in the case of a qualified
facility, the construction of which
begins before January 1, 2023;
(ii) 12.5 percent in the case of a
qualified facility, the construction of
which begins after December 31, 2022,
and before January 1, 2024; and
(iii) 15 percent in the case of a
qualified facility, the construction of
which begins after December 31, 2023.
(3) Transition rule. Taxpayers may
apply the rules set forth in Notice 2022–
61, 2022–52 I.R.B. 560, or these
regulations for determining when
construction began for purposes of the
applicable percentage of labor hours
performed by qualified apprentices
required under section 45(b)(8)(A) and
paragraph (b)(2) of this section.
(c) Ratio requirement—(1) In general.
The labor hours requirement under
paragraph (b) of this section is subject
to any applicable requirements for
apprentice-to-journeyworker ratios of
the U.S. Department of Labor or the
applicable State apprenticeship agency.
(2) Ratio. The allowable ratio of
apprentices to journeyworkers on the
job site in any occupation and its
corresponding classification on any day
must comply with the applicable
apprentice-to-journeyworker ratio of the
registered apprenticeship program in
accordance with 29 CFR part 29. If a
taxpayer, contractor, or subcontractor is
performing construction, alteration, or
repair work on a qualified facility in a
geographic area other than the
geographic area in which an
apprenticeship program is registered,
the taxpayer, contractor, or
subcontractor must comply with the
apprentice-to-journeyworker ratios
applicable within the geographic area in
which the construction, alteration, or
repair work is being performed. If there
is no applicable ratio for the geographic
area of the qualified facility, the ratio

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specified in the registered
apprenticeship program standard must
be observed.
(3) Failure to meet ratio requirements.
For purposes of section 45(b)(8)(B) and
paragraph (b) of this section, if on any
day the ratio of apprentices to
journeyworkers exceeds the ratio
established in accordance with
paragraph (c)(2) of this section, subject
to the requirements of the registered
apprenticeship program, the labor hours
performed by any qualified apprentice
in excess of the ratio may not be
counted as hours performed by qualified
apprentices for purposes of the labor
hours requirement. The hours devoted
to the performance of construction,
alteration, or repair work by any
qualified apprentice in excess of the
ratio will be counted towards the total
labor hours, but will not be counted as
hours performed by qualified
apprentices for purposes of the labor
hours requirement under paragraph (b)
of this section.
(d) Participation requirement. 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 work with
respect to the construction, alteration, or
repair of the qualified facility prior to
the facility being placed in service. The
participation requirement applies if a
taxpayer, contractor, or subcontractor
employs four or more individuals in the
construction of the qualified facility
over the entire course of the
construction, regardless of whether they
are employed at the same location or at
the same time.
(e) Examples. The provisions of
paragraphs (b) through (d) of this
section are illustrated by the following
examples. For purposes of the following
examples, assume that each taxpayer
has a calendar year taxable year.
(i) Example 1. Taxpayer A starts
construction of a qualified facility on
April 1, 2023. Accordingly, Taxpayer A
must ensure that at least 12.5% of the
total labor hours are performed by
qualified apprentices. The facility is
placed in service on April 1, 2025, and
Taxpayer A claims the increased credit
amount under section 45(b)(6)(B)(iii) on
its 2025 tax return. A total of eight
individuals performed construction,
alteration, or repair work during the
construction of the facility, all of whom
were employed directly by Taxpayer A.
Taxpayer A employed four
journeyworkers and no qualified
apprentices from April 1, 2023 through
October 31, 2024. Taxpayer A hired four

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qualified apprentices and retained three
journeyworkers to perform construction
on the facility for the period of
November 1, 2024 through March 31,
2025. The registered apprenticeship
program from which Taxpayer A
requested the apprentices required a
ratio of one journeyworker for every
apprentice. In the first year of
construction, a total of 10,000 labor
hours were performed on construction,
alteration, or repair work of the facility,
with each journeyworker working 2,500
hours. In the second year of
construction, 7,000 labor hours were
performed on construction, alteration,
or repair work of the facility, with each
qualified apprentice and journeyworker
working 1,000 hours during this time.
On each day of work during the second
year of construction, the three
journeyworkers oversaw the work of the
four qualified apprentices. A total of
17,000 labor hours were spent on the
construction, alteration, or repair work
of the facility, requiring that 2,125 labor
hours be performed by qualified
apprentices. Only 3,000 labor hours
performed by qualified apprentices
count towards the labor hours
requirement because the ratio
requirement was only satisfied with
respect to the work of three qualified
apprentices. Taxpayer A satisfied the
labor hours requirement under
paragraph (b)(2) of this section because
more than 12.5% (3,000 qualified
apprentice hours/17,000 total labor
hours = 17.6%) of the total labor hours
were performed by qualified
apprentices. Taxpayer A was also
subject to the participation requirement
because four or more individuals
employed by Taxpayer A performed
construction work on the facility.
Taxpayer A satisfied the participation
requirement because Taxpayer A hired
at least one qualified apprentice to
perform construction, alteration, or
repair with respect to the facility.
(ii) Example 2. Taxpayer B intends to
construct a qualified facility to claim the
increased credit amount under section
45(b)(6)(B)(iii) and executes a contract
for the construction of the facility. On
December 31, 2023, Taxpayer B expends
sufficient funds to meet the 5 Percent
Safe Harbor for beginning of
construction in reliance on Notice
2022–61. Construction activities as
defined in paragraph (d)(3) of this
section start on January 1, 2024. In
reliance on Notice 2022–61, Taxpayer B
employs qualified apprentices for 12.5%
of the total construction hours to
complete the qualified facility. Because
Taxpayer B applies the 12.5%
applicable percentage in reliance on

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53263

Notice 2022–61 for construction
beginning before January 1, 2024, but
after December 31, 2022, Taxpayer B has
satisfied the Labor Hours Requirement,
assuming all other provisions of the
Labor Hours Requirement are also
satisfied.
(iii) Example 3. Taxpayer C starts
construction of a qualified facility on
April 1, 2023, and complies with the
Labor Hours Requirement, the Ratio
Requirement, and the Participation
Requirement with respect to the
construction of the facility before it is
placed in service on April 1, 2025.
Taxpayer C claims the increased credit
amount under section 45(b)(6)(B)(iii) on
its 2025 tax return. The qualified facility
was repaired from September 1, 2025,
through October 31, 2025. No qualified
apprentices were employed for the
repairs. Taxpayer C did not fail the
Apprenticeship Requirements because
the Apprenticeship Requirements do
not apply after the qualified facility is
placed in service.
(iv) Example 4. Taxpayer D starts
construction of a qualified facility on
April 1, 2023. Accordingly, Taxpayer D
must ensure that at least 12.5% of the
total labor hours are performed by
qualified apprentices. The facility is
placed in service on April 1, 2025, and
Taxpayer D claims the increased credit
amount under section 45(b)(6)(B)(iii) on
its 2025 tax return. Taxpayer D
employed 12 individuals to perform the
construction, alteration, and repair work
on the qualified facility. Taxpayer D is
subject to the participation requirement.
For the first year of construction, a total
of 25,000 labor hours were performed
on the construction, alteration, or repair
of the facility, 3,000 of which were
performed by qualified apprentices. For
the second year of construction, an
additional 25,000 labor hours were
performed on the construction,
alteration, or repair of the facility, 3,250
of which were performed by qualified
apprentices. The ratio requirement was
satisfied for all labor hours performed
by qualified apprentices. Taxpayer D
has satisfied the labor hours
requirement because 12.5% (6,250 labor
hours divided by 50,000 labor hours) of
the total labor hours were performed by
qualified apprentices.
(v) Example 5. Taxpayer E starts
construction of a qualified facility on
January 1, 2024. Accordingly, Taxpayer
E must ensure that at least 15% of the
total labor hours are performed by
qualified apprentices. The facility is
placed in service on June 1, 2026.
Taxpayer E claims the increased credit
amount under section 45(b)(6)(B)(iii) on
its 2026 tax return. All individuals who
performed the construction, alteration,

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or repair work were employed directly
by Taxpayer E. A total of 50,000 labor
hours were spent on the construction,
alteration, or repair work of the facility,
7,000 of which were performed by
qualified apprentices and the ratio
requirement was met for all 7,000 labor
hours. Qualified apprentices also spent
500 hours in classroom training at a
location other than the location of the
qualified facility in preparation for the
performance of construction, alteration,
or repair work at the qualified facility.
Taxpayer E did not satisfy the labor
hours requirement under paragraph
(b)(2) of this section because less than
15% of the total labor hours were
performed by qualified apprentices. The
hours spent on classroom training at a
location other than the location of the
qualified facility in preparation for the
construction, alteration, or repair of the
facility are not considered labor hours
performed by qualified apprentices.
(f) Exceptions to the apprenticeship
requirements. If a taxpayer fails to
satisfy the Apprenticeship
Requirements in paragraph (a) of this
section with respect to the construction,
alteration, or repair of any qualified
facility prior to the facility being placed
in service, the taxpayer will nonetheless
be deemed to have satisfied the
Apprenticeship Requirements if the
taxpayer has made a good faith effort to
meet the Apprenticeship Requirements
as described in paragraph (f)(1) of this
section (Good Faith Effort Exception) or
made the penalty payment provided in
paragraph (f)(2) of this section
(Apprenticeship Cure Provision) for any
failures to which the Good Faith Effort
Exception does not apply.
(1) Good faith effort exception—(i) In
general. A taxpayer is deemed to have
satisfied the Apprenticeship
Requirements of this section with
respect to a request for qualified
apprentices if the taxpayer meets the
following requirements:
(A) Request for qualified apprentices.
The taxpayer, contractor, or
subcontractor must submit a written
request for qualified apprentices to at
least one registered apprenticeship
program that has a geographic area of
operation that includes the location of
the qualified facility; trains qualified
apprentices in the occupation(s) needed
to perform construction, alteration, or
repair with respect to the facility; and
has a usual and customary business
practice of entering into agreements
with employers for the placement of
qualified apprentices in the occupation
for which they are training, consistent
with the standards and requirements set
forth in 29 CFR parts 29 and 30, and any
subsequent guidance issued by the

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Department of Labor. Such request must
be in writing and sent electronically or
by registered mail. The initial request to
a registered apprenticeship program for
qualified apprentices must be made no
later than 45 days before the qualified
apprentices are requested to start work.
Any subsequent requests for qualified
apprentices made to the same registered
apprenticeship program after the initial
request must be made no later than 14
days before the qualified apprentices are
requested to start work. If there is no
registered apprenticeship program that
has a geographic area of operation that
includes the location of the qualified
facility; trains qualified apprentices in
the occupation(s) needed to perform
construction, alteration, or repair with
respect to the facility; and has a usual
and customary business practice of
entering into agreements with
employers for the placement of qualified
apprentices in the occupation for which
they are training, consistent with the
standards and requirements set forth in
29 CFR parts 29 and 30, and any
subsequent guidance issued by the
Department of Labor, the taxpayer will
be deemed to satisfy the Good Faith
Effort Exception with respect to the
qualified apprentices that the taxpayer,
contractor, or subcontractor would have
requested.
(1) Content of valid request. The
request of the taxpayer, contractor, or
subcontractor must include the
proposed dates of employment,
occupation of qualified apprentices
needed, location of the work to be
performed, number of qualified
apprentices needed, the number of labor
hours expected to be performed by the
qualified apprentices, and the name and
contact information of the taxpayer,
contractor, or subcontractor requesting
employment of qualified apprentices
from the registered apprenticeship
program. Reasonable estimates of the
foregoing information are permissible.
The request must also state that the
request for qualified apprentices is
made with an intent to employ qualified
apprentices in the occupation for which
they are being trained and in accordance
with the requirements and standards of
the registered apprenticeship program
and to employ qualified apprentices
consistent with the expected number of
hours and dates of employment
specified in the request. If the employer
of the requested qualified apprentices is
not the same as the taxpayer, contractor,
or subcontractor submitting the request
for qualified apprentices, then the
request must include the name of the
employer.
(2) Duration of request. If the
taxpayer, contractor, or subcontractor

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submits a request in accordance with
paragraph (f)(1)(i)(A) of this section and
the request is denied or not responded
to, the taxpayer will be deemed to have
exercised a Good Faith Effort with
respect to the request for the period
described in the request but not
exceeding 365 days (366 days in case of
a leap year). For requests that are denied
or not responded to and include a
period of employment for qualified
apprentices that exceeds 365 days (366
days in case of a leap year), the
taxpayer, contractor, or subcontractor
must submit one or more additional
requests with respect to the period of
such request in excess of 365 days (366
days in case of a leap year). The
taxpayer will not be deemed to have
exercised a Good Faith Effort beyond
365 days (366 days in case of a leap
year) of a previously denied request
unless the taxpayer submits an
additional request. There is no limit on
the number of requests a taxpayer,
contractor, or subcontractor may submit
to one or more registered apprenticeship
programs for purposes of the Good Faith
Effort Exception and the taxpayer,
contractor, or subcontractor is not
required to make subsequent requests to
the same registered apprenticeship
program in order to qualify for the Good
Faith Effort Exception. The 365 day (366
days in case of a leap year) duration of
requests for qualified apprentices also
applies in circumstances in which there
is no registered apprenticeship program
with a geographic area of operation that
includes the location of the facility at
the time a taxpayer, contractor, or
subcontractor attempts to requests
qualified apprentices from a registered
apprenticeship program.
(B) Denial of request. If a taxpayer,
contractor, or subcontractor submits a
request in accordance with paragraph
(f)(1)(i)(A) of this section and the
request is denied (including after an
initial acceptance and before the
scheduled qualified apprentice work
starts), the taxpayer will be deemed to
satisfy the requirements of section
45(b)(8)(A) through (C), and paragraphs
(b) through (d) of this section, provided
that such denial is not the result of a
refusal by the taxpayer or any
contractors or subcontractors engaged in
the performance of construction,
alteration, or repair work with respect to
such qualified facility to comply with
the established standards and
requirements of the registered
apprenticeship program. The denial of a
request is only valid for purposes of
establishing a Good Faith Effort with
respect to the portion(s) of the request
that were denied. In the case of a partial

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denial, a taxpayer, contractor, or
subcontractor must accept the qualified
apprentices offered in response to the
request to satisfy the Good Faith Effort
with respect to the portion of the
request that was denied. If a request is
partially denied, the qualified
apprentice labor hours specified in the
request that were denied that qualify for
the Good Faith Effort Exception are
considered to be labor hours performed
by qualified apprentices. Subject to the
requirements of paragraph (f)(1)(i)(A)(2)
of this section, the taxpayer, contractor,
or subcontractor does not need to follow
up with the registered apprenticeship
program after the initial request or after
the receipt of a non-substantive
response. The date on which a
registered apprenticeship program
received a request for qualified
apprentices is determined by the date
the electronic request is sent to the
registered apprenticeship program or
the date of delivery shown on a receipt
from the registered mail delivery.
(C) Response to a valid request. A
response to a valid request for qualified
apprentices is a substantive written
reply to the request that agrees, in whole
or in part, to the specific requirements
in the taxpayer’s, contractor’s, or
subcontractor’s request. If the registered
apprenticeship program fails to provide
a response to a request submitted in
accordance with paragraph (f)(1)(i)(A) of
this section within five business days
after the date on which such registered
apprenticeship program received the
taxpayer’s (or its contractor or
subcontractor) request, then such
request is deemed to be denied.
(D) Employer sponsored
apprenticeship programs. A taxpayer,
contractor, or subcontractor that
sponsors one or more internal registered
apprenticeship programs and that is
unable to employ a sufficient number of
qualified apprentices through such
programs to meet the Apprenticeship
Requirements must submit a request for
qualified apprentices to at least one
registered apprenticeship program that
it does not sponsor in order to satisfy
the Good Faith Effort Exception.
(ii) Examples. The provisions of this
paragraph (f)(1) are illustrated by the
following examples.
(A) Example 1. Taxpayer F submits a
request to a registered apprenticeship
program by email. The registered
apprenticeship program responds three
days later indicating that it has qualified
apprentices ready to start work, but the
reply email from the registered
apprenticeship program is automatically
forwarded to Taxpayer F’s spam or junk
mail folder, and Taxpayer F does not see
the email response. Taxpayer F would

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not qualify for the Good Faith Effort
Exception with respect to this request
because the registered apprenticeship
program provided a substantive reply to
the request that agreed to the specific
requirements in Taxpayer F’s request
within five business days.
(B) Example 2. Contractor G submits
a request for qualified apprentices from
a registered apprenticeship program
with an area of operation outside of the
geographic area of the qualified facility.
Contractor G’s request is denied because
the registered apprenticeship program
does not operate in the geographic area
where the qualified facility is located.
Contractor G’s request would not qualify
for the Good Faith Effort Exception
because the registered apprenticeship
program does not have a geographic area
of operation that includes the location
of the qualified facility.
(C) Example 3. Contractor H submits
a request for qualified apprentices to a
registered apprenticeship program.
Under its established standards and
requirements, the registered
apprenticeship program requires
contractors to enter into an agreement to
partner with that registered
apprenticeship program. Contactor H
refuses to enter into the agreement, and
as a result, the registered apprenticeship
program denies Contractor H’s request
for qualified apprentices. The
requirement to enter into the agreement
to partner with the registered
apprenticeship program applies to all
employers who request apprentices
from the registered apprenticeship
program. Neither the Department of
Labor nor a recognized State
apprenticeship agency has found the
requirement to enter into such an
agreement to be contrary to Department
of Labor guidance regarding the
administration of registered
apprenticeship programs. Contractor H’s
request would not qualify for the Good
Faith Effort Exception because
Contractor H refused to comply with the
established standards and requirements
of the registered apprenticeship
program.
(D) Example 4. Contractor I submits a
request for qualified apprentices from a
registered apprenticeship program on
November 15, 2024. Contractor I’s
request states that it seeks to employ
four qualified apprentices for the period
starting on January 2, 2025, and ending
June 30, 2025, for a total of 4,160 hours
(1,040 hours × four qualified
apprentices). On November 18, 2024,
the registered apprenticeship program
informs Contractor I that it can supply
four qualified apprentices for the
requested time period. On December 29,
2024, the registered apprenticeship

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program informs Contractor I that it is
only able to supply two of the four
qualified apprentices. Contractor I does
not submit any additional requests for
qualified apprentices from a registered
apprenticeship program. Contractor I’s
request would qualify for the Good
Faith Effort Exception for 2,080 hours
(1,040 hours for each of the two
requested qualified apprentices that
were denied after the request was
initially accepted), provided Contractor
I accepted the two qualified apprentices
that were offered for the requested
period.
(E) Example 5. Contractor J submits a
written request for qualified apprentices
from a registered apprenticeship
program on June 1, 2025. Contractor J’s
request states that it seeks to employ
three qualified apprentices for a period
starting September 1, 2025, and ending
December 31, 2026. The registered
apprenticeship program denies the
request on June 2, 2025. Contractor J’s
request satisfies the Good Faith Effort
Exception with respect to the three
qualified apprentices that were denied
for the period beginning September 1,
2025, and ending August 31, 2026.
Contractor J’s request does not satisfy
the Good Faith Effort Exception with
respect to the period beginning
September 1, 2026, and ending
December 31, 2026, because that is the
portion of the denied request that
exceeded 365 days (366 days in case of
a leap year) and Contractor J did not
submit an additional valid request for
that period.
(2) Apprenticeship cure provision—(i)
In general. A taxpayer that fails to
satisfy the Apprenticeship
Requirements in paragraph (a) of this
section with respect to the construction,
alteration, or repair of any qualified
facility prior to the facility being placed
in service, will be deemed to satisfy the
Apprenticeship Requirements if the
taxpayer pays the IRS a penalty equal to
$50 multiplied by the total labor hours
for which the requirements described in
paragraph (b) or (d) of this section were
not satisfied with respect to the
construction, alteration, or repair work
on such qualified facility.
(A) Total labor hours for which the
labor hours requirement is not met. For
failures to meet the percentage of total
labor hours requirement in paragraph
(b)(1) of this section, the total labor
hours for which the requirement was
not satisfied is calculated as the
difference between the total labor hours
performed by qualified apprentices that
would be required to meet the
applicable percentage under paragraph
(b)(2) of this section and the sum of the
labor hours actually worked by all

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qualified apprentices consistent with
the applicable ratio of apprentices to
journeyworkers and the hours
qualifying for the Good Faith Effort
exception.
(B) Total labor hours for which the
participation requirement is not met.
For failures to meet the participation
requirement in paragraph (d) of this
section, the total labor hours for which
the requirement was not satisfied is
calculated as the total labor hours of
construction, alteration, or repair work
with respect to the facility performed by
all laborers or mechanics employed by
the taxpayer, contractor, or
subcontractor that failed to meet the
participation requirement of the
qualified facility divided by the number
of laborers or mechanics employed by
such taxpayer, contractor, or
subcontractor that performed
construction, alteration, or repair work
on the facility.
(C) Penalty payment not required if
taxpayer ineligible for increased credit
amount under section 45(b)(6)(B)(iii). If
the taxpayer claims the increased credit
amount under section 45(b)(6)(B)(iii)
and does not satisfy the Apprenticeship
Requirements for the claimed increased
credit amount, then the obligation to
make the penalty payment under
paragraph (f)(2)(i) of this section
applies. If the IRS determines that a
taxpayer claiming the increased credit
amount under section 45(b)(6)(B)(iii)
failed to meet the Apprenticeship
Requirements and the taxpayer does not
make the penalty payment required
under paragraph (f)(2)(i) of this section,
then no penalty is assessed under
paragraph (f)(2)(i) of this section, and
the taxpayer is not eligible for the
increased credit amount under section
45(b)(6)(B)(iii). Taxpayers that are not
eligible to claim the increased credit
amount may still be eligible to claim the
base amount of the renewable electricity
production credit under section 45(a) if
they meet the requirements to claim the
credit.
(D) Examples. The provisions of
paragraph (f)(2)(i) of this section are
illustrated by the following examples,
which do not take into account any
possible application of the exception for
Good Faith Effort Exception under
paragraph (f)(1) of this section, the
enhanced penalty payment requirement
in the case of intentional disregard
under paragraph (f)(2)(ii) of this section,
or the inapplicability of the penalty in
the case of a Qualifying Project Labor
Agreement under paragraph (f)(2)(v) of
this section. In each example, assume
that the taxpayer uses the calendar year
as the taxpayer’s taxable year.

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(1) Example 1. Taxpayer K starts
construction of a qualified facility on
April 1, 2023. Accordingly, Taxpayer K
must ensure that at least 12.5% of the
total labor hours are performed by
qualified apprentices. The facility is
placed in service on April 1, 2025, and
Taxpayer K claims the increased credit
amount under section 45(b)(6)(B)(iii) on
its 2025 tax return. All individuals who
performed the construction, alteration,
or repair work were employed directly
by Taxpayer K, including two qualified
apprentices. Taxpayer K employed
enough journeyworkers to satisfy the
Ratio Requirement. A total of 50,000
labor hours were spent on the
construction, alteration, or repair work
of the facility, 6,000 of which were
performed by qualified apprentices.
Taxpayer K has satisfied the
participation requirement because
Taxpayer K has employed at least one
qualified apprentice. Taxpayer K failed
to satisfy the labor hours requirement
under paragraph (b)(2) of this section
because less than 12.5% of the total
labor hours were performed by qualified
apprentices. Qualified apprentices must
have performed at least 6,250 labor
hours (50,000 × 12.5%), so the total
labor hours by which the labor hours
requirement was not satisfied is 250
(6,250¥6,000). To cure Taxpayer K’s
failure to meet the labor hours
requirement, Taxpayer K must pay a
penalty of $12,500 (250 × $50).
(2) Example 2. Taxpayer L starts
construction of a qualified facility on
February 10, 2023. Accordingly,
Taxpayer L must ensure that at least
12.5% of the total labor hours are
performed by qualified apprentices. The
facility is placed in service on February
10, 2026, and Taxpayer L claims the
increased credit amount under section
45(b)(6)(B)(iii) on its 2026 tax return.
Taxpayer L employs 10 individuals to
perform construction, alteration, or
repair work of the facility, two of whom
are qualified apprentices. Taxpayer L
employed enough journeyworkers to
satisfy the Ratio Requirement. Taxpayer
L also hires Contractor M, who employs
five individuals to perform
construction, alteration, or repair work
of the facility, none of whom are
qualified apprentices. A total of 50,000
labor hours were spent on the
construction, alteration, or repair work
of the facility, 6,500 of which were
performed by qualified apprentices. Of
the total 50,000 labor hours, 33,000
labor hours were performed by
individuals employed by Taxpayer L
and 17,000 labor hours were performed
by individuals employed by Contractor
M. Taxpayer L has satisfied the labor

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hours requirement under paragraph
(b)(2) of this section because more than
12.5% of the total labor hours were
performed by qualified apprentices.
However, Taxpayer L failed to satisfy
the participation requirement under
paragraph (d) of this section because
Contractor M employed five individuals
but no qualified apprentices. The total
labor hours for which the participation
requirement was not satisfied is equal to
the total labor hours performed by
individuals employed by Contractor M
(17,000) divided by the number of
individuals employed by Contractor M
(five) on the construction of the
qualified facility, which is 3,400 hours
(17,000/5). To cure the failure to meet
the Apprenticeship Requirements,
Taxpayer L must pay a penalty of
$170,000 (3,400 × $50).
(3) Example 3. Taxpayer N starts
construction of a qualified facility on
January 1, 2024. Accordingly, Taxpayer
N must ensure that at least 15% of the
total labor hours are performed by
qualified apprentices. The facility is
placed in service on January 1, 2025,
and Taxpayer N claims the increased
credit amount under section
45(b)(6)(B)(iii) on its 2025 tax return.
Taxpayer N employs 15 individuals to
perform construction, alteration, or
repair work of the facility, none of
whom is a qualified apprentice.
Taxpayer N also hires Contractor O,
who employs five individuals to
perform construction, alteration, or
repair work of the facility, one of whom
is a qualified apprentice. At the time
Taxpayer N claims the increased credit
amount, a total of 20,000 labor hours
were spent on the construction,
alteration, or repair work of the facility,
1,000 of which were performed by the
qualified apprentice. Of the 20,000 total
labor hours, 15,000 labor hours were
performed by individuals employed by
Taxpayer N and 5,000 labor hours were
performed by individuals employed by
Contractor O. Taxpayer N failed to
satisfy the labor hours requirement
under paragraph (b)(2) of this section
because less than 15% of the total labor
hours were performed by qualified
apprentices. Qualified apprentices must
have performed at least 3,000 labor
hours, so the total labor hours by which
the labor hours requirement was not
satisfied is 2,000. Taxpayer N also failed
to satisfy the participation requirement
under paragraph (d) of this section
because Taxpayer N employed 15
individuals but no qualified
apprentices. The total labor hours for
which the participation requirement
was not satisfied is 1,000, which is
equal to the total labor hours performed

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by individuals employed by Taxpayer N
(15,000) divided by the number of
individuals employed by Taxpayer N
(15), which is 1,000 (15,000/15). The
total labor hours by which Taxpayer N
failed to meet the labor hours and
participation requirements is 3,000
(2,000 + 1,000). To cure Taxpayer N’s
failure to meet the Apprenticeship
Requirements, Taxpayer N must pay a
penalty of $150,000 (3,000 × $50).
(4) Example 4. Taxpayer P starts
construction of a qualified facility on
April 1, 2023. Accordingly, Taxpayer P
must ensure that at least 12.5% of the
total labor hours are performed by
qualified apprentices. The facility is
placed in service on January 5, 2024,
and Taxpayer P claims the increased
credit amount under section
45(b)(6)(B)(iii) on its 2024 tax return.
Taxpayer P hires Contractors Q, R, and
S to perform the construction,
alteration, and repair of the qualified
facility. Contractor Q employs 10
journeyworkers who work 10,000 hours
and one qualified apprentice who works
400 hours. Contractor R employs four
journeyworkers who work 4,000 hours
and five qualified apprentices who work
2,000 hours. Contractor S employs three
journeyworkers who work 3,000 hours
and one qualified apprentice who works
400 hours. The registered
apprenticeship program for all of the
qualified apprentices has prescribed a
1:1 apprentice-to-journeyworker ratio.
For each day, all journeyworkers and
qualified apprentices employed by the
contractors are on the job site. The
contractors have satisfied the
participation requirement under
paragraph (d) of this section because
they each employed one or more
qualified apprentices. The total labor
hours are 19,800 hours, and the total
hours worked by qualified apprentices
are 2,800. However, Contractor R
employed one qualified apprentice in
excess of the apprentice-tojourneyworker ratio (five qualified
apprentices: four journeyworkers) that
was prescribed by the apprenticeship
program. Because Contractor R
employed one qualified apprentice in
excess of the apprentice-tojourneyworker ratio on each day that
Contractor R performed work on the
facility, 400 of the qualified apprentice
hours worked by Contractor R do not
count towards the labor hour
requirement. Thus, Taxpayer P has
failed to meet the labor hours
requirement under paragraph (b)(2) of
this section because only 2,400 hours
worked by qualified apprentices are
counted for purposes of the labor hours
requirement. The total labor hours by

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which Taxpayer P failed to meet the
labor hours requirement is 75 (2,475
required hours (19,800 × 12.5%)¥2,400
qualified apprentice hours worked). To
cure Taxpayer P’s failure to meet the
Apprenticeship Requirements, Taxpayer
P must pay a penalty of $3,750 (75 ×
$50).
(ii) Intentional disregard—(A)
Application of section 45(b)(8)(D)(iii). If
the IRS determines that any failure to
satisfy the Apprenticeship
Requirements in paragraph (b) or (d) of
this section is due to intentional
disregard of those requirements, the
amount of the penalty payment under
paragraph (f)(2) of this section is
increased to $500 multiplied by the total
labor hours for which the requirements
described in paragraph (b) or (d) of this
section were not satisfied with respect
to the construction, alteration, or repair
work on such qualified facility.
(B) Meaning of intentional disregard.
A failure to satisfy the Apprenticeship
Requirements of paragraph (b) or (d) of
this section is due to intentional
disregard if it is knowing or willful.
(C) Facts and circumstances
considered. The facts and circumstances
that are considered in determining
whether a failure to satisfy the
Apprenticeship Requirements is due to
intentional disregard include, but are
not limited to—
(1) Whether the failure was part of a
pattern of conduct that includes
repeated or systemic failures to ensure
compliance with the Apprenticeship
Requirements;
(2) Whether the taxpayer took steps to
determine or review the applicable
percentage of labor hours required to be
performed by qualified apprentices;
(3) Whether the taxpayer sought to
promptly cure any failures;
(4) Whether the taxpayer has been
required to make a penalty payment
under paragraph (f)(2) of this section in
previous years;
(5) Whether the taxpayer included
provisions in any contracts entered into
with contractors that required the
employment of qualified apprentices by
the contractor and any subcontractors
consistent with the labor hour
requirement of section 45(b)(8)(A) and
the participation requirement of section
45(b)(8)(C) and whether taxpayers
regularly reviewed contractors’ and
subcontractors’ use of qualified
apprentices;
(6) Whether the taxpayer required
contractors and subcontractors to
forward to the taxpayer requests to
registered apprenticeship programs
within five business days of when
requests were made;

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(7) Whether the taxpayer made no
attempt to comply with the
Apprenticeship Requirements;
(8) Whether the taxpayer developed
and used a plan to utilize qualified
apprentices in the construction,
alteration, or repair of the qualified
facility;
(9) Whether the taxpayer, contractor,
or subcontractor regularly followed up
with registered apprenticeship programs
regarding requests for qualified
apprentices;
(10) Whether the taxpayer, contractor,
or subcontractor contacted the
Department of Labor’s Office of
Apprenticeship or relevant State
apprenticeship agency for assistance in
locating a registered apprenticeship
program;
(11) Whether the taxpayer had in
place procedures whereby individuals
could report suspected failures to
comply with the Apprenticeship
Requirements, without retaliation or
adverse action, whether taxpayer
investigated such reports by
individuals, and whether the taxpayer
had internal controls to prevent the
failures to comply with the
Apprenticeship Requirements;
(12) Whether the taxpayer
investigated complaints of retaliation or
adverse action resulting from reports of
suspected failures to comply with the
Apprenticeship Requirements, and took
appropriate actions to remedy any
retaliation or adverse action and prevent
it from reoccurring; and
(13) Whether taxpayer failed to
maintain and preserve records sufficient
to establish compliance with the
apprenticeship requirements for
relevant tax years.
(D) Examples. The provisions of
paragraph (f)(2)(ii) of this section are
illustrated by the following examples,
which take into account certain facts
and circumstances described in
paragraph (f)(2)(ii)(C) of this section,
that are considered in applying the
enhanced penalty payment requirement
in the case of intentional disregard.
These examples do not take into
account any possible application of the
exception for Good Faith Effort
Exception under paragraph (f)(1) of this
section or the inapplicability of the
penalty in the case of a Qualifying
Project Labor Agreement under
paragraph (f)(2)(v) of this section. In
each example, assume that the taxpayer
uses the calendar year as the taxpayer’s
taxable year.
(1) Example 1. Taxpayer T failed to
satisfy the labor hours requirement of
section 45(b)(8)(A), the participation
requirement of section 45(b)(8)(C), and
the requirements described in

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paragraphs (b) and (d) of this section.
Taxpayer T did not create a plan to
utilize qualified apprentices in the
construction, alteration, or repair of the
qualified facility. Taxpayer T did not
include contract provisions that requires
the hiring of qualified apprentices and
the compliance with the labor hours
requirement described in section
45(b)(8)(A) and the participation
requirement described in section
45(b)(8)(C), nor did Taxpayer T require
those contract provisions in any
subcontracts. Neither Taxpayer T nor
any contractors or subcontractors made
any requests to a registered
apprenticeship program for qualified
apprentices. Taxpayer T also did not
have procedures in place to audit
whether contractors or subcontractors
made a request to a registered
apprenticeship program. Taxpayer T’s
failures to satisfy the labor hours
requirement of section 45(b)(8)(A), the
participation requirement of section
45(b)(8)(C), and the requirements
described in paragraphs (b) and (d) of
this section would be considered due to
intentional disregard for purposes of
paragraph (f)(2)(ii) of this section. After
considering all of the facts and
circumstances, Taxpayer T would be
subject to the enhanced penalty
payment described in paragraph
(f)(2)(ii)(A) of this section.
(2) Example 2. Taxpayer U failed to
satisfy the labor hours requirement of
section 45(b)(8)(A), the participation
requirement of section 45(b)(8)(C), and
the requirements described in
paragraphs (b) and (d) of this section.
Taxpayer U created a plan to utilize
qualified apprentices in the
construction, alteration, or repair of a
qualified facility. Taxpayer U included
contract provisions that required the
hiring of qualified apprentices and the
compliance with the labor hours
requirement described in section
45(b)(8)(A) and the participation
requirement described in section
45(b)(8)(C) and required those contract
provisions in any subcontracts.
Taxpayer U and all contractors and
subcontractors of Taxpayer U requested
relevant qualified apprentices from
registered apprenticeship programs.
Taxpayer U also created procedures to
audit whether contractors or
subcontractors made a request to a
registered apprenticeship program and
ensured that the registered
apprenticeship programs were contacted
in writing. In cases in which a registered
apprenticeship program replied to a
proper request described in paragraph
(f)(1)(i)(A)(1) of this section with a nonsubstantive response, Taxpayer U

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encouraged follow-ups to the registered
apprenticeship program. Additionally,
Taxpayer U contacted and encouraged
contractors and subcontractors to
contact the Department of Labor’s Office
of Apprenticeship and the State
apprenticeship agency in cases in which
Taxpayer U, or any contractors or
subcontractors, experienced difficulty in
locating a registered apprenticeship
program. After considering all of the
facts and circumstances, Taxpayer U’s
failure to satisfy the labor hours
requirement of section 45(b)(8)(A), the
participation requirement of section
45(b)(8)(C), and the requirements
described in paragraphs (b) and (d) of
this section would not be considered
due to intentional disregard for
purposes of paragraph (f)(2)(ii) of this
section.
(E) Rebuttable presumption of no
intentional disregard. If a taxpayer
makes the penalty payment required by
this paragraph (f)(2) before receiving
notice of an examination from the IRS
with respect to a claim for the increased
credit amount under section 45(b)(6),
the taxpayer will be presumed not to
have intentionally disregarded the
Apprenticeship Requirements in
paragraphs (b) and (d) of this section.
The IRS may rebut this presumption
based on the relevant facts and
circumstances.
(iii) Deficiency procedures to apply.
The penalty payment required by this
paragraph (f)(2) is subject to deficiency
procedures of subchapter B of chapter
63 of the Code.
(iv) Penalty payments in the event of
a transfer pursuant to section 6418. To
the extent an eligible taxpayer, as
defined in section 6418(f)(2), has
determined an increased credit amount
under section 45(b)(6) and transferred
such increased credit amount as part of
a specified credit portion, the obligation
to make a penalty payment under
paragraph (f)(2)(i) of this section
remains with the eligible taxpayer. The
obligation for an eligible taxpayer to
satisfy the Apprenticeship
Requirements becomes binding upon
the earlier of the filing of the eligible
taxpayer’s return for the taxable year for
which the specified credit portion is
determined with respect to the eligible
taxpayer, or the filing of the return of
the transferee taxpayer for the year in
which the specified credit portion is
taken into account. If the IRS
determines that the eligible taxpayer
failed to meet the Apprenticeship
Requirements and the eligible taxpayer
does not then make the penalty
payments provided in paragraph (f)(2)(i)
of this section, then no penalty is
assessed under paragraph (f)(2)(i) of this

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section, and the eligible taxpayer is not
eligible for the increased credit amount
determined under section
45(b)(6)(B)(iii). Section 6418 and the
regulations under section 6418 control
for determining the impact of an eligible
taxpayer’s failure to cure on any
transferee taxpayer.
(v) Project labor agreements. The
penalty payment required by this
paragraph (f)(2) to cure a failure to
satisfy the Apprenticeship
Requirements in paragraphs (b) and (d)
of this section does not apply with
respect to the construction, alteration, or
repair work of a qualified facility if the
work is done pursuant to a Qualifying
Project Labor Agreement as defined in
§ 1.45–7(c)(6)(ii).
(g) Definitions. Solely for purposes of
this section, the following definitions
apply:
(1) Construction, alteration, or repair.
The term construction, alteration, or
repair has the same meaning as in
§ 1.45–7(d)(3).
(2) Contractor. The term contractor
has the same meaning as in § 1.45–
7(d)(4).
(3) Employed. The term employed has
the same meaning as in § 1.45–7(d)(5).
(4) Established standards and
requirements. The term established
standards and requirements means
those standards of apprenticeship
required by 29 CFR parts 29 and 30 for
registered apprenticeship programs, as
well as any additional requirements
established by the registered
apprenticeship program for the
placement of apprentices and applicable
to all employers participating in the
registered apprenticeship program. Such
requirements must not be found by the
U.S. Department of Labor’s Office of
Apprenticeship or a recognized State
apprenticeship agency to be contrary to
Department of Labor guidance regarding
the administration of registered
apprenticeship programs.
(5) Geographic area. The term
geographic area for purposes of
determining the geographic area of
operation of a registered apprenticeship
program has the same meaning as the
term geographic area and locality
defined in § 1.45–7(d)(7).
(6) Journeyworker. The term
journeyworker means an individual who
has attained a level of skill, abilities,
and competencies recognized within an
industry as having mastered the skills
and competencies required for the
occupation. Use of the term may also
refer to a mentor, technician, specialist,
or other skilled individual who has
documented sufficient skills and
knowledge of an occupation, either
through formal apprenticeship or

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through practical on-the-job experience
and formal training.
(7) Labor hours. The term labor hours
means 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. Labor hours do not
include hours worked by foremen,
superintendents, owners, or persons
employed in bona fide executive,
administrative, or professional
capacities (as defined in 29 CFR part
541).
(8) Qualified apprentice. The term
qualified apprentice means an
individual who is employed by the
taxpayer or by any contractor or
subcontractor and who is participating
in a registered apprenticeship program.
An individual is participating in a
registered apprenticeship program if,
the individual has entered into a written
agreement with a registered
apprenticeship program containing the
terms and conditions of the employment
and training of the apprentice and has
been registered as an apprentice with
the U.S. Department of Labor’s Office of
Apprenticeship or a recognized State
apprenticeship agency during the time
period in which work is performed by
the apprentice for the taxpayer,
contractor, or subcontractor, or the
individual is in the first 90 days of
probationary employment as an
apprentice in a registered
apprenticeship program and the
individual has been certified by the U.S.
Department of Labor’s Office of
Apprenticeship or a recognized State
apprenticeship agency as eligible for
probationary employment as an
apprentice.
(9) Registered apprenticeship
program. A registered apprenticeship
program means a program that has been
registered by the U.S. Department of
Labor’s Office of Apprenticeship or a
recognized State apprenticeship agency,
pursuant to the National Apprenticeship
Act and its implementing regulations for
registered apprenticeship at 29 CFR
parts 29 and 30, as meeting the basic
standards and requirements of the
Department of Labor for approval of
such program for Federal purposes.
Registration of a program is evidenced
by a Certificate of Registration or other
written indicia. Registered
apprenticeship programs include those
that taxpayers, contractors, or
subcontractors sponsor, create, or
partner with and include joint and nonjoint programs (as those terms are used
in 29 CFR part 29).
(10) State apprenticeship agency. The
term State apprenticeship agency means

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an agency of a State government that has
responsibility and accountability for
apprenticeship within the State and that
has been recognized and authorized by
the U.S. Department of Labor’s Office of
Apprenticeship to register and oversee
apprenticeship programs and
agreements for Federal purposes.
(11) Subcontractor. The term
subcontractor has the same meaning as
in § 1.45–7(d)(10).
(12) Taxpayer. The term taxpayer has
the same meaning as in § 1.45–7(d)(11).
(h) Applicability date. This section
applies to qualified facilities placed in
service in taxable years ending after
June 25, 2024, and the construction of
which begins after June 25, 2024.
Taxpayers may apply this section to
qualified facilities placed in service in
taxable years ending on or before June
25, 2024, and qualified facilities placed
in service in taxable years ending after
June 25, 2024, the construction of which
begins before June 25, 2024, provided
that taxpayers follow this section in its
entirety and in a consistent manner.
§§ 1.45–9—1.45.11
§ 1.45–12

[Reserved]

Recordkeeping and reporting.

(a) In general. The increased credit
amount determined under section
45(b)(6) must be claimed in such form
and manner as may be prescribed in IRS
forms, instructions, publications, or
guidance published in the Internal
Revenue Bulletin. See § 601.601 of this
chapter. Consistent with sections 45 and
6001 and § 1.6001–1(e), a taxpayer
claiming or transferring (under section
6418) an increased credit amount under
section 45(b)(6)(A) must maintain and
preserve records sufficient to establish
compliance with the requirements of
sections 45(b)(6)(B), (b)(7), and (8), as
applicable. In the case of any credit
transferred under section 6418 reflecting
an increased credit amount, the
requirement to maintain and preserve
sufficient records demonstrating
compliance with the applicable
prevailing wage and apprenticeship
requirements remains with the eligible
taxpayer that determined and
transferred the credit. For definitions of
terms used in this section, see § 1.45–
7(d) with respect to the prevailing wage
requirements, and § 1.45–8(g) with
respect to the apprenticeship
requirements.
(b) Recordkeeping for the prevailing
wage and apprenticeship requirements.
With respect to each qualified facility
for which a taxpayer is claiming or
transferring (under section 6418) a
credit reflecting an increased credit
amount under section 45(b)(6)(A)(iii),
the taxpayer must maintain and

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53269

preserve records sufficient to
demonstrate compliance with the
applicable prevailing wage and
apprenticeship requirements in sections
45(b)(7) and (8) and §§ 1.45–7 and 1.45–
8, respectively. At a minimum, those
records include payroll records for each
laborer and mechanic (including each
qualified apprentice) employed by the
taxpayer, contractor, or subcontractor in
the construction, alteration, or repair of
the qualified facility. If work is done
pursuant to a Qualifying Project Labor
Agreement as defined in § 1.45–
7(c)(6)(ii), the taxpayer should also
maintain and preserve records related to
that Qualifying Project Labor
Agreement.
(c) Recordkeeping for the prevailing
wage requirements. In addition to
payroll records otherwise maintained by
the taxpayer, records sufficient to
demonstrate compliance with the
applicable prevailing wage requirements
in section 45(b)(7) and § 1.45–7 may
include Forms WH–347 completed fully
and correctly with information for each
laborer and mechanic (including each
qualified apprentice) employed by the
taxpayer, a contractor, or subcontractor
with respect to each qualified facility.
Records sufficient to demonstrate
compliance with the applicable
prevailing wage requirements in section
45(b)(7) and § 1.45–7 may also include
the following other documents and
records with respect to each qualified
facility:
(1) Identifying information for each
laborer and mechanic who worked on
the construction, alteration, or repair of
the qualified facility, including the
name, the last four digits of a social
security or tax identification number,
address, telephone number, and email
address;
(2) The location and type of
construction of the qualified facility;
(3) The labor classification(s) the
taxpayer applied to each laborer and
mechanic for determining the prevailing
wage rate and documentation
supporting the applicable classification,
including the applicable wage
determination and copies of executed
contracts for construction, alteration, or
repair of the qualified facility with any
contractor or subcontractor;
(4) The hourly rate(s) of wages paid
(including rates of contributions or costs
for bona fide fringe benefits or cash
equivalents thereof) for each applicable
labor classification described in
paragraph (c)(3) of this section;
(5) Records to support any
contribution irrevocably made on behalf
of each laborer or mechanic to a trustee
or other third person pursuant to a bona
fide fringe benefit program, and the rate

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of costs that were reasonably anticipated
in providing bona fide fringe benefits to
laborers and mechanics pursuant to an
enforceable commitment to carry out a
plan or program described in 40 U.S.C.
3141(2)(B), including records
demonstrating that the enforceable
commitment was provided in writing to
the laborers and mechanics affected;
(6) The total number of hours worked
by each laborer and mechanic per pay
period;
(7) The total wages paid to each
laborer and mechanic for each pay
period (including identifying any
deductions from wages);
(8) Records to support wages paid to
any qualified apprentices at less than
the applicable prevailing wage rates,
including records reflecting an
individual’s participation in a registered
apprenticeship program and the
applicable wage rates and apprenticeto-journeyworker ratios prescribed by
the registered apprenticeship program;
(9) The amount and timing of any
correction and penalty payments and
documentation reflecting the calculation
of the correction and penalty payments,
including records to demonstrate
eligibility for the penalty waiver in
§ 1.45–7(c)(6);
(10) Records to document any failures
to pay prevailing wages and the actions
taken to prevent, mitigate, or remedy the
failure (for example, records
demonstrating that the taxpayer (or an
independent third party engaged by the
taxpayer) regularly reviewed payroll
practices, included requirements to pay
prevailing wages in contracts with
contractors, and posted prevailing wage
rates in a prominent place on the job
site); and
(11) Records related to any complaints
received by the taxpayer, contractor, or
subcontractor that the taxpayer,
contractor, or subcontractor was paying
wages less than the applicable
prevailing wage rate for work performed
by laborers and mechanics with respect
to the qualified facility.
(d) Recordkeeping for the
apprenticeship requirements. Records
sufficient to demonstrate compliance
with the applicable apprenticeship
requirements in section 45(b)(8) and
§ 1.45–8 may include the following
information with respect to each
qualified facility:
(1) Any written requests for the
employment of qualified apprentices
from registered apprenticeship
programs, including any contacts with
the U.S. Department of Labor’s Office of
Apprenticeship or a State
apprenticeship agency regarding
requests for qualified apprentices from
registered apprenticeship programs;

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(2) Any agreements entered into with
registered apprenticeship programs with
respect to the construction, alteration, or
repair of the facility;
(3) Documents reflecting the
standards and requirements of all
registered apprenticeship programs from
which taxpayers, contractors, or
subcontractors employed qualified
apprentices with respect to the
construction, alteration, or repair of the
facility (including the applicable ratio
requirement prescribed by each
registered apprenticeship program);
(4) The total number of labor hours
worked with respect to the construction,
alteration, or repair of the qualified
facility, including and identifying hours
worked by each qualified apprentice;
(5) Records reflecting the daily ratio of
apprentices to journeyworkers;
(6) Records demonstrating compliance
with the Good Faith Effort Exception in
§ 1.45–8(f)(1) (including requests for
qualified apprentices, correspondence
with registered apprenticeship
programs, and denials of requests);
(7) The amount and timing of any
penalty payments and documentation
reflecting the calculation of the penalty
payments;
(8) Records to document any failures
to satisfy the apprenticeship
requirements under section 45(b)(8) and
§ 1.45–8 and the actions taken to
prevent, mitigate, or remedy the failure;
and
(9) Records related to any complaints
received by the taxpayer, contractor, or
subcontractor that the taxpayer,
contractor, or subcontractor was not
satisfying the apprenticeship
requirements under section 45(b)(8) and
§ 1.45–8.
(e) Satisfaction of the recordkeeping
requirements. Taxpayers may satisfy the
recordkeeping requirements in this
section as follows:
(1) Taxpayers may collect and
physically retain relevant records from
every contractor and subcontractor. The
records may have personally
identifiable information (PII) redacted to
comply with applicable privacy laws.
Unredacted information must be made
available to the IRS upon request;
(2) Taxpayers, contractors, and
subcontractors may provide relevant
records to a third party vendor to
physically retain on behalf of the
taxpayer. The records may have PII
redacted to comply with applicable
privacy laws. Unredacted records must
be made available to the IRS upon
request; or
(3) Taxpayers, contractors, and
subcontractors may each physically
retain the relevant unredacted records
for their own employees. Unredacted

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records must be made available to the
IRS upon request.
(f) Applicability date. This section
applies to qualified facilities placed in
service in taxable years ending after
June 25, 2024, and the construction of
which begins after June 25, 2024.
Taxpayers may apply this section to
qualified facilities placed in service in
taxable years ending on or before June
25, 2024, and qualified facilities placed
in service in taxable years ending after
June 25, 2024, the construction of which
begins before June 25, 2024, provided
that taxpayers follow this section in its
entirety and in a consistent manner.
■ Par. 4. Sections 1.45L–1 through
1.45L–3 are added to read as follows:
§§ 1.45L–1—1.45L–2

[Reserved]

§ 1.45L–3 Rules relating to the increased
credit amount for prevailing wage.

(a) In general. With respect to a
qualified residence described in section
45L(a)(2)(B), the credit determined
under section 45L(a)(2)(B)(i) is $2,500
and the credit determined under section
45L(a)(2)(B)(ii) is $5,000 if the qualified
residence described in section
45L(a)(2)(B)—
(1) Meets the requirements under
section 45L(c)(1)(A) or 45L(c)(1)(B), as
applicable;
(2) Is constructed by an eligible
contractor;
(3) Is acquired by a person for use as
a residence during the taxable year; and
(4) Satisfies the prevailing wage
requirements of section 45(b)(7) and
§ 1.45–7, and the recordkeeping and
reporting requirements of § 1.45–12,
with respect to the construction of the
qualified residence before such
residence is acquired by a person for use
as a residence.
(b) Definitions—(1) Qualified
residence. For purposes of this section,
a qualified residence means a qualified
new energy efficient home as defined in
section 45L(b)(2).
(2) Eligible contractor. For purposes of
this section, an eligible contractor
means an eligible contractor as defined
in section 45L(b)(1).
(c) Applicability date. This section
applies to any qualified new energy
efficient home acquired for use as a
residence in taxable years ending after
June 25, 2024, and the construction of
which begins after June 25, 2024.
Taxpayers may apply this section to any
qualified new energy efficient home
acquired for use as a residence in
taxable years ending on or before June
25, 2024, and any qualified new energy
efficient home acquired for use as a
residence in taxable years ending after
June 25, 2024, the construction of which

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begins before June 25, 2024, provided
that taxpayers follow this section in its
entirety and in a consistent manner.
■ Par. 5. Section 1.45Q–6 is added to
read as follows:

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§ 1.45Q–6 Rules relating to the increased
credit amount for prevailing wage and
apprenticeship.

(a) In general. If the requirements in
paragraph (b) of this section are satisfied
with respect to any qualified facility or
any carbon capture equipment placed in
service at that facility, then the credit
determined under section 45Q(a) is
multiplied by five.
(b) Qualified facility and carbon
capture equipment requirements. The
requirements of this paragraph (b) are
satisfied if any of the following
requirements are met—
(1) With respect to a qualified facility
within the meaning of section 45Q the
construction of which begins on or after
January 29, 2023, and any carbon
capture equipment within the meaning
of section 45Q placed in service at such
facility, the taxpayer meets the
prevailing wage requirements of section
45(b)(7) and § 1.45–7 with respect to the
construction of such facility and
equipment and with respect to the
alteration or repair of such facility and
equipment for any taxable year, for any
portion of such taxable year that is
within the period described in section
45Q(3)(A) or (4)(A) after the facility or
equipment was originally placed in
service, the apprenticeship
requirements of section 45(b)(8) and
§ 1.45–8, and the recordkeeping and
reporting requirements of § 1.45–12;
(2) With respect to any carbon capture
equipment within the meaning of
section 45Q the construction of which
begins on or after January 29, 2023, and
that is installed at a qualified facility the
construction of which began prior to
January 29, 2023, the taxpayer meets the
prevailing wage requirements of section
45(b)(7) and § 1.45–7 with respect to the
construction of such equipment and
with respect to the alteration or repair
of such equipment for any taxable year,
for any portion of such taxable year that
is within the period described in section
45Q(3)(A) or (4)(A) after the equipment
was originally placed in service, the
apprenticeship requirements of section
45(b)(8) and § 1.45–8, and the
recordkeeping and reporting
requirements of § 1.45–12; or
(3) Carbon capture equipment within
the meaning of section 45Q the
construction of which began prior to
January 29, 2023, and such equipment
is installed at a qualified facility the
construction of which began prior to
January 29, 2023.

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(c) Applicability date. This section
applies to qualified facilities and carbon
capture equipment placed in service in
taxable years ending after June 25, 2024,
and the construction of which begins
after June 25, 2024. Taxpayers may
apply this section to qualified facilities
and carbon capture equipment placed in
service in taxable years ending on or
before June 25, 2024, and qualified
facilities and carbon capture equipment
placed in service in taxable years ending
after June 25, 2024, the construction of
which begins before June 25, 2024,
provided that taxpayers follow this
section in its entirety and in a consistent
manner.
■ Par. 6. Sections 1.45U–1 through
1.45U–3 are added to read as follows:
§§ 1.45U–1—1.45U–2

[Reserved]

§ 1.45U–3 Rules relating to the increased
credit amount for prevailing wage.

(a) In general. If a qualified nuclear
power facility satisfies the prevailing
wage requirements of section 45(b)(7)
and § 1.45–7 for any alteration or repair
with respect to such qualified nuclear
power facility within the meaning of
section 45U(b)(1), and the
recordkeeping and reporting
requirements of § 1.45–12, then the
amount of the zero-emission nuclear
power production credit for the taxable
year is equal to the credit amount
determined under section 45U(a)
multiplied by five.
(b) Qualifying Project Labor
Agreement for a qualified nuclear power
facility. For the purposes of section 45U
and § 1.45–7(c)(6)(ii), in order to be a
Qualifying Project Labor Agreement,
such agreement must, at a minimum:
(1) Be a collective bargaining
agreement with a one or more labor
organizations (as defined in 29 U.S.C.
152(5)) of which employees of the
qualified nuclear power facility are
members and such agreement
establishes the terms and conditions of
employment at the qualified nuclear
power facility;
(2) Contain guarantees against strikes,
lockouts, and similar job disruptions;
(3) Set forth effective, prompt, and
mutually binding procedures for
resolving labor disputes arising during
the term of the collective bargaining
agreement; and
(4) Contain provisions to pay wages at
rates not less than the prevailing rates
in accordance with subchapter IV of
chapter 31 of title 40 of the United
States Code.
(c) Applicability date. This section
applies to alterations and repairs of
qualified nuclear power facilities that
are performed after June 25, 2024, for

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53271

taxable years beginning after June 25,
2024. Taxpayers may apply this section
to alterations and repairs of qualified
nuclear power facilities that are
performed prior to June 25, 2024
provided that taxpayers follow this
section in its entirety and in a consistent
manner.
■ Par. 7. Sections 1.45V–1 through
1.45V–3 are added to read as follows:
§§ 1.45V–1—1.45V–2

[Reserved]

§ 1.45V–3 Rules relating to the increased
credit amount for prevailing wage and
apprenticeship.

(a) In general. If any qualified clean
hydrogen production facility (as defined
in section 45V(c)(3)) satisfies the
requirements in paragraph (b) of this
section, then the amount of the credit
for producing qualified clean hydrogen
determined under section 45V(a) with
respect to qualified clean hydrogen
described in section 45V(b)(2) is equal
to the credit amount determined under
section 45V(a) multiplied by five.
(b) Qualified clean hydrogen
production facility requirements. A
qualified clean hydrogen production
facility satisfies the requirements of
this paragraph (b) if it is one of the
following—
(1) A facility the construction of
which began prior to January 29, 2023,
and that meets the prevailing wage
requirements of section 45(b)(7) and
§ 1.45–7 with respect to alterations or
repairs of a qualified facility within the
meaning of section 45V that occur after
January 29, 2023 (to the extent
applicable), and that meets the
recordkeeping and reporting
requirements of § 1.45–12; or
(2) A facility that meets the prevailing
wage requirements of section 45(b)(7)
and § 1.45–7, the apprenticeship
requirements of section 45(b)(8) and
§ 1.45–8, and the recordkeeping and
reporting requirements of § 1.45–12
with respect to the construction,
alteration, or repair of a qualified
facility within the meaning of section
45V.
(c) Applicability date. This section
applies to qualified clean hydrogen
production facilities placed in service in
taxable years ending after June 25, 2024,
and the construction of which begins
after June 25, 2024. Taxpayers may
apply this section to qualified clean
hydrogen production facilities placed in
service in taxable years ending on or
before June 25, 2024, and qualified
clean hydrogen production facilities
placed in service in taxable years ending
after June 25, 2024, the construction of
which begins before June 25, 2024,
provided that taxpayers follow this

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section in its entirety and in a consistent
manner.
■ Par. 8. Sections 1.45Y–1 through
1.45Y–3 are added to read as follows:
§§ 1.45Y–1—1.45Y–2

[Reserved]

§ 1.45Y–3 Rules relating to the increased
credit amount for prevailing wage and
apprenticeship.

(a) In general. If any qualified clean
electricity production facility satisfies
the requirements in paragraph (b) of this
section, the amount of the credit for
producing clean electricity determined
under section 45Y(a) is the alternative
amount described in section
45Y(a)(2)(B), subject to adjustment
provided by section 45Y(c).
(b) Qualified clean electricity
production facility requirements. A
qualified facility satisfies the
requirements of this paragraph (b) if it
is one of the following—
(1) A facility with a maximum net
output of less than one megawatt (as
measured in alternating current);
(2) A facility the construction of
which began prior to January 29, 2023;
or
(3) A facility that meets the prevailing
wage requirements of section 45(b)(7)
and § 1.45–7, the apprenticeship
requirements of section 45(b)(8) and
§ 1.45–8, and the recordkeeping and
reporting requirements of § 1.45–12
with respect to the construction,
alteration, or repair of a qualified clean
electricity production facility within the
meaning of section 45Y.
(c) Applicability date. This section
applies to qualified clean electricity
production facilities placed in service in
taxable years ending after June 25, 2024,
and the construction of which begins
after June 25, 2024. Taxpayers may
apply this section to qualified clean
electricity production facilities placed
in service in taxable years ending on or
before June 25, 2024, and qualified
clean electricity production facilities
placed in service in taxable years ending
after June 25, 2024, the construction of
which begins before June 25, 2024,
provided that taxpayers follow this
section in its entirety and in a consistent
manner.
■ Par. 9. Sections 1.45Z–1 through
1.45Z–3 are added to read as follows:

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§§ 1.45Z–1—1.45Z–2

[Reserved]

§ 1.45Z–3 Rules relating to the increased
credit amount for prevailing wage and
apprenticeship.

(a) In general. If any qualified facility
(as defined in section 45Z(d)(4)) satisfies
the requirements in paragraph (b) of this
section, the applicable amount used to
calculate the clean fuel production

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credit determined under section 45Z(a)
is the alternative amount described in
section 45Z(a)(2)(B) or 45Z(a)(3)(A)(ii),
as applicable, subject to the inflation
adjustment provided by section 45Z(c).
(b) Qualified facility for clean fuel
production requirements. A qualified
facility (as defined in section 45Z(d)(4))
satisfies the requirements of this
paragraph (b) if it is one of the
following—
(1) A qualified facility that is placed
in service after December 31, 2024, that
meets the prevailing wage requirements
of section 45(b)(7) and § 1.45–7, the
apprenticeship requirements of section
45(b)(8) and § 1.45–8, and the
recordkeeping and reporting
requirements of § 1.45–12 with respect
to the construction, alteration, or repair
of such qualified facility; or
(2) A qualified facility that is placed
in service before January 1, 2025, that
meets the prevailing wage requirements
of section 45(b)(7) and § 1.45–7 with
respect to any alteration or repair of
such qualified facility that is performed
in taxable years beginning after
December 31, 2024, the apprenticeship
requirements of section 45(b)(8) and
§ 1.45–8 with respect to the construction
of such qualified facility, and the
recordkeeping and reporting
requirements of § 1.45–12.
(3) Special transition rule for facilities
placed in service before January 1, 2025.
Solely for purposes of the
apprenticeship requirements of section
45(b)(8) and § 1.45–8, taxpayers that
place a qualified facility in service
before January 1, 2025, must satisfy the
apprenticeship requirements with
respect to construction of the facility
that occurs 90 days after June 25, 2024.
(c) Applicability date. This section
applies to qualified facilities for clean
fuel production placed in service in
taxable years ending after June 25, 2024,
and the construction of which begins
after June 25, 2024. Taxpayers may
apply this section to qualified facilities
for clean fuel production placed in
service in taxable years ending on or
before June 25, 2024, and qualified
facilities for clean fuel production
placed in service in taxable years ending
after June 25, 2024, the construction of
which begins before June 25, 2024,
provided that taxpayers follow this
section in its entirety and in a consistent
manner.
Par. 10. Sections 1.48C–1 through
1.48C–3 are added to read as follows:

■

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§§ 1.48C–1—1.48C–2

[Reserved]

§ 1.48C–3 Rules relating to the increased
credit amount for prevailing wage and
apprenticeship.

(a) In general. If any qualifying
advanced energy project (as defined in
section 48C(c)(1)(A)) satisfies the
prevailing wage requirements of section
45(b)(7) and § 1.45–7, the
apprenticeship requirements of section
45(b)(8) and § 1.45–8, and the
recordkeeping and reporting
requirements of § 1.45–12, with respect
to the re-equipping, expansion, or
establishment of a qualifying advanced
energy project within the meaning of
section 48C, the qualifying advanced
energy project credit determined under
section 48C(a) for any taxable year with
respect to credits allocated pursuant to
section 48C(e) is an amount equal to 30
percent of the qualified investment for
the taxable year. For purposes of this
section, the term re-equipping,
expansion, or establishment means
those activities described in §§ 1.45–
7(d)(3) and 1.45–8(g)(1) that are
performed with respect to a qualifying
advanced energy project within the
meaning of section 48C before such
project is placed in service.
(b) Applicability date. This section
applies to qualifying advanced energy
projects placed in service in taxable
years ending after June 25, 2024, and the
re-equipping, expansion, or
establishment of which begins after June
25, 2024. Taxpayers may apply this
section to qualifying advanced energy
projects placed in service in taxable
years ending on or before June 25, 2024,
and qualifying advanced energy projects
placed in service in taxable years ending
after June 25, 2024, the re-equipping,
expansion, or establishment of which
begins before June 25, 2024, provided
that taxpayers follow this section in its
entirety and in a consistent manner.
■ Par. 11. Sections 1.179D–1 through
1.179D–3 are added to read as follows:
§§ 1.179D–1—1.179D–2

[Reserved]

§ 1.179D–3 Rules relating to the increased
deduction for prevailing wage and
apprenticeship.

(a) In general. If any energy efficient
commercial building property (as
defined in section 179D(c)(1)), energy
efficient building retrofit property (as
defined in section 179D(f)(3)), or
property installed pursuant to a
qualified retrofit plan (as defined in
section 179D(f)(2)) satisfies the
requirements in paragraph (b) of this
section, the applicable dollar value for
determining the maximum amount of
the deduction determined under section
179D(b)(2) is the increased amount

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Federal Register / Vol. 89, No. 122 / Tuesday, June 25, 2024 / Rules and Regulations

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described in section 179D(b)(3)(A). For
purposes of this section, installation
means those activities described in
§§ 1.45–7(d)(3) and 1.45–8(g)(1) that are
performed with respect to energy
efficient commercial building property,
energy efficient building retrofit
property, or property installed pursuant
to a qualified retrofit plan within the
meaning of section 179D before such
property is placed in service.
(b) Certain energy efficient
commercial building property
requirements. Energy efficient
commercial building property, energy
efficient building retrofit property, or
property installed pursuant to a
qualified retrofit plan satisfies the
requirements of this paragraph (b) if it
is one of the following—
(1) Property the installation of which
began prior to January 29, 2023; or

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(2) Property that meets the prevailing
wage requirements of section 45(b)(7) of
the Code and § 1.45–7, the
apprenticeship requirements of section
45(b)(8) of the Code and § 1.45–8, and
the recordkeeping and reporting
requirements of § 1.45–12, all with
respect to the installation of any
property.
(c) Applicability date. This section
applies to energy efficient commercial
building property, energy efficient
building retrofit property, or property
installed pursuant to a qualified retrofit
plan installed in taxable years ending
after June 25, 2024, and the installation
of which begins after June 25, 2024.
Taxpayers may apply this section to
energy efficient commercial building
property, energy efficient building
retrofit property, or property installed

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53273

pursuant to a qualified retrofit plan
installed in taxable years ending on or
before June 25, 2024, and energy
efficient commercial building property,
energy efficient building retrofit
property, or property installed pursuant
to a qualified retrofit plan installed in
taxable years ending after June 25, 2024,
the installation of which begins before
June 25, 2024, provided that taxpayers
follow this section in its entirety and in
a consistent manner.
Douglas W. O’Donnell,
Deputy Commissioner.
Approved: June 9, 2024.
Aviva R. Aron-Dine,
Acting Assistant Secretary of the Treasury
(Tax Policy).
[FR Doc. 2024–13331 Filed 6–18–24; 8:45 am]
BILLING CODE 4830–01–P

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