February 1, 2023

Volume XIII, Number 32


January 31, 2023

Subscribe to Latest Legal News and Analysis

January 30, 2023

Subscribe to Latest Legal News and Analysis

IRS Issues Critical Wage and Apprenticeship Guidance Under Inflation Reduction Act of 2022

The US Department of the Treasury just released its guidance on the labor requirements that must be fulfilled in order to maintain the credit for the full amount for clean energy and infrastructure projects under the Inflation Reduction Act of 2022 (Act). This includes renewable energy, energy storage, hydrogen, biogas, carbon capture and electric vehicle charging infrastructure. The guidance covers the Act’s two fundamental critical labor requirements— providing prevailing wages and employing a certain amount of registered apprentices—that project developers must meet for clean energy projects to maintain the credit for the full amount of 30% for the investment tax credit (ITC) or the full amount of the production tax credit (PTC).

As detailed further below, depending upon a project’s development status, such guidance either triggers a mad dash to begin construction by January 28, 2023, in order to be exempted from such requirements or continues to leave developers a bit in the dark on operational and administrative requirements for projects beginning construction after January 28, 2023 (as actual wages are not yet published), each assuming formal guidance is published in the Federal Register on November 30.


Key Takeaways

  • The guidance is scheduled to be published Wednesday, November 30, 2022.

  • The guidance starts the clock on a 60-day period for the labor provisions to take effect and impacts renewable energy, storage, hydrogen, biogas and carbon capture projects and electric vehicle charging infrastructure.

  • The net result is twofold and depends upon where a project is on its development timeline.

  • For those projects further along in the development lifecycle and that seek both (i) an exemption from the requirements as well as (ii) qualification for such tax benefits, such projects must be under construction by January 28, 2023, to be exempted from the new requirements (assuming formal guidance is published in the Federal Register on November 30).

  • For such projects, the guidance triggers a sprint to start construction of such projects before the new wage and apprentice requirements take effect.

  • The guidance clarifies that the two existing, long-standing methods to determine the start date of construction on a project still apply: (i) physical work and (ii) 5% safe harbor tests.

  • For those projects not seeking to “beat the clock” and that will start construction after January 28, 2023, there is currently little information about how to actually confirm you are paying appropriate wages.

  • The required wages vary by job type and location.

  • The guidance instructs project developers to access the wages published on the US Department of Labor website at sam.gov.

  • However, there are currently no postings for many job types or locations.

  • The guidance also includes instructions on how to request a wage determination from the department if the information is not available online.

  • Developers should send emails requesting wage determinations to [email protected] with the “facility, facility location, proposed labor classifications, proposed prevailing wage rates, job descriptions and duties, and any rationale for the proposed classifications.”

  • The guidance reiterates certain information on qualified apprentices under the Act.

  • It states qualified apprentices must be used for 10% to 15% of total labor hours.

  • The percentage is 10% for projects on which construction starts in 2022 or earlier, 12.5% for projects starting construction in 2023 and 15% thereafter.

  • At least one qualified apprentice must be used on any project that at least four individuals will participate.

  • The guidance further directs owners to employ general record-keeping requirements, such as accounting for contractors and subcontractors, to prove to the federal government that they are hiring qualified apprentices or made a good faith effort to find them and that required wages were paid.

  • Such records must identify the wage determinations, the mechanics and laborers who performed the work, the classifications of work they performed, their hours worked in each classification and the wage rates paid for the work.


The newly released guidance is important to those developers and investors who may benefit from “beating the clock” in order to gain an exemption from the new requirements. And while the guidance is informative on certain other aspects of project development post the 60-day clock, there are still some gaps that remain for developers to fill in before they can be certain these projects will meet the guidance on wages and pencil out.

© 2023 McDermott Will & EmeryNational Law Review, Volume XII, Number 336

About this Author

Carl Fleming Washington D.C. Transaction Lawyer McDermott Will Emery Law Firm

Carl J. Fleming focuses his practice on mergers and acquisitions, project development and project finance, predominately in the renewable energy industry. He leads energy, infrastructure and PPP transactions throughout the US and in more than 40 countries worldwide. Carl represents private equity investors, Fortune 500 companies, foreign governments, and a broad range of leading renewable energy developers and sponsors.

Carl provides legal and commercial advice for the development, construction, operation, purchase and sale, and financing of projects and infrastructure, including...

202 756 8917
Heather Cooper, Energy Attorney, McDermott Will & Emery Law Firm

Heather Cooper is counsel in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Miami office.  She works on federal income tax matters, with a focus on energy tax issues. She represents clients in restructurings, mergers and acquisitions, and other transactional energy related matters. Her national practice includes advising on renewable energy transactions, such as solar and wind projects.