Increased Amounts of Credit or Deduction for Satisfying Certain Prevailing Wage and Registered Apprenticeship Requirements, 53184-53273 [2024-13331]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 89, Number 122 (Tuesday, June 25, 2024)]
[Rules and Regulations]
[Pages 53184-53273]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-13331]



[[Page 53183]]

Vol. 89

Tuesday,

No. 122

June 25, 2024

Part II





Department of the Treasury





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Internal Revenue Service





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26 CFR Part 1





Increased Amounts of Credit or Deduction for Satisfying Certain 
Prevailing Wage and Registered Apprenticeship Requirements; Final Rule

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

[[Page 53184]]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9998]
RIN 1545-BQ62


Increased Amounts of Credit or Deduction for Satisfying Certain 
Prevailing Wage and Registered Apprenticeship Requirements

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final rule.

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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 subsequently comply 
with the correction and penalty procedures in order to be deemed to 
satisfy the PWA requirements (or prevailing wage requirements, as 
applicable). Finally, these final regulations address specific PWA and 
prevailing wage recordkeeping and reporting requirements.

DATES: 
    Effective date: These regulations are effective August 26, 2024.
    Applicability date: For date of applicability, see Sec. Sec.  
1.30C-3(c), 1.45-6(d), 1.45-7(e), 1.45-8(h), 1.45-12(f), 1.45L-3(c), 
1.45Q-6(c), 1.45U-3(c), 1.45V-3(c), 1.45Y-3(c), 1.45Z-3(c), 1.48C-3(b), 
1.179D-3(c).

FOR FURTHER INFORMATION CONTACT: The Office of Associate Chief Counsel 
(Passthroughs & Special Industries) at (202) 317-6853 (not a toll-free 
number).

SUPPLEMENTARY INFORMATION:

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 credits or an increased deduction, as 
applicable, for taxpayers who satisfy certain requirements and added 
sections 45U, 45V, 45Y, 45Z, and 48E to the Code to provide new 
credits, which also contain provisions for increased credit amounts for 
taxpayers who satisfy certain requirements. Increased credit amounts 
are available under sections 30C, 45, 45Q, 45V, 45Y, 45Z, 48, 48C, and 
48E, and an increased deduction is available under section 179D for 
taxpayers satisfying certain PWA requirements. Increased credit amounts 
are available under sections 45L and 45U for taxpayers satisfying 
certain prevailing wage requirements.\1\ The IRA includes correction 
and penalty provisions available in certain situations for taxpayers 
that have initially failed to satisfy the PWA requirements and are not 
otherwise eligible for the increased amount of credit or deduction 
because they do not qualify for an exception.
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    \1\ The provisions in sections 45L and 45U relating to increased 
credit amounts do not contain apprenticeship requirements. For 
simplicity, where possible, the preamble to these final regulations 
uses the acronym PWA to refer to the prevailing wage and 
apprenticeship requirements generally, including the prevailing wage 
requirements in sections 45L and 45U.
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    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 
requirements (Prevailing Wage Requirements),\2\ and section 45(b)(8) 
provides the apprenticeship requirements (Apprenticeship 
Requirements).\3\
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    \2\ The Prevailing Wage Requirements in sections 30C(g), 45L(g), 
45Q(h), 45U(d), 45V(e), 48(a)(10), 48C(e), and 179D(b) are similar 
to the requirements provided under section 45(b)(7). Sections 30C, 
45L, 48C, and 179D, however, do not require the payment of wages at 
rates not less than the prevailing rates after construction, re-
equipping, expansion, establishment, or installation, as applicable, 
ends. Sections 45Y(g)(9) and 45Z(f)(6)(A) adopt by cross-reference 
the Prevailing Wage Requirements under section 45(b)(7). Section 
48E(d)(3) adopts by cross-reference the Prevailing Wage Requirements 
under section 48(a)(10). Section 48(a)(10)(C) provides for a special 
5-year recapture rule that applies for purposes of the Prevailing 
Wage Requirements with respect to sections 48 and 48E.
    \3\ Sections 30C(g)(3), 45Q(h)(4), 45V(e)(4), 45Y(g)(10), 
45Z(f)(7), 48(a)(11), 48C(e)(6), 48E(d)(4), and 179D(b)(5) cross-
reference the Apprenticeship Requirements in section 45(b)(8). 
Sections 45L and 45U do not have Apprenticeship Requirements.
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    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

[[Page 53185]]

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, 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.
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    \4\ Effective November 25, 2022, 29 CFR part 29 is no longer 
divided into subparts A and B because subpart B (Industry Recognized 
Apprenticeship Programs) was rescinded in a final rule published on 
September 26, 2022 (87 FR 58269). On January 17, 2024, the DOL 
released a notice of proposed rulemaking that would once again place 
apprenticeship standards in subpart A of part 29. See 89 FR 3118.
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2. Ratio Requirement
    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).

[[Page 53186]]

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

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 
of section 45(b)(7)(A) and (8) is a facility eligible for the increased 
credit amount in section 45(b)(6). On November 30, 2022, the Department 
of the Treasury (Treasury Department) and the IRS published Notice 
2022-61 in the Federal Register (87 FR 73580, corrected in 87 FR 75141 
(Dec. 7, 2022)), providing guidance with respect to the PWA 
requirements in section 45(b)(7) and (8), including initial guidance 
for determining the beginning of construction under section 45 and 
other credits and the beginning of installation under section 179D. 
Therefore, if a taxpayer began construction or installation of a 
facility \5\ before January 29, 2023, then the taxpayer is eligible for 
the increased amount of credit or deduction without satisfying the PWA 
requirements, provided the taxpayer is otherwise eligible for the 
credit or deduction. Similar exceptions apply under sections 30C, 45Q, 
45V, 45Y, 48, 48E, and 179D.
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    \5\ Notice 2022-61 defines facility as qualified facility, 
property, project, or equipment.
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    For purposes of determining when construction or installation 
begins, Notice 2022-61 incorporates by reference the notices issued 
under sections 45,\6\ 45Q,\7\ and 48 \8\ (collectively, IRS Notices). 
The IRS Notices describe two methods of 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).
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    \6\ Notice 2013-29, 2013-20 I.R.B. 1085; clarified by Notice 
2013-60, 2013-44 I.R.B. 431; clarified and modified by Notice 2014-
46, 2014-36 I.R.B. 520; updated by Notice 2015-25, 2015-13 I.R.B. 
814; clarified and modified by Notice 2016-31, 2016-23 I.R.B. 1025; 
updated, clarified, and modified by Notice 2017-04, 2017-4 I.R.B. 
541; Notice 2018-59, 2018-28 I.R.B. 196; modified by Notice 2019-43, 
2019-31 I.R.B. 487; modified by Notice 2020-41, 2020-25 I.R.B. 954; 
clarified and modified by Notice 2021-5, 2021-3 I.R.B. 479; 
clarified and modified by Notice 2021-41, 2021-29 I.R.B. 17.
    \7\ Notice 2020-12, 2020-11 I.R.B. 495.
    \8\ Notice 2018-59; modified by Notice 2019-43; modified by 
Notice 2020-41; clarified and modified by Notice 2021-5; clarified 
and modified by Notice 2021-41.
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    The IRS Notices provide that for purposes of the Physical Work Test 
and Five Percent Safe Harbor, taxpayers must demonstrate either 
continuous construction or continuous efforts (Continuity Requirement) 
regardless of whether the Physical Work Test or the Five Percent Safe 
Harbor was used to establish the beginning of construction. Whether a 
taxpayer meets the Continuity Requirement under either test is 
determined by the relevant facts and circumstances.
    The IRS Notices also provide for a Continuity Safe Harbor under 
which a taxpayer will be deemed to satisfy the Continuity Requirement 
provided a qualified facility is placed in service no more than four 
calendar years after the calendar year during which construction of the 
qualified facility began for purposes of sections 45 and 48, and no 
more than six calendar years after the calendar year during which 
construction of the qualified facility or carbon capture equipment 
began for purposes of section 45Q. For purposes of the Continuity Safe 
Harbor, certain offshore projects and projects built on Federal land 
under sections 45 and 48 satisfy the Continuity Requirement if such a 
project is placed into service no more than ten calendar years after 
the calendar year during which construction of the project began.
    Until the Treasury Department and the IRS issue further guidance on 
determining when construction or installation begins, taxpayers may 
continue to rely on the guidance provided in Notice 2022-61 and the IRS 
Notices. Specifically, to determine when construction begins for 
purposes of sections 30C, 45V, 45Y, and 48E, principles similar to 
those under Notice 2013-29 regarding the Physical Work Test and Five 
Percent Safe Harbor apply, and taxpayers satisfying either test will be 
considered to have begun construction. In addition, principles similar 
to those provided in the IRS Notices regarding the Continuity 
Requirement for purposes of sections 30C, 45V, 45Y, and 48E apply. 
Whether a taxpayer meets the Continuity Requirement under either test 
is determined by the relevant facts and circumstances. Similar 
principles to those under section 3 of Notice 2016-31 regarding the 
Continuity Safe Harbor also apply for purposes of sections 30C, 45V, 
45Y, and 48E. Taxpayers may rely on the Continuity Safe Harbor with

[[Page 53187]]

respect to those sections, provided the facility is placed in service 
no more than four calendar years after the calendar year during which 
construction began.
    For purposes of section 179D, installation of energy efficient 
commercial building property, energy efficient building retrofit 
property, or property installed pursuant to a qualified retrofit plan 
has begun if a taxpayer generally satisfies principles similar to the 
Physical Work Test and the Five Percent Safe Harbor described in 
section 2.02 of Notice 2022-61 regarding the beginning of construction 
under Notice 2013-29. The relevant facts and circumstances will 
ultimately determine whether a taxpayer has begun installation.
    For purposes of sections 45, 45Q, and 48, the IRS Notices will 
continue to apply under each respective Code section, including 
application of the Physical Work Test and Five Percent Safe Harbor, and 
the rules regarding the Continuity Requirement and Continuity Safe 
Harbors.
B. One Megawatt Exception
    Under the One Megawatt Exception in section 45(b)(6)(B)(i), a 
qualified facility that has a maximum net output of less than one 
megawatt (as measured in alternating current) is a facility eligible 
for the increased credit amount. Similar exceptions apply for a 
qualified facility with a maximum net output of less than one megawatt 
(as measured in alternating current) under sections 45Y(a)(2)(B)(i) and 
48E(a)(2)(A)(ii)(I); an energy project with a maximum net output of 
less than one megawatt of electrical (as measured in alternating 
current) or thermal energy under section 48(a)(9)(B)(i); and energy 
storage technology with a capacity of less than one megawatt under 
section 48E(a)(2)(B)(ii)(I).

IV. Prior Guidance

    On October 24, 2022, the Treasury Department and the IRS published 
Notice 2022-51, 2022-43 I.R.B. 331, requesting comments on aspects of 
the increased amounts of credits and deduction enacted or amended by 
the IRA, including the PWA provisions. On November 30, 2022, the 
Treasury Department and the IRS published Notice 2022-61. Notice 2022-
61 provided guidance on the PWA requirements that generally apply under 
sections 30C, 45, 45L, 45Q, 45U, 45V, 45Y, 45Z, 48, 48C, 48E, and 179D. 
Additionally, as discussed in Section III.A. of this Background, Notice 
2022-61 established the 60-day period described in sections 
30C(g)(1)(C)(i), 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 Sec.  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 
Sec.  1.48E-3 would have incorporated the rules of proposed Sec.  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 Sec.  1.48-13 and proposed Sec.  1.48E-3 in future Treasury 
decisions.
    The Proposed Regulations provided that taxpayers may rely on 
proposed Sec.  1.48E-3 with respect to construction of a qualified 
facility on or after January 29, 2023, and on or before the date 
proposed Sec.  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 
Sec.  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 Sec.  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 Sec.  1.48-13 in its 
entirety and in a consistent manner. These final regulations do not 
change the reliance provided with respect to proposed Sec.  1.48-13 and 
proposed Sec.  1.48E-3.
    Comments received regarding the specific PWA requirements under 
sections 48 and 48E, the One Megawatt Exception under sections 48 and 
48E, and the recapture rules contained in section 48(a)(10)(C), all 
whether in response to the Proposed Regulations or the Section 48 
Proposed Regulations, will be addressed in the future Treasury decision 
adopting those rules as final regulations. Other comments on the PWA 
requirements (including comments that referenced section 48 or section 
48E, but addressed the PWA requirements more generally) were considered 
in the drafting of these final regulations and are discussed herein.
    On June 3, 2024, the Treasury Department and the IRS published a 
notice of proposed rulemaking and a notice of public hearing (REG-
119283-23) in the Federal Register (89 FR 47792), proposing guidance 
under sections 45Y and 48E (Section 45Y/48E Proposed Regulations). In 
the Section 45Y/48E Proposed Regulations, the Treasury Department and 
the IRS requested comments on the proposed definition of a qualified 
facility with a maximum net output of less than one megawatt (as 
measured in alternating current) for purposes of the One Megawatt 
Exception under section 45Y(a)(2)(B)(i). All comments received 
pertaining to the One Megawatt Exception under section 45Y(a)(2)(B)(i), 
whether in response to the Proposed Regulations or the Section 45Y/48E 
Proposed Regulations, will be addressed in future guidance under 
section 45Y finalizing those rules. General PWA comments that were 
received in response to the Proposed Regulations and that referenced 
section 45Y are discussed throughout this Summary of Comments and 
Explanation of Revisions because they were considered in the drafting 
of these final regulations.

Summary of Comments and Explanation of Revisions

    This Summary of Comments and Explanation of Revisions summarizes 
the Proposed Regulations, all the substantive comments submitted in 
response to the Proposed Regulations, and revisions adopted by these 
final regulations. The Treasury Department

[[Page 53188]]

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

I. Pre-Filing Activities

A. Applicability of the Davis-Bacon Act in General 9
---------------------------------------------------------------------------

    \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).
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    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.
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    \10\ In accordance with, Oxford English Dictionary, https://www.oed.com/search/dictionary/?scope=Entries&q=in+accordance+with 
(last visited Aug. 8, 2023); see Accordance, Merriam-Webster's 
Collegiate Dictionary (11th ed. 2006) (meaning agreement, 
conformity).
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    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

[[Page 53189]]

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 
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.
    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 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 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

[[Page 53190]]

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 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 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 
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

[[Page 53191]]

mandate specific contract terms, including the taxpayer's intent to 
claim the credit, the expected wage classifications of laborers and 
mechanics who will work on the project, estimates of apprenticeship 
hours, and flow-down responsibility clauses requiring compliance with 
the PWA requirements by all contractors and subcontractors. 
Additionally, commenters suggested that all solicitations, contracts, 
and subcontracts include clauses committing to the proper hiring and 
involvement of qualified apprentices under the Apprenticeship 
Requirements.
    Commenters also recommended that the final regulations adopt the 
requirement in section 3142(c)(2) of the DBA that prevailing wage rates 
must be posted by employers on the job site in a prominent and 
accessible location where they can be easily seen by workers. The 
Proposed Regulations would have included as a factor to be considered 
in the determination of whether a failure to satisfy the Prevailing 
Wage Requirements was due to intentional disregard, whether the 
taxpayer posted in a prominent place at the facility or otherwise 
provided written notice to laborers and mechanics during the 
construction, alteration, or repair of the facility, of the applicable 
wage rate(s) as determined by the DOL for all classifications of work 
to be performed for the construction, alteration, or repair of the 
facility, and that in order to be eligible to claim certain tax 
benefits, employers must ensure that laborers and mechanics are paid 
wages at rates not less than such wage rates. Although commenters were 
supportive of this factor, some commenters were critical of the fact 
that the information proposed for the notice leaves open the question 
of whether the worker is actually entitled to prevailing wages because 
the worker may not know whether an increased credit amount is being 
claimed with respect to the work they are performing. One commenter 
further requested that the poster include language regarding the right 
to be properly classified as an employee, the right to be free from 
retaliation related to immigration status, and information regarding 
how to contact the IRS. One commenter suggested requiring each 
contractor and subcontractor employing workers on projects for which an 
increased credit amount could be claimed to provide each worker with an 
individualized written notice identifying their respective 
classification and the prevailing wage rate to which they are entitled. 
The commenter suggested requiring notice to be made no later than when 
construction, alteration, or repair begins, and delivering the 
suggested notice along with workers' paychecks.
    Although both contract language and the posting of the applicable 
prevailing wage rates is required by the DBA, no similar provision 
exists in section 45(b)(7) of the Code that would require taxpayers to 
include specific terms in a contract or post prevailing wage rates 
during construction. Applying the principle outlined in Section I.A. of 
this Summary of Comments and Explanation of Revisions to incorporate 
only the DBA requirements that are relevant for claiming the increased 
credit amount and consistent with sound tax administration, the 
Treasury Department and the IRS have decided not to require specific 
DBA or other PWA-related provisions in private commercial contracts. 
These agreements are executed well before a tax return claiming the 
credit is filed. Similarly, the final regulations do not require the 
posting of applicable wage rates, because a taxpayer may decide to 
claim the increased credit amount after construction has started. 
Requests regarding the posting of information related to general rights 
of workers under State labor laws or other Federal laws are outside the 
scope of these final regulations. For these reasons, the comments 
requesting that the final regulations require the incorporation of DBA-
contract provisions and the posting of applicable prevailing wage rates 
are not adopted.
    However, there is likely a benefit to taxpayers seeking to comply 
with the PWA requirements if the requirement to pay prevailing wages 
and hire qualified apprentices is incorporated in the terms of any 
contract with respect to the construction, alteration, or repair of a 
facility, including lower-tier agreements between contractors and 
subcontractors, and if the laborers and mechanics who are employed in 
the construction of a facility are informed of the applicable 
prevailing wage rates that would be required if the taxpayer claims the 
increased credit amount. The Proposed Regulations would have encouraged 
this behavior from taxpayers who know they are going to claim the 
increased credit amount, and the final regulations incorporate and 
expand upon the list of factors that may be considered by the IRS for 
purposes of determining if a failure to satisfy the PWA requirements 
was due to intentional disregard.
C. Including Other Conditions as a Prerequisite for Claiming the 
Increased Amount of Credit
    Some commenters suggested that the final regulations should require 
taxpayers to provide advance notice to the IRS, the DOL, potential 
employees, and the general public of their intent to claim the 
increased credit amount by satisfying the PWA requirements to provide 
clarity to workers. Specifically, one commenter suggested requiring 
taxpayers to file a statement of intent to claim the increased credit 
amount with the DOL WHD, which would then be available for public 
review to enable interested parties to monitor projects that may be 
subject to the PWA requirements. Another commenter recommended 
requiring taxpayers to provide notice to workers, before the start of 
any project for which an increased credit amount could be claimed, of 
their intention to claim the increased credit amount by satisfying the 
PWA requirements.
    Consistent with the principles outlined in Section I.A. of this 
Summary of Comments and Explanation of Revisions, the final regulations 
do not adopt these suggestions. Requiring taxpayers to declare an 
intent to claim an increased credit amount would provide no meaningful 
benefit for the IRS's administration of the PWA requirements, and would 
impose additional pre-filing requirements on taxpayers. Section 
45(b)(6) does not require taxpayers to declare an intent to claim the 
increased credit amount. However, as noted previously, posting or 
otherwise providing general information about applicable wage rates is 
a good practice for taxpayers to incorporate if the taxpayer is 
planning to claim the increased credit amount. The final regulations 
retain these practices as a factor that may be considered by the IRS 
for purposes of determining if a failure to satisfy the Prevailing Wage 
Requirements was due to intentional disregard.
    Commenters also asked that the final regulations require a pre-
filing registration or reporting system, similar to that provided for 
under sections 6417 and 6418, applicable to taxpayers intending to 
claim the increased credit amount for satisfying the PWA requirements. 
Commenters alleged that since many of the credits covered by sections 
6417 and 6418 also contain PWA requirements, the language in sections 
6417 and 6418 requiring information or registration can be applied to 
require pre-filing registration of the intent to claim the increased 
credit amount.

[[Page 53192]]

    Section 6418(g)(1) provides that as a ``condition of, and prior to, 
any transfer of any portion of an eligible credit'' under section 6418, 
the Secretary of the Treasury or her delegate (Secretary) ``may require 
such information (including, in such form or manner as is determined 
appropriate by the Secretary, such information returns) or registration 
as the Secretary deems necessary for purposes of preventing 
duplication, fraud, improper payments, or excessive payments.'' Section 
6417(d)(5) provides the Secretary with similar discretion to implement 
a registration requirement. The authority to implement a pre-filing 
registration requirement provided in sections 6417 and 6418 is 
statutorily created and intended to address different underlying 
circumstances. Sections 6417(d)(5) and 6418(g) address the use of a 
registration system as a condition of and prior to certain events, 
specifically, prior to the amounts being treated as payments made by 
applicable entities or prior to transferring a credit.
    There is no analogous statutory language in section 45 or elsewhere 
in the Code related to the PWA requirements. Moreover, the registration 
requirements for sections 6417 and 6418 serve the specific purposes of 
preventing duplication, fraud, improper payments, or excessive 
payments. Those concerns are largely unique to the elective pay and 
credit transfer opportunities created by sections 6417 and 6418. In the 
context of sections 6417 and 6418, the IRS implemented the registration 
portal to prevent fraud and duplicate or improper payments, by 
providing the IRS with basic information that will facilitate 
processing and improve the administration of the credits. A 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 Pre-Filing Activities and IRS Enforcement 
Procedures
1. Organizational Changes to the IRS and General Tax Administration
    Several commenters suggested that the final regulations implement 
organizational changes to the IRS. For example, one commenter 
recommended that the regulations create a dedicated office of labor 
standards enforcement to enforce the PWA provisions. An additional 
commenter requested that the Treasury Department establish a dedicated 
compliance and enforcement office. The commenter also encouraged the 
Treasury Department to review State requirements for disclosures, proof 
of payment, and affirmation, and adopt models that best effectuate 
compliance. One commenter suggested that the Treasury Department and 
the IRS create an inter-agency office with the DOL to facilitate the 
receipt of contemporaneous reporting from taxpayers.
    Another commenter suggested the creation of a digital platform to 
be used by taxpayers to submit PWA documentation that would be 
accessible by businesses, the DOL, and local apprenticeship programs. 
Several commenters recommended that the Treasury Department and the IRS 
partner with the DOL and applicable State agencies in the enforcement 
of PWA requirements. Additional commenters requested that the Treasury 
Department and the IRS establish formal partnerships with fair 
contracting organizations, labor unions, and other workers' rights 
organizations in order to expand the capacity to monitor jobsites. A 
commenter stated that such 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. 
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 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

[[Page 53193]]

appropriate personnel departments or managers without retaliation or 
other adverse action as a factor to be considered in the determination 
of intentional disregard.
    Many commenters requested that the final regulations prescribe the 
process through which a worker can complain about being underpaid. 
Commenters suggested that the process for complaints should be 
available to all interested parties, and that any person should be able 
to submit complaints to the government, preferably through the IRS 
website, without fear of retaliation by their employers or others. A 
commenter urged the IRS to develop and inform stakeholders and the 
public on complaint and enforcement procedures and provide contact 
information for the IRS office that will accept and investigate 
complaints. Another commenter recommended that the Treasury Department 
and the IRS create a complaint mechanism with both a telephone hotline 
and an online portal, and available in English and Spanish, to file 
complaints.
    Commenters acknowledged that unlike under the DBA, if the Treasury 
Department and the IRS are informed of violations or irregularities 
before the increased credit is claimed, the agencies would not be able 
to immediately assess fines or mandate that taxpayers issue corrective 
payments. A commenter acknowledged that there are limitations on the 
IRS's remedial authority, but suggested that the Treasury Department 
and the IRS have a compelling interest in instituting a complaint 
mechanism to obtain vital information that they can use in determining 
which taxpayers to audit. One commenter suggested permitting registered 
apprenticeship programs to petition the Treasury Department if they 
believe that a taxpayer is falsely claiming that the program is unable 
to meet the taxpayer's request for qualified apprentices.
    While the IRS takes information it receives regarding alleged tax 
violations very seriously, the comments requesting that the final 
regulations require a specific process regarding complaints are not 
adopted. Similar to the comments addressed in Section I.D.1. of this 
Summary of Comments and Explanation of Revisions regarding overall IRS 
administration, the comments concerning how the IRS should address 
reports of alleged tax violations are outside the scope of these final 
regulations. Additionally, the commenters overstate the usefulness of 
such information in the pre-filing context with respect to the PWA 
requirements. A laborer or mechanic might be paid wages at rates less 
than the applicable prevailing wage rates would require for such work, 
but that does not mean the laborer or mechanic was underpaid for 
purposes of section 45(b)(7)(A), unless and until a tax return claiming 
the increased credit amount is filed. The PWA requirements apply to the 
taxpayer, and the taxpayer must ensure that laborers and mechanics are 
paid wages at rates not less than the appliable prevailing wage rates 
for construction, alteration, or repair of a qualified facility. If a 
taxpayer, contractor, or subcontractor underpays a laborer or mechanic 
and does not subsequently correct the underpayment with the appropriate 
backpay and interest and pay the penalty amount, then the increased 
credit amount will be disallowed by the IRS.
    However, the Treasury Department and the IRS acknowledge the value 
in encouraging internal complaint and anti-retaliation procedures on 
facilities for which taxpayers acknowledge they anticipate claiming an 
increased credit amount by satisfying the PWA requirements. As 
discussed in Section VII.D.3. of this Summary of Comments and 
Explanation of Revisions, the final regulations include the existence 
of these procedures as a factor in determining whether a failure to 
satisfy the PWA requirements was due to intentional disregard. Further, 
these final regulations add as factors in determining intentional 
disregard whether the taxpayer posted information on how to contact the 
appropriate office to report suspected failures and whether in response 
to any complaint, the taxpayer investigated the complaint and took 
appropriate action to remedy the situation.
    Additional commenters proposed that the Treasury Department and the 
IRS clarify that workers who report PWA violations are protected by the 
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

[[Page 53194]]

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 taxable 
years beginning after December 31, 2022.\20\
---------------------------------------------------------------------------

    \11\ IRA Sec.  13404(f).
    \12\ IRA Sec.  13101(k).
    \13\ IRA Sec.  13304(f).
    \14\ IRA Sec.  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 Sec.  13701(c).
    \16\ IRA Sec.  13105(c).
    \17\ IRA Sec.  13204(a)(5).
    \18\ IRA Sec.  13704(c).
    \19\ IRA Sec.  13501(e).
    \20\ IRASec.  13303(d).
---------------------------------------------------------------------------

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

[[Page 53195]]

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 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 Sec.  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.
---------------------------------------------------------------------------

    \21\ 40 U.S.C. 3142(a) and (c).
---------------------------------------------------------------------------

    Notice 2022-61 and proposed Sec.  1.45-7(d)(2)(i) would have 
defined construction, alteration, or repair by reference to the DBA. 
This means that the activity triggering the PWA requirements for a 
facility subject to the PWA requirements is determined by reference to 
activities that constitute construction under the DBA. A taxpayer must 
begin to satisfy the PWA requirements once construction, alteration, or 
repair activities occur if those activities are described in 29 CFR 
5.2. Under this definition, construction, alteration, or repair would 
mean all types of work performed at the location of the qualified 
facility.
C. Comments on Determining the Beginning of Construction for PWA 
Purposes
    Several commenters requested clarification concerning when the 
obligation to comply with the PWA requirements arises in the lifespan 
of a construction project apart from satisfying the BOC Exception, 
including what methods may be relied upon (the Physical Work Test or 
Five Percent Safe Harbor) and the Continuity Requirement. Another 
commenter suggested that the final regulations incorporate the tests 
from the IRS Notices into the final regulations. Commenters indicated 
that there is confusion regarding the precise scope of the PWA 
requirements because the word ``construction'' has different meanings 
under the DBA and the IRS Notices. One commenter stated that the 
preamble's use of both ``beginning of construction'' and ``start of 
construction'' was confusing.
    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

[[Page 53196]]

preliminary activity, not the ``beginning of construction.'' However, 
under the DBA definition, the same activity would constitute 
construction. The Five Percent Safe Harbor, which has no equivalent 
under DBA, looks solely at incurred costs in determining whether 
construction has begun. Under all three tests, once construction begins 
a taxpayer must satisfy the PWA requirements with respect to all 
construction, alteration, or repair as defined in proposed Sec.  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 Sec.  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 Sec.  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 definitions in the IRS Notices for purposes of determining 
those activities that were considered construction, alteration, or 
repair of the facility subject to the PWA requirements in the initial 
stages of construction. The final regulations waive penalties for 
taxpayers who applied the IRS Notices for determining when the 
obligation to pay prevailing wages began, provided the taxpayer makes 
the appropriate correction payments to the impacted workers within 180 
days of the publication of the final regulations. As part of the 
transition relief, the final regulations also allow taxpayers to use 
the IRS Notices for determining when construction begins under section 
45(b)(8)(A) to determine the applicable percentage of labor hours 
performed by qualified apprentices required in satisfying the Labor 
Hours Requirement.

IV. One Megawatt Exception

    Under the One Megawatt Exception in section 45(b)(6)(B)(i), a 
qualified facility that has a maximum net output of less than one 
megawatt (as measured in alternating current) is eligible for the 
increased credit amount. The preamble to the Proposed Regulations would 
have provided that a qualified facility's nameplate capacity determines 
whether the facility meets the One Megawatt Exception. Similar 
exceptions apply for a qualified facility with a maximum net output of 
less than one megawatt (as measured in alternating current) under 
sections 45Y(a)(2)(B)(i) and 48E(a)(2)(A)(ii)(I); an energy project 
with a maximum net output of less than one megawatt of electrical (as 
measured in alternating current) or thermal energy under section 
48(a)(9)(B)(i); and energy storage technology with a capacity of less 
than one megawatt under section 48E(a)(2)(B)(ii)(I).
    Proposed Sec.  1.45-6(c) would have provided that nameplate 
capacity for an electrical generating unit means the maximum electrical 
generating output in megawatts that the unit is capable of producing on 
a steady state basis and during continuous operation under standard 
conditions, as measured by the manufacturer and consistent with the 
definition provided in 40 CFR 96.202. If applicable, the International 
Standard Organization (ISO) conditions are used to measure the maximum 
electrical generating output or usable energy capacity.
    Commenters stated that the term ``maximum net output'' is ambiguous 
and that no method is provided for 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 Sec.  1.45-6(c) contained testing 
methodologies and conditions and the statute already requires the 
measurement be in alternating current. The final regulations adopt the 
definition without change.
    Another commenter suggested clarifying when multiple energy 
projects constitute a single facility for purposes of the One Megawatt 
Exception under section 45. One commenter suggested adopting the eight 
factors of a single project determination listed in Notice 2013-29 and 
Notice 2018-59, to determine when multiple energy projects constitute a 
single facility for purposes of the One Megawatt Exception. The 
commenter stated that it could be difficult, such as for solar arrays 
constructed on multiple buildings, to determine when multiple projects 
may constitute a single facility. Another commenter stated that 
taxpayers should not be permitted to subdivide projects and 
construction contracts in an effort to evade the Prevailing Wage 
Requirements using the One Megawatt Exception. The commenter stated 
that to prevent taxpayers from manipulating the One Megawatt Exception, 
the Treasury Department should evaluate whether facilities will be 
using the same transmission lines or connecting to the same powerhouse. 
One commenter recommended using certain factors, including ownership, 
proximity, and connection to transmission lines or powerhouse, to 
determine whether multiple energy projects may be deemed to constitute 
one facility.
    The definition of a qualified facility, energy project, or energy 
storage technology under the respective Code section controls for 
purposes of the One Megawatt Exception. Therefore, the definition of 
qualified facility under section 45 governs for purposes of the One 
Megawatt Exception under section 45(b)(6)(B)(i). Accordingly, the 
application of the aggregation principles issued under Notice 2013-29 
and Notice

[[Page 53197]]

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 correction and 
penalty provisions under the Prevailing Wage Requirements, and the Good 
Faith Effort Exception and Apprenticeship Cure Provision under the 
Apprenticeship Requirements. However, nothing in the Proposed 
Regulations was intended to supersede requirements that might otherwise 
apply to a taxpayer, contractor, or subcontractor under State or 
Federal law.
    Commenters requested guidance concerning whether the taxpayer is 
responsible for ensuring the compliance with the PWA requirements by 
contractors and subcontractors if the taxpayer may not be in privity of 
contract with all contractors and subcontractors. Commenters noted that 
proposed Sec.  1.45-7(d)(3) would have defined a contractor as any 
person that enters into a contract with the taxpayer for the 
construction, alteration, or repair of a qualified facility. However, 
commenters stated that the taxpayer is not always in privity of 
contract with each contractor and subcontractor. Similarly, another 
commenter suggested that the definition of contractor be revised to 
address situations in which the taxpayer is not in privity of contract 
with the contractors, because the sponsor or developer of the facility 
assumes responsibility for construction of the facility. The final 
regulations clarify that the definition of contractor applies to those 
situations. Additionally, a commenter stated that DOL guidance under 29 
CFR 5.5(a)(6) provides that prime contractors have the responsibility 
for the compliance of all the subcontractors on a covered prime 
contract, whereas the Proposed Regulations state that the taxpayer is 
solely responsible for PWA compliance. The final regulations retain the 
requirements in the Proposed Regulations that the taxpayer is solely 
responsible for the PWA requirements, including ensuring that the 
relevant laborers and mechanics are paid wages at rates not less than 
the prevailing rates whether employed directly by the taxpayer, a 
contractor, or a subcontractor and ensuring that the Apprenticeship 
Requirements are satisfied.
    A commenter suggested that the final regulations adopt a safe 
harbor allowing taxpayers to avoid corrections and penalty payments if 
the taxpayer contracted with a third party to ensure compliance with 
relevant PWA requirements. Section 45(b)(7)(A) requires that the 
taxpayer ensures that laborers and mechanics are paid wages at rates 
not less than the applicable prevailing wage rates with respect to the 
construction, alteration, or repair of a qualified facility and under 
section 45(b)(8)(A), that the required number of labor hours with 
respect to the construction of a qualified facility are performed by 
qualified apprentices. The burden to ensure that these requirements are 
met falls with the taxpayer. The final regulations do not adopt the 
suggestion to incorporate a safe harbor, but the penalty waiver in 
Sec.  1.45-7(c)(6) and described in Section VII.D.4. of this Summary of 
Comments and Explanation of Revisions provides an appropriately limited 
exception to corrections and penalty payments in the case of 
inadvertent errors.
    Similarly, one commenter requested that the final regulations 
permit contractors or subcontractors to make corrective payments on 
behalf of the taxpayer directly to laborers or mechanics. The 
correction and penalty provision in section 45(b)(7)(B)(i) requires 
that the taxpayer makes payment to the laborer or mechanic of the 
correction amount. The Treasury Department and the IRS appreciate 
commenters' suggestions to encourage methods that result in prompt 
correction payments to laborers and mechanics. Although the statute 
requires that the correction payment be made by the taxpayer to the 
laborers and mechanics, it does not prescribe the method by which the 
taxpayer must make payment. The final regulations similarly do not 
prescribe a specific method of payment and adopt the proposed rule 
without change. Regardless of how payments are made, taxpayers must 
maintain records demonstrating when and how correction payments were 
made.
    A few commenters suggested that the final regulations clarify the 
requirement that the taxpayer ensure that all laborers and mechanics 
employed by the taxpayer, or any contractor or subcontractor, are paid 
wages at rates not less than the prevailing rates applies to all 
subcontractors. Specifically, taxpayers stated that the DBA definition 
of subcontractor indicates that a subcontractor includes subcontractors 
of any tier, and suggested that the final regulations use the same term 
in the definition of subcontractor. The definition of subcontractor in 
the final regulations clarifies that the requirement applies to all 
subcontractors, including those who contract with other subcontractors.
    Another commenter suggested that the use of subcontractor labor 
providers, such as labor brokers, should be explicitly discouraged 
because of the risk of fraud. This suggestion is overbroad and 
inconsistent with the plain language of section 45, which anticipates 
the use of contractors and subcontractors. This suggestion is not 
adopted.
B. Transferability Pursuant to Section 6418
    The Treasury Department and the IRS requested comments on the 
application of the PWA correction and penalty provisions in the context 
of transferred credits. The credit available under section 45, 
including the increased credit amount available under section 45(b)(6), 
is an eligible credit subject to section 6418. Proposed Sec.  1.45-
7(c)(1)(iv) and proposed Sec.  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

[[Page 53198]]

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 Sec.  1.45-7(c)(1)(i) and (ii) and the penalty payment under 
proposed Sec.  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 Sec.  1.45-7(c)(1)(iv) or proposed Sec.  1.45-8(e)(2)(iv). 
Consequently, these final regulations adopt proposed Sec.  1.45-
7(c)(1)(iv) and proposed Sec.  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 Sec.  1.45-7(c)(1)(iv) and proposed Sec.  1.45-
8(e)(2)(iv), to the extent an eligible taxpayer transfers a credit 
increased pursuant to the PWA requirements, the obligation to satisfy 
the PWA requirements becomes binding upon the earlier of the filing of 
the eligible taxpayer's return for the taxable year for which the 
specified credit portion is determined with respect to the eligible 
taxpayer or the filing of the return of the transferee taxpayer for the 
year in which the specified credit portion is taken into account. One 
commenter stated that if the eligible taxpayer is a calendar year 
taxpayer and the transferee taxpayer is a fiscal year taxpayer, then 
the ability of the eligible taxpayer to make any correction or penalty 
payments may be shortened.
    Section 6418 and the final regulations thereunder (TD 9993) 
published in the Federal Register (89 FR 34770) on April 30, 2024 (6418 
Final Regulations), provide that the transferee taxpayer takes into 
account the transferred credit in the first taxable year ending on or 
after the taxable year of the eligible taxpayer with respect to which 
the credit was determined. Consequently, if an eligible taxpayer has a 
calendar year taxable year and the transferee taxpayer has a fiscal 
year taxable year, the transferee taxpayer's return due date generally 
will be after the eligible taxpayer's return due date. In the event a 
transferee taxpayer files a return that claims an increased credit 
amount transferred from an eligible taxpayer prior to the eligible 
taxpayer filing its return, the obligation to have satisfied the PWA 
requirements becomes legally binding upon the filing of the return of 
the transferee taxpayer. However, in any scenario, eligible taxpayers 
will have the ability to make any required correction and penalty 
payments as provided under section 45(b)(7)(B)(iv), which allows such 
payments to be made within 180 days of a determination by the IRS with 
respect to a failure regarding prevailing wages, or under section 
45(b)(8)(D)(i) with respect to apprenticeship failures. The transferee 
taxpayer filing its tax return before the eligible taxpayer does not 
shorten this period. Further, the eligible taxpayer and the transferee 
taxpayer are required to attach a transfer election statement 
describing specific details relating to the transaction, including any 
increased credit amounts, and prior to filing any tax returns, the 
parties should have verified eligibility under the PWA provisions. 
Therefore, the Treasury Department and the IRS did not revise the 
proposed rule in these final regulations.
    Commenters recommended specifying that if a credit amount increased 
pursuant to the PWA requirements is transferred to multiple transferee 
taxpayers, the responsibility to make correction and penalty payments 
remains indivisible with the eligible taxpayer. This comment is 
consistent with the Proposed Regulations, which did not distinguish 
between situations with one or multiple transferee taxpayers. These 
final regulations adopt the proposed rule without change.
    One commenter recommended that transferee taxpayers being 
transferred an eligible credit increased pursuant to the PWA 
requirements should be secondarily liable for any correction and 
penalty payments. The commenter stated that if the transferee taxpayer 
is not secondarily liable, then the amounts may not be paid because the 
eligible taxpayer will have already received the consideration from the 
transfer of the tax credit. Further, the commenter suggested that the 
transferee taxpayer should be required to keep the same records as the 
eligible taxpayer in order to demonstrate reasonable cause with respect 
to excessive credit transfers and should also be required to 
contractually bind the eligible taxpayer to meet the PWA requirements, 
indemnifying the transferee taxpayer for any such payments it is 
secondarily required to make.
    The Treasury Department and the IRS do not adopt these changes. As 
explained in the preamble to the Proposed Regulations, credit amounts 
increased pursuant to the PWA requirements are part of determining the 
eligible credit by the eligible taxpayer. The 6418 Final Regulations 
confirm that any specified credit portion is a proportionate share of 
the entire eligible credit, including any increases pursuant to the PWA 
requirements. Therefore, it is part of the eligible taxpayer's 
responsibility to satisfy the PWA requirements and requiring the 
eligible taxpayer to make any correction or penalty payments remains 
appropriate. Requiring the transferee taxpayer to be secondarily liable 
may inappropriately shift the responsibility to satisfy the PWA 
requirements. It is the responsibility of the transferee taxpayer under 
section 6418 and the 6418 Final Regulations to perform due diligence to 
show reasonable cause in the event of an excessive credit transfer, but 
changes to those rules are outside the scope of these final 
regulations. Additionally, specific recordkeeping requirements for the 
eligible taxpayer and transferee taxpayer(s) under section 6418 are 
addressed in the 6418 Final Regulations and are outside the scope of 
these final regulations.
    A commenter recommended that a transferee taxpayer should be able 
to rely on assurances from the eligible taxpayer that all covered work 
was performed under the terms of a qualifying project labor agreement 
(discussed in Section V.D. of this Summary of Comments and Explanation 
of Revisions) to demonstrate ``reasonable cause'' in the context of an 
excessive credit transfer relating to the PWA requirements. These final 
regulations do not adopt this suggestion as excessive credit transfers 
are outside the scope of these final regulations and are addressed in 
the 6418 Final Regulations.
C. Application to Indian Tribal Governments and the Tennessee Valley 
Authority
    The preamble to the Proposed Regulations explained that the 
statutory language of the IRA does not reflect any intent to include 
exceptions from the PWA requirements other than the BOC Exception and 
the One Megawatt Exception. Consequently, the Proposed Regulations 
would not have included a rule that would exempt Indian Tribal 
governments or the Tennessee Valley Authority (TVA) from the PWA 
requirements. The Treasury Department and the IRS requested comments on 
the need for any exceptions, including for Indian Tribal governments or 
the TVA, from the PWA requirements in addition to those expressly 
described in the statute.
1. Indian Tribal Governments
    In accordance with Executive Order 13175 (Consultation and 
Coordination with Indian Tribal governments) and Executive Order 14112 
(Reforming Federal Funding and Support for Tribal

[[Page 53199]]

Nations To Better Embrace Our Trust Responsibilities and Promote the 
Next Era of Tribal Self-Determination), the Treasury Department and the 
IRS support the right of Indian Tribes to self-govern and recognize 
that Indian Tribes exercise inherent sovereign powers over their 
members and territory. The Treasury Department and the IRS are guided 
by the fundamental principles in Executive Orders 13175 and 14112. 
Under those principles, the Treasury Department and the IRS have an 
obligation to consider the concerns raised by Tribes and, to the extent 
permitted by law, address those concerns in the final regulations.
    On September 25, 2023, the Treasury Department and the IRS held a 
Tribal consultation with Tribal leaders requesting assistance in 
addressing questions related to the PWA requirements in the Proposed 
Regulations. Through consultation and in response to the Proposed 
Regulations, the Treasury Department and the IRS received numerous 
comments regarding an exception to the PWA requirements for projects 
constructed by Indian Tribal governments. A number of commenters 
recommended that Indian Tribal governments should not be exempted from 
the PWA requirements and cited to the lack of statutory basis to grant 
an exception. In contrast, other commenters supported an exception to 
the PWA requirements for Indian Tribal governments.
A. Prevailing Wage Requirements and Indian Tribal Governments
    With respect to the Prevailing Wage Requirements, commenters 
suggested that requiring projects located on Tribal lands to comply 
with wage standards set by the DOL undermines Tribal sovereignty. Some 
commenters stated that the DOL provides an exception from the DOL 
prevailing wage rates for work done by Indian Tribal governments using 
their own employees, and advocated that the final regulations, at a 
minimum, contain a similar rule under the IRA.
    Commenters also stated that the DOL prevailing wage rates often are 
defined at the county level, which may include higher cost urban areas 
and could negatively impact projects on Tribal lands that often occur 
in the rural portions of such counties. These commenters stated that 
complying with wage standards set by the DOL for IRA projects could 
place additional administrative burdens on Tribes by requiring Tribes 
to administer two sets of prevailing wages (DOL prevailing wage 
standards for IRA projects and Tribal prevailing wage standards for 
other projects). As an alternative to permitting Indian Tribal 
governments to set their own prevailing wage rates for IRA projects, 
commenters suggested defining the term locality to include Tribal lands 
as a separate category to allow Tribes to submit a request to the DOL 
for a supplemental wage determination for that specific Tribal 
locality.
    With respect to the Prevailing Wage Requirements, the Treasury 
Department and the IRS continue to understand the statutory language of 
the Code as not reflecting an intent to entirely exempt Indian Tribal 
governments from the PWA requirements. The statutory language also does 
not reflect an intent to allow Indian Tribal governments to substitute 
their own prevailing wage rates for those generally required under the 
DBA.
    However, in accordance with Executive Order 14112, the final 
regulations provide two special rules that apply to Indian Tribal 
governments (including a subdivision, agency, or instrumentality of an 
Indian Tribal government). First, the final regulations provide that an 
Indian Tribal government, as defined in section 30D(g)(9) of the Code, 
is excepted from the Prevailing Wage Requirements under the IRA with 
respect to laborers and mechanics that are employees, within the 
meaning of section 3121(d)(2), of the Indian Tribal government. This 
rule also applies to joint ownership arrangements that involve an 
Indian Tribal government (including a subdivision, agency, or 
instrumentality of an Indian Tribal government), but only with respect 
to the employees, within the meaning of section 3121(d)(2), of the 
Indian Tribal government. As stated in some comments from Tribes, the 
DOL provides an exception from the DOL prevailing wage rates for work 
done by Tribal governments using their own employees. Specifically, 
under the DBA, a government agency may perform construction work in-
house with its own employees rather than contract out the work. Work 
performed by these employees generally is not subject to the DBA 
requirements because governmental agencies are not considered 
contractors or subcontractors under the DBA. This is known as the force 
account exception. The DOL has explained that in cases in which an 
Indian Tribal government performs work with its own employees, the 
force account exception to the DBA generally applies and the Tribal 
government is not required to pay DOL-determined prevailing wages for 
work done by its own employees. Tribes historically have relied on this 
exception. Under these final regulations, Tribes may continue that 
practice for purposes of the Prevailing Wage Requirements under the 
IRA.
    Second, the Treasury Department and the IRS recognize that Tribal 
lands generally are not coextensive with a single geographic area for 
which the DOL may have made an applicable wage determination. Comments 
from Tribes requested that the final regulations define the term 
``locality'' to include Tribal lands as a separate category to allow 
Tribes to submit a request to the DOL for a supplemental wage 
determination for specified Tribal lands. However, defining locality in 
this way would require that the DOL establish a new administrative 
process to implement a unique wage determination for Tribal lands; that 
process is outside of the authority of the Treasury Department and the 
IRS. Thus, these final regulations do not change the definition of 
locality to include Tribal lands as a separate category.
    However, recognizing that Tribal lands are sovereign territories 
that may encompass or overlap with numerous geographic areas, the final 
regulations provide a special rule for Indian Tribal governments that 
perform construction, alteration, or repair of a facility on Indian 
land, as that term is defined in 25 U.S.C. 3501(2). Specifically, if 
the Indian land encompasses or overlaps more than one geographic area 
with respect to which the DOL has made an applicable wage 
determination, then the Indian Tribal government may choose the 
applicable wage determination for any one of those geographical areas 
and apply that applicable wage determination for work performed on any 
qualified facility that is located on the Indian land. If the Indian 
Tribal government chooses to use this alternative applicable wage 
determination, it must maintain and preserve records sufficient to 
document the applicable prevailing wage for each laborer, contractor, 
or subcontractor with respect to each qualified facility on Indian 
land. This rule applies to a qualified facility that is subject to 
joint ownership arrangements that involve an Indian Tribal government 
(including a subdivision, agency, or instrumentality of an Indian 
Tribal government). This rule is intended to ease the administrative 
burden on Indian Tribal governments because they can use a single 
applicable wage determination for all projects on Indian land.

[[Page 53200]]

b. Apprenticeship Requirements and Indian Tribal Governments
    Regarding the Apprenticeship Requirements, some commenters 
supported an exception for Indian Tribal governments and stated that 
Tribes may have limited access to registered apprenticeship programs. 
These commenters stated that Tribal members may face burdens associated 
with participating in existing State registered apprenticeship programs 
that are located many miles away. A commenter requested clarification 
regarding whether Tribes, like States, have the sovereign and 
jurisdictional authority to develop and certify their own 
apprenticeship programs rather than being required to use the DOL 
approval process. The same commenter requested that the Treasury 
Department and the IRS review and report on any barriers that may 
disproportionately prevent Tribes from fulfilling the Apprenticeship 
Requirements. Commenters suggested that if Indian Tribal governments do 
not have authority to certify their own programs, then the 
Apprenticeship Requirements could force Tribal governments to rely on 
State or Federal apprenticeship programs, which may frustrate Indian 
Tribal governments' efforts to develop their Tribal workforce.
    Commenters supporting an Indian Tribal government exception to the 
Apprenticeship Requirements also stated that the Good Faith Effort 
Exception places too much onus on Indian Tribal governments to obtain 
qualified apprentices. These commenters suggested that Indian Tribal 
governments could need to submit multiple requests to multiple 
apprenticeship programs and that Indian Tribal governments could need 
to search across non-Tribal areas to meet the Good Faith Effort 
Exception. These commenters suggested that the statute did not require 
this level of apprenticeship coverage. Commenters also stated that the 
Good Faith Effort Exception may not be met if a registered 
apprenticeship program can meet some, but not all of requests for 
qualified apprentices, and suggested that the Good Faith Effort 
Exception should be satisfied if a registered apprenticeship program 
could not fulfill more than 50 percent of a taxpayer, contractor, or 
subcontractor's request. These commenters also suggested that the Good 
Faith Effort Exception should be satisfied if a local registered 
apprenticeship program cannot provide more than 50 percent of the 
requested qualified apprentices. Commenters also stated that the Good 
Faith Effort Exception is unreasonable for Indian Tribal governments in 
rural areas because of the limited access to registered apprenticeship 
programs. Finally, another commenter suggested creating a database for 
taxpayers to find Tribal apprenticeship programs within their State.
    With respect to the Apprenticeship Requirements, the Treasury 
Department and the IRS recognize that there may be a limited number of 
registered apprenticeship programs with an area of operation that 
includes the geographic location of a facility located on Tribal lands. 
As explained in Section VIII.B.1.f. of this Summary of Comments and 
Explanation of Revisions, the final regulations clarify the scope of 
the Good Faith Effort Exception with respect to situations in which 
only part of the request is denied. The final regulations confirm that 
if there is no registered apprenticeship program with a geographic area 
of operation that includes the location of the facility, taxpayers will 
be deemed to satisfy the Good Faith Effort Exception for the qualified 
apprentices they (or the contractor or subcontractor) would have 
requested for that occupation and location.
    Indian Tribal governments may also consider sponsoring their own 
registered apprenticeship programs to satisfy the Apprenticeship 
Requirements. The National Apprenticeship Act (NAA) of 1937 (29 U.S.C. 
50) authorizes the Secretary of Labor to formulate and promote the 
furtherance of labor standards necessary to safeguard the welfare of 
apprentices. The Treasury Department and the IRS have consulted with 
the DOL OA and understand based on that discussion that although 
neither the text of the NAA, nor the content of the NAA's implementing 
regulations at 29 CFR parts 29 and 30, explicitly addresses Indian 
Tribes, Indian Tribal governments may sponsor registered apprenticeship 
programs and obtain registration of such a Tribal apprenticeship 
program by a State or Federal governmental agency that has been 
designated for that purpose.
    Federal apprenticeship regulations (see 29 CFR part 29) authorize 
the DOL to grant recognition, for Federal purposes, to State 
apprenticeship agencies for the purpose of registering and overseeing 
apprenticeship programs that operate within their respective 
jurisdictions, provided that such State apprenticeship agencies operate 
in accordance with the minimum standards for State apprenticeship 
agencies that are established by Federal apprenticeship regulations. 
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-to-nation 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.
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

[[Page 53201]]

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 Sec.  1.45-7(c)(6)(ii) would have provided that in order to be 
considered a qualifying project labor agreement, such agreement must at 
a minimum: (i) bind all contractors and subcontractors on the 
construction project through the inclusion of appropriate 
specifications in all relevant solicitation provisions and contract 
documents; (ii) contain guarantees against strikes, lockouts, and 
similar job disruptions; (iii) set forth effective, prompt, and 
mutually binding procedures for resolving labor disputes arising during 
the term of the project labor agreement; (iv) contain provisions to pay 
prevailing wages; (v) contain provisions for referring and using 
qualified apprentices consistent with section 45(b)(8)(A) through (C) 
and guidance issued thereunder; and (vi) be a collective bargaining 
agreement with one or more labor organizations (as defined in 29 U.S.C. 
152(5)) of which building and construction employees are members, as 
described in 29 U.S.C. 158(f).
    The Treasury Department and the IRS requested comments on the 
proposed treatment of PLAs, other ways taxpayers might use PLAs to meet 
the PWA requirements, and the proposed definition of a qualifying 
project labor agreement. Several comments were received addressing the 
proposed treatment of PLAs under the Proposed Regulations.
    Several commenters asserted that the Treasury Department and the 
IRS should not exempt taxpayers using PLAs from the penalty payment 
requirements. Commenters stated that the proposed rule violates the 
plain text of the IRA, which includes no PLA provision and does not 
authorize the waiver of intentional violations and additional penalties 
based on a clean energy project developer's inclusion of a PLA 
requirement in its solicitation for construction services. Several 
commenters stated that the IRS should not incentivize or coerce the use 
of PLAs through a penalty waiver or other benefit. Commenters suggested 
that PLAs will discourage taxpayers from using their existing 
workforce. Commenters were also concerned with PLAs increasing the cost 
of construction. Another commenter suggested that PLA mandates would 
likely lead to a decrease in hiring of local, minority, women, veteran, 
and other potentially disadvantaged groups. Other commenters stated 
that encouraging labor unions was not the intent of the IRA. A 
commenter also asserted that PLAs force contractors to replace 
employees with workers from unions, undermine workforce development 
strategies, force contractors to follow inefficient union work rules, 
expose workers to wage theft, and expose employers to multiemployer 
pension plan liabilities. The commenter also asserted that PLA mandates 
force employees to join a union and pay dues and discourage competition 
from nonunionized contractors. The commenter claimed that strikes have 
occurred on PLA projects and that PLAs will not improve efficiency in 
terms of safety, quality, or project delivery.
    In contrast, other commenters asserted that PLAs help ensure 
compliance with the PWA requirements. Several commenters requested that 
taxpayers certifying that construction of a facility is subject to a 
PLA or a collective bargaining agreement should be entitled to a safe 
harbor or a rebuttable presumption of compliance with the PWA 
requirements. Commenters asserted that such a presumption would be 
warranted because PLAs provide assurances of compliance and contractors 
operating under PLAs typically pay wages at rates that are at or above 
the prevailing wage rates. At least one commenter suggested that the 
final regulations should clarify that a taxpayer is deemed to have 
satisfied the PWA requirements, including recordkeeping requirements, 
if the taxpayer can provide proof of a valid PLA.
    Other commenters suggested that the final regulations create a two-
tier compliance structure under which participants with PLAs are 
awarded a presumption of compliance on several requirements (or limited 
review by the IRS on examination) while other taxpayers not 
participating in PLAs should be subjected to heightened scrutiny by the 
IRS. A commenter stated that, in the absence of a PLA, violations of 
PWA requirements would be more prevalent. Therefore, the commenter 
suggested increasing the oversight and noncompliance penalties for non-
PLA projects, mandating robust recordkeeping requirements for 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

[[Page 53202]]

goals, and community engagement requirements. Contrary to some 
commenters' concerns, the final regulations do not require non-union 
employees to join a union or to pay union dues. The National Labor 
Relations Act permits employees to choose not to join a union in their 
workplace. 29 U.S.C. 157. Non-members may choose not to pay union dues 
and instead pay agency fees that cover only the share of dues used 
directly for representation, such as for collective bargaining or 
grievance procedures. Moreover, the final regulations do not require 
any taxpayer to sign a PLA.
---------------------------------------------------------------------------

    \22\ Emma Waitzman & Peter Philips, UC Berkeley Labor Ctr., 
Project Labor Agreements and Bidding Outcomes: The Case of Community 
College Construction in California 3,51 (2017) ((finding no 
statistically significant difference in costs between PLA and non-
PLA projects); Peter Philips & Scott Littlehale, Did PLAs on LA 
Affordable Housing Projects Raise Construction Costs? (Univ. of Utah 
Dep't of Econ., Working Paper No. 2015-03, 2015) (finding no 
statistically significant difference in costs between PLA projects 
and non-PLA projects); Cong. Research Serv., R41310, Project Labor 
Agreements at 9 (2012) (surveying the empirical literature about the 
effects of PLAs on costs and finding that it was inconclusive).
---------------------------------------------------------------------------

    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 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 Sec.  1.45-7(c)(6)(ii) applies to both base penalty amounts 
and any enhanced penalty due to intentional disregard. Similarly, 
commenters requested clarifying the impact of using a PLA on any 
required correction payments. Commenters also asked for the final PWA 
rules to clarify that the agreed-upon wages under a PLA are prevailing 
wages for the purposes of PWA requirements. At least one commenter 
asked whether agreed-upon wages under a PLA or a collective bargaining 
agreement could be treated as the prevailing wage for PWA purposes. 
Another commenter explained that generally, under a PLA, the taxpayer 
must pay the wage rates negotiated with the union, which are often 
higher than the prevailing wage rates set forth in DOL wage 
determinations, but under the Proposed Regulations, taxpayers must pay 
the prevailing wage rate, even if that is lower. Another commenter 
stated that asking contractors to comply with prevailing wage rates, 
which may be based on union work rates contained in collective 
bargaining agreements not publicly available, could add risk for 
contractors and reduce competition, especially from small businesses.
    Additional commenters requested permitting taxpayers to satisfy the 
Apprenticeship Requirements in the case of a PLA that includes a 
preference to use qualified apprentices, even if the PLA does not 
require compliance with all the Apprenticeship Requirements under 
section 45(b)(8). A commenter asserted that the criteria that the PLA 
must contain provisions for referring and using qualified apprentices 
consistent with section 45(b)(8)(A) through (C) and guidance issued 
thereunder was circular and did not align with PLAs generally. The 
commenter explained that the requirement that the PLA incorporate the 
IRA apprenticeship rules undercuts the PLA exception and makes it 
superfluous. An additional commenter suggested clarifying that a PLA 
for PWA purposes should allow taxpayers to use both union and non-union 
registered apprenticeship programs. A commenter also suggested revising 
the definition of a PLA to include a requirement for referring and 
using qualified journeyworkers. Similarly, a commenter asked whether a 
taxpayer may use the journeyworker-to-apprentice ratio under a PLA or a 
collective bargaining agreement for PWA purposes.
    Some commenters requested that the final regulations provide that 
PLA provisions regarding hiring union workers be optional and that 
exceptions be explicitly provided for circumstances in which union 
labor is not available. Commenters suggested that the final regulations 
should permit contractors who sign a PLA to use their own work rules 
independent of union collective bargaining agreements. One commenter 
stated that PLAs must not require payment into union benefit funds as 
long as contractors have bona fide benefits and are satisfying DBA 
standards. Similarly, a commenter recommended that the final 
regulations provide that PLAs can only require the payment of union 
dues and fringe benefits for the duration of the contract.
    A commenter requested that the final regulations adopt the 
definition for a qualifying project labor organization, largely based 
in Executive Order 14063

[[Page 53203]]

(Use of Project Labor Agreements for Federal Construction Projects), 
and permit contractors and subcontractors to compete for contracts and 
subcontracts regardless of whether they are a party to a collective 
bargaining agreement. The commenter also suggested revising the 
definition of labor organizations to require some affiliation with a 
registered apprenticeship program.
    A commenter recommended incentivizing taxpayers using a PLA to 
comply with all of the PLA's provisions, not just PWA-related 
provisions. The commenter stated that a subset of PLAs (known as 
community workforce agreements) include provisions beyond the elements 
defined in the Proposed Regulations. Additionally, a commenter 
recommended requiring service maintenance workers, like custodians, be 
included and covered under PLAs used for PWA purposes.
    Further, a commenter suggested that recordkeeping related to PLAs 
be limited to producing a valid PLA covering all laborers and mechanics 
at the site of work. The commenter also stated that it would be helpful 
to clarify the role of collective bargaining agreements and a master 
agreement, as well as the eligible status, if any, of PLAs entered and 
covering periods before the publication of the proposed rules in the 
Federal Register. The commenter also requested guidance concerning 
whether the PLA exception still applies if some, but not all, 
contractors are able to meet the PLA requirements.
    Additionally, a commenter suggested that the PWA rules align the 
criteria for PLAs with the provisions of commonly used PLA templates or 
that the final regulations adopt a new template. The commenter stated 
that the proposed rules presented six criteria for qualifying PLAs, but 
many widely used PLA templates do not meet all six criteria.
    The Treasury Department and the IRS agree with the comment to 
clarify that proposed Sec.  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 Sec.  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 provisions for referring and 
using qualified apprentices consistent with section 45(b)(8)(A) through 
(C) and guidance issued thereunder. The statute defines qualified 
apprentice and provides the Apprenticeship Requirements. Accordingly, 
the final regulations do not adopt comments to modify the 
Apprenticeship Requirements for a qualifying project labor agreement.
    Regarding additions to the proposed definition of qualifying 
project labor agreement, the Treasury Department and the IRS considered 
these comments and have not adopted these comments in the final 
regulations. Specific requirements or contractual language in a PLA may 
arbitrarily exclude many PLAs from the proposed definition of a 
qualifying project labor agreement for reasons unrelated to ensuring 
compliance with the PWA requirements. A PLA is a negotiated contract 
and parties must have the appropriate flexibility to negotiate 
provisions. Nothing in the final regulations precludes parties from 
negotiating additional local hire, equity, or community engagement 
provisions in 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-unionized 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

[[Page 53204]]

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 credit, a collective bargaining 
agreement provides workers conducting an alteration or repair the same 
assurances of up-front compliance that a PLA would, including union 
oversight and private enforcement. A taxpayer that has a collective 
bargaining agreement for a qualified nuclear facility that meets 
minimum requirements analogous to the minimum requirements for a 
qualifying project labor agreement should also benefit from the rule 
that penalties do not apply if any correction payment owed to a laborer 
or mechanic is paid before the increased credit amount is claimed. In 
response to the comments, the final regulations modify the definition 
of qualifying project labor agreement for section 45U. For purposes of 
section 45U, in order to be a qualifying project labor agreement, such 
agreement must, at a minimum: (i) be a collective bargaining agreement 
with a one or more labor organizations (as defined in 29 U.S.C. 152(5)) 
of which employees of the qualified nuclear power facility are members 
and such agreement establishes the terms and conditions of employment 
at the qualified nuclear power facility; (ii) contain guarantees 
against strikes, lockouts, and similar job disruptions; (iii) set forth 
effective, prompt, and mutually binding procedures for resolving labor 
disputes arising during the term of the collective bargaining 
agreement; and (iv) contain provisions to pay wages at rates not less 
than the prevailing wages in accordance with subchapter IV of chapter 
31 of title 40 of the United States Code.

VI. Applicable Scope of the PWA Requirements

    Section 45(b)(7)(A) provides that with respect to any qualified 
facility, the taxpayer must ensure that any laborers and mechanics 
employed by the taxpayer or any contractor or subcontractor in ``the 
construction of such facility'' and for the 10-year period after the 
facility is placed in service, ``the alteration or repair of such 
facility'' are paid wages at rates not less than the applicable 
prevailing wage rates. Under section 45(b)(7)(A)(ii), the prevailing 
wage rates that are required to be paid with respect to such 
construction, alteration, or repair are determined by reference to the 
prevailing rates for construction, alteration, or repair of a similar 
character in the locality in which such facility is located.
    Section 45(b)(8) sets forth the Apprenticeship Requirements that 
apply ``with respect to the construction of any qualified facility.'' 
Under the Labor Hours Requirement, section 45(b)(8)(A)(i) provides that 
taxpayers must ensure ``with respect to the construction of any 
qualified facility'' that the applicable percentage of the total labor 
hours is performed by qualified apprentices. Under the Participation 
Requirement, section 45(b)(8)(C) provides that each taxpayer, 
contractor, or subcontractor who employs four or more individuals ``to 
perform construction, alteration, or repair work with respect to the 
construction of a qualified facility'' must employ one or more 
qualified apprentices.
    The Proposed Regulations would have defined the scope of taxpayers' 
obligation to comply with the PWA requirements consistent with this 
statutory language. Under the Proposed Regulations, taxpayers would 
have been required to comply generally with respect to the construction 
of a qualified facility. The Proposed Regulations did not define the 
meaning of construction of a qualified facility for purposes of either 
the Prevailing Wage Requirements or the Apprenticeship Requirements.
    Proposed Sec.  1.45-7(d)(2)(i) would have defined ``construction, 
alteration, or repair'' to mean construction, prosecution, completion, 
or repair as defined in 29 CFR 5.2. Under 29 CFR 5.2, construction, 
prosecution, completion, or repair is defined expansively to include 
``all types of work'' done on a particular building or work at the site 
of the work, as defined in 29 CFR 5.2, by laborers and mechanics 
employed by a contractor or subcontractor. This work includes altering, 
remodeling, installing of items fabricated offsite; painting and 
decorating; manufacturing or furnishing of materials, articles, and 
supplies or equipment on the site of the work; and certain demolition 
or removal activities.
    Under the Proposed Regulations, the scope of the requirement to pay 
wages at rates not less than the prevailing rates would be clarified by 
the ``site of the work'' definition under the DBA. Under the DBA, the 
requirement to pay prevailing wages is limited by statute to work 
performed ``directly on the site of the work.'' \23\ Under the DBA, 
secondary construction sites are considered part of the site of the 
work if a significant portion of a building or work is constructed at 
the secondary site for specific use in the designated building or work 
and the site either was established specifically for the performance of 
the covered contract or project or dedicated exclusively, or nearly so, 
to the covered contract or project for a specific period of time. By 
comparison, section 45(b)(7)(A)(i) and (ii) requires the payment of 
prevailing wages generally in the construction of a qualified facility 
and the alteration or repair of such facility. As explained in the 
preamble to the Proposed Regulations, the language of section 
45(b)(7)(A) could be, but does not need to be, interpreted to support 
an expansive reading of construction such that all construction of a 
qualified facility, wherever located and however small, would be 
subject to the Prevailing Wage Requirements, resulting in a 
significantly broader scope under section 45(b)(7) than under the DBA. 
The Proposed Regulations would have taken a less expansive reading and 
applied the scope of the Prevailing Wage Requirements to the site of 
the work, consistent with the DBA rules.
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    \23\ 40 U.S.C. 3142(c)(1).
---------------------------------------------------------------------------

    The Treasury Department and the IRS understood the DBA approach to 
the site of the work as providing useful guidance for balancing the 
requirements to pay wages at rates not less than prevailing rates with 
respect to the construction of a qualified facility and existing 
construction practices in cases in which some construction activities 
related to a facility may occur in multiple locations. This approach is 
also consistent with the principle outlined in Section I.A. of this 
Summary of Comments and Explanation of Revisions to incorporate the DBA 
requirements that are relevant for claiming the increased credit amount 
and consistent with sound tax administration. The Proposed Regulations 
would have largely adopted

[[Page 53205]]

the DBA approach (including rules relating to secondary sites) for 
purposes of defining the scope of the Prevailing Wage Requirements in 
proposed Sec.  1.45-7(d)(6). Under proposed Sec.  1.45-7(d)(6), 
taxpayers would have been subject to the requirement to ensure that 
laborers and mechanics are paid wages at rates not less than prevailing 
wage rates with respect to the construction, alteration, or repair at 
the locality in which the facility is located, which is defined to 
include any secondary sites where a significant portion of the 
construction, alteration, or repair of the facility occurs, provided 
that the secondary site either was established specifically for, or 
dedicated exclusively for a specific period of time to, the 
construction, alteration, or repair of the facility.
    Many commenters requested clarification of how the definition and 
the site of the work DBA-concept applies across the various Code 
sections for purposes of determining what work performed in the 
construction, alteration, or repair of a qualified facility is subject 
to the Prevailing Wage Requirements. Commenters also emphasized that 
the site of work definition must reflect the expanded realities of 
modern construction practices, under which a large and growing 
percentage of construction, alteration, and repair work is performed 
offsite through either prefabrication, modularization, or both. A 
commenter recommended that the site of work definition account for 
recent technological developments in which the COVID-19 pandemic 
magnified the need to build spaces that can be rapidly adjusted. A 
commenter stated that a number of legal challenges to newly added 
provisions to the regulations under the DBA are expected to be filed, 
creating ambiguity and a lack of reliability. Commenters also suggested 
providing specific examples relevant to clean energy projects.
    Commenters requested that the site of work for PWA purposes no 
longer incorporate the DOL definition, based on the DBA. Commenters 
opined that site of the work for PWA purposes should not be based on 
the scope of the DBA and should not extend to offsite or secondary 
construction sites, including manufacturing sites, access roads, 
substations, buildings, and similar property. Commenters argued that 
incorporating the DOL definition of site of the work leads to an overly 
broad application of the PWA requirements to such activities as offsite 
manufacturing facilities, dedicated production lines, or modular 
facilities that service multiple projects but that may service a single 
large project for an extended period of time--which is not uncommon in 
the clean energy industry. Commenters also sought guidance concerning 
the treatment of property such as access roads and substations that may 
not be eligible property associated with a qualified facility resulting 
in a scope of the PWA requirements reaching beyond the qualified 
facility that is eligible for the increased credit amount. One 
commenter stated that the incorporation of the site of work may subject 
some taxpayers to different enforcement schemes because the projects 
may be subject to State or local prevailing wage laws.
    Commenters also suggested that if the DBA approach is adopted in 
the final rule, that any discussion of secondary manufacturing 
facilities distinguish with examples between genuine offsite 
manufacturing activities and those that the newly expanded DBA 
definition would include. Commenters requested that the Prevailing Wage 
Requirements not apply to manufacturing facilities, dedicated 
production lines, prefabrication facilities, laydown yards, or ``mod-
yard'' locations that generally service multiple projects and 
customers. A commenter requested that the final regulations clarify 
that structures established prior to the start of construction of the 
qualified facility are not covered by the phrase ``site of the work'' 
irrespective of their adjacency or dedication to that site. The 
commenter also suggested that adjacent or virtually adjacent locations 
should not be covered by the PWA requirements if they exceed a 2-mile 
perimeter.
    In contrast, other commenters urged the Treasury Department and the 
IRS to use the DBA site of work definition for the PWA requirements, 
including secondary sites that are established specifically for the 
performance of the covered contract or project or dedicated 
exclusively, or nearly so, to the covered contract or project for a 
specific period of time. These commenters emphasized the lack of 
statutory language in the IRA limiting the application of prevailing 
wage rules based on where work in furtherance of the project is 
performed and also suggested defining site of work to cover all 
locations where construction of a covered project is performed. Another 
commenter claimed that Congress deliberately chose to draft section 
45(b)(7)(A) in broader terms than the DBA and recommended that the 
final regulations apply to all construction sites where integral 
components of the facility are constructed and dedicated support sites. 
Commenters recommended that the IRS follow DBA court decisions and 
mirror the considerations of DBA regulations.
    The Treasury Department and the IRS agree with commenters that 
additional clarity is warranted with respect to defining the scope of 
the PWA requirements. The Prevailing Wage Requirements apply with 
respect to the construction of a facility and with respect to the 
alteration or repair of a facility. The Apprenticeship Requirements 
apply with respect to construction of a facility. While the terms 
construction, alteration, and repair draw meaning from the DBA, 
Congress did not qualify the scope of such activities by the site of 
the work rule found explicitly in the DBA in defining the scope of the 
PWA requirements under the IRA. Instead, section 45(b)(7) and (8) limit 
the scope of construction, alteration, or repair to those activities 
occurring with respect to a qualified facility. The term qualified 
facility (as described in section 45 and guidance thereunder) has 
specific meaning for tax purposes.\24\
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    \24\ See, e.g., Rev. Rul. 94-31, 1994-1 C.B. 16.
---------------------------------------------------------------------------

    The final regulations clarify that the PWA requirements apply with 
respect to a qualified facility within the meaning of section 45. The 
Treasury Department and the IRS recognize that only a portion of a 
construction project may be used to produce energy covered by the IRA 
tax credits. Under the general rule provided for in the final 
regulations, the PWA requirements apply to the portion of the activity 
that is creditable or deductible per the Code under the respective 
underlying section.\25\
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    \25\ Accordingly, as applicable, the PWA requirements apply 
under section 30C with respect to a qualified alternative fuel 
vehicle refueling project described in section 30C(g)(1)(B) 
(consisting of one or more qualified properties within the meaning 
of section 30C(c) that are part of a single project); under section 
45L with respect to a qualifying residence described in section 
45L(a)(2)(B) (that meets the requirements of section 45L(c)(1)(A) or 
(B), as applicable); under section 45Q, with respect to a qualified 
facility and any carbon capture equipment placed in service at that 
facility within the meaning of section 45Q(d); under section 45U 
with respect to a qualified nuclear power facility within the 
meaning of section 45U(b); under section 45V with respect to a 
qualified clean hydrogen production facility within the meaning of 
section 45V(c)(3); under section 45Y with respect to a qualified 
facility within the meaning of section 45Y(b); under section 45Z, 
with respect to a qualified facility within the meaning of section 
45Z(d)(4) producing transportation fuel (as defined in section 
45Z(d)(5)) or sustainable aviation fuel (as defined in section 
45Z(a)(3)(B)); under section 48C, with respect to a qualified 
investment (as defined in section 48C(b)) in a qualifying advanced 
energy project within the meaning of section 48C(c)(1)(A); and under 
section 179D, with respect to energy efficient commercial building 
property within the meaning of section 179D(c)(1), and energy 
efficient building retrofit property pursuant to a qualified 
retrofit within the meaning of section 179(f); and in each case 
including any guidance issued thereunder the relevant Code section.

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[[Page 53206]]

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

VII. Prevailing Wage Requirements

A. In General
    Section 45(b)(7)(A)(i) requires that with respect to a qualified 
facility, taxpayers who are seeking an increased credit amount ensure 
that laborers and mechanics employed by the taxpayer, or any contractor 
or subcontractor in the construction of such facility are paid wages at 
rates not less than the prevailing rates determined by the DOL in 
accordance with the DBA. Section 45(b)(7)(A)(ii) further requires that 
prevailing wages are paid with respect to alteration or repair of a 
qualified facility for any portion of a taxable year that is within the 
10-year period beginning on the date the qualified facility was placed 
in service. Proposed Sec.  1.45-7(a) generally would have provided that 
a taxpayer claiming or transferring (under section 6418) the increased 
credit amount under section 45(b)(6)(B)(iii) with respect to any 
qualified facility must satisfy the requirements of section 45(b)(7) 
and proposed Sec.  1.45-7. Proposed Sec.  1.45-7(b)(1) would have 
provided that a taxpayer needs to ensure that the wages paid to 
laborers and mechanics employed by the taxpayer, contractor, or 
subcontractor in the construction, alteration, or repair of the 
facility must be not less than the prevailing rates in the geographic 
area in which such facility is located. Proposed Sec.  1.45-7(b)(6) 
would have provided that all laborers and mechanics working on a 
qualified facility must be paid in the time and manner consistent with 
the regular payroll practices of the taxpayer, contractor, or 
subcontractor.
    A few commenters requested that the final regulations require 
taxpayers, contractors, and subcontractors to adopt weekly payroll 
practices, as is required for DBA-covered contracts. The commenters 
stated that requiring weekly payroll would deter fraud and enable 
taxpayers to ensure that contractors and subcontractors comply with PWA 
requirements. Many other commenters supported the payment of prevailing 
wages consistent with the taxpayer's regular payroll practices. The 
commenters supported the flexibility of the proposed rule and stated 
that a weekly payroll requirement would not assist the IRS in 
administering the PWA requirements.
    Section 45(b)(7) requires that laborers and mechanics be paid wages 
at rates not less than the prevailing rates; there is no statutory 
requirement that laborers and mechanics must be paid on a weekly basis. 
As several commenters stated, taxpayers, contractors, and 
subcontractors should have the flexibility to pay their workers in 
accordance with their ordinary payroll schedules. For these reasons, 
these final regulations adopt the proposed rule requiring payment in 
the time and manner consistent with the regular payroll practices 
without change.
    A commenter requested that the final regulations provide an 
exception for effective compliance with the Prevailing Wage 
Requirements. The limited penalty waiver in Sec.  1.45-7(c)(6) and 
described in Section VII.D.4. of this Summary of Comments and 
Explanation of Revisions provides sufficient relief for inadvertent, 
minor errors. Another commenter suggested clarifying whether a taxpayer 
would be deemed to satisfy the Prevailing Wage Requirements for a given 
year after a facility is placed in service if neither alterations nor 
repairs were performed during that year. The final regulations clarify 
that after a facility is placed in service, taxpayers are only required 
to meet the Prevailing Wage Requirements with respect to alterations 
and repairs if alterations or repairs are actually performed during the 
relevant period.\26\ The final regulations also provide that if there 
is no alteration or repair that occurs during the relevant year, the 
taxpayer is deemed to satisfy the Prevailing Wage Requirements with 
respect to that year.
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    \26\ This rule does not apply with respect to sections 30C, 45L, 
48C, and 179D as those Code sections do not include a continuing 
obligation for the payment of prevailing wages with respect to any 
alterations or repairs that occur after the placed in service date.
---------------------------------------------------------------------------

    Commenters asked that the final regulations clarify whether the 
applicable prevailing wage rate is based on where the project is being 
constructed or where the contractor is performing their work. Another 
commenter stated that in most cases the wages paid are based on the 
local market where the contractor or subcontractor obtains their labor. 
Section 45(b)(7)(A) provides that the prevailing wage rate is based on 
the locality of the facility that is being constructed. The Proposed 
Regulations similarly would have provided that the wage rates must be 
not less than the prevailing rates in the geographic area in which such 
facility is located. The final regulations continue to use the DBA 
concept of site of the work to address construction of a qualified 
facility that occurs at one or more secondary locations. The applicable 
prevailing wage rate that must be paid to laborers and mechanics is 
determined by the location of the work performed, which may be the 
location of the qualified facility or any secondary locations.
    The Proposed Regulations would have provided a special rule for 
qualified facilities located offshore so taxpayers would not need to 
request a supplemental wage determination for offshore facilities. 
Under the Proposed Regulations, in lieu of requesting a supplemental 
wage determination for a facility located in an offshore area within 
the outer continental shelf of the United States, a taxpayer, 
contractor, or subcontractor would be permitted to rely on the general 
wage determination for the relevant category of construction that is 
applicable in the geographic area closest to the area in which the 
qualified facility will be located. To the extent that the PWA 
requirements apply to onshore activities related to an offshore wind 
facility, one commenter suggested clarifying that the locality in which 
such onshore activities occur, and not where the offshore wind facility 
is located, would determine prevailing wage rates for those activities. 
A commenter expressed their support for permitting offshore facilities 
to use the general wage determination applicable

[[Page 53207]]

to the closest onshore area to the facility. The proposed rule is 
adopted without change. Onshore activities that are also considered 
construction of a facility within the scope of the PWA requirements 
must pay wages at rates not less than the applicable prevailing rates 
for the location of the work performed.
B. Determining the Applicable Prevailing Wage Rate
1. General Wage Determinations
    Section 45(b)(7)(A) requires that with respect to a qualified 
facility, taxpayers who are seeking an increased credit amount ensure 
that laborers and mechanics employed by the taxpayer, or any contractor 
or subcontractor, in the construction, alteration, or repair of such 
facility are paid wages at rates not less than the prevailing rates as 
most recently determined by the DOL in accordance with the DBA. As 
stated in the preamble to the Proposed Regulations, prevailing wage 
rates are those determined to be prevailing for laborers and mechanics 
for the various classifications of work performed with respect to a 
specified type of construction in a geographic area. Under the Proposed 
Regulations, prevailing wage rates would be determined by the DOL in 
accordance with the DBA if they are issued and published by the DOL as 
a general wage determination or if issued to a taxpayer as part of a 
supplemental wage determination or pursuant to a request for a wage 
rate for an additional classification.
    With respect to the proper timing of a wage determination, proposed 
Sec.  1.45-7(b)(5) would have provided that the applicable prevailing 
wage rates on a general wage determination are those in effect at the 
time construction, alteration, or repair of the facility begins, and 
generally remain valid for the duration of the work performed with 
respect to the construction, alteration, or repair of the facility by 
the taxpayer, contractor, or subcontractor. Taxpayers who perform any 
alteration or repair of a facility after the facility is placed in 
service would have been required to use the applicable wage 
determination in effect at the time the alteration or repair work 
begins.
    Commenters suggested aligning the timing of wage determinations 
with the DOL regulations under the DBA, including updates to the DBA 
regulations released in August of 2023, to minimize taxpayer confusion. 
Several commenters requested that the final regulations provide that 
prevailing wage rates be established for the entire project when 
construction contracts are executed, not when construction begins, 
consistent with the DBA. Commenters emphasized that prevailing wage 
determinations are an important factor in determining the cost of labor 
and that project costs need to be known ahead of time to accurately bid 
on contracts. Commenters asserted that waiting until construction 
begins to determine labor costs will lead to financial uncertainty and 
may discourage participation in construction projects by many 
contractors because contractors need to know what the prevailing wage 
obligations are prior to bidding for a project. The commenter stated 
that the need to apply new wage rates at the start of construction 
would be disruptive and create unnecessary financial risk for 
contractors after they have entered into a contract for construction of 
a facility.
    Commenters stated that portions of the Proposed Regulations refer 
to a contract when referencing the timing of a DBA wage determination, 
while others refer to a facility, and requested clarification. Another 
commenter stated that the approach in the Proposed Regulations 
conflicts with early guidance issued by the DOL regarding IRA 
prevailing wage compliance.\27\ A few commenters requested that the 
final regulations retain the rule that the wage determination be 
determined at the beginning of construction or revise the rule to 
provide for the determination of wage rates at the project level to 
avoid multiple wage rates for the same work. These commenters stated 
that because there is no analogous prime contract with a Federal agency 
as under the DBA, connecting the wage determination timing to the 
execution of a contract could be challenging. Commenters stated that 
determining prevailing wage rates at the project level would allow for 
greater consistency between contractors and subcontractors. Another 
commenter emphasized that each taxpayer, contractor, and subcontractor 
should be subject to the same applicable wage determination. At least 
one commenter suggested that the final regulations should permit 
taxpayers to use wage determinations at the time contracts are executed 
or when construction begins.
---------------------------------------------------------------------------

    \27\ U.S. Dept. of Labor, Davis-Bacon and Related Acts (DBRA) 
Frequently Asked Questions, Sec.  III.11, https://www.dol.gov/agencies/whd/government-contracts/construction/faq.
---------------------------------------------------------------------------

    The DBA framework is predicated on a Federal contract for the 
construction of public buildings and public works between the Federal 
Government and contractors. Under the DBA, every contract to perform 
construction, alteration, or repair to which the Federal Government is 
a party must contain a provision stating the prevailing wage rates to 
be paid to various classes of laborers and mechanics. The DBA 
regulations generally provide that the applicable wage rates for a 
contract are those in effect at the time the prime contract is awarded 
by the Federal contracting agency.\28\ By contrast, under the PWA 
requirements, there is no contracting party directly analogous to the 
Federal Government. Under the Prevailing Wage Requirements, taxpayers 
are required to ensure the payment of at least prevailing wages, but 
they may do so through the execution of multiple contracts and 
subcontracts or may perform the work with their own employees.
---------------------------------------------------------------------------

    \28\ Under 29 CFR 5.2, the term ``contract'' means any prime 
contract that is subject wholly or in part to the labor standards 
provisions of any of the laws referenced by 29 CFR 5.1 and any 
subcontract of any tier thereunder, let under the prime contract.
---------------------------------------------------------------------------

    Because of the perceived difficulty in assigning a fixed time to 
establish the applicable prevailing wage rates based on the execution 
of contracts, the proposed rules would have provided that the 
applicable prevailing rates are determined at the beginning of 
construction. However, the Treasury Department and the IRS understand 
the need for taxpayers to reduce uncertainty and determine expected 
labor costs prior to entering into contracts for the construction of a 
facility. Additionally, the Treasury Department and the IRS agree that 
the ``in accordance with'' language in section 45(b)(7) supports 
drawing from the DBA rules to determine the appropriate timing for 
establishing the applicable wage rates. Accordingly, the final 
regulations are revised to provide that the applicable prevailing rates 
are determined at the time the contract for the construction, 
alteration, or repair of the facility is executed by the taxpayer (or 
the taxpayer's designee, assignee, or agent) and a contractor. The 
prevailing wage rates at the time such contract is executed apply to 
all subcontractors of that contractor. In circumstances in which a 
taxpayer (or the taxpayer's designee, assignee, or agent) executes 
separate contracts with more than one contractor, then for each such 
contract, the applicable prevailing rates with respect to any work 
performed by the contractor (and all subcontractors of the contractor) 
are determined at the time the contract is executed by the taxpayer (or 
the taxpayer's designee, assignee, or agent) and the contractor. In the 
absence of a contract, or if a contractor or subcontractor is unable to 
determine the date of execution of the contract, the

[[Page 53208]]

final regulations provide that the applicable wage determinations are 
those in effect at the time construction starts.
    These revisions address commenters' practical business concerns 
regarding costs and financing and provide greater consistency with how 
the applicable wage rates are established under the DBA. The final 
regulations address the concern of commenters that various wage rates 
would apply, or that costs will not be able to be determined up front, 
because they apply the rate at the time the contract is executed 
between the taxpayer and a contractor to all subsequent contracts that 
flow from such contract. Thus, consistent with the DBA, the final 
regulations allow for more than one wage determination to apply with 
respect to the construction, alteration, or repair of a facility in 
cases in which a taxpayer executes separate contracts with more than 
one contractor, but nonetheless provide certainty for the taxpayer, 
contractor, and subcontractor with respect to any work performed 
pursuant to that contract.
    The final regulations also adopt a similar framework for 
alterations or repairs that occur after the facility is placed in 
service with applicable wage determinations applying when a contract is 
executed between a taxpayer and contractor for the alteration or repair 
of a facility, or absent a contract, when the repair or alteration 
starts. The final regulations also add all contracts for construction, 
alteration, or repair to the list of records that may be necessary to 
demonstrate compliance with the applicable Prevailing Wage 
Requirements.
    Under the Proposed Regulations, taxpayers generally would not have 
been required to update the applicable prevailing wage rates during 
construction of the facility in the event a new general wage 
determination was published by the DOL after construction of the 
facility begins. The preamble to the Proposed Regulations stated that a 
new wage determination would be required if the contract is changed to 
include additional, substantial construction, alteration, or repair 
work not within the scope of work of the original contract, or to 
require work to be performed for an additional time period not 
originally obligated, including in the case of an option to extend the 
term of a contract for the construction, alteration, or repair being 
exercised. Proposed Sec.  1.45-7(b)(5) mirrored the language in the 
preamble, but omitted the term substantial from the rule. The Proposed 
Regulations also would have provided that taxpayers would need to 
update the applicable wage rate(s), as necessary, with respect to any 
alteration or repair of a facility that begins after the facility has 
been placed in service. Taxpayers would do this by ensuring that wages 
are paid for such alteration or repair based on the general wage 
determination in effect when the alteration or repair begins.
    Several commenters were concerned about the requirement to update 
prevailing wage rates during the lifespan of a construction project. 
Commenters suggested clarifying how to determine when, under the 
Proposed Regulations, an additional time period not originally 
obligated has occurred that necessitates obtaining a new wage 
determination. The commenters stated that the language with respect to 
an additional time period is ambiguous and could apply to ordinary 
delays and extensions that are common in construction projects. 
Commenters requested that the terms substantial and additional be 
defined, or a de minimis value be set, to better clarify the threshold 
of new work or additional time above which taxpayers would be required 
to seek a new wage determination.
    The commenters recommended inclusion of language from the DBA 
regulations to clarify that a new wage determination is not required if 
additional time is given to complete the original commitment or if the 
additional construction, alteration, and/or repair work as part of the 
modification is merely incidental. Other commenters recommended the 
final regulations include a substantiality threshold consistent with 
DBA regulations. One commenter suggested the final regulations require 
new wage rates only if there is a cardinal change to a covered project. 
Another commenter suggested limiting the need for additional wage 
determinations to increases in the project's budget of at least 30 
percent or delays of at least 120 days to the project's expected 
completion date. One commenter suggested that the wage determination in 
effect at the beginning of a taxpayer's taxable year be used for all 
alterations and repairs occurring in the years after a facility is 
placed in service.
    The Treasury Department and the IRS agree that clarifications are 
needed and that the rules regarding when a new wage determination is 
required should be consistent with the rules under the DBA. Under the 
DBA guidance in 29 CFR 1.6, if there is additional, substantial 
construction, alteration, and/or repair work not within the scope of 
work of the original contract or order, or changes to require the 
contractor to perform work for an additional time period not originally 
obligated, including cases in which an option to extend the term of a 
contract is exercised, the contracting agency must include the most 
recent revision of any wage determination(s) at the time the contract 
is changed or the option is exercised. This does not apply if the 
contractor is simply given additional time to complete its original 
commitment or if the additional construction, alteration, and/or repair 
work in the modification is merely incidental. The DBA regulations also 
provide rules with respect to contracts for construction, alteration, 
or repair work over a period of time that is not tied to the completion 
of any specific work, such as indefinite operations and maintenance or 
repair contracts. The DBA regulations require contractors who are 
parties to these types of contracts to update the applicable wage rates 
for such contracts on an annual basis. The revised wage determination 
then applies to any alteration or repair work that begins under such a 
contract during the 12 months following the update until such 
construction work is completed, even if the completion of that work 
extends beyond the twelve-month period.
    Accordingly, the final regulations update the proposed rule to 
include the substantiality requirement discussed in the preamble to the 
Proposed Regulations, and further clarify that the requirement to 
update the wage determination does not apply if the contractor is given 
more time to complete its original commitment or if the additional work 
is merely incidental. The final regulations also update the proposed 
rule to provide that if a taxpayer enters into a contract for 
alteration or repair work over an indefinite period of time that is not 
tied to the completion of any specific work, the applicable wage rates 
must be updated on an annual basis.
2. Applicable Prevailing Wage Rate for General Wage Determinations
    The Proposed Regulations would have provided that a general wage 
determination would be one issued and published by the DOL that 
includes a list of wage and bona fide fringe benefit rates determined 
to be prevailing for laborers and mechanics for the various 
classifications of work performed with respect to a specified type of 
construction in a geographic area. As stated in the preamble to the 
Proposed Regulations, generally, the DOL conducts surveys to determine 
the prevailing rate based on wage rate data submitted by contractors, 
contractors' associations, labor organizations, public

[[Page 53209]]

officials, and other interested parties. In general, the Proposed 
Regulations would have provided that to determine the applicable 
prevailing wage rates, taxpayers would need to use the general wage 
determination(s) published by the DOL under the DBA on a DOL approved 
website. The current DOL approved website for publishing general wage 
determinations https://www.sam.gov.
    Section 45(b)(7)(A) requires that taxpayers ensure the payment of 
prevailing wages at rates not less than the prevailing rates determined 
in accordance with the DBA. The Proposed Regulations would have largely 
incorporated the definition of wages from 29 CFR 5.2 for the Prevailing 
Wage Requirements. Under the Proposed Regulations, wages would be 
defined as the basic hourly rate of pay; any contribution irrevocably 
made by a contractor or subcontractor to a trustee or to a third person 
pursuant to a bona fide fringe benefit fund, plan, or program; and the 
rate of costs to the contractor or subcontractor that may be reasonably 
anticipated in providing bona fide fringe benefits to laborers and 
mechanics pursuant to an enforceable commitment to carry out a 
financially responsible plan or program, which was communicated in 
writing to the laborers and mechanics affected. The Proposed 
Regulations would have also incorporated by reference the rules set 
forth in 29 CFR 5.25 through 5.33 with respect to the costs for bona 
fide fringe benefits that may be credited for purposes of the payment 
of wages. The Proposed Regulations would have prescribed rules with 
respect to the payment of wages including that the payment of wages be 
made without deduction (except such payroll deductions as are required 
by the law or permitted by regulations issued by the Secretary of 
Labor) and must consist of the full amount of wages (including bona 
fide fringe benefits or cash equivalents thereof). Under the Proposed 
Regulations, whether amounts are wages for purposes of the Prevailing 
Wage Requirements would not be relevant in determining whether amounts 
are wages or compensation for other Federal tax purposes.
    One commenter suggested that prevailing wage rates established by 
the DOL fail to take into account actual compensation to workers, 
including fringe benefits, in all cases. The commenter suggested that 
to calculate prevailing wage amounts, an employer would not be able to 
take credit for the cost to set up and offer medical insurance if an 
employee opts out of medical coverage. The commenter also stated that 
taxpayers who enter into a collective bargaining agreement may be 
disadvantaged, because the agreement could set the wages and benefits 
below the prevailing wage amounts for covered employees. The commenter 
suggested establishing a safe harbor whereby a taxpayer would be deemed 
to satisfy Prevailing Wage Requirements if a substantial number--
defined as 90 percent--of their employees are paid prevailing wages.
    This comment appears to misstate the DBA requirements, and to the 
extent the comment addresses the determination of prevailing wage rates 
for purposes of the DBA, the comment is outside the scope of these 
regulations. The Proposed Regulations would have largely incorporated 
the definition of wages from 29 CFR 5.2 for the Prevailing Wage 
Requirements. Under 29 CFR 5.2 wages include any contribution 
irrevocably made by a contractor or subcontractor to a trustee or to a 
third person pursuant to a bona fide fringe benefit fund, plan, or 
program; and the rate of costs to the contractor or subcontractor that 
may be reasonably anticipated in providing bona fide fringe benefits to 
laborers and mechanics pursuant to an enforceable commitment to carry 
out a financially responsible plan or program, which was communicated 
in writing to the laborers and mechanics affected. The Proposed 
Regulations would have therefore included in the payment of prevailing 
wages, the rate of costs to an employer to provide bona fide fringe 
benefits. Additionally, the statute requires the payment of prevailing 
wages in accordance with the DBA and does not allow lower wage rates 
because there is a collective bargaining agreement or if 90 percent of 
workers have been paid the applicable wage rates. Accordingly, the 
changes suggested by the commenter are not incorporated.
    A commenter stated that the Proposed Regulations impose no 
obligation on taxpayers to confirm that fringe benefit contributions by 
contractors are made to bona fide entities. The commenter suggested 
requiring taxpayers to: (i) provide notice of an enforceable commitment 
to provide bona fide fringe benefits, and (ii) confirm that fringe 
benefit contributions made on behalf of laborers and mechanics by 
contractors and subcontractors are made to a bona fide fringe benefit 
fund, plan, or program. Another commenter request that the final 
regulations specifically allow for the payment of non-required forms of 
compensation, such as paying for a portion of health insurance, to make 
up for any wage payments that are below the prevailing wage rate.
    Consistent with the DBA, the final regulations clarify that a 
taxpayer may discharge its wage obligations for the payment of 
prevailing wages by paying the full amount in cash, by making payments 
to a bona fide fringe benefit provider or incurring costs for bona fide 
fringe benefits, or by a combination thereof. As discussed previously, 
wages are defined to include contributions irrevocably made by a 
contractor or subcontractor to a trustee or to a third person pursuant 
to a bona fide fringe benefit fund, plan, or program. Failures by 
contractors or subcontractors to make payments to bona fide plans or 
programs may result in laborers and mechanics being paid wages at rates 
less than the required prevailing wage rates. However, there is 
flexibility because the taxpayer, contractor, or subcontractor can pay 
the entire prevailing wage amount through the basic hourly rate, 
including the cash equivalent of fringe benefits. They are permitted, 
but not required, to provide bona fide fringe benefits. If they do 
provide bona fide fringe benefits, the cost of those benefits is 
included in the prevailing wage rate. It is ultimately the taxpayer's 
responsibility to ensure compliance with the Prevailing Wage 
Requirements. These final regulations do not require any specific 
method for the taxpayer to ensure compliance; however, taxpayers must 
maintain records reflecting that compliance.
    Other commenters opined that the DOL prevailing wage rates are 
based on unreliable methodologies and are flawed and inaccurate. A 
commenter stated that existing prevailing wage laws have an 
inflationary impact on construction costs. Similarly, a commenter 
suggested that the rates used for the wages are generally drawn from 
the nearest urban center and don't necessarily reflect local market 
conditions. A commenter expressed that the prevailing wage rates 
published by the DOL are subject to change and can vary greatly by 
location, category, and job type. The commenter suggested the 
uncertainty of prevailing wage rates will inhibit investment in clean 
energy projects and raise the cost and risk of such projects.
    Under section 45(b)(7)(A), the increased credit amount provided by 
section 45(b)(6) is available with respect to a qualified facility if a 
taxpayer ensures that laborers and mechanics are paid wages at rates 
not less than the prevailing rates for construction, alteration, or 
repair of a similar character in the locality in which such facility is 
located as most recently determined by the Secretary of Labor in 
accordance with the DBA. The statute mandates the use of prevailing 
wage rates determined by the DOL. The DOL

[[Page 53210]]

wage determination survey process and data sufficiency are outside the 
scope of these final regulations.
    Commenters also stated that union classifications are complex and 
confusing and that nonunion contractors may struggle to classify 
certain jobs with descriptions contained in collective bargaining 
agreements that are not shared publicly. The commenter raised that the 
DOL has applied union work rules and job descriptions to any 
classification for which the union rate prevails. A commenter 
recommended that taxpayers, contractors, and subcontractors should not 
be penalized for failing to conform to job descriptions that are not 
published by the DOL and/or the unions whose wage scales are found to 
be prevailing. The commenter suggested that, at a minimum, no 
intentional violation penalty should be assessed in the absence of 
publication of the job descriptions for each trade, which can be 
readily accomplished by posting hyperlinks to union collective 
bargaining agreements, or the DOL dictionary of occupation definitions.
    Commenters also encouraged the Treasury Department and the IRS to 
recognize that new clean energy technologies require new labor 
classifications and suggested providing additional guidance regarding 
other types of professional workers unique to clean energy that should 
be considered distinct from laborers or mechanics. Commenters also 
requested that the DOL FAQs be amended to no longer preemptively 
declare that clean technology workers will generally be deemed covered 
and classified under so-called established trades, particularly with 
regard to solar and wind turbine industries. Commenters stated that 
standardization and definition regarding multiple labor categories is 
necessary to avoid protracted delays and confusion. Similarly, a 
commenter suggested that taxpayers should not be penalized for 
misclassifications arising from delays in the DOL determinations. 
Another commenter stated that no clear labor classifications exist for 
workers directly employed by nuclear power plant operators.
    Other commenters recommended implementing the DOL system of trade 
and craft classifications under the DBA, including updates to the DBA 
regulations released in August of 2023. A commenter stated that the 
update contained specific recommendations for prevailing wage 
classifications, including new definitions of geographic localities and 
broader definitions of construction to better reflect work on clean 
energy projects.
    The Treasury Department and the IRS appreciate commenters' concerns 
and suggestions regarding emerging technologies and the need for 
consistency and transparency in the classification process. However, 
revisions to the DOL regulations and other guidance regarding worker 
classifications for DBA purposes are outside the scope of these final 
regulations.
    Commenters also requested that the final regulations clarify the 
types of construction subject to wage determinations. For purposes of 
determining the applicable general wage determination, the Proposed 
Regulations would have provided that the types of construction for 
which wage determinations may be issued include, but are not limited 
to, building, residential, heavy, and highway, which are the types of 
construction for which the DOL issues general wage determinations under 
the DBA.\29\
---------------------------------------------------------------------------

    \29\ Dep't of Labor, ALL AGENCY MEMORANDUM NO. 130 (March 17, 
1978).
---------------------------------------------------------------------------

    A commenter recommended clarifying that the DOL definition and 
interpretation of the types of construction should control for PWA 
purposes and that only those types of construction designated by the 
DOL as of a similar character in the locality should be permitted for 
IRA projects. Other commenters supported only recognizing the DOL's 
four major categories of construction.
    The language in the Proposed Regulations was intended to align with 
the types of construction for which the DOL currently issues wage 
determinations and allow for additional or different classifications 
should the DOL designate additional classifications in the future. The 
final regulations clarify that the types of construction are those 
identified by the DOL and provide the flexibility for the DOL to add to 
or modify those categories as necessary within the DOL's existing 
authorities. Any decision by the DOL to add to or modify those 
categories is outside of the scope of these final regulations.
    A commenter requested that the final regulations clarify whether 
the definition of wages as used in sections 45(b)(7)(A) and 45Q(h)(3) 
has the same meaning as wages provided by 48 CFR 22.401 and whether 
such wages should be computed according to 48 CFR 22.406-2. The final 
regulations do not adopt this comment because section 45(b)(7)(A) 
requires taxpayers to ensure that wages are paid at rates not less than 
the prevailing rates in accordance with the DBA and not the Federal 
Acquisition Regulations in Title 48 of the Code of Federal Regulations.
    One commenter recommended expressly adopting the DBA's ``30-percent 
rule,'' whereby the prevailing wage rate is defined as the rate paid to 
the greatest number or laborers or mechanics in the classification on 
similar projects in the area during the period in question, provided 
that the wage is paid to at least 30 percent of those employed in the 
classification. Section 45(b)(7)(A)(ii) requires taxpayers who are 
seeking an increased credit amount to ensure that laborers and 
mechanics are paid wages at rates that are not less than the prevailing 
rates ``as most recently determined'' by the DOL in accordance with the 
DBA. The Proposed Regulations would have provided for incorporation of 
DBA rules for determining prevailing wage rates by defining prevailing 
wage rates as those rates most recently determined by the DOL. 
Consistent with section 45(b)(7)(A)(ii), the final regulations retain 
the rule from the Proposed Regulations; they do not incorporate the 
comment to expressly adopt the 30-percent rule.
3. Supplemental Wage Determinations and Rates for Additional 
Classification Requests
    The Proposed Regulations would have provided special procedures for 
the limited circumstances in which a general wage determination does 
not provide an applicable wage rate(s) for the work to be performed on 
the facility or if there is no applicable general wage determination. 
These circumstances would include cases in which no general wage 
determination has been issued for the geographic area or for the 
specified type of construction, or in which the DOL has issued a 
general wage determination for the relevant geographic area and type of 
construction, but one or more labor classifications necessary for the 
construction, alteration, or repair work that will be done on the 
facility is not listed as part of that determination.
    The Proposed Regulations would have provided that under these 
circumstances, a taxpayer, contractor, or subcontractor would need to 
request a supplemental wage determination or request a prevailing wage 
rate for an additional classification from the DOL. Under the Proposed 
Regulations, a taxpayer, contractor, or subcontractor could have also 
requested a supplemental wage determination if the location of the 
facility involves work by covered laborers and mechanics that spans 
more than one contiguous geographic area. The procedures for

[[Page 53211]]

requesting a supplemental wage determination or a prevailing wage rate 
for an additional classification from the DOL were intended to 
correspond to the provisions under the DBA that allow contracting 
agencies to seek a project wage determination or a conformance under 29 
CFR 1.5(b) and 5.5(a)(1)(iii), respectively.
    With respect to supplemental wage determination requests and 
requests for additional classifications and wage rates, proposed Sec.  
1.45-7(b)(3)(ii)(A) would have provided that a taxpayer, contractor, or 
subcontractor should make such requests no more than 90 days before the 
beginning of construction, alteration, or repair, as appropriate. While 
the procedures for requesting a supplemental wage determination or 
rates for additional classifications would have generally been 
consistent with DBA rules, there is no similar timing requirement under 
DBA rules with respect to project wage determinations or conformances 
that are requested by the contracting agency. The 90-day limitation was 
proposed to limit requests for hypothetical wage determinations that 
were not tied to actual construction projects in the final planning 
stages. According to the DOL, this concern is addressed in the DBA 
context through the involvement of the contracting agency, but there is 
no contracting agency involved in the construction of facilities for 
PWA purposes that would help avoid unnecessary and hypothetical 
requests.
    Commenters generally expressed support of the supplemental wage 
determination and additional classification process. Commenters stated 
that the procedures were largely consistent with processes under the 
DBA and were necessary given the constant transformational nature of 
the construction industry. One commenter expressed support for the 
requirement that any requests for additional wage determinations bear a 
reasonable relationship to the established wage rates, consistent with 
the DBA rules. The commenter also supported the IRS's recognition that 
a request for a prevailing wage rate for an additional classification 
would not be permitted to be used to split, subdivide, or otherwise 
avoid application of classifications listed in a general wage 
determination. In addition, commenters supported adopting the DOL test 
for determining whether to approve a taxpayer or contractor's request 
to add a missing classification to a DBA wage determination. Some 
commenters requested that the final regulations expressly adopt the DOL 
three-part conformance test for adding missing classifications to wage 
determinations. Commenters claimed that adopting DOL regulations 
governing conformance requests would help protect multiskilled 
occupations from unscrupulous contractors inventing unnecessary 
subclassifications for the purpose of paying workers less. The 
commenters also suggested clarifying that the DOL will consider the 
views of construction workers to be employed in the requested 
classification and stakeholders, including labor unions in the affected 
area, with respect to the adequacy of the requested classification and/
or proposed wage and fringe benefits rates.
    The Treasury Department and the IRS coordinated extensively with 
the DOL in drafting the supplemental wage determination and additional 
classification process outlined in the Proposed Regulations. The 
procedures in proposed Sec.  1.45-7(b)(3) for requesting a supplemental 
wage determination or a rate for an additional classification from the 
DOL would have corresponded to the provisions under the DBA that allow 
contracting agencies to seek a project wage determination or a 
conformance under 29 CFR 1.5(b) and 5.5(a)(1)(iii), respectively. They 
would have included certain minor differences from the conformance 
process to account for the absence of a Federal contracting agency. The 
comments suggesting that the DOL should alter its underlying process 
and methodology for determining prevailing wages (both in the DBA and 
the PWA context) are not adopted. Additionally, changes to DOL 
procedures regarding the DBA are outside the scope of these final 
regulations as the DOL administers those DBA provisions.
    Several commenters shared concerns with the wage determination 
process administered by the DOL. One commenter stated that numerous 
occupations in the clean energy industry are unrepresented in the 
general wage determinations currently offered by the DOL, such as wind 
technicians often relied upon for the installation and assembly of 
onshore and offshore wind turbines. One commenter stated that nuclear 
power generating facilities are different than other construction 
projects, including other electric generating facilities, and that the 
specialized roles performed by employees at nuclear facilities are not 
always covered by existing DOL classifications. A commenter also asked 
for guidance on how to categorize specific repairs or alterations of an 
existing nuclear facility for purposes of DOL general wage 
determinations. Similarly, commenters recommended providing additional 
guidance about multi-category projects, such as who will make the final 
determination on the classification of a project (for example, building 
or heavy), and the category a contractor should follow.
    Comments requesting additional classifications and additional 
guidance from the DOL on the application of appropriate classifications 
are outside the scope of these final regulations. The procedures for 
requesting a supplemental wage determination or a prevailing wage rate 
for an additional classification from the DOL continue to apply.
    Some commenters were critical of the proposed rule requiring that a 
taxpayer, contractor, or subcontractor request a supplemental wage 
determination no more than 90 days before the beginning of construction 
of a facility. Commenters stated that the 90-day period is too short 
because of the high importance of the prevailing wage determination on 
the cost of labor. Similar to general wage determinations, commenters 
stated that it is necessary to know project costs at the bidding stage, 
and bidding on contracts to construct a facility takes place far more 
than 90 days before the beginning of construction, often more than one 
year prior to construction beginning. Some commenters suggested the 
time be extended to a year before a bid is due or 24 months before the 
beginning of construction, asserting that this would provide all 
potential bidders with sufficient clarity on wage determinations and 
job classifications in sufficient time to make informed bids on solar 
and other clean energy projects. The commenter also stated that this 
would reduce the number of requests to the DOL, which will mitigate the 
burden on government regulators and allow them to process requests more 
efficiently.
    The Treasury Department and the IRS agree with the comments seeking 
additional time to request supplemental wage determinations and rates 
for additional classifications. The commenters persuasively argued that 
wage determinations issued at or near the beginning of construction are 
not helpful for taxpayers who will likely seek to enter contracts well 
in advance of construction starting. Taxpayers and their contractors 
need certainty regarding the labor costs of a project at the time of 
entering contracts for work to be performed rather than when 
construction begins. Moreover, the 90-day period prior to construction 
starting lacks consistency with the rules under the DBA. The final 
regulations revise the Proposed Regulations to align the timing of 
requests for supplemental

[[Page 53212]]

wage determinations or rates for additional classification with the 
contract framework adopted for general wage determinations. The final 
regulations update when taxpayers must request a supplemental wage 
determination or rate for additional classification from the DOL to 
provide greater certainty for taxpayers and better align with the rules 
under the DBA, while also preventing an influx of hypothetical requests 
for supplemental wage determinations or additional classifications that 
would be administratively burdensome to the DOL.
    Under the final regulations, requests for supplemental wage 
determinations cannot be made more than 90 days before the date the 
contract between the taxpayer (or the taxpayer's designee, assignee, or 
agent) and a contractor for construction, alteration, or repair of the 
facility is expected to be executed. The final regulations further 
prescribe that any supplemental wage determinations are required to be 
incorporated into the contract between the taxpayer and contractor 
within 180 days of issuance. The 180-day period for incorporation into 
a contract provides consistency with the DBA rules under 29 CFR 
1.6(a)(3)(i).
    Under the final regulations, requests for prevailing wage rates for 
additional classifications can be made any time after a contract for 
the construction, alteration, or repair of a facility has been executed 
between the taxpayer and a contractor. The final regulations balance 
the need of taxpayers for increased certainty regarding labor costs at 
or near the time of entering a contract with the need to limit 
hypothetical requests that are not tied to actual construction 
projects. The DOL WHD has advised the Treasury Department and the IRS 
that most taxpayers will likely not need to use the process for 
requesting a supplemental wage determination or request a rate for an 
additional classification because of the availability of general wage 
determinations.
    Commenters requested that the final regulations provide that if a 
response from the DOL for an additional wage rate is not provided 
within a specific time period, such as 60 days, the prevailing wage 
rate requirement for that role should no longer apply. Under the 
Proposed Regulations, the procedures for requesting a prevailing wage 
rate for an additional classification from the DOL were intended to 
correspond to the provisions under the DBA that allow contracting 
agencies to seek a conformance under 29 CFR 5.5(a)(1)(iii). Section 
5.5(a)(1)(iii) of the DBA regulations provides that the DOL will 
approve, modify, or disapprove any classification action within 30 days 
of receipt or advise the requesting contracting agency within the 30-
day period that additional time is necessary. To retain consistency 
with the DBA and address the valid taxpayer and contractor concerns 
regarding cost certainty and preventing unreasonable delays, the final 
regulations adopt similar language that the DOL will resolve requests 
for a prevailing wage rate for an additional classification within 30 
days of receipt or advise the requester within the 30-day period that 
additional time is necessary. The final regulations do not, however, 
adopt the commenters suggestion that a delay in receiving an additional 
wage rate excepts a taxpayer from the requirement to pay wages at rates 
not less than the prevailing rates for that role.
    An additional commenter recommended that, in instances in which 
taxpayers receive a supplemental wage determination or a prevailing 
wage rate for an additional classification, taxpayers be provided a 30-
day grace period during which to pay the affected employees the 
difference between the wage determination and previous wage rates. A 
commenter also proposed a 30-day grace period following a denial or 
partial-relief from an appeal with respect to wage determinations 
generally.
    The Treasury Department and the IRS recognize the possibility that 
the DOL response to a request for a supplemental wage determination or 
additional classifications may not be issued until after laborers and 
mechanics have started working on the facility or project. The Proposed 
Regulations would have provided that the taxpayer would not be 
considered to have failed to meet the Prevailing Wage Requirements with 
respect to any mechanics or laborers whose wage rate was subject to the 
request and who were paid less than the prevailing wage rate before the 
determination by the DOL if the taxpayer requests the supplemental wage 
determination or prevailing wage rate for an additional classification 
before the beginning of construction (or as soon as practicable after 
the start of construction) and makes a correction payment within 30 
days of the determination to each laborer or mechanic equal to the 
difference between the amount of wages paid to such laborer or mechanic 
before the determination and the amount of wages required by the 
Prevailing Wage Requirements to be paid to such laborer or mechanic 
during such period. This exception is intended to mitigate a rule that 
would require taxpayers to make correction and penalty payments for 
failures to pay a prevailing wage rate that could not be timely 
determined by the taxpayer. The same considerations do not apply to the 
request for additional time while an appeal with respect to a wage 
determination is pending. Therefore, the final regulations adopt the 
proposed rule without change.
    Commenters also requested that the final regulations require 
consistency between who can request supplemental wage determinations or 
additional classifications and who can seek reconsideration of such a 
decision. A commenter stated that proposed Sec.  1.45-7(b)(3)(ii)(A) 
would have provided that a taxpayer, contractor, or subcontractor 
request a supplemental wage determination or additional classification 
and wage rate and after review, the DOL WHD will notify the taxpayer, 
contractor, or subcontractor as to the supplemental wage determination 
or the labor classifications and wage rates to be used for the type of 
work in question in the geographic area in which the facility is 
located. However, proposed Sec.  1.45-7(b)(4) would have provided that, 
in connection with seeking a reconsideration of a wage determination, a 
``taxpayer may seek reconsideration and review by the Administrator of 
the Wage and Hour Division of a general wage determination, or a 
determination issued with respect to a request for a supplemental wage 
determination or additional classification and wage rate.'' In 
contrast, one commenter requested that only taxpayers be permitted to 
request supplemental wage determinations. Under 29 CFR 1.8(a), any 
interested party may seek reconsideration of a wage determination.
    The final regulations clarify that any supplemental wage 
determination or rate for additional classification request may be made 
by the taxpayer, contractor, or subcontractor. With respect to seeking 
a reconsideration of a general wage determination, or a determination 
issued with respect to a request for a supplemental wage determination 
or rate for additional classification request, the final regulations 
further clarify that the taxpayer, contractor, or subcontractor may 
seek the reconsideration. Ultimately, the taxpayer must ensure that the 
PWA requirements are satisfied regardless of whether a contractor or 
subcontractor requested a supplemental wage determination or requested 
an additional classification.

[[Page 53213]]

4. Applicable Prevailing Wage Rate for Apprentices
    With respect to the prevailing wage rates for apprentices, the 
Proposed Regulations would have adopted 29 CFR 5.5(a)(4)(i), allowing 
the payment of wages that differ from the applicable prevailing wage 
rate to apprentices who are participating in a registered 
apprenticeship program. The Proposed Regulations would have also 
provided that taxpayers and contractors or subcontractors who employ 
individuals who are not in a registered apprenticeship program or who 
employ apprentices in excess of applicable ratios permitted by the 
registered apprenticeship program would need to pay those individuals 
the full prevailing wage rate listed for the classification of the work 
performed in the applicable wage determination.
    A commenter recommended increasing the rate of pay for apprentices, 
given the frequency at which apprentices travel for work. This comment 
is not adopted as the prevailing rate of pay for work performed by 
apprentices is determined by the DOL and is outside the scope of these 
final regulations. Comments concerning employing apprentices in excess 
of the applicable ratios are discussed in Section VIII.A.2. and 
employing individuals who are not apprentices because they are not 
participating in a registered apprenticeship program are discussed in 
Section VIII.A.5., of this Summary of Comments and Explanation of 
Revisions.
    The Proposed Regulations would have provided a reciprocity rule. 
Under the proposed reciprocity rule, if the construction is occurring 
in a geographic area other than the geographic area in which an 
apprenticeship program is registered, the ratio applicable within the 
geographic area where the construction is being performed would apply. 
If there is no applicable ratio for the geographic area of the 
facility, the ratio specified in the registered apprenticeship program 
standard would apply.
    Commenters requested clarification on the applicable apprentice-to-
journeyworker ratio if work is performed outside of the geographic area 
in which the apprenticeship program typically operates. A few 
commenters suggested that the final regulations adopt a reciprocity 
standard that would permit taxpayers to apply either the 
apprenticeship-to-journeyworker ratio set by the registered 
apprenticeship program or the State where the construction is being 
performed. Another commenter recommended giving taxpayers flexibility 
to determine the appropriate ratio and wage rates if the taxpayer, 
contractor, or subcontractor is performing covered work in a geographic 
area other than that in which the apprenticeship program is registered.
    The Treasury Department and the IRS appreciate commenters' 
requested clarification on the proposed reciprocity rule and work that 
is performed outside of the geographic area in which the apprenticeship 
program is registered. The proposed reciprocity rule would have largely 
followed the rule in 29 CFR 5.5(a)(4)(i)(D) regarding the payment of 
prevailing wages to apprentices. Based on consultations with the DOL, 
the Treasury Department and the IRS understand that this rule is 
intended to apply in cases in which the ratio requirement of the State 
where the construction occurs is stricter than that of the registered 
apprenticeship program. The final regulations largely adopt the 
proposed rule, and also clarify that if more than one apprentice-to-
journeyworker ratio could apply because the construction work is 
occurring in a geographic area where the registered apprenticeship 
program is not registered, the taxpayer must comply with the 
apprentice-to-journeyworker ratio set for the geographic area where the 
construction occurs. Thus, if the geographic area in which the 
construction is occurring requires a higher number of journeyworkers 
per apprentices than the ratio required by the registered 
apprenticeship program, then the taxpayer, contractor, or subcontractor 
must follow the stricter ratio. The final regulations also adopt the 
proposed rule that the wage rates (expressed in percentage of the 
journeyworker hourly rate) applicable in the geographic area in which 
the construction, alteration, or repair work is performed must be 
observed.
    A commenter requested guidance for determining the apprentice or 
apprentices that must be paid not less than the full prevailing wage 
rate for their hours if the daily ratio requirement is not satisfied. 
The final regulations clarify that the taxpayer, contractor, or 
subcontractor, as applicable, has the discretion to determine which 
apprentice(s) must receive the full prevailing wage rate for hours 
worked if there is a failure to satisfy the Ratio Requirement.
    At least one commenter recommended that the final regulations not 
require taxpayers to pay at least the full prevailing wage rate to 
apprentices in excess of the applicable ratio. Under the DBA, any 
apprentice performing work on the job site in excess of the ratio 
permitted under the registered program or the ratio applicable to the 
geographic area of the facility pursuant to 29 CFR 5.5(a)(4)(i) must be 
paid not less than the full applicable prevailing wage rate on the wage 
determination for the work actually performed. The Proposed Regulations 
would have provided that the calculation of the prevailing wage rate 
for the work of apprentices would be in accordance with the DBA rules. 
The proposed rule is adopted as final.
    A commenter raised that the Proposed Regulations appear to limit 
the number of apprentices that can be paid the apprenticeship rate to 
the number of apprenticeships required by the regulation. The commenter 
stated that limiting the number of apprentices that can be paid the 
apprenticeship rate to the number of apprentices required by the 
regulation discourages the use of a larger number of apprentices and 
would seem to violate the policy objectives of the requirements to use 
apprentices. On the other hand, a commenter recommended adopting the 
DOL oversight and quality control standards, including apprentice-to-
journeyworker ratios, to help ensure safe training of apprentices.
    Apprentice-to-journeyworker ratios prescribe the minimum number of 
journeyworkers required for each apprentice that is on a job site on a 
given day to ensure the appropriate training and supervision of 
apprentices and to maintain workplace safety. The apprentice-to-
journeyworker ratio does not impose a cap on the total number of 
apprentices that can be paid the apprentice rate. For example, a 
taxpayer may satisfy a 1:1 ratio by hiring one journeyworker and one 
apprentice or by hiring 20 journeyworkers and 20 apprentices. The 
prescribed ratio does not restrict the total number of individuals that 
are hired.
C. Definitions
    Commenters suggested clarifying the extent to which the relevant 
definitions under proposed Sec.  1.45-7(d) for the Prevailing Wage 
Requirements apply to the proposed Sec.  1.45-8(f) definitions for the 
Apprenticeship Requirements. The final regulations align the relevant 
definitions for the Prevailing Wage Requirements in Sec.  1.45-7(d) 
with the Apprenticeship Requirements in Sec.  1.45-8(g).
1. Laborer and Mechanic
    Proposed Sec.  1.45-7(d)(7) would have defined the terms laborer 
and mechanic consistent with the definition under the

[[Page 53214]]

DBA as those individuals whose duties are manual or physical in nature 
(including those individuals who use tools or who are performing the 
work of a trade). Under the Proposed Regulations, laborers and 
mechanics would not have included individuals whose duties are 
primarily administrative, executive, or clerical, rather than manual. 
Persons employed in a bona fide executive, administrative, or 
professional capacity as defined in 29 CFR part 541 would not be deemed 
to be laborers or mechanics. These individuals are generally exempt 
under the Fair Labor Standards Act and are not labors or mechanics for 
purposes of the DBA. Consistent with the DBA, working forepersons who 
devote more than 20 percent of their time during a workweek to laborer 
or mechanic duties, and who do not meet the criteria for exemption 
under 29 CFR part 541, also would be considered laborers and mechanics 
for the time spent conducting laborer and mechanic duties. Under the 
Proposed Regulations, laborers and mechanics would have included 
apprentices and helpers. The Treasury Department and the IRS requested 
comments on the treatment of working forepersons or owners performing 
the duties of laborers and mechanics under certain circumstances, and 
other executive or administrative personnel who also perform duties of 
a manual or physical nature, in the construction, alteration, or repair 
of a qualified facility.
    At least one commenter requested that the Treasury Department and 
the IRS confirm that the terms laborer and mechanic are defined as 
under the DBA to include individuals whose duties are manual or 
physical in nature rather than primarily administrative, executive, or 
clerical. Commenters also requested that the final regulations exclude 
certain owners and specialized employees from the definitions of 
laborer and mechanic, such as engineers, architects, inspectors, 
testers, and troubleshooters; wind or solar commissioning technicians; 
workers involved in tie-ins and other commissioning, testing, and 
troubleshooting of grid-connected facilities after mechanical 
completion; workers associated with initial energization, testing, and 
synchronization of installed equipment; wind turbine commissioners; and 
other similar professionals. In requesting these exclusions from the 
definition of laborer or mechanic, commenters analogized work described 
in the DOL Field Operations Handbook (FOH) \30\ that is not covered 
under the DBA unless those individuals are performing the duties of a 
laborer or mechanic.
---------------------------------------------------------------------------

    \30\ The DOL Field Operations Handbook for administering the DBA 
can be found at https://www.dol.gov/agencies/whd/field-operations-handbook/Chapter-15.
---------------------------------------------------------------------------

    Commenters generally supported the working foreperson rule, but 
some sought additional guidance regarding whether the 20-percent 
threshold applies to professional workers other than working 
forepersons. Some commenters requested clarifying that any foreperson, 
owner, or administrative, executive, or clerical personnel contributing 
more than 20 percent of their time during a workweek to laborer or 
mechanic duties be considered laborers and mechanics for the time spent 
conducting laborer and mechanic duties, even if they are exempt under 
29 CFR part 541. Other commenters suggested limiting the application of 
the 20-percent threshold to these other individuals, but only if they 
are not exempt under 29 CFR part 541. A few commenters suggested that 
individuals who own at least a 20 percent equity interest and work on a 
construction project, should also be excluded from the PWA 
requirements, because they are not subject to DBA requirements to 
receive prevailing wages. One commenter asked if non-exempt individuals 
(other than working forepersons) who devote 20 percent or less of their 
time to laborer and mechanic duties are laborers and mechanics. One 
commenter stated that it would be difficult for taxpayers and 
contractors to bifurcate supervisory and direct time for a working 
foreperson in determining the 20-percent threshold.
    The final regulations incorporate the definitions of laborer and 
mechanic from the Proposed Regulations, which is largely consistent 
with the definition of those terms for DBA purposes. The Treasury 
Department and the IRS have determined that providing an exhaustive 
list of those specialized employees who are not laborers or mechanics 
or defining laborers and mechanics on an industry-by-industry basis is 
not practical and does not provide the necessary flexibility for future 
industry developments. Although the DOL FOH may provide some guidance 
to taxpayers, whether an individual is a laborer or mechanic will 
depend on the specific job duties and the relevant facts and 
circumstances. The final regulations also adopt the rule that persons 
employed in a bona fide executive, administrative, or professional 
capacity as defined in 29 CFR part 541 are not deemed to be laborers or 
mechanics and the working foreperson rule as proposed. The final 
regulations do not extend the working forepersons rule to other working 
professionals or adopt any exceptions from the proposed rule for 
owners.
2. Employed
    Consistent with the DBA, proposed Sec.  1.45-7(d)(4) would have 
provided that the definition of employed means ``performing the duties 
of a laborer or mechanic for the taxpayer, contractor, or subcontractor 
(as applicable), regardless of whether the individual would be 
characterized as an employee or an independent contractor for other 
Federal tax purposes.'' For purposes of the Prevailing Wage 
Requirements, this definition would generally be different and broader 
than the definition used elsewhere in the Code, for example with 
respect to employment taxes, as well as the associated reporting and 
withholding obligations. Laborers and mechanics who are independent 
contractors for employment tax purposes may be considered employed for 
purposes of the Prevailing Wage Requirements.
    Commenters supported the Proposed Regulation's definition of 
``employed.'' The commenters stated that the application of prevailing 
wages to all workers, even if they are non-employees, aligns with the 
DBA. The Treasury Department and the IRS agree, and the proposed 
definition is adopted without change.
3. Construction, Alteration, or Repair
    Proposed Sec.  1.45-7(d)(2)(i) would have provided that the term 
construction, alteration, or repair generally means ``construction, 
prosecution, completion, or repair'' as defined in 29 CFR 5.2 of the 
DBA regulations. In general, 29 CFR 5.2 defines construction, 
prosecution, completion, or repair as all types of work done on a 
particular building or work at the site of the work. Proposed Sec.  
1.45-7(d)(2)(i) would have also clarified that construction, 
alteration, or repair for purposes of the PWA requirements has no 
bearing on any other sections of the Code, including any determination 
of construction, alteration, repair, or maintenance under section 162 
or 263 of the Code.
    Some commenters requested clarification on the definition of 
construction, alteration, or repair of a facility. Commenters also 
requested clarification that alteration or repair means construction-
like or construction-type activities. One commenter suggested 
clarifying the differences between construction and alteration or 
repair so that a taxpayer may determine those activities that 
constitute construction and those that are

[[Page 53215]]

alteration or repair. Commenters also recommended clarifying whether, 
as under the DBA, the PWA requirements do not apply to installation 
work related to supply or service contracts, unless such installation 
involves substantial construction work distinct and separable from the 
non-construction aspects of the contract. One commenter requested 
clarifying that the work of material suppliers is not considered 
construction consistent with the DBA. Another commenter requested that 
the final regulations clarify that certain preliminary work that is not 
considered construction for DBA purposes (such as exploratory 
drilling), is not considered construction for PWA purposes.
    In response to comments the final regulations clarify that 
``construction, alteration, or repair'' means the same activities that 
are covered by the DBA definition of construction, prosecution, 
completion, or repair under 29 CFR 5.2 that are performed with respect 
to a facility. Activities that are excluded from the DBA definition of 
construction, prosecution, completion, or repair under 29 CFR 5.2 are 
similarly excluded under the final regulations. This definition of 
construction, alteration, or repair covers some activities that occur 
during the construction of a facility before it is placed in service as 
well as activities that take place after placed in service as 
alterations or repairs. Further, specific installation work (as 
applicable) that occurs during the construction of a facility would be 
subject to PWA requirements consistent with 29 CFR 5.2. As discussed in 
Section VI. of this Summary of Comments and Explanation of Revisions, 
the final regulations clarify that construction of a facility is 
interpreted consistent with the underlying definition of a facility for 
tax purposes.
4. Maintenance
    Proposed Sec.  1.45-7(d)(2)(i) would have provided that the term 
construction, alteration, or repair generally excludes maintenance work 
that occurs after a facility is placed in service. The preamble to the 
Proposed Regulations stated that maintenance would be work that is 
ordinary and regular in nature and designed to maintain existing 
functionality of a facility as opposed to an isolated or infrequent 
repair of a facility to restore specific functionality or adapt the 
facility for a different or improved use.
    Under the Proposed Regulations, work designed to maintain and 
preserve functionality of a facility after it is placed in service 
would have included basic maintenance such as regular inspections of 
the facility, regular cleaning and janitorial work, replacing materials 
with limited lifespans such as filters and light bulbs, and the 
calibration of any equipment. Proposed Sec.  1.45-7(d)(2)(i) would have 
provided that maintenance work that occurs before the facility is 
placed in service may constitute construction for which prevailing 
wages must be paid in order to claim the increased credit amount. Under 
the Proposed Regulations, maintenance would not have included work that 
improves a facility, adapts it for a different use, or restores 
functionality as a result of inoperability. Proposed Sec.  1.45-
7(d)(2)(ii) would have also included an example.
    Commenters requested additional guidance on how to determine 
whether work performed after a facility is placed in service is 
alteration or repair work or maintenance work. One commenter requested 
clarification on how to distinguish between work that restores 
functionality and work designed to maintain and preserve existing 
functionalities. Commenters also suggested clarifying whether work 
performed before or after a facility is placed in service impacts 
whether it would be considered maintenance work.
    One commenter suggested that the final regulations provide that 
maintenance work includes the standard replacement of equipment and 
parts (including with functionally similar, yet improved parts), minor 
or incidental repair or installation work, and routine tasks preventing 
failure or decline. Another commenter requested that the final 
regulations define maintenance to exclude work that is extended in 
nature, involves a major replacement, or is otherwise not regular and 
customary for the applicable type of project. Several commenters also 
requested that the final regulations define maintenance to include 
reactive maintenance, isolated or infrequent repair to restore specific 
functionality; troubleshooting; activities related to operations 
(operations and maintenance or O&M work); and work performed by 
welders, winders, or machinists to address a customer service outage. 
Another commenter suggested that work performed under a construction 
contract warranty after a facility is placed in service should be 
treated as maintenance work.
    A few commenters suggested that the final regulations incorporate a 
de minimis threshold to distinguish between maintenance and alteration 
or repair work based on either a specified dollar amount and/or a 
percentage of the original capitalized cost of the qualified facility. 
Other commenters suggested that the term maintenance in the Proposed 
Regulations be revised to mirror descriptions of maintenance work in 
DBA sub-regulatory guidance, the Service Contract Act (SCA), nuclear 
industry maintenance standards, or regulations and case law related to 
sections 162 and 263.
    Commenters stated that the example provided under proposed Sec.  
1.45-7(d)(2)(ii) may have unintentionally suggested a broader 
definition of alteration or repair than anticipated, because the 
example described the replacement of a part in an inverter as a rare 
occurrence although it may be a regular occurrence at a solar farm. A 
few commenters suggested that the final regulations incorporate 
additional examples of basic maintenance, and alteration or repair 
activities, as applied to specific facilities or properties, including 
alternative fuel infrastructure, solar farms, biogas systems, ethanol 
facilities, nuclear facilities, and offshore wind facilities.
    In the Proposed Regulations, the Treasury Department and the IRS 
sought to distinguish between alteration and repair work (for which 
payment of prevailing wages is required whether the work occurs before 
or after the qualified facility is placed in service) and maintenance 
work (for which payment of prevailing wages is required only if the 
work occurs before a qualified facility is placed in service), 
consistent with the DBA and DOL sub-regulatory guidance contained in 
the Prevailing Wage Resource Book (PWRB).\31\
---------------------------------------------------------------------------

    \31\ The DOL Prevailing Wage Resource Book can be found at 
https://www.dol.gov/agencies/whd/government-contracts/prevailing-wage-resource-book/determining-which-labor-standards-apply#_SCA-covered_maintenance_work.
---------------------------------------------------------------------------

    While 29 CFR 5.2 includes various activities that fall within the 
definition of construction, including altering, remodeling, some 
installation work, and painting and decorating, it does not 
specifically address maintenance work. However, the DOL PWRB compares 
servicing and maintenance work typically covered by the SCA and 
construction activities of all types that are covered by the DBA.
    The DOL PWRB describes maintenance work that would be covered by 
the SCA, and not the DBA, as work that is routinely scheduled and 
continuous or recurring. According to the PWRB, SCA-covered maintenance 
work typically includes: (i) work that is needed to keep the building 
or work in its current condition so that it may continue to be used; 
(ii) work that does not improve the current condition or function of 
the building or work; or (iii) work that may be completed relatively

[[Page 53216]]

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

    \32\ The Proposed Regulations relied on a prior version of the 
PWRB. These final regulations reflect updates to the PWRB made in 
April of 2024.
---------------------------------------------------------------------------

    The Treasury Department and the IRS agree that additional 
clarification on the distinction between alteration and repair work and 
maintenance work is needed. Accordingly, the final regulations revise 
the Proposed Regulations to more closely align with 29 CFR 5.2 and DOL 
sub-regulatory guidance in the PWRB.
    Specifically, the final regulations provide that maintenance work 
is work that is routinely scheduled and continuous or recurring. The 
final regulations explain that maintenance normally involves the 
activity of keeping the facility in its current condition so that it 
may continue to be used. The final regulations include additional 
clarifying criteria that repair work normally includes an activity 
that: (i) improves the facility, either by fixing something that is not 
functioning properly or by improving upon the facility's existing 
condition; (ii) involves the correction of individual problems or 
defects as separate and segregable incidents and is not continuous or 
recurring; or (iii) improves the facility's structural strength, 
stability, safety, capacity, efficiency, or usefulness. The final 
regulations retain the proposed rule that maintenance work that occurs 
before the qualified facility is placed in service generally 
constitutes construction work for which wages at rates not less than 
the prevailing rates must be paid.
    As stated by many commenters, and several administrative decisions 
involving the application of the DBA or the SCA,\33\ the determination 
of whether work is properly viewed as maintenance or as an alteration 
or repair is dependent on the specific facts and circumstances of the 
work. The final regulations clarify that the facts and circumstances 
are ultimately determinative.
---------------------------------------------------------------------------

    \33\ See Norsaire Systems Inc., WAB Case No. 94-06, 1995 WL 
90009 (Feb. 28, 1995) (explaining that the distinction between 
covered construction work and non-covered service and maintenance 
work depended on using a number of nondeterminative factors to 
closely examine actual work performed); see also ITT Base Services, 
Inc., B-220518.2 (Nov. 10, 1986) (noting that distinguishing between 
construction and maintenance activities may be difficult, and some 
repair activities could reasonably be categorized as either Davis-
Bacon Act or Service Contract Act repair work depending upon the 
context in which they are performed); Four Star Maintenance, B-
229703 (Apr. 7, 1988) (noting that the determination of whether 
items of work involve basic maintenance within the coverage of the 
Service Contract Act, or are more in the nature of construction, 
alteration, or repair within the scope of the Davis-Bacon Act, is 
largely a matter of judgment).
---------------------------------------------------------------------------

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

[[Page 53217]]

the prevailing wage rates becomes binding only if the increased credit 
amount is claimed on a return, and that the obligation to make 
correction payments and pay the penalty would not become binding until 
a return is filed claiming the increased credit amount.
    The preamble to the Proposed Regulations stated that, in general, 
taxpayers would be obligated to make any necessary correction payments 
to any laborer and mechanic on or before the date a return is filed 
claiming an increased credit amount. Under the Proposed Regulations, 
the earliest time that a taxpayer can make a penalty payment to the IRS 
would have been at the time of filing a tax return claiming the 
increased credit amount. However, taxpayers would retain the option of 
making correction payments to laborers and mechanics at any time after 
the initial wage payments were made and in advance of the filing of a 
tax return claiming the increased credit amount in order to limit the 
amount of additional interest the taxpayer would have to pay at the 
elevated rates set forth in section 45(b)(7)(B)(i)(I)(bb). The Proposed 
Regulations would have provided that whether taxpayers make the 
necessary correction payments and pay the penalty amounts promptly is 
one of the facts and circumstances that would be considered for 
purposes of the enhanced penalties for intentional disregard.
    Under section 45(b)(7)(B)(iv), once the IRS makes a final 
determination that a taxpayer has failed to satisfy the Prevailing Wage 
Requirements, the taxpayer must make the correction and penalty 
payments within 180 days after the final determination to be eligible 
for the increased credit. The Proposed Regulations would have also 
provided a deadline for a taxpayer's ability to use the correction and 
penalty provisions to rectify a failure to comply with the Prevailing 
Wage Requirements once the IRS makes a final determination that a 
taxpayer has failed to satisfy the Prevailing Wage Requirements. The 
Proposed Regulations would have clarified that this final determination 
would come in the form of a notice sent by the IRS.
    One commenter argued that it is inequitable to permit taxpayers to 
receive the benefit of increased credit amounts before workers received 
their rightful compensation. The commenter stated that the penalty and 
cure provisions allow corrections after the filing of a tax return, 
when the credit is already claimed. The commenter suggested that the 
final regulations require correction no later than the earlier of the 
tax return filing or when the taxpayer receives an economic benefit. 
Another commenter recommended that corrective payments be required to 
be paid within 90 days following the year in which the original 
compensation should have been paid.
    One commenter suggested that if the taxpayer's failure to pay 
prevailing wages was unintentional, the taxpayer should be given 90 
days to make correction and penalty payments, but if the taxpayer acted 
intentionally then the taxpayer should be given 30 days to pay the 
penalty and two weeks to make correction payments. An additional 
commenter suggested extending the cure period to permit taxpayers to 
cure further mistakes once they become known.
    The comments requesting changes to the timing of correction and 
penalty payments are not adopted. The prevailing wage provisions 
generally require compliance with the payment of applicable prevailing 
wage rates at the time work is performed. The final regulations 
reiterate the position in the Proposed Regulations that the correction 
and penalty provisions relate back to the time of the failure. For 
example, the final regulations provide that interest accrues on back 
wages to the time of the failure to pay wages at rates not less than 
the applicable prevailing rates. However, section 45(b)(7)(B)(iv) 
permits taxpayers to make correction and penalty payments up to 180 
days after a final determination and remain eligible for the increased 
credit amount. These final regulations encourage the taxpayer to make 
correction payments sooner by waiving the penalty payment requirement 
if the taxpayer makes the required correction payment in a timely 
manner and meets additional requirements. Further, taxpayers may avoid 
some of the challenges in making correction payments, such as locating 
former employees, by addressing any failures immediately after 
discovering them.
    Consistent with section 45(b)(7)(B)(ii), the Proposed Regulations 
would have provided that deficiency procedures do not apply to the 
assessment or collection of any penalty payment required to be made in 
connection with a failure to meet the Prevailing Wage Requirements. The 
Proposed Regulations would have clarified that although deficiency 
procedures would not apply to the penalty payment, deficiency 
procedures would apply to any determination by the IRS disallowing a 
taxpayer's claim for the increased credit amount (for example, because 
of a failure to pay prevailing wages and the correction and penalty 
amounts). Under the Proposed Regulations, if the taxpayer does not 
correct, and therefore is not subsequently granted the increased credit 
amount, no penalty would have been assessed under section 45(b)(7)(B).
    Commenters requested that the final regulations provide guidance 
regarding a taxpayer's ability to contest an IRS determination that a 
taxpayer failed to pay prevailing wages. Commenters suggested that 
deficiency procedures be made available to challenge correction payment 
amounts due to laborers and mechanics once a final determination is 
made. A commenter suggested that taxpayers be provided a forum to 
expeditiously resolve any disputes regarding disallowed credits and all 
appeals of IRS determinations before such decisions become final. 
Commenters stated that, other than a failure to make the required 
correction and penalty payments, the Proposed Regulations do not 
specify under what circumstances there would be a determination by the 
IRS disallowing a claim for the increased credit amount.
    The deficiency procedures are statutorily precluded and providing 
taxpayers prepayment forums to resolve disputes would cause 
unreasonable delays to workers who were entitled to correction payments 
from receiving the full amount of underpaid wages. Additionally, the 
statutory 180-day period taxpayers are allowed to cure a failure after 
receiving a final determination does not toll the general three-year 
statute of limitations for assessment under section 6501. Thus, the 
final regulations do not provide any additional forum for taxpayers to 
challenge an IRS determination. However, if a taxpayer refuses to make 
correction and penalty payments, the increased credit amount will be 
disallowed. Any disallowance of a credit, including disallowance of 
increased credit amounts, would be subject to deficiency procedures 
(including the opportunity to seek review by the IRS Independent Office 
of Appeals) and a taxpayer would be able to petition the U.S. Tax Court 
to review the underlying deficiency determination on a de novo basis.
    A commenter appreciated the Treasury Department and the IRS's 
consideration of waivers for penalties and provisions for curing wage 
deficiencies but recommended that the taxpayer be given the opportunity 
to review and cure mistakes. The commenter explained that due to the 
complexity of the PWA requirements, the logistics of projects, and the 
management of people, there will be instances in which the taxpayer 
will not meet all of the PWA requirements

[[Page 53218]]

perfectly. The Treasury Department and the IRS agree and have provided 
for a limited penalty waiver to address such circumstances as discussed 
in Section VII.D.4. of this Summary of Comments and Explanation of 
Revisions.
    One commenter stated that a failure to maintain records by one or 
more subcontractors or a subsequent determination by the IRS that 
additional work, additional laborers or mechanics, or secondary 
construction sites are covered by the PWA requirements may create a 
circumstance in which the curative payment cannot be calculated because 
of the absence of records. The commenter suggested that the taxpayer 
not be disallowed the increased credit amount under such circumstances 
if the taxpayer is willing to make a curative payment based on a 
reasonable estimate of the wages that should have been paid. Commenters 
also suggested that the final regulations waive penalties and the 
requirement to make correction payments if the taxpayer hires a third-
party reviewer, such as a certified public accountant, to review 
payroll records for compliance with the Prevailing Wage Requirements.
    Permitting taxpayers to rely on a third-party reviewer to 
demonstrate compliance is inconsistent with the statutory requirement 
that the taxpayer ensure that laborers and mechanics are paid 
prevailing wages. Maintaining adequate records is the taxpayer's 
responsibility under section 6001 as explained in Section X.A. of this 
Summary of Comments and Explanation of Revisions. A failure to maintain 
adequate records, even those of lower tier subcontractors, does not 
excuse taxpayers from their obligations to comply with the PWA 
requirements.
    One commenter requested that the final regulations provide that 
corrective payments are neither taxable income to the workers nor 
deductible by the payors. The commenter stated that taxing corrective 
payments is unfair to the workers and argued that a taxpayer or 
transferee who receives the benefit of the tax credits should not be 
able to ``double dip'' and take a tax deduction for the payment of the 
penalty or the increased corrective payments. The determination of 
whether correction payments are taxable to a laborer or mechanic or 
deductible by the payor is governed by Federal tax law that is outside 
the scope of these final regulations.
    Commenters stated that the preamble to the Proposed Regulations 
explained that the regulations would adopt, by cross-reference, the 
review and appeal procedures available to any interested party under 
the DBA with respect to wage determinations generally. Commenters 
explained that a DBA determination can be appealed to the DOL, a 
process that could take longer than the 180-day cure period under 
section 45(b)(7)(B)(iv). Commenters also sought clarification that the 
180-day cure period would be tolled until a taxpayer has exhausted the 
appellate remedies with the DOL. From a practical standpoint, the 
commenter emphasized that once wages are paid it would be harmful to 
both employees and employers to attempt to claw back such payments if 
there is a subsequent determination by the DOL that results in the 
correction and penalty payments not being owed.
    The final regulations do not adopt this comment to provide for 
tolling of the 180-day cure period if a wage determination has been 
appealed to the DOL. With respect to the commenter's comparison to the 
review and appeal procedures for wage determinations, that process is 
distinct from the 180-day period after an IRS determination during 
which a taxpayer may make correction and penalty payments to be deemed 
to have complied with the Prevailing Wage Requirements. The review and 
appeal procedures available to a taxpayer under the Proposed 
Regulations regarding wage determinations are with respect to the DOL's 
determination of an applicable prevailing wage rate. The IRS's 
determination of a failure to pay prevailing wage rates triggering the 
180-day cure period is not subject to appeal, and thus not subject to 
tolling. Section 45(b)(7)(B)(ii) provides that the deficiency 
procedures for income, estate, gift, and certain excise taxes do not 
apply with respect to the assessment or collection of any penalty 
imposed by section 45(b)(7)(B). A taxpayer would, however, be able to 
appeal any disallowance of the increased credit amount after the 
expiration of the 180-day cure period.
    Regarding the commenter's practical concern, if a taxpayer believes 
that the IRS incorrectly issued a final determination that the taxpayer 
failed to pay prevailing wages, then the taxpayer may decline to make 
correction and penalty payments and wait to petition an IRS deficiency 
determination to the U.S. Tax Court following the end of the 180-day 
cure period. Alternatively, after the IRS issues a final determination, 
the taxpayer could make correction and penalty payments and remain 
eligible for the increased credit amount. The taxpayer in this scenario 
would retain the ability to seek a refund of the penalty payments paid 
to the IRS.
    One commenter observed that the cost of penalties is steep, given 
the reliance that most taxpayers will have to place on contractors and 
subcontractors to comply with the PWA requirements. The Treasury 
Department and the IRS recognize that taxpayers will have to oversee 
and rely on contractors and subcontractors to comply with the PWA 
requirements. However, the statutory text of the IRA puts the 
responsibility on the taxpayer to ensure that contractors and 
subcontractors comply with the PWA requirements, including section 
45(b)(7)(B)(i)(ll), which prescribes the amount of penalty payment. 
Through the factors considered for purposes of intentional disregard, 
these regulations create a framework that encourages taxpayer 
practices, such as quarterly compliance reviews and flow-down contract 
provisions, that will assist taxpayers in complying with the Prevailing 
Wage Requirements. Further, these regulations reflect the Treasury 
Department's and the IRS's waiver authority with respect to the penalty 
if the failures were small in amount or occurred in a limited number of 
pay periods.
    Additionally, a commenter requested that, specifically for the 
initial years following the application of the PWA requirements to the 
section 45Z credit, taxpayers be exempted from penalties if they make 
correction payments. The commenter stated that any noncompliance during 
initial years will more likely be a result of inexperience than 
intentional disregard. The Treasury Department and the IRS understand 
commenters' concerns regarding how the correction and penalty 
procedures affect each relevant industry or taxpayers claiming the 
increased amount of credit. A transition rule is provided for section 
45Z, described in Section IX.G. of this Summary of Comments and 
Explanation of Revisions. The penalty waiver for inadvertent errors is 
described in Section VII.D.4. of this Summary of Comments and 
Explanation of Revisions.
2. Laborers or Mechanics Who Cannot Be Located
    Under section 45(b)(7)(B)(i), a taxpayer is deemed to satisfy the 
Prevailing Wage Requirements if, with respect to any laborer or 
mechanic who was paid wages at rates less than the prevailing rates for 
any period during that year, the taxpayer makes a correction payment to 
the affected laborer or mechanic and the required penalty payment to 
the IRS. Section 45(b)(7)(B)(i) does not except taxpayers from the 
requirement to make the

[[Page 53219]]

correction payment, even if the taxpayer is unable to locate the 
laborer or mechanic.
    The preamble to the Proposed Regulations explained that the 
Treasury Department and the IRS expect that taxpayers will be able to 
establish having made correction payments even if a former laborer or 
mechanic cannot be located and provided examples of how such payments 
could be made, such as compliance with State unclaimed property rules 
and withholding and information reporting obligations as means of 
substantiating the payments. The Treasury Department and the IRS 
requested comments concerning appropriate rules for situations in which 
laborers and mechanics who are owed wages cannot be located and how 
taxpayers may establish that they have made the required correction 
payment described in section 45(b)(7)(B)(i)(I).
    A few commenters suggested that the final regulations provide 
additional guidance regarding situations in which correction payments 
are due to affected laborers or mechanics who cannot be located. A 
commenter suggested the formalization of specific procedures by the 
Treasury Department for such circumstances and asked the Treasury 
Department to solicit further comments from stakeholders on this issue. 
One commenter suggested requiring the taxpayer to send the corrective 
payment amount to the State where the missing worker performed the work 
along with payroll information validating the payment amount, and 
records of attempts by the taxpayer to reach the former laborer or 
mechanic. One commenter stated that the final regulations should not 
rely on State unclaimed property laws. A commenter stated that State 
unclaimed property laws may impose additional burdens and complexities 
on taxpayers (such as requirements that due diligence efforts be 
undertaken by a holder of unclaimed property to find the rightful owner 
of such property before the property can be delivered to the State). 
Other commenters asked that the final regulations provide that a 
payment made to a State pursuant to the State's unclaimed property 
rules be deemed to satisfy the correction payment requirement for 
purposes of section 45(b)(7)(B)(i)(I).
    The Treasury Department and the IRS recognize that the construction 
of a qualified facility may occur over the course of several years and 
some taxpayers who fail to meet the Prevailing Wage Requirements may be 
unable to locate all laborers and mechanics to which correction 
payments must be made. However, section 45(b)(7)(B)(i) does not excuse 
taxpayers from the requirement to make the correction payment, even if 
the taxpayer is unable to locate the laborer or mechanic. Unless 
another exception applies, if a taxpayer fails to make and substantiate 
all necessary correction payments, the taxpayer will not be eligible 
for the increased credit amount. Although the statute and final 
regulations permit corrections, contemporaneous compliance with the 
Prevailing Wage Requirements will likely be easier for taxpayers to 
administer and substantiate, because locating workers after a project 
has ended may be difficult and time consuming. The final regulations 
confirm that a taxpayer is not excused from the requirement to make the 
correction payment even if the taxpayer is unable to locate a laborer 
or mechanic.
    As provided for under the Proposed Regulations, the Treasury 
Department and the IRS continue to expect that taxpayers will be able 
to substantiate having made all necessary correction payments even if a 
former laborer or mechanic cannot be located. In general, States have 
developed specific rules for the payment of wages to former laborers 
and mechanics who cannot be located. These rules can include diligence 
requirements to locate the laborer or mechanic, information reporting 
obligations to relevant State agencies on the unclaimed wage amounts, 
and requirements to remit any unclaimed wage amounts to State control 
as unclaimed property after defined holding periods. A taxpayer will be 
deemed to have paid a correction payment to a laborer or mechanic who 
cannot be located if the taxpayer can establish that correction 
payments have been made. A taxpayer may establish that correction 
payments have been made by demonstrating compliance with the applicable 
State unclaimed property law and all Federal and State withholding and 
information reporting requirements with respect to the payments.
3. Intentional Disregard
    Section 45(b)(7)(B)(iii) provides that if the failure to ensure 
that the laborers and mechanics are paid wages at rates not less than 
the applicable prevailing wage rates is found to be due to intentional 
disregard, then the amount of the correction payment is tripled and the 
amount of the penalty payment is doubled. The Proposed Regulations 
would have provided that failures to meet the Prevailing Wage 
Requirements would be due to intentional disregard if they are knowing 
or willful, which is a determination that must be made by considering 
all relevant facts and circumstances. The Proposed Regulations would 
have provided a non-exhaustive list of factors that may be relevant to 
this determination.
    Proposed Sec.  1.45-7(c)(3)(iii) provided that the relevant facts 
and circumstances in weighing intentional disregard would include 
whether a failure to satisfy the Prevailing Wage Requirements was part 
of a pattern of conduct that includes repeated or systemic failures to 
ensure that the laborers and mechanics were paid wages at or above the 
applicable prevailing wage rate and whether the taxpayer: (i) failed to 
take steps to determine the applicable classifications of laborers and 
mechanics; (ii) failed to take steps to determine the applicable 
prevailing wage rate(s) for laborers and mechanics; (iii) promptly 
cured any failures to ensure that laborers and mechanics were paid 
wages not less than the applicable prevailing rates; (iv) has been 
required to make a penalty payment in previous years; (v) undertook a 
quarterly, or more frequent, review of wages paid to mechanics and 
laborers to ensure that wages not less than the applicable prevailing 
wage rate were paid; (vi) included provisions in any contracts entered 
into with contractors that required the contractors and any 
subcontractors retained by the contractors to pay laborers and 
mechanics at or above the prevailing wage rates and maintain records to 
ensure the taxpayer's compliance with the recordkeeping requirements; 
(vii) posted in a prominent place at the facility or otherwise provided 
written notice to laborers and mechanics during the construction, 
alteration, or repair of the facility: (a) of the applicable wage 
rate(s) as determined by the DOL for all classifications of work to be 
performed for the construction, alteration, or repair of the facility, 
and (b) that in order to be eligible to claim certain tax benefits, 
employers must ensure that laborers and mechanics are paid wages at 
rates not less than such wage rates; and (viii) had in place procedures 
whereby laborers and mechanics could report suspected failures to pay 
prevailing wages and/or suspected failures to classify workers in 
accordance with the wage determination of workers to appropriate 
personnel departments or managers without retaliation or adverse 
action. The Treasury Department and the IRS requested comments on 
additional criteria that might be used as part of a facts and 
circumstances analysis of intentional disregard in this context.

[[Page 53220]]

    Many commenters generally expressed support for enhanced penalties 
for intentional failures to comply with the PWA requirements and the 
factors that would be considered in the Proposed Regulations. One 
commenter suggested that the Treasury Department and the IRS engage in 
outreach to educate taxpayers about distinguishing between intentional 
and unintentional violations of the PWA requirements. Some commenters 
recommended that the final regulations provide an inclusive and 
exhaustive list of practices for taxpayers to follow in order to show 
they acted with proper diligence and in good faith in trying to meet 
the PWA requirements. The final regulations do not incorporate this 
suggestion. Although the final regulations provide a detailed list of 
factors for determining intentional disregard, the list remains non-
exhaustive. There may be additional factors that the IRS will consider 
based on the specific facts and circumstances of the failure. These 
final regulations provide guidance to taxpayers about the application 
of the PWA requirements to assist with compliance, including the 
numerous factors that the IRS will consider in determining whether 
failures to comply were the result of intentional disregard.
    Commenters had the following suggestions for additional factors or 
modifications to the proposed factors. Several commenters suggested 
that the final regulations include intentional disregard factors 
relating to pre-filing activities that are not applicable to taxpayers 
claiming the increased credit amount (for example, whether a taxpayer 
regularly submitted certified weekly payroll records to the IRS or 
publicly declared the intent to claim the credit). Because those 
underlying pre-filing activities are not applicable, the comments 
suggesting factors relating to those specific actions are not included 
as factors demonstrating intentional disregard. However, several other 
commenters suggested additional factors or modifications to the 
proposed factors relating to other pre-filing activities, that while 
not required, could be relevant to a determination of intentional 
disregard.
    Specifically, with respect to the factors in proposed Sec.  1.45-
7(c)(3)(iii)(A) through (C) commenters suggested that the final 
regulations clarify what would constitute a pattern of conduct and a 
failure to take steps to determine applicable classifications and wage 
rates. One commenter suggested that a taxpayer's pattern of conduct 
include the taxpayer's conduct on non-IRA projects and violations 
unrelated to prevailing wage rules (including violations under DBA). 
Another commenter recommended that the final regulations consider the 
taxpayer's history of violations of any Federal, State, or local laws. 
The Treasury Department and the IRS agree that some additional 
clarification would be helpful for taxpayers and the IRS. The final 
regulations clarify that taking steps to determine applicable 
classifications and wage rates could include a quarterly or more 
frequent review of these actions by the taxpayer (or a third party 
acting on behalf of the taxpayer). The final regulations retain the 
factor describing a pattern of conduct and clarify that the pattern of 
conduct could include failures to pay prevailing wages as required 
under other laws. The final regulations do not specifically include all 
possible violations of law; although certain violations may be relevant 
depending on the facts and circumstances. What constitutes a pattern 
will depend on the facts and circumstances.
    Commenters also suggested modifications to the factors in proposed 
Sec.  1.45-7(c)(3)(iii)(H) and (I). Specifically, commenters stated 
that proof, via signatures of laborers and mechanics, that covered 
employees have been given notice of the taxpayer's intent to pay 
prevailing wages should be a factor. The final regulations retain the 
factor from the Proposed Regulations regarding written notice to 
laborers and mechanics. However, this factor relates to the notice that 
in order to claim certain tax benefits, employers must ensure that 
laborers and mechanics are paid wages at rates not less than prevailing 
wage rates. It does not consider whether a taxpayer disclosed their 
intent to claim a tax benefit. In response to the comment, the final 
regulations further clarify that acknowledgement of the notice by the 
laborer or mechanic is an additional factor.
    Commenters also suggested that the poster or notice to employees 
described in proposed Sec.  1.45-7(c)(3)(iii)(H) include instructions 
on how laborers and mechanics may contact the taxpayers' personnel 
departments or taxpayers' managers to report suspected failures to pay 
prevailing wages and/or suspected failures to classify workers without 
retaliation or adverse action. The final regulations include this 
additional information. At least one commenter suggested that the 
factor in proposed Sec.  1.45-7(c)(3)(iii)(I) regarding whether a 
taxpayer had in place a procedure to report suspected failures to pay 
prevailing wages without retaliation or adverse action be expanded to 
include employment tax violations or workplace standards laws. The 
commenter also suggested the factor be revised to also require that no 
actual retaliation or adverse action occurred. The final regulations 
incorporate the comments regarding employment tax and workplace 
standards violations. The final regulations also consider whether the 
taxpayer investigated complaints and took appropriate action.
    A commenter suggested adding a factor addressing the use of 
debarred contractors. The commenter stated that contractors who are 
debarred from working on publicly funded projects for serious 
violations of DBA prevailing wage requirements are more likely to 
violate the Prevailing Wage Requirements on IRA projects. The Treasury 
Department and the IRS agree that knowingly contracting with debarred 
contractors could be a factor demonstrating intentional disregard. The 
final regulations reflect this comment.
    Several commenters made general suggestions that the intentional 
disregard factors should be strengthened to encourage behaviors that 
will help ensure that laborers and mechanics working on projects for 
which an increased credit amount may be claimed are paid prevailing 
wages. As stated elsewhere in this preamble, the Treasury Department 
and the IRS agree that adding factors to encourage certain practices 
will further compliance with the Prevailing Wage Requirements. 
Accordingly, the final regulations add new factors that consider 
whether the taxpayer has: (i) provided or otherwise made available to 
laborers and mechanics paystubs or other individual payroll records 
reflecting the amount being paid per pay period (including the specific 
hourly rate and any deductions from wages); (ii) conducted 
investigations or otherwise reviewed complaints of retaliation or 
adverse actions against workers for reporting the underpayment of wages 
and took appropriate corrective action; (iii) provided notice regarding 
possible rights under the Taxpayer First Act; and (iv) whether the 
taxpayer failed to maintain and preserve records in accordance with 
Sec.  1.45-12.
    Some commenters stated that considering all relevant facts and 
circumstances in determining whether a failure to comply with the PWA 
requirements was intentional would be burdensome to taxpayers who would 
have to investigate their contractors and subcontractors about possible 
failures. One commenter suggested that additional guidance consider the 
degrees of separation between contractual parties responsible for

[[Page 53221]]

fulfilling the PWA requirements. The final regulations do not 
incorporate this suggestion. Under section 45(b)(7)(A), the taxpayer 
must ensure that any laborers and mechanics employed by the taxpayer, 
contractor, or subcontractor are paid wages at rates not less than the 
prevailing rates. If the taxpayer fails to do so, and that failure is 
due to intentional disregard, the enhanced correction and penalty 
payments apply. It is the obligation of the taxpayer to ensure that its 
contractors and subcontractors pay wages at rates not less than the 
applicable prevailing wage rates if the taxpayer claims the increased 
credit amount, regardless of the number of contracts separating the 
taxpayer and the subcontractor. This responsibility of the taxpayer is 
one reason why the final regulations include factors that help 
demonstrate whether a taxpayer's failure was due to intentional 
disregard.
    One commenter requested that intentional disregard penalties be 
solely limited to those taxpayers who admit to intentionally failing to 
pay prevailing wages. The final regulations do not adopt this 
suggestion, as the statute does not limit the application of 
intentional disregard penalties to only those who admit to 
intentionally failing to pay prevailing wages.
    The Proposed Regulations would have also provided a rebuttable 
presumption against a finding of intentional disregard if the taxpayer 
made the correction and penalty payments before receiving a notice of 
an examination with respect to a return that claimed the underlying 
increased amount of credit. This presumption of no intentional 
disregard is intended to encourage taxpayers who discover a failure to 
meet the Prevailing Wage Requirements after filing a return to promptly 
use the correction and penalty procedures to remedy that failure.
    Some commenters supported the rebuttable presumption against 
intentional disregard and agreed that it would encourage taxpayers to 
make timely curative payments. Other commenters were critical of the 
presumption and suggested that it might encourage taxpayers to avoid 
promptly curing failures or allow taxpayers who knowingly or willfully 
violate the PWA requirements to avoid penalties. A few commenters 
suggested that the final regulations modify the presumption to apply 
only if the taxpayer makes the required correction and penalty payments 
before: (i) the earlier of the filing of the tax return claiming the 
credit or one year after discovering the failure, or (ii) the earlier 
of receiving notice of an examination from the IRS or one year after 
discovering the failure.
    The final regulations adopt the rebuttable presumption of no 
intentional disregard as proposed. The Treasury Department and the IRS 
appreciate the concerns of commenters. However, the presumption of no 
intentional disregard as proposed provides a valuable incentive to 
encourage taxpayers to regularly review and confirm that they are 
complying with the PWA requirements. Additionally, the rebuttable 
presumption requires all correction payments (including correction 
payments if a former laborer or mechanic cannot be located as described 
in Section VII.D.2. of this Summary of Comments and Explanation of 
Revisions) and penalty amounts be paid before the taxpayer receives a 
notice of examination. If the taxpayer does not correct the failure to 
ensure that prevailing wages are paid (either as a precursor to the 
application of the rebuttable presumption or otherwise in response to 
an IRS determination of a failure), the taxpayer is not eligible for 
the increased credit amount. Taxpayers are encouraged to regularly 
review payroll records to ensure that workers are paid prevailing 
wages. Conducting reviews and curing discovered failures to pay 
prevailing wages several years after payments were made may be 
difficult, particularly if multiple contractors and subcontractors were 
involved in the project.
    A few commenters suggested including a presumption of intentional 
disregard if a labor union or other worker representative reaches out 
to a taxpayer, project developer, or contractor and raises concerns 
about the PWA requirements and the project developer or taxpayer 
chooses to move forward without making any changes regardless of the 
concern that was raised. Commenters also suggested finding that 
taxpayers acted with intentional disregard if they did not diligently 
investigate their contractor and subcontractor practices. For the 
reasons noted herein regarding the factors for intentional disregard, 
the suggestions to include a new presumption of intentional disregard 
are not adopted. The final regulations retain the approach of providing 
factors that will be considered in determining whether a failure was 
due to intentional disregard based on all relevant facts and 
circumstances.
4. Penalty Waiver
    In general, the IRS may exercise its discretion to waive or decline 
to assert penalties in the interest of sound tax administration. The 
Proposed Regulations would have provided limited penalty waivers for 
instances in which the failures to pay prevailing wages to laborers and 
mechanics for the construction, alteration, or repair of a facility 
were small in amount or occurred in a limited number of pay periods. 
The Proposed Regulations would have also provided that the penalty 
waiver cannot be used after a return has been filed claiming the 
increased credit amount. Finally, the Proposed Regulations would have 
applied the waiver authority in a manner that assists taxpayers seeking 
to be eligible for the increased credit amount while remaining 
consistent with the statutory requirement to ensure that laborers and 
mechanics are paid applicable prevailing wage rates. As noted in the 
preamble to the Proposed Regulations, the Treasury Department and the 
IRS understand that taxpayers intending to pay prevailing wage rates 
may make payroll errors or classification errors with respect to work 
that is performed by laborers or mechanics. The Proposed Regulations 
sought to account for these circumstances while continuing to ensure 
that laborers and mechanics are paid according to the applicable 
prevailing wage rates.
    Proposed Sec.  1.45-7(c)(6)(i) provided that the penalty payment 
requirement would be waived with respect to the construction, 
alteration, or repair performed by a laborer or mechanic during a 
calendar year if: (i) the taxpayer makes the required correction 
payment (back wages and interest) by the earlier of: (a) 30 days after 
the taxpayer became aware of the error, or (b) the date on which the 
tax return claiming the increased credit amount is filed; and (ii) 
either: (a) the laborer or mechanic is paid below the prevailing wage 
rate for not more than 10 percent of all pay periods of the calendar 
year (or part thereof) during which the laborer or mechanic worked on 
the construction, alteration, or repair of the facility, or (b) the 
difference between the amount the laborer or mechanic was paid for the 
calendar year (or part thereof) during which the laborer or mechanic 
worked on the construction, alteration, or repair of the facility and 
the amount required to be paid by the Prevailing Wage Requirements for 
the calendar year is not greater than 2.5 percent of the amount 
required under the Prevailing Wage Requirements. The Proposed 
Regulations would have used calendar years to measure any failures 
because taxpayers, contractors, and subcontractors performing 
construction

[[Page 53222]]

may have different taxable years and laborers and mechanics are 
generally paid on a calendar year basis. The Treasury Department and 
the IRS requested comments on the proposed use of calendar years in 
place of taxable years for this purpose.
    Many commenters were supportive of the penalty waiver, but they 
provided practical concerns with the 30-day correction period and the 
maximum underpayment period and amount due to the short-term nature of 
some construction work, as well as the logistical difficulties 
involving multiple payroll periods and/or payroll processors used by 
different contractors and subcontractors. Commenters suggested 
increasing both the correction period and maximum underpayment period 
and amount to provide more time to account for these practical 
difficulties. Some commenters suggested increasing the correction 
period to 60 or 90 days. Others suggested raising the maximum 
underpayment period to the greater of three pay periods or 20 percent 
of all pay periods in a calendar year, and the maximum underpayment 
amount to the greater of $5,000 or five percent of all amounts required 
to be paid in a calendar year. Another commenter suggested removing the 
maximum underpayment amounts entirely. At least one commenter supported 
finalizing the rule as is in the Proposed Regulations, because it is 
sufficient to address de minimis payroll errors. A few commenters 
suggested that the waiver should not be available to a taxpayer who did 
not provide their workers notice of their wage rate, maintained poor 
records, exercised no contemporaneous monitoring or due diligence, or 
retaliated against workers who complained of not being paid the 
prevailing wage. Given the complexity of the PWA requirements, one 
commenter recommended limiting penalties that apply to businesses with 
fewer than 50 employees.
    In recognition of the comments that the proposed correction period 
is too short to be useful, the final regulations revise the proposed 
penalty waiver to provide that corrections must be made by the last day 
of the first month following the end of the calendar quarter in which 
the failure occurred. The final regulations clarify that the correction 
must be made within the relevant time period after the failure 
occurred, not when the taxpayer becomes aware of the failure. This 
revised correction period is intended to coincide with the due date for 
the filing of Federal employment tax returns. The Treasury Department 
and the IRS expect that most employers will have conducted a review of 
payroll for each quarter in connection with the filing of their 
quarterly employment tax return, and they should be aware of failures 
at this time. This change will result in a correction period that 
generally ranges from one to three months depending on when the failure 
occurred.
    The final regulations also modify the proposed waiver provision by 
increasing the maximum underpayment amount to underpayments that do not 
exceed five percent of all amounts required to be paid in a calendar 
year. The final regulations retain the maximum underpayment period as 
proposed to reflect the intent that this waiver provision apply only to 
minor errors that occur infrequently. The change to the correction 
period provides additional time, more certainty, and aligns with filing 
of the majority of employment tax returns. This change also removes the 
knowledge requirement, providing a more definitive correction period 
for taxpayer certainty and aiding IRS administration.
    A few commenters indicated support of the use of calendar years for 
purposes of the waiver provision. No commenters suggested a different 
time period. Thus, the final regulations adopt calendar years as the 
appropriate period to measure failures for purposes of the waiver 
provisions.

VIII. Apprenticeship Requirements

A. In General
1. Scope
    Under section 45(b)(8), in order to satisfy the Apprenticeship 
Requirements, certain requirements with respect to the construction of 
any qualified facility relating to labor hours, apprentice-to-
journeyworker ratios, and participation by qualified apprentices must 
be satisfied. Under section 45(b)(8)(D)(i), a taxpayer is not treated 
as failing to satisfy the Apprenticeship Requirements in section 
45(b)(8) if: (i) the taxpayer satisfies the Good Faith Effort 
Exception, or (ii) in the case of any failure by the taxpayer to 
satisfy the Labor Hours Requirement under section 45(b)(8)(A) and the 
Participation Requirement under section 45(b)(8)(C), the taxpayer makes 
a penalty payment to the IRS under the Apprenticeship Cure Provision.
    Proposed Sec.  1.45-8(a) generally would have provided that a 
taxpayer claiming or transferring (under section 6418) the increased 
credit amount under section 45(b)(6)(B)(iii) with respect to any 
qualified facility must satisfy the requirements of section 45(b)(8) 
and proposed Sec.  1.45-8. Proposed Sec.  1.45-8(b), (c), and (d) would 
have provided the Labor Hours Requirement, the Ratio Requirement, and 
the Participation Requirement, respectively. Proposed Sec.  1.45-8(e) 
would have detailed exceptions to the Apprenticeship Requirements, 
enabling the taxpayer to be deemed to have satisfied the Apprenticeship 
Requirements if the taxpayer has either made a good faith effort to 
meet the Apprenticeship Requirements as described in proposed Sec.  
1.45-8(e)(1) or made the penalty payment provided in proposed Sec.  
1.45-8(e)(2) for any failures to which the Good Faith Effort Exception 
does not apply. Proposed Sec.  1.45-8(f) would have provided additional 
definitions applicable to the Apprenticeship Requirements.
    Section 45(b)(8) imposes the Apprenticeship Requirements with 
respect to the construction of any qualified facility. As discussed in 
Section VI. of this Summary of Comments and Explanation of Revisions, 
the final regulations clarify that the qualified facility for both the 
Prevailing Wage Requirements and the Apprenticeship Requirements is 
defined as a qualified facility under section 45.
    Commenters asked whether the Apprenticeship Requirements applied to 
work performed on a qualified facility after the facility is placed in 
service. Commenters asserted that the statutory text supports limiting 
the Apprenticeship Requirements to the construction of the qualified 
facility. Many commenters pointed to the explicit language in section 
45(b)(7)(A)(ii) applying the Prevailing Wage Requirements to alteration 
and repair activities in the 10-year period after a facility is placed 
in service, and they stated that there is no similar language in 
section 45(b)(8) applying the Apprenticeship Requirements to alteration 
and repair activities for the period after a facility is placed in 
service. Commenters also pointed out the impracticality of applying the 
Apprenticeship Requirements to alteration and repair activities after a 
facility is placed in service. Commenters emphasized that repairs to 
facilities already in service usually must be made as quickly as 
possible. They indicated that such repairs are often a short-term 
project, and requesting, hiring, and onboarding qualified apprentices 
consistent with the Labor Hours Requirement would cause costly delays. 
Commenters stated that during large power outages and other 
emergencies, energy-production facilities are primarily focused on 
returning power to customers in as timely and efficient a manner as 
possible.

[[Page 53223]]

    While there is some ambiguity in the statutory text regarding 
whether the Apprenticeship Requirements apply to the alteration or 
repair of a qualified facility after it is placed in service, the more 
natural reading of section 45(b)(8) supports the interpretation of the 
commenters that the Apprenticeship Requirements only apply to the 
construction of a qualified facility. Under this reading, alterations 
and repairs occurring while a facility is being constructed would be 
subject to the Apprenticeship Requirements, but those occurring after 
the facility is placed in service would not.
    Section 45(b)(7) is clear that the Prevailing Wage Requirements 
apply to two distinct periods with respect to the construction, 
alteration, or repair of a qualified facility: (i) construction under 
section 45(b)(7)(A)(i); and (ii) alteration or repair for any portion 
of a taxable year that is within the 10-year period beginning on the 
date the qualified facility is placed in service under section 
45(b)(7)(A)(ii). Conversely, section 45(b)(8) provides requirements 
that apply only with respect to the construction of any qualified 
facility. The lack of any explicit language in section 45(b)(8) with 
respect to alterations or repairs during the 10-year period after a 
facility is placed in service, as is seen in section 45(b)(7), suggests 
that the Apprenticeship Requirements do not apply after a facility is 
placed in service.
    This conclusion is also supported by the specific language in the 
Apprenticeship Requirements. The applicable percentage under the Labor 
Hours Requirement in section 45(b)(8)(A) applies to the total labor 
hours of the construction, alteration, or repair work performed with 
respect to construction of the qualified facility. This language 
suggests that although hours spent on alteration and repair work can be 
part of the calculation used to determine whether the Labor Hours 
Requirement is satisfied, the requirement only applies to the 
construction of the qualified facility and not after it is placed in 
service. Similar language is used in section 45(b)(8)(C) in which the 
Participation Requirement is limited by the phrase ``with respect to 
the construction of the facility.'' Together, the language of these 
provisions suggests that taxpayers, contractors, and subcontractors may 
perform alteration and repair work that would be subject to the 
Apprenticeship Requirements, but that obligation only applies during 
construction and not after the facility is placed in service. The final 
regulations have been amended to confirm that the Apprenticeship 
Requirements apply only to the construction of the qualified facility 
including alteration and repair work that is performed prior to the 
facility being placed in service, and not to alteration or repair work 
occurring after the facility is placed in service.
2. Labor Hours Requirement
    Section 45(b)(8)(A)(i) provides that ``[t]axpayers shall ensure 
that, with respect to the construction of any qualified facility, not 
less than the applicable percentage of the total labor hours of the 
construction, alteration, or repair work (including such work performed 
by any contractor or subcontractor) with respect to such facility 
shall, subject to [section 45(b)(8)(B)], be performed by qualified 
apprentices.'' This rule is referred to as the Labor Hours Requirement.
    For purposes of the Labor Hours Requirement, section 
45(b)(8)(A)(ii) provides that the applicable percentage is: (i) 10 
percent in the case of a qualified facility the construction of which 
begins before January 1, 2023; (ii) 12.5 percent in the case of a 
qualified facility the construction of which begins after December 31, 
2022, and before January 1, 2024; and (iii) 15 percent in the case of a 
qualified facility the construction of which begins after December 31, 
2023. Section 45(b)(8)(E)(i) provides that the term ``labor hours'' 
means the total number of hours devoted to the performance of 
construction, alteration, or repair work by any individual employed by 
the taxpayer or by any contractor or subcontractor, and excludes any 
hours worked by foremen, superintendents, owners, or persons employed 
in a bona fide executive, administrative, or professional capacity 
(within the meaning of those terms in part 541 of title 29, Code of 
Federal Regulations).
    Commenters recommended that the final regulations clarify that 
there is no minimum amount of time that a qualified apprentice must be 
registered or employed in order to count the qualified apprentice's 
work towards the labor hours requirement. The statute does not impose a 
minimum time period, and the Treasury Department and the IRS have 
determined that any additional requirement would not be in furtherance 
of the IRA or in the interest of sound tax administration. Thus, the 
final regulations do not require a minimum number of hours worked 
before labor hours count toward the total labor hours performed by a 
qualified apprentice.
    Commenters requested that the final regulations provide additional 
guidance regarding how to calculate the total labor hours and the 
applicable percentage. Specifically, a few commenters requested 
guidance on the period of time the total labor hours requirement 
encompasses and when the applicable percentage should be calculated. 
Similarly, another commenter asked whether total labor hours should be 
calculated on a trade-by-trade basis or by aggregating all contractors' 
labor hours. A commenter stated that one of the examples in the 
Proposed Regulations seemed to imply that the Labor Hour Requirement 
apply to each contractor and subcontractor involved in the 
construction, alteration, or repair of a covered facility, rather than 
the aggregate labor hours for the construction project. One commenter 
requested that the final regulations clarify that the labor hours 
calculation does not include hours worked by contractors with fewer 
than four employees. Another commenter asked whether on-the-job 
training hours worked by qualified apprentices at locations other than 
the location of the facility count for purposes of the Labor Hours 
Requirement.
    Consistent with the statutory language in section 45(b)(8)(A)(i), 
the final regulations clarify that the Labor Hours Requirement applies 
to the construction of a facility, not on a contractor-by-contractor or 
trade-by-trade basis. The final regulations further clarify that 
taxpayers determine whether the Labor Hours Requirement has been 
satisfied by aggregating all labor hours worked by laborers and 
mechanics on the construction of the facility (including those hours 
worked by contractors with fewer than four employees), from the 
beginning of construction through the time the facility is placed in 
service and calculating whether the applicable percentage of those 
labor hours was worked by qualified apprentices. Accordingly, 
taxpayers, contractors, and subcontractors will need to keep track of 
labor hours from the beginning of the construction of the facility 
until the project or facility is placed in service. Additionally, since 
the statute requires not less than the applicable percentage of total 
labor hours of construction, alteration, or repair work with respect to 
the qualified facility be performed by qualified apprentices, on-the-
job training hours worked by qualified apprentices at a location other 
than the location of the facility do not count for purposes of the 
Labor Hours Requirement. Training hours of qualified apprentices at the 
location of the facility that involve the performance of construction, 
alteration, or repair work with respect to the qualified

[[Page 53224]]

facility count towards the labor hours performed by qualified 
apprentices for purposes of the Labor Hours Requirement. The final 
regulations provide examples to illustrate these calculations.
    One commenter asked whether the hours worked by a working 
foreperson are included in the total number of labor hours in 
calculating the applicable percentage for purposes of the Labor Hours 
Requirement. One commenter requested guidance on whether a 
subcontractor, who only had working foremen on site to complete a 
project, and no qualified apprentices, would be considered to have 
worked zero labor hours and would not be subject to any penalties. The 
Proposed Regulations would have provided that working forepersons who 
devote more than 20 percent of their time during a workweek to laborer 
or mechanic duties, and who do not meet the criteria for exemption of 
29 CFR part 541, are considered laborers and mechanics for the time 
spent conducting laborer and mechanic duties for purposes of the 
Prevailing Wage Requirements. As discussed in Section VII.C.1. of this 
Summary of Comments and Explanation of Revisions, the final regulations 
retain this rule. The Proposed Regulations also would have provided 
that the hours worked by forepersons, regardless of whether they are 
considered working forepersons for purposes of the Prevailing Wage 
Requirements are excluded from labor hours for purposes of the Labor 
Hours Requirement. The final regulations also retain this rule.
    Commenters suggested that the regulations clarify whether the Labor 
Hours Requirement applies to projects with three or fewer employees. 
The comment seems to be asking whether the Labor Hours Requirement 
applies if the Participation Requirement does not apply. The two 
requirements are separate. Under the Participation Requirement in 
section 45(b)(8)(C), each taxpayer, contractor, or subcontractor who 
employs four or more individuals to perform construction, alteration, 
or repair work with respect to the construction of a qualified facility 
must employ one or more qualified apprentices. There is no similar 
minimum threshold in the Labor Hours Requirement. To satisfy the 
Apprenticeship Requirements, a taxpayer needs to satisfy the Labor 
Hours Requirement, the Ratio Requirement, and the Participation 
Requirement. If the Participation Requirement does not apply, the 
taxpayer will still need to satisfy the Labor Hours Requirement and the 
Ratio Requirement.
    Commenters also requested guidance on the effect of the Good Faith 
Effort Exception with respect to the Labor Hours Requirement. The 
Proposed Regulations would have provided that if a taxpayer, 
contractor, or subcontractor qualifies for the Good Faith Effort 
Exception, the number of hours that the qualified apprentices would 
have performed had a registered apprenticeship program supplied those 
qualified apprentices, would have counted towards the number of labor 
hours performed by qualified apprentices. The Proposed Regulations 
included an example illustrating the interaction between the Labor 
Hours Requirement and the Good Faith Effort Exception. The final 
regulations retain this rule and example.
    Commenters also inquired whether total labor hours continue to be 
aggregated for all work in subsequent tax years after construction has 
ended, or only for those labor hours resulting from covered alteration 
or repair work. Another commenter requested further examples 
illustrating the proper calculation of labor hours for the 10-year 
period beginning on the date the facility was originally placed in 
service. Because the final regulations clarify that the Apprenticeship 
Requirements apply only to the construction (including alterations and 
repairs during construction) of the qualified facility, and not to 
alteration or repair work occurring after the facility is placed in 
service, the Labor Hours Requirement does not apply after the qualified 
facility has been placed in service. The final regulations incorporate 
additional examples clarifying this rule.
    Another commenter suggested that the final regulations clarify 
whether the hours qualified apprentices are paid as journeyworkers as a 
result of failing the daily Ratio Requirement count towards the Labor 
Hours Requirement as qualified apprentice hours or as journeyworker 
hours. Proposed Sec.  1.45-8(c)(3) would have provided that any labor 
hours performed by any qualified apprentice in excess of the applicable 
apprentice-to-journeyworker ratio may not be counted as hours performed 
by qualified apprentices for purpose of the Labor Hours Requirement. 
The final regulations retain this rule and clarify that these labor 
hours performed by qualified apprentices in excess of the apprentice-
to-journeyworker ratio will count towards the total labor hours but 
will not count as hours performed by qualified apprentices for the 
purposes of calculating the applicable percentage.
    A commenter requested additional examples addressing work performed 
in years after the initial year of construction. The final regulations 
address this comment by providing an example illustrating the 
calculation of the Labor Hours Requirement after the initial year of 
construction.
3. Ratio Requirement
    Under section 45(b)(8)(B), the Labor Hours Requirement is subject 
to any applicable requirements for apprentice-to-journeyworker ratios 
of the DOL or the applicable State apprenticeship agency. Under 29 CFR 
part 29, registered apprenticeship programs prescribe a numeric ratio 
of apprentices to journeyworkers in their standards of 
apprenticeship.\34\ This ratio is intended to ensure that there are 
enough journeyworkers to oversee the work of qualified apprentices, 
provide appropriate training, and maintain workplace safety. The 
Treasury Department and the IRS understand that the DOL and State 
apprenticeship agencies review and approve the prescribed ratio 
requirements. Proposed Sec.  1.45-8(c)(2), would have provided that the 
allowable ratio of apprentices to journeyworkers on the job site in any 
occupation and its corresponding classification on any day must comply 
with the applicable apprentice-to-journeyworker ratio of the registered 
apprenticeship program in accordance with 29 CFR part 29. The Treasury 
Department and the IRS requested comments on the application of the 
Ratio Requirement for purposes of satisfying the Apprenticeship 
Requirements. Commenters generally supported the Ratio Requirement 
aligning with ratio requirements set by registered apprenticeship 
programs.
---------------------------------------------------------------------------

    \34\ On January 17, 2024, the DOL published a notice of proposed 
rulemaking (ETA-2023-0004) in the Federal Register (89 FR 3118), to 
revise the regulations for registered apprenticeships. Under 
proposed 29 CFR 29.8(a)(19) each registered apprenticeship program 
must have a written set of standards of apprenticeship that includes 
the program's specific numeric ratio of apprentices to 
journeyworkers. National Apprenticeship System Enhancements, 89 FR 
3118, 3279 (proposed Jan. 17, 2024).
---------------------------------------------------------------------------

    As discussed in section VII.B.4. of this Summary of Comments and 
Explanation of Revisions, the Proposed Regulations would have provided 
a reciprocity rule for purposes of the payment of applicable prevailing 
wage rates for qualified apprentices. The final regulations adopt the 
reciprocity rule under the Prevailing Wage Requirements as proposed. 
The comments with respect to the reciprocity rule and the need for 
clarity on the ratio requirement if registered apprenticeship programs 
supply qualified apprentices outside of the geographic area in which 
the program is

[[Page 53225]]

registered applies equally with respect to the Ratio Requirement under 
the Apprenticeship Requirements. Accordingly, the final regulations 
adopt the reciprocity rule for purposes of determining the applicable 
ratio of apprentices to journeyworkers under the Ratio Requirement. The 
final regulations clarify that if more than one apprentice-to-
journeyworker ratio could apply because the construction work is 
occurring in a geographic area where the registered apprenticeship 
program is not registered, the taxpayer must comply with the 
apprentice-to-journeyworker ratio set for the geographic area where the 
construction occurs.
    One commenter recommended that the final regulations clarify 
whether taxpayers, contractors, or subcontractors must only follow the 
ratio requirement of a registered apprenticeship program in those 
States and localities that prescribe ratio requirements for private 
sector projects. There is no such exception under the Ratio 
Requirement, and therefore the final regulations do not adopt this 
suggestion.
    One commenter suggested that registered apprenticeship programs in 
some States may have a difficult time supplying enough qualified 
apprentices to meet the applicable apprentice-to-journeyworker ratios. 
The comment is inconsistent with the general application of 
apprenticeship ratio requirements. The Treasury Department and the IRS 
understand from the DOL that ratio requirements of registered 
apprenticeship programs that are reviewed and approved by the DOL and 
State apprenticeship agencies do not prescribe a certain number of 
qualified apprentices at a job site. Instead, they prescribe the number 
of journeyworkers required for each qualified apprentice that is on a 
job site on a given day. If on a particular day there are no qualified 
apprentices scheduled to work, there is no ratio requirement to adhere 
to. Additionally, comments regarding substantive ratio requirements set 
by registered apprenticeship programs and reviewed and approved by the 
DOL and State apprenticeship agencies are outside the scope of these 
final regulations.
    One commenter suggested that the final regulations should 
incorporate the DOL regulations at 29 CFR part 29 to account for the 
fact that collective bargaining agreements may prohibit employers from 
abiding by the Ratio Requirement. The commenter was concerned that 
contractors may be faced with conflicting obligations and that 
taxpayers may be required to pay penalties as a result of negotiations 
outside of the taxpayer's control. The Treasury Department and the IRS 
understand that collective bargaining agreements may have terms that 
prohibit the use of apprentice-to-journeyworker ratios established as 
part of a registered apprenticeship program; however, section 
45(b)(8)(B) provides that the Labor Hours Requirement is subject to the 
apprentice-to-journeyworker ratios of the DOL or the applicable State 
apprenticeship agency. The Treasury Department and the IRS decline to 
provide a rule in the final regulations that is contrary to this 
statutory requirement. Changes to the ratio requirements that are 
approved by the DOL OA or applicable State apprenticeship agencies as 
part of the standards for registered apprenticeship programs under 29 
CFR part 29 are outside the scope of these final regulations.
    The Proposed Regulations would have provided that the applicable 
ratio established by the registered apprenticeship program would need 
to be satisfied each day during construction, alteration, or repair of 
the qualified facility for which qualified apprentice labor hours are 
being claimed. Some commenters stated that it would be administratively 
challenging to comply with the Ratio Requirement each day. One 
commenter suggested that the apprenticeship-to-journeyworker ratio be 
measured over a 30-day time period. One commenter suggested providing a 
safe harbor for taxpayers who are able to meet the relevant 
apprenticeship-to-journeyworker ratio requirement for at least 90 
percent of the working days of a construction project. Additionally, a 
commenter requested guidance on the effect on taxpayers' responsibility 
to meet applicable apprenticeship-to-journeyworker ratios if a 
registered apprenticeship program is unable to supply the necessary 
qualified apprentices requested by the taxpayer. At least one commenter 
stated that applying the Ratio Requirement on a daily basis aligns with 
industry custom.
    The Treasury Department and the IRS recognize that there may be 
scheduling conflicts or other issues that may make it difficult to meet 
the Ratio Requirement. Under 29 CFR 29.5, registered apprenticeship 
programs must have a ratio requirement as part of their program 
standards. According to the DOL, it is industry practice for registered 
apprenticeship programs to set daily ratio requirements to ensure the 
safety and welfare of the apprentices and properly oversee the work of 
apprentices, and requiring different ratios under the final regulations 
could be administratively challenging and confusing. Additionally, a 
daily requirement is needed to determine whether a qualified apprentice 
may be paid at a rate less than the prevailing rate for work performed 
that day as explained in Section VII.B.4. of this Summary of Comments 
and Explanation of Revisions. Accordingly, the final regulations 
confirm that the Ratio Requirement applies each day.
    One commenter requested that the final regulations require that 
registered apprenticeship programs identify and publish their 
apprentice-to-journeyworker ratios. Based on consultations with the 
DOL, the Treasury Department and the IRS understand that apprentice-to-
journeyworker ratios of individual registered apprenticeship programs 
are not publicly available. However, under 29 CFR 29.5(b)(7), the ratio 
of apprentices to journeyworkers is a part of a registered 
apprenticeship program's standards of apprenticeship. A registered 
apprenticeship program's apprentice-to-journeyworker ratio is provided 
to an employer when the employer joins a registered apprenticeship 
program and agrees to abide by the standards of apprenticeship under 29 
CFR part 29. The DOL regulates registered apprenticeship programs, and 
requests to impose requirements on registered apprenticeship programs 
is outside the scope of these final regulations.
4. Participation Requirement
    Under section 45(b)(8)(C), each taxpayer, contractor, or 
subcontractor who employs four or more individuals to perform 
construction, alteration, or repair work with respect to the 
construction of a qualified facility must employ one or more qualified 
apprentices to perform that work. The Proposed Regulations would have 
provided that the Participation Requirement would be satisfied as long 
as the taxpayer, contractor, or subcontractor employs one or more 
qualified apprentices to perform work on the facility and this 
requirement would not be a daily requirement. Additionally, the 
Proposed Regulations would have clarified that it would be the 
responsibility of the taxpayer to ensure that any contractor or 
subcontractor with four or more employees who perform work on the 
facility has hired one or more qualified apprentices. The preamble to 
the Proposed Regulations explained that the Treasury Department and the 
IRS proposed to interpret the Participation Requirement as designed to 
prevent taxpayers from satisfying the Labor Hours Requirement by only 
hiring

[[Page 53226]]

qualified apprentices to perform one type of work and instead 
encourages taxpayers to use qualified apprentices across the full range 
of work performed with respect to the facility.
    Commenters requested clarification on how to determine whether a 
taxpayer, contractor, or subcontractor employs four or more individuals 
to perform construction, alteration, or repair work with respect to the 
construction of a qualified facility. One commenter sought confirmation 
that the Participation Requirement does not apply on a daily basis. 
Commenters specifically requested clarification on whether the number 
of employees counted in determining whether the Participation 
Requirement applies are only those employed in the construction of the 
facility at the same time and at the same location.
    Under section 45(b)(8)(C), the Participation Requirement applies if 
the taxpayer, contractor, or subcontractor employs four or more 
individuals to perform construction, alteration, or repair work with 
respect to the construction of a qualified facility. It does not 
require employment of four individuals in the construction of the 
qualified facility at the same time or at the same location. The final 
regulations clarify that the Participation Requirement applies if the 
taxpayer, contractor, or subcontractor employ four individuals in the 
construction of the qualified facility at any time during the 
construction, regardless of whether they are employed at the same 
location or at the same time.
    Commenters suggested raising the number of employees that are 
required for the Participation Requirement to apply so that qualified 
apprentices will only need to be employed on larger projects with more 
resources. Section 45(b)(8)(C) provides that each taxpayer, contractor, 
or subcontractor who employs four or more individuals to perform 
construction, alteration, or repair work with respect to the 
construction of a qualified facility must employ one or more qualified 
apprentices to perform such work. The final regulations adhere to the 
statutory requirement under section 45(b)(8)(C).
5. Other General Apprenticeship Issues
    Section 45(b)(8)(A) provides, in relevant part, that taxpayers must 
ensure that not less than the applicable percentage of the total labor 
hours of the construction, alteration, or repair work with respect to 
such facility are performed by qualified apprentices. Consistent with 
this statutory provision, the Proposed Regulations would have provided 
that the taxpayer would be solely responsible for ensuring that the 
Apprenticeship Requirements are satisfied. Some commenters stated that 
this provision is burdensome on taxpayers because it makes them 
responsible for the hiring decisions of contractors and subcontractors. 
Specifically, commenters were concerned that taxpayers may fail to 
satisfy the Apprenticeship Requirements if a contractor does not hire a 
sufficient number of qualified apprentices.
    The statute requires that the taxpayer ensure that the applicable 
percentage of total labor hours are performed by qualified apprentices, 
irrespective of which entity employs the qualified apprentices. If a 
contractor or subcontractor does not comply with the Labor Hours 
Requirement, the taxpayer retains the opportunity to cure that failure 
by paying the penalty described under section 45(b)(8)(D)(i)(II). Thus, 
subject to the Participation Requirement, the taxpayer retains some 
flexibility in ensuring that the Apprenticeship Requirements are 
satisfied.
    One commenter suggested that the final regulations require 
taxpayers to collect and audit their contractor and subcontractors' 
requests for qualified apprentices. Taxpayers may establish procedures 
to help ensure their compliance with the Apprenticeship Requirements. 
Those procedures may include regularly reviewing the qualified 
apprentice hiring practices of contractors and subcontractors or 
including requirements to hire qualified apprentices in contracts. 
Whether a taxpayer regularly reviewed contractors' and subcontractors' 
use of qualified apprentices is a factor in determining intentional 
disregard.
    A commenter stated that depending on a construction project's 
geographic access to registered apprenticeship programs, it could be 
impractical for some smaller contractors to maintain the relatively 
high percentage of qualified apprentices necessary to meet each of the 
Apprenticeship Requirements. The Participation Requirement, which does 
not require the hiring of qualified apprentices if a contractor does 
not employ four or more individuals, provides limited relief for 
smaller businesses and addresses potential burdens. Further, the Good 
Faith Effort Exception discussed in Section VIII.B.1. of this Summary 
of Comments and Explanation of Revisions may provide relief in those 
circumstances raised by commenters. Accordingly, the final regulations 
do not provide any additional exceptions.
    Section 45(b)(8)(E)(ii) defines a qualified apprentice as an 
individual who is employed by the taxpayer or by any contractor or 
subcontractor and who is participating in a registered apprenticeship 
program, as defined in section 3131(e)(3)(B). For purposes of the 
Apprenticeship Requirements, the Proposed Regulations would have 
defined a qualified apprentice, in part, as an individual who is 
employed by the taxpayer or by any contractor or subcontractor who is 
participating in a registered apprenticeship program. Under the 
Proposed Regulations, participating in a registered apprenticeship 
program would have included entering into a written agreement with a 
registered apprenticeship program. The Proposed Regulations would have 
also provided that for purposes of the Prevailing Wage Requirements, an 
apprentice includes an individual in the first 90 days of probationary 
employment who has been certified by the DOL OA or a State 
apprenticeship agency (if appropriate) to be eligible for probationary 
employment as an apprentice. One commenter asked for the final 
regulations to clarify whether the term qualified apprentice includes 
those individuals in the first 90 days of probationary employment with 
the registered apprenticeship program, similar to how such individuals 
are treated as apprentices under 29 CFR 22.401. The final regulations 
clarify that a qualified apprentice includes those individuals in the 
first 90 days of probationary employment with the registered 
apprenticeship program because they are participating in the registered 
apprenticeship program.
    The Proposed Regulations would have provided that pre-
apprenticeship programs do not qualify as registered apprenticeship 
programs for purposes of section 45(b)(8) and hours worked as part of a 
pre-apprenticeship program would not count towards the Labor Hours 
Requirement. Commenters recommended that the Treasury Department and 
the IRS permit other programs, such as trade schools, colleges, 
programs run by local high schools and school districts, and other 
privately run, non-registered apprenticeship or workforce development 
programs to supply apprentices to taxpayers, contactors, or 
subcontractors to satisfy the Apprenticeship Requirements. Commenters 
asserted that permitting programs in addition to registered 
apprenticeship programs to supply apprentices will help ease the 
expected short supply of qualified apprentices

[[Page 53227]]

due to high demand. A commenter also explained that biogas systems are 
usually co-located at farms and some members in the biogas industry 
rely on apprenticeship programs run through local high schools and 
school districts, that help provide hands-on experience and develop 
interest for agricultural careers. The commenter suggested including 
those school-based apprenticeship programs if they meet certain 
criteria.
    Although the Treasury Department and the IRS understand there may 
be advantages to hiring individuals through programs other than 
registered apprenticeship programs, the statute requires that qualified 
apprentices be employed by the taxpayer, contractor, or subcontractor 
and be participating in a registered apprenticeship program for 
purposes of the Apprenticeship Requirements. The final regulations 
adhere to the statutory requirements and the proposed rule is adopted 
without change.
    Several commenters indicated a general concern with the lack of 
qualified apprentices to staff construction projects. One commenter 
stated that in the next five to ten years, the construction industry is 
bracing for hundreds of billions of dollars of additional 
infrastructure spending and tax incentives. The commenter was skeptical 
that there are sufficient registered apprenticeship programs and 
qualified apprentices available to meet the Apprenticeship 
Requirements. An additional commenter shared survey data indicating 
that the necessary registered apprenticeship programs have not been 
established in their geographic area. The same commenter also opined 
that there are not enough qualified apprentices currently enrolled in 
registered apprenticeship programs to supply a workforce capable of 
meeting the Labor Hour Requirements.
    Comments discussing the possible shortage of qualified apprentices 
or registered apprenticeship programs are outside the scope of these 
final regulations. However, the Treasury Department and the IRS 
appreciate that the commenters raised these concerns and have consulted 
with the DOL OA regarding them. The DOL OA explained that group 
registered apprenticeship programs that typically place qualified 
apprentices with multiple employers for on-the-job training are 
designed to expand with demand because they typically only admit as 
many qualified apprentices as they have guaranteed placements for. If 
there are additional employers, they can admit additional qualified 
apprentices to their programs. The DOL OA also indicated that over the 
last several years the DOL has made significant investments in the 
registered apprenticeship space to prepare and expand access to 
qualified apprentices. The DOL OA is ready to assist in the creation of 
new registered programs that may be needed to meet the increased demand 
for apprentices. Taxpayers, contractors, and subcontractors are 
encouraged to start their own registered apprenticeship programs to 
help increase the supply of qualified apprentices.
    Additionally, the Good Faith Effort Exception contemplates that the 
supply of available qualified apprentices may not always match the 
demand necessary to meet the Apprenticeship Requirements and provides 
relief in those cases as explained in Section VIII.B.1. of this Summary 
of Comments and Explanation of Revisions. However, use of the Good 
Faith Effort Exception if there is no registered apprenticeship program 
that operates in the geographic location of the facility is expected to 
be rare because registered apprenticeship programs can operate across 
State and county lines and are expected to expand according to demands.
    A commenter requested that the final regulations clarify that a 
registered apprenticeship program may only provide qualified 
apprentices for the specific classification(s) requested by the 
taxpayer. The regulation of registered apprenticeship programs is 
outside the scope of these final regulations. Taxpayers, contractors, 
and subcontractors retain flexibility in their hiring decisions, 
including with respect to qualified apprentices. Under these final 
regulations, the hours that are worked by a qualified apprentice only 
qualify towards the Labor Hours Requirement and the Participation 
Requirement to the extent the qualified apprentice is performing 
construction, alteration, or repair work with respect to the 
construction of a facility consistent with the occupation in which the 
qualified apprentice is training.
    Another commenter claimed that the Proposed Regulations would place 
the responsibility to provide qualified apprentices on group sponsors 
of registered apprenticeship programs, thereby limiting taxpayer 
incentives to launch their own programs and hire qualified apprentices 
in other circumstances. The Proposed Regulations did not intend to 
restrict taxpayers, contractors, or subcontractors from developing 
their own registered apprenticeship programs. The final regulations 
clarify that taxpayers, contractors, and subcontractors have the 
flexibility to create their own registered apprenticeship program 
(within the meaning of section 3131(e)(3)(B)) or partner with existing 
registered apprenticeship programs to satisfy the Apprenticeship 
Requirements.
    Another commenter requested that the final regulations require that 
any funds contributed to a registered apprenticeship program must be 
used to train qualified apprentices. While the Treasury Department and 
the IRS understand that commenters want to ensure funds contributed to 
a registered apprenticeship program are used appropriately, this is 
outside the scope of the final regulations.
    Several commenters requested assistance in finding registered 
apprenticeship programs to provide qualified apprentices to a project. 
The DOL OA, in collaboration with participating State apprenticeship 
agencies, has created an online search tool to assist taxpayers, 
contractors, and subcontractors in finding registered apprenticeship 
programs (currently https://www.apprenticeship.gov/partner-finder). 
Taxpayers, contractors, and subcontractors can search for registered 
apprenticeship programs by occupation or industry in a certain State, 
city, or zip code. Taxpayers, contractors, and subcontractors can also 
contact the DOL OA or their State apprenticeship agency for assistance 
in locating registered apprenticeship programs.
    A commenter also stated that the Apprenticeship Requirements could 
create new challenges for taxpayers who depend on labor from other 
countries to help install equipment. The commenter explained that 
foreign contractors and subcontractors will be unable to meet the 
Apprenticeship Requirements because they are not permitted to hire 
qualified apprentices from registered apprenticeship programs. The 
commenter suggested that the final regulations expand the Good Faith 
Effort Exception to provide reasonable accommodations for taxpayers who 
rely on foreign companies for specific work.
    The Treasury Department and the IRS understand from the DOL OA that 
DOL regulations governing registered apprenticeship programs do not 
prohibit foreign employers from hiring qualified apprentices from 
registered apprenticeship programs or registering an apprenticeship 
program, provided certain requirements are satisfied (for example, the 
foreign employer must have a physical presence in the United States and 
be legally authorized to conduct business in the United States). The 
DOL OA confirmed that there are several registered apprenticeship 
programs sponsored by foreign employers. Accordingly, the Treasury

[[Page 53228]]

Department and the IRS decline to provide special exceptions for 
taxpayers who use foreign contractors or subcontractors for specific 
work as the statute does not contemplate such an exception.
    A commenter requested that the final regulations clarify the effect 
of the DOL deregistering a registered apprenticeship program. The 
commenter recommended that the final regulations permit taxpayers, 
contractors, and subcontractors to continue to pay the applicable 
apprenticeship prevailing wage rate if a registered apprenticeship 
program is deregistered, provided the taxpayer, contractor, or 
subcontractor can find a new registered apprenticeship program for the 
apprentices already employed within 90 days from the date the taxpayer, 
contractor, or subcontractor is notified in writing that the program 
was deregistered. The commenter also requested that the Treasury 
Department and the IRS provide an option for enrolling apprentices in 
registered apprenticeship programs that offer remote learning in the 
event a registered apprenticeship program is deregistered.
    The Treasury Department and the IRS understand that programs may be 
deregistered by the DOL OA or the State apprenticeship agency as a 
result of the program's failure to follow the requirements in 29 CFR 
parts 29 and 30. When an apprenticeship program is deregistered, the 
DOL OA or State apprenticeship agency assists with transferring the 
apprentices to other registered apprenticeship programs. The DOL OA has 
indicated that deregistration is rare and the process leading up to 
deregistration involves ample opportunities for programs to take 
corrective action prior to deregistration such that there will be time 
for taxpayers, contractors, and subcontractors to find new registered 
apprenticeship programs or qualified apprentices if a program is at 
risk of deregistration.
    The final regulations do not adopt this comment. Section 45(b)(8) 
requires the use of qualified apprentices participating in a registered 
apprenticeship program. An individual registered in an apprenticeship 
program that has been deregistered is no longer a qualified apprentice 
and the hours worked by the individual after deregistration of the 
program will not qualify towards the Apprenticeship Requirements. The 
Treasury Department and the IRS also decline to permit taxpayers, 
contractors, or subcontractors to pay the reduced applicable 
apprenticeship prevailing wage rate in the event of deregistration as 
doing so would be inconsistent with the statute.
    A commenter recommended that the final regulations provide guidance 
for situations in which the construction work outlasts the qualified 
apprentice's tenure with a registered apprenticeship program, because 
the qualified apprentice is promoted, graduates, or otherwise leaves 
the program. The employment of individuals who are no longer qualified 
apprentices for any reason will not qualify for purposes of the 
Apprenticeship Requirements.
    Similarly, a few commenters requested guidance regarding the impact 
to the Apprenticeship Requirements if circumstances change in the 
middle of construction of a facility, such as qualified apprentice 
labor becoming unavailable. The Treasury Department and the IRS 
understand there might be situations in which qualified apprentice 
labor becomes unavailable, which may affect a taxpayer's ability to 
comply with the Labor Hours Requirement. In this situation, taxpayers 
may be eligible for the Good Faith Effort Exception (if those 
requirements are satisfied) or may cure the failure to meet the 
Apprenticeship Requirements by paying the prescribed penalty under 
section 45(b)(8)(D)(i)(II). The Good Faith Effort Exception and the 
Apprenticeship Cure Provision are discussed in Section VIII.B. of this 
Summary of Comments and Explanation of Revisions.
    A commenter also suggested that in order to ensure high quality on-
the-job training in registered apprenticeship programs, the final 
regulations should either support or require employers seeking the 
increased amounts of credit to be registered training agents and 
demonstrate their proof of status with a registered apprenticeship 
program. Because registered apprenticeship programs must provide 
supervised work experience and training on the job, the use of 
qualified apprentices already ensures quality on-the-job training, and 
the final regulations do not require taxpayers, contractors, or 
subcontractors to register as training agents.
B. Exceptions to the Apprenticeship Requirements
    Under section 45(b)(8)(D)(i), a taxpayer is not treated as failing 
to satisfy the Apprenticeship Requirements in section 45(b)(8) if: (i) 
the taxpayer satisfies the Good Faith Effort Exception in section 
45(b)(8)(D)(ii), or (ii) in the case of any failure by the taxpayer to 
satisfy the Labor Hours Requirement under section 45(b)(8)(A) and the 
Participation Requirement under section 45(b)(8)(C), the taxpayer makes 
a penalty payment to the IRS.
1. Good Faith Effort Exception
    Under the Good Faith Effort Exception, a taxpayer is deemed to have 
satisfied the Apprenticeship Requirements with respect to a qualified 
facility if the taxpayer has requested qualified apprentices from a 
registered apprenticeship program and: (i) such request has been 
denied, provided that such denial is not the result of a refusal by the 
taxpayer or any contractors or subcontractors engaged in the 
performance of construction, alteration, or repair work with respect to 
such qualified facility to comply with the established standards and 
requirements of the registered apprenticeship program, or (ii) the 
registered apprenticeship program fails to respond to such request 
within five business days after the date on which such registered 
apprenticeship program received the request.
    The Proposed Regulations would have provided that, generally, a 
taxpayer is deemed to have satisfied the Apprenticeship Requirements 
with respect to a request for qualified apprentices if the taxpayer, 
contractor, or subcontractor submitted a written request for qualified 
apprentices to at least one registered apprenticeship program that: (i) 
has a geographic area of operation that includes the location of the 
facility, or that can reasonably be expected to provide apprentices to 
the location of the facility; (ii) trains apprentices in the 
occupation(s) needed to perform construction, alteration, or repair 
with respect to the facility; and (iii) has a usual and customary 
business practice of entering into agreements with employers for the 
placement of apprentices in the occupation for which they are training, 
pursuant to its standards and requirements. The Proposed Regulations 
would have further required that the request be in writing and sent 
electronically or by registered mail. The Proposed Regulations would 
have defined a registered apprenticeship program to mean a program that 
has been registered by the DOL OA or a recognized State apprenticeship 
agency pursuant 29 CFR parts 29 and 30, as meeting the basic standards 
and requirements of the DOL (DOL Apprenticeship Standards).
    The Proposed Regulations would have provided that the Good Faith 
Effort Exception is specific to the request for qualified apprentices 
made by the taxpayer, contractor, or subcontractor, including the 
number of apprentice hours for which the request for apprentices has 
been made to a

[[Page 53229]]

registered apprenticeship program. Thus, the Good Faith Effort 
Exception would have applied to the specific portion of the request for 
qualified apprentices that was not responded to or denied. The Proposed 
Regulations would also have provided that the denial of a request for 
qualified apprentices would qualify for the Good Faith Effort Exception 
for a period of 120 days after the denial and that taxpayers, 
contractors, or subcontractors would be required to submit an 
additional request for apprentices every 120 days after a denial to 
continue to qualify for the Good Faith Effort Exception. The Treasury 
Department and the IRS requested comments on the duration of requests 
for qualified apprentices under the Good Faith Effort Exception.
    The Treasury Department and the IRS are aware that the DOL OA, as 
well as State apprenticeship agencies, routinely provide technical 
expertise on registered apprenticeship program matters, including 
identifying registered apprenticeship programs and assisting employers 
seeking to register their own programs. The Treasury Department and the 
IRS requested comments on whether and how the proposed Good Faith 
Effort Exception might account for a situation in which a taxpayer 
contacts the DOL OA or the appropriate State apprenticeship agency 
regarding their apprenticeship request, in addition to contacting a 
specific registered apprenticeship program(s).
    The Treasury Department and the IRS also requested comments on how 
the proposed Good Faith Effort Exception would align with current 
practices with respect to use of apprentices in the construction, 
alteration, or repair of facilities. In particular, the Treasury 
Department and the IRS requested comments on the role of collective 
bargaining agreements, PLAs, and other agreements to satisfy the 
request for apprentices under the Good Faith Effort Exception. The 
following sections summarize the comments received. The final 
regulations provide further guidance regarding the Good Faith Effort 
Exception and revise the Proposed Regulations in response to the 
comments received.
a. Content and Scope of a Request
    The Proposed Regulations would have required that a request for 
qualified apprentices must include the proposed dates of employment, 
occupation of apprentices needed, location of the work to be performed, 
number of apprentices needed, the expected number of labor hours to be 
performed by the apprentices, and the name and contact information of 
the taxpayer, contractor, or subcontractor requesting employment of 
apprentices from the registered apprenticeship program. The Proposed 
Regulations would have also required that the request state that the 
request for qualified apprentices is made with an intent to employ 
apprentices in the occupation for which they are being trained and in 
accordance with the requirements and standards of the registered 
apprenticeship program.
    Several commenters requested that the final regulations further 
clarify what information must be included in the request for qualified 
apprentices for purposes of the Good Faith Effort Exception. At least 
one commenter asked whether the request could estimate the dates of 
employment and the number of qualified apprentices needed. Commenters 
suggested that the final regulations require requests to explain the 
need for qualified apprentices and provide the exact number of 
qualified apprentices needed. Other commenters specifically asked that 
the request be required to include the name and contact information of 
the entity that will employ the qualified apprentices.
    The final regulations retain the proposed rule requiring taxpayers, 
contractors, and subcontractors to include specific and detailed 
information concerning the qualified apprentices that are requested and 
the work to be performed with certain revisions to provide greater 
clarity for taxpayers and to strengthen the Good Faith Effort 
Exception. The final regulations further require that a request must 
identify who will employ the qualified apprentices. The Treasury 
Department and the IRS understand that requests for qualified 
apprentices will be based on projections or estimates of the work to be 
performed including the duration of the work and the number of hours. 
Nonetheless, the estimates must be consistent with the requester's 
intent to employ the qualified apprentices. Accordingly, the final 
regulations provide that requests may include reasonable estimates, and 
also require that the request include a statement of intent to employ 
qualified apprentices consistent with the hours and dates of employment 
included in the request.
    The Treasury Department and the IRS are aware of the concerns about 
potential abuse of the Good Faith Effort Exception. Taxpayers, 
contractors, and subcontractors should be mindful that requests that 
lack specific details of employment or do not reflect reasonable 
estimates will not be considered valid requests under the final 
regulations. Consistent with the general rule in Sec.  1.45-12 that 
taxpayers must maintain and preserve records sufficient to demonstrate 
compliance with the applicable PWA requirements, taxpayers need to keep 
records demonstrating the estimates included in the request were 
reasonable, such as projected and actual labor needs (both for 
journeyworkers and qualified apprentices) during the construction of 
the qualified facility, and any factors impacting those needs, such as 
apprentice utilization plans or contract requirements, as applicable.
b. Required Format of a Request
    Commenters recommended that the final regulations require taxpayers 
to make requests for qualified apprentices in writing and by telephone. 
Commenters argued that adding the requirement to contact registered 
apprenticeship programs by telephone would ensure taxpayers, 
contractors, and subcontractors use forms of communication that are 
reasonably calculated to properly and timely notify registered 
apprenticeship programs of their requests.
    The Treasury Department and the IRS recognize that some taxpayers, 
contractors, and subcontractors have ongoing relationships with 
registered apprenticeship programs and may request qualified 
apprentices from the program informally, such as by telephone. However, 
in administering the Good Faith Effort Exception the IRS needs to be 
able to verify and evaluate the request for qualified apprentices, 
including if the request was received by the registered apprenticeship 
program and whether the request included the necessary details to be 
considered a valid request. Accordingly, the final regulations retain 
the rule that a request to a registered apprenticeship program must be 
a written request, sent electronically or by registered mail, for 
purposes of the Good Faith Effort Exception. Taxpayers, contractors, or 
subcontractors are permitted and encouraged to contact registered 
apprenticeship programs in writing and by telephone, but in order to 
satisfy the Good Faith Effort Exception, the request must be in 
writing.
c. Required Recipients of a Request
    A commenter stated that many employers who are signatories to 
collective bargaining agreements with building trades labor unions 
request qualified apprentices from the labor union and not from a 
registered apprenticeship program. The commenters indicated that this 
is the common practice because the labor union will have a list of 
qualified

[[Page 53230]]

apprentices who will be dispatched to the employer's job site. The 
commenter suggested the final regulations revise the Good Faith Effort 
Exception to reflect this practice. The Treasury Department and the IRS 
understand that this practice may occur; however, section 
45(b)(8)(D)(ii) provides that requests for qualified apprentices must 
be made to a registered apprenticeship program. Accordingly, the 
Treasury Department and the IRS decline to amend the Good Faith Effort 
Exception to allow this alternative procedure.
    The Proposed Regulations would have provided that in order to 
qualify for the Good Faith Effort Exception, taxpayers, contractors, or 
subcontractors must submit a written request for qualified apprentices 
to at least one registered apprenticeship program, which has a 
geographic area of operation that includes the location of the 
facility, or to a registered apprenticeship program that can reasonably 
be expected to provide apprentices to the location of the facility. In 
the preamble to the Proposed Regulations, the Treasury Department and 
the IRS explained that although a taxpayer only needs to submit a 
request to one registered apprenticeship program, depending on the size 
of the facility and the likelihood of multiple occupations involved in 
the construction of the facility, a taxpayer may need to submit a 
request to more than one apprenticeship program in order to meet the 
Good Faith Effort Exception.
    Several commenters suggested that the final regulations require 
taxpayers to request qualified apprentices from all available 
registered apprenticeship programs. Other commenters requested the 
final regulations retain the requirement to contact at least one 
available registered apprenticeship program in order to meet the Good 
Faith Effort Exception. Given that the statute does not impose this 
requirement, it would be unreasonable to require taxpayers to contact 
all possible apprenticeship programs. The final regulations adopt the 
proposed rule without change. In order to qualify for the Good Faith 
Effort Exception, taxpayers, contractors, or subcontractors must submit 
a written request for qualified apprentices to at least one registered 
apprenticeship program. The Good Faith Effort Exception is limited to 
the number of qualified apprentice labor hours that are requested as 
part of a valid request for qualified apprentices.
    A commenter requested that the final regulations clarify that 
taxpayers are not required to request apprentices from the same 
geographic area as the project. The final regulations do not require 
taxpayers to use qualified apprentices from a program located in the 
same geographic area as the project to meet the Labor Hours 
Requirement. Taxpayers, contractors, or subcontractors have the 
flexibility to request and use qualified apprentices from any location 
so long as the apprentices are part of a registered apprenticeship 
program. However, as provided herein, in order to qualify for the Good 
Faith Effort Exception, taxpayers are required to request qualified 
apprentices from at least one apprenticeship program with a geographic 
area of operation that includes the geographic location of the 
facility.
    Commenters requested additional guidance regarding how to determine 
those apprenticeship programs that would reasonably be expected to 
provide apprentices to the location of a facility. Some commenters 
suggested making this requirement less ambiguous by requiring 
taxpayers, contractors, and subcontractors to contact all registered 
apprenticeship programs within a certain distance from the project 
location. One commenter suggested that taxpayers should be required to 
accept apprentices from a ``sister'' program either from within the 
same State or from one or more States adjacent to the State in which 
the construction is occurring. Other commenters recommended being able 
to unconditionally use local registered apprenticeship programs. A 
commenter also recommended clarifying the expectations for nonunion 
contractors to use apprentices from union-affiliated programs if 
nonunion programs are not locally available.
    The Treasury Department and the IRS agree that additional 
clarification is needed on which registered apprenticeship program must 
be contacted to satisfy the Good Faith Effort Exception. The proposed 
rule was intended to require sending the request to a registered 
apprenticeship program that would ordinarily provide apprentices to the 
area where the facility is located. The Treasury Department and the IRS 
have determined that this prerequisite is sufficiently addressed in the 
requirement that the registered apprenticeship program have a 
geographic area of operation that includes the location of the 
facility, because those registered apprenticeship programs can 
reasonably be expected to provide apprentices to the area where the 
facility is located. Accordingly, the proposed requirement to contact a 
registered apprenticeship program that can reasonably be expected to 
provide apprentices to the location of the facility is not retained in 
the final regulations. The final regulations clarify that the 
geographic area of operation of a registered apprenticeship program has 
the same meaning as geographic area and locality for purposes of the 
Prevailing Wage Requirements. In most cases, this will mean that the 
registered apprenticeship program operates in the county, independent 
city, or other civil subdivision of the State in which the facility is 
located, regardless of where the registered apprenticeship program is 
physically located.
    Commenters requested guidance with respect to the application of 
the Good Faith Effort Exception if there is no registered 
apprenticeship program with a geographic area of operation that 
includes the location of the facility or that can be reasonably 
expected to provide apprentices to a project. A commenter also 
requested guidance in situations in which certain trades lacked 
qualified apprentices either locally or nationally. Commenters also 
requested clarification on how to determine that there are no 
registered apprenticeship programs in the geographic area or that can 
be reasonably expected to provide apprentices to a project. Other 
commenters recommended requiring taxpayers, contractors, or 
subcontractors to seek assistance from the DOL OA or State 
apprenticeship agency if the taxpayer is having trouble locating a 
registered apprenticeship program with a geographic area of operation 
that includes the location of the facility in order to qualify for the 
Good Faith Effort Exception.
    Although the Treasury Department and the IRS expect this situation 
to be rare, the final regulations address the application of the Good 
Faith Effort Exception in the absence of a registered apprenticeship 
program with an area of operation that includes the location of the 
facility. The final regulations provide that if there is no registered 
apprenticeship program with a geographic area of operation that 
includes the location of the facility, taxpayers will be deemed to 
satisfy the Good Faith Effort Exception for the apprentices they (or 
the contractor or subcontractor) would have requested for that 
occupation.
    Taxpayers, contractors, and subcontractors should keep records 
sufficient to substantiate that there are no existing registered 
apprenticeship programs with a geographic area of operation that 
includes the facility at the time the request would have been made, as 
well as documentation of the requests for apprentices that would have 
been made, including the specific work

[[Page 53231]]

and hours that would have been performed by the apprentices if a 
registered apprenticeship program were available. Taxpayers are also 
able, but not required for the purposes of the Good Faith Effort 
Exception, to create their own registered apprenticeship programs.
    Because registered apprenticeship programs can operate across State 
and county lines, determining that a registered apprenticeship program 
does not have a geographic area of operation that includes the location 
of the facility may necessitate contacting the registered 
apprenticeship program to determine its geographic area of operation. 
Taxpayers should also consider contacting the DOL OA or relevant State 
apprenticeship agency for assistance in locating registered 
apprenticeship programs and documenting that no registered 
apprenticeship programs are available. Examples of evidence that no 
registered apprenticeship programs were available could include written 
confirmation from registered apprenticeship programs that they do not 
have a geographic area of operation that includes the location of the 
facility or confirmation from the DOL OA or the relevant State 
apprenticeship agency that there are no existing registered 
apprenticeship programs with a geographic area of operation that 
includes the facility.
    Commenters also requested guidance on how a taxpayer, contractor, 
or subcontractor who sponsors its own registered apprenticeship program 
and employs qualified apprentices would qualify for the Good Faith 
Effort Exception. The final regulations clarify that if a taxpayer, 
contractor, or subcontractor is a registered apprenticeship program 
sponsor and there are no available qualified apprentices in the 
registered apprenticeship program sponsored by the taxpayer, 
contractor, or subcontractor, the taxpayer, contractor, or 
subcontractor may qualify for the Good Faith Effort Exception by 
demonstrating that it made a request to another registered 
apprenticeship program (and such request was denied or not responded to 
within five business days) or by establishing that there are no other 
registered apprenticeship programs with an area of operation that 
includes the location of the facility.
    One commenter stated that it is customary for some employers who 
are signatories to collective bargaining agreements to hire qualified 
apprentices through the union instead of by contacting a registered 
apprenticeship program. The commenter requested the final rule clarify 
that this practice is permissible. The final regulations do not adopt 
this suggestion. The Treasury Department and the IRS recognize that an 
employer may not directly contact a registered apprenticeship program 
for qualified apprentices if the employer is a signatory to a 
collective bargaining agreement with a labor organization. However, for 
purposes of satisfying the Good Faith Effort Exception, the taxpayer 
must have requested qualified apprentices from a registered 
apprenticeship program and not a labor organization.
    In the preamble to the Proposed Regulations, the Treasury 
Department and the IRS requested comments on whether and how the 
proposed Good Faith Effort Exception might take into account a 
situation in which a taxpayer contacts the DOL OA or the appropriate 
State apprenticeship agency regarding their apprenticeship request, in 
addition to contacting a specific registered apprenticeship program or 
programs. Some commenters requested that the final regulations clarify 
that a taxpayer's outreach to the DOL OA or a State apprenticeship 
agency has no bearing on whether a taxpayer qualifies for a Good Faith 
Effort Exception. The Treasury Department and the IRS have determined 
that taxpayers, contractors, or subcontractors are not required to 
contact the DOL OA or State apprenticeship agency to satisfy the Good 
Faith Effort Exception. However, as noted previously, it is recommended 
that taxpayers, contractors, and subcontractors contact the DOL OA or a 
State apprenticeship agency if they have difficulty locating a 
registered apprenticeship program. Additionally, the final regulations 
provide that evidence that the taxpayer, contractor, or subcontractor 
contacted the DOL OA or a State apprenticeship agency for assistance 
will be considered in determining whether taxpayers, contractors, or 
subcontractors acted with intentional disregard if the Good Faith 
Effort Exception does not apply.
d. Timing of a Request
    Commenters asked that the final regulations clarify when a request 
must be made in order to satisfy the Good Faith Effort Exception. 
Several commenters recommended that requests should be made within a 
certain time before the requested qualified apprentices are needed. 
Some commenters indicated that in the absence of a temporal 
requirement, some taxpayers, contractors, or subcontractors may make 
last-minute requests for qualified apprentices. The commenters asserted 
that it may be very difficult or impossible for a registered 
apprenticeship program to respond to a request for qualified 
apprentices without adequate time to staff the request. Some commenters 
suggested that there may be a loophole allowing for the application of 
the Good Faith Effort Exception in situations in which it was not 
intended to apply if the final regulations do not impose a temporal 
requirement. Commenters proposed time periods that ranged from five 
days before qualified apprentices are needed (if a taxpayer, 
contractor, or subcontractor has a pre-existing relationship with the 
registered apprenticeship program) to 90 days before qualified 
apprentices are needed in the absence of a pre-existing relationship. 
Several commenters suggested that requests should be required 10 to 14 
days before qualified apprentices are expected to start work on the 
project.
    The DOL OA has indicated that typical apprenticeship cycles in 
construction involve at least 2,000 hours of on-the-job training and at 
least 144 hours of related instruction for each year of the 
apprenticeship program. According to the DOL OA, registered 
apprenticeship programs in the construction industry typically hire 
qualified apprentices in cohorts, and advance notice is needed to allow 
the registered apprenticeship program adequate time to supply the 
requested qualified apprentices within the timeframe needed.
    The Treasury Department and the IRS agree that in order to satisfy 
the Good Faith Effort Exception, the initial request for qualified 
apprentices must be made with enough advance notice to allow registered 
apprenticeship programs time to respond. The Treasury Department and 
the IRS also recognize that given the nature of construction projects, 
and the desire to complete projects on time, a shorter timeframe may be 
appropriate for any subsequent requests once construction is underway. 
Accordingly, the final regulations require that taxpayers, contractors, 
and subcontractors must make an initial request for qualified 
apprentice(s) from a registered apprenticeship program at least 45 days 
before the qualified apprentice is requested to begin work on the 
facility so that registered apprenticeship programs have adequate time 
to plan for the anticipated need. The final regulations also clarify 
that to satisfy the Good Faith Effort Exception, any subsequent 
requests to the same registered apprenticeship program must be made no 
later than 14 days before qualified apprentices are requested to begin 
work on the facility.

[[Page 53232]]

    The Treasury Department and the IRS received numerous comments 
regarding the 120-day period for which the denial or nonresponse of a 
request for qualified apprentices is considered to satisfy the Good 
Faith Effort Exception and the requirement for taxpayers to submit 
additional requests for qualified apprentices to continue to satisfy 
the Good Faith Effort Exception at the end of the 120-day period. Some 
commenters suggested eliminating the requirement to submit additional 
requests or extending the time before an additional request needs to be 
made from 120 days to one year, noting that the 120-day period could be 
impractical or burdensome, create uncertainty, and that it might not 
increase the hiring of qualified apprentices. Several commenters 
asserted that the 120-day period and the requirement to submit 
additional requests lacked a statutory basis, because the statutory 
text of the Good Faith Effort Exception in section 45(b)(8)(D) does not 
prescribe or mention any 120-day period and does not require any 
renewal by the taxpayer of its request for a qualified apprentice in 
order to be deemed to satisfy the Apprenticeship Requirements. Other 
commenters suggested that the 120-day period be shortened to better 
align with project timelines for subcontractors who typically conclude 
their work on a project well within the 120-day window.
    Commenters also asked that the final regulations clarify if 
subsequent requests have to be made to the same registered 
apprenticeship program and if there is a limit on the number of times 
an additional request needed to be made in order to satisfy the Good 
Faith Effort Exception. Additionally, a commenter suggested that the 
final regulations require follow-up requests for qualified apprentices 
to include the names of any registered apprenticeship programs the 
taxpayer previously contacted for qualified apprentices. Commenters 
also asked whether the Labor Hours Requirement applied if taxpayers, 
contractors, or subcontractors met the Good Faith Effort Exception for 
120 days, and subsequently obtained qualified apprentices in response 
to an additional request made after the expiration of the 120-day 
period. If the Labor Hours Requirement applied in this scenario, the 
commenter requested guidance on how to determine if a taxpayer 
satisfied the Labor Hours Requirement under these circumstances.
    The Treasury Department and the IRS agree with the comments 
indicating that the 120-day period introduces unnecessary uncertainty 
with respect to labor supply and costs. A request that is initially 
denied for lack of available qualified apprentices that is later 
accepted pursuant to a renewed request after only 120 days could 
disrupt staffing decisions. Moreover, the Treasury Department and the 
IRS acknowledge that a requirement to submit additional requests after 
120 days could increase burdens in cases in which businesses may not 
have the staff or staffing flexibility to comply with a requirement for 
multiple, ongoing requests. However, the Treasury Department and the 
IRS also recognize the value in prescribing the duration of requests to 
prevent the Good Faith Effort Exception from allowing the 
Apprenticeship Requirements to be avoided in their entirety if 
qualified apprentices will likely be available for work at some time 
during the lifespan of a construction project as the supply adjusts to 
demands.
    Based on the comments received and in consultation with the DOL, 
the Treasury Department and the IRS have determined that the maximum 
duration of a request for qualified apprentices is 365 days (366 days 
in case of a leap year). The final regulations have been revised to 
provide that taxpayers must submit additional requests 365 days (366 
days in case of a leap year) after the denial of a previous request to 
continue to satisfy the Good Faith Effort Exception. The final 
regulations also clarify that the annual duration applies if a 
taxpayer, contractor, or subcontractor is not able to locate a 
registered apprenticeship program with an area of operation that 
includes the location of the facility.
    Extending the maximum duration of requests for qualified 
apprentices to an annual period will allow employers sufficient time to 
assess future work needs appropriate for qualified apprentices without 
causing uncertainty for existing staff and unexpected costs that might 
otherwise result if requests were required on a more frequent basis. It 
also allows sufficient time for the supply of qualified apprentices to 
adjust to the construction demands of the location of the facility 
through the registration of new apprenticeship programs and recruitment 
of qualified apprentices into those programs. The final regulations 
retain the rule that requests for purposes of the Good Faith Effort 
Exception must be specific as to the dates of employment and the 
expected number of hours the qualified apprentices are needed with the 
intent to employ the qualified apprentices consistent with the request. 
Taxpayers, contractors, or subcontractors making general requests that 
lack an intent to employ the qualified apprentices consistent with the 
request would not satisfy the Good Faith Effort Exception. The final 
regulations also clarify that requests for qualified apprentices do not 
need to be made to the same registered apprenticeship program that 
received and denied an earlier request.
    The final regulations also include an example in response to the 
request for clarification on how the Labor Hours Requirement applies if 
a taxpayer satisfies the Good Faith Effort Exception for one 365-day 
period (or 366-day period in the case of a leap year), and then obtains 
qualified apprentices in response to an additional request for 
qualified apprentices that is made later.
e. Definition of a Response
    The Proposed Regulations would have provided that an 
acknowledgement, whether in writing or otherwise by a registered 
apprenticeship program, of receipt of the request is a sufficient 
response for purposes of the Good Faith Effort Exception. Several 
commenters requested that the final regulations modify this proposed 
requirement and provide that open-ended and non-substantive replies do 
not constitute a response for purposes of satisfying the Good Faith 
Effort Exception. Commenters were concerned that if a non-substantive 
acknowledgement is treated as a response, taxpayers could be foreclosed 
from relying on the Good Faith Effort Exception and be unable to 
satisfy the Apprenticeship Requirements despite legitimate attempts to 
do so. They also stated that the proposed rule could lead to 
uncertainty for taxpayers and indefinitely delay construction while 
taxpayers attempt to comply with the Apprenticeship Requirements. 
Another commenter requested that the final regulations require the 
acknowledgment to be in writing, consistent with the requirement that 
the request must be in writing.
    The Treasury Department and the IRS agree with the concerns raised 
by the commenters. Accordingly, the final regulations provide that a 
response is a substantive written reply that agrees, in part or in 
whole, to the specific requirements in the taxpayer's, contractor's, or 
subcontractor's request. Automated or other non-substantive responses 
or acknowledgments are not responses for purposes of the Good Faith 
Effort Exception.
    One commenter suggested the final regulations clarify that if a 
program replies with a non-substantive response, the taxpayer is not 
required to follow up with the registered apprenticeship program for a 
more specific response. The Treasury Department and the IRS

[[Page 53233]]

agree that additional guidance is needed on the procedures after a 
taxpayer, contractor, or subcontractor makes an initial request to a 
registered apprenticeship program. The final regulations clarify that, 
for purposes of the Good Faith Effort Exception and subject to the 
annual duration of a request, a taxpayer, contractor, or subcontractor 
does not need to follow up with the registered apprenticeship program 
after an initial request is made or after receipt of a non-substantive 
response.
    Although follow-up requests are not required for purposes of the 
Good Faith Effort Exception, the Treasury Department and the IRS 
encourage taxpayers, contractors, and subcontractors to regularly 
follow up with registered apprenticeship programs regarding requests 
for qualified apprentices, and the final regulations clarify that 
evidence that this occurred is a factor the IRS will consider in 
determining whether there is intentional disregard of the 
Apprenticeship Requirements if the Good Faith Effort Exception does not 
apply.
f. Denial of a Request
    The Proposed Regulations would have provided that a denial of a 
request means that the registered apprenticeship program denied the 
request in its entirety. The Proposed Regulations would have further 
provided that a registered apprenticeship program's response that it 
could partially fulfill a request in the occupation(s) for which it 
trains apprentices would not constitute a denial of the request with 
respect to the parts of the request that could be fulfilled. Commenters 
suggested that the final regulations require taxpayers to accept all 
qualified apprentices offered by a registered apprenticeship program, 
even if a registered apprenticeship program is only partially able to 
meet a request. The final regulations clarify that partial denials may 
also serve as a valid basis for the Good Faith Effort Exception with 
respect to the portion denied, provided that the taxpayer, contractor, 
or subcontractor hires the qualified apprentices that are available for 
the construction as provided by the registered apprenticeship program 
in its response. The final regulations also clarify through an example 
that a denial that follows an initial acceptance and is received prior 
to the start of the requested work (for example, if a registered 
apprenticeship program indicates it can provide qualified apprentices 
to a project and is subsequently unable to fulfill the request) may 
also serve as a valid basis for the Good Faith Effort Exception.
    Commenters also asked if the Labor Hours Requirement is 
proportionately reduced in the event of a partial denial. The Treasury 
Department and the IRS understand the need for clarification on the 
interaction between the Labor Hours Requirement and the Good Faith 
Effort Exception. An example in proposed Sec.  1.45-8(e)(1)(ii)(F) 
illustrates that if a request is partially denied, the part of the 
request that was denied would qualify for the Good Faith Effort 
Exception. As proposed, the example would have stated the number of 
qualified apprentice labor hours that would qualify for the Good Faith 
Effort Exception, but it did not clearly indicate how these hours are 
treated. The final regulations contain a revised example clarifying 
that there is no proportionate reduction of the Labor Hours 
Requirement. Instead, the qualified apprentice labor hours that qualify 
for the Good Faith Effort Exception are treated as labor hours 
performed by qualified apprentices.
    Commenters requested that the final regulations clarify how to 
determine the date on which a registered apprenticeship program 
received a request for purposes of the Good Faith Effort Exception. One 
commenter suggested that the date of receipt should be determined by a 
proof of receipt from a delivery service. As explained in Section 
VIII.B.1.b. of this Summary of Comments and Explanation of Revisions, 
for purposes of the Good Faith Effort Exception, requests for qualified 
apprentices must be in writing and sent electronically or by registered 
mail. The final regulations provide that date of receipt of the request 
is the date an email request is sent to the registered apprenticeship 
program, or the date of delivery shown on a receipt from the registered 
mail delivery.
    Under section 45(b)(8)(D)(ii)(I), in order to satisfy the Good 
Faith Effort Exception, a denial of a request for qualified apprentices 
cannot be ``the result of a refusal by the taxpayer or any contractors 
or subcontractors engaged in the performance of construction, 
alteration or repair work with respect to such qualified facility to 
comply with the established standards and requirements of the 
registered apprenticeship program.'' The Proposed Regulations 
reiterated this requirement. The preamble to the Proposed Regulations 
provided further that ``if a registered apprenticeship program requires 
a requesting employer to enter into an agreement with the registered 
apprenticeship program, then a denial of the request because the 
employer refused to enter into the agreement would not be a valid 
denial for purposes of the Good Faith Effort Exception.''
    A few commenters requested that the final regulations confirm that 
the established standards and requirements of the registered 
apprenticeship program refer to those requirements included in the DOL 
Apprenticeship Standards. Commenters asserted that requiring taxpayers 
to comply with requirements other than those necessary to comply with 
the DOL Apprenticeship Standards would unfairly restrict a taxpayer's 
ability to negotiate contract terms with a registered apprenticeship 
program. Some commenters were also concerned that the proposed rule 
would require taxpayers, contractors, and subcontractors who are not 
parties to collective bargaining agreements or PLAs to enter into these 
agreements in order to comply with a union registered apprenticeship 
program's standards and requirements. Commenters stated that non-union 
contractors generally do not employ qualified apprentices enrolled in 
union sponsored registered apprenticeship programs, and they requested 
confirmation that this rule would not require them to do so. A 
commenter also requested guidance concerning what remedies are 
available to taxpayers if there is a conflict between standards imposed 
by an apprenticeship program registered by the DOL OA and an 
apprenticeship program registered by a State apprenticeship agency. The 
commenter requested clarification that taxpayers may choose to request 
and employ qualified apprentices from either registered apprenticeship 
program.
    The Treasury Department and the IRS agree that the final 
regulations should further clarify what established standards and 
requirements means. Under section 45(b)(8)(D)(ii) the denial cannot be 
a result of a failure to comply with the ``established standards and 
requirements'' of a registered apprenticeship program (as defined in 
section 3131(e)(3)(B)). Section 3131(e)(3)(B) requires a registered 
apprenticeship program to satisfy the DOL Apprenticeship Standards.
    Section 29.5 of the current DOL Apprenticeship Standards provides 
the standards of apprenticeship that an apprenticeship program must 
satisfy to be eligible for approval and registration by the DOL OA or a 
State apprenticeship agency.\35\ Under 29 CFR 29.5(a), the 
apprenticeship program must have ``an organized, written plan

[[Page 53234]]

(program standards) embodying the terms and conditions of employment, 
training, and supervision of one or more apprentices in an 
apprenticeable occupation, as defined in this part, and subscribed to 
by a sponsor who has undertaken to carry out the apprentice training 
program.'' Section 29.5(b) lists 23 different provisions that the 
program standards must address, including the employment and training 
of the apprentice, the term of apprenticeship and the minimum 
qualifications required by a sponsor for persons entering the 
apprenticeship program. The Treasury Department and the IRS have 
determined that the use of the phrase ``established standards'' in 
section 45(b)(8)(D)(ii)(l) of the Code should be construed as a 
reference to the DOL Apprenticeship Standards referenced by section 
3131(e)(3)(B) of the Code and contained in 29 CFR parts 29 and 30. 
Based on consultation with the DOL OA, the Treasury Department and the 
IRS understand that the DOL also refers to the established standards as 
the DOL Apprenticeship Standards that are applicable to--and required 
of--all employers who wish to join the registered apprenticeship 
program for the purpose of employing apprentices.
---------------------------------------------------------------------------

    \35\ On January 17, 2024, the DOL released an NPRM proposing to 
update the DOL Apprenticeship Standards contained in 29 CFR part 29. 
See 89 FR 3118.
---------------------------------------------------------------------------

    However, Congress's use of the phrase ``established standards and 
requirements'' captures more than the DOL Apprenticeship Standards. In 
order to give meaning to the words ``and requirements,'' terms and 
conditions beyond those contained in the DOL Apprenticeship Standards 
(those that are necessary for DOL approval) must not be rejected by 
taxpayers, contractors, and subcontractors for purposes of the Good 
Faith Effort Exception. Whether additional requirements may be imposed 
by the registered apprenticeship program will depend, in part, on what 
the DOL allows the registered apprenticeship program to require. The 
DOL is the agency responsible for regulating registered apprenticeship 
programs, and the DOL determines the permissible standards and 
requirements of a registered apprenticeship program. The DOL OA has 
indicated it is important for efficient oversight and administration of 
registered apprenticeship programs that these programs not be required 
to establish separate standards and requirements for the purposes of 
the IRA.
    The Treasury Department and the IRS appreciate the importance of 
the DOL's management of the registered apprenticeship program and the 
DOL's well-established understanding of what constitutes established 
standards and requirements for the registered apprenticeship programs 
that the DOL is responsible for overseeing and approving. Based on 
consultation with the DOL OA, the Treasury Department and the IRS also 
understand that registered apprenticeship programs are expected to 
provide prospective employers with the program's established standards 
and requirements, including those reviewed by the DOL or the State 
apprenticeship agency.
    The Treasury department and the IRS have determined that the final 
regulations must interpret the statutory language in a way that gives 
meaning to the entire phrase, and also appropriately recognize 
procedures implemented by the DOL OA. Accordingly, the final 
regulations provide that the requirements referenced as part of the 
established standards and requirements are those additional 
requirements that are established by the registered apprenticeship 
program for the placement of apprentices, applicable to all employers 
participating in the registered apprenticeship program, and not found 
by the DOL OA or a State apprenticeship agency to be contrary to the 
DOL guidance regarding the administration of registered apprenticeship 
programs.
    Consistent with this explanation and in response to comments, the 
final regulations revise the proposed rule with respect to the 
established standards and requirements that must not be rejected by 
taxpayers, contractors, or subcontractors for purposes of satisfying 
the Good Faith Effort Exception. For example, if a registered 
apprenticeship program requires all employers who request qualified 
apprentices to enter into an agreement with the registered 
apprenticeship program, sign a collective bargaining agreement, and pay 
user fees, and these requirements have not been found by the DOL OA or 
a State apprenticeship agency to be contrary to DOL guidance regarding 
the administration of registered apprenticeship programs, then a denial 
of the request because the employer refused to enter into the 
agreement, sign the collective bargaining agreement, or pay the user 
fees would not qualify as a valid denial for purposes of the Good Faith 
Effort Exception. In order to substantiate the Good Faith Effort 
Exception, a taxpayer will be expected to document that a denial of a 
request was not because of the taxpayer's refusal to comply with the 
established standards and requirements of the registered apprenticeship 
program.
    Taxpayers, contractors, and subcontractors also retain the ability 
to contact other registered apprenticeship programs that do not have 
similar requirements in an effort to satisfy the Apprenticeship 
Requirements or the Good Faith Effort Exception. Because of the 
requirement that taxpayers, contractors, and subcontractors contact 
registered apprenticeship programs with a geographic area of operation 
that includes the location of the facility, the Treasury Department and 
the IRS do not anticipate that the established standards and 
requirements of the registered apprenticeship program will conflict 
with those required by State law. In the unlikely event that they do, 
the taxpayer, contractor, or subcontractor should contact the DOL OA 
for assistance.
g. Other Good Faith Effort Exception Issues
    A commenter asked the Treasury Department and the IRS to consider 
limiting the number of Good Faith Effort Exceptions available per trade 
to encourage taxpayers to individually sponsor new registered 
apprenticeship programs. The Treasury Department and the IRS 
acknowledge that there is interest in developing new registered 
apprenticeship programs to meet the anticipated need for additional 
qualified apprentices. The final regulations already impose some limits 
on the Good Faith Effort Exception through the requirement to submit 
additional requests following the denial of a request and other 
requirements relating to the required contents and scope of a request. 
The final regulations do not otherwise impose a limit on the 
availability of using the Good Faith Effort Exception.
    Under section 45(b)(8)(D)(ii), to satisfy the Good Faith Effort 
Exception, requests must be made for qualified apprentices from a 
registered apprenticeship program as defined in section 3131(e)(3)(B). 
One commenter was concerned that employers would fund apprenticeship 
programs and request qualified apprentices from those programs in an 
effort to manufacture denials. To reduce abuse of the Good Faith Effort 
Exception, the commenter recommended requiring apprenticeship requests 
to be sent only to registered programs with a prior record of operation 
and prior record of meeting certain graduation rates. A few other 
commenters were concerned with the proliferation of new registered 
apprenticeship programs that are registered with the DOL but do not 
provide training to a meaningful number of workers.
    As discussed in Section VIII.B.1.c., the final regulations clarify 
that a taxpayer cannot satisfy the Good Faith

[[Page 53235]]

Effort Exception through a denial from a registered apprenticeship 
program it sponsors. If the program sponsored by the taxpayer has no 
available qualified apprentices, the taxpayer must contact other 
registered apprenticeship programs for qualified apprentices to satisfy 
the Apprenticeship Requirements or the Good Faith Effort Exception. 
Additionally, while the Treasury Department and the IRS recognize that 
there are concerns that the Good Faith Effort Exception may be abused, 
the statute requires requests of qualified apprentices from registered 
apprenticeship programs. Registered apprenticeship programs are 
registered by the DOL OA or a recognized State apprenticeship agency, 
pursuant to the standards in 29 CFR parts 29 and 30. As indicated in 
Section II.D.1. of this Background, the DOL is responsible for 
regulating the registered apprenticeship programs, and the extent to 
which operational history, graduation rates, and training are relevant 
to registration is more appropriate for the DOL to determine. Comments 
suggesting that the final regulations impose requirements on registered 
apprenticeship programs beyond those required by the DOL are outside 
the scope of these final regulations and are not adopted.\36\
---------------------------------------------------------------------------

    \36\ Under 29 CFR 29.5(a), registered apprenticeship programs 
must have an organized, written plan embodying the terms and 
conditions of employment, training, and supervision of one or more 
apprentices in an apprenticeable occupation, as defined in 29 CFR 
part 29, and subscribed to by a sponsor who has undertaken to carry 
out the apprentice training program. Additionally, under 29 CFR 
29.5(b)(3), a registered apprenticeship program's program standards 
must contain provisions that outline the work process in which the 
apprentice will receive supervised work experience and training on 
the job. Accordingly, taxpayers are required to make requests to 
programs that provide meaningful training to qualified apprentices. 
The DOL's proposed 29 CFR 29.8(a) provides that each registered 
apprenticeship program must have a written set of standards of 
apprenticeship that will govern the conduct and operation of that 
program. 89 FR 3118, 3278.
---------------------------------------------------------------------------

    Another commenter suggested that taxpayers make requests solely to 
the DOL registered apprenticeship programs. Under 45(b)(8)(D)(ii), to 
qualify for the Good Faith Effort Exception, a taxpayer is required to 
make a request for a qualified apprentice from a registered 
apprenticeship program, as defined in section 3131(e)(3)(B). Under 
3131(e)(3)(B), a registered apprenticeship program means an 
apprenticeship registered under the Act of August 16, 1937 (commonly 
known as the National Apprenticeship Act; 50 Stat. 664, chapter 663; 29 
U.S.C. 50 et seq.) that meets the standards of subpart A of part 29 and 
part 30 of title 29, Code of Federal Regulations.
    29 CFR 29.3(a) provides that eligibility for registration of an 
apprenticeship program is conditioned upon a program's conformity with 
the apprenticeship program standards of 29 CFR part 29. For a program 
to be determined by the DOL as conforming with the standards under 29 
CFR part 29, the program must apply for registration and be registered 
with the DOL OA or with a State apprenticeship agency recognized by the 
DOL OA. 29 CFR 29.2 defines a State apprenticeship agency to mean an 
agency of a State government that has responsibility and accountability 
for apprenticeship within the State. 29 CFR 29.2 specifies that only a 
State apprenticeship agency may seek recognition by the DOL OA as an 
agency that has been properly constituted under an acceptable law or 
Executive order, and authorized by the DOL OA to register and oversee 
apprenticeship programs. Thus, the final regulations provide that a 
request may be made to a registered apprenticeship program that is 
either registered by the DOL OA or a State apprenticeship agency. 
Regardless of whether the program is registered by the DOL OA or a 
State apprenticeship agency, the registered apprenticeship program must 
meet the standards of 29 CFR parts 29 and 30.
    A commenter recommended expanding the Good Faith Effort Exception 
to make allowances for emergency circumstances during which it may not 
be practicable or in the public interest to ensure compliance with the 
Apprenticeship Requirements, such as during an unexpected outage due to 
severe weather or operational issues. The commenter explained that in 
these circumstances, companies must be able to restore service quickly 
to provide critical fuel supplies.
    The Treasury Department and the IRS acknowledge that there may be 
circumstances in which it will be impractical to have qualified 
apprentices perform work on the qualified facility. However, the 
Apprenticeship Requirements do not require qualified apprentices to 
work at all times. The Participation Requirement only requires each 
taxpayer, contractor, or subcontractor who employs four or more 
individuals to perform construction, alteration, or repair work with 
respect to the construction of a qualified facility to employ one or 
more qualified apprentices to perform such work. The Labor Hours 
Requirement only requires taxpayers to ensure that not less than a 
certain percentage (10 percent, 12.5 percent, or 15 percent, depending 
on the date on which construction began) of total labor hours of the 
construction, alteration, or repair work (including such work performed 
by any contractor or subcontractor) with respect to such facility, be 
performed by qualified apprentices.
    In other words, taxpayers have flexibility in satisfying the Labor 
Hours Requirement. Additionally, the Apprenticeship Requirements apply 
only to the construction of the qualified facility (including 
alteration and repair performed during construction), and not to 
alteration or repair work conducted after the facility is placed in 
service. Because the Apprenticeship Requirements do not apply to the 
alteration or repair work after a facility is placed in service and 
because the Labor Hours Requirement only requires qualified apprentices 
to perform a certain percentage of work, the Treasury Department and 
the IRS have determined that the Good Faith Effort Exception does not 
need to be expanded to make allowances for emergency circumstances 
contemplated by the commenter.
    One commenter requested that the Treasury Department and the IRS 
grant a Good Faith Effort Exception in situations in which taxpayers 
are denied qualified apprentices because States have illegally and 
unjustifiably delayed or denied registration of apprenticeship 
programs. The Good Faith Effort Exception requires a request to a 
registered apprenticeship program. If the apprenticeship program is not 
registered, the denial of or nonresponse to that request is irrelevant 
for purposes of the Good Faith Effort Exception. The Treasury 
Department and the IRS decline to adopt an exception from that rule 
based on the reasons an apprenticeship program is denied registration.
    Commenters asked for clarification regarding the operation of the 
Good Faith Effort Exception for employers that do not participate in 
registered apprenticeship programs that share a ``pool'' of qualified 
apprentices. The Treasury Department and the IRS are interpreting these 
comment letters as referring to group registered apprenticeship 
programs, under which the registered apprenticeship program places 
qualified apprentices with multiple-employer participants. One 
commenter stated that many construction firms typically sponsor an 
existing employee's apprenticeship through an association, community-
based, or employer-run registered apprenticeship programs and the 
commenter was concerned that the

[[Page 53236]]

Good Faith Effort Exception would not align with those existing 
practices.
    Section 45(b)(8)(D)(ii) provides that taxpayers are deemed to 
satisfy the Apprenticeship Requirements if they have requested 
qualified apprentices from a registered apprenticeship program and such 
request has been denied or if the registered apprenticeship program 
fails to respond within five business days of receiving a request. The 
Proposed Regulations would have provided that a taxpayer, contractor, 
or subcontractor must submit a written request to at least one 
registered apprenticeship program that has a usual and customary 
business practice of entering into agreements with employers for the 
placement of qualified apprentices in the occupation for which they are 
training.
    The Treasury Department and the IRS recognize that many contractors 
currently sponsor existing employees through registered apprenticeship 
programs, and hours worked by those employees may satisfy the 
Apprenticeship Requirements, provided all requirements are met. 
However, as discussed in Section VII.B.1.c. of this Summary of 
Explanations and Revisions, if a taxpayer, contractor, or subcontractor 
is a registered apprenticeship program sponsor and there are no 
available qualified apprentices in the registered apprenticeship 
program sponsored by the taxpayer, contractor, or subcontractor, then 
the taxpayer, contractor, or subcontractor may only qualify for the 
Good Faith Effort Exception by demonstrating that it made a request to 
another registered apprenticeship program (and such request was denied 
or not responded to within five business days) or by establishing that 
there are no other registered apprenticeship programs with an area of 
operation that includes the location of the facility. The final 
regulations clarify this requirement.
    A commenter asked the Treasury Department and the IRS to consider 
requiring the DOL OA or the appropriate State apprenticeship agency 
representative to sign off on a taxpayer's satisfaction of the Good 
Faith Effort Exception. As discussed in Section V.A. of this Summary of 
Comments and Explanation of Revisions, the taxpayer is ultimately 
responsible for ensuring compliance with the PWA requirements, 
including exceptions to the requirements such as the Good Faith Effort 
Exception, and may not rely on other parties, the DOL OA, or State 
apprenticeship agencies to certify compliance. Consequently, the final 
regulations do not adopt this suggestion. The final regulations provide 
that contacting the DOL OA or a State apprenticeship agency for 
assistance in locating a registered apprenticeship program may be a 
factor for purposes of determining intentional disregard.
    A commenter suggested requiring taxpayers relying on the Good Faith 
Effort Exception to summarize their good faith efforts as part of their 
reporting to the IRS. As an example, the commenter stated that 
taxpayers could list the registered apprenticeship programs from which 
they requested qualified apprentices, the dates of their requests, and 
any reasons that their requests were denied. The final regulations 
retain the requirement from the Proposed Regulations that taxpayers 
must maintain and preserve sufficient records to demonstrate compliance 
with the PWA requirements, and if the taxpayer is relying on the Good 
Faith Effort Exception, this includes any written requests for the 
employment of qualified apprentices from registered apprenticeship 
programs and all correspondence with the registered apprenticeship 
program regarding the request, including denials of such requests. 
Whether, and to what extent information must be provided to the IRS at 
filing will be addressed in IRS forms, instructions, and publications.
    Some commenters suggested that to qualify for the Good Faith Effort 
Exception, taxpayers, contactors, or subcontractors should develop and 
submit apprenticeship utilization plans to the Treasury Department. The 
Treasury Department and the IRS decline to include this requirement in 
the final regulations because such rules would not further tax 
administration and are not required by the statute. While an 
apprenticeship utilization plan is not required for the Good Faith 
Effort Exception, the existence of a utilization plan may assist 
taxpayers in requesting qualified apprentices from a registered 
apprenticeship program and the final regulations provide that the 
development and use of an apprenticeship utilization plan is a factor 
the IRS will consider in determining whether the failure to satisfy the 
Apprenticeship Requirements is due to intentional disregard.
2. Apprenticeship Cure Provision
a. General Procedures
    Commenters requested additional guidance concerning the 
Apprenticeship Cure Provision. Specifically, comments asked if there is 
a deadline for the penalty payment provided by section 
45(b)(8)(D)(i)(II) to cure any failure to satisfy the Labor Hours 
Requirement and Participation Requirement, and whether, for such 
penalties, the IRS would issue a final determination consistent with 
the Prevailing Wage Requirements, a statutory notice of deficiency, or 
other notice to the taxpayer regarding this penalty. The Treasury 
Department and the IRS understand the need for clarification regarding 
the deadline to make the penalty payment required by the Apprenticeship 
Cure Provision.
    With respect to failures to pay wages at rates not less than the 
prevailing rates, section 45(b)(7)(B)(iv) provides that the taxpayer 
must make required correction and penalty payments within 180 days 
after a final determination to be eligible for the increased credit 
amount. There is no similar statutory requirement in the Apprenticeship 
Cure Provision. Further, section 45(b)(7)(B)(ii) provides that 
Subchapter B of chapter 63 (relating to deficiency procedures for 
income, estate, gift, and certain excise taxes) does not apply with 
respect to the assessment or collection of any penalty imposed by 
section 45(b)(7) with respect to the Prevailing Wage Requirements. 
Section 45(b)(8) does not provide a similar exception to the deficiency 
procedures with respect to the Apprenticeship Cure Provision. The final 
regulations clarify that there is no specific deadline for payment of 
the penalty required by the Apprenticeship Cure Provision. The 
deficiency procedures apply to the penalty payments for the failure to 
satisfy the Apprenticeship Requirements. Although there is no specific 
statutory deadline for payment of the penalty, as discussed in Section 
VII.D.3. of this Summary of Comments and Explanation of Revisions, if a 
taxpayer makes the necessary penalty payments before the taxpayer 
receives notice of an examination from the IRS with respect to a claim 
for the increased credit amount under section 45(b)(6), the taxpayer 
will be presumed not to have intentionally disregarded the 
Apprenticeship Requirements.
    At least one commenter suggested clarifying whether the Treasury 
Department and the IRS intended to double-count the penalty with 
respect to any given labor hour if the taxpayer fails to meet both the 
Labor Hours Requirement and Participation Requirement. The Proposed 
Regulations would have provided that if a taxpayer fails both the Labor 
Hours Requirement and the Participation Requirement the penalty would 
equal the sum of the penalty for the failure to meet the Labor Hours 
Requirement plus the penalty for failure to meet the Participation

[[Page 53237]]

Requirement. The penalty provision of section 45(b)(8)(D)(i)(II) 
provides that the penalty applies to any failure by the taxpayer to 
satisfy the Labor Hours Requirement under section 45(b)(8)(A) and the 
Participation Requirement under section 45(b)(8)(C). The use of ``any 
failure'' reflects a broad scope such that taxpayers may be subject to 
penalties for failure to meet the Labor Hours Requirement and the 
Participation Requirement with respect to the same facility.
    One commenter requested that the Treasury Department and the IRS 
exercise discretion to decline to impose penalties for any failure to 
satisfy the Participation Requirement with respect to any contractor or 
subcontractor that qualifies as a small business under the U.S. Small 
Business Administration's guidance. Although the Treasury Department 
and the IRS appreciate the concern for small businesses, the 
Participation Requirement in section 45(b)(8)(C) applies to each 
taxpayer, contractor, or subcontractor who employs four or more 
individuals to perform construction, alteration, or repair work with 
respect to the construction of a qualified facility. The final 
regulations retain the proposed rule consistent with this statutory 
language.
b. Intentional Disregard
    The Proposed Regulations would have provided that failures to meet 
the Apprenticeship Requirements would be due to intentional disregard, 
and subject to enhanced penalty amounts, if the failure is knowing or 
willful, considering all relevant facts and circumstances. The Proposed 
Regulations would have provided a non-exhaustive list of facts and 
circumstances that may be relevant to determining whether the failure 
was knowing or willful.
    In assessing intentional disregard, commenters recommended 
considering whether the taxpayer: (i) used and complied with an 
apprenticeship utilization plan; (ii) failed to require contractors and 
subcontractors to forward to the taxpayer all requests to registered 
apprenticeship programs for qualified apprentices within five business 
days of when the requests were made; (iii) failed to audit requests to 
registered apprenticeship programs for qualified apprentices to ensure 
compliance with the labor hours, participation, and ratio obligations 
in the Apprenticeship Requirements; and (iv) abided by anti-retaliation 
procedures. The Proposed Regulations would have provided that the 
failure to meet the Labor Hours Requirement or the Participation 
Requirement would be due to intentional disregard if the failure was 
knowing or willful. The determination that a failure was knowing or 
willful will be made by considering all the relevant facts and 
circumstances.
    The final regulations provide a non-exhaustive list of facts and 
circumstances that may be relevant to determine whether the failure was 
knowing or willful. The Treasury Department and the IRS agree that the 
following factors are relevant and may be considered in determining 
whether a failure was due to intentional disregard: (i) the taxpayer's 
use of and compliance with an apprenticeship utilization plan; (ii) the 
taxpayer requiring contractors and subcontractors to forward to the 
taxpayer requests to registered apprenticeship programs within five 
business days of when requests are made; (iii) whether taxpayers 
regularly reviewed contractors' and subcontractors' use of qualified 
apprentices; and (iv) investigating complaints concerning failures to 
comply with the Apprenticeship Requirements and complaints concerning 
retaliation. The final regulations incorporate these additional factors 
and other clarifying edits consistent with the intentional disregard 
factors in Sec.  1.45-7(c)(3) that are applicable to the Prevailing 
Wage Requirements. Intentional disregard for purposes of the Prevailing 
Wage Requirements is discussed in Section VII.D.3. of this Summary of 
Comments and Explanation of Revisions.
    A commenter recommended that a taxpayer who is found to have failed 
the Good Faith Effort Exception, be presumed to have done so with 
intentional disregard. The Good Faith Effort Exception is intended to 
provide relief for taxpayers, contractors, and subcontractors who were 
unable to employ qualified apprentices despite making valid requests 
for qualified apprentices to registered apprenticeship programs. The 
failure to qualify for the Good Faith Effort Exception does not create 
a presumption of intentional disregard because the intentional 
disregard provisions are only relevant if the taxpayer has otherwise 
failed to meet the Apprenticeship Requirements. Thus, the Treasury 
Department and the IRS decline to adopt the commenter's suggestion.
    A commenter suggested that the Treasury Department and the IRS 
adopt a presumption that the taxpayer did not act in good faith if a 
labor union or representative of a registered apprenticeship program 
contacted the taxpayer, contractor, or subcontractor and made them 
aware of the apprenticeship requirement and the availability of 
qualified apprentices and was ignored. The Treasury Department and the 
IRS decline to adopt this recommendation. The Proposed Regulations 
would have provided a non-exhaustive list of facts and circumstances 
considered to determine whether a failure to satisfy the Apprenticeship 
Requirements is due to intentional disregard. If a taxpayer makes a 
request for qualified apprentices to a registered apprenticeship 
program and the registered apprenticeship program informs the taxpayer 
of available qualified apprentices, but the taxpayer does not employ 
the available qualified apprentices and fails to satisfy the 
Apprenticeship Requirements, then the taxpayer's refusal to employ the 
available qualified apprentices could be considered in determining 
whether the taxpayer's failure was due to intentional disregard. 
However, if labor unions or representatives of registered 
apprenticeship programs are reaching out to taxpayers regarding the 
Apprenticeship Requirements and the availability of qualified 
apprentices and taxpayers ignore these solicitations, taxpayers will 
not automatically be deemed to have acted with intentional disregard.

IX. Applying the PWA Provisions for Increased Amounts of Credit and 
Deduction Under Other Code Sections

    The majority of the comments the Treasury Department and the IRS 
received relate to the general application of the PWA requirements 
across multiple Code sections, and those comments have been addressed 
in Sections I. through VIII. of this Summary of Comments and 
Explanation of Revisions. Additional comments that relate solely to 
specific Code sections are discussed in this Section IX. of this 
Summary of Comments and Explanation of Revisions.
A. Section 30C
    Section 30C provides a credit for the cost of any qualified 
alternative fuel vehicle refueling property placed in service during 
the taxable year. For properties placed in service before January 1, 
2023, the credit is equal to 30 percent. For properties placed in 
service after December 31, 2022, the credit is equal to 30 percent (6 
percent for property of a character subject to depreciation). If a 
taxpayer satisfies the PWA requirements in sections 30C(g)(2) and (3) 
or meets the BOC Exception with respect to a qualified alternative fuel 
vehicle refueling project, then the

[[Page 53238]]

credit determined under section 30C(a) for any qualified alternative 
fuel vehicle refueling property of a character subject to an allowance 
for depreciation that is part of such project is multiplied by five. 
For purposes of the PWA requirements, section 30C(g)(1)(B) defines a 
qualified alternative fuel vehicle refueling project as a project 
consisting of one or more properties that are part of a single project. 
The Prevailing Wage Requirements in section 30C(g)(2)(A) are that the 
taxpayer ensure that laborers and mechanics employed by the taxpayer or 
any contractor or subcontractor in the construction of any qualified 
alternative fuel vehicle refueling property that is part of a qualified 
alternative fuel vehicle refueling project are paid wages at rates not 
less than prevailing rates. Under section 30(c)(g)(3), rules similar to 
the rules in section 45(b)(8) apply regarding the Apprenticeship 
Requirements.
    Proposed Sec.  1.30C-3(b) would have provided that a qualified 
alternative fuel vehicle refueling project would satisfy the PWA 
requirements for the increased credit amount if the project either 
begins construction prior to January 29, 2023, or meets the Prevailing 
Wage Requirements of section 45(b)(7) and proposed Sec.  1.45-7, the 
Apprenticeship Requirements of section 45(b)(8) and proposed Sec.  
1.45-8, and the recordkeeping and reporting requirements of proposed 
Sec.  1.45-12.
    Commenters asked whether cross-references in proposed Sec.  1.30C-
3(b)(2) to sections 45(b)(7) and 45(b)(8) meant that PWA requirements 
apply to alteration or repair work after a qualified property is placed 
in service under section 30C. Commenters asserted that the statutory 
text of section 30C(g)(2)(A) limits the PWA requirements only to the 
construction of any qualified alternative fuel vehicle refueling 
property. Commenters also stated the impracticality of imposing PWA 
requirements under section 30C after qualified alternative fuel vehicle 
refueling property is placed in service. Commenters emphasized that 
alteration or repair work of such property often requires a trained 
technician due to the necessary skill sets for both the hardware and 
software characteristics of the charging property. Commenters further 
stated that requesting and waiting for qualified apprentices in order 
to complete alteration or repair work could imperil a taxpayer's 
ability to comply with national uptime requirements implemented by the 
Department of Transportation through the National Electric Vehicle 
Infrastructure program.
    Section 30C(g)(2)(A) states that the Prevailing Wage Requirements 
apply in the construction of any qualified alternative fuel vehicle 
refueling property that is part of a qualified alternative fuel vehicle 
refueling project. Nothing in section 30C requires the payment of 
prevailing wages with respect to alterations or repairs after the 
property is placed in service. By contrast, section 45(b)(7)(A) 
provides that the Prevailing Wage Requirements apply in the 
construction of a facility and to the alteration and repair of the 
facility in the 10-year period after placed in service. The final 
regulations clarify that the Prevailing Wage Requirements do not apply 
after a section 30C project is placed in service. The applicable scope 
of the PWA requirements is explained in Section VI. of this Summary of 
Comments and Explanation of Revisions. As explained in Section 
VIII.A.1. of this Summary of Comments and Explanation of Revisions, the 
Apprenticeship Requirements apply only during the construction of the 
qualified alternative fuel vehicle refueling property that is part of a 
qualified alternative fuel vehicle refueling project (including 
alterations and repairs that occur during construction) and not with 
respect to any alteration or repair after a section 30C project is 
placed in service. Under the transition rule described in Section II. 
of this Summary of Comments and Explanation of Revisions, the PWA 
requirements do not apply to any work performed before January 29, 
2023.
    Another commenter suggested that the Treasury Department and the 
IRS consider aligning the implementation of PWA requirements for 
section 30C projects with forthcoming guidance on section 30C eligible 
census tracts. On January 19, 2024, the Treasury Department and the IRS 
issued Notice 2024-20 providing notice of intent to propose regulations 
on eligible census tracts under section 30C. Notice 2024-20 does not 
address the application of PWA requirements under section 30C. Guidance 
concerning eligible census tracts under section 30C is outside the 
scope of these final regulations.
B. Section 45L
    Section 45L provides a credit for a qualified new energy efficient 
home (qualified home) that is constructed by an eligible contractor and 
acquired by a person from that eligible contractor for use as a 
residence during the taxable year. In the case of a qualifying 
residence that meets the Prevailing Wage Requirements, section 
45L(g)(1) provides an increased credit amount. The Prevailing Wage 
Requirements in section 45L(g)(2)(A) are that the taxpayer must ensure 
that laborers and mechanics employed by the taxpayer or any contractor 
or subcontractor in the construction of any qualified residence are 
paid wages at rates not less than prevailing rates.
    Proposed Sec.  1.45L-3(a) would have provided that with respect to 
a qualified home, the credit determined under section 45L(a)(2)(B)(i) 
is $2,500 and the credit determined under section 45L(a)(2)(B)(ii) is 
$5,000 if the qualified home meets the requirements under section 
45L(c)(1)(A) or 45L(c)(1)(B), as applicable; is constructed by an 
eligible contractor; is acquired by a person for use as a residence 
during the taxable year; and satisfies the Prevailing Wage Requirements 
of section 45(b)(7) and proposed Sec.  1.45-7, and the recordkeeping 
and reporting requirements of proposed Sec.  1.45-12.
    One commenter stated that the Proposed Regulations may have 
erroneously incorporated the requirement in proposed Sec.  1.45-7(a) to 
pay prevailing wages during the 10-year period after a facility is 
placed in service and requested that the final regulations specify 
whether the PWA requirements apply after a facility is placed in 
service.
    Section 45L(g)(2)(A) provides that the Prevailing Wage Requirements 
apply ``in the construction of such residence.'' Nothing in section 45L 
requires the payment of prevailing wages with respect to alterations or 
repairs after construction of a qualified residence ends. For the 
reasons described in Section IX.A. of this Summary of Comments and 
Explanation of Revisions, the final regulations clarify that the 
Prevailing Wage Requirements under section 45L do not apply after 
construction of a qualified residence ends. The applicable scope of the 
Prevailing Wage Requirements is explained in Section VI. of this 
Summary of Comments and Explanation of Revisions. Under the transition 
rule described in Section II. of this Summary of Comments and 
Explanation of Revisions, the Prevailing Wage Requirements do not apply 
to any work performed before January 29, 2023.
C. Section 45Q
    Section 45Q provides a credit for the capture and sequestration of 
qualified carbon oxide using equipment placed in service at a qualified 
facility. Section 45Q(h) provides an increased credit amount for 
qualified facilities or any carbon capture equipment placed in service 
or installed at such facilities that satisfies the PWA requirements.

[[Page 53239]]

    Proposed Sec.  1.45Q-6(b)(1) would have provided that to claim the 
increased credit amount with respect to a qualified facility the 
construction of which begins on or after January 29, 2023, and any 
carbon capture equipment placed in service at such facility, the 
taxpayer must meet the Prevailing Wage Requirements of section 45(b)(7) 
and proposed Sec.  1.45-7 with respect to such facility and equipment, 
the Apprenticeship Requirements of section 45(b)(8) and proposed Sec.  
1.45-8 with respect to the construction of such facility and equipment, 
and the recordkeeping and reporting requirements of proposed Sec.  
1.45-12.
    Proposed Sec.  1.45Q-6(b)(2) would have provided that to claim the 
increased credit amount with respect to any carbon capture equipment 
the construction of which begins on or after January 29, 2023, and that 
is installed at a qualified facility the construction of which began 
prior to such date, the taxpayer must meet the Prevailing Wage 
Requirements of section 45(b)(7) and proposed Sec.  1.45-7 with respect 
to such equipment, the Apprenticeship Requirements of section 45(b)(8) 
and proposed Sec.  1.45-8 with respect to the construction of such 
equipment, and the recordkeeping and reporting requirements of proposed 
Sec.  1.45-12.
    Proposed Sec.  1.45Q-6(b)(3) would have provided that to claim the 
increased credit amount a taxpayer does not need to meet the PWA 
requirements with respect to the construction of carbon capture 
equipment the construction of which begins prior to January 29, 2023, 
provided that such equipment is installed at a qualified facility the 
construction of which also begins prior to January 29, 2023.
    Commenters sought clarification regarding the application of PWA 
requirements to construction of a qualified facility the construction 
of which begins on or after January 29, 2023. Commenters opined that 
section 45Q(h)(2)(A) could be interpreted to apply the PWA requirements 
with respect to construction of a facility before it is known or even 
expected to be within the definition of a qualified facility. 
Commenters argued that this would equate to a retroactive application 
of the PWA requirements and may have a negative impact on the 
construction of these facilities. Commenters stated that facilities may 
be built in 2023, but the decision to construct and install carbon 
capture equipment can come later as technologies develop. Commenters 
argued that a retroactive application of PWA requirements would put an 
end to investment in this area. At least one commenter also contended 
that the penalty and cure provisions built into the PWA requirements 
would be a far from certain means to secure the increased credit amount 
under section 45Q. The commenter stated that construction contracts for 
facilities with no plans for carbon capture would have no reason to 
require contractors to retain and disclose wage and apprenticeship 
information to the taxpayer. Without such information, the taxpayer 
would be unable to later determine the applicable correction and 
penalty payments.
    Section 45Q(h)(2)(A) states that to qualify for the increased 
credit amount, the taxpayer must satisfy the PWA requirements with 
respect to the construction of any qualified facility the construction 
of which begins on or after January 29, 2023, as well as any carbon 
capture equipment placed in service at such facility. Under section 
45Q(d), a facility may be a qualified facility, even if carbon capture 
equipment was not included in its original planning and design, so long 
as construction of the facility and carbon capture equipment begins 
before January 1, 2033. There is no exception from the PWA requirements 
if the construction of the qualified facility begins on or after 
January 29, 2023. The commenters' suggestions are not adopted in the 
final regulations.
    One commenter stated that the definition of a qualified facility 
could be construed as requiring taxpayers to satisfy the PWA 
requirements with respect to the entire facility even if only a small 
portion of the facility is responsible for the carbon oxide emission 
stream. Similarly, a commenter recommended clarifying that the scope of 
construction, alteration, or repair work only applies to the single 
process train of carbon capture equipment as defined in Sec.  1.45Q-
2(c)(3), and is not inclusive of any other construction, alteration, or 
repair work performed at the facility or plant. The applicable scope of 
the PWA requirements is explained in Section VI. of this Summary of 
Comments and Explanation of Revisions.
    Another commenter stated that proposed Sec.  1.45Q-6(b) would have 
erroneously incorporated the requirement in section 45(b)(7) and 
proposed Sec.  1.45-7 to pay prevailing wages for the alteration or 
repair of a facility during the 10-year period after a facility is 
placed in service, even though section 45Q(h)(3)(A)(ii) prescribes the 
payment of prevailing wages for alteration or repair during the 12-year 
period beginning on the date the equipment was originally placed in 
service. The final regulations clarify that the Prevailing Wage 
Requirements under section 45Q apply with respect to the alteration or 
repair of a qualified facility or carbon capture equipment placed in 
service at such facility during the applicable 12-year period. As 
explained in Section VIII.A.1. of this Summary of Comments and 
Explanation of Revisions, the Apprenticeship Requirements apply only 
during the construction of the facility and not with respect to any 
alteration or repair after a facility is placed in service. Under the 
transition rule described in Section II. of this Summary of Comments 
and Explanation of Revisions, the PWA requirements do not apply to any 
work performed before January 29, 2023.
D. Section 45U
    Section 45U provides a credit for electricity produced by the 
taxpayer at a qualified nuclear power facility (as defined in section 
45U(b)(1)) and sold by the taxpayer to an unrelated person during the 
taxable year. Generally, for taxable years beginning after December 31, 
2023, the credit is equal to the amount by which the product of 0.3 
cents multiplied by the kilowatt hours of electricity produced by the 
taxpayer at a qualified nuclear power facility and sold by the taxpayer 
to an unrelated person during the taxable year exceeds the reduction 
amount (as determined under section 45(b)(2)) for such taxable year. 
Under section 45U(d), if a taxpayer satisfies the Prevailing Wage 
Requirements with respect to a qualified nuclear power facility, then 
the credit determined under section 45U(a) for the qualified nuclear 
power facility is multiplied by five. Under section 45U(d)(2)(A), the 
Prevailing Wage Requirements apply to the alteration or repair of any 
qualified nuclear power facility.
    Proposed Sec.  1.45U-3(a) would have provided that the amount of 
the zero-emission nuclear power production credit for the taxable year 
is equal to the credit amount determined under section 45U(a) 
multiplied by five, if a qualified nuclear power facility satisfies the 
Prevailing Wage Requirements of section 45(b)(7) and proposed Sec.  
1.45-7 in the alteration or repair of such facility, and the 
recordkeeping and reporting requirements of proposed Sec.  1.45-12.
    One commenter suggested that the final regulations create an 
exception from the Prevailing Wage Requirements under section 45U for 
taxpayers, contractors, and subcontractors who have fewer than 25 
employees. There is no statutory exception for employers of less than 
25 individuals and, consistent

[[Page 53240]]

with the statute, the final regulations do not adopt one.
    The applicable scope of the Prevailing Wage Requirements is 
explained in Section VI. of this Summary of Comments and Explanation of 
Revisions. As discussed in Section II. of this Summary of Comments and 
Explanation of Revisions, a transition rule is unnecessary because the 
Prevailing Wage Requirements under section 45U apply to electricity 
produced and sold after December 31, 2023, in taxable years beginning 
after such date. The Treasury Department and the IRS interpret section 
13105(c) of the IRA as providing that the Prevailing Wage Requirements 
only apply to alterations or repairs of a qualified nuclear power 
facility occurring in taxable years beginning after December 31, 2023. 
The final regulations are clarified to reflect the statutory effective 
date under section 45U of the Code for alteration and repairs. Finally, 
as explained in Section V.D. of this Summary of Comments and 
Explanation of Revisions, the final rules include a definition of 
``qualifying project labor agreement'' that is modified specifically 
for the purposes of section 45U.
E. Section 45V
    Section 45V provides a credit for the production of qualified clean 
hydrogen by the taxpayer during the taxable year at a qualified clean 
hydrogen production facility during the 10-year period beginning on the 
date the facility was originally placed in service. Proposed Sec.  
1.45V-3(b)(1) would have provided that with respect to a facility the 
construction of which began prior to January 29, 2023, the taxpayer 
must meet the Prevailing Wage Requirements of section 45(b)(7) and 
proposed Sec.  1.45-7 with respect to an alteration or repair of the 
facility that occurs after January 29, 2023 (to the extent applicable), 
and must meet the recordkeeping and reporting requirements of proposed 
Sec.  1.45-12, in order to claim the increased credit amount. Proposed 
Sec.  1.45V-3(b)(2) would have provided that with respect to a 
facility, a taxpayer must meet the Prevailing Wage Requirements of 
section 45(b)(7) and proposed Sec.  1.45-7, the Apprenticeship 
Requirements of section 45(b)(8) and proposed Sec.  1.45-8, and the 
recordkeeping and reporting requirements of proposed Sec.  1.45-12 in 
order to claim the increased credit amount.
    No comments were received specifically pertaining to proposed Sec.  
1.45V-3. The applicable scope of the PWA requirements is explained in 
Section VI. of this Summary of Comments and Explanation of Revisions. 
As explained in Section VIII.A.1. of this Summary of Comments and 
Explanation of Revisions, the Apprenticeship Requirements apply only 
during the construction of the facility and not with respect to any 
alteration or repair after a facility is placed in service. Under the 
transition rule described in Section II. of this Summary of Comments 
and Explanation of Revisions, the PWA requirements do not apply to any 
work performed before January 29, 2023. Proposed Sec.  1.45V-3 is 
otherwise adopted without change.
F. Section 45Y
    Section 45Y provides a credit for clean electricity produced by the 
taxpayer at a qualified facility and sold to an unrelated person, or in 
the case of a qualified facility that is equipped with a metering 
device that is owned and operated by an unrelated person, sold, 
consumed, or stored by the taxpayer during the taxable year, for 
facilities placed in service after December 31, 2024. Generally, the 
credit for any taxable year is the product of the kilowatt hours of 
electricity multiplied by either: (i) 0.3 cents (the base amount under 
section 45Y(a)(2)(A)); or (ii) 1.5 cents (the alternative amount under 
section 45Y(a)(2)(B)) for certain qualified facilities. Under section 
45Y(c), both the base amount and the alternative amount are adjusted 
for inflation in years beginning after 2024.
    Proposed Sec.  1.45Y-3(a) would have provided that the amount of 
the credit for producing clean electricity determined under section 
45Y(a)(2) equals 1.5 cents if any qualified clean electricity 
production facility satisfies the requirements of proposed Sec.  1.45Y-
3(b). Proposed Sec.  1.45Y-3(b) would have provided that a qualified 
facility satisfies the PWA requirements by having a maximum net output 
of less than one megawatt (as measured in alternating current), or 
beginning construction prior to January 29, 2023, or meeting the 
Prevailing Wage Requirements of section 45(b)(7) and proposed Sec.  
1.45-7, the Apprenticeship Requirements of section 45(b)(8) and 
proposed Sec.  1.45-8, and the recordkeeping and reporting requirements 
of proposed Sec.  1.45-12.
    Commenters suggested definitions regarding the One Megawatt 
Exception for purposes of section 45Y and requested clarifications with 
respect to determining nameplate capacity. A few commenters suggested 
testing methodologies for purposes of the greenhouse gas emissions rate 
under section 45Y(b)(2) and specific approaches for publishing those 
emissions rates under section 45Y(b)(2)(C)(i). Comments regarding the 
One Megawatt Exception for the purposes of section 45Y will be 
addressed in future guidance under section 45Y finalizing those rules.
    The applicable scope of the PWA requirements is explained in 
Section VI. of this Summary of Comments and Explanation of Revisions. 
As explained in Section VIII.A.1. of this Summary of Comments and 
Explanation of Revisions, the Apprenticeship Requirements apply only 
during the construction of the facility (including alterations and 
repairs that occur during construction) and not with respect to any 
alteration or repair after a facility is placed in service. Under the 
transition rule described in Section II. of this Summary of Comments 
and Explanation of Revisions, the PWA requirements do not apply to any 
work performed before January 29, 2023. The final regulations also 
clarify that for certain facilities, the applicable amount determined 
under section 45Y(a)(2) is the alternative amount described in section 
45Y(a)(2)(B), subject to adjustment for inflation as provided by 
section 45Y(c). Proposed Sec.  1.45Y-3 is otherwise adopted without 
change.
G. Section 45Z
    Section 45Z provides a credit for clean transportation fuel 
produced by the taxpayer at a qualified facility after December 31, 
2024, and sold to an unrelated person in a manner described in section 
45Z(a)(4). Generally, the credit is the product of the applicable 
amount (determined under section 45Z(a)(2) and (3)) per gallon (or 
gallon equivalent) of transportation fuel multiplied by the emissions 
factor for the fuel (determined under section 45Z(b)). If a taxpayer 
satisfies the PWA requirements in sections 45Z(f)(6) and (7), then the 
applicable amount is $1.00 for transportation fuel that is not a 
sustainable aviation fuel (non-SAF) (determined under section 
45Z(a)(2)(B)) and $1.75 for transportation fuel that is a sustainable 
aviation fuel (SAF) (determined under section 45Z(a)(3)(A)(ii)). If the 
taxpayer does not satisfy the PWA requirements in section 45Z(f)(6) and 
(7), the applicable amount is 20 cents for non-SAF and 35 cents for 
SAF. Under section 45Z(c), the applicable amounts are adjusted for 
inflation in years beginning after 2024.
    In general, section 45Z(f)(6)(A) provides that rules similar to 
section 45(b)(7) apply for purposes of the Prevailing Wage 
Requirements. Section 45Z(f)(7) provides that rules similar to section 
45(b)(8) apply for purposes of the Apprenticeship Requirements.

[[Page 53241]]

Section 45Z(f)(6)(B) provides a special rule for a facility placed in 
service before January 1, 2025. Under this rule, if a facility is 
placed in service before January 1, 2025, the taxpayer is not subject 
to the Prevailing Wage Requirements with respect to the construction of 
the facility but is subject to the Prevailing Wage Requirements for the 
alteration or repair of the facility with respect to any taxable year 
beginning after December 31, 2024, for which the section 45Z credit is 
allowed. Section 13704(c) of the IRA provides that these provisions are 
effective for transportation fuel produced after December 31, 2024.
    Proposed Sec.  1.45Z-3(b)(1) would have provided that a qualified 
facility that begins construction on or after January 29, 2023, and is 
placed in service after December 31, 2024, satisfies the requirements 
for the increased credit under section 45Z of the Code if it meets the 
Prevailing Wage Requirements of section 45(b)(7) and proposed Sec.  
1.45-7, the Apprenticeship Requirements of section 45(b)(8) and 
proposed Sec.  1.45-8, and the recordkeeping and reporting requirements 
of proposed Sec.  1.45-12. Proposed Sec.  1.45Z-3(b)(2) would have 
provided that a qualified facility that is placed in service before 
January 1, 2025, satisfies the requirements for the increased credit 
amount under section 45Z if it meets the Prevailing Wage Requirements 
of section 45(b)(7) and proposed Sec.  1.45-7, the Apprenticeship 
Requirements of section 45(b)(8) and proposed Sec.  1.45-8, and the 
recordkeeping and reporting requirements of proposed Sec.  1.45-12, 
with respect to any alteration or repair of the facility with respect 
to any taxable year beginning after December 31, 2024, for which the 
credit is allowed under section 45Z.
    With respect to the proposed rule in Sec.  1.45Z-3(b)(1), 
commenters asked that the final regulations clarify the requirements 
for the increased credit amount with respect to facilities that begin 
construction before January 29, 2023, but are not placed in service 
until after December 31, 2024. Commenters asked whether the Proposed 
Regulations intended to create a BOC Exception for section 45Z. Some 
commenters indicated support for a BOC Exception for consistency with 
other increased credit provisions, while others argued that there is no 
statutory support for a BOC Exception. Other commenters generally 
requested transition relief from the PWA requirements and suggested 
that the final regulations clarify proposed Sec.  1.45Z-3(b)(1) to 
remove the clause requiring construction on or after January 29, 2023.
    In response to comments, the final regulations modify the Proposed 
Regulations in several respects. With respect to the rule in proposed 
Sec.  1.45Z-3(b)(1) for facilities placed in service after December 31, 
2024, the final regulations remove the clause requiring construction on 
or after January 29, 2023. The Treasury Department and the IRS agree 
that this language, which was intended to provide transition relief 
similar to that described in Section II. of this Summary of Comments 
and Explanation of Revisions, was confusing. Taxpayers can satisfy the 
requirements for the increased credit amount regardless of whether 
construction began before or after January 29, 2023. The Treasury 
Department and the IRS decline to prescribe a BOC Exception through 
regulation because Congress did not statutorily provide for one. Under 
the transition rule described in Section II. of this Summary of 
Comments and Explanation of Revisions, the PWA requirements do not 
apply for any work performed before January 29, 2023. Thus, the final 
regulations provide that for facilities placed in service on or after 
January 1, 2025, taxpayers must meet the Prevailing Wage Requirements, 
but only for construction, alteration, and repair work performed on or 
after January 29, 2023.
    Regarding the special rule proposed in Sec.  1.45Z-3(b)(2) for 
facilities placed in service before January 1, 2025, commenters 
requested that the final regulations clarify that the special rule in 
section 45Z(f)(6)(B) applies to all facilities placed in service before 
January 1, 2025, regardless of whether construction began before 
January 29, 2023. The final regulations confirm that with respect to 
all facilities placed in service before January 1, 2025 (regardless of 
when construction began), the Prevailing Wage Requirements do not apply 
with respect to construction, but taxpayers must satisfy the Prevailing 
Wage Requirements with respect to any alteration or repair of the 
facility for taxable years beginning after December 31, 2024, for which 
the credit is allowed.
    At least one commenter asserted that the special rule in section 
45Z(f)(6)(B) also includes an exception from the Apprenticeship 
Requirements for facilities placed in service before January 1, 2025. 
Section 45Z(f)(6)(A) provides that, ``[s]ubject to [the special rule 
of] subparagraph (B), rules similar to the [prevailing wage] rules of 
section 45(b)(7) shall apply.'' Section 45Z(f)(7) provides that 
``[r]ules similar to the apprenticeship requirement rules of section 
45(b)(8) shall apply.'' Under section 13101(k) of the IRA, the rules of 
section 45(b)(7) and 45(b)(8) apply with respect to facilities that are 
placed in service after December 31, 2021. Thus, the Treasury 
Department and the IRS interpret the PWA requirements of sections 
45Z(f)(6) and 45Z(f)(7) generally as applying to any qualified facility 
that is placed in service after December 31, 2021, subject to the 
transition rule described in Section II. of this Summary of Comments 
and Explanation of Revisions. There is no exception to the 
Apprenticeship Requirements in section 45Z(f)(7), regardless of whether 
a facility is placed in service before, on, or after January 1, 2025. 
In the absence of a statutory basis, the Treasury Department and the 
IRS do not provide an exception to the Apprenticeship Requirements in 
the final regulations.
    While there is no statutory basis to except taxpayers from the 
Apprenticeship Requirements in section 45Z, the Treasury Department and 
the IRS agree that the proposed rule caused confusion for taxpayers 
that intend to place a qualified facility in service before January 1, 
2025. The Proposed Regulations suggested that taxpayers that placed a 
qualified facility in service before January 1, 2025, must only satisfy 
the Prevailing Wage Requirements and the Apprenticeship Requirements 
with respect to alterations and repairs that occur in taxable years 
beginning after December 31, 2024. This incorrectly suggested that 
there was an Apprenticeship Requirement with respect to alterations and 
repairs to a facility after it is placed in service and did not address 
whether the construction of a qualified facility is subject to the 
Apprenticeship Requirements prior to the facility being placed in 
service.
    In recognition of the confusion created by the Proposed 
Regulations, the final regulations provide additional transition relief 
under section 45Z for taxpayers who relied on the Proposed Regulations 
with respect to the Apprenticeship Requirements for facilities placed 
in service before January 1, 2025. In general, the final regulations 
allow taxpayers to continue to rely on the Proposed Regulations up to 
the date these regulations are published in the Federal Register. The 
final regulations provide that taxpayers may rely on proposed Sec.  
1.45Z-3(b)(2) for an additional 90 days from the date these regulations 
are published in the Federal Register as transition relief from the 
Apprenticeship Requirements. This 90-day period will provide taxpayers

[[Page 53242]]

with time to locate and request qualified apprentices from registered 
apprenticeship programs for any remaining construction work that occurs 
after 90 days after the date these regulations are published in the 
Federal Register and before the facility is placed in service. This 
transition relief does not apply to facilities that are placed in 
service after December 31, 2024. Such facilities must comply with the 
Prevailing Wage Requirements and the Apprenticeship Requirements with 
respect to construction, alteration, or repair work beginning on or 
after January 29, 2023.
    A commenter asked for clarification regarding the applicable amount 
used to calculate the increased credit amount under section 45Z if the 
PWA requirements are satisfied. The commenter requested that the 
description of the credit amount in proposed Sec.  1.45Z-3(a) be 
amended to clarify that the alternative applicable amount of the credit 
is $1.00 per gallon for non-SAF (and $1.75 for SAF) and not $5.00 per 
gallon for non-SAF ($8.75 for SAF).
    Section 45Z generally provides a base applicable amount, and if the 
PWA requirements are satisfied, an alternative applicable amount that 
is five times the base amount. The Treasury Department and the IRS 
recognize that proposed Sec.  1.45Z-3(a) could have been interpreted to 
mean that the entire increased credit amount determined under section 
45Z(a) should be multiplied by five, rather than just the base 
applicable amount. The final regulations clarify that if the PWA 
requirements are satisfied, then the applicable amount is the 
alternative applicable amount determined under section 45Z(a)(2)(B) for 
non-SAF or section 45Z(a)(3)(A)(ii) for SAF, each subject to 
adjustments for inflation under section 45Z(c).
H. Section 48C
    Section 48C provides a credit for a qualified investment in a 
qualifying advanced energy project for that taxable year (section 48C 
Credit). The IRA added section 48C(e) to the Code, extending the 
section 48C Credit to provide an additional section 48C Credit 
allocation of $10 billion. Generally, the credit amount for section 48C 
Credits allocated pursuant to section 48C(e) is equal to six percent of 
the basis of the eligible property. Under section 48C(e)(4), if a 
taxpayer satisfies the PWA Requirements in section 48C(e)(5) and (6) 
with respect to a qualifying advance energy project, then the credit 
amount determined under section 48C(a) is 30 percent.
    To satisfy the Prevailing Wage Requirements under section 
48C(e)(5)(A), a taxpayer must ensure that with respect to a qualifying 
advanced energy project, any laborers and mechanics employed by the 
taxpayer or any contractor or subcontractor in the re-equipping, 
expansion, or establishment of a manufacturing facility are paid wages 
at rates not less than the prevailing rates for construction, 
alteration, or repair of a similar character in the locality in which 
the project is located. Section 48C(e)(5)(B) provides that rules 
similar to section 45(b)(7)(B) apply for purposes of the correction and 
penalty related to the failure to satisfy the Prevailing Wage 
Requirements. Section 48C(e)(6) provides that rules similar to section 
45(b)(8) apply for purposes of the Apprenticeship Requirements.
    A section 48C Credit allocation is made after an application and 
project certification. The extension of section 48C and the additional 
allocations under section 48C(e) are effective on January 1, 2023. The 
Treasury Department and the IRS issued Notice 2023-18, 2023-10 I.R.B. 
508, Notice 2023-44, 2023-25 I.R.B. 924, and Notice 2024-36, 2024-24 
I.R.B. 1479, to provide guidance under section 48C(e). These notices 
provide a process for the IRS to allocate section 48C Credits. To 
prevent an overallocation of section 48C Credits, section 5.07 of 
Notice 2023-18 requires a taxpayer that applies for a section 48C 
Credit allocation at the 30 percent credit amount to confirm that the 
taxpayer intends to satisfy the PWA requirements. Section 5.07 of 
Notice 2023-18 additionally requires that if the taxpayer provides 
notification that it placed the project in service, the taxpayer must 
also confirm that it satisfied the PWA requirements.
    The Proposed Regulations would have provided that if a taxpayer 
satisfies both the PWA requirements and the PWA confirmation 
requirements provided in Notice 2023-18 (or any subsequent guidance), 
then the credit amount for section 48C Credits allocated pursuant to 
section 48C(e) of the Code would be equal to 30 percent. Notice 2023-44 
provides that a property placed in service prior to being awarded a 
section 48C Credit under the section 48C(e) program is not eligible to 
receive such an allocation. It is possible that a taxpayer will have 
performed work after January 1, 2023, with respect to the construction, 
alteration, or repair of a qualifying advanced energy project and 
before being awarded an allocation under section 48C.
    Proposed Sec.  1.48C-3 would have provided that the increased 
credit amount is available for any qualifying advanced energy project 
that satisfies the Prevailing Wage Requirements of section 45(b)(7) and 
proposed Sec.  1.45-7, the Apprenticeship Requirements of section 
45(b)(8) and proposed Sec.  1.45-8, and the recordkeeping and reporting 
requirements of proposed Sec.  1.45-12.
    One commenter stated that the Proposed Regulations may have 
erroneously incorporated the requirement in proposed Sec.  1.45-7(a) to 
pay prevailing wages during the 10-year period after a facility is 
placed in service and requested that the final regulations specify 
whether the PWA requirements apply after a facility is placed in 
service. Section 48C provides that the Prevailing Wage Requirements 
apply in the ``re-equipping, expansion, or establishment of a 
manufacturing facility.'' Nothing in section 48C requires the payment 
of prevailing wages with respect to alterations or repairs after a 
qualifying advanced energy project is placed in service. For the 
reasons described in Sections VIII.A.1. and IX.A. of this Summary of 
Comments and Explanation of Revisions, the final regulations amend the 
Proposed Regulations to confirm that the PWA requirements under section 
48C apply only during the re-equipping, expansion, or establishment of 
a qualifying advanced energy project and not with respect to any 
alteration or repair after a qualifying advanced energy project is 
placed in service. Under the transition rule described in Section II. 
of this Summary of Comments and Explanation of Revisions, the PWA 
requirements do not apply to any work performed before January 29, 
2023.
    Additionally, a commenter requested guidance concerning whether for 
purposes of section 48C projects the PWA requirements are similarly 
limited to the same eligible property defined by 48C(c)(2). The 
commenter asked for PWA requirements to be limited to this same 
eligible property and any costs integral to that eligible property--
excluding any work related to the building or its structural 
components. The applicable scope of the PWA requirements is explained 
in Section VI. of this Summary of Comments and Explanation of 
Revisions.
I. Section 179D
    Section 179D(a) generally allows a deduction in an amount equal to 
the cost of energy efficient commercial building property placed in 
service during the taxable year. Section 179D(f) generally allows as a 
deduction for the taxable year the amount of the aggregate adjusted 
basis of energy efficient

[[Page 53243]]

building retrofit property placed in service by the taxpayer pursuant 
to a qualified retrofit plan. Under section 179D(b)(3), (4), and (5), 
an increased deduction amount is allowed if the taxpayer ensures that 
laborers and mechanics employed by the taxpayer or any contractor or 
subcontractor in the installation of any energy efficient commercial 
building property, energy efficient building retrofit property, or 
property installed pursuant to a qualified retrofit plan (collectively, 
179D qualified property) are paid wages at rates not less than the 
prevailing rates and satisfies the Apprenticeship Requirements. Under 
section 179D(g), the increased deduction amount in 179D(b) is subject 
to an adjustment for inflation in taxable years beginning after 2022.
    Proposed Sec.  1.179D-3(b) would have provided that the increased 
deduction is available for any 179D qualified property that either 
began installation prior to January 29, 2023, or meets the Prevailing 
Wage Requirements of section 45(b)(7) and proposed Sec.  1.45-7, the 
Apprenticeship Requirements of section 45(b)(8) and proposed Sec.  
1.45-8, and the recordkeeping and reporting requirements of proposed 
Sec.  1.45-12.
    One commenter stated that the Proposed Regulations may have 
erroneously incorporated the requirement in proposed Sec.  1.45-7(a) to 
pay prevailing wages during the 10-year period after a property is 
placed in service and requested that the final regulations specify 
whether the PWA requirements apply after a property is placed in 
service. Section 179D provides that the Prevailing Wage Requirements 
apply ``in the installation of any property.'' Nothing in section 179D 
requires the payment of prevailing wages with respect to alterations or 
repairs after such installation. For the reasons described more fully 
in Sections VIII.A.1. and IX.A. of this Summary of Comments and 
Explanation of Revisions, the final regulations amend the Proposed 
Regulations to confirm that the PWA requirements under section 179D 
apply only during the installation of the 179D qualified property and 
not with respect to any alteration or repair after the 179D qualified 
property is placed in service. The applicable scope of the PWA 
requirements is explained in Section VI. of this Summary of Comments 
and Explanation of Revisions. Under the transition rule described in 
Section II. of this Summary of Comments and Explanation of Revisions, 
the PWA requirements do not apply to any work performed before January 
29, 2023. The final regulations also clarify that the deduction amounts 
are increased for inflation.
    On October 5, 2022, the IRS issued Notice 2022-48 and requested 
comments with respect to the allocation of the section 179D deduction 
and the criteria that the Treasury Department and the IRS should 
consider in drafting rules to determine the person that is primarily 
responsible for designing the property under section 179D(d)(3)(A). The 
Proposed Regulations would have provided general rules for satisfying 
the PWA requirements for purposes of section 179D, but the Proposed 
Regulations would not have addressed the allocation of the deduction in 
the case of 179D qualified property installed on, or in property owned 
by, a specified tax-exempt entity as described in section 
179D(d)(3)(B).
    A few commenters suggested that the Treasury Department and the IRS 
provide an exception to meeting PWA requirements for primary designers 
who are allocated the deduction under section 179D(d)(3)(A). For 
example, the commenters explained that because designers do not 
directly employ laborers, mechanics, contractors, or subcontractors and 
because the allocating tax-exempt entity has little interest in 
undertaking the compliance burden for an allocated deduction, the 
designer will have difficulty ensuring compliance with the PWA 
requirements. Another commenter suggested that the regulations require 
the contractor to consult with all other contractors and subcontractors 
on the project and certify that they are not also seeking the 
allocation of the deduction, similar to an approach developed by the 
General Services Administration.
    The Proposed Regulations would not have provided rules regarding 
the allocation of the deduction in the case of 179D qualified property 
installed on or in property owned by a specified tax-exempt entity. 
After reviewing comments, the Treasury Department and the IRS 
determined that the section 179D allocation is outside the scope of 
these final regulations and rules for the section 179D allocation will 
be addressed in future guidance.
    One commenter asked whether architects and engineers who do not 
employ laborers, mechanics, contractors, or subcontractors 
automatically qualify for the increased section 179D deductions. 
Generally applicable rules for laborers and mechanics are discussed in 
Section VII.C.1. of this Summary of Comments and Explanation of 
Revisions. Another commenter stated that without a de minimis threshold 
for noncompliance, small, accidental deviations may prevent earning the 
increased section 179D deduction. The limited penalty waiver is 
discussed in Section VII.D.4. of this Summary of Comments and 
Explanation of Revisions.
    Additionally, a commenter requested that section 179D be modified 
so that the relevant property's basis is not reduced by the amount of 
the claimed deduction under section 179D. The commenter stated that 
reducing the property's basis by the received deduction amount may 
actually place the taxpayer worse off financially. Statutory revisions 
are outside the scope of these final regulations.

X. Recordkeeping and Reporting Requirements

A. In General
    Section 45(b)(12) authorizes the Secretary to issue such 
regulations or other guidance as the Secretary determines necessary to 
carry out the purposes of section 45(b), including regulations or other 
guidance that provide requirements for recordkeeping or information 
reporting for purposes of administering the requirements of section 
45(b). Section 6001 provides that every person liable for any tax 
imposed by the Code, or for the collection thereof, must keep such 
records as the Secretary may from time to time prescribe. Section 
1.6001-1(a) provides that any person subject to income tax must keep 
such permanent books of account or records, including inventories, as 
are sufficient to establish the amount of gross income, deductions, 
credits, or other matters required to be shown by such person in any 
return of such tax. Section 1.6001-1(e) provides that the books and 
records required by Sec.  1.6001-1 must be retained so long as the 
contents thereof may become material in the administration of any 
Internal Revenue law.
    Proposed Sec.  1.45-12(a) would have provided that the increased 
credit amount must be claimed in such form and manner as may be 
prescribed in IRS forms or instructions or in publications or guidance 
published in the Internal Revenue Bulletin. The preamble to the 
Proposed Regulations also stated that the Proposed Regulations would 
require taxpayers to provide a statement with the tax return that 
claims an increased amount of credit or deduction that includes 
aggregate information as detailed in proposed Sec.  1.45-12.
    The Proposed Regulations would have imposed recordkeeping 
requirements that are generally consistent with the recordkeeping 
requirements under the DBA regime for purposes of the PWA requirements. 
Proposed Sec.  1.45-12(b)

[[Page 53244]]

would have provided that with respect to each qualified facility for 
which a taxpayer is claiming or transferring (under section 6418) an 
increased credit amount under section 45(b)(6)(A), unless section 
45(b)(6)(B)(i) or 45(b)(6)(B)(ii) applies, the taxpayer would be 
required to maintain and preserve records sufficient to demonstrate 
compliance with the applicable PWA requirements in proposed Sec. Sec.  
1.45-7 and 1.45-8, respectively. Under the Proposed Regulations, at a 
minimum, those records would have included payroll records for each 
laborer and mechanic (including each qualified apprentice) employed by 
the taxpayer, contractor, or subcontractor in the construction, 
alteration, or repair of the qualified facility.
    Proposed Sec.  1.45-12(c) would have provided an enumerated list of 
records, in addition to payroll records otherwise maintained by the 
taxpayer, that may be sufficient to establish compliance with the 
Prevailing Wage Requirements. The list in proposed Sec.  1.45-12(c) 
included the following information for each laborer or mechanic 
(including each qualified apprentice) employed by the taxpayer, a 
contractor, or subcontractor with respect to each qualified facility: 
(i) identifying information, including the name, social security or tax 
identification number, address, telephone number, and email address; 
(ii) the location and type of qualified facility; (iii) the labor 
classification(s) the taxpayer applied to the laborer or mechanic for 
determining the prevailing wage rate and documentation supporting the 
applicable classification, including the applicable wage determination; 
(iv) the hourly rate(s) of wages paid (including rates of contributions 
or costs for bona fide fringe benefits or cash equivalents thereof) for 
each applicable labor classification; (v) records to support any 
contribution irrevocably made on behalf of a laborer or mechanic to a 
trustee or other third person pursuant to a bona fide fringe benefit 
program, and the rate of costs that were reasonably anticipated in 
providing bona fide fringe benefits to laborers and mechanics pursuant 
to an enforceable commitment to carry out a plan or program described 
in 40 U.S.C. 3141(2)(B), including records demonstrating that the 
enforceable commitment was provided in writing to the laborers and 
mechanics affected; (vi) the total number of labor hours worked per pay 
period; (vii) the total wages paid for each pay period (including 
identifying any deductions from wages); (viii) records to support wages 
paid to any apprentices at less than the applicable prevailing wage 
rates, including records reflecting the registration of the apprentices 
with a registered apprenticeship program and the applicable wage rates 
and apprentice-to-journeyworker ratios prescribed by the apprenticeship 
program; and (ix) the amount and timing of any correction payments and 
documentation reflecting the calculation of the correction payments.
    Proposed Sec.  1.45-12(d) would have required taxpayers subject to 
the Apprenticeship Requirements to maintain sufficient records to 
establish compliance with the Labor Hours Requirement, Ratio 
Requirement, and Participation Requirement. Under the Proposed 
Regulations, records that may be sufficient to demonstrate compliance 
with the applicable Apprenticeship Requirements in Sec.  1.45-8 would 
have included the following information for each apprentice employed by 
the taxpayer, a contractor, or subcontractor with respect to each 
qualified facility: (i) any written requests for the employment of 
apprentices from registered apprenticeship programs, including any 
contacts with the DOL OA or a State apprenticeship agency regarding 
requests for apprentices from registered apprenticeship programs; (ii) 
any agreements entered into with registered apprenticeship programs 
with respect to the construction, alteration, or repair of the 
facility; (iii) documents reflecting the standards and requirements of 
any registered apprenticeship program, including the applicable ratio 
requirement prescribed by each registered apprenticeship program from 
which taxpayers, contractors, or subcontractors employ apprentices; 
(iv) the total number of labor hours worked by apprentices; and (v) 
records reflecting the daily ratio of apprentices to journeyworkers.
    The Proposed Regulations under sections 30C, 45L, 45Q, 45U, 45V, 
45Y, 45Z, 48C, and 179D would have provided similar recordkeeping 
requirements as described in proposed Sec.  1.45-12.
    As discussed in Section I. of this Summary of Comments and 
Explanation of Revisions, several commenters suggested that that final 
regulations should impose additional reporting and recordkeeping 
requirements, including many pre-filing reporting requirements such as 
certified weekly payroll and monthly apprenticeship hours reporting. 
However, other commenters stated that having to comply with the 
recordkeeping and reporting requirements as proposed would be 
burdensome and create costly administrative work for business owners. 
These commenters requested that documentation and reporting 
requirements be as streamlined and minimal as possible.
    As explained in greater detail in Section I. of this Summary of 
Comments and Explanation of Revisions, the final regulations strike an 
appropriate balance between imposing requirements intended to encourage 
the timely and correct payment of prevailing wages and the hiring of 
qualified apprentices while recognizing the prospective nature inherent 
in the increased amount of credit and deduction. The Treasury 
Department and the IRS want to avoid imposing unnecessary 
administrative work on taxpayers, especially small businesses. However, 
the IRS must be able to determine taxpayer compliance with the PWA 
requirements once a return is filed claiming an increased amount of 
credit or deduction. For this reason, the final regulations do not 
incorporate the suggestions regarding pre-filing activities, although 
many comments are incorporated as factors for determining intentional 
disregard, and instead adopt the robust recordkeeping and reporting 
requirements from the Proposed Regulations. The final regulations 
provide recordkeeping and reporting requirements that are consistent 
with the DBA, relevant for the purposes of the increased amount of 
credit and deduction and the intent of the IRA, and that are necessary 
for, and consistent with, sound tax administration.
    Many commenters stated that the proposed regulations struck an 
appropriate balance between ensuring there is significant documentation 
to ensure compliance without adding unnecessary burden. Some commenters 
requested that taxpayers be provided flexibility related to the 
recordkeeping requirements, while others asked for guidance on how to 
demonstrate compliance with the recordkeeping requirements and whether 
specific records would satisfy the recordkeeping requirement. A few 
commenters suggested that the final regulations incorporate or require 
specific forms or reporting methods similar to those used in other 
contexts (for example, the IRS Form 1099). Some commenters suggested 
taxpayers could use the DOL's Registered Apprenticeship Partners 
Information Data System (commonly referred to as RAPIDS) to assist in 
reporting compliance with the Participation Requirement. Another 
commenter suggested the final regulations require taxpayer to report 
evidence of compliance with the Good Faith Effort Exception at filing.

[[Page 53245]]

    The final regulations largely follow the approach in the Proposed 
Regulations. Consistent with IRS practice, the final regulations adopt 
the rule from the Proposed Regulations that the increased credit amount 
must be claimed in such form and manner as may be prescribed in IRS 
forms, instructions, publications, or guidance published in the 
Internal Revenue Bulletin. Comments suggesting specific forms or 
reporting methods are not incorporated. It is critical that the IRS 
retain the ability to prescribe the required reporting requirements in 
relevant forms and instructions to allow for modifications as 
necessary. Draft forms and instructions are typically made available 
for public comment on https://www.irs.gov.
    To provide flexibility to taxpayers, the final regulations do not 
prescribe a specific form or manner in which records must be kept. In 
response to comments that asked whether certain records would be 
sufficient, the final regulations indicate that an accurately completed 
DOL Form WH-347 may constitute a sufficient record reflecting the 
payment of prevailing wages to the individuals identified on the form 
for the period identified on the form for purposes of Sec.  1.45-12. 
The final regulations also add copies of contracts for construction, 
alteration, or repair of the facility with any contractor or 
subcontractor to the list of records that may be sufficient to 
demonstrate compliance with the Prevailing Wage Requirements. In most 
cases, payroll records alone will not demonstrate a taxpayer's 
compliance with the totality of the PWA requirements. Nothing in these 
regulations is intended to restrict the IRS's authority to request 
additional records to determine whether the taxpayer has complied with 
the PWA requirements. For example, during an examination, the IRS may 
request information and documents with respect to the taxpayer's 
process for the proper identification, classification, and payment of 
wages to laborers and mechanics performing construction on the 
qualified facility and for determining labor needs on a construction 
project, including specific apprenticeship needs.
    Commenters requested guidance on the length of time records need to 
be maintained. A commenter stated that once a construction project is 
completed, the taxpayer would no longer have access to competitively 
sensitive data, such as wage information, stored by contractors and 
subcontractors. One commenter suggested that records should be retained 
for at least three years after all work on the construction project is 
completed. Another commenter suggested requiring taxpayers to retain 
adequate payroll records for at least five years from the projected end 
of the tax credit period. At least one commenter suggested that not 
retaining adequate records should be considered evidence of intentional 
disregard. The commenter emphasized that maintaining such records would 
not be burdensome because records are now kept digitally. The final 
regulations clarify that taxpayers are required to maintain and 
preserve records sufficient to establish compliance with the PWA 
requirements for relevant tax years as provided for under section 6001 
and Sec.  1.6001-1(e). The final regulations also add the failure to 
maintain records to the intentional disregard factors.
    Some commenters stated that it might be difficult for taxpayers to 
obtain records of wages paid by contractors and subcontractors. 
Commenters suggested permitting taxpayers to rely on written 
certifications from contractors and subcontractors that the contractor 
or subcontractor is complying with the PWA requirements, including 
recordkeeping. One commenter suggested that the final regulations 
permit taxpayers to rely on contractual provisions that require strict 
adherence to IRS goals and standards. Another commenter was concerned 
that despite contractual agreements between the taxpayer and a general 
contractor detailing the PWA requirements, taxpayers would be subject 
to the subcontractors' recordkeeping abilities, over which they have no 
control.
    Commenters also claimed that the proposed recordkeeping 
requirements raise privacy and antitrust concerns. Specifically, 
commenters argued that requiring taxpayers to maintain the payroll 
records of contractors and subcontractors could violate Federal or 
State privacy laws or company policies on the proper handling of 
personally identifiable information (PII) such as social security 
numbers and dates of birth. Commenters suggested: (i) allowing the 
direct employer (whether that is the taxpayer, contractor, or 
subcontractor) to maintain required payroll records and confidential 
employee information subject to contractual provisions requiring the 
maintenance and preservation of the records and permitting access to 
such records by the IRS as part of a duly issued audit request; (ii) 
allowing the taxpayer to collect and maintain the payroll records and 
data specified in proposed Sec.  1.45-12 with a third-party vendor 
subject to similar contractual provisions and access to the IRS audit 
function; (iii) allowing taxpayers, transferee taxpayers, and/or their 
agents to inspect payroll records and data under a nondisclosure 
arrangement as part of proper due diligence without taking physical 
custody or control of such payroll records or data; (iv) allowing 
payroll records and data to be collected and maintained by the taxpayer 
or any contractor in a manner that redacts certain sensitive 
information as long as the information is maintained by the direct 
employer pursuant to contractual arrangements; and (v) allowing 
alternative forms of validation for hourly wage rates and other payroll 
data to avoid antitrust and confidentiality concerns among taxpayers, 
contractors, and subcontractors. A commenter recommended that for 
recordkeeping of fringe benefits, the final regulations should accept 
sworn statements of contributions as sufficient. The commenter stated 
that it is exceedingly difficult for entities to monitor and verify 
subcontractor contributions to fringe benefit programs.
    Consistent with the requirements in section 45(b)(7) and (8) that 
the taxpayer ensure that the Prevailing Wage Requirements and 
Apprenticeship Requirements are satisfied, the final regulations adopt 
the rule as proposed that the taxpayer is required to maintain all 
relevant records, regardless of whether the laborers and mechanics are 
employed by the taxpayer, a contractor, or a subcontractor. In response 
to comments regarding privacy concerns and data sensitivity, the final 
regulations amend the proposed rule to clarify that records need only 
contain the last four digits of a social security number. The final 
regulations also provide three alternatives that taxpayers may use to 
satisfy the recordkeeping requirements in Sec.  1.45-12. These 
alternatives are intended to assist taxpayers in satisfying the 
recordkeeping requirements while also complying with applicable law. 
Under the final regulations: (i) taxpayers may collect and physically 
retain redacted records from every relevant contractor and 
subcontractor; (ii) taxpayers may use a third-party vendor to collect 
and physically retain records from every relevant contractor and 
subcontractor on behalf of the taxpayer, and the records may have PII 
redacted to comply with applicable privacy laws; or (iii) taxpayers, 
contractors, and subcontractors may physically retain unredacted 
records for their own employees. Under all three alternatives, 
unredacted records must be made available to the IRS upon request.

[[Page 53246]]

    Although retaining records consistent with one or more of these 
options will constitute satisfaction of the recordkeeping requirements 
in Sec.  1.45-12 of these final regulations, the Prevailing Wage 
Requirements in Sec.  1.45-7 and the Apprenticeship Requirements in 
Sec.  1.45-8 of these final regulations must be satisfied (as 
applicable) in order for the taxpayer to obtain the increased amount of 
credit or deduction. The taxpayer is ultimately responsible for 
compliance with the PWA requirements and may not rely on certifications 
from contractors and subcontractors that they are complying with PWA 
requirements (including recordkeeping). Taxpayers may delegate certain 
recordkeeping activities to comply with applicable laws; however, the 
ultimate responsibility to ensure compliance with the PWA requirements 
remains with the taxpayer, and taxpayers may not rely on a contractual 
provision to delegate that responsibility to contractors and 
subcontractors for purposes of satisfying the PWA requirements. 
Additionally, taxpayers should consider the impact that a recordkeeping 
approach may have on their ability to demonstrate the facts and 
circumstances listed in Sec. Sec.  1.45-7(c)(3)(iii) and 1.45-
8(f)(2)(ii) pertaining to intentional disregard.
    The preamble to the Proposed Regulations would have provided that 
to demonstrate that a failure was not due to intentional disregard, 
taxpayers must maintain and preserve records sufficient to document any 
failures to satisfy the Prevailing Wage Requirements or the 
Apprenticeship Requirements, and the actions taken to prevent, 
mitigate, or remedy the failure (for example, records demonstrating 
that the taxpayer regularly reviewed payroll practices, included 
requirements to pay prevailing wages in contracts with contractors, and 
posted prevailing wage rates in a prominent place on the job site). The 
preamble to the Proposed Regulations also indicated that the Proposed 
Regulations would have imposed recordkeeping requirements related to 
correction and penalty payments, penalty waiver provisions, and the 
Good Faith Effort Exception. The final regulations incorporate these 
provisions as described in the preamble to the Proposed Regulations and 
clarify that any failures to satisfy the Prevailing Wage Requirements 
and the actions taken to prevent, mitigate, or remedy the failure may 
be documented with records demonstrating that the taxpayer engaged an 
independent third party to aid in the review of payroll information.
B. Recordkeeping for Credits Transferred Pursuant to Section 6418
    The Proposed Regulations would have provided that because an 
eligible taxpayer determines any increased credit amount applicable to 
the PWA requirements, the general recordkeeping requirements would 
remain with an eligible taxpayer who transfers a specified credit 
portion that includes an increased credit amount. The increased credit 
amount that is determined by an eligible taxpayer would be reported on 
the return of the eligible taxpayer. The minimum required documentation 
to be provided to the transferee taxpayer is a separate requirement 
under the 6418 Final Regulations that does not impact the requirements 
in these final regulations. Comments received relating to section 6418 
and responses by the Treasury Department and the IRS are discussed in 
Section V.B. of this Summary of Comments and Explanation of Revisions.

XI. Applicability Date

    The Proposed Regulations would have provided that the final 
regulations apply to facilities, property, projects, or equipment 
placed in service in taxable years ending after the date these final 
regulations are published in the Federal Register and the construction, 
or installation, of which begins after the date these final regulations 
are published in the Federal Register. The Proposed Regulations would 
have provided that taxpayers could rely on the Proposed Regulations 
with respect to construction or installation of a facility, property, 
project, or equipment beginning on or after January 29, 2023, and on or 
before the date these final regulations are published, provided, that 
beginning after the date that is 60 days after August 29, 2023, 
taxpayers follow the Proposed Regulations in their entirety and in a 
consistent manner. The Proposed Regulations would have also provided 
that the provisions of sections 3 and 4 of Notice 2022-61 would be 
obsoleted for facilities, property, projects, or equipment the 
construction, or installation of which begins after the date these 
final regulations are published. The Proposed Regulations would not 
have otherwise affected Notice 2022-61.
    Several commenters requested transition relief with respect to the 
applicability date of these final regulations. One commenter suggested 
that because Notice 2022-61 was used to justify the application of PWA 
requirements to projects that started after January 29, 2023, the IRS 
should establish a new effective date for the IRA's PWA requirements. 
The commenter argued that, at a minimum, additional guidance set forth 
in the Proposed Regulations and the final regulations should be applied 
only prospectively. The commenter raised that the rescission of 
guidance issued in Notice 2022-61, if done on a retroactive basis, 
would be arbitrary and capricious and a violation of the Administrative 
Procedure Act, 5 U.S.C. 702, unless the IRS provides much greater 
explanation for its actions.
    As stated in Section II. of this Summary of Comments and 
Explanation of Revisions, the final regulations provide a transition 
rule under which the PWA requirements do not apply to construction, 
alteration, and repair activities occurring before January 29, 2023. 
Further, the final regulations generally apply to qualified facilities 
placed in service in taxable years ending after June 25, 2024 and the 
construction of which begins after June 25, 2024. Additionally, 
taxpayers may choose to apply the final regulations to qualified 
facilities placed in service in taxable years ending on or before June 
25, 2024, and qualified facilities placed in service in taxable years 
ending after June 25, 2024, the construction of which begins before 
June 25, 2024, provided that taxpayers follow the final regulations in 
their entirety and in a consistent manner. Taxpayers may also rely on 
the Proposed Regulations with respect to construction of a qualified 
facility beginning on or after January 29, 2023, and on or before June 
25, 2024, provided, that beginning after the date that is 60 days after 
August 29, 2023, taxpayers follow the Proposed Regulations in their 
entirety and in a consistent manner.
    Consistent with the Proposed Regulations, the final regulations 
confirm that the obsoletion of sections 3 and 4 of Notice 2022-61 is 
prospective as it applies facilities, property, projects, or equipment 
the construction, or installation, of which begins after June 25, 2024. 
The final regulations do not otherwise affect Notice 2022-61.

XII. Severability

    If any provision in this rulemaking is held to be invalid or 
unenforceable facially, or as applied to any person or circumstance, it 
shall be severable from the remainder of this rulemaking, and shall not 
affect the remainder thereof, or the application of the provision to 
other persons not similarly situated or to other dissimilar 
circumstances.

Applicability Dates

    These regulations apply to qualified facilities placed in service 
in taxable

[[Page 53247]]

years ending after June 25, 2024 and the construction of which begins 
after June 25, 2024. Taxpayers may choose to apply these regulations to 
qualified facilities placed in service in taxable years ending on or 
before June 25, 2024, and qualified facilities placed in service in 
taxable years ending after June 25, 2024, the construction of which 
begins before June 25, 2024, provided that taxpayers follow these 
regulations in their entirety and in a consistent manner. Taxpayers may 
also continue to rely on the Proposed Regulations with respect to 
construction of a qualified facility beginning on or after January 29, 
2023, and on or before June 25, 2024, provided, that beginning after 
the date that is 60 days after August 29, 2023, taxpayers follow the 
Proposed Regulations in their entirety and in a consistent manner.

Effect on Other Documents

    Sections 3 and 4 of Notice 2022-61 are obsoleted for facilities, 
property, projects, or equipment the construction, or installation, of 
which begins after August 26, 2024.

Special Analyses

I. Regulatory Planning and Review

    Pursuant to the Memorandum of Agreement, Review of Treasury 
Regulations under Executive Order 12866 (June 9, 2023), tax regulatory 
actions issued by the IRS are not subject to the requirements of 
section 6(b) of Executive Order 12866, as amended. Therefore, a 
regulatory impact assessment is not required.

II. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) (PRA) 
generally requires that a Federal agency obtain the approval of the 
Office of Management and Budget (OMB) before collecting information 
from the public, whether such collection of information is mandatory, 
voluntary, or required to obtain or retain a benefit.
    The collections of information in these final regulations contain 
reporting, recordkeeping, and third-party disclosure requirements, each 
of which is described below. These collections are required for 
purposes of claiming an increased amount of credit or deduction; and 
are necessary for the IRS to validate that taxpayers have met the 
regulatory requirements and are eligible to claim the increased credit 
amounts. The likely respondents are individual, business, trust and 
estate filers, and tax-exempt organizations.
    These final regulations set forth procedures for requesting 
supplemental wage determinations and wage rates for additional 
classifications from the DOL. This collection is approved by the OMB 
under DOL Control Number 1235-0034. These final regulations do not 
alter any of the DOL collections approved under this control number.
    These final regulations include requirements to keep records 
sufficient to demonstrate that the PWA requirements have been met as 
detailed in Sec.  1.45-12. For purposes of the PRA, the records 
required to be kept pursuant to Sec.  1.45-12 are considered general 
tax records. The collection of these general tax records is approved 
annually under 1545-0074 for individuals/sole proprietors, 1545-0123 
for business entities, and 1545-0047 for tax-exempt organizations. The 
IRS received from the OMB a new OMB Control number (1545-2315) for 
trust and estate filers.
    These final regulations also include reporting requirements that 
taxpayers provide a statement with the tax return that claims an 
increased amount of credit or deduction that includes aggregate 
information as detailed in Sec.  1.45-12. The IRS may issue forms and 
instructions in future guidance for the purpose of meeting these 
reporting requirements. These reporting requirements will be covered 
under 1545-0074 for individuals/sole proprietors and 1545-0123 for 
business entities. These reporting requirements are covered under the 
new OMB Control Number (1545-2315) for trust and estate filers.
    These final regulations include third-party disclosures that 
include notifying laborers and mechanics of the applicable prevailing 
wage rates as detailed in Sec.  1.45-7. These final regulations also 
include third-party disclosures for taxpayers requesting the dispatch 
of qualified apprentices from a registered apprenticeship program as 
detailed in Sec.  1.45-8. The third-party disclosures apply to all 
filers. The third-party disclosures applicable to all filers are also 
covered under the new OMB Control Number (1545-2315).
    In the Notice of Proposed Rulemaking, the Treasury Department and 
the IRS requested public comments on the proposed collections of 
information including: (i) whether the proposed collection of 
information is necessary for the proper performance of the functions of 
the IRS; (ii) the accuracy of the estimated burden associated with the 
proposed collection of information; (iii) how the quality, utility, and 
clarity of the information to be collected may be enhanced; (iv) how 
the burden of complying with the proposed collection of information may 
be minimized; and (v) estimates of capital or start-up costs and costs 
of operation, maintenance, and purchase of services to provide 
information.
    One commenter suggested the Treasury Department and the IRS provide 
additional clarification regarding the estimated time for filers to 
find and display the prevailing wage rates and to request qualified 
apprentices from registered apprenticeship programs. One commenter 
suggested that the estimate failed to consider additional actions 
related to complying with PWA rules, such as tracking the payment of 
prevailing wages and usage of qualified apprentices. Commenters stated 
that it may take some taxpayers more than two hours annually to find 
and display the prevailing wage rates and to request qualified 
apprentices from registered apprenticeship programs. Another commenter 
expressed confusion over the difference in the proposed compliance time 
required by trusts and estate in comparison to all other filers.
    The Treasury Department and the IRS agree that the estimated annual 
burden with respect to the reporting and recordkeeping requirements of 
these final regulations can be clarified. The preamble to the NPRM 
estimated these recordkeeping and reporting obligations necessary for 
compliance with the PWA Requirements will take 40 hours annually. This 
estimate was submitted as part of seeking a new OMB control number with 
respect to trust and estate filers. The estimate will also be submitted 
to OMB as part of the annual approval process with respect to the OMB 
control numbers that already exist for other filers.\37\ This estimate 
includes time necessary for taxpayers to become familiar with the 
obligations set forth in these regulations. Much of the data taxpayers 
will be required to maintain, such as the applicable prevailing wage 
rates, is readily available from DOL websites. Additionally, the 
recordkeeping requirements with respect to amounts paid to laborers and 
mechanics are similar to existing requirements imposed by other law. 
While exact data is not available to estimate the additional burden 
imposed by these regulations, the Treasury Department and the IRS have 
retained the estimate of 40 hours.
---------------------------------------------------------------------------

    \37\ Additional information on taxpayer compliance burdens can 
be found in Publication 5743, IRS Taxpayer Compliance Burden, 
https://www.irs.gov/pub/irs-pdf/p5743.pdf.
---------------------------------------------------------------------------

    The commenters also suggested that the two hours estimated for all 
filers with respect to the third-party disclosures did not properly 
account for the expected burdens. The Treasury

[[Page 53248]]

Department and the IRS agree with this comment and have revised the 
estimate to account for the burden of complying with the Apprenticeship 
Requirements. The final regulations require taxpayers to request 
qualified apprentices from an apprenticeship program with an area of 
operation that includes the location of the facility and may require 
taxpayers to submit additional requests on an annual basis if requests 
have been denied. Further, the final regulations will require taxpayers 
to review the standards and requirements of the registered 
apprenticeship program as part of making a request, which will likely 
take more than the two hours estimated as part of the preamble to the 
proposed regulations. Accordingly, the Treasury Department and the IRS 
have determined that the estimated burden to comply with the third-
party disclosures is four hours instead of two hours.
    No other public comments were received by the IRS directed 
specifically at the PRA or on the collection requirements, but 
commenters generally articulated the burdens associated with the 
documentation requirements contained in the Proposed Regulations. As 
described in the relevant portions of this preamble, the Treasury 
Department and the IRS believe that the documentation requirements are 
necessary to administer the increased credit amounts resulting from 
compliance with the PWA requirements.

III. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes 
certain requirements with respect to Federal rules that are subject to 
the notice and comment requirements of section 553(b) of the 
Administrative Procedure Act (5 U.S.C. 551 et seq.) and that are likely 
to have a significant economic impact on a substantial number of small 
entities. Unless an agency determines that a proposal is not likely to 
have a significant economic impact on a substantial number of small 
entities, section 603 of the RFA requires the agency to present a final 
regulatory flexibility analysis (FRFA) of the final regulations. The 
Treasury Department and the IRS have not determined whether the final 
regulations will likely have a significant economic impact on a 
substantial number of small entities. This determination requires 
further study. Because there is a possibility of significant economic 
impact on a substantial number of small entities, a FRFA is provided in 
these final regulations.
    Pursuant to section 7805(f) of the Code, the Proposed Regulations 
were submitted to the Chief Counsel of the Office of Advocacy of the 
Small Business Administration for comment on its impact on small 
business. The Treasury Department and the IRS also requested comments 
generally with respect to the number of entities affected by the 
Proposed Regulations and the economic impact on small entities.
A. Need for and Objectives of the Rule
    The final regulations provide clarifying guidance for taxpayers 
intending to satisfy the PWA requirements to qualify for the increased 
amounts of credit or deduction under sections 30C, 45, 45Q, 45V, 45Y, 
45Z, 48C, and 179D and for those taxpayers intending to satisfy the 
Prevailing Wage Requirements to qualify for the increased credit 
amounts under sections 45L and 45U. These final regulations provide 
needed guidance for taxpayers on obtaining and using applicable wage 
determinations issued by the DOL, on the time and manner for reporting 
compliance with the PWA requirements, as well as needed definitions. 
The final regulations also provide guidance concerning correction and 
penalty payments that can be made by taxpayers who initially fail to 
satisfy the PWA requirements in order to qualify for the increased 
amounts of credit and deduction.
    The Treasury Department and the IRS expect that the increased 
amounts of credit and deduction of five times the base amount of credit 
or deduction for taxpayers that ensure the payment of paying prevailing 
wages and hiring qualified apprentices in the construction, alteration, 
or repair of qualified facilities provides financial incentives that 
will beneficially impact various industries involved in the investment 
in and production of clean energy. These final regulations provide 
clarifying guidance that will assist taxpayers seeking to comply with 
the statutory PWA requirements in order to take advantage of the 
financial incentives. In the absence of this clarifying guidance, 
taxpayers would be required to rely solely upon the language of the 
Code in determining how to comply with the PWA requirements, which 
would likely deter many taxpayers from seeking the increased amounts of 
credit and deduction and would otherwise greatly increase the costs of 
compliance for taxpayers choosing to pursue the credits. The Treasury 
Department and the IRS expect that the increased credit and deduction 
amounts available to taxpayers as financial incentives will exceed the 
costs of the additional recordkeeping and reporting obligations imposed 
on taxpayers by these regulations beyond those otherwise be required by 
the statute.
    The Treasury Department and the IRS also expect the financial 
incentives of the increased amounts of credit and deduction for 
taxpayers that ensure payment of prevailing wage rates and use of 
qualified apprentices will deliver benefits across the economy by 
creating increased opportunities for contractors and subcontractors as 
well as laborers and mechanics to become involved in clean energy 
production. Allowing these increased amounts of credits and deduction 
for taxpayers who satisfy the PWA requirements will incentivize 
expansion of clean energy resources and will reduce economy wide 
greenhouse gas emissions.
B. Significant Issues Raised by Public Comments in Response to the 
Initial Regulatory Flexibility Analysis
    The Small Business Administration's Office of Advocacy provided 
comments on the initial regulatory flexibility analysis (IRFA) set 
forth in the Proposed Regulations. Specifically, the Office of Advocacy 
commented that the IRFA did not adequately describe regulated small 
entities, that the IRFA did not adequately estimate potential impacts 
to regulated small entities, and that the IRFA did not adequately 
discuss specific alternatives that might reduce the impact on small 
entities.
    Other comments were received on the burdens associated with the PWA 
requirements, including burdens on small businesses. One commenter 
requested that the process for obtaining wage determinations from the 
DOL be streamlined to avoid delays that might increase uncertainty and 
costs for contractors. Another commenter suggested that because 
prevailing wage rates are subject to change, the PWA requirements 
create uncertainty and risk that will increase costs for construction 
projects. One commenter suggested reducing the burden on small 
businesses to qualify for the Good Faith Effort Exception. Another 
commenter proposed that the Treasury Department and the IRS decline to 
impose penalties for any failure to satisfy the Participation 
Requirement with respect to any contractor or subcontractor that 
qualifies as a ``small business'' under the U.S. Small Business 
Administration's ``Table of Size Standards''.
    The Treasury Department and the IRS have made a number of revisions 
to these final regulations to assist taxpayers, including small 
businesses, and reduce the burdens associated with

[[Page 53249]]

complying with the PWA requirements. These revisions are discussed in 
this Summary of Comments and Explanation of Revisions of the preamble 
to these regulations and in this FRFA.
C. Affected Small Entities
    The RFA directs agencies to provide a description of, and if 
feasible, an estimate of, the number of small entities that may be 
affected by the proposed rules, if adopted. The Small Business 
Administration's (SBA) Office of Advocacy estimates in its 2023 
Frequently Asked Questions that 99.9 percent of American businesses 
meet its definition of a small business. The applicability of these 
Proposed Regulations does not depend on the size of the business, as 
defined by the SBA. These final regulations may affect a variety of 
different entities across several different green energy industries as 
they prescribe rules with respect to ten different sections of the Code 
with provisions related to increased amounts of credit and deduction.
    The Office of Advocacy commented that the IRFA did not describe or 
estimate the number of impacted small entities and did not provide 
information related to such entities such as the North American 
Industry Classification System (NAICS) classifications. The Office of 
Advocacy also commented that because the regulation requires taxpayers 
to verify compliance for contracted work, that the Proposed Regulations 
were directly regulating the contractors hired to perform the work and 
that the IRFA failed to consider the impact of the proposed rules on 
these contractors and subcontractors, many of which are likely small 
businesses. The Treasury Department and the IRS utilize tax data as the 
basis for its Regulatory Flexibility Act analysis. Tax entities supply 
information on tax forms, which information is processed and recorded 
by the IRS. This data is then available to the IRS office of Research, 
Applied Analytics and Statistics and to the Treasury Department's 
Office of Tax Policy for use in estimating the impact of tax regulation 
on businesses.
    Tax data is the more appropriate data as it provides nearly 
universal coverage of the entities that are affected by these tax 
regulations. All taxpayers and many potential taxpayers are represented 
in the universe of tax data. Second, the tax data more accurately 
reflect the level of organization to which tax regulations are 
applicable because tax data is collected on the entity rather than the 
enterprise level. Overwhelmingly, business tax regulations apply to the 
entity level making tax data a natural fit for the analysis of 
regulatory impact. Further, with limited exceptions, tax regulations 
apply to all entities organized in a particular manner regardless of 
industry or size. Finally, analysis of the implications of tax 
regulations for the purposes of the Paperwork Reduction Act and any 
Special Analyses, including the Regulatory Impact Analysis, are carried 
out using tax data. Generally, restricting analysis for the RFA to tax 
data prevents difficulties in reconciling the different analyses within 
a given regulation.
    Reliance on tax data has some drawbacks. In general, tax forms do 
not collect information unless it is directly relevant to the 
calculation of tax liability. The NAICS codes referenced by the Office 
of Advocacy are included on tax forms for informational purposes and 
may not be reliable. For example, past the first two-digits of the 
NAICS code, economic sector level, entries may be left blank in the raw 
data. In addition, for a tax entity that is comprised of multiple 
different enterprises that each operate in a different industry, the 
NAICS code reported on a tax form may not reflect the appropriate 
industry for the regulation under analysis. Furthermore, most tax 
returns have no independent verification of the accuracy of NAICS 
codes. Notwithstanding this concern, tax data remains the most 
appropriate data for analysis of the implications of tax regulations.
    The Treasury Department and the IRS have considered other data 
alternatives including Census data sources, such as the Statistics of 
U.S. Businesses (SUSB) suggested by SBA's Office of Advocacy. The 2020 
SUSB includes only six million firms and eight million establishments 
while the proposed tax data include approximately 18 million business 
entities. Unlike the SUSB data, the tax data include more small 
businesses, not only ones with at least one employee. Tax data provide 
a more inclusive estimate of businesses affected by tax regulations. In 
conclusion, while tax data are an appropriate resource for evaluating 
the impact of tax regulations, this data does not permit some of the 
usual analysis presented to the SBA. Furthermore, since the NAICS codes 
reported on the tax return may not accurately reflect the industry of 
the entity, applying separate standards by industry is inadvisable.
    Thus, the Treasury Department and the IRS have determined that 
reliance on NAICS codes would not accurately reflect the entities 
affected by these regulations. Further, the Treasury Department and the 
IRS currently do not have useable tax data that reflects the entities 
that will be affected by these regulations. While there is uncertainty 
as to the exact number of small businesses within this group, the 
Treasury Department and the IRS continue to estimate that approximately 
70,000 taxpayers will be impacted as described in the preamble to the 
Proposed Regulations.
    With respect to the Office of Advocacy's comments regarding the 
regulation of contractors and subcontractors, these regulations provide 
guidance for taxpayers that seek the increased amounts of credit and 
deduction provided under the IRA by ensuring the payment of prevailing 
wage rates and the use of qualified apprentices with respect to the 
construction of qualified facilities. The regulations do not directly 
regulate the contractors and subcontractors who may be hired by 
taxpayers. The taxpayers claiming the increased amounts of credit and 
deduction are the entities responsible for compliance with the PWA 
requirements. While the final regulations set forth and incentivize 
various practices, taxpayers retain flexibility to determine how best 
to ensure compliance with the statutory requirements and the 
recordkeeping and reporting obligations imposed as part of these final 
regulations.
D. Impact of the Rules
    These final regulations provide rules for how taxpayers can satisfy 
the PWA requirements in order to seek the increased credit amounts 
under section 45 as well as the increased amounts of credit or 
deduction available under sections 30C, 45L, 45Q, 45U, 45V, 45Y, 45Z, 
48C, and 179D. Taxpayers that seek to claim the increased amount of 
credit or deduction will have administrative costs related to reading 
and understanding these final regulations, as well as increased costs 
for the recordkeeping and reporting requirements necessary to establish 
compliance with the PWA requirements. The costs will vary across 
different-sized taxpayers and across the type of facilities and 
projects in which such taxpayers are engaged.
    The Prevailing Wage Requirements require the taxpayer to obtain the 
published wage determination issued by the DOL for the county in which 
the facility is located. To the extent a wage determination does not 
include a required classification, or if no wage determination has been 
published, the taxpayer is required to contact the DOL to obtain a 
supplemental wage determination or a wage rate for an additional 
classification. The taxpayer is required to ensure that any contractor 
or subcontractor that works on the

[[Page 53250]]

construction, alteration, or repair of a facility has paid hourly wages 
in accordance with the applicable wage determination for each 
classification required to complete such work. In order to be eligible 
for certain cure provisions, the taxpayer is required to know or be 
able to determine whether the laborers and mechanics employed for 
construction, alteration, or repair of the facility were paid in 
accordance with the applicable wage determination. Additionally, the 
taxpayer is required to retain records sufficient to establish 
compliance for as long as may be relevant. The Treasury Department and 
the IRS expect that some of the recordkeeping that is required under 
these rules will be consistent with recordkeeping requirements already 
imposed under the DBA and the Fair Labor Standards Act, 29 U.S.C. 201 
et seq.
    In adopting these final regulations, the Treasury Department and 
the IRS have made several revisions that will ease burdens for 
taxpayers. A few commenters commented on the time that will be required 
for taxpayers and contractors to read and understand these regulations. 
In a number of instances, the final regulations have been revised in 
response to comments to assist taxpayers with understanding the rules, 
including through clarifying explanations in the preamble, edits to the 
regulatory text, and additional examples.
    Other changes have been made throughout these regulations that will 
reduce burdens on taxpayers. The Proposed Regulations would have 
established the time that construction starts as the applicable time 
for taxpayers and contractors to determine applicable wage rates. 
Commenters stated this would be burdensome for taxpayers to determine 
labor costs and could require the renegotiation of contracts that have 
been executed. In response to these comments, the final regulations 
provide that generally the applicable prevailing wage rates are 
determined at the time a taxpayer (or the taxpayer's designee, 
assignee, or agent) executes the contract for the construction, 
alteration, or repair of the facility with a contractor. The final 
regulations also provide transition rules that delay the start of the 
PWA Requirements to assist taxpayers with complying with the PWA 
requirements. Under the transition rules, the PWA requirements only 
apply for work performed on or after January 29, 2023, which follows 
the issuance of the initial guidance on the PWA requirements by the 
Treasury Department and the IRS. The final regulations also prescribe 
penalty waivers for taxpayers who make limited errors in compliance 
with the Prevailing Wage Requirements. In response to comments, the 
threshold to qualify for the penalty waivers has been increased to 
underpayments that do not exceed five percent of all amounts required 
to be paid in a calendar year to make the penalty waiver more 
accessible to taxpayers with small failures.
    For the Apprenticeship Requirements, the taxpayer, contractor, or 
subcontractor, is required to contact a registered apprenticeship 
program for purposes of requesting the dispatch of qualified 
apprentices to work on the construction, alteration, or repair of the 
facility. Whether or not the registered apprenticeship program 
dispatches qualified apprentices, the taxpayer is required to maintain 
and preserve records to establish compliance for as long as may be 
relevant.
    The Apprenticeship Requirements have also been revised in these 
final regulations that will reduce burdens for taxpayers. In response 
to several comments, the final regulations clarify that the requirement 
to use qualified apprentices only applies with respect to the 
construction of a facility prior to the facility being placed in 
service, and does not apply to alterations or repairs after the 
facility is placed in service. Several comments were received on the 
burden of the Proposed Regulations that would have required the renewal 
of requests for qualified apprentices every 120 days for taxpayers to 
continue to qualify for the Good Faith Effort Exception. These final 
regulations have extended the 120-day period to provide that qualified 
apprentices only need to be requested on an annual basis to qualify for 
the Good Faith Effort Exception. This revision reduces burdens for 
taxpayers and contractors who would have been required to evaluate 
labor needs on a frequent basis and provides taxpayers and their 
contractors with flexibility to make hiring decisions over a longer 
period of time.
    The taxpayer claiming the increased credit or deduction amount is 
required to report the payment of prevailing wages and the utilization 
of qualified apprentices consistent with the forms and instructions of 
the IRS. Although the Treasury Department and the IRS do not have 
sufficient data to precisely determine the likely extent of the 
increased costs of compliance, the estimated burden of complying with 
the recordkeeping and reporting requirements are described in Section 
II. of this Special Analyses pertaining to the Paperwork Reduction Act.
E. Alternatives Considered
    The Treasury Department and the IRS considered alternatives to 
these final regulations. The Office of Advocacy commented that the 
recordkeeping and reporting requirements of the Proposed Regulations 
would likely discourage small entities from bidding on clean energy 
projects because they will incur heightened compliance costs without 
sharing in the financial benefits of the increased amounts of credit 
and deduction. In contrast, several commenters recommended that the 
Treasury Department and the IRS adopt additional pre-filing enforcement 
processes to ensure that laborers and mechanics are paid wages at rates 
not less than the applicable prevailing wage rates. Commenters 
suggested that that final regulations impose significant additional 
reporting and recordkeeping requirements, including many pre-filing 
reporting requirements such as certified weekly payroll and monthly 
apprenticeship hours reporting.
    The final regulations strike an appropriate balance between these 
alternatives that minimizes burdens for taxpayers and their contractors 
while also ensuring that laborers and mechanics are paid wages at rates 
not less than the applicable prevailing wage rates, and ultimately that 
the IRS has sufficient information to administer the provisions related 
to increased amounts of credit and deduction that are claimed on 
returns filed by taxpayers. Thus, the final regulations do not adopt 
the pre-filing alternatives urged by the commenters, including the DBA 
requirement of submitting weekly certified payroll records to the IRS. 
The submission of weekly payroll records to the IRS by taxpayers would 
not assist the IRS with the efficient administration of the increased 
credit amount provisions and would increase burdens for taxpayers. The 
Treasury Department and the IRS also considered an alternative 
requirement that taxpayers submit payroll records for all laborers and 
mechanics at the time of filing a return that claims an increased 
credit amount. The Treasury Department and the IRS determined that per-
laborer and per-mechanic payroll records would not provide the IRS with 
useful information and would also involve substantial burdens for 
taxpayers to report such information.
    The Office of Advocacy also commented that the IRFA did not analyze 
how the Proposed Regulations treatment of PLAs would increase the 
compliance costs of the regulation to small construction firms because 
they primarily use non-union labor. As

[[Page 53251]]

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

IV. Unfunded Mandates Reform Act

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

V. Executive Order 13132: Federalism

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

VI. Executive Order 13175: Consultation and Coordination With Indian 
Tribal Governments

    Executive Order 13175 (Consultation and Coordination with Indian 
Tribal governments) prohibits an agency from publishing any rule that 
has Tribal implications if the rule either imposes substantial, direct 
compliance costs on Indian Tribal governments, and is not required by 
statute, or preempts Tribal law, unless the agency meets the 
consultation and funding requirements of section 5 of the Executive 
order. On September 25, 2023, the Treasury Department and the IRS held 
a consultation with Tribal leaders requesting assistance in addressing 
questions related to the Proposed Regulations, which informed the 
development of these final regulations.

VII. Congressional Review Act

    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
the Office of Information and Regulatory Affairs designated this rule 
as a major rule as defined by 5 U.S.C. 804(2).

Statement of Availability of IRS Documents

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

Drafting Information

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

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR part 1 is amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 is amended by adding 
entries for Sec. Sec.  1.30C-3, 1.45-6 through 1.45-8, 1.45-12, 1.45L-
3, 1.45Q-6, 1.45U-3, 1.45V-3, 1.45Y-3, 1.45Z-3, 1.48C-3, and 1.179D-3 
in numerical order to read in part as follows:

    Authority:  26 U.S.C. 7805 * * *
    Section 1.30C-3 also issued under 26 U.S.C. 30.
* * * * *
    Section 1.45-6 also issued under 26 U.S.C. 45.
    Section 1.45-7 also issued under 26 U.S.C. 45.
    Section 1.45-8 also issued under 26 U.S.C. 45.
    Section 1.45-12 also issued under 26 U.S.C. 45.
* * * * *
    Section 1.45L-3 also issued under 26 U.S.C. 45L.
* * * * *
    Section 1.45Q-6 also issued under 26 U.S.C. 45Q.
    Section 1.45U-3 also issued under 26 U.S.C. 45U.
    Section 1.45V-3 also issued under 26 U.S.C. 45V.
    Section 1.45Y-3 also issued under 26 U.S.C. 45Y.
    Section 1.45Z-3 also issued under 26 U.S.C. 45Z.
* * * * *
    Section 1.179D-3 also issued under 26 U.S.C. 179D.
* * * * *


0
Par. 2. Sections 1.30C-1 through 1.30C-3 are added to read as follows:


Sec. Sec.  1.30C-1--1.30C-2  [Reserved]


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

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

[[Page 53252]]

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

0
Par. 3. Sections 1.45-0 through 1.45-12 are added to read as follows:

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


Sec.  1.45-0  Table of contents.

    This section lists the table of contents for Sec. Sec.  1.45-1 
through 1.45-12.


Sec. Sec.  1.45-1--1.45-5  [Reserved]

Sec.  1.45-6 Increased credit amount.

    (a) In general.
    (b) Qualified facility requirements.
    (c) Definition of nameplate capacity for purposes of determining 
maximum net output under section 45(b)(6)(B)(i).
    (d) Applicability date.

Sec.  1.45-7 Prevailing wage requirements.

    (a) Prevailing wage requirements.
    (b) Wage determinations.
    (c) Curing a failure to satisfy the prevailing wage requirements.
    (d) Definitions.
    (e) Applicability date.

Sec.  1.45-8 Apprenticeship requirements.

    (a) Apprenticeship requirements.
    (b) Labor hours requirement.
    (c) Ratio requirement.
    (d) Participation requirement.
    (e) Examples.
    (f) Exceptions to the apprenticeship requirements.
    (g) Definitions.
    (h) Applicability date.


Sec. Sec.  1.45-9--1.45-11  [Reserved]

Sec.  1.45-12 Recordkeeping and reporting.

    (a) In general.
    (b) Recordkeeping for the prevailing wage and apprenticeship 
requirements.
    (c) Recordkeeping for the prevailing wage requirements.
    (d) Recordkeeping for the apprenticeship requirements.
    (e) Satisfaction of the recordkeeping requirements.
    (f) Applicability date.


Sec. Sec.  1.45-1--1.45-5  [Reserved]


Sec.  1.45-6  Increased credit amount.

    (a) In general. If a qualified facility (as defined in section 45) 
satisfies the requirements in paragraph (b) of this section, the amount 
of the renewable electricity production credit determined under section 
45(a) (after the application of section 45(b)(1) through (5)) is equal 
to the credit determined under section 45(a) multiplied by five.
    (b) Qualified facility requirements. A qualified facility satisfies 
the requirements of this paragraph (b) if it is one of the following--
    (1) A facility with a maximum net output (as determined under 
paragraph (c) of this section) of less than one megawatt (as measured 
in alternating current);
    (2) A facility the construction of which began prior to January 29, 
2023; or
    (3) A facility that meets the prevailing wage requirements of 
section 45(b)(7) and Sec.  1.45-7, the apprenticeship requirements of 
section 45(b)(8) and Sec.  1.45-8, and the recordkeeping and reporting 
requirements of Sec.  1.45-12.
    (c) Definition of nameplate capacity for purposes of determining 
maximum net output under section 45(b)(6)(B)(i). For purposes of 
determining whether a facility has a maximum net output of less than 
one megawatt (as measured in alternating current) for purposes of 
section 45(b)(6)(B)(i), nameplate capacity is determinative. Nameplate 
capacity for an electrical generating unit means the maximum electrical 
generating output in megawatts that the unit is capable of producing on 
a steady state basis and during continuous operation under standard 
conditions, as measured by the manufacturer and consistent with the 
definition provided in 40 CFR 96.202. If applicable, the International 
Standard Organization (ISO) conditions are used to measure the maximum 
electrical generating output or usable energy capacity.
    (d) Applicability date. This section applies to qualified 
facilities placed in service in taxable years ending after June 25, 
2024, and the construction of which begins after June 25, 2024. 
Taxpayers may apply this section to qualified facilities placed in 
service in taxable years ending on or before June 25, 2024, and 
qualified facilities placed in service in taxable years ending after 
June 25, 2024, the construction of which begins before June 25, 2024, 
provided that taxpayers follow this section in its entirety and in a 
consistent manner.


Sec.  1.45-7  Prevailing wage requirements.

    (a) Prevailing wage requirements--(1) In general. Except as 
provided in paragraphs (a)(2), (3), and (c) of this section, a taxpayer 
claiming or transferring (under section 6418) the increased credit 
amount under section 45(b)(6)(B)(iii) with respect to any qualified 
facility must satisfy the requirements of section 45(b)(7) and this 
section by ensuring that all laborers and mechanics employed by the 
taxpayer or any contractor or subcontractor in the construction of such 
facility, and with respect to any taxable year, for any portion of such 
taxable year that is within the 10-year period beginning on the date 
the qualified facility was placed in service, the alteration or repair 
of such facility, are paid wages at rates not less than the prevailing 
rates for construction, alteration, or repair of a similar character in 
the locality in which such facility is located (Prevailing Wage 
Requirements). If alteration or repair of a qualified facility occurs 
during any portion of such taxable year(s) within the 10-year period 
after the qualified facility was placed in service, the Prevailing Wage 
Requirements apply with respect to such taxable year(s) in which that 
alteration or repair occurs. If no alteration or repair work occurs 
during the taxable year(s) with respect to the qualified facility after 
the facility is placed in service, the taxpayer is deemed to satisfy 
the Prevailing Wage Requirements with respect to such taxable year. 
Prevailing rates are those rates most recently determined by the 
Secretary of Labor in accordance with 40 U.S.C. chapter 31, subchapter 
IV (Davis-Bacon Act), and as set forth in paragraph (b) of this 
section. See paragraph (d) of this section for definitions of terms 
used in this section.

[[Page 53253]]

    (2) Transition relief. Taxpayers are excepted from the Prevailing 
Wage Requirements with respect to any activities that would be 
considered construction, alteration, or repair of the qualified 
facility and that occurred prior to January 29, 2023.
    (3) Relief for Indian Tribal governments. An Indian Tribal 
government, as defined in section 30D(g)(9), and including any 
subdivision, agency, or instrumentality of the Indian Tribal 
government, is excepted from the Prevailing Wage Requirements with 
respect to laborers and mechanics that are employees, within the 
meaning of section 3121(d)(2), of the Indian Tribal government. This 
paragraph (a)(3) also applies to a qualified facility that is subject 
to joint ownership arrangements that involve an Indian Tribal 
government, including any subdivision, agency, or instrumentality of 
the Indian Tribal government. However, any activity that would be 
considered construction, alteration, or repair of the qualified 
facility that is not performed by Indian Tribal government employees 
(within the meaning of section 3121(d)(2)), but that is instead 
performed by or through a contractor or subcontractor, is subject to 
the Prevailing Wage Requirements described in this paragraph (a).
    (b) Wage determinations--(1) In general. A taxpayer satisfies the 
Prevailing Wage Requirements with respect to a qualified facility, if 
the taxpayer ensures that laborers and mechanics employed by the 
taxpayer or any contractor or subcontractor in the construction, 
alteration, or repair of the facility are paid wages at rates not less 
than those set forth in the applicable wage determination issued by the 
Secretary of Labor pursuant to 40 U.S.C. 3142, 29 CFR part 1, and other 
implementing guidance for the specified type of construction in the 
geographic area where that facility is located. If the construction, 
alteration, or repair of a facility occurs in more than one geographic 
area, the taxpayer, contractor, or subcontractor must use the 
applicable wage determination for the work performed in each geographic 
area. Subject to the requirements of this section, the applicable wage 
determination is a general wage determination described in paragraph 
(b)(2) of this section (including any additional classifications and 
wage rates described in paragraph (b)(3) of this section), or a 
supplemental wage determination described in paragraph (b)(3) of this 
section.
    (2) General wage determinations--(i) In general. Except as provided 
in paragraph (b)(3) of this section, to satisfy the Prevailing Wage 
Requirements described in paragraph (a) of this section with respect to 
a qualified facility, taxpayers must ensure that laborers and mechanics 
employed by the taxpayer or any contractor or subcontractor in the 
construction, alteration, or repair of the facility are paid wages at 
rates not less than those set forth in the applicable general wage 
determination(s) published by the U.S. Department of Labor on the 
approved website. The applicable general wage determination is the 
general wage determination in effect for the specified type of 
construction in the geographic area at the time a contract for the 
construction, alteration, or repair of the facility is executed by the 
taxpayer (or the taxpayer's designee, assignee, or agent) and any 
contractor. The applicable general wage determination will continue in 
effect for any additional contracts executed by such contractor with 
any subcontractors with respect to the construction, alteration, or 
repair of the facility. In the absence of a contract (or if the date of 
execution of the contract cannot be reasonably determined), the 
applicable general wage determination is the general wage determination 
in effect for the specified type of construction in the geographic area 
when the construction, alteration, or repair of the facility starts.
    (ii) Wage determinations applicable to Indian Tribal governments. 
If the taxpayer is an Indian Tribal government, as defined in section 
30D(g)(9), including any subdivision, agency, or instrumentality of the 
Indian Tribal government, and the construction, alteration, or repair 
of a qualified facility occurs on Indian land, as defined in 25 U.S.C. 
3501(2), that encompasses or overlaps with more than one geographic 
area with respect to which the U.S. Department of Labor has issued a 
general wage determination, the Indian Tribal government may choose the 
general wage determination applicable for any one of those geographic 
areas and apply that general wage determination for work performed on 
any qualified facility that is located on the Indian land. This 
paragraph (b)(2)(ii) also applies to a qualified facility that is 
subject to joint ownership arrangements that involve an Indian Tribal 
government, including any subdivision, agency, or instrumentality of 
the Indian Tribal government. If the Indian Tribal government chooses 
to use a single general wage determination under this paragraph 
(b)(2)(ii), it must maintain and preserve records sufficient to 
document the applicable prevailing wage rates for each laborer and 
mechanic employed by the Indian Tribal government or any contractor or 
subcontractor with respect to each qualified facility on Indian land.
    (3) Supplemental wage determinations and additional classifications 
and rates--(i) Use of supplemental wage determinations and additional 
classifications and rates. In the event the Secretary of Labor has not 
issued a general wage determination for the relevant geographic area 
and type of construction for the facility, or the Secretary of Labor 
has issued a general wage determination for the relevant geographic 
area and type of construction, but one or more labor classifications 
for the construction, alteration, or repair work that will be done on 
the facility by laborers or mechanics is not listed, the taxpayer must 
ensure that laborers and mechanics employed by the taxpayer or any 
contractor or subcontractor in the construction, alteration, or repair 
of a facility are paid wages at rates not less than those set forth in 
a supplemental wage determination or in an additional classification 
and wage rate issued to the taxpayer by the U.S. Department of Labor 
upon request by the taxpayer, contractor, or subcontractor in 
accordance with paragraph (b)(3)(ii) of this section. A taxpayer, 
contractor, or subcontractor may also request a supplemental wage 
determination if the location of the facility involves work by covered 
laborers and mechanics that spans more than one contiguous geographic 
area.
    (ii) Request for supplemental wage determinations and additional 
classifications and rates--(A) Manner of making request. A taxpayer, 
contractor, or subcontractor requesting a supplemental wage 
determination or additional classification and wage rate under 
paragraph (b)(3)(i) of this section must submit the request to the U.S. 
Department of Labor at, U.S. Department of Labor, Wage and Hour 
Division, Branch of Construction Wage Determinations, Washington, DC 
20210, by email at [email protected], or such other address as 
may be prescribed in guidance and instructions issued by the 
Administrator of the Wage and Hour Division of the U.S. Department of 
Labor (Wage and Hour Division).
    (B) Timing of supplemental wage determination requests. A taxpayer, 
contractor, or subcontractor should make requests for a supplemental 
wage determination no more than 90 days before the taxpayer (or the 
taxpayer's designee, assignee, or agent) expects to execute the 
contract for the

[[Page 53254]]

construction, alteration, or repair of the facility with a contractor. 
In the absence of a contract, the taxpayer, contractor, or 
subcontractor should make such requests no more than 90 days before 
construction, alteration, or repair of the facility starts.
    (C) Timing of requests for prevailing wage rates for additional 
classifications. A request for prevailing wage rates for additional 
classifications can be made any time after a contract for the 
construction, alteration, or repair of a facility has been executed 
between the taxpayer (or the taxpayer's designee, assignee, or agent) 
and a contractor. In the absence of a contract, the taxpayer, 
contractor, or subcontractor should make such requests no more than 90 
days before construction, alteration, or repair of the facility starts. 
If the taxpayer, contractor, or subcontractor cannot reasonably 
determine prior to execution of the contract between the taxpayer (or 
the taxpayer's designee, assignee, or agent) and the contractor or 
prior to the start of the construction, alteration, or repair work that 
an additional classification and wage rate is necessary, the taxpayer, 
contractor, or subcontractor should make such request as soon as 
practicable after determining that an additional classification and 
wage rate is necessary.
    (D) Required information. The request for a supplemental wage 
determination or additional classification and wage rate must include 
the following information:
    (1) The name of the taxpayer, contractor, or subcontractor 
requesting the supplemental wage determination or wage rate;
    (2) The general wage determination(s), if any, applicable to 
construction, alteration, or repair of the facility;
    (3) A description of the work to be performed, including the 
type(s) of construction involved and, if the project involves multiple 
types of construction, information indicating the expected cost 
breakdown by type of construction;
    (4) The geographic area in which the facility is being constructed, 
altered, or repaired, including the name and address of the facility 
(if known);
    (5) The date the taxpayer (or the taxpayer's designee, assignee, or 
agent) expects to enter into a contract with a contractor for which a 
supplemental wage determination is needed or the date of execution of 
the contract with a contractor for which a prevailing wage rate for an 
additional classification is needed;
    (6) The start date of construction, alteration, or repair at the 
facility;
    (7) The labor classification(s) needed for performance of the work 
on the facility (excluding those for which wage rates are available on 
an applicable general wage determination);
    (8) The duties to be performed by each such labor classification on 
the facility;
    (9) The proposed wage rate, including any bona fide fringe 
benefits, for each such labor classification;
    (10) Any pertinent wage payment information that may be available;
    (11) Any additional relevant information otherwise required by 
forms and instructions published by the U.S. Department of Labor; and
    (12) Any additional information the taxpayer, contractor, or 
subcontractor wants the U.S. Department of Labor to consider.
    (iii) Issuance of supplemental wage determinations and additional 
classifications and wage rates. After review, the Wage and Hour 
Division will notify the taxpayer, contractor, or subcontractor as to 
the supplemental wage determination or the labor classifications and 
wage rates to be used for the type of work in question in the 
geographic area in which the facility is located. Supplemental wage 
determinations issued by the Wage and Hour Division are effective for 
180 calendar days from the date such determinations are issued. If a 
supplemental wage determination is not incorporated into the contract 
(or, in the absence of a contract, if construction has not started) 
during the 180-day period, the determination is no longer effective, 
and a new supplemental wage determination will need to be requested. 
The Wage and Hour Division will resolve requests for a prevailing wage 
rate for an additional classification within 30 days of receipt of the 
request or will advise the requester within the 30-day period that 
additional time is necessary.
    (iv) Special rule for qualified facilities located offshore. If a 
general wage determination is not available, in lieu of requesting a 
supplemental wage determination for a qualified facility located in an 
offshore area within the outer continental shelf of the United States, 
a taxpayer, contractor, or subcontractor may rely on the general wage 
determination for the relevant category of construction that is 
applicable in the geographic area closest to the area in which the 
qualified facility will be located.
    (4) Reconsideration and review. A taxpayer, contractor, or 
subcontractor may seek reconsideration and review by the Administrator 
of the Wage and Hour Division of a general wage determination, or a 
determination issued with respect to a request for a supplemental wage 
determination or additional classification and wage rate in accordance 
with the procedures set forth in 29 CFR 1.8 and 5.13 and any subsequent 
guidance issued by the U.S. Department of Labor. A taxpayer, 
contractor, or subcontractor may appeal the decision of the 
Administrator of the Wage and Hour Division to the U.S. Department of 
Labor's Administrative Review Board in accordance with the procedures 
set forth in 29 CFR part 7 and any subsequent guidance issued by the 
U.S. Department of Labor. Questions regarding wage determinations and 
rates may be referred to the Administrator of the Wage and Hour 
Division.
    (5) Timing of wage determination. The applicable prevailing wage 
rates on a general wage determination are those in effect at the time a 
contract for the construction, alteration, or repair of the qualified 
facility is executed by the taxpayer (or the taxpayer's designee, 
assignee, or agent) and a contractor. After the qualified facility is 
placed in service, the applicable prevailing wage rates on a general 
wage determination for the alteration or repair of a qualified facility 
are those in effect at the time the contract for the alteration or 
repair work is executed by the taxpayer (or the taxpayer's designee, 
assignee, or agent) and a contractor. The applicable prevailing wage 
rates on a general wage determination at the time such contract is 
executed apply to all subcontractors of that contractor. If a taxpayer 
(or the taxpayer's designee, assignee, or agent) executes separate 
contracts with more than one contractor with respect to the 
construction, alteration, or repair of the qualified facility, then, 
for each such contract, the applicable prevailing wage rates with 
respect to any work performed by the contractor (and all subcontractors 
of the contractor) are determined at the time the contract is executed 
by the taxpayer (or the taxpayer's designee, assignee, or agent). If no 
contract exists with respect to the construction, alteration, or repair 
of the qualified facility (or if the date of execution of the relevant 
contract cannot be reasonably determined), the applicable prevailing 
wage rates on a general wage determination are those in effect at the 
time the construction, alteration, or repair work starts. The 
applicable prevailing wage rates of a general wage determination 
generally remain valid for the duration of the work performed with 
respect to the construction, alteration, or repair of the qualified 
facility by the taxpayer, contractor, or subcontractor. A new general 
wage determination is required to be used if the contract between the

[[Page 53255]]

taxpayer (or the taxpayer's designee, assignee, or agent) and the 
contractor for work on a facility is modified to include additional 
substantial construction, alteration, or repair work not within the 
scope of work of the original contract, or to require work to be 
performed for an additional time period not originally obligated, 
including if an option to extend the term of a contract for the 
construction, alteration, or repair is exercised. A new general wage 
determination is not required if the contractor is simply given 
additional time to complete its original commitment or if the 
additional construction, alteration, and/or repair work in the 
modification of the contract is merely incidental. In circumstances in 
which a new general wage determination is required, the applicable 
prevailing wage rates on a general wage determination are those in 
effect at the time the additional substantial work is agreed to or at 
the time when an option to extend the term of the contract is executed. 
If a taxpayer enters into a contract for alteration or repair work over 
an indefinite period of time that is not tied to the completion of any 
specific work, the applicable prevailing wage rates must be updated on 
an annual basis on the anniversary date of such contract. General wage 
determinations published on the U.S. Department of Labor approved 
website contain no expiration date and remain valid until revised, 
superseded, or canceled. Any supplemental wage determination issued 
under paragraph (b)(3) of this section applies without expiration from 
the time the taxpayer incorporates the supplemental wage determination 
into the contract provided that the supplemental wage determination is 
incorporated into the contract within 180 days of issuance of the 
supplemental wage determination. If there is no contract, any 
supplemental wage determination issued under paragraph (b)(3) of this 
section applies without expiration from the time construction, 
alteration, or repair starts provided the construction, alteration, or 
repairs starts within 180 days of issuance of the supplemental 
determination. Any additional classification and wage rate issued under 
paragraph (b)(3) of this section applies without expiration from the 
earlier of the date of issuance or the first day in which work in the 
additional classification was performed. If a supplemental wage 
determination or additional classification and wage rate is issued 
after construction, alteration, or repair of the facility has started, 
the applicable prevailing rates apply retroactively to the date 
construction started.
    (6) Payment of wages. All laborers and mechanics working on a 
qualified facility must be paid in the time and manner consistent with 
the regular payroll practices of the taxpayer, contractor, or 
subcontractor, as applicable. The payment of wages must be made without 
subsequent deduction or rebate on any account (except such payroll 
deductions as are required by the law or permitted by regulations 
issued by the Secretary of Labor), and must consist of the full amount 
of wages (including bona fide fringe benefits or cash equivalents 
thereof) due at the time of payment computed at rates not less than 
those contained in the applicable wage determination of the Secretary 
of Labor. A taxpayer may discharge its wage obligations for the payment 
of wages by paying the full amount in cash, by making payments to a 
bona fide fringe benefit provider or incurring costs for bona fide 
fringe benefits, or by a combination thereof. The taxpayer is solely 
responsible for ensuring that laborers and mechanics are paid wages not 
less than the prevailing rate whether employed directly by the 
taxpayer, a contractor, or a subcontractor in the construction, 
alteration, or repair of the qualified facility for purposes of 
claiming the increased credit amount under section 45(b)(6)(B)(iii). 
The rules set forth in 29 CFR 5.25 through 5.33, and any subsequent 
guidance issued by the U.S. Department of Labor apply with respect to 
costs for bona fide fringe benefits that may be credited for purposes 
of the payment of wages.
    (7) Apprentices--(i) Rate of pay. Apprentices who perform work with 
respect to the construction, alteration, or repair of a qualified 
facility consistent with the requirements of section 45(b)(8) and Sec.  
1.45-8 may be paid wages at rates that are less than the rates that 
would otherwise apply under paragraph (a) of this section. Every 
apprentice must be paid wages at rates not less than the rates 
specified by the registered apprenticeship program for the apprentice's 
level of progress, expressed as a percentage of the journeyworker 
hourly rate specified for the apprentice's classification in the 
applicable wage determination. If the apprentice is working in a 
classification that is not part of the occupation of the registered 
apprenticeship program, the apprentice must be paid not less than the 
applicable wage rate on the wage determination for laborers or 
mechanics working in that classification. Any individual listed on 
payroll at an apprenticeship wage, who is not participating in a 
registered apprenticeship program, must be paid not less than the 
applicable wage rate on the wage determination for the classification 
of work actually performed to satisfy the Prevailing Wage Requirements. 
In the event the U.S. Department of Labor's Office of Apprenticeship or 
a State apprenticeship agency recognized by the U.S. Department of 
Labor's Office of Apprenticeship withdraws approval of an 
apprenticeship program, the taxpayer, contractor, or subcontractor will 
no longer satisfy the Prevailing wage Requirements by paying 
apprentices less than the applicable predetermined rate for the work 
performed until an acceptable program is approved.
    (ii) Bona fide fringe benefits. To satisfy the Prevailing Wage 
Requirements, apprentices must be paid bona fide fringe benefits in 
accordance with the provisions of the registered apprenticeship 
program. If the apprenticeship program does not specify the payment of 
bona fide fringe benefits, apprentices must be paid the full amount of 
bona fide fringe benefits listed on the wage determination for the 
applicable classification in cash or in kind.
    (iii) Apprenticeship ratio. The allowance for payment of wages to 
apprentices at rates less than the applicable prevailing wage rates 
determined by the U.S. Department of Labor is subject to any applicable 
ratio of apprentices to journeyworkers required under the registered 
apprenticeship program and consistent with section 45(b)(8)(B) and 
Sec.  1.45-8. Any apprentice performing construction, alteration, or 
repair work on the job site in excess of the ratio permitted under the 
registered program or the ratio applicable to the geographic area of 
the facility pursuant to 29 CFR 5.5(a)(4)(i) must be paid not less than 
the applicable wage rate on the wage determination for the work 
actually performed to satisfy the Prevailing Wage Requirements. 
Taxpayers, contractors, or subcontractors have the discretion to 
determine which apprentice(s) must receive the full prevailing wage 
rate for hours worked if the applicable ratio of apprentices to 
journeyworkers has not been met.
    (iv) Reciprocity of ratios and wage rates. If a taxpayer, 
contractor, or subcontractor is performing construction, alteration, or 
repair work on a facility in a geographic area other than the 
geographic area in which an apprenticeship program is registered, the 
taxpayer, contractor, or subcontractor must comply with the apprentice-
to-journeyworker ratios

[[Page 53256]]

applicable within the geographic area in which the construction, 
alteration, or repair work is being performed. If there is no 
applicable ratio for the geographic area of the facility, the ratio 
specified in the registered apprenticeship program standard must be 
observed. The wage rates (expressed in percentages of the 
journeyworker's hourly rate) applicable within the geographic area in 
which the construction, alteration, or repair work is being performed 
must be observed.
    (c) Curing a failure to satisfy the prevailing wage requirements--
(1) In general. If a taxpayer fails to ensure that all laborers and 
mechanics employed by the taxpayer or any contractor or subcontractor 
in the construction, alteration, or repair of a qualified facility are 
paid wages at rates not less than those set forth in the applicable 
wage determination(s), such taxpayer will be deemed to have satisfied 
the Prevailing Wage Requirements with respect to such facility for any 
year if the taxpayer makes the correction and penalty payments provided 
in paragraphs (c)(1)(i) and (ii) of this section.
    (i) Correction payment. The taxpayer must pay any laborer or 
mechanic who was paid wages at a rate below the rate described in 
paragraph (b) of this section for any pay period during such year an 
amount equal to the sum of:
    (A) The difference between the amount of wages paid to such laborer 
or mechanic for all hours worked during such period and the amount of 
wages required to be paid to such laborer or mechanic pursuant to 
paragraph (a) of this section for all hours worked during such period; 
and
    (B) Interest on the amount determined under paragraph (c)(1)(i)(A) 
of this section at the Federal short-term rate as determined under 
section 6621 but substituting ``6 percentage points'' for ``3 
percentage points'' in section 6621(a)(2).
    (ii) Penalty payment. The taxpayer must pay a penalty equal to 
$5,000 multiplied by the total number of laborers and mechanics who 
were paid wages at a rate below the rate described in paragraph (b) of 
this section for any period during such year.
    (iii) Correction and penalty payments not required if taxpayer 
ineligible for increased credit amount under section 45(b)(6)(B)(iii). 
If the taxpayer claims the increased credit amount under section 
45(b)(6)(B)(iii) and does not satisfy the Prevailing Wage Requirements 
for the claimed increased credit amount, then the obligation to make 
correction and penalty payments under paragraphs (c)(1)(i) and (ii) of 
this section applies in order for the taxpayer to retain the credit. If 
the IRS determines that a taxpayer claiming the increased credit amount 
under section 45(b)(6)(B)(iii) failed to meet the Prevailing Wage 
Requirements and the taxpayer does not make the correction and penalty 
payments provided in paragraphs (c)(1)(i) and (ii) of this section, 
then no penalty is assessed under paragraph (c)(1)(ii) of this section, 
and the taxpayer is not eligible for the increased credit amount under 
section 45(b)(6)(B)(iii). Taxpayers that are not eligible to claim the 
increased credit amount may still be eligible to claim the base amount 
of the renewable electricity production credit under section 45(a) if 
they meet the requirements to claim the credit.
    (iv) Correction and penalty payments in the event of a transfer 
pursuant to section 6418. To the extent an eligible taxpayer, as 
defined in section 6418(f)(2), has determined an increased credit 
amount under section 45(b)(6) and transferred such increased credit 
amount as part of a specified credit portion, the obligation to make 
correction and penalty payments under paragraphs (c)(1)(i) and (ii) of 
this section remains with the eligible taxpayer. The obligation for an 
eligible taxpayer to satisfy the Prevailing Wage Requirements becomes 
binding upon the earlier of the filing of the eligible taxpayer's 
return for the taxable year for which the specified credit portion is 
determined with respect to the eligible taxpayer, or the filing of the 
return of the transferee taxpayer for the year in which the specified 
credit portion is taken into account. If the IRS determines that the 
eligible taxpayer failed to meet the Prevailing Wage Requirements and 
the eligible taxpayer does not then make the correction and penalty 
payments provided in paragraphs (c)(1)(i) and (ii) of this section, 
then no penalty is assessed under paragraph (c)(1)(ii) of this section, 
and the eligible taxpayer is not eligible for the increased credit 
amount determined under section 45(b)(6)(B)(iii). Section 6418 and the 
regulations under section 6418 control for determining the impact of an 
eligible taxpayer's failure to cure on any transferee taxpayer. The 
eligible taxpayer that is not eligible to claim the increased credit 
amount may still be eligible to claim the base amount of the renewable 
electricity production credit under section 45(a) if they meet the 
requirements to claim the credit.
    (v) Special rule for laborers and mechanics who cannot be located. 
A taxpayer will be deemed to have paid a correction payment, under this 
paragraph (c)(1), to a laborer or mechanic who cannot be located if the 
taxpayer can establish that correction payments have been made. A 
taxpayer may establish that correction payments have been made by 
demonstrating compliance with the applicable State unclaimed property 
law and all Federal and State withholding and information reporting 
requirements with respect to the payments.
    (vi) Examples. The provisions of this paragraph (c)(1) are 
illustrated by the following examples, which do not take into account 
any possible application of the enhanced correction and penalty payment 
requirements in the case of intentional disregard under paragraph 
(c)(3) of this section, the exception for wages paid before a 
determination by the U.S. Department of Labor under paragraph (c)(5) of 
this section, or the penalty waiver under paragraph (c)(6) of this 
section. In each example, assume that the taxpayer uses the calendar 
year as the taxpayer's taxable year.
    (A) Example 1. Taxpayer A starts construction of a qualified 
facility on February 3, 2023. The facility is placed in service on 
October 10, 2023, and Taxpayer A claims the increased credit amount 
under section 45(b)(6)(B)(iii) on its 2023 tax return. Laborer X was 
employed in the construction, alteration, or repair of the facility in 
calendar year 2023 for 20 weeks and was paid on a weekly basis. Laborer 
X was paid wages below the prevailing wage rate for all pay periods in 
calendar year 2023. All other laborers and mechanics were paid wages at 
the prevailing wage rate. The aggregate difference between the amount 
of wages Laborer X was paid and the amount required to be paid under 
paragraph (a) of this section is $400 (that is, Laborer X worked 20 
weeks during the year and was underpaid by $20 in each of those weeks). 
The amount of the correction payment Taxpayer A must make to Laborer X 
is equal to $400 plus interest from the date of each underpayment at 
the rate as determined under section 6621 but substituting ``6 
percentage points'' for ``3 percentage points'' in section 6621(a)(2). 
The total number of laborers underpaid for any period in 2023 was one, 
so the total amount of the penalty payment that Taxpayer A must pay to 
the IRS to retain the increased credit amount is $5,000.
    (B) Example 2. Taxpayer B starts construction of a qualified 
facility on January 30, 2023. The facility is placed in service on 
February 2, 2024. Taxpayer B claims the increased credit amount under 
section 45(b)(6)(B)(iii) on its 2024 tax return. Taxpayer B paid 
workers on a biweekly basis. Five laborers employed in the construction 
of the facility were paid wages at rates

[[Page 53257]]

below the prevailing wage rates in 2023, with the difference between 
the amount they were paid and the amount of wages required to be paid 
under paragraph (a) of this section being $500 per laborer. One of 
those laborers remained employed in the construction of the facility in 
2024 and was paid wages below the prevailing wage rate in 2024, with 
the difference between the amount the laborer was paid and the amount 
of wages required to be paid under paragraph (a) of this section being 
$100. All other laborers and mechanics involved in the construction, 
alteration, or repair of the facility were paid wages at the prevailing 
wage rates. Taxpayer B must make correction payments of $500 plus 
interest from the date of each underpayment at the rate as determined 
under section 6621 but substituting ``6 percentage points'' for ``3 
percentage points'' in section 6621(a)(2) to each of the five laborers 
that were underpaid in 2023, and a correction payment of $100 plus 
interest from the date of each underpayment at the rate as determined 
under section 6621 but substituting ``6 percentage points'' for ``3 
percentage points'' in section 6621(a)(2) to the laborer that was 
underpaid in 2024. The total amount of the penalty payment that 
Taxpayer B must pay to the IRS to retain the increased credit amount is 
$30,000, which includes $5,000 for each laborer underpaid in 2023 and 
$5,000 for the laborer underpaid in 2024.
    (C) Example 3. Taxpayer C starts construction of a qualified 
facility on January 30, 2023. The facility is placed in service on 
February 2, 2024. Taxpayer C claims the increased credit amount under 
section 45(b)(6)(B)(iii) on its 2024 tax return. Taxpayer C paid 
workers on a biweekly basis. Laborer Y was employed in the construction 
of the facility for 22 weeks in 2023 was paid wages at rates below the 
prevailing wage rates for the first 20 weeks of her employment in the 
amount of $500 (that is, Laborer Y was underpaid $50 in each of the 10 
biweekly periods). For the last biweekly pay period, Taxpayer C paid 
Laborer Y the correct prevailing rate for the work performed during the 
period, plus $500 for the amounts that were underpaid in the first 10 
periods. All other laborers and mechanics involved in the construction, 
alteration, or repair of the facility were paid at the prevailing wage 
rates. Taxpayer C is required to make a correction payment to Laborer Y 
in the amount of the interest from the date of each underpayment at the 
rate as determined under section 6221 but substituting ``6 percentage 
points'' for ``3 percentage points'' in section 6221(a)(2) to the 
laborer that was underpaid in 2023. To retain the increased credit 
amount, Taxpayer C must make a penalty payment of $5,000 to the IRS 
with respect to Laborer Y.
    (2) Deficiency procedures not to apply. The penalty payment 
required by paragraph (c)(1)(ii) of this section may be assessed and 
collected without regard to the deficiency procedures provided by 
subchapter B of chapter 63 of the Code. Any determination by the IRS 
disallowing a claim for the increased credit amount under section 
45(b)(6) will be subject to the deficiency procedures of subchapter B 
of chapter 63.
    (3) Intentional disregard--(i) Application of section 45 
(b)(7)(B)(iii). If the IRS determines that any failure to satisfy the 
Prevailing Wage Requirements in paragraph (a) of this section is due to 
intentional disregard of the requirement--
    (A) The correction payment under paragraph (c)(1)(i) of this 
section is increased to three times the sum determined in paragraph 
(c)(1)(i) of this section; and
    (B) The penalty payment under paragraph (c)(1)(ii) of this section 
is increased to $10,000 multiplied by the total number of laborers and 
mechanics who were paid wages at a rate below the rate described in 
paragraph (b) of this section for any period during such year.
    (ii) Meaning of intentional disregard. A failure to ensure that any 
laborer or mechanic employed in the construction, alteration, or repair 
of a qualified facility is paid wages at the prevailing wage rate is 
due to intentional disregard if it is knowing or willful.
    (iii) Facts and circumstances considered. The facts and 
circumstances that are considered in determining whether a failure to 
satisfy the Prevailing Wage Requirements is due to intentional 
disregard include, but are not limited to--
    (A) Whether the failure was part of a pattern of conduct that 
includes repeated or systemic failures to ensure that the laborers and 
mechanics were paid wages at rates not less than the applicable 
prevailing wage rate, including failures to pay prevailing wages as 
required under other applicable laws;
    (B) Whether the taxpayer took steps to determine or review the 
applicable classifications of laborers and mechanics, such as through a 
quarterly, or more frequent, review of the applicable classifications 
of laborers and mechanics according to the actual duties performed by 
those laborers and mechanics;
    (C) Whether the taxpayer took steps to determine or review the 
applicable prevailing wage rate(s) for laborers and mechanics to ensure 
usage of correct rates by all contractors and subcontractors, such as 
through a quarterly, or more frequent, review of the prevailing wage 
rates;
    (D) Whether the taxpayer promptly cured any failures to ensure that 
laborers and mechanics were paid wages at rates not less than the 
applicable prevailing rates;
    (E) Whether the taxpayer has been required to make a penalty 
payment under paragraph (c)(1)(ii) of this section in previous years;
    (F) Whether the taxpayer undertook (or engaged an independent third 
party to aid in conducting) a quarterly, or more frequent, review of 
wages paid to mechanics and laborers to ensure that wages at rates not 
less than the applicable prevailing wage rates were paid (including by 
reviewing payroll information of contractors and subcontractors or by 
requiring contractors and subcontractors to regularly provide payroll 
information to the taxpayer or a third party acting on behalf of the 
taxpayer);
    (G) Whether the taxpayer included provisions in any contracts 
entered into with contractors that required the contractors and any 
subcontractors retained by the contractors to pay laborers and 
mechanics wages at rates not less than the prevailing wage rates and 
maintain records to ensure the taxpayer's compliance with recordkeeping 
requirements set forth in Sec.  1.45-12;
    (H) Whether the taxpayer posted in a prominent place at the 
qualified facility or otherwise provided written notice to laborers and 
mechanics during the construction, alteration, or repair of the 
qualified facility, the applicable wage rate(s) as determined by the 
U.S. Department of Labor for all classifications of work to be 
performed for the construction, alteration, or repair of the facility, 
that in order to be eligible to claim certain tax benefits, employers 
must ensure that laborers and mechanics are paid wages at rates not 
less than such wage rates, and instructions on how laborers and 
mechanics may contact the taxpayers' personnel departments or 
taxpayers' managers to report suspected failures to pay prevailing 
wages and/or suspected failures to classify workers in accordance with 
applicable wage determinations, employment tax violations, or 
violations of workplace standard laws without retaliation or adverse 
action;

[[Page 53258]]

    (I) Whether laborers and mechanics were given the opportunity to 
acknowledge notice provided by the taxpayer, contractor, or 
subcontractor that in order to be eligible to claim certain tax 
benefits, taxpayers must ensure that laborers and mechanics employed by 
the taxpayer, contractor, or subcontractor in the construction of a 
qualified facility are paid wages at rates not less than prevailing 
wage rates;
    (J) Whether the taxpayer had in place procedures whereby laborers 
and mechanics could report suspected failures to pay prevailing wages 
and/or suspected failures to classify workers in accordance with the 
wage determination of workers, employment tax violations, or violations 
of workplace standard laws to appropriate personnel departments or 
managers without retaliation or adverse action, and whether taxpayer 
investigated such reports by laborers and mechanics and had internal 
controls to prevent failures to pay prevailing wages and classify 
workers in accordance with the wage determination of workers, 
employment tax violations, and violations of workplace standard laws;
    (K) Whether all laborers and mechanics were provided with a written 
notice of the rights conferred by the whistleblower provisions of the 
Taxpayer First Act in section 7623(d);
    (L) Whether all laborers and mechanics were provided with paystubs 
(or access to individual payroll records) reflecting the amount they 
were paid per pay period (including the specific hourly rate and all 
deductions from wages);
    (M) Whether the taxpayer investigated any complaints of retaliation 
or adverse action resulting from, reports of suspected failures to pay 
prevailing wages and/or classify workers in accordance with applicable 
wage determinations, employment tax violations, or violations of 
workplace standard laws and took appropriate actions to remedy any 
retaliation or adverse action and prevent it from reoccurring;
    (N) Whether the taxpayer, contractor, or subcontractor contracted 
with contractors who, at the time the work was performed, was known by 
the taxpayer, contractor, or subcontractor to be debarred by a 
municipality, State, or the U.S. Department of Labor for violations 
related to the underpayment of local, State, or Federal prevailing 
wages; and
    (O) Whether the taxpayer failed to maintain and preserve records in 
accordance with Sec.  1.45-12 sufficient to establish compliance with 
the prevailing wage requirements for relevant tax years.
    (iv) Examples. The provisions of this paragraph (c)(3) are 
illustrated by the following examples, which take into account certain 
facts and circumstances described in paragraph (c)(3)(iii) of this 
section, that are considered in applying the enhanced correction and 
penalty payment requirements in the case of intentional disregard. 
These examples do not take into account any possible application of the 
exception for wages paid before a determination by the U.S. Department 
of Labor under paragraph (c)(5) of this section, or the penalty waiver 
under paragraph (c)(6) of this section. In each example, assume that 
the taxpayer uses the calendar year as the taxpayer's taxable year.
    (A) Example 1. Taxpayer D failed to satisfy the Prevailing Wage 
Requirements with respect to the construction of a qualified facility. 
Taxpayer D did not include contract language that requires the payment 
of prevailing wages in the contract executed with the contractor nor 
did it require similar contract provisions in any subcontracts. 
Taxpayer D did not post in a prominent place at the qualified facility 
or otherwise notify any laborers or mechanics that in order to claim 
certain tax benefits (the increased credit amount described in section 
45(b)(6)(B)(iii)) taxpayers must ensure that laborers and mechanics are 
paid wages at rates not less than prevailing wage rates for 
construction of the qualified facility. Taxpayer D did not have a 
process for laborers and mechanics to report suspected failures to pay 
prevailing wages and/or suspected failures to classify workers in 
accordance with applicable wage determinations. Additionally, Taxpayer 
D did not have a procedure for the review of wages paid to laborers and 
mechanics to ensure that wages at rates not less than the applicable 
prevailing wage rate were paid, nor did Taxpayer D undertake any actual 
review of the wages paid to any laborers or and mechanics employed in 
the construction of the qualified facility. Taxpayer D failed to 
maintain any records documenting wages paid to laborers and mechanics 
in connection with the construction of the facility. Considering all of 
the facts and circumstances, Taxpayer D's failure to satisfy the 
Prevailing Wage Requirements would be considered due to intentional 
disregard for purposes of this paragraph (c)(3) and Taxpayer D would be 
subject to the enhanced correction and penalty payments described in 
paragraph (c)(3)(i) of this section.
    (B) Example 2. Taxpayer E failed to satisfy the Prevailing Wage 
Requirements with respect to the construction of a qualified facility. 
Taxpayer E included contract language that requires the payment of 
prevailing wages in the contract executed with the contractor and 
required similar language be included in all subcontracts. Taxpayer E 
posted in a prominent place at the qualified facility that in order to 
claim tax benefits (that is, the increased credit amount described in 
section 45(b)(6)(B)(iii)) employers must ensure that laborers and 
mechanics are paid wages at rates not less than prevailing wage rates 
for the construction of the qualified facility. Additionally, Taxpayer 
E created procedures for a quarterly review of the applicable 
classifications of laborers and mechanics according to the actual 
duties performed by those laborers and mechanics and the actual wages 
paid to laborers and mechanics. In cases in which reviews found any 
instance that a laborer or mechanic was paid wages at rates less than 
the applicable prevailing wage rates, Taxpayer E promptly cured the 
failure. Considering all of the facts and circumstances, Taxpayer E's 
failure to satisfy the Prevailing Wage Requirements would not be 
considered due to intentional disregard for purposes of this paragraph 
(c)(3) and Taxpayer E would not be subject to the enhanced correction 
and penalty payments described in paragraph (c)(3)(i) of this section. 
Taxpayer E would be subject to the normal correction and penalty 
payments described in paragraph (c)(1)(i) of this section.
    (v) Rebuttable presumption of no intentional disregard. If a 
taxpayer makes the correction and penalty payments required by 
paragraphs (c)(1)(i) and (ii) of this section before receiving notice 
of an examination from the IRS with respect to a claim for the 
increased credit amount under section 45(b)(6), the taxpayer will be 
presumed not to have intentionally disregarded the Prevailing Wage 
Requirements in paragraph (a) of this section. The IRS may rebut this 
presumption based on the relevant facts and circumstances.
    (4) Limitation on the availability of cure--(i) 180-day limit. In 
the case of a final determination by the IRS with respect to any 
failure by the taxpayer to satisfy the Prevailing Wage Requirements in 
paragraph (a) of this section, the cure provision in paragraph (c)(1) 
of this section does not apply unless the correction and penalty 
payments described in paragraphs (c)(1)(i) and (ii) of this section are 
made by the taxpayer on or before the date

[[Page 53259]]

that is 180 days after the date of such determination.
    (ii) Final determination. For purposes of paragraph (c)(4)(i) of 
this section, a final determination occurs on the date the IRS sends to 
the taxpayer a notice stating that the taxpayer has failed to satisfy 
the Prevailing Wage Requirements under paragraph (a) of this section.
    (5) Exception for wages paid before a supplemental wage 
determination or additional classification and wage rate is issued by 
the U.S. Department of Labor Wage and Hour Division. If a taxpayer has 
requested a supplemental wage determination or an additional 
classification and wage rate from the Wage and Hour Division in 
accordance with paragraph (b)(3)(ii) of this section and the Wage and 
Hour Division makes a wage determination or issues an additional 
classification and wage rate determination after the construction, 
alteration, or repair of a qualified facility has started, the taxpayer 
will not be considered to have failed to meet the Prevailing Wage 
Requirements under paragraph (a) of this section with respect to wages 
paid to any mechanic or laborer whose wage rate was subject to the 
request and who was paid below the prevailing wage rate before the 
determination by the Wage and Hour Division if the taxpayer makes a 
payment within 30 days of the determination to each laborer or mechanic 
equal to the difference between the amount of wages paid to such 
laborer or mechanic before the determination and the amount of wages 
required to be paid to such laborer or mechanic pursuant to paragraph 
(a) of this section during such period.
    (6) Waiver of the penalty--(i) Availability of waiver. The penalty 
payment required by paragraph (c)(1)(ii) of this section to cure a 
failure to satisfy the Prevailing Wage Requirements in paragraph (a) of 
this section is waived with respect to a laborer or mechanic employed 
in the construction, alteration, or repair of a qualified facility 
during a calendar year if the taxpayer makes the correction payment 
required by paragraph (c)(1)(i) of this section by the last day of the 
first month that follows the end of the calendar quarter in which the 
failure occurred, and:
    (A) The laborer or mechanic is paid wages at rates less than the 
amount required to be paid under paragraph (b) of this section for not 
more than 10 percent of all pay periods of the calendar year (or part 
thereof) during which the laborer or mechanic was employed in the 
construction, alteration, or repair of the qualified facility; or
    (B) The difference between the amount the laborer or mechanic was 
paid during the calendar year (or part thereof) and the amount required 
to be paid under paragraph (b) of this section is not greater than 5 
percent of the amount required to be paid under paragraph (b) of this 
section.
    (ii) Project labor agreements. The penalty payments required by 
paragraphs (c)(1)(ii) and (c)(3)(i)(B) of this section to cure a 
failure to satisfy the Prevailing Wage Requirements in paragraph (a) of 
this section do not apply with respect to a laborer or mechanic 
employed in the construction, alteration, or repair work of a qualified 
facility if the work is done pursuant to a pre-hire collective 
bargaining agreement with one or more labor organizations that 
establishes the terms and conditions of employment for a specific 
construction project (Qualifying Project Labor Agreement) and any 
correction payment owed to any laborer or mechanic is paid on or before 
the date on which the increased credit amount is claimed under section 
45(b)(6). In order to be considered a Qualifying Project Labor 
Agreement, such agreement must at a minimum:
    (A) Bind all contractors and subcontractors on the construction 
project through the inclusion of appropriate specifications in all 
relevant solicitation provisions and contract documents;
    (B) Contain guarantees against strikes, lockouts, and similar job 
disruptions;
    (C) Set forth effective, prompt, and mutually binding procedures 
for resolving labor disputes arising during the term of the project 
labor agreement;
    (D) Contain provisions to pay wages at rates not less than the 
prevailing rates in accordance with subchapter IV of chapter 31 of 
title 40 of the United States Code;
    (E) Contain provisions for referring and using qualified 
apprentices consistent with section 45(b)(8)(A) through (C) and 
guidance issued thereunder; and
    (F) Be a collective bargaining agreement with one or more labor 
organizations (as defined in 29 U.S.C. 152(5)) of which building and 
construction employees are members, as described in 29 U.S.C. 158(f).
    (iii) Transition Waiver. The penalty payment required by paragraph 
(c)(1)(ii) of this section to cure a failure to satisfy the Prevailing 
Wage Requirements in paragraph (a) of this section is waived with 
respect to a laborer or mechanic who performed work in the 
construction, alteration, or repair of a qualified facility on or after 
January 29, 2023, and prior to June 25, 2024, if the taxpayer relied 
upon Notice 2022-61, 2022-52 I.R.B. 560, or the Proposed Regulations 
(REG-100908-23) (88 FR 60018), corrected in 88 FR 73807 (Oct. 27, 
2023), corrected in 89 FR 25550 (April 11, 2024), to determine when the 
activities of any laborer or mechanic became subject to the Prevailing 
Wage Requirements, and the taxpayer makes the correction payments 
required by paragraph (c)(1)(i) of this section with respect to such 
laborer and mechanics within 180 days of June 25, 2024.
    (iv) Examples. The provisions of this paragraph (c)(6) are 
illustrated by the following examples, which do not take into account 
any possible application of the enhanced correction and penalty payment 
requirements in the case of intentional disregard under paragraph 
(c)(3) of this section or the exception for wages paid before a 
determination by the U.S. Department of Labor under paragraph (c)(5) of 
this section. In each example, assume that the taxpayer uses the 
calendar year as the taxpayer's taxable year.
    (A) Example 1. Taxpayer F starts construction of a qualified 
facility on February 1, 2023. The facility is placed in service on 
October 10, 2023, and Taxpayer F claims the increased credit amount 
under section 45(b)(6)(B)(iii) on its 2023 tax return filed on April 
15, 2024. Taxpayer F employs Laborer Z in the construction of the 
facility for a total of 36 weekly pay periods. Taxpayer F pays Laborer 
Z wages at the prevailing wage rate for all pay periods except for the 
pay periods ending on April 8, April 22, and May 20. Under the 
applicable prevailing wage rate, Laborer Z should have been paid a 
total of $35,000 in 2023, but was instead paid only $30,000. Taxpayer F 
ensures that all other laborers and mechanics employed in the 
construction, alteration, or repair of the facility are paid wages at 
the prevailing wage rate. Taxpayer F becomes aware of the failure on 
June 1, 2023. On June 19, 2023, Taxpayer F pays Laborer Z the 
correction payment required by paragraph (c)(1)(i) of this section. The 
penalty waiver applies to Taxpayer F. Although the difference between 
the amount Laborer Z was paid in 2023 and the amount required to be 
paid under the applicable prevailing wage rate was greater than five 
percent ($5,000/$35,000 = 14.29%), Laborer Z was paid below the 
prevailing wage rate for only three out of 36 pay periods, or 8.3% of 
the applicable pay periods. Furthermore, Taxpayer F made the correction 
payment before the last day of the first month that follows the end

[[Page 53260]]

of the calendar quarter in which the failure occurred.
    (B) Example 2. Taxpayer G starts construction of a qualified 
facility on February 1, 2024. The facility is placed in service on 
October 10, 2024, and Taxpayer G claims the increased credit under 
section 45(b)(6)(B)(iii) on its 2024 tax return filed on April 15, 
2025. Taxpayer G hires Contractor M to assist in the construction, and 
Contractor M employs Laborer Y in the construction of the facility for 
a total of 36 pay periods. Contractor M pays Laborer Y wages at the 
prevailing wage rate for all pay periods except for the pay periods 
ending on February 24 and March 2 of 2024. Under the applicable 
prevailing wage rate, Laborer Y should have been paid a total of 
$50,000 in 2024, but was instead paid only $49,000. All other laborers 
and mechanics employed in the construction, alteration, or repair of 
the facility are paid wages at the prevailing wage rate. Taxpayer G 
learns on January 1, 2025, that Laborer Y was paid wages at rates that 
were less than the prevailing wage rates, and on January 19, 2025, 
Taxpayer G pays Laborer Y the correction payment required by paragraph 
(c)(1)(i) of this section. The penalty waiver does not apply to 
Taxpayer G. Laborer Y was paid wages at rates below the prevailing wage 
rate for two out of 36 pay periods, or 5.5% of the applicable pay 
periods, and the difference between the amount Laborer Y was paid in 
2024 and the amount required to be paid under the applicable prevailing 
wage rate was $1,000, which is only 2% of the amount required to be 
paid under the applicable prevailing wage rate. However, because 
Taxpayer G did not make the correction payments until January 19, 2025, 
which was later than the last day of the first month that followed the 
end of the calendar quarter in which the failure occurred, Taxpayer G 
does not qualify for the penalty waiver. Taxpayer G must pay a penalty 
of $5,000 with respect to the failure.
    (C) Example 3. Taxpayer H starts the construction of a qualified 
facility on April 8, 2024. The facility is placed in service on 
December 1, 2024, and Taxpayer H claims the increased credit amount 
under section 45(b)(6)(B)(iii) on its 2024 tax return filed on April 
15, 2025. Taxpayer H employs Laborer X in the construction of the 
facility for a total of 34 pay periods. Due to a failure to classify 
workers in accordance with the wage determination, Taxpayer H pays 
Laborer X wages at rates below the prevailing wage rates for the first 
12 pay periods. Under the applicable prevailing wage rate, Laborer X 
should have been paid $20,000 during those 12 pay periods, but was 
instead paid only $17,000. All other laborers and mechanics employed in 
the construction, alteration, or repair of the facility were paid wages 
at the prevailing wage rates. Taxpayer H becomes aware of the failure 
on July 15, 2024, and on July 30, 2024, Taxpayer H pays Laborer X the 
correction payments required by paragraph (c)(1)(i) of this section. 
For the 22 pay periods from July 1, 2024, through December 1, 2024, 
Taxpayer H pays Laborer X the correct prevailing wage rate in amounts 
that total $41,000. The penalty waiver applies to Taxpayer H. Taxpayer 
H made the correction payment on July 30, 2024, which was before the 
last day of the first month that followed the end of the quarter in 
which the failures occurred. Although Laborer X was paid wages at a 
rate below the prevailing wage rate for 35% (12 pay periods with 
underpayments/34 total pay periods) of the applicable pay periods, the 
difference between the total amount Laborer X was paid in 2024 and the 
amount required to be paid under the applicable prevailing wage rate 
was $3,000, which is only 4.9% of the total amount required to be paid 
to Laborer X under the applicable prevailing wage rate ($3,000/
$61,000).
    (D) Example 4. Taxpayer I begins construction of a qualified 
facility on August 29, 2024. The facility is placed in service on June 
30, 2025, and Taxpayer I claims the increased credit amount under 
section 45(b)(6)(B)(iii) on its 2025 tax return. Taxpayer I employs 
Laborer W in the construction of the facility for a total of 25 weekly 
pay periods in 2025. Taxpayer I pays Laborer W wages at or above the 
prevailing wage rate for all pay periods except for the pay periods 
ending on April 12, May 10, and June 14. Under the applicable 
prevailing wage rate, Laborer W should have been paid $25,000 in 2025, 
but was instead paid only $20,000. Taxpayer I ensures that all other 
laborers and mechanics employed in the construction, alteration, or 
repair of the facility are paid at the prevailing wage rate. Taxpayer I 
has in place a pre-hire collective bargaining agreement, but the 
agreement does not contain a provision for referring and using 
qualified apprentices. Taxpayer I becomes aware of the failure to pay 
Laborer W at the prevailing wage rate on June 30, 2025, and on July 4, 
2025, Taxpayer I pays Laborer W the correction payment required by 
paragraph (c)(1)(i) of this section. The penalty waiver does not apply 
to Taxpayer I. The difference between the amount Laborer W was paid in 
2025 and the amount required to be paid under the applicable prevailing 
wage rate was $5,000, which is 20% of the amount required to be paid 
under the applicable prevailing wage rate. Laborer W was paid below the 
prevailing wage rate for three out of 25 pay periods, or 12% of the 
applicable pay periods. Taxpayer I does not have in place a Qualifying 
Project Labor Agreement because the pre-hire collective bargaining 
agreement does not contain a provision for referring and using 
qualified apprentices as required by paragraph (c)(6)(ii)(E) of this 
section.
    (E) Example 5. Taxpayer J intends to construct a qualified facility 
and claim the increased credit amount under section 45(b)(6)(B)(iii). 
Taxpayer J executes a contract for the construction of the facility and 
engages in construction activities as defined in paragraph (d)(3) of 
this section starting August 1, 2023. Taxpayer J began construction as 
of September 1, 2023, pursuant to the Physical Work Test in Notice 
2022-61. During the period of August 1 to September 1 of 2023, Taxpayer 
J paid all laborers and mechanics wages at rates below the applicable 
prevailing wage rates in reliance on Notice 2022-61 regarding when 
construction began for purposes of satisfying the requirements of 
section 45(b)(7). After September 1, 2023, Taxpayer J paid all laborers 
and mechanics wages at the prevailing wage rate for the appropriate 
classification for work performed on the facility. Within 180 days of 
June 25, 2024, Taxpayer J makes correction payments to all affected 
laborers and mechanics for the period of August 1, 2023. to September 
1, 2023, equal to the amount described in paragraph (c)(1)(i) of this 
section. Pursuant to paragraph (c)(6)(iii) of this section, the penalty 
under paragraph (c)(1)(ii) of this section is waived.
    (d) Definitions. Solely for purposes of this section, the following 
definitions apply:
    (1) Apprentice. The term apprentice has the same meaning as 
qualified apprentice in Sec.  1.45-8(g)(8).
    (2) Bona fide fringe benefits. The term bona fide fringe benefits 
means fringe benefits described in 29 CFR part 5. Bona fide fringe 
benefits include medical or hospital care, pensions on retirement or 
death, compensation for injuries or illness resulting from occupational 
activity, or insurance to provide any of the foregoing; unemployment 
benefits; life insurance, disability insurance, sickness insurance, or 
accident insurance; vacation or holiday pay; defraying costs of 
apprenticeship or other similar programs; or other bona fide fringe 
benefits (each as described in 29 CFR

[[Page 53261]]

part 5 and other U.S. Department of Labor guidance). Consistent with 29 
CFR 5.29, bona fide fringe benefits do not include benefits required by 
other Federal, State, or local law.
    (3) Construction, alteration, or repair. The term construction, 
alteration, or repair generally means those activities, described in 29 
CFR 5.2 as being construction, prosecution, completion, or repair that 
are performed with respect to a qualified facility as defined under 
section 45. Construction, alteration, or repair does not include any 
activities that are excluded from the requirement to pay prevailing 
wages under the definitions described in 29 CFR 5.2. Repair work 
normally includes an activity that improves the facility, either by 
fixing something that is not functioning properly or by improving upon 
the facility's existing condition; involves the correction of 
individual problems or defects as separate and segregable incidents and 
is not continuous or recurring; or improves the facility's structural 
strength, stability, safety, capacity, efficiency, or usefulness. 
Construction, alteration, or repair does not include work that is 
ordinary and regular in nature that is designed to maintain and 
preserve existing functionalities of a facility after it is placed in 
service. Work designed to maintain and preserve functionality of a 
facility after it is placed in service includes basic maintenance such 
as regular inspections of the facility, regular cleaning and janitorial 
work, regular replacement of materials with limited lifespans such as 
filters and light bulbs, and the regular calibration of equipment. 
However, such work that occurs before the facility is placed in service 
may constitute construction for which prevailing wages must be paid in 
order to claim the increased credit amount. Maintenance generally 
includes work that is needed to keep the facility in its current 
condition so that it may continue to be used and work that does not 
improve the current condition or function of a facility. Maintenance is 
routinely scheduled and continuous or recurring. Ultimately, the 
determination of whether an activity can be categorized as 
construction, alteration, or repair is dependent on the facts and 
circumstances. This definition has no bearing on any other sections of 
the Code, including any determination of construction, alteration, 
repair, or maintenance under sections 162 or 263 of the Code, unless 
specified otherwise in the Code or in this chapter.
    (4) Contractor. The term contractor means any person that enters 
into a contract directly with the taxpayer (or the taxpayer's designee, 
assignee, or agent) for the construction, alteration, or repair of a 
qualified facility.
    (5) Employed. The term employed means performing the duties of a 
laborer or mechanic for the taxpayer, contractor, or subcontractor (as 
applicable), regardless of whether the individual would be 
characterized as an employee or an independent contractor for other 
Federal tax purposes.
    (6) General wage determination. The term general wage determination 
means a wage determination issued by the U.S. Department of Labor and 
published on the approved website. A general wage determination 
provides the minimum hourly wage rates (both the basic hourly rate of 
pay and bona fide fringe benefit rates) that the U.S. Department of 
Labor has determined are prevailing for laborers and mechanics in 
specified types of construction in a given geographic area.
    (7) Geographic area and locality. The terms geographic area and 
locality mean the county, independent city, or other civil subdivision 
of the State in which a qualified facility is located. The terms 
geographic area and locality also include areas located offshore of the 
United States and within the outer continental shelf of the United 
States and the U.S. territories. If construction, alteration, or repair 
work is performed in multiple counties, independent cities, or other 
civil subdivisions, the geographic area may include all counties, 
independent cities, or other civil subdivisions in which the work will 
be performed. The locality in which a facility is located is defined as 
the physical place or places where the facility will be placed in 
service and remain. The locality of the facility also includes 
secondary locations where a significant portion of the facility is 
constructed, altered, or repaired provided that such construction is 
for specific use at that facility and does not simply reflect the 
manufacture or construction of a product made available to the general 
public, and provided further that the site is either established 
specifically for, or dedicated exclusively for a specific period of 
time to, the construction, alteration, or repair of the facility. A 
significant portion means one or more entire portion(s) or module(s) of 
the facility, such as a completed room or structure, with minimal 
construction work remaining other than the installation and/or final 
assembly of the portions or modules at the place where the facility 
will be placed in service and remain. A significant portion does not 
include materials or prefabricated component parts delivered to the 
location of a facility. A specific period of time means a period of 
weeks, months, or more, and does not include circumstances in which a 
site at which multiple facilities are in progress is shifted 
exclusively to a single facility for a few hours or days in order to 
meet a deadline. The locality of the facility also includes any 
adjacent or virtually adjacent dedicated support sites, including job 
headquarters, tool yards, batch plants, borrow pits, and similar 
facilities of a taxpayer, contractor, or subcontractor that are 
established specifically for or dedicated exclusively to the 
construction, alteration, or repair of the facility, and adjacent or 
virtually adjacent to either a primary construction site or a secondary 
construction site.
    (8) Laborer and mechanic--(i) In general. The terms laborer and 
mechanic mean those individuals whose duties are manual or physical in 
nature (including those individuals who use tools or who are performing 
the work of a trade). The terms laborer and mechanic include 
apprentices and helpers. The terms do not apply to individuals whose 
duties are primarily administrative, executive, or clerical, rather 
than manual. Persons employed in a bona fide executive, administrative, 
or professional capacity as defined in 29 CFR part 541 are not deemed 
to be laborers or mechanics. Working forepersons who devote more than 
20 percent of their time during a workweek to laborer or mechanic 
duties, and who do not meet the criteria for exemption of 29 CFR part 
541, are considered laborers and mechanics for the time spent 
conducting laborer and mechanic duties.
    (ii) Examples--(A) Individual working in professional capacity. 
Taxpayer hires an architect (Architect) to design a qualified facility 
and general layout of the site including access roads and ancillary 
buildings to support the facility. Taxpayer engages a general 
contractor (Contractor) to construct the qualified facility based on 
the drafting plans of Architect. Contractor hires an electrical 
engineer (Engineer) to assist Architect and Contractor with design and 
placement of the electrical systems necessary to support the qualified 
facility. Engineer oversees and inspects construction of the electrical 
systems to ensure the systems conform to the facility's specifications 
and Architect's drafting plans. Architect and Engineer do not perform 
any actual duties of a laborer or mechanic during their employment with 
Taxpayer and Contractor. Architect and Engineer are working in a 
professional capacity as defined under 29 CFR part 541 and are exempt 
employees under the DBA. Architect and Engineer are not

[[Page 53262]]

considered laborers and mechanics for the duration of their employment 
for purposes of this section and Taxpayer does not need to ensure they 
are paid wages at rates not less than the prevailing wage rates for 
purposes of claiming the increased credit amount under section 
45(b)(6)(B)(iii).
    (B) Working foreperson. A supervisory employee who is a working 
foreperson (Foreperson) spends 60% of the time during the workweek (24 
hours of a 40 hour workweek) performing administrative functions such 
as preparing timecards, supervising work on the qualified facility and 
arranging for deliveries. Foreperson spends the remaining 40% (16 
hours) of the time performing the duties of an electrician with respect 
to construction of a qualified facility. Because Foreperson devoted 
more than 20% of their time during the workweek to laborer or mechanic 
duties, Foreperson must be paid wages at rates not less than the 
electrician's applicable prevailing wage rate for the 16 hours spent 
doing the duties of an electrician for purposes of the Prevailing Wage 
Requirements.
    (9) Subcontractor. The term subcontractor means any person that 
enters into a contract with a contractor for the construction, 
alteration, or repair of a qualified facility. The term subcontractor 
also includes any person that agrees to perform or be responsible for 
the performance of any part of a contract entered into between the 
taxpayer (or the taxpayer's designee, assignee, or agent) and a 
contractor (or between a contractor and another subcontractor) with 
respect to the construction, alteration, or repair of a qualified 
facility.
    (10) Taxpayer. The term taxpayer means any taxpayer as defined in 
section 7701(a)(14), including applicable entities described in section 
6417(d)(1)(A). In the case of a credit transferred under section 6418, 
the term taxpayer means the eligible taxpayer that determines the 
eligible credit to be transferred and makes a transfer election under 
section 6418 to transfer any specified credit portion (including 100 
percent) of an eligible credit determined with respect to any eligible 
credit property of such eligible taxpayer for any taxable year.
    (11) Type of construction. The type of construction is the general 
category of construction as established by the U.S. Department of Labor 
for the publication of general wage determinations as defined in 29 CFR 
1.2.
    (12) Wages. The term wages generally means wages as defined in 29 
CFR 5.2. In general, wages means the basic hourly rate of pay; any 
contribution irrevocably made by a taxpayer, contractor, or 
subcontractor to a trustee or to a third person pursuant to a bona fide 
fringe benefit fund, plan, or program; and the rate of costs to the 
taxpayer, contractor, or subcontractor that may be reasonably 
anticipated in providing bona fide fringe benefits to laborers and 
mechanics pursuant to an enforceable commitment to carry out a 
financially responsible plan or program, provided the commitment was 
communicated in writing to the laborers and mechanics affected. Whether 
amounts are wages for prevailing wage purposes is not relevant in 
determining whether amounts are wages or compensation for other Federal 
tax purposes.
    (e) Applicability date. This section applies to qualified 
facilities placed in service in taxable years ending after June 25, 
2024, and the construction of which begins after June 25, 2024. 
Taxpayers may apply this section to qualified facilities placed in 
service in taxable years ending on or before June 25, 2024, and 
qualified facilities placed in service in taxable years ending after 
June 25, 2024, the construction of which begins before June 25, 2024, 
provided that taxpayers follow this section in its entirety and in a 
consistent manner.


Sec.  1.45-8  Apprenticeship requirements.

    (a) Apprenticeship requirements--(1) In general. Except as provided 
in paragraphs (a)(2) and (f) of this section, a taxpayer claiming or 
transferring (under section 6418) the increased credit amount under 
section 45(b)(6)(B)(iii) with respect to any qualified facility must 
satisfy the requirements of section 45(b)(8) and this section with 
respect to the construction of such facility (Apprenticeship 
Requirements). The taxpayer is solely responsible for ensuring that the 
Apprenticeship Requirements are satisfied. See paragraph (g) of this 
section for definitions of terms used in this section.
    (2) Transition relief. Taxpayers are excepted from the 
Apprenticeship Requirements with respect to any activities that would 
be considered construction, alteration, or repair of the qualified 
facility and that occurred prior to January 29, 2023.
    (b) Labor hours requirement--(1) Percentage of total labor hours. A 
taxpayer claiming or transferring (under section 6418) the increased 
credit amount under section 45(b)(6) must ensure that qualified 
apprentices (hired by the taxpayer, contractor, or subcontractor) 
perform not less than the applicable percentage of the total labor 
hours of the construction, alteration, or repair work (including work 
performed by any contractor or subcontractor) with respect to any 
qualified facility prior to the facility being placed in service, 
subject to the apprentice-to-journeyworker ratio described in paragraph 
(c) of this section. The percentage of total labor hours is calculated 
on a per qualified facility basis, aggregating all hours worked by all 
laborers and mechanics (including the hours of qualified apprentices) 
during construction of the facility and dividing the total hours work 
by all laborers and mechanics by the hours of the qualified 
apprentices.
    (2) Applicable percentage. For purposes of paragraph (b)(1) of this 
section, and subject to paragraph (b)(3) of this section, the 
applicable percentage is--
    (i) 10 percent in the case of a qualified facility, the 
construction of which begins before January 1, 2023;
    (ii) 12.5 percent in the case of a qualified facility, the 
construction of which begins after December 31, 2022, and before 
January 1, 2024; and
    (iii) 15 percent in the case of a qualified facility, the 
construction of which begins after December 31, 2023.
    (3) Transition rule. Taxpayers may apply the rules set forth in 
Notice 2022-61, 2022-52 I.R.B. 560, or these regulations for 
determining when construction began for purposes of the applicable 
percentage of labor hours performed by qualified apprentices required 
under section 45(b)(8)(A) and paragraph (b)(2) of this section.
    (c) Ratio requirement--(1) In general. The labor hours requirement 
under paragraph (b) of this section is subject to any applicable 
requirements for apprentice-to-journeyworker ratios of the U.S. 
Department of Labor or the applicable State apprenticeship agency.
    (2) Ratio. The allowable ratio of apprentices to journeyworkers on 
the job site in any occupation and its corresponding classification on 
any day must comply with the applicable apprentice-to-journeyworker 
ratio of the registered apprenticeship program in accordance with 29 
CFR part 29. If a taxpayer, contractor, or subcontractor is performing 
construction, alteration, or repair work on a qualified facility in a 
geographic area other than the geographic area in which an 
apprenticeship program is registered, the taxpayer, contractor, or 
subcontractor must comply with the apprentice-to-journeyworker ratios 
applicable within the geographic area in which the construction, 
alteration, or repair work is being performed. If there is no 
applicable ratio for the geographic area of the qualified facility, the 
ratio

[[Page 53263]]

specified in the registered apprenticeship program standard must be 
observed.
    (3) Failure to meet ratio requirements. For purposes of section 
45(b)(8)(B) and paragraph (b) of this section, if on any day the ratio 
of apprentices to journeyworkers exceeds the ratio established in 
accordance with paragraph (c)(2) of this section, subject to the 
requirements of the registered apprenticeship program, the labor hours 
performed by any qualified apprentice in excess of the ratio may not be 
counted as hours performed by qualified apprentices for purposes of the 
labor hours requirement. The hours devoted to the performance of 
construction, alteration, or repair work by any qualified apprentice in 
excess of the ratio will be counted towards the total labor hours, but 
will not be counted as hours performed by qualified apprentices for 
purposes of the labor hours requirement under paragraph (b) of this 
section.
    (d) Participation requirement. Each taxpayer, contractor, or 
subcontractor who employs four or more individuals to perform 
construction, alteration, or repair work with respect to the 
construction of a qualified facility must employ one or more qualified 
apprentices to perform work with respect to the construction, 
alteration, or repair of the qualified facility prior to the facility 
being placed in service. The participation requirement applies if a 
taxpayer, contractor, or subcontractor employs four or more individuals 
in the construction of the qualified facility over the entire course of 
the construction, regardless of whether they are employed at the same 
location or at the same time.
    (e) Examples. The provisions of paragraphs (b) through (d) of this 
section are illustrated by the following examples. For purposes of the 
following examples, assume that each taxpayer has a calendar year 
taxable year.
    (i) Example 1. Taxpayer A starts construction of a qualified 
facility on April 1, 2023. Accordingly, Taxpayer A must ensure that at 
least 12.5% of the total labor hours are performed by qualified 
apprentices. The facility is placed in service on April 1, 2025, and 
Taxpayer A claims the increased credit amount under section 
45(b)(6)(B)(iii) on its 2025 tax return. A total of eight individuals 
performed construction, alteration, or repair work during the 
construction of the facility, all of whom were employed directly by 
Taxpayer A. Taxpayer A employed four journeyworkers and no qualified 
apprentices from April 1, 2023 through October 31, 2024. Taxpayer A 
hired four qualified apprentices and retained three journeyworkers to 
perform construction on the facility for the period of November 1, 2024 
through March 31, 2025. The registered apprenticeship program from 
which Taxpayer A requested the apprentices required a ratio of one 
journeyworker for every apprentice. In the first year of construction, 
a total of 10,000 labor hours were performed on construction, 
alteration, or repair work of the facility, with each journeyworker 
working 2,500 hours. In the second year of construction, 7,000 labor 
hours were performed on construction, alteration, or repair work of the 
facility, with each qualified apprentice and journeyworker working 
1,000 hours during this time. On each day of work during the second 
year of construction, the three journeyworkers oversaw the work of the 
four qualified apprentices. A total of 17,000 labor hours were spent on 
the construction, alteration, or repair work of the facility, requiring 
that 2,125 labor hours be performed by qualified apprentices. Only 
3,000 labor hours performed by qualified apprentices count towards the 
labor hours requirement because the ratio requirement was only 
satisfied with respect to the work of three qualified apprentices. 
Taxpayer A satisfied the labor hours requirement under paragraph (b)(2) 
of this section because more than 12.5% (3,000 qualified apprentice 
hours/17,000 total labor hours = 17.6%) of the total labor hours were 
performed by qualified apprentices. Taxpayer A was also subject to the 
participation requirement because four or more individuals employed by 
Taxpayer A performed construction work on the facility. Taxpayer A 
satisfied the participation requirement because Taxpayer A hired at 
least one qualified apprentice to perform construction, alteration, or 
repair with respect to the facility.
    (ii) Example 2. Taxpayer B intends to construct a qualified 
facility to claim the increased credit amount under section 
45(b)(6)(B)(iii) and executes a contract for the construction of the 
facility. On December 31, 2023, Taxpayer B expends sufficient funds to 
meet the 5 Percent Safe Harbor for beginning of construction in 
reliance on Notice 2022-61. Construction activities as defined in 
paragraph (d)(3) of this section start on January 1, 2024. In reliance 
on Notice 2022-61, Taxpayer B employs qualified apprentices for 12.5% 
of the total construction hours to complete the qualified facility. 
Because Taxpayer B applies the 12.5% applicable percentage in reliance 
on Notice 2022-61 for construction beginning before January 1, 2024, 
but after December 31, 2022, Taxpayer B has satisfied the Labor Hours 
Requirement, assuming all other provisions of the Labor Hours 
Requirement are also satisfied.
    (iii) Example 3. Taxpayer C starts construction of a qualified 
facility on April 1, 2023, and complies with the Labor Hours 
Requirement, the Ratio Requirement, and the Participation Requirement 
with respect to the construction of the facility before it is placed in 
service on April 1, 2025. Taxpayer C claims the increased credit amount 
under section 45(b)(6)(B)(iii) on its 2025 tax return. The qualified 
facility was repaired from September 1, 2025, through October 31, 2025. 
No qualified apprentices were employed for the repairs. Taxpayer C did 
not fail the Apprenticeship Requirements because the Apprenticeship 
Requirements do not apply after the qualified facility is placed in 
service.
    (iv) Example 4. Taxpayer D starts construction of a qualified 
facility on April 1, 2023. Accordingly, Taxpayer D must ensure that at 
least 12.5% of the total labor hours are performed by qualified 
apprentices. The facility is placed in service on April 1, 2025, and 
Taxpayer D claims the increased credit amount under section 
45(b)(6)(B)(iii) on its 2025 tax return. Taxpayer D employed 12 
individuals to perform the construction, alteration, and repair work on 
the qualified facility. Taxpayer D is subject to the participation 
requirement. For the first year of construction, a total of 25,000 
labor hours were performed on the construction, alteration, or repair 
of the facility, 3,000 of which were performed by qualified 
apprentices. For the second year of construction, an additional 25,000 
labor hours were performed on the construction, alteration, or repair 
of the facility, 3,250 of which were performed by qualified 
apprentices. The ratio requirement was satisfied for all labor hours 
performed by qualified apprentices. Taxpayer D has satisfied the labor 
hours requirement because 12.5% (6,250 labor hours divided by 50,000 
labor hours) of the total labor hours were performed by qualified 
apprentices.
    (v) Example 5. Taxpayer E starts construction of a qualified 
facility on January 1, 2024. Accordingly, Taxpayer E must ensure that 
at least 15% of the total labor hours are performed by qualified 
apprentices. The facility is placed in service on June 1, 2026. 
Taxpayer E claims the increased credit amount under section 
45(b)(6)(B)(iii) on its 2026 tax return. All individuals who performed 
the construction, alteration,

[[Page 53264]]

or repair work were employed directly by Taxpayer E. A total of 50,000 
labor hours were spent on the construction, alteration, or repair work 
of the facility, 7,000 of which were performed by qualified apprentices 
and the ratio requirement was met for all 7,000 labor hours. Qualified 
apprentices also spent 500 hours in classroom training at a location 
other than the location of the qualified facility in preparation for 
the performance of construction, alteration, or repair work at the 
qualified facility. Taxpayer E did not satisfy the labor hours 
requirement under paragraph (b)(2) of this section because less than 
15% of the total labor hours were performed by qualified apprentices. 
The hours spent on classroom training at a location other than the 
location of the qualified facility in preparation for the construction, 
alteration, or repair of the facility are not considered labor hours 
performed by qualified apprentices.
    (f) Exceptions to the apprenticeship requirements. If a taxpayer 
fails to satisfy the Apprenticeship Requirements in paragraph (a) of 
this section with respect to the construction, alteration, or repair of 
any qualified facility prior to the facility being placed in service, 
the taxpayer will nonetheless be deemed to have satisfied the 
Apprenticeship Requirements if the taxpayer has made a good faith 
effort to meet the Apprenticeship Requirements as described in 
paragraph (f)(1) of this section (Good Faith Effort Exception) or made 
the penalty payment provided in paragraph (f)(2) of this section 
(Apprenticeship Cure Provision) for any failures to which the Good 
Faith Effort Exception does not apply.
    (1) Good faith effort exception--(i) In general. A taxpayer is 
deemed to have satisfied the Apprenticeship Requirements of this 
section with respect to a request for qualified apprentices if the 
taxpayer meets the following requirements:
    (A) Request for qualified apprentices. The taxpayer, contractor, or 
subcontractor must submit a written request for qualified apprentices 
to at least one registered apprenticeship program that has a geographic 
area of operation that includes the location of the qualified facility; 
trains qualified apprentices in the occupation(s) needed to perform 
construction, alteration, or repair with respect to the facility; and 
has a usual and customary business practice of entering into agreements 
with employers for the placement of qualified apprentices in the 
occupation for which they are training, consistent with the standards 
and requirements set forth in 29 CFR parts 29 and 30, and any 
subsequent guidance issued by the Department of Labor. Such request 
must be in writing and sent electronically or by registered mail. The 
initial request to a registered apprenticeship program for qualified 
apprentices must be made no later than 45 days before the qualified 
apprentices are requested to start work. Any subsequent requests for 
qualified apprentices made to the same registered apprenticeship 
program after the initial request must be made no later than 14 days 
before the qualified apprentices are requested to start work. If there 
is no registered apprenticeship program that has a geographic area of 
operation that includes the location of the qualified facility; trains 
qualified apprentices in the occupation(s) needed to perform 
construction, alteration, or repair with respect to the facility; and 
has a usual and customary business practice of entering into agreements 
with employers for the placement of qualified apprentices in the 
occupation for which they are training, consistent with the standards 
and requirements set forth in 29 CFR parts 29 and 30, and any 
subsequent guidance issued by the Department of Labor, the taxpayer 
will be deemed to satisfy the Good Faith Effort Exception with respect 
to the qualified apprentices that the taxpayer, contractor, or 
subcontractor would have requested.
    (1) Content of valid request. The request of the taxpayer, 
contractor, or subcontractor must include the proposed dates of 
employment, occupation of qualified apprentices needed, location of the 
work to be performed, number of qualified apprentices needed, the 
number of labor hours expected to be performed by the qualified 
apprentices, and the name and contact information of the taxpayer, 
contractor, or subcontractor requesting employment of qualified 
apprentices from the registered apprenticeship program. Reasonable 
estimates of the foregoing information are permissible. The request 
must also state that the request for qualified apprentices is made with 
an intent to employ qualified apprentices in the occupation for which 
they are being trained and in accordance with the requirements and 
standards of the registered apprenticeship program and to employ 
qualified apprentices consistent with the expected number of hours and 
dates of employment specified in the request. If the employer of the 
requested qualified apprentices is not the same as the taxpayer, 
contractor, or subcontractor submitting the request for qualified 
apprentices, then the request must include the name of the employer.
    (2) Duration of request. If the taxpayer, contractor, or 
subcontractor submits a request in accordance with paragraph 
(f)(1)(i)(A) of this section and the request is denied or not responded 
to, the taxpayer will be deemed to have exercised a Good Faith Effort 
with respect to the request for the period described in the request but 
not exceeding 365 days (366 days in case of a leap year). For requests 
that are denied or not responded to and include a period of employment 
for qualified apprentices that exceeds 365 days (366 days in case of a 
leap year), the taxpayer, contractor, or subcontractor must submit one 
or more additional requests with respect to the period of such request 
in excess of 365 days (366 days in case of a leap year). The taxpayer 
will not be deemed to have exercised a Good Faith Effort beyond 365 
days (366 days in case of a leap year) of a previously denied request 
unless the taxpayer submits an additional request. There is no limit on 
the number of requests a taxpayer, contractor, or subcontractor may 
submit to one or more registered apprenticeship programs for purposes 
of the Good Faith Effort Exception and the taxpayer, contractor, or 
subcontractor is not required to make subsequent requests to the same 
registered apprenticeship program in order to qualify for the Good 
Faith Effort Exception. The 365 day (366 days in case of a leap year) 
duration of requests for qualified apprentices also applies in 
circumstances in which there is no registered apprenticeship program 
with a geographic area of operation that includes the location of the 
facility at the time a taxpayer, contractor, or subcontractor attempts 
to requests qualified apprentices from a registered apprenticeship 
program.
    (B) Denial of request. If a taxpayer, contractor, or subcontractor 
submits a request in accordance with paragraph (f)(1)(i)(A) of this 
section and the request is denied (including after an initial 
acceptance and before the scheduled qualified apprentice work starts), 
the taxpayer will be deemed to satisfy the requirements of section 
45(b)(8)(A) through (C), and paragraphs (b) through (d) of this 
section, provided that such denial is not the result of a refusal by 
the taxpayer or any contractors or subcontractors engaged in the 
performance of construction, alteration, or repair work with respect to 
such qualified facility to comply with the established standards and 
requirements of the registered apprenticeship program. The denial of a 
request is only valid for purposes of establishing a Good Faith Effort 
with respect to the portion(s) of the request that were denied. In the 
case of a partial

[[Page 53265]]

denial, a taxpayer, contractor, or subcontractor must accept the 
qualified apprentices offered in response to the request to satisfy the 
Good Faith Effort with respect to the portion of the request that was 
denied. If a request is partially denied, the qualified apprentice 
labor hours specified in the request that were denied that qualify for 
the Good Faith Effort Exception are considered to be labor hours 
performed by qualified apprentices. Subject to the requirements of 
paragraph (f)(1)(i)(A)(2) of this section, the taxpayer, contractor, or 
subcontractor does not need to follow up with the registered 
apprenticeship program after the initial request or after the receipt 
of a non-substantive response. The date on which a registered 
apprenticeship program received a request for qualified apprentices is 
determined by the date the electronic request is sent to the registered 
apprenticeship program or the date of delivery shown on a receipt from 
the registered mail delivery.
    (C) Response to a valid request. A response to a valid request for 
qualified apprentices is a substantive written reply to the request 
that agrees, in whole or in part, to the specific requirements in the 
taxpayer's, contractor's, or subcontractor's request. If the registered 
apprenticeship program fails to provide a response to a request 
submitted in accordance with paragraph (f)(1)(i)(A) of this section 
within five business days after the date on which such registered 
apprenticeship program received the taxpayer's (or its contractor or 
subcontractor) request, then such request is deemed to be denied.
    (D) Employer sponsored apprenticeship programs. A taxpayer, 
contractor, or subcontractor that sponsors one or more internal 
registered apprenticeship programs and that is unable to employ a 
sufficient number of qualified apprentices through such programs to 
meet the Apprenticeship Requirements must submit a request for 
qualified apprentices to at least one registered apprenticeship program 
that it does not sponsor in order to satisfy the Good Faith Effort 
Exception.
    (ii) Examples. The provisions of this paragraph (f)(1) are 
illustrated by the following examples.
    (A) Example 1. Taxpayer F submits a request to a registered 
apprenticeship program by email. The registered apprenticeship program 
responds three days later indicating that it has qualified apprentices 
ready to start work, but the reply email from the registered 
apprenticeship program is automatically forwarded to Taxpayer F's spam 
or junk mail folder, and Taxpayer F does not see the email response. 
Taxpayer F would not qualify for the Good Faith Effort Exception with 
respect to this request because the registered apprenticeship program 
provided a substantive reply to the request that agreed to the specific 
requirements in Taxpayer F's request within five business days.
    (B) Example 2. Contractor G submits a request for qualified 
apprentices from a registered apprenticeship program with an area of 
operation outside of the geographic area of the qualified facility. 
Contractor G's request is denied because the registered apprenticeship 
program does not operate in the geographic area where the qualified 
facility is located. Contractor G's request would not qualify for the 
Good Faith Effort Exception because the registered apprenticeship 
program does not have a geographic area of operation that includes the 
location of the qualified facility.
    (C) Example 3. Contractor H submits a request for qualified 
apprentices to a registered apprenticeship program. Under its 
established standards and requirements, the registered apprenticeship 
program requires contractors to enter into an agreement to partner with 
that registered apprenticeship program. Contactor H refuses to enter 
into the agreement, and as a result, the registered apprenticeship 
program denies Contractor H's request for qualified apprentices. The 
requirement to enter into the agreement to partner with the registered 
apprenticeship program applies to all employers who request apprentices 
from the registered apprenticeship program. Neither the Department of 
Labor nor a recognized State apprenticeship agency has found the 
requirement to enter into such an agreement to be contrary to 
Department of Labor guidance regarding the administration of registered 
apprenticeship programs. Contractor H's request would not qualify for 
the Good Faith Effort Exception because Contractor H refused to comply 
with the established standards and requirements of the registered 
apprenticeship program.
    (D) Example 4. Contractor I submits a request for qualified 
apprentices from a registered apprenticeship program on November 15, 
2024. Contractor I's request states that it seeks to employ four 
qualified apprentices for the period starting on January 2, 2025, and 
ending June 30, 2025, for a total of 4,160 hours (1,040 hours x four 
qualified apprentices). On November 18, 2024, the registered 
apprenticeship program informs Contractor I that it can supply four 
qualified apprentices for the requested time period. On December 29, 
2024, the registered apprenticeship program informs Contractor I that 
it is only able to supply two of the four qualified apprentices. 
Contractor I does not submit any additional requests for qualified 
apprentices from a registered apprenticeship program. Contractor I's 
request would qualify for the Good Faith Effort Exception for 2,080 
hours (1,040 hours for each of the two requested qualified apprentices 
that were denied after the request was initially accepted), provided 
Contractor I accepted the two qualified apprentices that were offered 
for the requested period.
    (E) Example 5. Contractor J submits a written request for qualified 
apprentices from a registered apprenticeship program on June 1, 2025. 
Contractor J's request states that it seeks to employ three qualified 
apprentices for a period starting September 1, 2025, and ending 
December 31, 2026. The registered apprenticeship program denies the 
request on June 2, 2025. Contractor J's request satisfies the Good 
Faith Effort Exception with respect to the three qualified apprentices 
that were denied for the period beginning September 1, 2025, and ending 
August 31, 2026. Contractor J's request does not satisfy the Good Faith 
Effort Exception with respect to the period beginning September 1, 
2026, and ending December 31, 2026, because that is the portion of the 
denied request that exceeded 365 days (366 days in case of a leap year) 
and Contractor J did not submit an additional valid request for that 
period.
    (2) Apprenticeship cure provision--(i) In general. A taxpayer that 
fails to satisfy the Apprenticeship Requirements in paragraph (a) of 
this section with respect to the construction, alteration, or repair of 
any qualified facility prior to the facility being placed in service, 
will be deemed to satisfy the Apprenticeship Requirements if the 
taxpayer pays the IRS a penalty equal to $50 multiplied by the total 
labor hours for which the requirements described in paragraph (b) or 
(d) of this section were not satisfied with respect to the 
construction, alteration, or repair work on such qualified facility.
    (A) Total labor hours for which the labor hours requirement is not 
met. For failures to meet the percentage of total labor hours 
requirement in paragraph (b)(1) of this section, the total labor hours 
for which the requirement was not satisfied is calculated as the 
difference between the total labor hours performed by qualified 
apprentices that would be required to meet the applicable percentage 
under paragraph (b)(2) of this section and the sum of the labor hours 
actually worked by all

[[Page 53266]]

qualified apprentices consistent with the applicable ratio of 
apprentices to journeyworkers and the hours qualifying for the Good 
Faith Effort exception.
    (B) Total labor hours for which the participation requirement is 
not met. For failures to meet the participation requirement in 
paragraph (d) of this section, the total labor hours for which the 
requirement was not satisfied is calculated as the total labor hours of 
construction, alteration, or repair work with respect to the facility 
performed by all laborers or mechanics employed by the taxpayer, 
contractor, or subcontractor that failed to meet the participation 
requirement of the qualified facility divided by the number of laborers 
or mechanics employed by such taxpayer, contractor, or subcontractor 
that performed construction, alteration, or repair work on the 
facility.
    (C) Penalty payment not required if taxpayer ineligible for 
increased credit amount under section 45(b)(6)(B)(iii). If the taxpayer 
claims the increased credit amount under section 45(b)(6)(B)(iii) and 
does not satisfy the Apprenticeship Requirements for the claimed 
increased credit amount, then the obligation to make the penalty 
payment under paragraph (f)(2)(i) of this section applies. If the IRS 
determines that a taxpayer claiming the increased credit amount under 
section 45(b)(6)(B)(iii) failed to meet the Apprenticeship Requirements 
and the taxpayer does not make the penalty payment required under 
paragraph (f)(2)(i) of this section, then no penalty is assessed under 
paragraph (f)(2)(i) of this section, and the taxpayer is not eligible 
for the increased credit amount under section 45(b)(6)(B)(iii). 
Taxpayers that are not eligible to claim the increased credit amount 
may still be eligible to claim the base amount of the renewable 
electricity production credit under section 45(a) if they meet the 
requirements to claim the credit.
    (D) Examples. The provisions of paragraph (f)(2)(i) of this section 
are illustrated by the following examples, which do not take into 
account any possible application of the exception for Good Faith Effort 
Exception under paragraph (f)(1) of this section, the enhanced penalty 
payment requirement in the case of intentional disregard under 
paragraph (f)(2)(ii) of this section, or the inapplicability of the 
penalty in the case of a Qualifying Project Labor Agreement under 
paragraph (f)(2)(v) of this section. In each example, assume that the 
taxpayer uses the calendar year as the taxpayer's taxable year.
    (1) Example 1. Taxpayer K starts construction of a qualified 
facility on April 1, 2023. Accordingly, Taxpayer K must ensure that at 
least 12.5% of the total labor hours are performed by qualified 
apprentices. The facility is placed in service on April 1, 2025, and 
Taxpayer K claims the increased credit amount under section 
45(b)(6)(B)(iii) on its 2025 tax return. All individuals who performed 
the construction, alteration, or repair work were employed directly by 
Taxpayer K, including two qualified apprentices. Taxpayer K employed 
enough journeyworkers to satisfy the Ratio Requirement. A total of 
50,000 labor hours were spent on the construction, alteration, or 
repair work of the facility, 6,000 of which were performed by qualified 
apprentices. Taxpayer K has satisfied the participation requirement 
because Taxpayer K has employed at least one qualified apprentice. 
Taxpayer K failed to satisfy the labor hours requirement under 
paragraph (b)(2) of this section because less than 12.5% of the total 
labor hours were performed by qualified apprentices. Qualified 
apprentices must have performed at least 6,250 labor hours (50,000 x 
12.5%), so the total labor hours by which the labor hours requirement 
was not satisfied is 250 (6,250-6,000). To cure Taxpayer K's failure to 
meet the labor hours requirement, Taxpayer K must pay a penalty of 
$12,500 (250 x $50).
    (2) Example 2. Taxpayer L starts construction of a qualified 
facility on February 10, 2023. Accordingly, Taxpayer L must ensure that 
at least 12.5% of the total labor hours are performed by qualified 
apprentices. The facility is placed in service on February 10, 2026, 
and Taxpayer L claims the increased credit amount under section 
45(b)(6)(B)(iii) on its 2026 tax return. Taxpayer L employs 10 
individuals to perform construction, alteration, or repair work of the 
facility, two of whom are qualified apprentices. Taxpayer L employed 
enough journeyworkers to satisfy the Ratio Requirement. Taxpayer L also 
hires Contractor M, who employs five individuals to perform 
construction, alteration, or repair work of the facility, none of whom 
are qualified apprentices. A total of 50,000 labor hours were spent on 
the construction, alteration, or repair work of the facility, 6,500 of 
which were performed by qualified apprentices. Of the total 50,000 
labor hours, 33,000 labor hours were performed by individuals employed 
by Taxpayer L and 17,000 labor hours were performed by individuals 
employed by Contractor M. Taxpayer L has satisfied the labor hours 
requirement under paragraph (b)(2) of this section because more than 
12.5% of the total labor hours were performed by qualified apprentices. 
However, Taxpayer L failed to satisfy the participation requirement 
under paragraph (d) of this section because Contractor M employed five 
individuals but no qualified apprentices. The total labor hours for 
which the participation requirement was not satisfied is equal to the 
total labor hours performed by individuals employed by Contractor M 
(17,000) divided by the number of individuals employed by Contractor M 
(five) on the construction of the qualified facility, which is 3,400 
hours (17,000/5). To cure the failure to meet the Apprenticeship 
Requirements, Taxpayer L must pay a penalty of $170,000 (3,400 x $50).
    (3) Example 3. Taxpayer N starts construction of a qualified 
facility on January 1, 2024. Accordingly, Taxpayer N must ensure that 
at least 15% of the total labor hours are performed by qualified 
apprentices. The facility is placed in service on January 1, 2025, and 
Taxpayer N claims the increased credit amount under section 
45(b)(6)(B)(iii) on its 2025 tax return. Taxpayer N employs 15 
individuals to perform construction, alteration, or repair work of the 
facility, none of whom is a qualified apprentice. Taxpayer N also hires 
Contractor O, who employs five individuals to perform construction, 
alteration, or repair work of the facility, one of whom is a qualified 
apprentice. At the time Taxpayer N claims the increased credit amount, 
a total of 20,000 labor hours were spent on the construction, 
alteration, or repair work of the facility, 1,000 of which were 
performed by the qualified apprentice. Of the 20,000 total labor hours, 
15,000 labor hours were performed by individuals employed by Taxpayer N 
and 5,000 labor hours were performed by individuals employed by 
Contractor O. Taxpayer N failed to satisfy the labor hours requirement 
under paragraph (b)(2) of this section because less than 15% of the 
total labor hours were performed by qualified apprentices. Qualified 
apprentices must have performed at least 3,000 labor hours, so the 
total labor hours by which the labor hours requirement was not 
satisfied is 2,000. Taxpayer N also failed to satisfy the participation 
requirement under paragraph (d) of this section because Taxpayer N 
employed 15 individuals but no qualified apprentices. The total labor 
hours for which the participation requirement was not satisfied is 
1,000, which is equal to the total labor hours performed

[[Page 53267]]

by individuals employed by Taxpayer N (15,000) divided by the number of 
individuals employed by Taxpayer N (15), which is 1,000 (15,000/15). 
The total labor hours by which Taxpayer N failed to meet the labor 
hours and participation requirements is 3,000 (2,000 + 1,000). To cure 
Taxpayer N's failure to meet the Apprenticeship Requirements, Taxpayer 
N must pay a penalty of $150,000 (3,000 x $50).
    (4) Example 4. Taxpayer P starts construction of a qualified 
facility on April 1, 2023. Accordingly, Taxpayer P must ensure that at 
least 12.5% of the total labor hours are performed by qualified 
apprentices. The facility is placed in service on January 5, 2024, and 
Taxpayer P claims the increased credit amount under section 
45(b)(6)(B)(iii) on its 2024 tax return. Taxpayer P hires Contractors 
Q, R, and S to perform the construction, alteration, and repair of the 
qualified facility. Contractor Q employs 10 journeyworkers who work 
10,000 hours and one qualified apprentice who works 400 hours. 
Contractor R employs four journeyworkers who work 4,000 hours and five 
qualified apprentices who work 2,000 hours. Contractor S employs three 
journeyworkers who work 3,000 hours and one qualified apprentice who 
works 400 hours. The registered apprenticeship program for all of the 
qualified apprentices has prescribed a 1:1 apprentice-to-journeyworker 
ratio. For each day, all journeyworkers and qualified apprentices 
employed by the contractors are on the job site. The contractors have 
satisfied the participation requirement under paragraph (d) of this 
section because they each employed one or more qualified apprentices. 
The total labor hours are 19,800 hours, and the total hours worked by 
qualified apprentices are 2,800. However, Contractor R employed one 
qualified apprentice in excess of the apprentice-to-journeyworker ratio 
(five qualified apprentices: four journeyworkers) that was prescribed 
by the apprenticeship program. Because Contractor R employed one 
qualified apprentice in excess of the apprentice-to-journeyworker ratio 
on each day that Contractor R performed work on the facility, 400 of 
the qualified apprentice hours worked by Contractor R do not count 
towards the labor hour requirement. Thus, Taxpayer P has failed to meet 
the labor hours requirement under paragraph (b)(2) of this section 
because only 2,400 hours worked by qualified apprentices are counted 
for purposes of the labor hours requirement. The total labor hours by 
which Taxpayer P failed to meet the labor hours requirement is 75 
(2,475 required hours (19,800 x 12.5%)-2,400 qualified apprentice hours 
worked). To cure Taxpayer P's failure to meet the Apprenticeship 
Requirements, Taxpayer P must pay a penalty of $3,750 (75 x $50).
    (ii) Intentional disregard--(A) Application of section 
45(b)(8)(D)(iii). If the IRS determines that any failure to satisfy the 
Apprenticeship Requirements in paragraph (b) or (d) of this section is 
due to intentional disregard of those requirements, the amount of the 
penalty payment under paragraph (f)(2) of this section is increased to 
$500 multiplied by the total labor hours for which the requirements 
described in paragraph (b) or (d) of this section were not satisfied 
with respect to the construction, alteration, or repair work on such 
qualified facility.
    (B) Meaning of intentional disregard. A failure to satisfy the 
Apprenticeship Requirements of paragraph (b) or (d) of this section is 
due to intentional disregard if it is knowing or willful.
    (C) Facts and circumstances considered. The facts and circumstances 
that are considered in determining whether a failure to satisfy the 
Apprenticeship Requirements is due to intentional disregard include, 
but are not limited to--
    (1) Whether the failure was part of a pattern of conduct that 
includes repeated or systemic failures to ensure compliance with the 
Apprenticeship Requirements;
    (2) Whether the taxpayer took steps to determine or review the 
applicable percentage of labor hours required to be performed by 
qualified apprentices;
    (3) Whether the taxpayer sought to promptly cure any failures;
    (4) Whether the taxpayer has been required to make a penalty 
payment under paragraph (f)(2) of this section in previous years;
    (5) Whether the taxpayer included provisions in any contracts 
entered into with contractors that required the employment of qualified 
apprentices by the contractor and any subcontractors consistent with 
the labor hour requirement of section 45(b)(8)(A) and the participation 
requirement of section 45(b)(8)(C) and whether taxpayers regularly 
reviewed contractors' and subcontractors' use of qualified apprentices;
    (6) Whether the taxpayer required contractors and subcontractors to 
forward to the taxpayer requests to registered apprenticeship programs 
within five business days of when requests were made;
    (7) Whether the taxpayer made no attempt to comply with the 
Apprenticeship Requirements;
    (8) Whether the taxpayer developed and used a plan to utilize 
qualified apprentices in the construction, alteration, or repair of the 
qualified facility;
    (9) Whether the taxpayer, contractor, or subcontractor regularly 
followed up with registered apprenticeship programs regarding requests 
for qualified apprentices;
    (10) Whether the taxpayer, contractor, or subcontractor contacted 
the Department of Labor's Office of Apprenticeship or relevant State 
apprenticeship agency for assistance in locating a registered 
apprenticeship program;
    (11) Whether the taxpayer had in place procedures whereby 
individuals could report suspected failures to comply with the 
Apprenticeship Requirements, without retaliation or adverse action, 
whether taxpayer investigated such reports by individuals, and whether 
the taxpayer had internal controls to prevent the failures to comply 
with the Apprenticeship Requirements;
    (12) Whether the taxpayer investigated complaints of retaliation or 
adverse action resulting from reports of suspected failures to comply 
with the Apprenticeship Requirements, and took appropriate actions to 
remedy any retaliation or adverse action and prevent it from 
reoccurring; and
    (13) Whether taxpayer failed to maintain and preserve records 
sufficient to establish compliance with the apprenticeship requirements 
for relevant tax years.
    (D) Examples. The provisions of paragraph (f)(2)(ii) of this 
section are illustrated by the following examples, which take into 
account certain facts and circumstances described in paragraph 
(f)(2)(ii)(C) of this section, that are considered in applying the 
enhanced penalty payment requirement in the case of intentional 
disregard. These examples do not take into account any possible 
application of the exception for Good Faith Effort Exception under 
paragraph (f)(1) of this section or the inapplicability of the penalty 
in the case of a Qualifying Project Labor Agreement under paragraph 
(f)(2)(v) of this section. In each example, assume that the taxpayer 
uses the calendar year as the taxpayer's taxable year.
    (1) Example 1. Taxpayer T failed to satisfy the labor hours 
requirement of section 45(b)(8)(A), the participation requirement of 
section 45(b)(8)(C), and the requirements described in

[[Page 53268]]

paragraphs (b) and (d) of this section. Taxpayer T did not create a 
plan to utilize qualified apprentices in the construction, alteration, 
or repair of the qualified facility. Taxpayer T did not include 
contract provisions that requires the hiring of qualified apprentices 
and the compliance with the labor hours requirement described in 
section 45(b)(8)(A) and the participation requirement described in 
section 45(b)(8)(C), nor did Taxpayer T require those contract 
provisions in any subcontracts. Neither Taxpayer T nor any contractors 
or subcontractors made any requests to a registered apprenticeship 
program for qualified apprentices. Taxpayer T also did not have 
procedures in place to audit whether contractors or subcontractors made 
a request to a registered apprenticeship program. Taxpayer T's failures 
to satisfy the labor hours requirement of section 45(b)(8)(A), the 
participation requirement of section 45(b)(8)(C), and the requirements 
described in paragraphs (b) and (d) of this section would be considered 
due to intentional disregard for purposes of paragraph (f)(2)(ii) of 
this section. After considering all of the facts and circumstances, 
Taxpayer T would be subject to the enhanced penalty payment described 
in paragraph (f)(2)(ii)(A) of this section.
    (2) Example 2. Taxpayer U failed to satisfy the labor hours 
requirement of section 45(b)(8)(A), the participation requirement of 
section 45(b)(8)(C), and the requirements described in paragraphs (b) 
and (d) of this section. Taxpayer U created a plan to utilize qualified 
apprentices in the construction, alteration, or repair of a qualified 
facility. Taxpayer U included contract provisions that required the 
hiring of qualified apprentices and the compliance with the labor hours 
requirement described in section 45(b)(8)(A) and the participation 
requirement described in section 45(b)(8)(C) and required those 
contract provisions in any subcontracts. Taxpayer U and all contractors 
and subcontractors of Taxpayer U requested relevant qualified 
apprentices from registered apprenticeship programs. Taxpayer U also 
created procedures to audit whether contractors or subcontractors made 
a request to a registered apprenticeship program and ensured that the 
registered apprenticeship programs were contacted in writing. In cases 
in which a registered apprenticeship program replied to a proper 
request described in paragraph (f)(1)(i)(A)(1) of this section with a 
non-substantive response, Taxpayer U encouraged follow-ups to the 
registered apprenticeship program. Additionally, Taxpayer U contacted 
and encouraged contractors and subcontractors to contact the Department 
of Labor's Office of Apprenticeship and the State apprenticeship agency 
in cases in which Taxpayer U, or any contractors or subcontractors, 
experienced difficulty in locating a registered apprenticeship program. 
After considering all of the facts and circumstances, Taxpayer U's 
failure to satisfy the labor hours requirement of section 45(b)(8)(A), 
the participation requirement of section 45(b)(8)(C), and the 
requirements described in paragraphs (b) and (d) of this section would 
not be considered due to intentional disregard for purposes of 
paragraph (f)(2)(ii) of this section.
    (E) Rebuttable presumption of no intentional disregard. If a 
taxpayer makes the penalty payment required by this paragraph (f)(2) 
before receiving notice of an examination from the IRS with respect to 
a claim for the increased credit amount under section 45(b)(6), the 
taxpayer will be presumed not to have intentionally disregarded the 
Apprenticeship Requirements in paragraphs (b) and (d) of this section. 
The IRS may rebut this presumption based on the relevant facts and 
circumstances.
    (iii) Deficiency procedures to apply. The penalty payment required 
by this paragraph (f)(2) is subject to deficiency procedures of 
subchapter B of chapter 63 of the Code.
    (iv) Penalty payments in the event of a transfer pursuant to 
section 6418. To the extent an eligible taxpayer, as defined in section 
6418(f)(2), has determined an increased credit amount under section 
45(b)(6) and transferred such increased credit amount as part of a 
specified credit portion, the obligation to make a penalty payment 
under paragraph (f)(2)(i) of this section remains with the eligible 
taxpayer. The obligation for an eligible taxpayer to satisfy the 
Apprenticeship Requirements becomes binding upon the earlier of the 
filing of the eligible taxpayer's return for the taxable year for which 
the specified credit portion is determined with respect to the eligible 
taxpayer, or the filing of the return of the transferee taxpayer for 
the year in which the specified credit portion is taken into account. 
If the IRS determines that the eligible taxpayer failed to meet the 
Apprenticeship Requirements and the eligible taxpayer does not then 
make the penalty payments provided in paragraph (f)(2)(i) of this 
section, then no penalty is assessed under paragraph (f)(2)(i) of this 
section, and the eligible taxpayer is not eligible for the increased 
credit amount determined under section 45(b)(6)(B)(iii). Section 6418 
and the regulations under section 6418 control for determining the 
impact of an eligible taxpayer's failure to cure on any transferee 
taxpayer.
    (v) Project labor agreements. The penalty payment required by this 
paragraph (f)(2) to cure a failure to satisfy the Apprenticeship 
Requirements in paragraphs (b) and (d) of this section does not apply 
with respect to the construction, alteration, or repair work of a 
qualified facility if the work is done pursuant to a Qualifying Project 
Labor Agreement as defined in Sec.  1.45-7(c)(6)(ii).
    (g) Definitions. Solely for purposes of this section, the following 
definitions apply:
    (1) Construction, alteration, or repair. The term construction, 
alteration, or repair has the same meaning as in Sec.  1.45-7(d)(3).
    (2) Contractor. The term contractor has the same meaning as in 
Sec.  1.45-7(d)(4).
    (3) Employed. The term employed has the same meaning as in Sec.  
1.45-7(d)(5).
    (4) Established standards and requirements. The term established 
standards and requirements means those standards of apprenticeship 
required by 29 CFR parts 29 and 30 for registered apprenticeship 
programs, as well as any additional requirements established by the 
registered apprenticeship program for the placement of apprentices and 
applicable to all employers participating in the registered 
apprenticeship program. Such requirements must not be found by the U.S. 
Department of Labor's Office of Apprenticeship or a recognized State 
apprenticeship agency to be contrary to Department of Labor guidance 
regarding the administration of registered apprenticeship programs.
    (5) Geographic area. The term geographic area for purposes of 
determining the geographic area of operation of a registered 
apprenticeship program has the same meaning as the term geographic area 
and locality defined in Sec.  1.45-7(d)(7).
    (6) Journeyworker. The term journeyworker means an individual who 
has attained a level of skill, abilities, and competencies recognized 
within an industry as having mastered the skills and competencies 
required for the occupation. Use of the term may also refer to a 
mentor, technician, specialist, or other skilled individual who has 
documented sufficient skills and knowledge of an occupation, either 
through formal apprenticeship or

[[Page 53269]]

through practical on-the-job experience and formal training.
    (7) Labor hours. The term labor hours means the total number of 
hours devoted to the performance of construction, alteration, or repair 
work by any individual employed by the taxpayer or by any contractor or 
subcontractor. Labor hours do not include hours worked by foremen, 
superintendents, owners, or persons employed in bona fide executive, 
administrative, or professional capacities (as defined in 29 CFR part 
541).
    (8) Qualified apprentice. The term qualified apprentice means an 
individual who is employed by the taxpayer or by any contractor or 
subcontractor and who is participating in a registered apprenticeship 
program. An individual is participating in a registered apprenticeship 
program if, the individual has entered into a written agreement with a 
registered apprenticeship program containing the terms and conditions 
of the employment and training of the apprentice and has been 
registered as an apprentice with the U.S. Department of Labor's Office 
of Apprenticeship or a recognized State apprenticeship agency during 
the time period in which work is performed by the apprentice for the 
taxpayer, contractor, or subcontractor, or the individual is in the 
first 90 days of probationary employment as an apprentice in a 
registered apprenticeship program and the individual has been certified 
by the U.S. Department of Labor's Office of Apprenticeship or a 
recognized State apprenticeship agency as eligible for probationary 
employment as an apprentice.
    (9) Registered apprenticeship program. A registered apprenticeship 
program means a program that has been registered by the U.S. Department 
of Labor's Office of Apprenticeship or a recognized State 
apprenticeship agency, pursuant to the National Apprenticeship Act and 
its implementing regulations for registered apprenticeship at 29 CFR 
parts 29 and 30, as meeting the basic standards and requirements of the 
Department of Labor for approval of such program for Federal purposes. 
Registration of a program is evidenced by a Certificate of Registration 
or other written indicia. Registered apprenticeship programs include 
those that taxpayers, contractors, or subcontractors sponsor, create, 
or partner with and include joint and non-joint programs (as those 
terms are used in 29 CFR part 29).
    (10) State apprenticeship agency. The term State apprenticeship 
agency means an agency of a State government that has responsibility 
and accountability for apprenticeship within the State and that has 
been recognized and authorized by the U.S. Department of Labor's Office 
of Apprenticeship to register and oversee apprenticeship programs and 
agreements for Federal purposes.
    (11) Subcontractor. The term subcontractor has the same meaning as 
in Sec.  1.45-7(d)(10).
    (12) Taxpayer. The term taxpayer has the same meaning as in Sec.  
1.45-7(d)(11).
    (h) Applicability date. This section applies to qualified 
facilities placed in service in taxable years ending after June 25, 
2024, and the construction of which begins after June 25, 2024. 
Taxpayers may apply this section to qualified facilities placed in 
service in taxable years ending on or before June 25, 2024, and 
qualified facilities placed in service in taxable years ending after 
June 25, 2024, the construction of which begins before June 25, 2024, 
provided that taxpayers follow this section in its entirety and in a 
consistent manner.


Sec. Sec.  1.45-9--1.45.11   [Reserved]


Sec.  1.45-12  Recordkeeping and reporting.

    (a) In general. The increased credit amount determined under 
section 45(b)(6) must be claimed in such form and manner as may be 
prescribed in IRS forms, instructions, publications, or guidance 
published in the Internal Revenue Bulletin. See Sec.  601.601 of this 
chapter. Consistent with sections 45 and 6001 and Sec.  1.6001-1(e), a 
taxpayer claiming or transferring (under section 6418) an increased 
credit amount under section 45(b)(6)(A) must maintain and preserve 
records sufficient to establish compliance with the requirements of 
sections 45(b)(6)(B), (b)(7), and (8), as applicable. In the case of 
any credit transferred under section 6418 reflecting an increased 
credit amount, the requirement to maintain and preserve sufficient 
records demonstrating compliance with the applicable prevailing wage 
and apprenticeship requirements remains with the eligible taxpayer that 
determined and transferred the credit. For definitions of terms used in 
this section, see Sec.  1.45-7(d) with respect to the prevailing wage 
requirements, and Sec.  1.45-8(g) with respect to the apprenticeship 
requirements.
    (b) Recordkeeping for the prevailing wage and apprenticeship 
requirements. With respect to each qualified facility for which a 
taxpayer is claiming or transferring (under section 6418) a credit 
reflecting an increased credit amount under section 45(b)(6)(A)(iii), 
the taxpayer must maintain and preserve records sufficient to 
demonstrate compliance with the applicable prevailing wage and 
apprenticeship requirements in sections 45(b)(7) and (8) and Sec. Sec.  
1.45-7 and 1.45-8, respectively. At a minimum, those records include 
payroll records for each laborer and mechanic (including each qualified 
apprentice) employed by the taxpayer, contractor, or subcontractor in 
the construction, alteration, or repair of the qualified facility. If 
work is done pursuant to a Qualifying Project Labor Agreement as 
defined in Sec.  1.45-7(c)(6)(ii), the taxpayer should also maintain 
and preserve records related to that Qualifying Project Labor 
Agreement.
    (c) Recordkeeping for the prevailing wage requirements. In addition 
to payroll records otherwise maintained by the taxpayer, records 
sufficient to demonstrate compliance with the applicable prevailing 
wage requirements in section 45(b)(7) and Sec.  1.45-7 may include 
Forms WH-347 completed fully and correctly with information for each 
laborer and mechanic (including each qualified apprentice) employed by 
the taxpayer, a contractor, or subcontractor with respect to each 
qualified facility. Records sufficient to demonstrate compliance with 
the applicable prevailing wage requirements in section 45(b)(7) and 
Sec.  1.45-7 may also include the following other documents and records 
with respect to each qualified facility:
    (1) Identifying information for each laborer and mechanic who 
worked on the construction, alteration, or repair of the qualified 
facility, including the name, the last four digits of a social security 
or tax identification number, address, telephone number, and email 
address;
    (2) The location and type of construction of the qualified 
facility;
    (3) The labor classification(s) the taxpayer applied to each 
laborer and mechanic for determining the prevailing wage rate and 
documentation supporting the applicable classification, including the 
applicable wage determination and copies of executed contracts for 
construction, alteration, or repair of the qualified facility with any 
contractor or subcontractor;
    (4) The hourly rate(s) of wages paid (including rates of 
contributions or costs for bona fide fringe benefits or cash 
equivalents thereof) for each applicable labor classification described 
in paragraph (c)(3) of this section;
    (5) Records to support any contribution irrevocably made on behalf 
of each laborer or mechanic to a trustee or other third person pursuant 
to a bona fide fringe benefit program, and the rate

[[Page 53270]]

of costs that were reasonably anticipated in providing bona fide fringe 
benefits to laborers and mechanics pursuant to an enforceable 
commitment to carry out a plan or program described in 40 U.S.C. 
3141(2)(B), including records demonstrating that the enforceable 
commitment was provided in writing to the laborers and mechanics 
affected;
    (6) The total number of hours worked by each laborer and mechanic 
per pay period;
    (7) The total wages paid to each laborer and mechanic for each pay 
period (including identifying any deductions from wages);
    (8) Records to support wages paid to any qualified apprentices at 
less than the applicable prevailing wage rates, including records 
reflecting an individual's participation in a registered apprenticeship 
program and the applicable wage rates and apprentice- to-journeyworker 
ratios prescribed by the registered apprenticeship program;
    (9) The amount and timing of any correction and penalty payments 
and documentation reflecting the calculation of the correction and 
penalty payments, including records to demonstrate eligibility for the 
penalty waiver in Sec.  1.45-7(c)(6);
    (10) Records to document any failures to pay prevailing wages and 
the actions taken to prevent, mitigate, or remedy the failure (for 
example, records demonstrating that the taxpayer (or an independent 
third party engaged by the taxpayer) regularly reviewed payroll 
practices, included requirements to pay prevailing wages in contracts 
with contractors, and posted prevailing wage rates in a prominent place 
on the job site); and
    (11) Records related to any complaints received by the taxpayer, 
contractor, or subcontractor that the taxpayer, contractor, or 
subcontractor was paying wages less than the applicable prevailing wage 
rate for work performed by laborers and mechanics with respect to the 
qualified facility.
    (d) Recordkeeping for the apprenticeship requirements. Records 
sufficient to demonstrate compliance with the applicable apprenticeship 
requirements in section 45(b)(8) and Sec.  1.45-8 may include the 
following information with respect to each qualified facility:
    (1) Any written requests for the employment of qualified 
apprentices from registered apprenticeship programs, including any 
contacts with the U.S. Department of Labor's Office of Apprenticeship 
or a State apprenticeship agency regarding requests for qualified 
apprentices from registered apprenticeship programs;
    (2) Any agreements entered into with registered apprenticeship 
programs with respect to the construction, alteration, or repair of the 
facility;
    (3) Documents reflecting the standards and requirements of all 
registered apprenticeship programs from which taxpayers, contractors, 
or subcontractors employed qualified apprentices with respect to the 
construction, alteration, or repair of the facility (including the 
applicable ratio requirement prescribed by each registered 
apprenticeship program);
    (4) The total number of labor hours worked with respect to the 
construction, alteration, or repair of the qualified facility, 
including and identifying hours worked by each qualified apprentice;
    (5) Records reflecting the daily ratio of apprentices to 
journeyworkers;
    (6) Records demonstrating compliance with the Good Faith Effort 
Exception in Sec.  1.45-8(f)(1) (including requests for qualified 
apprentices, correspondence with registered apprenticeship programs, 
and denials of requests);
    (7) The amount and timing of any penalty payments and documentation 
reflecting the calculation of the penalty payments;
    (8) Records to document any failures to satisfy the apprenticeship 
requirements under section 45(b)(8) and Sec.  1.45-8 and the actions 
taken to prevent, mitigate, or remedy the failure; and
    (9) Records related to any complaints received by the taxpayer, 
contractor, or subcontractor that the taxpayer, contractor, or 
subcontractor was not satisfying the apprenticeship requirements under 
section 45(b)(8) and Sec.  1.45-8.
    (e) Satisfaction of the recordkeeping requirements. Taxpayers may 
satisfy the recordkeeping requirements in this section as follows:
    (1) Taxpayers may collect and physically retain relevant records 
from every contractor and subcontractor. The records may have 
personally identifiable information (PII) redacted to comply with 
applicable privacy laws. Unredacted information must be made available 
to the IRS upon request;
    (2) Taxpayers, contractors, and subcontractors may provide relevant 
records to a third party vendor to physically retain on behalf of the 
taxpayer. The records may have PII redacted to comply with applicable 
privacy laws. Unredacted records must be made available to the IRS upon 
request; or
    (3) Taxpayers, contractors, and subcontractors may each physically 
retain the relevant unredacted records for their own employees. 
Unredacted records must be made available to the IRS upon request.
    (f) Applicability date. This section applies to qualified 
facilities placed in service in taxable years ending after June 25, 
2024, and the construction of which begins after June 25, 2024. 
Taxpayers may apply this section to qualified facilities placed in 
service in taxable years ending on or before June 25, 2024, and 
qualified facilities placed in service in taxable years ending after 
June 25, 2024, the construction of which begins before June 25, 2024, 
provided that taxpayers follow this section in its entirety and in a 
consistent manner.

0
Par. 4. Sections 1.45L-1 through 1.45L-3 are added to read as follows:


Sec. Sec.  1.45L-1--1.45L-2  [Reserved]


Sec.  1.45L-3   Rules relating to the increased credit amount for 
prevailing wage.

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

[[Page 53271]]

begins before June 25, 2024, provided that taxpayers follow this 
section in its entirety and in a consistent manner.


0
Par. 5. Section 1.45Q-6 is added to read as follows:


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

    (a) In general. If the requirements in paragraph (b) of this 
section are satisfied with respect to any qualified facility or any 
carbon capture equipment placed in service at that facility, then the 
credit determined under section 45Q(a) is multiplied by five.
    (b) Qualified facility and carbon capture equipment requirements. 
The requirements of this paragraph (b) are satisfied if any of the 
following requirements are met--
    (1) With respect to a qualified facility within the meaning of 
section 45Q the construction of which begins on or after January 29, 
2023, and any carbon capture equipment within the meaning of section 
45Q placed in service at such facility, the taxpayer meets the 
prevailing wage requirements of section 45(b)(7) and Sec.  1.45-7 with 
respect to the construction of such facility and equipment and with 
respect to the alteration or repair of such facility and equipment for 
any taxable year, for any portion of such taxable year that is within 
the period described in section 45Q(3)(A) or (4)(A) after the facility 
or equipment was originally placed in service, the apprenticeship 
requirements of section 45(b)(8) and Sec.  1.45-8, and the 
recordkeeping and reporting requirements of Sec.  1.45-12;
    (2) With respect to any carbon capture equipment within the meaning 
of section 45Q the construction of which begins on or after January 29, 
2023, and that is installed at a qualified facility the construction of 
which began prior to January 29, 2023, the taxpayer meets the 
prevailing wage requirements of section 45(b)(7) and Sec.  1.45-7 with 
respect to the construction of such equipment and with respect to the 
alteration or repair of such equipment for any taxable year, for any 
portion of such taxable year that is within the period described in 
section 45Q(3)(A) or (4)(A) after the equipment was originally placed 
in service, the apprenticeship requirements of section 45(b)(8) and 
Sec.  1.45-8, and the recordkeeping and reporting requirements of Sec.  
1.45-12; or
    (3) Carbon capture equipment within the meaning of section 45Q the 
construction of which began prior to January 29, 2023, and such 
equipment is installed at a qualified facility the construction of 
which began prior to January 29, 2023.
    (c) Applicability date. This section applies to qualified 
facilities and carbon capture equipment placed in service in taxable 
years ending after June 25, 2024, and the construction of which begins 
after June 25, 2024. Taxpayers may apply this section to qualified 
facilities and carbon capture equipment placed in service in taxable 
years ending on or before June 25, 2024, and qualified facilities and 
carbon capture equipment placed in service in taxable years ending 
after June 25, 2024, the construction of which begins before June 25, 
2024, provided that taxpayers follow this section in its entirety and 
in a consistent manner.


0
Par. 6. Sections 1.45U-1 through 1.45U-3 are added to read as follows:


Sec. Sec.  1.45U-1--1.45U-2  [Reserved]


Sec.  1.45U-3  Rules relating to the increased credit amount for 
prevailing wage.

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


0
Par. 7. Sections 1.45V-1 through 1.45V-3 are added to read as follows:


Sec. Sec.  1.45V-1--1.45V-2  [Reserved]


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

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

[[Page 53272]]

section in its entirety and in a consistent manner.

0
Par. 8. Sections 1.45Y-1 through 1.45Y-3 are added to read as follows:


Sec. Sec.  1.45Y-1--1.45Y-2  [Reserved]


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

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

0
Par. 9. Sections 1.45Z-1 through 1.45Z-3 are added to read as follows:


Sec. Sec.  1.45Z-1--1.45Z-2  [Reserved]


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

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

0
Par. 10. Sections 1.48C-1 through 1.48C-3 are added to read as follows:


Sec. Sec.  1.48C-1--1.48C-2  [Reserved]


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

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

0
Par. 11. Sections 1.179D-1 through 1.179D-3 are added to read as 
follows:


Sec. Sec.  1.179D-1--1.179D-2  [Reserved]


Sec.  1.179D-3  Rules relating to the increased deduction for 
prevailing wage and apprenticeship.

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

[[Page 53273]]

described in section 179D(b)(3)(A). For purposes of this section, 
installation means those activities described in Sec. Sec.  1.45-
7(d)(3) and 1.45-8(g)(1) that are performed with respect to energy 
efficient commercial building property, energy efficient building 
retrofit property, or property installed pursuant to a qualified 
retrofit plan within the meaning of section 179D before such property 
is placed in service.
    (b) Certain energy efficient commercial building property 
requirements. Energy efficient commercial building property, energy 
efficient building retrofit property, or property installed pursuant to 
a qualified retrofit plan satisfies the requirements of this paragraph 
(b) if it is one of the following--
    (1) Property the installation of which began prior to January 29, 
2023; or
    (2) Property that meets the prevailing wage requirements of section 
45(b)(7) of the Code and Sec.  1.45-7, the apprenticeship requirements 
of section 45(b)(8) of the Code and Sec.  1.45-8, and the recordkeeping 
and reporting requirements of Sec.  1.45-12, all with respect to the 
installation of any property.
    (c) Applicability date. This section applies to energy efficient 
commercial building property, energy efficient building retrofit 
property, or property installed pursuant to a qualified retrofit plan 
installed in taxable years ending after June 25, 2024, and the 
installation of which begins after June 25, 2024. Taxpayers may apply 
this section to energy efficient commercial building property, energy 
efficient building retrofit property, or property installed pursuant to 
a qualified retrofit plan installed in taxable years ending on or 
before June 25, 2024, and energy efficient commercial building 
property, energy efficient building retrofit property, or property 
installed pursuant to a qualified retrofit plan installed in taxable 
years ending after June 25, 2024, the installation of which begins 
before June 25, 2024, provided that taxpayers follow this section in 
its entirety and in a consistent manner.

Douglas W. O'Donnell,
Deputy Commissioner.
    Approved: June 9, 2024.
Aviva R. Aron-Dine,
Acting Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2024-13331 Filed 6-18-24; 8:45 am]
BILLING CODE 4830-01-P