Bulletin No. 2024–34

HIGHLIGHTS

OF THIS ISSUE





Bulletin No. 2024–34

August 19, 2024

These synopses are intended only as aids to the reader in

identifying the subject matter covered. They may not be

relied upon as authoritative interpretations.

EMPLOYEE PLANS

Rev. Proc. 2024-32, page 523.

This revenue procedure updates the procedures in Rev. Proc.

2017-55 to set forth the procedure by which the sponsor of

a defined benefit plan that is subject to the funding requirements of § 430 may request approval from the IRS for the

use of plan-specific substitute mortality tables in accordance

with § 430(h)(3)(C) and § 1.430(h)(3)-2. This revenue procedure also specifies the date by which the use of a previously

approved substitute mortality table must be terminated in

conjunction with the replacement of the generally applicable

mortality tables specified in § 430(h)(3)(A) and § 1.430(h)

(3)-1.

T.D. 10005, page 510.

These regulations update the requirements that a plan sponsor of a single-employer defined benefit plan must meet to

obtain IRS approval to use mortality tables specific to the

plan in calculating present value for minimum funding purposes (as a substitute for the generally applicable mortality

tables).

EXEMPT ORGANIZATIONS

Announcement 2024-31, page 533.

Revocation of IRC 501(c)(3) Organizations for failure to meet

the code section requirements. Contributions made to the

organizations by individual donors are no longer deductible

under IRC 170(b)(1)(A).

INCOME TAX

Notice 2024-60, page 515.

This notice describes the information that must be included

in a written report described in § 1.45Q-4(c)(2) (LCA Report)

Finding Lists begin on page ii.

and provides the procedures a taxpayer must follow to submit the LCA Report and required supporting information to

the IRS and the Department of Energy for review under §

1.45Q-4(c)(5) before any credit for carbon oxide sequestration allowed under § 45Q(a)(2)(B)(ii) or (a)(4)(B)(ii) is determined for qualified carbon oxide utilized by any taxpayer in

the manner described in § 45Q(f)(5) as implemented by §

1.45Q-4 (§ 45Q utilization credit).

Notice 2024-61, page 520.

The notice announces the inflation adjustment factor and

phase-out amount for the enhanced oil recovery credit for

taxable years beginning in the 2024 calendar year. The

format of the notice is identical to the format of previously

published notices on this issue. The notice concludes that

because the reference price for the 2023 calendar year

($76.10) exceeds $28 multiplied by the inflation adjustment

factor for the 2024 calendar year ($28 multiplied by 2.0615

= $57.72) by $18.38, the enhanced oil recovery credit for

qualified costs paid or incurred in 2024 is phased-out completely.

T.D. 9998, page 412.

The final regulations provide the rules for taxpayers satisfying the prevailing wage and registered apprenticeship

requirements to qualify for increased credit or deduction

amounts under the Internal Revenue Code. The final regulations provide guidance regarding correction and penalty procedures that allow taxpayers who initially fail to satisfy the

prevailing wage and apprenticeship requirements to claim

the increased credit or deduction amounts. The final regulations also address specific prevailing wage and apprenticeship recordkeeping and reporting requirements. Published:

TD 9998 [June 25, 2024].

The IRS Mission

Provide America’s taxpayers top-quality service by helping

them understand and meet their tax responsibilities and

enforce the law with integrity and fairness to all.

Introduction

The Internal Revenue Bulletin is the authoritative instrument

of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service

and for publishing Treasury Decisions, Executive Orders, Tax

Conventions, legislation, court decisions, and other items of

general interest. It is published weekly.

It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application

of the tax laws, including all rulings that supersede, revoke,

modify, or amend any of those previously published in the

Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of

internal practices and procedures that affect the rights and

duties of taxpayers are published.

Revenue rulings represent the conclusions of the Service

on the application of the law to the pivotal facts stated in

the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices,

identifying details and information of a confidential nature are

deleted to prevent unwarranted invasions of privacy and to

comply with statutory requirements.

Rulings and procedures reported in the Bulletin do not have the

force and effect of Treasury Department Regulations, but they

may be used as precedents. Unpublished rulings will not be

relied on, used, or cited as precedents by Service personnel in

the disposition of other cases. In applying published rulings and

procedures, the effect of subsequent legislation, regulations,

court decisions, rulings, and procedures must be considered,

and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless

the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.

This part includes rulings and decisions based on provisions

of the Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation.

This part is divided into two subparts as follows: Subpart A,

Tax Conventions and Other Related Items, and Subpart B,

Legislation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.

To the extent practicable, pertinent cross references to these

subjects are contained in the other Parts and Subparts. Also

included in this part are Bank Secrecy Act Administrative

Rulings. Bank Secrecy Act Administrative Rulings are issued

by the Department of the Treasury’s Office of the Assistant

Secretary (Enforcement).

Part IV.—Items of General Interest.

This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative index

for the matters published during the preceding months. These

monthly indexes are cumulated on a semiannual basis, and are

published in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

August 19, 2024 

Bulletin No. 2024–34

Part I

26 CFR 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; 1.179D-3

T.D. 9998

DEPARTMENT OF THE

TREASURY

Internal Revenue Service

26 CFR Part 1

Increased Amounts of

Credit or Deduction

for Satisfying Certain

Prevailing Wage and

Registered Apprenticeship

Requirements

AGENCY: Internal Revenue Service

(IRS), Treasury.

ACTION: Final rule.

SUMMARY: 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 subse-

quently 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), 1.45Q6(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 tollfree number).

SUPPLEMENTARY INFORMATION:

Background

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 credit 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, 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 require-

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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August 19, 2024

412

Bulletin No. 2024–34

ments (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 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 [10-year 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 Davis-Bacon

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).

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,

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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413

August 19, 2024

taxpayers must satisfy the Apprenticeship Requirements. The Apprenticeship

Requirements impose rules regarding

labor hours, apprentice-to-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 (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.

Under section 45(b)(8)(B), the Labor

Hours Requirement is subject to any applicable requirements for apprentice-to-journeyworker ratios of the DOL or the applicable State apprenticeship agency (Ratio

Requirement).

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. Participation Requirement

3. Apprenticeship Cure Provision

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).

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 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.

2. Ratio Requirement

E. Exceptions to Apprenticeship

Requirements

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).

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

III. Other Increased Credit Amount

Provisions

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

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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August 19, 2024

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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 facility5 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 488 (collectively, 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).

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 Con-

tinuity 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 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 pur-

suant 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.

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 credit 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

Notice 2022-61 defines facility as qualified facility, property, project, or equipment.

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.

5

6

Bulletin No. 2024–34

415

August 19, 2024

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), 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 cross-reference, 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.

August 19, 2024

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 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

416

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 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

Bulletin No. 2024–34

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 and stylistic changes to the Proposed Regulations.

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, 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 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 post-filing compliance was

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).

Bulletin No. 2024–34

417

August 19, 2024

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.

August 19, 2024

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 pre-filing 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

418

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 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

post-filing 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

Bulletin No. 2024–34

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

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).

B. Specific pre-filing activities required

under the DBA

Some commenters requested that

the final regulations incorporate certain

pre-filing 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

Bulletin No. 2024–34

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

pre-filing review, because the requirement

to pay prevailing wages is not binding

until the taxpayer files a tax return claiming the increased credit amount. 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

419

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 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

August 19, 2024

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 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

August 19, 2024

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 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

420

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.

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

Bulletin No. 2024–34

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.

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

Bulletin No. 2024–34

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 pre-filing

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.

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 provi-

421

sions. An 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 interagency 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 third-party 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.

August 19, 2024

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 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

August 19, 2024

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 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

422

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 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 applicable 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

Bulletin No. 2024–34

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 anti-retaliation

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 anti-retaliation 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. 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 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) are effective on January 1, 2023.19

The amendments to section 179D apply to

IRA §13404(f).

IRA §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).

19

IRA §13501(e).

11

12

Bulletin No. 2024–34

423

August 19, 2024

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 Janu-

20

ary 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 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, once a taxpayer meets either method, beginning of

construction is established and a taxpayer

may not alternate between methods.

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

IRA§13303(d).

August 19, 2024

424

Bulletin No. 2024–34

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 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 §1.457(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

21

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.

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 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 the 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

40 U.S.C. 3142(a) and (c).

Bulletin No. 2024–34

425

August 19, 2024

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 the IRS Notices

for determining when construction begins,

the final regulations provide transition

relief for taxpayers who applied the defi-

August 19, 2024

nitions 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

426

electrical generating output or usable

energy capacity.

Commenters stated that the term “maximum net output” is ambiguous and that

no method is provided for 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 §1.456(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.

Bulletin No. 2024–34

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 a

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 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.

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 correc-

Bulletin No. 2024–34

tion 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 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

427

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 §1.457(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 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

August 19, 2024

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 §1.457(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

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 §1.457(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

August 19, 2024

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 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

428

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

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

Bulletin No. 2024–34

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 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

Bulletin No. 2024–34

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

429

Tribal prevailing wage standards for 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

August 19, 2024

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 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 or

mechanic with respect to each qualified

facility on Indian land. This rule applies to

a qualified facility that is subject to joint

August 19, 2024

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.

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

430

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 the 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 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

Bulletin No. 2024–34

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. 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.apprenticeship.gov/about-us/

legislation-regulations-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/about-us/

apprenticeship-system.

Bulletin No. 2024–34

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 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

431

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. 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

August 19, 2024

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 non-PLA 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.

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 goals, and

community engagement requirements.

Contrary to some commenters’ concerns,

the final regulations do not require nonunion 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

not apply if a taxpayer uses a qualifying

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).

22

August 19, 2024

432

Bulletin No. 2024–34

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-

Bulletin No. 2024–34

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 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.

433

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 (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,

August 19, 2024

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 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 pro-

August 19, 2024

visions 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 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 non-union-

434

ized direct employees be accepted as

payment of prevailing wages, if the sum

is equal to the collectively-bargained

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 themselves against other

similar qualified nuclear power facilities

that do directly employ collectively-bargained 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

Bulletin No. 2024–34

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 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 rates in accordance with subchapter IV of chapter 31 of

title 40 of the United States Code.

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 ref23

erence 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 statuto

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