# Inflation Reduction Act (IRA) Wage and Apprenticeship Requirements: Effect on Tax Credit Values

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URL: https://www.frixlaw.com/law-library/documents/crs%3AR48428

## Record

- **Collection:** Congressional research report
- **Document type:** Reports
- **Published:** April 1, 2026
- **Citation:** R48428

## Text

Inflation Reduction Act (IRA) Wage and
Apprenticeship Requirements: Effect on Tax
Credit Values
Updated April 1, 2026

Congressional Research Service
https://crsreports.congress.gov
R48428

SUMMARY

Inflation Reduction Act (IRA) Wage and
Apprenticeship Requirements: Effect on Tax
Credit Values

R48428
April 1, 2026
Nicholas E. Buffie
Analyst in Public Finance

The Inflation Reduction Act of 2022 (P.L. 117-169; IRA) created or modified 21 tax provisions
subsidizing the use of “clean” energy. These benefits targeted taxpayers who purchase electric
vehicles, produce fuels with low greenhouse gas emissions, make energy-efficiency upgrades to
buildings, and engage in other activities potentially resulting in lower fossil fuel consumption.
Low-emission energy sources such as wind, solar, and nuclear often have high fixed costs and low operational costs.
Similarly, consumers pay a certain amount up front for energy-efficiency upgrades to buildings and benefit from lower
energy bills thereafter.
To reduce these high fixed costs and thereby increase energy efficiency and clean-energy consumption, the IRA tax credits
and deductions subsidize the construction, alteration, or repair of certain energy infrastructure. The credits and deductions are
accompanied by prevailing wage and registered apprenticeship (PWA) requirements that increase the generosity of the credits
or deductions five-fold. (Although these rules are referred to as “requirements,” they can be thought of as requirements to
receive a larger credit or deduction rather than as requirements to qualify for a credit or deduction.) The prevailing wage
requirements stipulate that laborers and mechanics involved in the construction, alteration, or repair of facilities, projects,
property, and equipment (FPPE) must be paid at least the average wage of workers performing similar work in the same
locality. The registered apprenticeship requirements stipulate that registered apprentices must supply at least 12.5% or 15%
(depending on when the given facility began construction) of the labor hours associated with constructing, altering, or
repairing FPPEs used to claim an IRA tax benefit. Under the good faith effort exception, firms are deemed to have met the
apprenticeship requirements if they request apprentices from a registered apprenticeship program and either do not receive a
response within five business days or are denied for reasons other than their refusal to comply with the requirements. The
good faith effort exception may limit the impact of the apprenticeship requirements.
Table 2 describes the 12 IRA tax provisions that include PWA requirements, and contrasts the value of tax credits or
deductions for firms meeting the PWA requirements with firms not meeting PWA requirements. Tax credit or deduction
values are generally five times as large for firms meeting PWA requirements as for firms not meeting the requirements. For
example, various tax credits are equivalent to 6% of applicable investment costs for firms not meeting PWA requirements
and to 30% for firms meeting PWA requirements. Tax credit bonuses are also sometimes increased five-fold, though this is
not true of every bonus credit.

Congressional Research Service

Inflation Reduction Act (IRA) Wage and Apprenticeship Requirements

Contents
Wage and Apprenticeship Requirements in the IRA ....................................................................... 1
Prevailing Wage Requirements ................................................................................................. 3
Registered Apprenticeship Requirements ................................................................................. 3
Tax Values for Firms Meeting vs. Not Meeting the PWA Requirements ........................................ 4

Tables
Table 1. Prevailing Wage and Registered Apprenticeship Requirements, by IRA Tax
Provision....................................................................................................................................... 2
Table 2. Effect of Wage and Apprenticeship Requirements on IRA Tax Benefits........................... 5

Contacts
Author Information........................................................................................................................ 15

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Inflation Reduction Act (IRA) Wage and Apprenticeship Requirements

Wage and Apprenticeship Requirements in the IRA
The Inflation Reduction Act of 2022 (P.L. 117-169; IRA) enacted or modified 21 tax provisions
subsidizing energy efficiency and “clean” energy use.1 These benefits targeted taxpayers who
purchase electric vehicles, produce fuels with low greenhouse gas emissions, make energyefficiency upgrades to buildings, and engage in other activities potentially resulting in lower
fossil fuel consumption.2 (The term taxpayer may refer to either businesses or individuals who
pay federal taxes.)
Low-emissions energy sources such as wind, solar, and nuclear often have high fixed costs (costs
associated with getting facilities up and running) paired with low operational costs (otherwise
known as variable costs).3 Similarly, the fixed cost of energy-efficiency upgrades to buildings is
essentially the only cost to consumers, who benefit from lower energy bills thereafter.4 To reduce
these high fixed costs, the IRA’s tax provisions generally subsidize the construction, alteration, or
repair of clean energy infrastructure.
For business tax credits associated with constructing, altering, or repairing facilities, projects,
property, or equipment (FPPE) generating clean energy, the applicable credit is often larger if the
firm meets prevailing wage and registered apprenticeship (PWA) requirements.5 Firms may claim
these larger credits without meeting the PWA requirements only if (1) they are small facilities
producing less than 1 megawatt of energy, or (2) they began construction on the facilities used to
claim the credit before January 29, 2023.6
Table 1 summarizes the applicability of PWA requirements to all 21 energy tax provisions from
the IRA. The requirements apply to nine energy-related business tax credits and one energyrelated business tax deduction. Two IRA business tax credits are subject to prevailing wage
requirements but not subject to registered apprenticeship requirements. The PWA requirements do
not apply to the IRA’s individual tax credits, perhaps because private individuals would have
difficulty verifying compliance with the requirements.7 Finally, five business tax credits from the
IRA are subject to neither prevailing wage nor registered apprenticeship requirements.
The Internal Revenue Service (IRS) issued initial guidance for the PWA requirements on
November 30, 2022; issued proposed regulations on August 30, 2023; and issued final regulations
on June 25, 2024.8
1 P.L. 117-169.
2 For descriptions of the energy tax provisions in the IRA, see CRS Report R47202, Tax Provisions in the Inflation

Reduction Act of 2022 (H.R. 5376), and CRS Report R46865, Energy Tax Provisions: Overview and Budgetary Cost.
3 CRS Report R44715, Financial Challenges of Operating Nuclear Power Plants in the United States, by Phillip
Brown and Mark Holt; Justin Worland, “What High Interest Rates Mean for U.S. Renewable Energy,” Time, May 19,
2023; and Tim Gould et al., Financial Headwinds for Renewables Investors: What’s the Way Forward?, International
Energy Agency, December 8, 2023, https://www.iea.org/commentaries/financial-headwinds-for-renewables-investorswhat-s-the-way-forward.
4 Richard A. Muller, Energy for Future Presidents: The Science Behind the Headlines (W.W. Norton & Company, Inc.,
2013), pp. 114-129.
5 The PWA “requirements” can be thought of as requirements for receiving a larger credit or deduction rather than as
requirements to receive a credit or deduction.
6 Internal Revenue Service (IRS), “Increased Amounts of Credit or Deduction for Satisfying Certain Prevailing Wage
and Registered Apprenticeship Requirements,” 89 Federal Register 53184-53273, June 25, 2024.
7 These credits were later repealed, according to varying timelines, in the FY2025 reconciliation law (P.L. 119-21).
8 IRS, “Prevailing Wage and Apprenticeship Initial Guidance Under Section 45(b)(6)(B)(ii) and Other Substantially
Similar Provisions,” 87 Federal Register 73580-73585, November 30, 2022, https://www.federalregister.gov/
(continued...)

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Inflation Reduction Act (IRA) Wage and Apprenticeship Requirements

Table 1. Prevailing Wage and Registered Apprenticeship Requirements, by IRA Tax
Provision
Prevailing Wage
Requirement

Registered
Apprenticeship
Requirement

✔a

✔a

Second-Generation Biofuel Producer Credit (IRC §40)

n/a

n/a

Credits for Agri-biodiesel, Biodiesel, Biodiesel Mixtures, Renewable
Diesel, Alternative Fuels, and Alternative Fuels Mixtures (IRC §40A)

n/a

n/a

Sustainable Aviation Fuel Credit (IRC §40B)

n/a

n/a

Renewable Electricity Production Tax Credit (IRC §45)

✔

✔

New Energy-Efficient Home Credit (IRC §45L)

✔

n/a

Credit for Carbon Oxide Sequestration (IRC §45Q)

✔

✔

Zero-Emission Nuclear Power Production Credit (IRC §45U)

✔

n/a

Clean Hydrogen Production Credit (IRC §45V)

✔

✔

Credit for Qualified Commercial Clean Vehicles (IRC §45W)

n/a

n/a

Advanced Manufacturing Production Credit (IRC §45X)

n/a

n/a

Clean Electricity Production Credit (IRC §45Y)

✔

✔

Clean Fuel Production Credit (IRC §45Z)

✔

✔

Energy Investment Tax Credit (IRC §48)

✔

✔

Qualifying Advanced Energy Project Credit (IRC §48C)

✔

✔

Clean Electricity Investment Credit (IRC §48E)

✔

✔

✔

✔

Energy Efficient Home Improvement Credit (IRC §25C)

n/a

n/a

Residential Clean Energy Credit (IRC §25D)

n/a

n/a

Used Clean Vehicle Credit (IRC §25E)b

n/a

n/a

Clean Vehicle Credit (IRC §30D)

n/a

n/a

Business and individual tax credits
Alternative Fuel Vehicle Refueling Property Credit (IRC §30C)
Business tax credits

Business tax deductions
Energy Efficient Commercial Buildings Deduction (IRC §179D)
Individual tax credits

Source: CRS analysis of P.L. 117-169 and the Internal Revenue Code (IRC).

documents/2022/11/30/2022-26108/prevailing-wage-and-apprenticeship-initial-guidance-under-section-45b6bii-andother-substantially; IRS, “Increased Credit or Deduction Amounts for Satisfying Certain Prevailing Wage and
Registered Apprenticeship Requirements,” 88 Federal Register 60018-60054, August 30, 2023,
https://www.federalregister.gov/documents/2023/08/30/2023-18514/increased-credit-or-deduction-amounts-forsatisfying-certain-prevailing-wage-and-registered; and IRS, “Increased Amounts of Credit or Deduction for Satisfying
Certain Prevailing Wage and Registered Apprenticeship Requirements,” 89 Federal Register 53184-53273, June 25,
2024, https://www.federalregister.gov/documents/2024/06/25/2024-13331/increased-amounts-of-credit-or-deductionfor-satisfying-certain-prevailing-wage-and-registered.

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Notes: “n/a” stands for “not applicable.”
a. Requirement applies to the business portion but not to the individual portion of the tax credit.
b. The used clean vehicle credit is alternatively referred to as the “credit for previously-owned clean vehicles”
or the “previously-owned clean vehicles credit.”

Prevailing Wage Requirements
To satisfy the prevailing wage requirements, laborers and mechanics constructing, altering, or
repairing an FPPE must be paid wages at or above the prevailing wage (including fringe
benefits).9 The prevailing wage is the average wage of laborers and mechanics performing similar
work in the same locality; prevailing wage rates are posted at the federal government’s System
for Awards Management (SAM) website.10 Laborers and mechanics are workers (including
apprentices and helpers) whose duties are physical or manual in nature.11
For projects spanning more than one geographic area and therefore coinciding with more than one
prevailing wage, businesses must pay the wage specified for each area.12 For offshore wind
facilities and other offshore energy property, businesses may use the prevailing wage in the
closest onshore geographic area or request a supplemental wage determination.13
To comply with the requirements, businesses must pay the prevailing wage rates in place when a
contract is established, but are generally not required to update those rates throughout the
project’s life.14 However, additional work beyond that in the initial contract requires a new wage
determination, and prevailing wage rates for contracts “not tied to the completion of any specific
work” must be updated annually.15 Laborers and mechanics involved in the “alteration or repair of
a facility after the facility is placed in service” must be paid the prevailing wage that is “in effect
at the time the contract for the alteration or repair work is executed by the taxpayer and a
contractor.”16

Registered Apprenticeship Requirements
The apprenticeship requirements stipulate that registered apprentices must provide at least 12.5%
or 15% of the total labor hours associated with constructing, altering, or repairing any FPPEs.17

9 For background information on prevailing wage requirements, see CRS In Focus IF11927, Federally Funded

Construction and the Payment of Locally Prevailing Wages, by Elizabeth Weber Handwerker and Jon O. Shimabukuro.
10 For more information on prevailing wages as posted by the System for Awards Management (SAM), see General
Services Administration, SAM, “Wage Determinations,” https://sam.gov/wage-determinations.
11 Department of Labor, “Prevailing Wage and the Inflation Reduction Act,” https://www.dol.gov/agencies/whd/IRA;
and Keith Martin et al., “Final Wage and Apprentice Requirements,” Norton Rose Fulbright, June 24, 2024,
https://www.projectfinance.law/publications/2024/june/final-wage-and-apprentice-requirements/.
12 IRS, “Increased Amounts of Credit or Deduction,” p. 53253.
13 IRS, “Increased Amounts of Credit or Deduction,” p. 53206.
14 IRS, “Increased Amounts of Credit or Deduction,” pp. 53207 and 53253.
15 IRS, “Increased Amounts of Credit or Deduction,” p. 53208.
16 IRS, “Frequently Asked Questions about the Prevailing Wage and Apprenticeship Under the Inflation Reduction
Act,” July 3, 2024, https://www.irs.gov/credits-deductions/frequently-asked-questions-about-the-prevailing-wage-andapprenticeship-under-the-inflation-reduction-act.
17 A registered apprentice is an individual participating in a registered apprenticeship program under the National
Apprenticeship Act.

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Inflation Reduction Act (IRA) Wage and Apprenticeship Requirements

The threshold is 12.5% for FPPEs beginning construction in 2023 and 15% for FPPEs beginning
construction after 2023.18
Taxpayers, contractors, and subcontractors employing four or more individuals in the
construction, alteration, or repair of an FPPE must employ at least one qualified apprentice.19 In
addition, the number of apprentices per journeyworker cannot exceed certain ratios prescribed by
the Department of Labor and state apprenticeship agencies.20 This “ratio requirement” is applied
on a daily basis.21
Under the good faith effort exception, firms are deemed to have met the apprenticeship
requirements if they request apprentices from a registered apprenticeship program and either do
not receive a response within five business days or are denied for reasons other than their refusal
to comply with the apprenticeship program requirements.22 Taxpayers must submit new requests
for registered apprentices every year to continue qualifying for the exception.23 The good faith
effort exception is meant to accommodate situations in which the potential supply of registered
apprentices does not meet the demand necessary to otherwise comply with the apprenticeship
requirements.24 The good faith effort exception may limit the impact of the apprenticeship
requirements.

Tax Values for Firms Meeting vs. Not Meeting the
PWA Requirements
Table 2 shows how the values of 11 IRA tax credits and one deduction are affected by
compliance with the PWA requirements. IRA tax credits not subject to the requirements are not
included. For tax provisions affected by the PWA requirements, credit and deduction values are
five times the amount for firms meeting the requirements as for firms not meeting them; precise
values may depart from this general rule somewhat due to rules about rounding credit or
deduction values to the nearest cent or dollar. Apart from this five-fold multiplier, the provisions
are otherwise the same regardless of firms’ PWA compliance. Credit and deduction values are
listed in bold to facilitate easy visual comparisons.
Additional information on these credits and deductions is available in CRS Report R46865,
Energy Tax Provisions: Overview and Budgetary Cost, and CRS Report R47202, Tax Provisions
in the Inflation Reduction Act of 2022 (H.R. 5376). Where applicable, Table 2 includes references
18 IRS, “Increased Amounts of Credit or Deduction,” p. 53185. The threshold is 10% for FPPEs beginning construction

before 2023. However, because facilities beginning construction before January 29, 2023, are eligible for the maximum
credit amounts regardless of taxpayer compliance with the PWA requirements, the 10% requirement is effectively void.
19 IRS, “Increased Credit or Deduction Amounts,” pp. 60020 and 60048.
20 According to the Department of Labor, journeyworker means “a worker who has attained a level of skill, abilities,
and competencies recognized within an industry as having mastered the skills and competencies for the occupation.”
See Department of Labor, “Inflation Reduction Act Apprenticeship Resources,” Apprenticeship USA,
https://www.apprenticeship.gov/inflation-reduction-act-apprenticeship-resources.
21 The daily requirement was established in the 2023 proposed regulations and verified in the final 2024 regulations.
See IRS, “Increased Credit or Deduction Amounts,” p. 60030; and IRS, “Increased Amounts of Credit or Deduction,”
p. 53225.
22 26 U.S.C. §45(b)(8)(D)(ii) and IRS, “Increased Amounts of Credit or Deduction,” pp. 53186 and 53228.
23 IRS, “Increased Amounts of Credit or Deduction,” pp. 53232 and 53264. Page 53264 gives examples of cases that do
and do not qualify for the good faith effort exception.
24 IRS, “Increased Amounts of Credit or Deduction,” p. 53227. The regulation states: “the Good Faith Effort Exception
contemplates that the supply of available qualified apprentices may not always match the demand necessary to meet the
Apprenticeship Requirements.”

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to short CRS products (two pages or fewer) describing the given credit or deduction in greater
detail.
Table 2. Effect of Wage and Apprenticeship Requirements on IRA Tax Benefits
Credit or Deduction for Firms Not
Meeting PWA Requirements

Credit or Deduction for Firms
Meeting PWA Requirementsa

Alternative Fuel
Vehicle Refueling
Property Credit
(IRC §30C)

The Section 30C credit is equal to 6% of
the cost of installing qualified alternative
fuel vehicle refueling property at a
taxpayer’s business, up to a limit of
$100,000 per property item.
For property installed on a personal
residence, the credit is equal to 30% of
installation costs up to a maximum value of
$1,000. (The PWA requirements do not
apply to property installed at personal
residences.)
The FY2025 reconciliation law (P.L. 119-21)
terminated this credit for property placed
in service after June 2026.

The Section 30C credit is equal to 30% of
the cost of installing qualified alternative
fuel vehicle refueling property at a
taxpayer’s business, up to a limit of
$100,000 per property item.
For property installed on a personal
residence, the credit is equal to 30% of
installation costs up to a maximum value of
$1,000. (The PWA requirements do not
apply to property installed at personal
residences.)
The FY2025 reconciliation law (P.L. 119-21)
terminated this credit for property placed
in service after June 2026.

Renewable
Electricity
Production Tax
Credit (IRC §45)

The renewable electricity production tax
credit may be claimed by facilities producing
electricity from renewable energy sources.
Qualifying facilities must have commenced
construction before January 1, 2025.
For calendar year 2023, the credit was
equivalent to 0.6 cents per kilowatt-hour
(kWh) of electricity produced by wind,
closed-loop biomass, geothermal energy,
and solar energy facilities that were placed
in service after 2021. The credit was 0.3
cents per kWh for facilities producing
electricity from open-loop biomass, small
irrigation power, and landfill gas and trash
that were placed in service after 2021. The
credit was 0.3 cents per kWh for qualified
hydropower and marine and hydrokinetic
renewable energy facilities that were placed
in service in 2022. For qualified
hydropower and marine and hydrokinetic
renewable energy facilities that were placed
in service after 2022, the 2023 credit
amount was 0.6 cents per kWh. Credit
values are adjusted annually for inflation,
and taxpayers may claim the credit for the
first 10 years of a facility’s production.
Credit amounts are reduced in proportion
to the share of capital financing coming
from tax-exempt bonds, up to a maximum
reduction of 15%.b
Taxpayers receiving the production tax
credit are eligible for a 10% bonus credit
if certain shares of the iron, steel, and
manufactured products used to construct
the facility were produced in the United
States.c Taxpayers are eligible for a separate

The renewable electricity production tax
credit may be claimed by facilities producing
electricity from renewable energy sources.
Qualifying facilities must have commenced
construction before January 1, 2025.
For calendar year 2023, the credit was
equivalent to 3.0 cents per kilowatt-hour
(kWh) of electricity produced by wind,
closed-loop biomass, geothermal energy,
and solar energy facilities that were placed
in service after 2021. The credit was 1.5
cents per kWh for facilities producing
electricity from open-loop biomass, small
irrigation power, and landfill gas and trash
that were placed in service after 2021. The
credit was 1.5 cents per kWh for qualified
hydropower and marine and hydrokinetic
renewable energy facilities that were placed
in service in 2022. For qualified
hydropower and marine and hydrokinetic
renewable energy facilities that were placed
in service after 2022, the 2023 credit
amount was 3.0 cents per kWh. Credit
values are adjusted annually for inflation,
and taxpayers may claim the credit for the
first 10 years of a facility’s production.
Credit amounts are reduced in proportion
to the share of capital financing coming
from tax-exempt bonds, up to a maximum
reduction of 15%.b
Taxpayers receiving the production tax
credit are eligible for a 10% bonus credit
if certain shares of the iron, steel, and
manufactured products used to construct
the facility were produced in the United
States.c Taxpayers are eligible for a separate

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Credit or Deduction for Firms Not
Meeting PWA Requirements

Credit or Deduction for Firms
Meeting PWA Requirementsa

10% bonus credit if the facility used to
claim the credit is located in an energy
community.d Bonus credit amounts are
calculated after considering any reduction
for financing from tax-exempt bonds.

10% bonus credit if the facility used to
claim the credit is located in an energy
community.d Bonus credit amounts are
calculated after considering any reduction
for financing from tax-exempt bonds.

New EnergyEfficient Home
Credit (IRC §45L)

For multifamily dwelling units, contractors
may receive a credit equal to $500 per unit
meeting certain Energy Star efficiency
standards and $1,000 per unit meeting
Zero Energy Ready Home standards
established by the Department of Energy.
(These are known as “DOE ZERH
standards.”)
For homes acquired after 2021, the credit is
$2,500 if the home meets certain Energy
Star efficiency standards and is $5,000 if
the home meets DOE ZERH standards.
The FY2025 reconciliation law terminated
this credit for homes acquired after June
2026.

For multifamily dwelling units, contractors
may receive a credit equal to $2,500 per
unit meeting certain Energy Star efficiency
standards and $5,000 per unit meeting
Zero Energy Ready Home standards
established by the Department of Energy.
(These are known as “DOE ZERH
standards.”)
For homes acquired after 2021, the credit is
$2,500 if the home meets certain Energy
Star efficiency standards and is $5,000 if
the home meets DOE ZERH standards.
The FY2025 reconciliation law terminated
this credit for homes acquired after June
2026.
There is no apprenticeship requirement for
this provision.

Credit for Carbon
Oxide
Sequestration (IRC
§45Q)e

The base credit amounts are $36 per
metric ton of carbon oxide that is captured
and geologically sequestered, $26 per
metric ton that is reused, and $36 per
metric ton that is captured using direct air
capture (DAC) technologies and then
geologically sequestered. The credit is $26
per metric ton for carbon oxide captured
using DAC that is utilized in a qualified
manner. These amounts are scheduled to
remain in place through the end of 2026
and will be adjusted annually for inflation
starting in 2027.
Credit amounts are reduced in proportion
to the share of capital financing coming
from tax-exempt bonds, up to a maximum
reduction of 15%.b
The FY2025 reconciliation law increased
tax credit amounts for carbon oxides that
were not captured using DAC technologies.
Under the IRA, for non-DAC carbon
oxides, the credit amount was $17 per ton
that was geologically sequestered and $12
per ton that was reused.

The base credit amounts are $180 per
metric ton of carbon oxide that is captured
and geologically sequestered, $130 per
metric ton that is reused, and $180 per
metric ton that is captured using direct air
capture (DAC) technologies and then
geologically sequestered. The credit is $130
per metric ton for carbon oxide captured
using DAC that is utilized in a qualified
manner. These amounts are scheduled to
remain in place through the end of 2026
and will be adjusted annually for inflation
starting in 2027.
Credit amounts are reduced in proportion
to the share of capital financing coming
from tax-exempt bonds, up to a maximum
reduction of 15%.b
The FY2025 reconciliation law increased
tax credit amounts for carbon oxides that
were not captured using DAC technologies.
Under the IRA, for non-DAC carbon
oxides, the credit amount was $85 per ton
that was geologically sequestered and $60
per ton that was reused.
Firms must pay prevailing wages during the
construction phase and the first 12 years of
the facility’s or equipment’s operations.
Firms receiving the credit must also meet
registered apprenticeship requirements.

Zero-Emission
Nuclear Power

The zero-emission nuclear power
production credit subsidizes electricity
generation from qualifying nuclear power

The zero-emission nuclear power
production credit subsidizes electricity
generation from qualifying nuclear power

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Production Credit
(IRC §45U)

Credit or Deduction for Firms Not
Meeting PWA Requirements

Credit or Deduction for Firms
Meeting PWA Requirementsa

facilities. Qualifying facilities must have been
placed in service before August 16, 2022,
and cannot have received a previous tax
credit allocation under IRC §45J.
Depending on the price of electricity, the
tax credit may reach a value of up to 0.3
cents per kilowatt-hour (kWh) of
electricity produced and sold after
December 31, 2023.
When the taxpayer’s gross receipts from
electricity sales are at or below 2.5 cents
per kWh, the baseline credit is set at 0.3
cents per kWh. Gross receipts include
revenues from the sale of electricity as well
as any local, state, or federal zero-emission
credit programs or subsidies (excluding the
IRC §45U credit itself). When the
taxpayer’s gross receipts exceed 2.5 cents
per kWh, the baseline credit is reduced by
16% of the difference between the gross
receipts per kWh and 2.5 cents per kWh.
For example, a taxpayer with gross receipts
of 3.5 cents per kWh would have their
baseline credit reduced by 0.16 cents per
kWh, resulting in a baseline credit of 0.14
cents per kWh. The baseline credit is
reduced to 0.0 cents per kWh when gross
receipts are at or above 4.375 cents per
kWh.
After the baseline credit per kWh has been
determined, this amount is multiplied by
the kWh of electricity produced to
arrive at the taxpayer’s total tax credit
under IRC §45U.
Values depicted above are for 2024. Both
the maximum baseline credit amount of 0.3
cents per kWh and the gross receipts cutoff
of 2.5 cents per kWh are adjusted annually
for inflation. (The point at which the credit
reduces to zero, which is 4.375 cents per
kWh, is not directly adjusted for inflation.
However, it changes every year based on
its implicit linkages to changes in the 0.3cent and 2.5-cent values.)

facilities. Qualifying facilities must have been
placed in service before August 16, 2022,
and cannot have received a previous tax
credit allocation under IRC §45J.
Depending on the price of electricity, the
tax credit may reach a value of up to 1.5
cents per kilowatt-hour (kWh) of
electricity produced and sold after
December 31, 2023.
When the taxpayer’s gross receipts from
electricity sales are at or below 2.5 cents
per kWh, the baseline credit is set at 0.3
cents per kWh. Gross receipts include
revenues from the sale of electricity as well
as any local, state, or federal zero-emission
credit programs or subsidies (excluding the
IRC §45U credit itself). When the
taxpayer’s gross receipts exceed 2.5 cents
per kWh, the baseline credit is reduced by
16% of the difference between the gross
receipts per kWh and 2.5 cents per kWh.
For example, a taxpayer with gross receipts
of 3.5 cents per kWh would have their
baseline credit reduced by 0.16 cents per
kWh, resulting in a baseline credit of 0.14
cents per kWh. The baseline credit is
reduced to 0.0 cents per kWh when gross
receipts are at or above 4.375 cents per
kWh.
After the baseline credit per kWh has been
determined, this amount is multiplied by
five times the kWh of electricity
produced to arrive at the taxpayer’s total
tax credit under IRC §45U.
Values depicted above are for 2024. Both
the maximum baseline credit amount of 0.3
cents per kWh and the gross receipts cutoff
of 2.5 cents per kWh are adjusted annually
for inflation. (The point at which the credit
reduces to zero, which is 4.375 cents per
kWh, is not directly adjusted for inflation.
However, it changes every year based on
its implicit linkages to changes in the 0.3cent and 2.5-cent values.)
To qualify for the larger total credit
amounts, IRC §45U(d)(2)(A) states that
“any laborers and mechanics employed by
the taxpayer or any contractor or
subcontractor in the alteration or repair of
such facility shall be paid wages at rates not
less than the prevailing rates for 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.” The IRC §45U credit is not
subject to apprenticeship requirements.

Congressional Research Service

7

Inflation Reduction Act (IRA) Wage and Apprenticeship Requirements

Credit or Deduction for Firms Not
Meeting PWA Requirements

Credit or Deduction for Firms
Meeting PWA Requirementsa

Clean Hydrogen
Production Credit
(IRC §45V)f

Businesses and other eligible entities may
receive a tax credit for each kilogram of
qualified clean hydrogen (QCH) that they
produce. For calendar year 2024, the credit
is $0.622 per kilogram of QCH if the
hydrogen has a lifecycle greenhouse gas
emissions rate of less than 0.45 kilograms of
carbon dioxide equivalent (CO2e). The
credit per kilogram of QCH is $0.208 if
the emissions rate is between 0.45 and 1.5
kilograms of CO2e, $0.156 if the emissions
rate is between 1.5 and 2.5 kilograms of
CO2e, and $0.124 if the emissions rate is
between 2.5 and 4.0 kilograms of CO2e.
These amounts are adjusted annually for
inflation.
Credit amounts are reduced in proportion
to the share of capital financing coming
from tax-exempt bonds, up to a maximum
reduction of 15%.b

Businesses and other eligible entities may
receive a tax credit for each kilogram of
qualified clean hydrogen (QCH) that they
produce. For calendar year 2024, the credit
is $3.11 per kilogram of QCH if the
hydrogen has a lifecycle greenhouse gas
emissions rate of less than 0.45 kilograms of
carbon dioxide equivalent (CO2e). The
credit per kilogram of QCH is $1.04 if the
emissions rate is between 0.45 and 1.5
kilograms of CO2e, $0.78 if the emissions
rate is between 1.5 and 2.5 kilograms of
CO2e, and $0.62 if the emissions rate is
between 2.5 and 4.0 kilograms of CO2e.
These amounts are adjusted annually for
inflation.
Credit amounts are reduced in proportion
to the share of capital financing coming
from tax-exempt bonds, up to a maximum
reduction of 15%.b

Clean Electricity
Production Credit
(IRC §45Y)

The clean electricity production tax credit
(CEPTC) may be claimed by facilities
producing electricity from any zeroemissions energy source. Qualifying facilities
must be placed in service after December
31, 2024.
Since 2025, the tax credit has been set at
the equivalent of 0.3 cents per kilowatthour (kWh) of electricity in 1992 dollars.
Credit values are adjusted annually for
inflation, and taxpayers may claim the credit
for the first 10 years of a facility’s
production.
Credit amounts are reduced in proportion
to the share of capital financing coming
from tax-exempt bonds, up to a maximum
reduction of 15%.b
Taxpayers receiving the CEPTC are eligible
for a 10% bonus credit if certain shares of
the iron, steel, and manufactured products
used to construct the facility were
produced in the United States.c Taxpayers
are eligible for a separate 10% bonus
credit if the facility used to claim the credit
is located in an energy community.d Bonus
credit amounts are calculated after
considering any reduction for financing
from tax-exempt bonds.

The clean electricity production tax credit
(CEPTC) may be claimed by facilities
producing electricity from any zeroemissions energy source. Qualifying facilities
must be placed in service after December
31, 2024.
Since 2025, the tax credit has been set at
the equivalent of 1.5 cents per kilowatthour (kWh) of electricity in 1992 dollars.
Credit values are adjusted annually for
inflation, and taxpayers may claim the credit
for the first 10 years of a facility’s
production.
Credit amounts are reduced in proportion
to the share of capital financing coming
from tax-exempt bonds, up to a maximum
reduction of 15%.b
Taxpayers receiving the CEPTC are eligible
for a 10% bonus credit if certain shares of
the iron, steel, and manufactured products
used to construct the facility were
produced in the United States.c Taxpayers
are eligible for a separate 10% bonus
credit if the facility used to claim the credit
is located in an energy community.d Bonus
credit amounts are calculated after
considering any reduction for financing
from tax-exempt bonds.

Clean Fuel
Production Credit
(IRC §45Z)g

The clean fuel production credit (CFPC)
may be claimed by businesses and other
entities producing “clean” transportation
fuel. To qualify as “clean,” fuel claimed
under the credit must have a lifecycle
greenhouse gas (GHG) emissions rate less
than or equal to 50 grams of carbon

The clean fuel production credit (CFPC)
may be claimed by businesses and other
entities producing “clean” transportation
fuel. To qualify as “clean,” fuel claimed
under the credit must have a lifecycle
greenhouse gas (GHG) emissions rate less
than or equal to 50 grams of carbon

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8

Inflation Reduction Act (IRA) Wage and Apprenticeship Requirements

Energy Investment
Tax Credit (IRC
§48)h

Credit or Deduction for Firms Not
Meeting PWA Requirements

Credit or Deduction for Firms
Meeting PWA Requirementsa

dioxide equivalent (CO2e) per 1 million
British Thermal Units (mmBTU). Qualifying
fuel must be produced in the United States
or its possessions and must be sold no later
than December 31, 2029. Due to reforms
enacted under the FY2025 reconciliation
law, qualifying fuels must use feedstocks
produced or grown in the United States,
Canada, or Mexico. The FY2025
reconciliation law also extended the credit’s
expiration date from 2027 to 2029.
The CFPC is structured on a sliding scale so
that fuel producers become eligible for
larger credits as their fuel’s lifecycle GHG
emissions approach zero. For fuel with zero
lifecycle GHG emissions, the maximum
credit is $0.20 per gallon of either aviation
fuel or nonaviation fuel (i.e., car fuel). (The
IRA allowed a higher credit of $0.35 per
gallon of nonaviation fuel, though this was
changed in the FY2025 reconciliation law.)
The amounts phase down, in a linear
fashion, to $0.00 per gallon when the fuel’s
lifecycle emissions reach 50 grams of CO2e
per mmBTU. Fuels with emissions rates
between 0 and 50 grams are eligible for
intermediate amounts. For example, fuel
with a lifecycle GHG emissions rate of 20
grams of CO2e per mmBTU is eligible for a
credit of $0.12 per gallon.
CFPC values are adjusted annually for
inflation and are depicted above in 2022
dollars.

dioxide equivalent (CO2e) per 1 million
British Thermal Units (mmBTU). Qualifying
fuel must be produced in the United States
or its possessions and must be sold no later
than December 31, 2029. Due to reforms
enacted under the FY2025 reconciliation
law, qualifying fuels must use feedstocks
produced or grown in the United States,
Canada, or Mexico. The FY2025
reconciliation law also extended the credit’s
expiration date from 2027 to 2029.
The CFPC is structured on a sliding scale so
that fuel producers become eligible for
larger credits as their fuel’s lifecycle GHG
emissions approach zero. For fuel with zero
lifecycle GHG emissions, the maximum
credit is $1.00 per gallon of either aviation
fuel or nonaviation fuel (i.e., car fuel). (The
IRA allowed a higher credit of $1.75 per
gallon of nonaviation fuel, though this was
changed in the FY2025 reconciliation law.)
The amounts phase down, in a linear
fashion, to $0.00 per gallon when the fuel’s
lifecycle emissions reach 50 grams of CO2e
per mmBTU. Fuels with emissions rates
between 0 and 50 grams are eligible for
intermediate amounts. For example, fuel
with a lifecycle GHG emissions rate of 20
grams of CO2e per mmBTU is eligible for a
credit of $0.60 per gallon.
CFPC values are adjusted annually for
inflation and are depicted above in 2022
dollars.

The Energy Investment Tax Credit (ITC)
subsidizes the costs of energy storage and
renewable electricity generation. The ITC is
available to electricity suppliers and other
entities.
Facilities, projects, property, and equipment
(FPPE) qualifying for the ITC must have
begun construction before January 1, 2025.
ITC amounts differ by energy source and
storage technology, but are always
calculated as a share of the taxpayer’s
capital investment costs (described in
statute as “basis”). The percentages under
current law are

The Energy Investment Tax Credit (ITC)
subsidizes the costs of energy storage and
renewable electricity generation. The ITC is
available to electricity suppliers and other
entities.
Facilities, projects, property, and equipment
(FPPE) qualifying for the ITC must have
begun construction before January 1, 2025.
ITC amounts differ by energy source and
storage technology, but are always
calculated as a share of the taxpayer’s
capital investment costs (described in
statute as “basis”). The percentages under
current law are

•

•

6% (of capital investment costs) for
solar energy property and equipment,
small wind energy property, qualified
fuel cell property, geothermal power
equipment, combined heat and power
system property, and waste energy
recovery property;

Congressional Research Service

30% (of capital investment costs) for
solar energy property and equipment,
small wind energy property, qualified
fuel cell property, geothermal power
equipment, combined heat and power
system property, and waste energy
recovery property;

9

Inflation Reduction Act (IRA) Wage and Apprenticeship Requirements

Credit or Deduction for Firms Not
Meeting PWA Requirements
•

Credit or Deduction for Firms
Meeting PWA Requirementsa

6% for energy storage technology,
qualified biogas property, and
microgrid controllers; and

•

6% for “qualified interconnection
property” installed in connection with
energy property with “a maximum net
output of not greater than 5
megawatts (as measured in alternating
current).”
Prior law also allowed a 2% credit for
qualified microturbine property, though this
was disallowed under the FY2025
reconciliation law.
Geothermal heat pumps are eligible for the
ITC if they begin construction before 2035.
Geothermal heat pumps are eligible for a
6% credit if they begin construction before
2033, 5.2% if they begin construction in
2033, and 4.4% if they begin construction in
2034.
In some circumstances, the ITC allows
taxpayers qualifying for other energy tax
credits to receive the ITC in place of the
other credits. Taxpayers qualifying for a
renewable electricity production tax credit
(PTC) using technologies specified in
subsections 1-7, 9, and 11 of IRC §45(d) are
eligible for a 6% ITC if they choose not to
claim the PTC. Technologies covered under
the relevant subsections include wind
facilities other than small wind energy
property, closed-loop biomass facilities,
open-loop biomass facilities, geothermal
energy facilities, solar energy facilities, small
irrigation power facilities, landfill gas
facilities, trash facilities, qualified
hydropower facilities, and marine and
hydrokinetic renewable energy facilities.
Qualified property that is part of a specified
clean hydrogen production facility may
claim the ITC in lieu of the clean hydrogen
production credit from IRC §45V. The ITC
is 6% if hydrogen produced by the facility
has a lifecycle greenhouse gas emissions
rate of less than 0.45 kilograms of carbon
dioxide equivalent (CO2e). The ITC is 2% if
the emissions rate is between 0.45 and 1.5
kilograms of CO2e, 1.5% if the emissions
rate is between 1.5 and 2.5 kilograms of
CO2e, and 1.2% if the emissions rate is
between 2.5 and 4.0 kilograms of CO2e. In
addition to foregoing the clean hydrogen
production credit, taxpayers claiming the
ITC for a specified clean hydrogen
production facility are prohibited from

•

•

Congressional Research Service

30% for energy storage technology,
qualified biogas property, and
microgrid controllers; and

30% for “qualified interconnection
property” installed in connection with
energy property with “a maximum net
output of not greater than 5
megawatts (as measured in alternating
current).”
Prior law also allowed a 10% credit for
qualified microturbine property, though this
was disallowed under the FY2025
reconciliation law.
Geothermal heat pumps are eligible for the
ITC if they begin construction before 2035.
Geothermal heat pumps are eligible for a
30% credit if they begin construction
before 2033, 26% if they begin construction
in 2033, and 22% if they begin construction
in 2034.
In some circumstances, the ITC allows
taxpayers qualifying for other energy tax
credits to receive the ITC in place of the
other credits. Taxpayers qualifying for a
renewable electricity production tax credit
(PTC) using technologies specified in
subsections 1-7, 9, and 11 of IRC §45(d) are
eligible for a 30% ITC if they choose not to
claim the PTC. Technologies covered under
the relevant subsections include wind
facilities other than small wind energy
property, closed-loop biomass facilities,
open-loop biomass facilities, geothermal
energy facilities, solar energy facilities, small
irrigation power facilities, landfill gas
facilities, trash facilities, qualified
hydropower facilities, and marine and
hydrokinetic renewable energy facilities.
Qualified property that is part of a specified
clean hydrogen production facility may
claim the ITC in lieu of the clean hydrogen
production credit from IRC §45V. The ITC
is 30% if hydrogen produced by the facility
has a lifecycle greenhouse gas emissions
rate of less than 0.45 kilograms of carbon
dioxide equivalent (CO2e). The ITC is 10%
if the emissions rate is between 0.45 and
1.5 kilograms of CO2e, 7.5% if the
emissions rate is between 1.5 and 2.5
kilograms of CO2e, and 6% if the emissions
rate is between 2.5 and 4.0 kilograms of
CO2e. In addition to foregoing the clean
hydrogen production credit, taxpayers
claiming the ITC for a specified clean
hydrogen production facility are prohibited

10

Inflation Reduction Act (IRA) Wage and Apprenticeship Requirements

Qualifying Advanced
Energy Project
Credit (IRC §48C)

Credit or Deduction for Firms Not
Meeting PWA Requirements

Credit or Deduction for Firms
Meeting PWA Requirementsa

claiming the credit for carbon oxide
sequestration under IRC §45Q.
Credit amounts are reduced in proportion
to the share of capital financing coming
from tax-exempt bonds, up to a maximum
reduction of 15%.b
Taxpayers receiving the ITC are eligible for
a 2 percentage-point bonus credit if
certain shares of the iron, steel, and
manufactured products used to construct
the facility were produced in the United
States.c Taxpayers are eligible for a separate
2 percentage-point bonus credit if the
facility used to claim the credit is located in
an energy community.d Bonus credit amounts
are calculated without considering any
reduction for financing from tax-exempt
bonds. (This is different from how bonus
credits are calculated under the PTC and
the CEPTC.)
Solar and wind facilities (and energy storage
technology installed with such facilities)
with a maximum net output of less than 5
megawatts, as measured in alternating
current, may qualify for a low-income
communities bonus credit. The bonus is 10
percentage points for facilities located in
a low-income community or on Indian land,
and is 20 percentage points for facilities
that are part of a qualified low-income
residential building project or a qualified
low-income economic benefit project. No
more than 1.8 gigawatts of electric capacity
may be claimed under this bonus credit
program in each of calendar years 2023 and
2024.j Unused electric capacity from one
year may be carried over to future years,
including to 2025 and later years under the
CEITC.
Considering the highest possible values of
all bonus credits, the maximum ITC is 30%
of capital investment costs for taxpayers
not meeting PWA requirements.

from claiming the credit for carbon oxide
sequestration under IRC §45Q.
Credit amounts are reduced in proportion
to the share of capital financing coming
from tax-exempt bonds, up to a maximum
reduction of 15%.b
Taxpayers receiving the ITC are eligible for
a 10 percentage-point bonus credit if
certain shares of the iron, steel, and
manufactured products used to construct
the facility were produced in the United
States.c Taxpayers are eligible for a separate
10 percentage-point bonus credit if the
facility used to claim the credit is located in
an energy community.d Bonus credit amounts
are calculated without considering any
reduction for financing from tax-exempt
bonds. (This is different from how bonus
credits are calculated under the PTC and
the CEPTC.)
Solar and wind facilities (and energy storage
technology installed with such facilities)
with a maximum net output of less than 5
megawatts, as measured in alternating
current, may qualify for a low-income
communities bonus credit. The bonus is 10
percentage points for facilities located in
a low-income community or on Indian land,
and is 20 percentage points for facilities
that are part of a qualified low-income
residential building project or a qualified
low-income economic benefit project. No
more than 1.8 gigawatts of electric capacity
may be claimed under this bonus credit
program in each of calendar years 2023 and
2024.j Unused electric capacity from one
year may be carried over to future years,
including to 2025 and later years under the
CEITC.
Considering the highest possible values of
all bonus credits, the maximum ITC is 70%
of capital investment costs for taxpayers
meeting PWA requirements.

Unlike the other energy tax credits enacted
or modified by the IRA, the Qualifying
Advanced Energy Project Credit (QAEPC)
is a competitively awarded or capped credit.
This means that total funding for the credit
may not exceed limits established under
law.
The QAEPC was created by P.L. 111-5, the
American Recovery and Reinvestment Act
of 2009, and was initially given $2.3 billion
of funding. The IRA added an additional $10
billion, to be distributed in two allocation
rounds. The first round provided $4 billion

Unlike the other energy tax credits enacted
or modified by the IRA, the Qualifying
Advanced Energy Project Credit (QAEPC)
is a competitively awarded or capped credit.
This means that total funding for the credit
may not exceed limits established under
law.
The QAEPC was created by P.L. 111-5, the
American Recovery and Reinvestment Act
of 2009, and was initially given $2.3 billion
of funding. The IRA added an additional $10
billion, to be distributed in two allocation
rounds. The first round provided $4 billion

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11

Inflation Reduction Act (IRA) Wage and Apprenticeship Requirements

Clean Electricity
Investment Credit
(IRC §48E)

Credit or Deduction for Firms Not
Meeting PWA Requirements

Credit or Deduction for Firms
Meeting PWA Requirementsa

for projects in energy communities located in
census tracts that did not receive QAEPC
funding under P.L. 111-5. The second round
provided $6 billion in funding without
statutory geographical restrictions, though
regulators determined that $2.5 billion or
more would go to energy communities.d
Taxpayers receiving the QAEPC may
receive a credit equal to 6% of qualifying
investment costs. Qualifying investments
include the costs associated with

for projects in energy communities located in
census tracts that did not receive QAEPC
funding under P.L. 111-5. The second round
provided $6 billion in funding without
statutory geographical restrictions, though
regulators determined that $2.5 billion or
more would go to energy communities.d
Taxpayers receiving the QAEPC may
receive a credit equal to 30% of qualifying
investment costs. Qualifying investments
include the costs associated with

•

reequipping, expanding, or establishing
an industrial or manufacturing facility
for the production or recycling of
certain energy equipment described in
IRC §48C(c)(1)(A)(i);

•

reequipping, expanding, or establishing
an industrial or manufacturing facility
for the production or recycling of
certain energy equipment described in
IRC §48C(c)(1)(A)(i);

•

reequipping an existing industrial or
manufacturing facility with equipment
designed to reduce greenhouse gas
(GHG) emissions by 20% or more; or

•

reequipping an existing industrial or
manufacturing facility with equipment
designed to reduce greenhouse gas
(GHG) emissions by 20% or more; or

•

reequipping, expanding, or establishing
an industrial facility for the processing,
refining, or recycling of critical materials
as defined in 30 U.S.C. §1606(a).
Because total funding for the QAEPC is
capped, taxpayers were required to submit
applications for QAEPC funding. IRC
§48C(d)(3) describes criteria for winning a
tax credit allocation, including domestic job
creation, impact on air pollution and GHG
emissions, technological innovation, and
commercial viability, among other factors.
Although total QAEPC funding is capped,
there are no caps per company or per
project. Round 1 allocation winners were
announced on March 29, 2024, and Round
2 allocation winners were announced on
January 10, 2025.

•

The clean electricity investment tax credit
(CEITC) may be claimed by facilities
producing electricity from any zeroemissions energy source. The CEITC is
equal to 6% of taxpayers’ capital investment
costs (defined in statute as “basis”), and
qualifying facilities must be placed in service
after 2024. Energy storage technology is
also eligible for the credit. Due to reforms
enacted in the FY2025 reconciliation law,
fuel cell property is also eligible for a 30%
tax credit that is not conditional on PWA
requirements. Unlike other energy sources,
fuel cell property may have positive
greenhouse gas emissions while qualifying
for the credit.

The clean electricity investment tax credit
(CEITC) may be claimed by facilities
producing electricity from any zeroemissions energy source. The CEITC is
equal to 30% of taxpayers’ capital
investment costs (defined in statute as
“basis”), and qualifying facilities must be
placed in service after 2024. Energy storage
technology is also eligible for the credit.
Due to reforms enacted in the FY2025
reconciliation law, fuel cell property is also
eligible for a 30% tax credit that is not
conditional on PWA requirements. Unlike
other energy sources, fuel cell property
may have positive greenhouse gas emissions
while qualifying for the credit.

Congressional Research Service

reequipping, expanding, or establishing
an industrial facility for the processing,
refining, or recycling of critical materials
as defined in 30 U.S.C. §1606(a).
Because total funding for the QAEPC is
capped, taxpayers were required to submit
applications for QAEPC funding. IRC
§48C(d)(3) describes criteria for winning a
tax credit allocation, including domestic job
creation, impact on air pollution and GHG
emissions, technological innovation, and
commercial viability, among other factors.
Although total QAEPC funding is capped,
there are no caps per company or per
project. Round 1 allocation winners were
announced on March 29, 2024, and Round
2 allocation winners were announced on
January 10, 2025.

12

Inflation Reduction Act (IRA) Wage and Apprenticeship Requirements

Energy Efficient
Commercial
Buildings Deduction
(IRC §179D)k

Credit or Deduction for Firms Not
Meeting PWA Requirements

Credit or Deduction for Firms
Meeting PWA Requirementsa

Credit amounts are reduced in proportion
to the share of capital financing coming
from tax-exempt bonds, up to a maximum
reduction of 15%.b
Taxpayers receiving the CEITC are eligible
for a 2 percentage-point bonus credit if
certain shares of the iron, steel, and
manufactured products used to construct
the facility were produced in the United
States.c Taxpayers are eligible for a separate
2 percentage-point bonus credit if the
facility used to claim the credit is located in
an energy community.d Bonus credit amounts
are calculated without considering any
reduction for financing from tax-exempt
bonds. (This is different from how bonus
credits are calculated under the PTC and
the CEPTC.)
Solar and wind facilities (and energy storage
technology installed with such facilities)
with a maximum net output of less than 5
megawatts, as measured in alternating
current, may qualify for a low-income
communities bonus credit. The bonus is 10
percentage points for facilities located in
a low-income community or on Indian land,
and is 20 percentage points for facilities
that are part of a qualified low-income
residential building project or a qualified
low-income economic benefit project. No
more than 1.8 gigawatts of electric capacity
may be claimed under this bonus credit
program each year, though unused electric
capacity from one year may be carried over
to future years, including pre-2025 amounts
carried over from the ITC.j
Considering the highest possible values of
all bonus credits, the maximum CEITC is
30% of capital investment costs for
taxpayers not meeting PWA requirements.

Credit amounts are reduced in proportion
to the share of capital financing coming
from tax-exempt bonds, up to a maximum
reduction of 15%.b
Taxpayers receiving the CEITC are eligible
for a 10 percentage-point bonus credit
if certain shares of the iron, steel, and
manufactured products used to construct
the facility were produced in the United
States.c Taxpayers are eligible for a separate
10 percentage-point bonus credit if the
facility used to claim the credit is located in
an energy community.d Bonus credit amounts
are calculated without considering any
reduction for financing from tax-exempt
bonds. (This is different from how bonus
credits are calculated under the PTC and
the CEPTC.)
Solar and wind facilities (and energy storage
technology installed with such facilities)
with a maximum net output of less than 5
megawatts, as measured in alternating
current, may qualify for a low-income
communities bonus credit. The bonus is 10
percentage points for facilities located in
a low-income community or on Indian land,
and is 20 percentage points for facilities
that are part of a qualified low-income
residential building project or a qualified
low-income economic benefit project. No
more than 1.8 gigawatts of electric capacity
may be claimed under this bonus credit
program each year, though unused electric
capacity from one year may be carried over
to future years, including pre-2025 amounts
carried over from the ITC.j
Considering the highest possible values of
all bonus credits, the maximum CEITC is
70% of capital investment costs for
taxpayers meeting PWA requirements.

The Energy Efficient Commercial Buildings
Deduction (EECBD) may be claimed by
commercial building owners either when
constructing a new energy-efficient building
or when upgrading the energy efficiency of
an existing building. Because the EECBD is a
deduction rather than a credit, it reduces the
amount of income subject to taxation.
Whereas credits generally lower tax
payments dollar for dollar, deductions
reduce tax payments by the amount of the
deduction multiplied by the tax rate.
Qualifying energy-efficient equipment must
be installed as part of (1) the interior
lighting systems; (2) the heating, cooling,
ventilation, and hot water systems; or (3)

The Energy Efficient Commercial Buildings
Deduction (EECBD) may be claimed by
commercial building owners either when
constructing a new energy-efficient building
or when upgrading the energy efficiency of
an existing building. Because the EECBD is a
deduction rather than a credit, it reduces the
amount of income subject to taxation.
Whereas credits generally lower tax
payments dollar for dollar, deductions
reduce tax payments by the amount of the
deduction multiplied by the tax rate.
Qualifying energy-efficient equipment must
be installed as part of (1) the interior
lighting systems; (2) the heating, cooling,
ventilation, and hot water systems; or (3)

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13

Inflation Reduction Act (IRA) Wage and Apprenticeship Requirements

Credit or Deduction for Firms Not
Meeting PWA Requirements

Credit or Deduction for Firms
Meeting PWA Requirementsa

the envelope of the commercial building.
Such equipment must reduce the building’s
annual energy and power costs by at least
25% relative to a reference building. The
maximum deduction is equivalent to $0.58
per square foot of the building, with an
additional $0.02 per square foot for every
additional percentage point of energy and
power cost reduction above 25%, up to a
maximum of $1.16 per square foot.
An alternative deduction available under
§179D(f) allows buildings engaged in
qualified retrofit plans to deduct the
adjusted basis in the retrofitted property.
To qualify, the building must be at least five
years old, and the qualified retrofit plan
must reduce the building’s energy use
intensity by at least 25%.
Amounts displayed above are for 2025,
though EECBD values are adjusted annually
for inflation.
The FY2025 reconciliation law terminates
this deduction for property beginning
construction after June 30, 2026.

the envelope of the commercial building.
Such equipment must reduce the building's
annual energy and power costs by at least
25% relative to a reference building. The
maximum deduction is equivalent to $2.90
per square foot of the building, with an
additional $0.12 per square foot for every
additional percentage point of energy and
power cost reduction above 25%, up to a
maximum of $5.81 per square foot.
An alternative deduction available under
§179D(f) allows buildings engaged in
qualified retrofit plans to deduct the
adjusted basis in the retrofitted property.
To qualify, the building must be at least five
years old, and the qualified retrofit plan
must reduce the building's energy use
intensity by at least 25%.
Amounts displayed above are for 2025,
though EECBD values are adjusted annually
for inflation.
The FY2025 reconciliation law terminates
this deduction for property beginning
construction after June 30, 2026.

Source: CRS analysis of P.L. 117-169, P.L. 119-21, the Internal Revenue Code, and various regulatory
documents published by the Internal Revenue Service (IRS).
Notes:
a. Firms may claim these larger credits without meeting the PWA requirements only if (1) they are small
facilities producing less than 1 megawatt of energy, or (2) they began construction on the facilities used to
claim the given credit before January 29, 2023.
b. For information on tax-exempt bonds and their uses in capital financing, see CRS Report R40523, Tax Credit
Bonds: Overview and Analysis, by Grant A. Driessen, CRS Report RL30638, Tax-Exempt Bonds: A Description of
State and Local Government Debt, by Grant A. Driessen, and CRS Report RL31457, Private Activity Bonds: An
Introduction, by Grant A. Driessen.
c. For information on the domestic content bonus credits in the ITC, PTC, CEITC, and CEPTC, see CRS
Report R48358, Domestic Content Requirements for Electricity Tax Credits in the Inflation Reduction Act (IRA), by
Nicholas E. Buffie.
d. For information on energy communities, see CRS Report R47831, Federal Economic Assistance for Coal
Communities, by Julie M. Lawhorn et al.
e. For more information on the credit for carbon oxide sequestration, see CRS In Focus IF11455, The Section
45Q Tax Credit for Carbon Sequestration, by Angela C. Jones and Donald J. Marples. For information on
reforms to the credit for carbon oxide sequestration in the FY2025 reconciliation law, see CRS Report
R48611, Tax Provisions in P.L. 119-21, the FY2025 Reconciliation Law, coordinated by Anthony A. Cilluffo.
f.
For more information on the clean hydrogen production credit, see CRS In Focus IF12602, The Section 45V
Clean Hydrogen Production Credit, by Nicholas E. Buffie and Martin C. Offutt.
g. Additional information on the CFPC can be found in CRS In Focus IF12502, The Section 45Z Clean Fuel
Production Credit, by Nicholas E. Buffie. For information on reforms to the CFPC in the FY2025
reconciliation law, see CRS Report R48611, Tax Provisions in P.L. 119-21, the FY2025 Reconciliation Law,
coordinated by Anthony A. Cilluffo.
h. The descriptions of the Energy Investment Tax Credit (ITC) generally apply to facilities, projects, property,
and equipment (FPPE) placed in service after 2021. In some cases, they apply to FPPE placed in service after
2022; see P.L. 117-169, page 105. FPPE placed in service in earlier years may have been subject to phaseouts
in 26 U.S.C. §48(a)(5)(E) or 26 U.S.C. §48(a)(6). Credit amounts and other rules for the ITC were modified

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Inflation Reduction Act (IRA) Wage and Apprenticeship Requirements

i.
j.

k.

in P.L. 117-169, pp. 97-105. For information on the previous structure of the ITC, see CRS In Focus
IF10479, The Energy Credit or Energy Investment Tax Credit (ITC).
Allocations of the 1.8 gigawatts of electric capacity for the low-income communities bonus credit program
are made by the IRS. For information on the allocation process and other aspects of the program, see
authorizing statute 26 U.S.C. §48(e) and the IRS web page on the bonus credit, available at
https://www.irs.gov/credits-deductions/clean-electricity-low-income-communities-bonus-credit-amountprogram.
Additional information on the EECBD can be found in CRS In Focus IF12862, The Section 179D Energy
Efficient Commercial Buildings Deduction, by Nicholas E. Buffie.

Author Information
Nicholas E. Buffie
Analyst in Public Finance

Disclaimer
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Congressional Research Service

R48428 · VERSION 7 · UPDATED

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/crs%3AR48428. Public record. Not legal advice.