[Federal Register Volume 88, Number 167 (Wednesday, August 30, 2023)]
[Proposed Rules]
[Pages 60018-60054]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-18514]



[[Page 60017]]

Vol. 88

Wednesday,

No. 167

August 30, 2023

Part II





Department of the Treasury





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Internal Revenue Service





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26 CFR Part 1





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

Federal Register / Vol. 88, No. 167 / Wednesday, August 30, 2023 / 
Proposed Rules

[[Page 60018]]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-100908-23]
RIN 1545-BQ54


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

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking and public hearing.

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SUMMARY: This document contains proposed regulations regarding 
increased credit or deduction amounts available for taxpayers 
satisfying prevailing wage and registered apprenticeship (collectively, 
PWA) requirements established by the Inflation Reduction Act of 2022 
(IRA). These proposed regulations would affect taxpayers intending to 
satisfy the PWA requirements for increased Federal income tax credits 
or deductions. These proposed regulations would also affect taxpayers 
intending to satisfy the prevailing wage requirements for increased 
Federal income tax credit amounts that do not have associated 
apprenticeship requirements. Additionally, these proposed regulations 
would affect taxpayers who initially fail to satisfy the PWA or 
prevailing wage requirements and subsequently comply with the 
correction and penalty procedures in order to be deemed to satisfy the 
PWA or prevailing wage requirements. Finally, the proposed regulations 
address specific PWA or prevailing wage recordkeeping and reporting 
requirements. The proposed regulations would affect taxpayers intending 
to claim increased credit or deduction amounts pursuant to the IRA, 
including those intending to make elective payment elections for 
available credit amounts, and those intending to transfer increased 
credit amounts. This document also provides notice of a public hearing 
on the proposed regulations.

DATES: Written or electronic comments and requests for a public hearing 
must be received by October 30, 2023. A public hearing on these 
proposed regulations is scheduled to be held on November 21, 2023, at 
10 a.m. ET. Requests to speak and outlines of topics to be discussed at 
the public hearing must be received by October 30, 2023. If no outlines 
are received by October 30, 2023, the public hearing will be cancelled. 
Requests to attend the public hearing must be received by 5 p.m. ET on 
November 17, 2023. The public hearing will be made accessible to people 
with disabilities. Requests for special assistance during the hearing 
must be received by November 16, 2023.

ADDRESSES: Commenters are strongly encouraged to submit public comments 
electronically via the Federal eRulemaking Portal at https://www.regulations (indicate IRS and REG-100908-23) by following the 
online instructions for submitting comments. Requests for a public 
hearing must be submitted as prescribed in the ``Comments and Requests 
for a Public Hearing'' section. Once submitted to the Federal 
eRulemaking Portal, comments cannot be edited or withdrawn. The 
Department of the Treasury (Treasury Department) and the IRS will 
publish for public availability any comments submitted to the IRS's 
public docket. Send paper submissions to: CC:PA:LPD:PR (REG-100908-23), 
Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin 
Station, Washington, DC 20044.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
the Office of Associate Chief Counsel (Passthroughs & Special 
Industries) at (202) 317-6853 (not a toll-free number); concerning 
submissions of comments or the public hearing, Vivian Hayes at (202) 
317-6901 (not a toll-free number) or by email to <a href="/cdn-cgi/l/email-protection#d9a9acbbb5b0bab1bcb8abb0b7beaa99b0abaaf7beb6af"><span class="__cf_email__" data-cfemail="dcaca9beb0b5bfb4b9bdaeb5b2bbaf9cb5aeaff2bbb3aa">[email protected]</span></a> 
(preferred).

SUPPLEMENTARY INFORMATION:

Background

I. Overview

    This document contains proposed regulations to amend the Income Tax 
Regulations (26 CFR part 1) under sections 30C, 45, 45L, 45U, 45V, 45Y, 
45Z, 48C, 48E, and 179D of the Internal Revenue Code (Code) and 
proposed amendments to the Income Tax Regulations (26 CFR part 1) under 
sections 45Q and 48 (proposed regulations). The Inflation Reduction Act 
of 2022 (IRA), Public Law 117-169, 136 Stat. 1818 (August 16, 2022), 
amended sections 30C, 45, 45L, 45Q, 48, 48C, and 179D to provide 
increased credit or deduction amounts 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 
prevailing wage and registered apprenticeship (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 if taxpayers have failed to satisfy the PWA requirements, 
and they are not otherwise eligible for the increased credit or 
deduction because they do not qualify for an exception.
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    \1\ The increased credit provisions in sections 45L and 45U do 
not contain apprenticeship requirements. For simplicity, where 
possible, the preamble to the proposed 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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    The increased credit amounts are also generally available under 
sections 45, 45Y, 48, and 48E with respect to certain facilities with a 
maximum net output (or capacity for energy storage technology under 
section 48E) of less than one megawatt (One Megawatt Exception). 
Additionally, increased credit and deduction amounts are available 
under sections 30C, 45, 45Q, 45V, 45Y, 48, 48E and 179D if beginning of 
installation or beginning of construction (BOC) occurs before January 
29, 2023 (BOC Exception).

II. Prior Guidance

    On October 24, 2022, the Treasury Department and the IRS issued 
Notice 2022-51, 2022-43 I.R.B. 331, requesting comments on aspects of 
the increased credits and deduction amounts enacted by the IRA, 
including the PWA provisions. Section 3.01 of Notice 2022-51 requested 
comments regarding the applicability of subchapter IV of chapter 31 of 
title 40 of the United States Code, which is commonly known as the 
Davis-Bacon Act; the special correction and penalty procedures 
generally provided for under section 45(b)(7)(B); any documentation or 
substantiation that should be required to show compliance with the 
prevailing wage requirements; and any other topics relating to the 
prevailing wage requirements that may require guidance. Section 3.02 of 
Notice 2022-51 requested comments addressing factors to be considered 
in regard to the appropriate duration of employment of individuals for 
construction, alteration, or repair work for purposes of the 
Participation Requirement; clarification regarding the Good Faith 
Effort Exception; factors to be considered in administering and 
promoting compliance with the Good

[[Page 60019]]

Faith Effort Exception; whether methods exist to facilitate reporting 
requirements for the Good Faith Effort Exception; documentation or 
substantiation taxpayers maintain or could create to demonstrate 
compliance with the apprenticeship requirements or the Good Faith 
Effort Exception; and any other topics relating to the apprenticeship 
requirements that may require guidance. Comments received in response 
to Notice 2022-51 were considered in the drafting of these proposed 
regulations.
    On November 30, 2022, the Treasury Department and the IRS published 
Notice 2022-61. 87 FR 73580, corrected in 87 FR 75141 (Dec. 7, 2022). 
Notice 2022-61 provided guidance on the PWA requirements that generally 
apply under sections 30C, 45, 45L, 45Q, 45U, 45V, 45Y, 45Z, 48, 48C, 
and 48E, and 179D. Additionally, 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). 
Specifically, Notice 2022-61 started the 60-day period applicable for 
determining if taxpayers qualify for the increased credit or deduction 
amounts by satisfying the BOC Exception. To be eligible for the BOC 
Exception, as indicated in Notice 2022-61, taxpayers must have begun 
construction or installation of a facility (as defined in Notice 2022-
61) before January 29, 2023. 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.

III. Inflation Reduction Act

A. In General

    Prior to enactment of the IRA, the Code provided for certain 
temporary credits and deductions with respect to energy related 
facilities, projects, equipment, and investments under sections 30C, 
45, 45L, 45Q, 48, 48C, and 179D. Congress had extended these provisions 
multiple times and for varying types of qualified facilities, energy 
projects, equipment, and investments. The IRA further amended these 
sections, generally adjusting the credit or deduction amounts, 
expiration dates, and qualifying activities. Under the IRA, Congress 
also enacted new credits under sections 45U, 45V, 45Y, 45Z, (production 
tax credits) and 48E (investment tax credit).
    The IRA provides increased credit or deduction amounts that 
generally apply for taxpayers who satisfy (i) certain PWA requirements 
regarding the construction, installation, alteration, or repair of a 
qualified facility, qualified property, qualified project, or qualified 
equipment, or with respect to certain facilities, (ii) the One Megawatt 
Exception, or (iii) the BOC Exception. Generally, if a taxpayer 
satisfies the PWA requirements or meets the One Megawatt Exception or 
the BOC Exception, the amount of credit or deduction determined is 
equal to the otherwise determined amount of the underlying credit or 
deduction multiplied by five.

B. PWA Provisions

1. 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), and section 45(b)(8) 
provides the apprenticeship requirements (Apprenticeship 
Requirements).\2\
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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 
substantially similar to the requirements provided under section 
45(b)(7). 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) provides for 
a special 5-year recapture rule that applies for purposes of the 
prevailing wage requirements with respect to sections 48 and 48E.
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    Section 45 provides a credit for taxpayers producing and selling 
electricity from renewable resources to unrelated persons during the 
taxable year (section 45 credit). The section 45 credit is generally 
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. If a taxpayer 
satisfies the PWA requirements, the One Megawatt Exception, or the BOC 
Exception, then the credit determined under section 45(a) for 
electricity produced at a qualified facility is multiplied by five.
2. Prevailing Wage Requirements
    Under section 45(b)(6), in the case of a qualified facility that 
satisfies the PWA requirements of section 45(b)(7) and (b)(8), the One 
Megawatt Exception, or the BOC Exception, the credit under section 
45(a) ``shall be equal to such amount multiplied by five.'' Section 
45(b)(7)(A) provides that with respect to any qualified facility, the 
taxpayer shall ensure that any laborers and mechanics employed by the 
taxpayer or any contractor or subcontractor in--(i) the construction of 
such facility, and (ii) with respect to any taxable year, for any 
portion of such taxable year that is within the 10-year period 
beginning on the date the qualified facility is 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.
3. Correction and Penalty Related to Failure To Satisfy Prevailing Wage 
Requirements
    Under section 45(b)(7)(B), a taxpayer who is not eligible for the 
One Megawatt Exception or the BOC Exception and fails to satisfy the 
Prevailing Wage Requirements under section 45(b)(7)(A) is ``deemed'' to 
have satisfied those requirements if, for ``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 facility, the taxpayer makes a correction payment to the laborer or 
mechanic and pays a penalty to the Secretary of the Treasury or her 
delegate (Secretary). 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 ``6 
percentage points'' for ``3 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).

[[Page 60020]]

    Under section 45(b)(7)(B)(iii), if the Secretary 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, ``pursuant to rules issued 
by the Secretary, in the case of a final determination by the Secretary 
with respect to any failure . . . to satisfy [the Prevailing Wage 
Requirements],'' the correction and penalty provisions do not apply, 
``unless the payments . . . are made by the taxpayer on or before the 
date which is 180 days after the date of such determination.''
4. Apprenticeship Requirements
    Under section 45(b)(8), in order to satisfy the Apprenticeship 
Requirements, certain requirements with respect to labor hours, 
apprentice-to-journeyworker ratios, and participation by apprentices 
must be satisfied.\3\
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    \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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a. 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 exclud[ing] 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\
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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).
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b. 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 U.S. Department of Labor (DOL) or the applicable State 
apprenticeship agency (Ratio Requirement).
c. 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).
5. Exceptions to Apprenticeship Requirements
a. In General
    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 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 
Secretary (Apprenticeship Cure Provision).
b. 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, as defined in section 3131(e)(3)(B), 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.
c. 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 Secretary 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 Secretary 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 requirement was not 
satisfied.

C. 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. A qualified facility's nameplate capacity 
determines whether the facility meets the One Megawatt Exception. 
Similar exceptions apply for a qualified facility under sections 
45Y(a)(2)(B)(i) and 48E(a)(2)(A)(ii)(I) with a maximum net output of 
less than one megawatt (as measured in alternating current); a 
qualified project under section 48(a)(9)(B)(i) with a maximum net 
output of less than one megawatt of

[[Page 60021]]

electrical (as measured in alternating current) or thermal energy; and 
energy storage technology under section 48E(a)(2)(B)(ii)(I) with a 
capacity of less than one megawatt.

D. 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 Secretary publishes guidance with respect to the 
requirements of section 45(b)(7)(A) and (8) is eligible for the 
increased credit amount in section 45(b)(6). On November 30, 2022, the 
IRS and the Treasury Department published Notice 2022-61, providing 
guidance with respect to the PWA requirements in section 45(b)(7)(A) 
and (8), including initial guidance for determining the beginning of 
construction for 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 credit amount without 
satisfying the PWA requirements, provided the taxpayer is otherwise 
eligible for the credit. 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, 45Q, and 48 (collectively, IRS Notices).\6\ 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 (section 45); Notice 
2020-12, 2020-11 I.R.B. 495 (section 45Q); Notice 2018-59, 2018-28 
I.R.B. 196 (section 48).
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    The IRS Notices, as clarified and modified by Notice 2021-41, 2021-
29 I.R.B. 17, 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, as subsequently clarified and modified, 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 10 calendar years after the calendar year 
during which construction of the project began.
    Until the Treasury Department and the IRS issue further guidance on 
determining when construction or installation begins, taxpayers may 
continue to rely on the guidance provided in Notice 2022-61 and the IRS 
Notices. Specifically, to determine when construction begins for 
purposes of sections 30C, 45V, 45Y, and 48E, principles similar to 
those under Notice 2013-29 regarding the Physical Work Test and Five 
Percent Safe Harbor apply, and taxpayers satisfying either test will be 
considered to have begun construction. In addition, principles similar 
to those provided in the IRS Notices regarding the Continuity 
Requirement for purposes of sections 30C, 45V, 45Y, and 48E apply. 
Whether a taxpayer meets the Continuity Requirement under either test 
is determined by the relevant facts and circumstances. Similar 
principles to those under section 3 of Notice 2016-31 regarding the 
Continuity Safe Harbor also apply for purposes of sections 30C, 45V, 
45Y, and 48E. Taxpayers may rely on the Continuity Safe Harbor with 
respect to those sections, provided the facility is placed in service 
no more than four calendar years after the calendar year during which 
construction began.
    For purposes of section 179D, installation of energy efficient 
commercial building property has begun if a taxpayer generally 
satisfies principles similar to the two tests described in section 2.02 
of Notice 2022-61 regarding the beginning of construction under Notice 
2013-29 (Physical Work Test and Five Percent Safe Harbor). 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.

IV. Davis-Bacon Act

    The Davis-Bacon Act (40 U.S.C. 3141 et seq.) (DBA), enacted in 
1931, requires the payment of minimum prevailing wages determined by 
the DOL to laborers and mechanics working on contracts entered into by 
Federal agencies and the District of Columbia that are in excess of 
$2,000 and are for the construction, alteration, or repair of public 
buildings and public works. The Copeland Act, Public Law 73-324 (40 
U.S.C. 3145), was enacted in 1934 to add a requirement that contractors 
working on contracts covered by the DBA submit weekly certified payroll 
records to the contracting agency for work performed on the contract. 
Congress has included DBA requirements in other laws, often referred to 
as the Davis-Bacon Related Acts (Related Acts), under which Federal 
agencies provide assistance for construction projects through grants, 
loans, insurance, and other methods.
    The Wage and Hour Division of the DOL is responsible for 
administering the DBA and has adopted regulations for the determination 
of prevailing wages as well as compliance with and enforcement of DBA 
labor standards requirements under 29 CFR parts 1, 3, and 5.
    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 performing work, and the Copeland 
Act, 40 U.S.C. 3145, sets forth the requirement to submit certified 
weekly payroll records to the contracting Federal agency. Under 
regulations implementing the DBA (29 CFR parts 1 and 5), the 
contracting agency and the Wage and Hour Division have responsibility 
to ensure compliance with prevailing wage requirements by engaging in 
periodic audits or investigations of contracts, including examination 
of payroll data.
    The Wage and Hour Division determines the wage rates that are 
``prevailing'' for purposes of section 3142(b) of the DBA for each 
classification of covered laborers and mechanics on similar projects in 
the

[[Page 60022]]

geographic area in which work is to be performed. A prevailing wage is 
the combination of the basic hourly rate and any fringe benefit rate 
listed on the wage determination. The Wage and Hour Division generally 
makes its determinations of the prevailing rates based on survey 
information provided by contractors and other interested parties. The 
prevailing wage determinations made by the Wage and Hour Division are 
published on the DOL-approved website for wage determinations 
(currently https://www.sam.gov).
    Under the DBA, contracting agencies follow specified procedures for 
incorporating wage determinations into covered contracts. The 
applicable prevailing wage determination generally applies for the 
duration of the contract.
    In accordance with the DBA, certain apprentices may be paid wages 
at a lower wage rate than journeyworker laborers and mechanics. Under 
29 CFR 5.5(a)(4), an apprentice from a registered apprentice program 
may be paid at not less than the rate specified in the registered 
program for the apprentice's level of progress in the apprenticeship 
program, expressed as a percentage of the journeyworker hourly rate 
specified in the applicable wage determination. Apprentices may also be 
paid bona fide fringe benefits in accordance with the provisions of the 
registered apprenticeship program, but if the registered apprenticeship 
program does not specify 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.
    Sections 3143 and 3144 of the DBA also provide for certain 
enforcement authority and remedies to ensure compliance with payment of 
prevailing wage rates. When a contracting agency or the Wage and Hour 
Division finds there has been an underpayment of wages, the contracting 
agency and the Wage and Hour Division can seek to recover the 
underpayments from the contractor responsible, including but not 
limited to the prime contractor. If the underpayment of wages to 
laborers and mechanics is not promptly remedied, then the contracting 
agency may withhold payments that are otherwise due under the contract 
or under another contract with the same prime contractor in order to 
compensate the laborers and mechanics for the underpayments. 
Contractors who have been found to have disregarded their obligations 
to employees and subcontractors, including by violating prevailing wage 
requirements, may also be subject to debarment from future Federal 
contracts under 40 U.S.C. 3144(b) and 29 CFR 5.12.

Explanation of Provisions

I. Overview

A. Incorporation of Certain DBA Guidance

    Under section 45(b)(7)(A), the increased credit 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 
. . . in accordance with [the DBA].'' The phrase ``in accordance with'' 
means ``in agreement or harmony with; in conformity to; according to.'' 
\7\ In interpreting the ``in accordance with'' language, the Treasury 
Department and the IRS propose to incorporate in these regulations 
certain 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.
---------------------------------------------------------------------------

    \7\ 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) (``agreement, conformity'').
---------------------------------------------------------------------------

    Under the DBA, a contractor must agree to pay prevailing wages at 
the commencement of the project as a condition of a Federal contract 
award. Conversely, under section 45, the requirements related to 
payment of prevailing wages are generally triggered at the beginning of 
construction and continue during the entire course of a project, but 
the requirement becomes binding only when a tax return claiming the 
increased credit is filed. The Code does not require taxpayers who do 
not seek an increased credit under section 45(b)(6) to pay prevailing 
wages in the construction, alteration, or repair of a facility.
    The proposed regulations seek to strike the appropriate balance in 
determining when DBA requirements are relevant for purposes of the PWA 
requirements and when they are not. The proposed regulations would 
incorporate DBA statutory and regulatory guidance that is relevant for 
purposes of claiming the increased tax credit and consistent with sound 
tax administration. For example, the proposed regulations would largely 
adopt DBA guidance relating to 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 adopt DBA guidance if the result of doing so 
would not be in furtherance of sound tax administration or the aims of 
the IRA. For example, the proposed regulations would not incorporate 
the rules under the DBA regarding provisions required to be included in 
contracts, those provisions related to the reporting of certified 
payroll records by contractors to contracting agencies, and the various 
enforcement processes that are available to the DOL and the contracting 
agencies to address noncompliance. Additionally, the DBA's $2,000 
monetary coverage threshold has not been incorporated.\8\
---------------------------------------------------------------------------

    \8\ The Treasury Department and the IRS interpret the One 
Megawatt Exception as addressing small business taxpayers who would 
be excluded under the $2,000 minimum contract requirement under the 
DBA.
---------------------------------------------------------------------------

    The statutory language of the IRA does not reflect any intent to 
include exceptions from the PWA requirements, other than the One 
Megawatt Exception and the BOC Exception. Consequently, the Treasury 
Department and the IRS have not proposed a rule exempting Tribal 
governments or the Tennessee Valley Authority (TVA) from the PWA 
requirements in section 45. The Treasury Department and the IRS request 
comments on the need for any exceptions, including for Tribal 
governments or the TVA, from the PWA requirements in addition to those 
expressly described in the statute. Such comments should detail the 
specific circumstances requiring the proposed exception as well as how 
its design would limit its application only to those circumstances.
    In addition, the Treasury Department and the IRS will hold Tribal 
consultation specifically to address the prevailing wage and 
apprenticeship requirements in these proposed regulations, which will 
inform the development of the final regulations. See part VI. of the 
Special Analyses section.

B. Applicability of PWA Requirements to the Taxpayer

    The proposed regulations would provide that in order to earn the 
increased credit 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 would also provide that the taxpayer would be solely 
responsible for the PWA recordkeeping requirements, the

[[Page 60023]]

correction and penalty provisions under the Prevailing Wage 
Requirements, and the Good Faith Effort Exception and penalty 
provisions under the Apprenticeship Requirements. However, nothing in 
these proposed regulations is intended to supersede requirements that 
might otherwise apply to a taxpayer, contractor, or subcontractor by 
State or Federal law.
    Generally, the proposed regulations would define 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 
will generally 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 section 45 
credit, including the increased credit amount available under section 
45(b)(6), is an eligible credit subject to the newly enacted section 
6418. Section 6418 allows ``eligible taxpayers'' to elect to transfer 
certain credits to unrelated taxpayers rather than using the credits 
against their Federal income tax liabilities. In the case of credits 
transferred under section 6418, these proposed regulations would 
provide that the term ``taxpayer'' also 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.
    Section 6418(a) provides that, in the case of an eligible taxpayer 
that elects to transfer all (or any specified portion) of an eligible 
credit determined with respect to the taxpayer for any taxable year to 
an unrelated transferee taxpayer, the transferee taxpayer specified in 
such election (and not the eligible taxpayer) is treated as the 
taxpayer with respect to such credit (or such portion thereof).
    The Treasury Department and the IRS published proposed regulations 
in the Federal Register (88 FR 40496 (June 21, 2023)) that would 
implement the statutory provisions of section 6418 (6418 Proposed 
Regulations). As explained in the 6418 Proposed Regulations, the 
Treasury Department and the IRS view inclusion of the word 
``determined'' as instructive. Only credits determined with respect to 
an eligible taxpayer can be transferred by the eligible taxpayer. The 
6418 Proposed Regulations would provide that Code sections relating to 
the determination of an eligible credit, such as sections 49 and 50(b), 
generally impact the amount of an eligible credit that an eligible 
taxpayer can transfer. A transferee taxpayer is generally not subject 
to those Code sections, but a transferee taxpayer is subject to Code 
sections that would limit the amount of an eligible credit that is 
allowed, such as sections 38(c) and 469. In making a transfer election, 
the 6418 Proposed Regulations also would require an eligible taxpayer 
to report the determined credit as part of the taxpayer's return, 
including filing properly completed credit source forms, a properly 
completed Form 3800, General Business Credit, and a schedule showing 
the amount of eligible credit transferred for each eligible credit 
property.
    The 6418 Proposed Regulations also would apply with respect to the 
entire credit determined under section 45, where the amount of credit 
determined would include increased credit amounts available under 
section 45(b)(6). As the rules for determining an eligible credit apply 
to the eligible taxpayer and not the transferee taxpayer under section 
6418, these proposed regulations would provide consistency with respect 
to the rules relating to the determination of the section 45 credit. 
Thus, while a transferee taxpayer would claim a transferred eligible 
credit (or portion thereof) on a tax return, the requirements of 
section 45 relevant to determining the credit, including the correction 
and penalty provisions described in section 45(b)(7)(B) and 
45(b)(8)(D), would remain with the eligible taxpayer who determined the 
credit. The Treasury Department and the IRS request comments on the 
application of the PWA penalty and cure provisions, including to 
transferees and eligible taxpayers, in the context of transferred 
credits.

II. Prevailing Wage Requirements Under Section 45(b)(7)(A)

A. In General

    Section 45(b)(7)(A) requires that taxpayers who are seeking an 
increased credit 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 that are 
not less than the prevailing rates determined by the DOL in accordance 
with the DBA.\9\ The proposed regulations would provide that a taxpayer 
would satisfy the Prevailing Wage Requirements with respect to the 
construction, alteration, or repair of a facility by ensuring that all 
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 that are not less than the prevailing rates 
determined by the DOL in accordance with the DBA.
---------------------------------------------------------------------------

    \9\ The requirement to pay prevailing wages with respect to 
alteration or repair applies 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.
---------------------------------------------------------------------------

    The proposed regulations would largely incorporate the definitions 
of contractor and subcontractor from the DBA and would provide that: 
(i) a contractor would be any person that enters into a contract with 
the taxpayer for the construction, alteration, or repair of a qualified 
facility, and (ii) a subcontractor would be any contractor that agrees 
to perform or be responsible for the performance of any part of a 
contract entered into with the taxpayer (or contractor) with respect to 
the construction, alteration, or repair of a facility.
    Consistent with the DBA and 29 CFR 5.2, and solely for purposes of 
the Prevailing Wage Requirements, the proposed regulations would 
provide that a laborer or mechanic would be considered employed by the 
taxpayer, contractor, or subcontractor if the individual performs 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. The definition of employed for purposes of 
the Prevailing Wage Requirements 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. Whether an individual is 
considered employed for purposes of the Prevailing Wage Requirements 
and these proposed regulations is not relevant when determining whether 
an individual is an employee or an independent contractor for other 
Federal tax purposes.

B. Determining the Prevailing Wage Rate

1. In General
    Under the proposed regulations, prevailing wage rates would be 
determined by the DOL in accordance with the DBA when they are issued 
and published by the DOL as a general wage determination or when issued 
to a taxpayer as part of a supplemental wage

[[Page 60024]]

determination or pursuant to a request for a wage rate for an 
additional classification. The proposed regulations would require 
taxpayers to use the general wage determination in effect when the 
construction of the facility begins but would not require taxpayers to 
update the applicable prevailing wage rates during construction of the 
facility in the event a new general wage determination is published by 
the DOL after construction of the facility begins. However, a new 
general wage determination would be required to be used when a 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 where an option to extend the term of a 
contract for the construction, alteration, or repair is exercised. This 
is consistent with DOL guidance under the DBA, which generally requires 
the contracting agency to incorporate the applicable wage 
determinations as part of the contract that is awarded to the 
contractor with the applicable rates valid through the duration of the 
contract. The proposed regulations also would provide 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.
2. General Wage Determinations
    The proposed regulations would provide 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. Generally, the DOL determines the 
prevailing rate based on wage rate data submitted by contractors, 
contractors' associations, labor organizations, public officials, and 
other interested parties. In general, the proposed regulations would 
provide that taxpayers would need to use the general wage 
determination(s) published by the DOL under the DBA on a DOL approved 
website, to determine the applicable prevailing wage rates. The current 
approved website for publishing general wage determinations is https://www.sam.gov.
    The proposed regulations would largely incorporate the definition 
of wages from 29 CFR 5.2 for the Prevailing Wage Requirements. Under 29 
CFR 5.2, wages are 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. Whether amounts are wages for purposes of the Prevailing Wage 
Requirements is not relevant in determining whether amounts are wages 
or compensation for other Federal tax purposes.
3. Supplemental Wage Determinations and Rates for Additional 
Classifications
    The proposed regulations would provide 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. These circumstances include when no general wage 
determination has been issued for the geographic area or for the 
specified type of construction, or when 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 
necessary for the construction, alteration, or repair work that will be 
done on the facility by laborers or mechanics is not listed as part of 
that determination. The proposed regulations would provide 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. A 
taxpayer satisfies section 45(b)(7)(A) by ensuring that laborers and 
mechanics are paid wages at rates not less than the rates determined by 
the DOL pursuant to a request for a supplemental wage determination or 
pursuant to a request for a prevailing wage rate for an additional 
classification.
    The DOL 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. The request for a prevailing wage rate for an 
additional classification would only be appropriate when the work to be 
performed by the classification is not performed by a classification in 
the applicable general wage determination and the classification is 
used in the area by the construction industry. In addition, a 
prevailing wage rate for an additional classification would only be 
approved when the proposed wage rate, including any bona fide fringe 
benefits, bears a reasonable relationship to the wage rates contained 
in the general wage determination. A request for a prevailing wage rate 
for additional classification would not be permitted to be used to 
split, subdivide, or otherwise avoid application of classifications 
listed in a general wage determination. Under the proposed regulations, 
the procedures for requesting a supplemental wage determination or a 
prevailing wage rate for an additional classification from the DOL 
would correspond to the provisions of 29 CFR 1.5(b) and 5.5(a)(1)(iii).
    The Treasury Department and the IRS expect that the construction of 
some facilities may span two or more adjacent geographic areas, and 
more than one general wage determination could apply to the facility. 
In such circumstances, a taxpayer would be able to satisfy the 
Prevailing Wage Requirements by ensuring that laborers and mechanics 
are paid wages at the highest rate for each classification provided 
under the general wage determinations. A taxpayer would also be 
permitted to request a supplemental wage determination with respect to 
the facility and pay the rates determined by the DOL pursuant to the 
request.
    The proposed regulations would also provide a special rule for 
qualified facilities located offshore so taxpayers would not need to 
request a supplemental wage determination for offshore facilities. 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.
    The process for requesting a supplemental wage determination or a 
prevailing wage rate for an additional classification provided for in 
the proposed regulations would be consistent with the process described 
in Notice 2022-61 while addressing the different context of the PWA 
regime wherein taxpayers, contractors, and

[[Page 60025]]

subcontractors, rather than a contracting agency, will seek additional 
wage rates for purposes of complying with the Prevailing Wage 
Requirements of section 45. Under the DBA, the request for a project 
wage determination applicable under 29 CFR 1.5(b) or for a conformance 
under 29 CFR 5.5(a)(1)(iii) is made by the contracting agency rather 
than the contractor and will often occur after the contracting agency 
and the contractor have conferred about the need for the project wage 
determination or for the conformance of an additional classification. 
Because there is no contracting agency in the tax credit regime, the 
proposed regulations would set forth an analogous process for 
taxpayers, contractors, and subcontractors to request a supplemental 
wage determination, or a request for a prevailing wage rate for an 
additional classification, by submitting the request and supporting 
material directly to the Wage and Hour Division of the DOL.
    The proposed regulations would provide that the request for a 
supplemental wage determination or a request for a prevailing wage rate 
for an additional classification would need to include information 
consistent with the information that is required to be provided by a 
contracting agency when requesting a project wage determination or a 
conformance for purposes of the DBA. This information would include a 
description of the type of work to be performed, the geographic area 
where the facility is located, the start date for the construction, 
alteration, or repair of the facility, the labor classification(s) 
needed for performance of the work on the facility for which wage rates 
are not available on an applicable general wage determination, 
pertinent wage payment information that may be available with respect 
to the classifications, and any information the taxpayer wants the DOL 
to consider for determining the applicable classifications and 
prevailing wage rates. After review, the Wage and Hour Division will 
notify the taxpayer as to 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.
    The proposed 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. Any interested 
party would be able to seek reconsideration and review of a 
supplemental wage determination, or a prevailing wage rate for an 
additional classification, by the DOL Administrator of the Wage and 
Hour Division and appeal any decision of the Administrator of the Wage 
and Hour Division to the DOL Administrative Review Board.
    In general, the Treasury Department and the IRS expect that 
supplemental wage determinations and requests for prevailing wage rates 
for an additional classification will be requested no more than 90 days 
prior to the beginning of the construction, alteration, or repair of 
the facility, as applicable. However, the Treasury Department and the 
IRS recognize that taxpayers may not reasonably determine until after 
construction, alteration, or repair begins that a supplemental wage 
determination or request for a prevailing wage rate for an additional 
classification is necessary. In these instances, the Treasury 
Department and the IRS would expect taxpayers, contractors, or 
subcontractors to make a request as soon as practicable after 
determining the need for a supplemental wage determination or 
prevailing wage rate for additional classifications. The proposed 
regulations would provide that when a supplemental wage determination 
or a prevailing wage rate for an additional classification is issued by 
the DOL after construction, alteration, or repair of the facility has 
begun, the applicable prevailing rates would apply retroactively to the 
date that the applicable construction, alteration, or repair work that 
is the subject of the request began. The taxpayer would be required to 
ensure that wages (including bona fide fringe benefits where 
appropriate) are paid at appropriate prevailing wage rates to all 
laborers and mechanics performing work on the project from the first 
day on which work is performed in the classification. The Treasury 
Department and the IRS request comments on the proposed procedures for 
requesting supplemental wage determinations and prevailing wage rates 
for additional classifications.

C. Paying Wages in Accordance With an Applicable Wage Determination

1. In General
    Under the proposed regulations, the applicable wage determination 
for a type of construction in a geographic area would provide the 
prevailing wage rates that apply to laborers or mechanics for the 
construction, alteration, or repair of a facility in that geographic 
area. The proposed regulations would provide that for purposes of 
satisfying the Prevailing Wage Requirements, all laborers and mechanics 
would need to be paid in the time and manner consistent with the 
regular payroll practices of the taxpayer, contractor, or 
subcontractor, as applicable. For purposes of satisfying section 
45(b)(7)(A), the proposed regulations would provide that a taxpayer 
would need to ensure that the wages paid to laborers and mechanics 
employed by the taxpayer, contractor, or subcontractor on the 
construction, alteration, or repair of the facility must be ``not less 
than the prevailing rates . . . in the locality in which such facility 
is located.'' The proposed regulations would define the terms: (i) 
laborer and mechanic, (ii) types of construction, (iii) construction, 
alteration, or repair, and (iv) locality, generally consistent with the 
DBA definitions.
    The proposed regulations would define the terms ``laborer'' and 
``mechanic'' as those individuals whose duties are manual or physical 
in nature. Laborers and mechanics would include apprentices and 
helpers. 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 would also be 
considered laborers and mechanics for the time spent conducting laborer 
and mechanic duties. However, laborers and mechanics would not include 
individuals whose duties are primarily administrative, executive, or 
clerical, and persons employed in a bona fide executive, 
administrative, or professional capacity as those terms are defined in 
29 CFR part 541. The Treasury Department and the IRS request 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.
    The proposed regulations would provide that the type of 
construction would be the general category of construction as 
established by the DOL for the publication of general wage 
determinations. Specific types of construction currently include 
building, residential, heavy, and highway. The Treasury Department and 
the IRS contemplate that the construction, alteration, or repair of 
most facilities eligible for the increased credit under section 
45(b)(6) would be either building or heavy construction.
    The proposed regulations would provide that the term construction, 
alteration, or repair would generally mean construction, prosecution, 
completion, or repair as provided under 29 CFR 5.2. Under this 
definition, construction, alteration, or repair would

[[Page 60026]]

mean all types of work performed at the location of the facility and 
includes, but is not limited to: constructing, altering, remodeling, 
installing of items fabricated offsite; painting and decorating; and 
manufacturing or furnishing of materials, articles, and supplies or 
equipment at the location of the facility. Additionally, the proposed 
regulations would provide that construction, alteration, or repair 
would not include maintenance work that occurs after the facility is 
placed in service. Under the proposed regulations, 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 it for a different or improved use. Further, the proposed 
regulations would provide that this definition of construction, 
alteration, or repair would be solely for purposes of the PWA 
requirements and has no bearing on any other provision under the Code, 
including any determination of construction, alteration, repair, or 
maintenance under section 162 or 263.
    The proposed regulations would provide that a locality or 
geographic area would be the county, independent city, or other civil 
subdivision of the State in which the facility or secondary site is 
located. Geographic area would also include offshore areas, including 
areas located within the outer continental shelf of the United States, 
and the U.S. territories. If construction, alteration, or repair is 
performed in multiple counties, independent cities, or other civil 
subdivisions, then the geographic area would also include all counties, 
independent cities, or other civil subdivisions in which the work will 
be performed.
    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.'' The proposed regulations 
would also use the DBA's ``site of the work'' definition to clarify the 
scope of the requirement under section 45(b)(7)(A) to pay prevailing 
wage rates. Under the DBA, the requirement to pay prevailing wages is 
limited by statute to laborers and mechanics ``employed directly on the 
site of the work.'' 40 U.S.C. 3142. 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.'' Over the years, the DOL has 
updated its rules to address developments in the construction industry 
that have enabled contractors to build large portions of a building or 
project on one or more secondary sites away from the primary site of 
the work. The DBA rules now provide that a secondary construction site 
is 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. 29 CFR 5.2.
    The Treasury Department and the IRS view the DBA's site of the work 
requirement to be helpful for purposes of interpreting the language in 
section 45(b)(7)(A) that the applicable prevailing wage rates for the 
construction, alteration, or repair of the facility are rates not less 
than those prevailing ``in the locality in which such facility is 
located.'' As with certain construction subject to the DBA, the 
Treasury Department and the IRS expect that taxpayers similarly may use 
multiple construction sites in the construction, alteration, or repair 
of a facility and in certain cases prefabricate large portions of the 
facility offsite for later installation at the facility's location. 
Some of these secondary sites will be dedicated solely to the 
construction of a facility while others may service multiple clients 
and facilities. While the language of section 45(b)(7)(A) could be 
interpreted to support an expansive reading of construction such that 
all construction of a facility, wherever located and however small, is 
subject to the Prevailing Wage Requirements, such a reading would 
result in significantly broader coverage than under the DBA and likely 
would entail substantial compliance costs and discourage taxpayers from 
seeking the increased credits or deduction available under the IRA. 
Thus, the Treasury Department and the IRS understand the DBA approach 
to ``site of the work'' to strike an appropriate balance between the 
requirements of section 45(b)(7)(A) and existing construction practices 
and thus propose to largely adopt the DBA approach for purposes of 
defining the scope of the Prevailing Wage Requirements.
    Therefore, under the proposed regulations, taxpayers would be 
subject to the requirement to ensure that laborers and mechanics are 
paid not less than prevailing wage rates with respect to the 
construction, alteration, or repair at the locality in which the 
facility is located, which would be 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.
    Under 29 CFR 1.6(b)(1), the prevailing wage rate that applies to 
laborers or mechanics engaged in the construction, alteration, or 
repair work at a secondary site is determined by the geographic area of 
the secondary site. The proposed regulations would similarly provide 
that when a secondary site is established specifically for, or 
dedicated exclusively for a specific period of time to, the 
construction, alteration, or repair of the facility, the prevailing 
wage rate applicable to laborers and mechanics engaged in the 
construction, alteration, or repair of the facility at the secondary 
site would be determined by the applicable wage rate for that laborer 
or mechanic classification based on the geographic area of the 
secondary site.
2. Wages for Apprentices
    Section 45(b)(8)(E)(ii) provides generally that a qualified 
apprentice is an individual who is employed by the taxpayer, 
contractor, or subcontractor and who is participating in a registered 
apprenticeship program, as defined in section 3131(e)(3)(B). For 
purposes of the DBA, an apprentice may also include an individual in 
the first 90 days of probationary employment as an apprentice in a 
registered apprenticeship program, who is not individually registered 
in the program, but who has been certified by the DOL's Office of 
Apprenticeship or a State apprenticeship agency (where appropriate) to 
be eligible for probationary employment as an apprentice.
    A registered apprenticeship program is a program that has been 
registered by the DOL's Office of Apprenticeship or a recognized State 
apprenticeship agency, pursuant to the basic standards and requirements 
in 29 CFR parts 29 and 30. Program registration is evidenced by a 
Certificate of Registration or other written indicia of registration.
    The proposed regulations would adopt 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 also provide 
that the calculation of the

[[Page 60027]]

apprentice wage rate would be in accordance with 29 CFR 5.5(a)(4)(i).
    For purposes of determining whether apprentices may be paid the 
apprentice wage rate rather than the full prevailing wage for other 
laborers and mechanics of the same classification, the proposed 
regulations would provide the apprentice must be participating in a 
registered apprentice program as demonstrated by a written 
apprenticeship agreement with the registered apprenticeship program 
containing the terms and conditions of the employment and training of 
the apprentice. The terms and conditions of the agreement would be 
required to comply with 29 CFR 29.7. The registered apprenticeship 
program would be required to be registered with the DOL or a recognized 
State apprenticeship agency in accordance with 29 CFR parts 29 and 30. 
If the apprentice is working in a classification that is not in an 
occupation that is part of the registered apprenticeship program, to 
satisfy the Prevailing Wage Requirements, the apprentice would need to 
be paid the full prevailing wage for laborers or mechanics for that 
classification in that location.
    The proposed regulations would provide that taxpayers and 
contractors or subcontractors who employ apprentices 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 apprentices the full prevailing wage rate 
listed for the classification of the work performed in the applicable 
wage determination.

D. Correction and Penalty Provisions

1. General Rule
    Under section 45(b)(7)(B)(i) and the proposed regulations, 
taxpayers would cure a failure to meet the Prevailing Wage Requirements 
by making the correction and penalty payments described in Section 
III.B.3. Section 45(b)(7)(B)(i) provides that ``[i]n the case of any 
taxpayer which fails to satisfy the requirement under subparagraph (A) 
. . . such 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. 
The phrase ``[i]n the case of any taxpayer which fails to satisfy the 
requirement under subparagraph (A) . . . for any period'' suggests that 
a failure to pay prevailing wages immediately triggers the 
applicability of the correction and penalty provisions if the increased 
credit is claimed on a return after a facility is placed in service. 
The proposed regulations would require the payment of prevailing wages 
at the time work is performed with respect to the construction, 
alteration, or repair of a facility in order to claim the increased 
credit. The proposed regulations would also provide that the 
requirement becomes binding only when the increased credit is claimed 
on a return. This is consistent with tax administration regarding the 
underlying credit.
    Thus, the correction and penalty payment requirements of section 
45(b)(7)(B)(i) would become applicable to a taxpayer upon the 
occurrence of the taxpayer's failure to satisfy the Prevailing Wage 
Requirements of section 45(b)(7)(A), which occurs whenever wages are 
paid to a laborer or mechanic below the prevailing wage rates. That 
failures will occur, and the obligation to make correction and penalty 
payments will have arisen, during the course of the construction, 
alteration, or repair of a qualified facility must be viewed in the 
context of taxpayers not needing to satisfy the Prevailing Wage 
Requirements in the absence of an increased credit being claimed on a 
return. Thus, the proposed regulations would provide that the 
obligation to make correction payments and pay the penalty would not 
become binding until a return is filed claiming the increased credit, 
and the proposed regulations would not require payment of the 
correction payment or the penalty until the time the increased credit 
is claimed. The earliest time that a taxpayer can make a penalty 
payment to the IRS is at the time of filing a tax return claiming the 
increased credit. However, taxpayers would retain the option of making 
correction payments to laborers and mechanics at any time after the 
initial payments were made and in advance of the filing of a tax return 
claiming the increased credit in order to limit the amount of 
additional interest the taxpayer must pay at the elevated rates set 
forth in section 45(b)(7)(B)(i)(I)(bb).
    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. A taxpayer would 
also be obligated to make any penalty payments owed with respect to a 
failure to meet the Prevailing Wage Requirements at the time a return 
is filed claiming the increased credit amount. Under the proposed 
regulations, 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 increased 
penalties for intentional disregard. The proposed regulations would 
also provide 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 when the IRS makes a final determination 
that a taxpayer has failed to satisfy the Prevailing Wage Requirements. 
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 to for the increased 
credit. The proposed regulations would clarify that this final 
determination would come in the form of a notice sent by the IRS.
    As provided in section 45(b)(7)(B)(ii), under the proposed 
regulations, deficiency procedures would not apply to any penalty 
payment required to be made in connection with a failure to meet the 
Prevailing Wage Requirements. The proposed regulations would clarify 
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.
2. Special Circumstances Involving Correction and Penalty Payments
    Section 45(b)(7)(B)(i) states that a taxpayer will be deemed to 
satisfy the prevailing wage requirement ``if, with respect to any 
laborer or mechanic who was paid wages at a rate below the rate 
described in such subparagraph for any period during such year, such 
taxpayer--makes payment to such laborer or mechanic . . .'' in the 
amount of the correction payment and makes the required penalty payment 
to the IRS. The Treasury Department and the IRS are aware 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 the correction payment 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. The proposed regulations would not provide for an 
exception to the statutory requirement.

[[Page 60028]]

    The Treasury Department and the IRS expect that taxpayers will be 
able to establish correction payments even when 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 amount of unclaimed wages, and 
requirements to remit any unclaimed wage amounts to State control as 
unclaimed property after defined holding periods. Taxpayers may also be 
able to establish correction payments were made by demonstrating 
compliance with any withholding and information reporting requirements 
with respect to the payments. The Treasury Department and the IRS 
request public 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 correction payment 
described in section 45(b)(7)(B)(i)(I).
    The Treasury Department and the IRS expect that some taxpayers will 
have made requests to the DOL for a supplemental wage determination or 
a prevailing wage rate for an additional classification. It is possible 
that the DOL's response to these requests will not be issued until 
after laborers and mechanics have started working on the facility. The 
laborers and mechanics who are the subject of the requests will have 
already been engaged in the construction, alteration, or repair, and 
may have already been paid wages below the rates later determined to be 
prevailing by the DOL. In this circumstance, the proposed regulations 
would provide 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 below 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.
    As previously described, for purposes of transfers pursuant to 
section 6418, the proposed regulations would clarify that the 
requirement to make correction and penalty payments would continue to 
apply to an eligible taxpayer who (i) transfers an increased credit 
amount under section 45(b)(6) as part of a specified credit portion and 
(ii) fails to meet the prevailing wage requirement of section 
45(b)(7)(A) with respect to such increased credit amount. Additionally, 
the proposed regulations would provide that the obligation to satisfy 
the Prevailing Wage Requirements would not become binding on an 
eligible taxpayer until the earlier of: (i) 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 (ii) 
the filing of the return of the transferee taxpayer for the year in 
which the specified credit portion is taken into account.
    The proposed regulations would also provide that a taxpayer who 
determines the underlying credit amount would have no obligation to 
comply with the correction and penalty provisions if the IRS later 
determines that the taxpayer was not entitled to the increased credit 
amount. Additionally, if the taxpayer does not correct and, therefore, 
is not subsequently granted the increased credit amount, no penalty is 
assessed under section 45(b)(7)(B).
3. Intentional Disregard
    Section 45(b)(7)(B)(iii) provides that if the failure to ensure 
that the laborers and mechanics are paid at the prevailing wage rate 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 provide 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 provide a non-exhaustive list of facts that may be 
relevant to this determination.
    The proposed regulations would explain that the facts and 
circumstances would include consideration of whether the failure was 
part of a pattern of conduct and whether the taxpayer has been required 
to pay the penalty in previous years. The Treasury Department and the 
IRS believe that failures that occur despite a taxpayer exercising 
reasonable diligence weigh against a finding of a knowing or willful 
failure. Under the proposed regulations, taxpayers would demonstrate 
reasonable diligence by taking appropriate steps to determine the 
applicable classifications and wage rates and by seeking to promptly 
correct any failures when discovered. Last, the proposed regulations 
would seek to draw from behavior that is generally required of 
contractors under the DBA and that the Treasury Department and the IRS 
believe would be best practices of taxpayers seeking to comply with the 
Prevailing Wage Requirements. These behaviors would include posting 
prevailing wage rates in a prominent place for the duration of the 
construction, alteration, or repair or otherwise notifying employees of 
the applicable prevailing wage rates; incorporating provisions in any 
contracts entered with contractors that require payment of prevailing 
wage rates by the contractors and any subcontractors; and undertaking 
quarterly, or more frequent, reviews of wages paid to laborers and 
mechanics to ensure that prevailing wages are being paid. The Treasury 
Department and the IRS request comments on additional criteria that 
might be used as part of a facts and circumstances analysis of 
intentional disregard in this context.
    The proposed regulations would also provide that there would be a 
rebuttable presumption against a finding of intentional disregard if 
the taxpayer makes the correction and penalty payments before receiving 
a notice of an examination with respect to a return that claimed the 
underlying increased credit. The presumption of no intentional 
disregard would be intended to encourage taxpayers who discover a 
failure to meet the Prevailing Wage Requirements after filing a return 
to use the correction and penalty provisions promptly.
    The Treasury Department and the IRS request comments on intentional 
disregard, including but not limited to additional criteria that might 
be used as part of a facts and circumstances analysis of intentional 
disregard and the applicability of a presumption against a finding of 
intentional disregard in certain situations.
4. Penalty Waiver
    In general, the IRS may exercise its discretion to waive or decline 
to assert penalties in the interest of sound tax

[[Page 60029]]

administration. The proposed regulations would use that discretion to 
provide 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 Treasury Department and the IRS 
would use the waiver authority in a manner that assists taxpayers 
seeking to be eligible for the increased credit while remaining 
consistent with the statutory requirement to ensure that laborers and 
mechanics are paid at prevailing wage rates.
    The Treasury Department and the IRS understand that taxpayers 
intending to pay prevailing wage rates may make payroll errors. These 
errors are likely to range in scope and frequency. It is also possible 
that taxpayers may make classification errors with respect to work that 
is performed by certain laborers or mechanics. The proposed regulations 
would seek to account for these likelihoods while continuing to ensure 
that laborers and mechanics are paid according to the applicable 
prevailing wage rates.
    The proposed regulations would provide 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 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 use calendar years to measure any failures because 
taxpayers, contractors, and subcontractors performing construction may 
have different taxable years and laborers and mechanics are generally 
paid on a calendar year basis. The Treasury Department and the IRS 
request comments on the proposed use of calendar years in place of 
taxable years for this purpose.
    Pre-hire project labor agreements 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, and having a project labor agreement in place may also help 
ensure compliance with PWA requirements. For these reasons, the 
proposed regulations would also provide that the penalty payment 
requirement would not apply with respect to a laborer or mechanic 
employed under a project labor agreement that meets certain 
requirements and any correction payment owed to the laborer or mechanic 
is paid on or before a return is filed claiming an increased credit 
amount. The Treasury Department and the IRS request comments on the 
proposed treatment of project labor agreements, other ways taxpayers 
might use project labor agreements to meet the PWA requirements, and 
the definition of a qualifying project labor agreement.
    The proposed regulations would use the IRS's general enforcement 
discretion to allow taxpayers to correct limited failures to pay 
prevailing wages if the taxpayers pay the mechanics and laborers back 
wages and interest in a timely manner before the increased credit is 
claimed. The proposed regulations would not provide for waiver of the 
penalty after a return has been filed claiming the increased credit. 
The proposed regulations would seek to create incentives for taxpayers 
to self-correct and promptly pay prevailing wages.

III. Apprenticeship Requirements

A. In General

    To satisfy the requirements of section 45(b)(8), taxpayers must 
ensure that, with respect to the construction of any qualified 
facility, the Labor Hours Requirement, Ratio Requirement, and 
Participation Requirement are satisfied. The proposed regulations would 
clarify the interaction among these requirements. The proposed 
regulations would explain that the Labor Hours Requirement generally 
would be subject to the Ratio Requirement. The proposed regulations 
would further explain that the Participation Requirement would apply in 
addition to the Labor Hour Requirement and the Ratio Requirement. 
Therefore, in order to meet the requirements of section 45(b)(8), a 
taxpayer generally would be subject to all three components of the 
Apprenticeship Requirements. If a taxpayer satisfies the applicable 
Labor Hours Requirement but fails the Participation Requirement, then 
the taxpayer would not be eligible for the increased credit unless the 
taxpayer complies with the penalty provisions of section 45(b)(8)(D) 
with respect to the total hours that are not met with respect to the 
Participation Requirement or meets the Good Faith Effort Exception.
1. Labor Hours Requirement
    The proposed regulations would reiterate that under the Labor Hours 
Requirement, the taxpayer must ensure that the ``applicable 
percentage'' of the total labor hours are performed by qualified 
apprentices.
    The Treasury Department and the IRS understand that certain 
jurisdictions and trades have developed pre-apprenticeship programs 
that are designed to help individuals prepare for and succeed in 
registered apprenticeship programs but that are not registered with the 
DOL 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.). 
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, which 
is defined in section 3131(e)(3)(B) as apprenticeship programs that are 
registered under the National Apprenticeship Act. Thus, under the 
proposed regulations, pre-apprenticeship programs would 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 Hour Requirement.
2. Ratio Requirement
    Under the Ratio Requirement, a taxpayer must ensure that any 
applicable apprenticeship-to-journeyworker ratio is satisfied. Section 
45(b)(8)(B) provides that the applicable apprenticeship-to-
journeyworker ratio is determined by reference to the 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. 
This ratio is intended to ensure that there are enough journeyworkers 
to oversee the work of apprentices. The Treasury Department and the IRS 
understand that the DOL and State apprenticeship agencies review and 
approve the prescribed ratio requirements.

[[Page 60030]]

    As stated in Notice 2022-61, the applicable ratios set by 
registered apprenticeship programs generally apply on a daily basis. 
The proposed regulations reiterate this requirement and would provide 
that the applicable ratio established by the apprenticeship program 
would need to be satisfied each day during construction, alteration, or 
repair of the qualified facility for which apprentice labor hours are 
being claimed. This means that the number of apprentices would not be 
permitted to exceed the number set forth in the ratio because the ratio 
sets the minimum number of journeyworkers needed for each apprentice, 
to ensure adequate safety and supervision. For example, for a 1:1 
apprentice to journeyworker ratio, having two apprentices and three 
journeyworkers on a given day would satisfy the ratio requirement 
whereas having three apprentices and two journeyworkers on a given day 
would not.
    The proposed regulations would provide that if the Ratio 
Requirement is not met on any day, then registered apprentices in 
excess of the applicable ratio who perform work on a facility would be 
required to be paid the full prevailing wage rate for the hours worked 
for purposes of the Prevailing Wage Requirement. Additionally, the 
hours worked by the apprentices on a day where the applicable ratio was 
not satisfied would not be counted as apprentice hours for purposes of 
calculating the applicable percentage under the Labor Hours 
Requirement.
    For purposes of the Ratio Requirement, the proposed regulations 
would adopt the DOL definition of journeyworker in 29 CFR 29.2, which 
defines a journeyworker as a laborer or mechanic 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. A mentor, technician, specialist, or other skilled 
individual who has documented sufficient skills and knowledge of an 
occupation, either through formal apprenticeship or through practical 
on-the-job experience and formal training may also be a journeyworker. 
The Treasury Department and the IRS request comments on the application 
of the Ratio Requirement for purposes of satisfying the Apprenticeship 
Requirement.
3. Participation Requirement
    The Treasury Department and the IRS propose to interpret the 
Participation Requirement as designed to prevent taxpayers from 
satisfying the Labor Hours Requirement by only hiring apprentices to 
preform one type of work and instead encourages taxpayers to use 
apprentices across the full range of work performed with respect to the 
facility. The proposed regulations would clarify that the Participation 
Requirement would be satisfied as long as the taxpayer, contractor, or 
subcontractor employs one or more apprentices to perform work on the 
facility and would not be a daily requirement. The proposed regulations 
would also clarify that it would be the responsibility of the taxpayer 
to ensure that any contractor or subcontractor performing work on the 
facility with four or more employees who perform such work on the 
facility has hired one or more apprentices in accordance with the 
Participation Requirement of section 45(b)(8)(C). Taxpayers who fail to 
meet the Participation Requirement would be subject to the penalty 
provisions of section 45(b)(8)(D) even if the taxpayer otherwise 
satisfies the applicable Labor Hours Requirement unless the Good Faith 
Effort Exception applies.

B. Exceptions

1. In General
    Section 45(b)(8)(D) and the proposed regulations would allow 
taxpayers who fail to meet the Apprenticeship Requirements to 
nonetheless qualify for the increased credit by curing their failures. 
To cure a failure to meet the Apprenticeship Requirements, taxpayers 
would be required to satisfy the Good Faith Effort Exception from the 
Apprenticeship Requirements or pay a penalty if they do not qualify for 
the Good Faith Effort Exception.
2. Good Faith Effort Exception
    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 for reasons other than the taxpayer, 
contractor, or subcontractor's refusal to comply with the program's 
standards and requirements or if the program fails to respond within 
five business days of receiving a request. Notice 2022-61 provided that 
taxpayers could satisfy the Good Faith Effort Exception if the taxpayer 
requested qualified apprentices ``in accordance with usual and 
customary business practices for registered apprenticeship programs in 
a particular industry.''
    The Treasury Department and the IRS believe that additional 
guidance explaining the ``usual and customary'' standard would be 
useful. The proposed regulations would require the taxpayer, 
contractor, or subcontractor to make a written request to at least one 
registered apprenticeship program that 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, trains apprentices in the occupation(s) needed by the 
taxpayer, contractors, or subcontractors performing 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 apprentices in the occupation for which they are 
training, pursuant to its standards and requirements.
    The Treasury Department and the IRS anticipate that a taxpayer may 
need to submit a request to more than one apprenticeship program in 
order to meet the Good Faith Effort Exception based on the size of the 
project, the number of contractors or subcontractors and the 
anticipated number of labor hours for which apprentices are needed. 
Although it may be possible for a taxpayer to meet all of its Labor 
Hours Requirement from one apprenticeship program, it is likely that 
given the multiple occupations involved in the construction, 
alteration, or repair of a qualified facility, the taxpayer would need 
to request apprentices from more than one apprenticeship program in 
order to satisfy the Labor Hours Requirement and the Participation 
Requirement with respect to that facility. This is in part because a 
registered apprenticeship program typically trains apprentices in a 
single occupation, whereas more than one occupation may be needed to 
meet the Labor Hours Requirement and the Participation Requirement. A 
taxpayer, contractor, or subcontractor would be expected to estimate 
the number of apprentices needed and the occupations for which they are 
needed and to submit its request for apprentices accordingly.
    The proposed regulations would require the written request to 
include information concerning the dates of employment, the occupation 
or classification needed, the location and type of work to be 
performed, the number of apprentices needed, the number of hours the 
apprentices will work, and the name and contact information of the 
person requesting the apprentices. The written request would also be 
required to include a statement that the request for 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. The Good Faith 
Effort Exception's

[[Page 60031]]

requirement to request qualified apprentices from a registered 
apprenticeship program would necessitate that the taxpayer ascertain 
its workforce needs to determine how many qualified apprentices it 
needs to employ in order to meet the Apprenticeship Requirements, 
identify registered apprenticeship programs in the occupations needed 
by the taxpayer and its contractors and subcontractors, and demonstrate 
capacity to employ apprentices in the occupations for which apprentices 
are requested.
    A denial of a request by a taxpayer, contractor, or subcontractor 
for a qualified apprentice would not automatically qualify the taxpayer 
for the Good Faith Effort Exception. The proposed regulations would 
require the taxpayer, contractor, or subcontractor to submit an 
additional request within 120 days of a previously denied request. The 
proposed regulations would also clarify that a denial of a request 
means that the registered apprenticeship program denied the request in 
its entirety. A registered apprenticeship program's response that it 
could partially fulfill the 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.
    Under the proposed regulations, the Good Faith Effort Exception 
would be specific to the request for 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 registered 
apprenticeship program. Thus, the Good Faith Effort Exception would 
apply to the specific portion of the request for apprentices that was 
denied or not responded to and would be subject to the requirement to 
submit an additional request after 120 days. The Treasury Department 
and the IRS request comments on this proposed approach.
    Consistent with section 45(b)(8)(D)(ii)(I), the proposed 
regulations would require that the request cannot have been denied 
because of a refusal of the taxpayer or any contractor or subcontractor 
to comply with the requirements and standards of the apprenticeship 
program. For example, 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. Section 
45(b)(8)(D)(ii) provides that taxpayers may also be deemed to satisfy 
the Good Faith Effort Exception if a registered apprenticeship program 
fails to respond to a request for a qualified apprentice. The proposed 
regulations explain that an acknowledgement of receipt by a registered 
apprenticeship program would constitute a response for purposes of 
section 45(b)(8)(D)(ii)(II), and a taxpayer would be unable to rely 
upon the Good Faith Effort Exception in such circumstances.
    The Treasury Department and the IRS understand that apprenticeship 
programs are not uniform across industries and localities, including 
the manner and processes by which apprentices may be requested and 
supplied for purposes of satisfying the Apprenticeship Requirements. 
The Treasury Department and the IRS also understand that in many cases 
employers are sponsors of registered apprenticeship programs and 
directly employ apprentices. In those instances, a taxpayer, 
contractor, or subcontractor would likely obtain apprentices to meet 
the labor hours and participation requirements through their own 
registered apprenticeship programs rather than requesting apprentices 
from other registered apprenticeship programs.
    In addition, the Treasury Department and the IRS are aware that the 
DOL's Office of Apprenticeship, 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.\10\ The Treasury Department and the IRS request 
comments on whether and how the proposed Good Faith Effort Exception 
might take into account a situation where a taxpayer contacts the DOL's 
Office of Apprenticeship or the appropriate State apprenticeship agency 
regarding their apprenticeship request, in addition to contacting a 
specific registered apprenticeship program or programs. The Treasury 
Department and the IRS also request comments on how the proposed Good 
Faith Effort Exception will align with current practices with respect 
to utilization of apprentices in the construction, alteration, or 
repair of facilities. In particular, the Treasury Department and the 
IRS request comments on the role of collective bargaining agreements, 
project labor agreements, and other agreements to satisfy the request 
for apprentices under the Good Faith Effort Exception.
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    \10\ Information is available at https://www.apprenticeship.gov/about-us/apprenticeship-system.
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3. Opportunity To Cure
    If a taxpayer does not qualify for the Good Faith Effort Exception 
under section 45(b)(8)(D)(ii), section 45(b)(8)(D)(i)(II) provides that 
the taxpayer is not treated as failing to satisfy the requirements of 
section 45(b)(8)(A) and (C) if the taxpayer pays a penalty to the 
Secretary. The proposed regulations explain that, with respect to 
failures to satisfy the Labor Hours Requirement or the Participation 
Requirement, the amount of the penalty would be equal to $50 multiplied 
by the total labor hours for which the taxpayer failed to meet the 
Labor Hours Requirement and the Participation Requirement. The proposed 
regulations would provide that the total labor hours by which the 
taxpayer failed to meet the Labor Hours Requirement would be calculated 
by subtracting the total labor hours worked by all qualified 
apprentices consistent with the Ratio Requirement from the total labor 
hours that should have been worked by qualified apprentices under 
section 45(b)(8)(A)(ii) to satisfy the applicable percentage.
    Section 45(b)(8)(C) does not specify the number of hours that 
apprentices must work to satisfy the Participation Requirement. The 
proposed regulations would address this issue by providing that the 
number of labor hours that an apprentice was required to work for 
purposes of calculating the penalty for failing to satisfy the 
Participation Requirement would be equal to the total number of labor 
hours performed for the taxpayer, contractor, or subcontractor during 
construction, alteration, or repair of the facility divided by the 
total number of individuals employed by that taxpayer, contractor, or 
subcontractor who performed construction, alteration, or repair work on 
the facility. This calculation would be specific to the taxpayer, 
contractor, or subcontractor who failed to meet the Participation 
Requirement. For example, if the taxpayer failed to meet the 
Participation Requirement, then the penalty would be calculated with 
reference to the total number of labor hours performed only by those 
individuals who worked directly for the taxpayer, and would not include 
the labor hours worked by any individuals who worked directly for a 
contractor or subcontractor that satisfied the Participation 
Requirement.
    If the taxpayer failed to meet 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

[[Page 60032]]

Requirement plus the penalty for failure to meet the Participation 
Requirement.
    If the failure to meet the Labor Hours Requirement or the 
Participation Requirement is determined to be the result of intentional 
disregard, then the amount of the penalty payment is enhanced tenfold--
from $50 to $500 per labor hour. The proposed regulations would provide 
that failures to meet the Apprenticeship Requirements would be due to 
intentional disregard if they are knowing or willful, considering all 
relevant facts and circumstances. The proposed regulations would 
provide a non-exhaustive list of facts and circumstances that may be 
relevant to determining whether the failure was knowing or willful.
    The proposed regulations would also provide the penalty payment 
requirement for failures to meet the Labor Hours Requirement or the 
Participation Requirement would not apply if there is in place a 
project labor agreement that meets certain requirements.
    The proposed regulations also state that there would be a 
rebuttable presumption against a finding of intentional disregard if 
the taxpayer makes the penalty payments before receiving a notice of an 
examination with respect to the claim for the increased credit. The 
presumption of no intentional disregard is intended to incentivize 
taxpayers who initially fail to meet the Apprenticeship Requirements to 
make use of the cure provision promptly.
    Consistent with the correction and penalty payments under the 
Prevailing Wage Requirements, the hiring of qualified apprentices is a 
factor in the taxpayer's eligibility for the increased credit and 
therefore applicable to determining the credit. Additionally, although 
the Apprenticeship Requirements must be satisfied contemporaneously 
with the construction, alteration, or repair of the qualified facility 
and before the filing of the taxpayer's tax return, the obligation to 
meet the Apprenticeship Requirements is not binding on the eligible 
taxpayer until the earlier of: (i) 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 (ii) 
the filing of the return of the transferee taxpayer for the year in 
which the specified credit portion is taken into account. As a result, 
the proposed regulations would provide that a penalty payment that is 
required to retain the increased credit because of the failure of the 
eligible taxpayer to satisfy the Apprenticeship Requirements would 
remain the responsibility of the eligible taxpayer following a transfer 
of a specified credit portion pursuant to section 6418.

IV. Other Code Sections Applying PWA Provisions for Increased Credit 
and Deduction Amounts

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 or the BOC Exception, then 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.
    To satisfy the Prevailing Wage Requirements under section 
30C(g)(2)(A), a taxpayer must ensure that any 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 such project 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 30C(g)(2)(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 30C(g)(3) provides 
that rules similar to section 45(b)(8) apply for purposes of the 
Apprenticeship Requirements.
    The proposed regulations would provide that if a taxpayer satisfies 
the PWA requirements, then 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 would be multiplied by five.

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. Under section 45L(b)(2), a qualified 
home is a dwelling unit located in the United States, the construction 
of which is substantially completed after August 8, 2005, and that 
meets the energy saving requirements of section 45L(c). Under section 
45L(b)(1), an eligible contractor is the person who constructed the 
qualified home, or in the case of a qualified home that is a 
manufactured home, the manufactured home producer of that home. For a 
qualified home acquired after December 31, 2022, and before January 1, 
2033, that is part of a building eligible to participate in the Energy 
Star Multifamily New Construction Program and meets the energy saving 
requirements under section 45L(c)(1)(A), the credit is $500 ($2,500 if 
the taxpayer satisfies the Prevailing Wage Requirements). For a 
qualified home acquired after December 31, 2022, and before January 1, 
2033, that is part of a building eligible to participate in the Energy 
Star Multifamily New Construction Program and meets the energy saving 
requirements under section 45L(c)(1)(B), the credit is $1,000 ($5,000 
if the taxpayer satisfies the Prevailing Wage Requirements).
    To satisfy the Prevailing Wage Requirements under section 
45L(g)(2)(A), a taxpayer must ensure that any laborers and mechanics 
employed by the taxpayer or any contractor or subcontractor in the 
construction of any qualified home described in section 45L(a)(2)(B) 
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 qualified home is located. Section 45L(g)(2)(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. There are no Apprenticeship Requirements 
with respect to section 45L.
    The proposed regulations would provide that if a taxpayer satisfies 
the Prevailing Wage Requirements, then for a qualified home that is 
part of a building eligible to participate in the Energy Star 
Multifamily New Construction Program acquired after December 31, 2022, 
and before January 1, 2033, the credit would be $2,500 if the qualified 
home meets the energy saving requirements under section 45L(c)(1)(A), 
and the credit would be $5,000 if the qualified home meets the energy 
saving requirements under section 45L(c)(1)(B).

C. Section 45Q

    Section 45Q provides a credit for the capture and sequestration of 
qualified carbon oxide. The credit is the sum of the specified dollar 
amount, as provided

[[Page 60033]]

by section 45Q(a) or (b), multiplied by the metric ton of each 
qualified carbon oxide specified under section 45Q(a). If a taxpayer 
satisfies the PWA requirements or the BOC Exception 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. For carbon capture equipment that will be placed in 
service at a qualified facility the construction of which begins on or 
after January 29, 2023, the section 45Q(a) credit is multiplied by five 
only if the PWA requirements are satisfied with respect to both the 
qualified facility and the carbon capture equipment. For carbon capture 
equipment the construction of which begins on or after January 29, 2023 
that will be placed in service at a qualified facility the construction 
of which began before January 29, 2023, the PWA requirements apply only 
to the carbon capture equipment.
    To satisfy the Prevailing Wage Requirements under section 
45Q(h)(3)(A), the attributable taxpayer described in section 
45Q(f)(3)(A) and Sec.  1.45Q-1(h)(1) must ensure that any laborers and 
mechanics employed by the taxpayer or any contractor or subcontractor 
in: (i) the construction of any qualified facility and any carbon 
capture equipment placed in service at that facility, and (ii) the 
alteration or repair of that facility or equipment (with respect to any 
taxable year, for any portion of such taxable year that is within the 
12-year period beginning on the date the facility or equipment is 
originally placed in service), 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 that facility and equipment 
are located. Section 45Q(h)(3)(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 45Q(h)(4) provides that rules similar to section 45(b)(8) apply 
for purposes of the Apprenticeship Requirements.
    The proposed regulations would provide rules based on the statutory 
rules.

D. Section 45U

    Section 45U provides a credit for electricity produced by the 
taxpayer at a qualified nuclear power facility 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 applicable ``reduction amount'' for such 
taxable year that is determined under section 45U(b)(2). If a taxpayer 
satisfies the Prevailing Wage Requirements, then the credit determined 
under section 45U(a) for a qualified nuclear power facility is 
multiplied by five.
    To satisfy the Prevailing Wage Requirements under section 
45U(d)(2)(A), a taxpayer must ensure that any laborers and mechanics 
employed by the taxpayer or any contractor or subcontractor in the 
alteration or repair of any qualified nuclear power facility are paid 
wages at rates not less than the prevailing rates for alteration or 
repair of a similar character in the locality in which that facility is 
located. Section 45U(d)(2)(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. There are no 
Apprenticeship Requirements with respect to section 45U.
    The proposed regulations would provide that if a taxpayer satisfies 
the Prevailing Wage Requirements, then the credit determined under 
section 45U(a) for any qualified nuclear power facility would be 
multiplied by five.

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. In general, for 
hydrogen produced after December 31, 2022, the credit is the product of 
the kilograms of qualified clean hydrogen produced multiplied by the 
applicable amount. The applicable amount is equal to the applicable 
percentage of $0.60, which is determined under section 45V(b)(2). If a 
taxpayer satisfies either the PWA requirements, or the BOC Exception 
and the Prevailing Wage Requirements for alterations or repairs 
occurring after January 29, 2023, then the credit amount determined 
under section 45V(a) for any qualified clean hydrogen produced by the 
taxpayer during the taxable year at a qualified clean hydrogen 
production facility is multiplied by five. A taxpayer must satisfy the 
Prevailing Wage Requirements with respect to an alteration or repair 
that occurs after January 29, 2023, notwithstanding the BOC Exception 
regarding the construction of that qualified facility.
    To satisfy the Prevailing Wage Requirements under section 
45V(e)(3)(A), a taxpayer must ensure that any laborers and mechanics 
employed by the taxpayer or any contractor or subcontractor in: (i) the 
construction of any qualified clean hydrogen production facility, and 
(ii) the alteration or repair of that facility (with respect to any 
taxable year, for any portion of such taxable year that is within the 
10-year credit period beginning on the date that the facility was 
originally placed in service),\11\ 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 that facility is located. 
Section 45V(e)(3)(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 45V(e)(4) provides 
that rules similar to section 45(b)(8) apply for purposes of the 
Apprenticeship Requirements.
---------------------------------------------------------------------------

    \11\ Section 45V(e)(3)(A)(ii) requires the payment of wages at 
prevailing rates ``with respect to any taxable year, for any portion 
of such taxable year which is within the period described in 
subsection (a)(2)'', with respect to the alteration or repair of 
such facility. There is no ``period described in subsection 
(a)(2).'' The Treasury Department and the IRS propose to interpret 
the reference to ``subsection (a)(2)'' as a reference to section 
45V(a)(1) where the 10-year credit period is identified, and the 
proposed regulations would apply to the period described in section 
45V(a)(1).
---------------------------------------------------------------------------

    The proposed regulations would provide that if a taxpayer satisfies 
either the PWA requirements, or the BOC Exception and the Prevailing 
Wage Requirements for alterations or repairs occurring after January 
29, 2023, then the credit amount determined under section 45V(a) for 
any qualified clean hydrogen produced by the taxpayer during the 
taxable year at a qualified clean hydrogen production facility would be 
multiplied by five.

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 which is equipped with a metering 
device which 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 0.3 cents. If a taxpayer satisfies the PWA 
requirements, the One Megawatt

[[Page 60034]]

Exception, or the BOC Exception, the applicable amount under section 
45Y(a)(2) equals 1.5 cents.
    Section 45Y(g)(9) provides that rules similar to section 45(b)(7) 
apply for purposes of the Prevailing Wage Requirements. Section 
45Y(g)(10) provides that rules similar to section 45(b)(8) apply for 
purposes of the Apprenticeship Requirements.
    The proposed regulations would provide that if a taxpayer satisfies 
the PWA requirements, then the applicable amount under section 
45Y(a)(2) would equal 1.5 cents.

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)) per gallon(s) of 
transportation fuel multiplied by the emission factor for the fuel 
(determined under section 45Z(b)). If a taxpayer satisfies the PWA 
requirements (modified for qualified facilities placed in service 
before January 1, 2025), then the applicable amount determined under 
section 45Z(a)(2)(B) is $1.00, otherwise the applicable amount is 20 
cents.
    In general, section 45Z(f)(6)(A) provides that rules similar to 
section 45(b)(7) apply for purposes of the Prevailing Wage 
Requirements. However, section 45Z(f)(6)(B) provides a special rule for 
qualified facilities placed in service before January 1, 2025. Under 
section 45Z(f)(6)(B), the Prevailing Wage Requirements do not apply 
with respect to construction of that facility but do apply to the 
alteration or repair of that facility with respect to any taxable year 
beginning after December 31, 2024, for which the section 45Z credit is 
allowed with respect to that facility. Section 45Z(f)(7) provides that 
rules similar to section 45(b)(8) apply for purposes of the 
Apprenticeship Requirements.
    The proposed regulations would provide that if a taxpayer satisfies 
the PWA requirements, then the applicable amount determined under 
section 45Z(a)(2)(B) would equal $1.00.

H. Section 48

    Section 48 provides a credit for an energy property placed in 
service during a taxable year. For properties placed in service after 
December 31, 2022, the credit is generally six percent of the basis of 
property described in section 48(a)(2)(A)(i) and two percent of the 
basis of property described in section 48(a)(2)(A)(ii). If a taxpayer 
satisfies the PWA requirements, the One Megawatt Exception, or the BOC 
Exception, then the credit determined under section 48(a) for the basis 
of each energy property placed in service during the taxable year is 
multiplied by five.
    To satisfy the Prevailing Wage Requirements under section 
48(a)(10)(A), a taxpayer must ensure that any laborers and mechanics 
employed by the taxpayer or any contractor or subcontractor in: (i) the 
construction of any energy project, and (ii) the alteration or repair 
of that energy project (for the five-year period beginning on the date 
such project is originally placed in service), 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 that energy 
project is located. Section 48(a)(10)(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 48(a)(10)(C) provides a special recapture rule with respect to 
alterations or repairs that occur during the five-year period after the 
energy project is placed in service if that taxpayer does not satisfy 
the Prevailing Wage Requirements. In general, the section 48(a)(10)(C) 
recapture is determined under similar rules to those provided for in 
section 50. Subject to the section 48(a)(10)(C) recapture, the taxpayer 
is deemed at the time the qualified energy project is placed in service 
to satisfy the Prevailing Wage Requirements for alterations or repairs 
for the five-year period beginning after such project is originally 
placed in service. Section 48(a)(11) provides that rules similar to 
section 45(b)(8) apply for purposes of the Apprenticeship Requirements.
    The proposed regulations would provide that if a taxpayer satisfies 
the PWA requirements, then the credit determined under section 48 for 
any qualified energy project would be multiplied by five.

I. 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. If a taxpayer satisfies the PWA 
requirements, 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.
    The Treasury Department and the IRS issued Notice 2023-18, 2023-10 
I.R.B. 508, and Notice 2023-44, 2023-25 I.R.B. 924, 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 
when 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 provide 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) would be equal to 30 percent.

J. Section 48E

    Section 48E provides a clean electricity investment credit for the 
investment in qualified facilities and energy storage technology placed 
in service for the taxable year after December 31, 2024. The credit is 
generally six percent of the qualified investment. If a taxpayer 
satisfies the PWA requirements, the One Megawatt Exception, or the BOC 
Exception, then the credit amount determined under section 48E(a) for a 
qualified investment is 30 percent.

[[Page 60035]]

    Section 48E(d)(3) provides that rules similar to section 48(a)(10) 
apply for purposes of the Prevailing Wage Requirements. Section 
48E(d)(4) provides that rules similar to section 45(b)(8) apply for 
purposes of the Apprenticeship Requirements.
    The proposed regulations would provide that if a taxpayer satisfies 
the PWA requirements, then the credit amount determined under section 
48E(a) for a qualified investment would be equal to 30 percent.

K. Section 179D

    Section 179D(a) provides a deduction for the cost of energy 
efficient commercial building property placed in service during the 
taxable year. Section 179D(f) provides an alternative deduction for 
energy efficient building retrofit property (alternative deduction). 
For taxable years beginning after December 31, 2022, section 179D(b) 
provides that the deduction cannot exceed the excess (if any) of the 
product of the applicable dollar value, and the square footage of the 
building, over the aggregate amount of deductions under section 179D(a) 
and section 179D(f) with respect to the building for the three taxable 
years immediately preceding the taxable year (or for any taxable year 
ending during the four-taxable-year period ending with such taxable 
year, if the deduction is allowed to a person other than the taxpayer). 
The alternative deduction is an amount equal to the lesser of the 
``excess'' described in section 179D(b) (determined by substituting 
``energy use intensity'' for ``total annual energy and power costs'') 
or the aggregate adjusted basis (determined after taking into account 
all adjustments with respect to the taxable year other than the 
reduction under section 179D(e)) of energy efficient building retrofit 
property placed in service by the taxpayer pursuant to a qualified 
retrofit plan. The applicable dollar value is $0.50 increased by $0.02 
(but not above $1.00) for each percentage point by which the total 
annual energy and power costs (or energy use intensity, in the case of 
the alternative deduction) for the building are certified to be reduced 
by a percentage greater than 25 percent. If a taxpayer satisfies the 
PWA requirements or the beginning of installation exception, then the 
applicable dollar value of the deduction determined under section 
179D(b)(2) is $2.50 increased by $0.10 (but not above $5.00).
    To satisfy the Prevailing Wage Requirements under section 
179D(b)(4)(A), a taxpayer must ensure that any laborers and mechanics 
employed by the taxpayer or any contractor or subcontractor in the 
installation of any property 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 property is located. Section 
179D(b)(4)(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 179D(b)(5) provides 
that rules similar to section 45(b)(8) apply for purposes of the 
Apprenticeship Requirements.
    The proposed regulations would provide that if a taxpayer satisfies 
the PWA requirements, then the applicable dollar value of the deduction 
determined under section 179D(b)(2) would be $2.50 increased by $0.10 
(but not above $5.00).

V. Recordkeeping 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.

B. Recordkeeping With Respect to Prevailing Wage Requirements

    The Copeland Act requires contractors and subcontractors subject to 
the DBA to submit certified weekly payroll records reflective of work 
performed on a covered contract to the contracting agency. This 
requirement to comply with the DBA is statutory and inherent in the 
award of a contract and the submission of weekly payroll records 
becomes part of the terms of the awarded contract. In contrast, under 
section 45(b)(7)(A), although the requirement to pay prevailing wages 
is triggered by the beginning of construction and continues over the 
entire course of a project, the requirement to pay prevailing wages 
becomes binding only when a tax return claiming the increased credit is 
filed. Thus, because the increased credit is not claimed until the time 
of filing a return, which will only occur after a qualified facility is 
placed in service, the proposed regulations would not adopt the 
Copeland Act requirement to report payroll records to the IRS on a 
weekly basis in advance of claiming an increased credit. The Treasury 
Department and the IRS understand that adoption of the Copeland Act 
reporting regime for purposes of section 45(b)(7)(A) would not assist 
the IRS with administering the provision.
    Instead, the proposed regulations would provide that taxpayers 
would be required to establish compliance with the Prevailing Wage 
Requirements at the time a return claiming the increased credit is 
filed. The proposed regulations would provide that a taxpayer would be 
required to do so on such forms and in such manner as the Commissioner 
provides in IRS forms, publications, or other guidance. The Treasury 
Department and the IRS expect that taxpayers will be required to report 
at the time of filing a return the following information: (i) the 
location and type of qualified facility; (ii) the applicable wage 
determinations for the type and location of the facility; (iii) the 
wages paid (including any correction payments) and hours worked for 
each of the laborer or mechanic classifications engaged in the 
construction, alteration, or repair of the facility; (iv) the number of 
workers who received correction payments; (v) the wages paid and hours 
worked by qualified apprentices for each of the laborer or mechanic 
classifications engaged in the construction, alteration, or repair of 
the facility; (vi) the total labor hours for the construction, 
alteration, or repair of the facility by any laborer or mechanic 
employed by the taxpayer or any contractor or subcontractor; and (vii) 
the total credit claimed.
    The DBA has comprehensive recordkeeping requirements that assist 
the DOL in its oversight of Prevailing Wage Requirements. The DBA 
recordkeeping regime is consistent with what the IRS would ordinarily 
expect taxpayers to preserve to be able to substantiate that the 
Prevailing Wage Requirements have been satisfied. The proposed 
regulations would impose recordkeeping requirements that are generally 
consistent with the

[[Page 60036]]

recordkeeping requirements under the DBA regime for purposes of the 
Prevailing Wage Requirements.
    The proposed regulations would require taxpayers to maintain and 
preserve sufficient records to establish compliance with the 
requirement that all laborers and mechanics were paid wages at rates 
not less than the applicable prevailing rates. Records sufficient to 
establish compliance would include payroll records that reflect the 
hours worked in each classification and the wages paid to each laborer 
and mechanic performing construction, alteration, or repair work on the 
facility (including any correction payments made to each laborer and 
mechanic). The Treasury Department and the IRS expect that most 
taxpayers will use contractors and subcontractors in the construction, 
alteration, or repair of facilities and that construction may occur for 
several years before a facility is placed in service. The proposed 
regulations would provide that it would be the responsibility of the 
taxpayer to maintain payroll records that reflect the wages paid to 
labors and mechanics engaged in the construction, alteration, or repair 
of the qualified facility, regardless of whether the laborers and 
mechanics are employed by the taxpayer, a contractor, or a 
subcontractor. The proposed regulations would also impose recordkeeping 
requirements related to correction and penalty payments.
    The proposed regulations include a non-exhaustive list of facts and 
circumstances that would be relevant to the IRS in determining whether 
a failure to meet the Prevailing Wage Requirements was due to 
intentional disregard. To demonstrate that a failure was not due to 
intentional disregard, taxpayers would need to maintain and preserve 
records sufficient to document the failure and the actions they took 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 proposed regulations would also waive penalties for certain 
limited failures. To the extent taxpayers intend to rely on these 
penalty waiver provisions, they would need to maintain records 
sufficient to demonstrate when a failure occurred and proof that the 
taxpayer made the required correction payment.

C. Recordkeeping With Respect to Apprenticeship Requirements

    The proposed regulations would require taxpayers subject to the 
Apprenticeship Requirements to maintain sufficient records to establish 
compliance with the Labor Hours Requirement, Ratio Requirement, and 
Participation Requirement. Records sufficient to establish compliance 
with the Apprenticeship Requirements include copies of any written 
requests for apprentices by the taxpayer, contractor, or subcontractor, 
any agreement entered by the taxpayer, contractor, or subcontractor 
with a registered apprenticeship program, documents reflecting any 
registered apprenticeship program sponsored by the taxpayer, 
contractor, or subcontractor, documents verifying participation in a 
registered apprenticeship program by each apprentice, records 
reflecting the required ratio of apprentices to journeyworkers 
prescribed by each registered apprenticeship program from which 
qualified apprentices are employed, records reflecting the daily ratio 
of apprentices to journeyworkers, and the payroll records for any work 
performed by apprentices. The proposed regulations provide that it 
would be the responsibility of the taxpayer to maintain the relevant 
records for each apprentice engaged in the construction, alteration, or 
repair on the qualified facility, regardless of whether the apprentice 
is employed by the taxpayer, a contractor, or a subcontractor.

D. Recordkeeping for Credits Transferred Under Section 6418

    Because an eligible taxpayer determines any increased credit amount 
applicable to the prevailing wage and apprenticeship requirements, the 
general recordkeeping requirements under these proposed regulations 
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 applicable forms 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 Proposed Regulations 
that does not impact the requirements in these proposed regulations.

VI. Effect on Other Documents

    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 the 
Treasury Decision adopting these regulations as final regulations is 
published in the Federal Register. The proposed regulations would not 
otherwise affect Notice 2022-61.

VII. Proposed Applicability Date

    These regulations are proposed to apply to facilities, property, 
projects, or equipment placed in service in taxable years ending after 
the date these regulations are published as final in the Federal 
Register and the construction or installation of which begins after the 
date these regulations are published as final regulations in the 
Federal Register. However, taxpayers may rely on these 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 regulations are published as final 
regulations 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.

Special Analyses

I. 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 proposed regulations would 
include reporting, recordkeeping, and third-party disclosure 
requirements. These collections are required for purposes of claiming 
an increased credit or deduction amount; and are necessary for the IRS 
to validate that taxpayers have met the regulatory requirements and are 
entitled to claim the increased credit amounts. The likely respondents 
are individual, business, trust and estate filers, and tax exempt 
organizations.
    The proposed regulations would set forth procedures for requesting 
supplemental wage determinations and wage rates for additional 
classifications from the DOL. This collection is approved by OMB under 
the DOL's Control Number 1235-0034. This IRS regulation does not alter 
any of the DOL collections approved under this control number.
    The proposed regulations would include requirements to keep records

[[Page 60037]]

sufficient to demonstrate that PWA requirements have been met as 
detailed in Sec.  1.45-12. For purposes of the PRA, the recordkeeping 
requirements of Sec.  1.45-12 are considered general tax records. These 
general tax records are approved annually under 1545-0074 for 
individuals/sole proprietors, 1545-0123 for business entities, and 
1545-0047 for tax-exempt organizations. IRS will seek OMB approval 
under a new OMB Control number (1545-NEW) for the burden for trust and 
estate filers.
    The proposed regulations would include reporting requirements that 
taxpayers provide a statement with the tax return that claims an 
increased credit or deduction amount that includes aggregate 
information as detailed in Sec.  1.45-12. The Secretary 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, 1545-0123 for 
business entities. IRS will solicit public comments on this requirement 
and the associated burden for trusts and estates filers as reflected 
below; and will seek OMB approval under a new OMB Control Number (1545-
NEW) for trust and estate filers.
    The proposed regulations would include third-party disclosures that 
include notifying laborers and mechanics of the applicable prevailing 
wage rates as detailed in Sec.  1.45-7. The proposed regulations would 
also include third party disclosures for taxpayers requesting the 
dispatch of apprentices from a registered apprenticeship program as 
detailed in Sec.  1.45-8. IRS will solicit public comment on this 
requirement and associated burden for all filers reflected below; and 
will seek OMB approval under a new OMB Control Number (1545-NEW) for 
all filers for the disclosure requirement.
    The collections of information contained in this notice of proposed 
rulemaking has been submitted to the Office of Management and Budget 
for review in accordance with the Paperwork Reduction Act. Commenters 
are strongly encouraged to submit public comments electronically. 
Written comments and recommendations for the proposed information 
collection should be sent to https://www.reginfo.gov/public/do/PRAMain, 
with copies to the Internal Revenue Service. Find this particular 
information collection by selecting ``Currently under Review--Open for 
Public Comments'' then by using the search function. Submit electronic 
submissions for the proposed information collection to the IRS via 
email at <a href="/cdn-cgi/l/email-protection#dcacaebdf2bfb3b1b1b9b2a8af9cb5aeaff2bbb3aa"><span class="__cf_email__" data-cfemail="265654470845494b4b43485255664f545508414950">[email protected]</span></a> (indicate REG-100908-23 on the Subject 
line). Comments on the collection of information should be received by 
October 30, 2023. Comments are specifically requested concerning:
    Whether the proposed collection of information is necessary for the 
proper performance of the functions of the IRS, including whether the 
information will have practical utility. The accuracy of the estimated 
burden associated with the proposed collection of information. How the 
quality, utility, and clarity of the information to be collected may be 
enhanced. How the burden of complying with the proposed collection of 
information may be minimized, including through the application of 
automated collection techniques or other forms of information 
technology; and estimates of capital or start-up costs and costs of 
operation, maintenance, and purchase of services to provide 
information.
    The IRS estimates that 70 trust and estates may claim the increased 
credit and that it could take approximately 40 hours to compile the 
data needed for the statement attached to their return.
    Estimated total annual reporting and recordkeeping burden for 
trusts and estates filers: 2,800 hours.
    Estimated average annual burden per respondent: 40 hours.
    Estimated number of respondents: 70.
    Estimated frequency of responses: Annual.
    The IRS estimates that 70,000 filers may claim the increased credit 
and that it could take approximately two hours to display the 
prevailing wages rates and to request the dispatch of apprentices.
    Estimated total annual third-party disclosure burden for all other 
filers: 140,000 hours.
    Estimated average annual burden per respondent: Two hours.
    Estimated number of respondents: 70,000.
    Estimated frequency of responses: Once.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a valid 
control number assigned by the Office of Management and Budget.

II. 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 an 
initial regulatory flexibility analysis (IRFA) of the proposed rule. 
The Treasury Department and the IRS have not determined whether the 
proposed rule, when finalized, will likely have a significant economic 
impact on a substantial number of small entities. This determination 
requires further study. However, because there is a possibility of 
significant economic impact on a substantial number of small entities, 
an IRFA is provided in these proposed regulations. The Treasury 
Department and the IRS invite comments on both the number of entities 
affected and the economic impact on small entities. Pursuant to section 
7805(f), this notice of proposed rulemaking has been submitted to the 
Chief Counsel of Advocacy of the Small Business Administration for 
comment on its impact on small business.

A. Need for and Objectives of the Rule

    The proposed regulations would provide guidance to taxpayers 
intending to satisfy the PWA requirements to qualify for an increased 
credit or deduction under sections 30C, 45, 45Q, 45V, 45Y, 45Z, 48, 
48C, 48E, and 179D and for those taxpayers intending to satisfy the 
Prevailing Wage Requirements to qualify for the increased credit under 
sections 45L and 45U. The proposed regulations would provide needed 
guidance for taxpayers on the use of wage determinations issued by the 
DOL, on the time and manner for reporting compliance with the PWA 
requirements, as well as needed definitions. The proposed regulations 
would 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 credit and deduction 
amounts.
    The Treasury Department and the IRS intend and expect that the 
increased credit amount of five times the base credit for taxpayers 
that ensure the payment of paying prevailing wages and hiring 
apprentices in the construction, alteration, or repair of qualified 
facilities provides financial incentives that will beneficially impact 
various industries involved in the production of and investment in 
clean energy. These proposed regulations would provide clarifying 
guidance that will assist taxpayers seeking to comply with the

[[Page 60038]]

statutory prevailing wage and apprenticeship requirements in order to 
take advantage of the financial incentives. The Treasury Department and 
IRS expect that the increased credit amounts available to taxpayers as 
financial incentives will exceed the costs of the additional 
recordkeeping and reporting obligations that would be imposed on 
taxpayers by these proposed regulations.
    The Treasury Department and the IRS also expect the financial 
incentives for taxpayers to ensure payment of prevailing wage rates and 
using 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 credits and an increased deduction for 
taxpayers who satisfy prevailing wage and apprentice requirements will 
incentivize expansion of clean energy resources and will reduce economy 
wide greenhouse gas emissions.

B. Affected Small Entities

    The RFA directs agencies to provide a description of, and where 
feasible, an estimate of, the number of small entities that may be 
affected by the proposed rules, if adopted. The Small Business 
Administration's 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 Small Business Administration. As described more fully in the 
preamble to this proposed regulation and in this IRFA, section 45 and 
these proposed regulations may affect a variety of different entities 
across several different green energy industries as there are 12 
different credits with increased credit amount provisions. Although 
there is uncertainty as to the exact number of small businesses within 
this group, the current estimated number of respondents to these 
proposed rules is 70,000 taxpayers as described in the Paperwork 
Reduction Act section of the preamble. The Treasury Department and the 
IRS expect to receive more information on the impact on small 
businesses through comments on this proposed rule.

C. Impact of the Rules

    The proposed regulations provide rules for how taxpayers can 
satisfy the PWA requirements in order to seek the increased credits 
under section 45 as well as the increased credit or deduction available 
under sections 30C, 45L, 45Q, 45U, 45V, 45Y, 45Z, 48, 48C, 48E, and 
179D. Taxpayers that seek to claim the increased credit or deduction 
will have administrative costs related to reading and understanding 
these proposed rules, 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 would 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 would be required to 
contact the DOL to obtain a supplemental wage determination or a wage 
rate for an additional classification. The taxpayer would be required 
to ensure that any contractor or subcontractor that works on the 
construction, alteration, or repair of a facility has paid hourly wages 
in accordance with the wage determination for each classification 
required to complete such work. In order to be eligible for certain 
proposed cure provisions, the taxpayer would be 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 would be required to retain records sufficient to establish 
compliance with these proposed regulations for as long as may be 
relevant. The Treasury Department and the IRS expect that some of the 
recordkeeping that would be required under these proposed 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.
    For the Apprenticeship Requirements, the taxpayer, contractor, and 
subcontractor, would be 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 apprentices, the taxpayer would be required to retain 
records to establish compliance with these proposed regulations for as 
long as may be relevant.
    The taxpayer claiming the increased credit would be required to 
report the payment of prevailing wages and the utilization of 
apprentices consistent with the forms and instructions of the IRS. 
Although the Treasury Department and the IRS do not have sufficient 
data to determine precisely the likely extent of the increased costs of 
compliance, the estimated burden of complying with the recordkeeping 
and reporting requirements are described in the Paperwork Reduction Act 
section of the preamble.

D. Alternatives Considered

    The Treasury Department and the IRS considered alternatives to the 
proposed regulations. The proposed regulations were designed to 
minimize burdens for taxpayers while ensuring that laborers and 
mechanics are paid the applicable wage rates and that the IRS has 
sufficient information to administer the increased credits and 
deduction provisions. The proposed regulations would not adopt the DBA 
requirement of submitting weekly certified payroll records to the IRS. 
The Treasury Department and IRS determined that submission of weekly 
payroll records to the IRS by taxpayers would not assist the IRS with 
the efficient administration of the increased credit provisions. The 
Treasury Department and the IRS also considered a requirement that 
taxpayers submit payroll records for all laborers and mechanics at the 
time of filing a return that claims an increased credit. 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.
    Comments are requested on the requirements in the proposed 
regulations, including specifically, whether there are less burdensome 
alternatives that ensure the IRS has sufficient information to 
administer the increased credit claimed under section 45 as well as the 
increased credit and deduction amounts that are claimed under sections 
30C, 45L, 45Q, 45U, 45V, 45Y, 45Z, 48, 48C, 48E, and 179D.

E. Duplicative, Overlapping, or Conflicting Federal Rules

    For energy facilities built under contracts with the Federal 
Government, or with Federal financial or other assistance provided 
under a Davis-Bacon Related Act, the proposed regulations may overlap 
with the rules under the DBA, 29 CFR parts 1, 5, and 7. In all other 
instances, the proposed regulations would not duplicate, overlap, or 
conflict with any relevant Federal rules. The Treasury Department

[[Page 60039]]

and the IRS invite input from interested members of the public about 
identifying and avoiding overlapping, duplicative, or conflicting 
requirements.

III. Section 7805(f)

    Pursuant to section 7805(f), this notice of proposed rulemaking has 
been submitted to the Chief Counsel for the Office of Advocacy of the 
Small Business Administration for comment on its impact on small 
business.

IV. Unfunded Mandates Reform Act

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
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). This proposed 
rule does 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. This proposed rule does not have 
federalism implications and does 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.
    The Treasury Department and the IRS will hold a consultation with 
Tribal leaders related to the prevailing wage and apprenticeship 
requirements in these proposed regulations, which will inform the 
development of the final regulations.

VII. 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 of Executive Order 12866, as amended. Therefore, a regulatory 
impact assessment is not required.

Comments and Public Hearing

    Before these proposed amendments to the regulations are adopted as 
final regulations, consideration will be given to comments regarding 
the notice of proposed rulemaking that are submitted timely to the IRS 
as prescribed in the preamble under the ADDRESSES section. The Treasury 
Department and the IRS request comments on all aspects of the proposed 
regulations. All comments will be made available at https://www.regulations.gov. Once submitted to the Federal eRulemaking Portal, 
comments cannot be edited or withdrawn.
    A public hearing has been scheduled for November 21, 2023, 
beginning at 10 a.m. ET, in the Auditorium at the Internal Revenue 
Building, 1111 Constitution Avenue NW, Washington, DC. Due to building 
security procedures, visitors must enter at the Constitution Avenue 
entrance. In addition, all visitors must present photo identification 
to enter the building. Because of access restrictions, visitors will 
not be admitted beyond the immediate entrance area more than 30 minutes 
before the hearing starts. Participants may alternatively attend the 
public hearing by telephone.
    The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who 
wish to present oral comments at the hearing must submit an outline of 
the topics to be discussed and the time to be devoted to each topic by 
October 30, 2023. A period of 10 minutes will be allotted to each 
person for making comments. An agenda showing the scheduling of the 
speakers will be prepared after the deadline for receiving outlines has 
passed. Copies of the agenda will be available free of charge at the 
hearing. If no outline of the topics to be discussed at the hearing is 
received by October 30, 2023, the public hearing will be cancelled. If 
the public hearing is cancelled, a notice of cancellation of the public 
hearing will be published in the Federal Register.
    Individuals who want to testify in person at the public hearing 
must send an email to <a href="/cdn-cgi/l/email-protection#1d6d687f71747e75787c6f74737a6e5d746f6e337a726b"><span class="__cf_email__" data-cfemail="6c1c190e00050f04090d1e05020b1f2c051e1f420b031a">[email protected]</span></a> to have your name added to 
the building access list. The subject line of the email must contain 
the regulation number REG-100908-23 and the language TESTIFY in Person. 
For example, the subject line may say: Request to TESTIFY in Person at 
Hearing for REG-100908-23.
    Individuals who want to testify by telephone at the public hearing 
must send an email to <a href="/cdn-cgi/l/email-protection#bececbdcd2d7ddd6dbdfccd7d0d9cdfed7cccd90d9d1c8"><span class="__cf_email__" data-cfemail="97e7e2f5fbfef4fff2f6e5fef9f0e4d7fee5e4b9f0f8e1">[email protected]</span></a> to receive the telephone 
number and access code for the hearing. The subject line of the email 
must contain the regulation number REG-100908-23 and the language 
TESTIFY Telephonically. For example, the subject line may say: Request 
to TESTIFY Telephonically at Hearing for REG-100908-23.
    Individuals who want to attend the public hearing in person without 
testifying must also send an email to <a href="/cdn-cgi/l/email-protection#f8888d9a94919b909d998a91969f8bb8918a8bd69f978e"><span class="__cf_email__" data-cfemail="94e4e1f6f8fdf7fcf1f5e6fdfaf3e7d4fde6e7baf3fbe2">[email protected]</span></a> to have 
your name added to the building access list. The subject line of the 
email must contain the regulation number REG-100908-23 and the language 
ATTEND In Person. For example, the subject line may say: Request to 
ATTEND Hearing in Person for REG-100908-23. Requests to attend the 
public hearing must be received by 5:00 p.m. EST on November 17, 2023.
    Hearings will be made accessible to people with disabilities. To 
request special assistance during a hearing please contact the 
Publications and Regulations Branch of the Office of Associate Chief 
Counsel (Procedure and Administration) by sending an email to 
<a href="/cdn-cgi/l/email-protection#abdbdec9c7c2c8c3cecad9c2c5ccd8ebc2d9d885ccc4dd"><span class="__cf_email__" data-cfemail="90e0e5f2fcf9f3f8f5f1e2f9fef7e3d0f9e2e3bef7ffe6">[email protected]</span></a> (preferred) or by telephone at (202) 317-6901 
(not a toll-free number) by at least November 15, 2023.

Statement of Availability of IRS Documents

    Guidance cited in this preamble is published in the Internal 
Revenue Bulletin and is 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 proposed regulations is the Office of 
the Associate Chief Counsel (Passthroughs and Special Industries). 
However, other personnel from the Treasury Department and the IRS 
participated in the development of the proposed regulations.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

[[Page 60040]]

Proposed Amendments to the Regulations

    Accordingly, the Treasury Department and the IRS propose to amend 
26 CFR part 1 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, 1.48-13, 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 1.48-13 also issued under 26 U.S.C. 48.
* * * * *
    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 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 project requirements. A qualified alternative fuel 
vehicle 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.
    (c) Applicability date. This section applies to projects placed in 
service in taxable years ending after [date final rule publishes in the 
Federal Register], and the construction of which begins after [date 
final rule publishes in the Federal Register].
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) In general.
    (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) In general.
    (b) Labor hours requirement.
    (c) Application of apprentice-to-journeyworker ratio.
    (d) Participation requirement.
    (e) Exceptions to the Apprenticeship Requirements.
    (f) Definitions.
    (g) Applicability date.

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

Sec.  1.45-12 Recordkeeping and reporting.

    (a) In general.
    (b) Recordkeeping for prevailing wage and apprenticeship 
requirements.
    (c) Recordkeeping for prevailing wage requirements.
    (d) Recordkeeping for apprenticeship requirements.
    (e) 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(d)) 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 sections 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 (MW) 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. Where 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 facilities placed in 
service in taxable years ending after [date final rule publishes in the 
Federal Register], and the construction of which begins after [date 
final rule publishes in the Federal Register].


Sec.  1.45-7  Prevailing wage requirements.

    (a) In general. In order for the increased credit under section 
45(b)(6)(B)(iii) with respect to any qualified facility to be claimed, 
the taxpayer must satisfy the requirements

[[Page 60041]]

of section 45(b)(7) and this section (the ``Prevailing Wage 
Requirements'') 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 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 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 paragraphs (b)(2) and (3) of this section. For 
purposes of determining the increased credit under section 45(b)(6) for 
a taxable year, the Prevailing Wage Requirements applicable to 
alteration or repair work with respect to the taxable year(s) in which 
the alteration or repair of the qualified facility occurs apply. See 
paragraph (d) of this section for definitions of terms used in this 
section.
    (b) Wage determinations--(1) In general. A taxpayer satisfies the 
Prevailing Wage Requirements if the taxpayer ensures 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 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. When 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. Except as provided in paragraph 
(b)(3) of this section, to satisfy the Prevailing Wage Requirements 
described in paragraph (a) of this section, taxpayers 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 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 wage determination in effect for the specified type of construction 
in the geographic area when the construction, alteration, or repair of 
the facility begins.
    (3) Supplemental wage determinations and rates--(i) Use of 
supplemental wage determinations and rates. In the event the Secretary 
of Labor has not published 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 areas.
    (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 <a href="/cdn-cgi/l/email-protection#c78e9586b7b5a2b1a6aeabaea9a0b0a6a0a287a3a8abe9a0a8b1"><span class="__cf_email__" data-cfemail="400912013032253621292c292e273721272500242f2c6e272f36">[email protected]</span></a>, 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). A taxpayer, contractor, or 
subcontractor should make such requests no more than 90 days before the 
beginning of construction, alteration, or repair, as appropriate (or as 
soon as practicable after the start of construction, alteration, or 
repair, in the instance where the taxpayer, contractor, or 
subcontractor cannot reasonably determine prior to the start of 
construction, alteration, or repair that a supplemental wage 
determination or an additional classification and wage rate is 
necessary). 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.
    (B) 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 start date of construction, alteration, or repair at the 
facility;
    (6) 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);
    (7) The duties to be performed by each such labor classification on 
the facility;
    (8) The proposed wage rate, including any bona fide fringe 
benefits, for each such labor classification;
    (9) Any pertinent wage payment information that may be available;
    (10) Any additional relevant information otherwise required by 
forms and instructions published by the U.S. Department of Labor; and
    (11) Any additional information the taxpayer wants the U.S. 
Department of Labor to consider.
    (iii) 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 facility located in an offshore 
area within the outer continental shelf of the United States, a

[[Page 60042]]

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 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 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 
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 must use the applicable wage determination in effect at the 
time the alteration or repair work begins. A new wage determination 
would be required to be used when work on a facility is changed to 
include additional construction, alteration, or repair work not within 
the scope of work of the original project, or to require work to be 
performed for an additional time period not originally obligated, 
including where an option to extend the term of a contract for the 
construction, alteration, or repair is exercised. 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 or 
additional classification and wage rate issued under paragraph (b)(3) 
of this section applies from the time the taxpayer begins the 
construction, alteration, or repair of the facility. If a supplemental 
wage determination or additional classification and wage rate is issued 
after construction, alteration, or repair of the facility has begun, 
the applicable prevailing rates apply retroactively to the date 
construction began.
    (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. 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 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 facility for purposes of claiming the increased credit 
under section 45(b)(6). The rules set forth in 29 CFR 5.25 through 
5.33, and 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 facility 
consistent with the requirements of section 45(b)(8) and Sec.  1.45-8 
and individuals in the first 90 days of probationary employment as an 
apprentice in a registered apprenticeship program who have been 
certified by the U.S. Department of Labor's Office of Apprenticeship or 
a State apprenticeship agency to be eligible for probationary 
employment as an apprentice, may be paid at less than the predetermined 
rate for the work they perform when they are employed pursuant to and 
individually registered in a bona fide apprenticeship program 
registered with the U.S. Department of Labor's Office of 
Apprenticeship, or with a State apprenticeship agency recognized by the 
U.S. Department of Labor's Office of Apprenticeship. Every apprentice 
must be paid at not less than the rate 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 at the full applicable wage rate 
determination for laborers or mechanics working in that classification. 
Any individual listed on payroll at an apprenticeship wage, who is not 
registered with 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 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.
    (iv) Reciprocity of ratios and wage rates. If a taxpayer, 
contractor, or subcontractor is performing

[[Page 60043]]

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 ratios and 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. If there is no applicable ratio or wage 
rate for the geographic area of the facility, the ratio and wage rate 
(expressed in percentages of the journeyworker's hourly rate) specified 
in the registered apprenticeship program standard 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 under section 45(b)(6)(B)(iii). If the 
taxpayer claims the increased credit 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 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 entitled to the increased credit under section 45(b)(6)(B)(iii). 
Taxpayers that are not entitled to claim the increased credit amount 
may still be entitled to 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 entitled to the increased credit 
amount determined under section 45(b)(6)(B)(iii). Section 6418 and the 
regulations in this part 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 entitled to claim the 
increased credit amount may still be entitled to the base amount of the 
renewable electricity production credit under section 45(a) if they 
meet the requirements to claim the credit.
    (v) Examples. The provisions of this paragraph (c)(1) may be 
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 begins construction of a qualified 
facility on February 3, 2023. The facility is placed in service on 
October 10, 2023, and A claims the increased credit under section 
45(b)(6) 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. X was paid wages 
below the prevailing wage rate for all pay periods in calendar year 
2023. All other laborers and mechanics were paid at the prevailing wage 
rate. The aggregate difference between the amount of wages X was paid 
and the amount required to be paid under paragraph (a) of this section 
is $400 (i.e., X worked 20 weeks during the year and was underpaid by 
$20 in each of those weeks). The amount of the correction payment A 
must make to 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 
A must pay to the IRS to retain the increased credit is $5,000.
    (B) Example 2. Taxpayer B begins construction of a qualified 
facility on January 30, 2023. The facility is placed in service on 
February 2, 2024. Taxpayer B files a claim for the increased credit 
under section 45(b)(6) with its 2024 tax return. Taxpayer B paid 
workers on a biweekly basis. Five laborers employed in the construction 
of the facility were paid wages 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, with the difference between the amount the 
laborer was paid and the amount of

[[Page 60044]]

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 at the prevailing wage 
rates. 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 B must pay to the IRS to retain the 
increased credit is $30,000, which includes $5,000 for each of the 
laborers underpaid in 2023 and $5,000 for the one laborer underpaid in 
2024.
    (C) Example 3. Taxpayer B begins construction of a qualified 
facility on January 30, 2023. The facility is placed in service on 
February 2, 2024. Taxpayer B files a claim for the increased credit 
under section 45(b)(6) with its 2024 tax return. Taxpayer B paid 
workers on a biweekly basis. Laborer X was employed by the taxpayer in 
the construction of the facility for 22 weeks in 2023 was paid wages 
below the prevailing wage rates for the first 20 weeks of her 
employment in the amount of $500 (i.e., X was underpaid $50 in each of 
the 10 biweekly periods). For the last biweekly pay period, Taxpayer B 
paid X 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 B is required to make a correction payment to X in the 
amount of the interest from the date of each underpayment. To retain 
the increased credit, B must make a penalty payment of $5,000 to the 
IRS with respect to Laborer X.
    (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 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 or above the applicable prevailing wage 
rate;
    (B) Whether the taxpayer failed to take steps to determine the 
applicable classifications of laborers and mechanics;
    (C) Whether the taxpayer failed to take steps to determine the 
applicable prevailing wage rate(s) for laborers and mechanics;
    (D) Whether the taxpayer promptly cured any failures to ensure that 
laborers and mechanics were paid wages 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 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;
    (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 at or above 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 
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 U.S. Department of Labor 
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; and
    (I) 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 to appropriate personnel departments or 
managers without retaliation or adverse action.
    (iv) 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 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.
    (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 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 wage determination by the 
U.S. Department of Labor. If a taxpayer has requested a supplemental 
wage determination or an additional classification and wage rate from 
the U.S. Department of Labor in accordance with paragraph (b)(3)(ii) of 
this section

[[Page 60045]]

and the U.S. Department of Labor makes a wage determination after the 
construction, alteration, or repair of the 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 U.S. Department of Labor 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 earlier of 30 
days after the taxpayer became aware of the error or the date on which 
the increased credit is claimed under section 45(b)(6), 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 2.5 
percent of the amount required to be paid under paragraph (b) of this 
section.
    (ii) Project labor agreements. 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 shall 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 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 prevailing wages;
    (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) Examples. The provisions of this paragraph (c)(6) may be 
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 A begins construction of a qualified 
facility on February 1, 2023. The facility is placed in service on 
October 10, 2023, and A claims the increased credit under section 
45(b)(6) on its 2023 tax return filed on April 18, 2024. Taxpayer A 
employs laborer W in the construction of the facility for a total of 36 
weekly pay periods. Taxpayer A pays W at or above 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, W 
should have been paid a total of $35,000 in 2023, but was instead paid 
only $30,000. Taxpayer A 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 A becomes aware of the 
failure on June 1, 2023, and on June 19, 2023, A pays W the correction 
payment required by paragraph (c)(1)(i) of this section. The penalty 
waiver applies to A. Although the difference between the amount W was 
paid in 2023 and the amount required to be paid under the applicable 
prevailing wage rate was $5,000, which is 14.29% of the amount required 
to be paid under the applicable prevailing wage rate, W was paid below 
the prevailing wage rate for only three out of 36 pay periods, or 8.3%. 
Furthermore, A made the correction payment within 30 days of 
discovering the failure on June 1, 2023, and before filing the tax 
return claiming the increased credit on April 18, 2024.
    (B) Example 2. Taxpayer B begins construction of a qualified 
facility on February 1, 2024. The facility is placed in service on 
October 10, 2024, and B claims the increased credit under section 
45(b)(6) on its 2024 tax return filed on April 15, 2025. Taxpayer B 
hires contractor M to assist in the construction, and contractor M 
employs laborer X in the construction of the facility for a total of 36 
pay periods. M pays X at or above the prevailing wage rate for all pay 
periods except for the pay periods ending on February 24 and March 2. 
Under the applicable prevailing wage rate, X 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 at the prevailing wage rate. B learns 
on January 1, 2025, that X was not paid at the prevailing wage rate, 
and on January 19, 2025, B pays X the correction payment required by 
paragraph (c)(1)(i) of this section. The penalty waiver applies to B. Y 
was paid below the prevailing wage rate for two out of 36 pay periods, 
or 5.5%, and the difference between the amount X 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. Although B did not learn 
that that M was paying X below the prevailing wage rate until after the 
end of the year, once B learned of the underpayment, B made the 
correction payment within 30 days and before filing the tax return 
claiming the increased credit on April 15, 2025.
    (C) Example 3. Taxpayer C begins the construction of a qualified 
facility on April 5, 2024. The facility is placed in service on 
December 1, 2024, and C claims the increased credit under section 
45(b)(6) on its 2024 tax return filed on April 15, 2025. Taxpayer C

[[Page 60046]]

employs laborer Y in the construction of the facility for a total of 35 
pay periods. Due to a failure to classify workers in accordance with 
the wage determination, C pays Y below the prevailing wage rate for all 
35 pay periods. Under the applicable prevailing wage rate, Y should 
have been paid $65,000 in 2024, but was instead paid only $63,500. All 
other laborers and mechanics employed in the construction, alteration, 
or repair of the facility were paid at the prevailing wage rate. 
Taxpayer C becomes aware of the failure on January 10, 2025, and on 
January 20, 2025, C pays Y the correction payment required by paragraph 
(c)(1)(i) of this section. The penalty waiver applies to C. Although Y 
was paid below the prevailing wage rate 100% of the pay periods Y 
worked in 2024, the difference between the amount Y was paid in 2024 
and the amount required to be paid under the applicable prevailing wage 
rate was $1,500, which is only 2.3% of the amount required to be paid 
under the applicable prevailing wage rate. Additionally, once C learned 
of the underpayment, C made the correction payment within 30 days and 
before filing the tax return claiming for the increased credit on April 
15, 2025.
    (D) Example 4. Taxpayer D begins construction of a qualified 
facility on August 29, 2024. The facility is placed in service on June 
30, 2025, and D claims the increased credit under section 45(b)(6) on 
its 2025 tax return. Taxpayer D employs laborer Z in the construction 
of the facility for a total of 25 weekly pay periods in 2025. Taxpayer 
D pays Z at or above the prevailing wage rate for all pay periods 
except for the pay periods ending on March 15, May 10, and June 14. 
Under the applicable prevailing wage rate, Z should have been paid 
$25,000 in 2025, but was instead paid only $20,000. Taxpayer D 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 D has in place a pre-hire collective bargaining 
agreement, but the agreement does not contain a provision for referring 
and using qualified apprentices. Taxpayer D becomes aware of the 
failure to pay Z at the prevailing wage rate on June 30, 2025, and on 
July 4, 2025, D pays Z the correction payment required by paragraph 
(c)(1)(i) of this section. The penalty waiver does not apply to D. The 
difference between the amount Z 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. Z was paid below the prevailing wage 
rate for three out of 25 pay periods, or 12%. D 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. Although the correction payment was made within 30 days 
of discovering the failure on June 30, 2025, and before filing the tax 
return claiming for the increased credit on April 15, 2026, Taxpayer D 
failed to satisfy the requirements of paragraphs (c)(6)(i)(A) and (B) 
or paragraph (c)(6)(ii) of this section.
    (d) Definitions. Solely for purposes of this section, the following 
definitions apply:
    (1) 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 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.
    (2) Construction, alteration, or repair--(i) In general. The term 
construction, alteration, or repair generally means construction, 
prosecution, completion, or repair as defined in 29 CFR 5.2. 
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, replacing materials with limited lifespans such as filters and 
light bulbs, and the calibration of any 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. Maintenance does not include work that improves a 
facility, adapts it for a different use, or restores functionality as a 
result of inoperability. This definition has no bearing on any other 
sections of the Code, including any determination of construction, 
alteration, repair, or maintenance under section 162 or 263.
    (ii) Example. Taxpayer T employs a contractor X to construct a 500 
megawatt solar farm that is a qualified facility under section 45. X 
employs numerous laborers and mechanics during construction and ensures 
that wages are paid to the laborers and mechanics at not less than the 
prevailing rate for the geographic area of the solar farm, as set forth 
in the applicable wage determination. After the solar farm is placed in 
service, an inverter malfunctions and requires a replacement part. T 
employs laborers and mechanics to replace the malfunctioning part to 
restore the inverter's functionality. The replacement work is not 
considered ordinary maintenance, and T must ensure those laborers and 
mechanics engaged in the replacement work are paid wages not less than 
the prevailing rate for the geographic area of the solar farm to 
satisfy the Prevailing Wage Requirements.
    (3) Contractor. The term contractor means any person that enters 
into a contract with the taxpayer for the construction, alteration, or 
repair of a qualified facility.
    (4) 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.
    (5) 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.
    (6) Geographic area and locality. The terms geographic area and 
locality mean the county, independent city, or other civil subdivision 
of the State in which the 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

[[Page 60047]]

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 the primary construction site of the facility, 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 
construction site(s), 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. A specific period 
of time means a period of weeks, months, or more, and does not include 
circumstances where a site at which multiple facilities are in progress 
is shifted exclusively so 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.
    (7) Laborer and mechanic. 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.
    (8) Subcontractor. The term subcontractor means any contractor that 
agrees to perform or be responsible for the performance of any part of 
a contract entered into with the taxpayer (or the taxpayer's 
contractor) with respect to the construction, alteration, or repair of 
a facility.
    (9) 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.
    (10) 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. Specific types of 
construction may include, but are not limited to, building, 
residential, heavy, and highway.
    (11) 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 facilities placed 
in service in taxable years ending after [date final rule publishes in 
the Federal Register], and the construction of which begins after [date 
final rule publishes in the Federal Register].


Sec.  1.45-8  Apprenticeship requirements.

    (a) In general. Except as provided in paragraph (e) 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 (the ``Apprenticeship Requirements''). The 
taxpayer is solely responsible for ensuring that the Apprenticeship 
Requirements are satisfied. See paragraph (f) of this section for 
definitions of terms used in this section.
    (b) Labor hours requirement--(1) Percentage of total 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) of any qualified 
facility, subject to the apprentice-to-journeyworker ratio described in 
paragraph (c) of this section.
    (2) Applicable percentage. For purposes of paragraph (b)(1) 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.
    (c) Application of apprentice-to-journeyworker ratio--(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.
    (3) Failure to meet ratio requirements. For purposes of section 
45(b)(8)(B), if on any day the ratio of apprentices to journeyworkers 
exceeds the ratio established in accordance with paragraph (c)(2) of 
this section, and subject to the requirements of the registered 
apprenticeship program, the labor hours performed by any qualified

[[Page 60048]]

apprentice in excess of the ratio may not be counted as hours performed 
by apprentices for purposes of the labor hours requirement of 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 facility.
    (e) 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 of any qualified facility 
or with respect to the alteration or repair of a facility, 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 (e)(1) of this 
section (the ``Good Faith Effort Exception'') or made the penalty 
payment provided in paragraph (e)(2) of this section 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 apprentices. The taxpayer, contractor, or 
subcontractor must submit a written request for qualified apprentices 
to at least one registered apprenticeship program, as defined in 
paragraph (f)(4) of this section, 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; trains 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 apprentices in the occupation for which they are training, 
pursuant to its standards and requirements. Such request must be in 
writing and sent electronically or by registered mail.
    (1) Content of request. The request of the taxpayer, contractor, or 
subcontractor 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 request 
must also state that the request for 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.
    (2) Duration of request. If the taxpayer, contractor, or 
subcontractor submits a request in accordance with paragraph 
(e)(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 a period of 120 days from the date of 
the request. The taxpayer will not be deemed to have exercised a Good 
Faith Effort beyond 120 days of a previously denied request unless the 
taxpayer submits an additional request.
    (B) Denial of request. If a taxpayer, contractor, or subcontractor 
submits a request in accordance with paragraph (e)(1)(i)(A) of this 
section and the request is denied, the taxpayer will be deemed to 
satisfy the requirements of section 45(b)(8)(A) through (C), 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.
    (C) Failure to respond. If the registered apprenticeship program 
fails to respond to a request submitted in accordance with paragraph 
(e)(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. Acknowledgement, whether in writing or otherwise, 
by the registered apprenticeship program of receipt of such request 
submitted in accordance with paragraph (e)(1)(i)(A) of this section is 
a sufficient response for purposes of this paragraph (e)(1)(i)(C).
    (ii) Examples. The provisions of paragraph (e)(1) of this section 
may be illustrated by the following examples.
    (A) Example 1. Taxpayer A submits a request to a registered 
apprenticeship program by email. The registered apprenticeship program 
responds three days later, but reply emails from the registered 
apprenticeship program are auto forwarded to taxpayer A's spam or junk 
mail folder. Taxpayer A claims that the registered apprenticeship 
program failed to respond within five business days and claims the good 
faith effort exception. Taxpayer A would not qualify for the Good Faith 
Effort Exception of this section because the registered apprenticeship 
program did respond within five business days.
    (B) Example 2. Contractor C makes a request for qualified 
apprentices from a registered apprenticeship program outside the 
geographic area of the qualified facility and the registered 
apprenticeship program cannot reasonably be expected to provide 
apprentices to the location of the facility. As a result, Contractor 
C's request is denied. Contractor C's request would not qualify for the 
Good Faith Effort Exception of this section because the registered 
apprenticeship program could not reasonably be expected to provide 
apprentices to the location of the facility.
    (C) Example 3. Contractor D submits a request to a registered 
apprenticeship program. The registered apprenticeship program requires 
contractors to enter into an agreement to partner with that registered 
apprenticeship program. Contractor D refuses to enter into the 
agreement and as a result, the registered apprenticeship program denies 
the Contractor D's request. Contractor D's request would not qualify 
for the Good Faith Effort Exception of this section because Contractor 
D refused to comply with the established standards of the registered 
apprenticeship program.
    (D) Example 4. Contractor E enters into an agreement with a 
registered apprenticeship program with standards of apprenticeship for 
a specific occupation. Contractor E then requests apprentices from that 
registered apprenticeship program for a different occupation in which 
they do not have standards of apprenticeship or an agreement. 
Contractor E's request would not qualify for the Good Faith Effort 
Exception of this section.
    (E) Example 5. Taxpayer F, a tax equity investor in the partnership 
that owns the facility, makes a request to a registered apprenticeship 
program. Taxpayer F's request is denied because it was not made with an 
intent to employ apprentices in the occupation

[[Page 60049]]

for which they are being trained and in accordance with the 
requirements and standards of the registered apprenticeship program. 
Rather, the contractor (or subcontractor) that will employ and train 
the apprentices in the construction, alteration, or repair of the 
facility is the proper party to request apprentices from the registered 
apprenticeship program. Taxpayer F's request would not qualify for the 
Good Faith Effort Exception of this section.
    (F) Example 6. Contractor G submits a request for apprentices from 
a registered apprenticeship program. Contractor's request states that 
it seeks to employ four apprentices for a period of 180 days for a 
total of 4,160 hours (1,040 hours x four apprentices). The registered 
apprenticeship program informs Contractor G that it can supply two 
apprentices for the 26 weeks and denies the request for the other two 
apprentices. Contractor G does not submit any additional requests for 
apprentices from a registered apprenticeship program after 120 days. 
Contractor G's request would qualify for the Good Faith Effort 
Exception of 693 hours for each of the two requested apprentices that 
were denied for the 120 day period after the request was submitted 
(120/180 x 1,040 hours = 693 hours for each denied apprentice). The 
request would not qualify for the Good Faith Effort Exception of this 
section after 120 days because Contractor G did not submit an 
additional request with respect to the portion of the request that was 
denied.
    (2) Penalty payment--(i) In general. The taxpayer must pay the 
Internal Revenue Service (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 to 
retain the increased credit.
    (A) Total labor hours for which the percentage 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 that would be required to meet 
the applicable percentage under paragraph (b)(2) of this section and 
the total labor hours actually worked by all qualified apprentices 
consistent with the applicable ratio of apprentices to journeyworkers.
    (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 worked by all individuals employed 
by the taxpayer, contractor, or subcontractor who failed to meet the 
participation requirement of the qualified facility divided by the 
number of individuals employed by the taxpayer, contractor, or 
subcontractor who performed construction, alteration, or repair work on 
the facility.
    (C) Penalty payment not required if taxpayer ineligible for 
increased credit under section 45(b)(6)(B)(iii). If the taxpayer claims 
the increased credit 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 (e)(2)(i) of this section applies. If the IRS determines that 
a taxpayer claiming the increased credit under section 45(b)(6)(B)(iii) 
failed to meet the Apprenticeship Requirements and the taxpayer does 
not make the penalty payment required under this paragraph (e)(2)(i), 
then no penalty is assessed under this paragraph (e)(2)(i), and the 
taxpayer is not entitled to the increased credit under section 
45(b)(6)(B)(iii). Taxpayers that are not entitled to claim the 
increased credit amount may still be entitled to 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 this paragraph (e)(2)(i) may be 
illustrated by the following examples, which do not take into account 
any possible application of the exception for Good Faith Effort 
Exception under paragraph (e)(1) of this section, the enhanced penalty 
payment requirement in the case of intentional disregard under 
paragraph (e)(2)(ii) of this section, or the inapplicability of the 
penalty in the case of a qualifying project labor agreement under 
paragraph (e)(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 A begins construction of a qualified 
facility on April 1, 2023. The facility is placed in service on April 
1, 2025, and A claims the increased credit on its 2025 tax return. All 
individuals who performed the construction, alteration, or repair work 
were employed directly by taxpayer A, including one qualified 
apprentice. At the time A claims the increased credit, 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 A has satisfied the participation requirement 
because A has employed at least one apprentice. Taxpayer A failed to 
satisfy the percentage 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, so the total labor hours by which the 
percentage requirement was not satisfied is 250. To cure A's failure to 
meet the percentage requirement, A must pay a penalty of $12,500.
    (2) Example 2. Taxpayer B begins construction of a qualified 
facility on February 10, 2023. The facility is placed in service on 
February 10, 2026, and B claims the increased credit on its 2026 tax 
return. B employs 10 individuals to perform construction, alteration, 
or repair work of the facility, two of whom are qualified apprentices. 
Taxpayer B also hires contractor M, who employs five individuals to 
perform construction, alteration, or repair work of the facility, none 
of whom are qualified apprentices. At the time B claims the increased 
credit, 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 B and 
17,000 labor hours were performed by individuals employed by M. B has 
satisfied the percentage requirement under paragraph (b)(2) of this 
section because more than 12.5% of the total labor hours were performed 
by qualified apprentices. B 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 
3,400, which is equal to the total labor hours performed by individuals 
employed by M (17,000) divided by the number of individuals employed by 
M (five). To cure B's failure to meet the Apprenticeship Requirements, 
B must pay a penalty of $170,000.
    (3) Example 3. Taxpayer C begins construction of a qualified 
facility on January 1, 2024. The facility is placed in service on 
January 1, 2025, and C claims the increased credit on its 2025 tax 
return. C employs 15 individuals to perform construction, alteration, 
or repair work of the facility, none of whom is a qualified apprentice. 
Taxpayer C also hires contractor N, who employs five individuals to 
perform

[[Page 60050]]

construction, alteration, or repair work of the facility, one of whom 
is a qualified apprentice. At the time C claims the increased credit, 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 
qualified apprentices. Of the 50,000 total labor hours, 15,000 labor 
hours were performed by individuals employed by C and 5,000 labor hours 
were performed by individuals employed by N. C failed to satisfy the 
percentage 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 percentage 
requirement was not satisfied is 2,000. C also failed to satisfy the 
participation requirement under paragraph (d) of this section because C 
employed 15 individuals but zero 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 by individuals 
employed by C--15,000--divided by the number of individuals employed by 
C--15. The total labor hours by which C failed to meet the percentage 
and participation requirements is 3,000. To cure C's failure to meet 
the Apprenticeship Requirements, C must pay a penalty of $150,000.
    (4) Example 4. Taxpayer D begins construction of a qualified 
facility on April 1, 2023. The facility is placed in service on January 
1, 2024, and D files a claim for the increased credit with its 2024 tax 
return. D does not employ any individuals to perform construction, 
alteration, or repair work of the facility, but hires contractors O, P, 
and Q. Contractor O employs 10 journeyworkers who work 10,000 hours and 
one qualified apprentice who works 400 hours. Contractor P employs four 
journeyworkers who work 4,000 hours and five qualified apprentices who 
work 2,000 hours. Contractor Q employs three journeyworkers who work 
3,000 hours and one qualified apprentice who works 400 hours. The 
registered apprenticeship program for all of the apprentices has 
prescribed a 1:1 apprentice to journeyworker ratio. For each day, all 
journeyworkers and apprentices employed by the contractors are on the 
job site. The contractors have satisfied the participation requirement 
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 P employed one apprentice in 
excess of the apprentice-to-journeyworker ratio (five qualified 
apprentices: four journeyworkers) that was prescribed by the 
apprenticeship program. Because Contractor P employed one apprentice in 
excess of the apprentice-to-journeyworker ratio, 400 of the apprentice 
hours worked by Contractor P do not count towards the labor hour 
requirement. Thus, Taxpayer D has failed to meet the percentage 
requirement because only 2,400 hours worked by apprentices are counted 
for purposes of the percentage requirement. The total labor hours by 
which D failed to meet the percentage requirement is 75 (19,800 total 
hours x 12.5%-2,400 apprentice hours). To cure D's failure to meet the 
Apprenticeship Requirements, D must pay a penalty of $3,750.
    (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 (e)(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 and systemic failures to comply with the 
Apprenticeship Requirements;
    (2) Whether the taxpayer failed to take steps to determine 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 (e)(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 
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
    (6) Whether the taxpayer made no attempt to comply with the 
Apprenticeship Requirements.
    (D) Rebuttable presumption of no intentional disregard. If a 
taxpayer makes the penalty payment required by paragraph (e)(2) of this 
section before receiving notice of an examination from the IRS with 
respect to a claim for the increased credit 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.
    (iii) Deficiency procedures to apply. The penalty payment required 
by paragraph (e)(2) of this section 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 (e)(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 (e)(2)(i) of this 
section, then no penalty is assessed under paragraph (e)(2)(i) of this 
section, and the eligible taxpayer is not entitled to the increased 
credit amount determined under section 45(b)(6)(B)(iii). Section 6418 
and the regulations in this part 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 
paragraph (e)(2)(i) of this section to cure a failure to satisfy the 
Apprenticeship Requirements in paragraphs (b) and (d) of this section 
shall not apply with respect to the construction, alteration, or repair 
work of a qualified facility if the work is done pursuant to a 
Qualifying

[[Page 60051]]

Project Labor Agreement as defined in Sec.  1.45-7(c)(6)(ii).
    (f) Definitions. Solely for purposes of this section, the following 
definitions apply:
    (1) 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 through practical on-the-job 
experience and formal training.
    (2) 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).
    (3) Qualified apprentice. The term qualified apprentice means an 
individual who is employed by the taxpayer or by any contractor or 
subcontractor who is participating in a registered apprenticeship 
program. Participating in a registered apprentice program means the 
apprentice 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 State apprenticeship agency during the time period in which work 
is performed by the apprentice for the taxpayer, contractor, or 
subcontractor.
    (4) 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.
    (5) 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.
    (6) Taxpayer. The term taxpayer has the same meaning as in Sec.  
1.45-7(d)(9).
    (g) Applicability date. This section applies to facilities placed 
in service in taxable years ending after [date final rule publishes in 
the Federal Register], and the construction of which begins after [date 
final rule publishes in the Federal Register].


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


Sec.  1.45-12  Recordkeeping and reporting.

    (a) In general. The increased credit must be claimed in such form 
and manner as may be prescribed in Internal Revenue Service forms or 
instructions or in publications or guidance published in the Internal 
Revenue Bulletin. See Sec.  601.601 of this chapter. Consistent with 
sections 45 and 6001, a taxpayer claiming or transferring (under 
section 6418) an increased credit under section 45(b)(6)(A) must retain 
records sufficient to establish compliance with the applicable 
requirements in section 45(b)(6)(B), as applicable. In the case of any 
increased credit transferred under section 6418, 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(f) with 
respect to the apprenticeship requirements.
    (b) Recordkeeping for prevailing wage and apprenticeship 
requirements. With respect to each qualified facility for which a 
taxpayer is claiming or transferring (under section 6418) an increased 
credit under section 45(b)(6)(A), unless section 45(b)(6)(B)(i) or 
45(b)(6)(B)(ii) applies, the taxpayer must maintain and preserve 
records sufficient to demonstrate compliance with the applicable 
prevailing wage and apprenticeship requirements in 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.
    (c) Recordkeeping for 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 Sec.  1.45-7 may include the following information 
for each laborer and mechanic (including each qualified apprentice) 
employed by the taxpayer, a contractor, or subcontractor with respect 
to each qualified facility:
    (1) Identifying information, including the name, social security or 
tax identification number, address, telephone number, and email 
address;
    (2) The location and type of qualified facility;
    (3) 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;
    (3) 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;
    (4) 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;
    (5) The total number of labor hours worked per pay period;
    (6) The total wages paid for each pay period (including identifying 
any deductions from wages);
    (7) 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
    (8) The amount and timing of any correction payments and 
documentation reflecting the calculation of the correction payments.
    (d) Recordkeeping for apprenticeship requirements. Records 
sufficient to demonstrate compliance with the applicable apprenticeship 
requirements in Sec.  1.45-8 may include the following information for 
each apprentice

[[Page 60052]]

employed by the taxpayer, a contractor, or subcontractor with respect 
to each qualified facility:
    (1) Any written requests for the employment of 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 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 any 
registered apprenticeship program, including the applicable ratio 
requirement prescribed by each registered apprenticeship program from 
which taxpayers, contractors, or subcontractors employ apprentices;
    (4) The total number of labor hours worked by apprentices; and
    (5) Records reflecting the daily ratio of apprentices to 
journeyworkers.
    (e) Applicability date. This section applies to facilities placed 
in service in taxable years ending after [date final rule publishes in 
the Federal Register], and the construction of which begins after [date 
final rule publishes in the Federal Register].
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 new energy efficient 
home 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 new energy 
efficient home 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.
    (b) Definitions--(1) Qualified new energy efficient home. For 
purposes of this section, a qualified new energy efficient home means a 
qualified new energy efficient home described in section 45L(b)(2).
    (2) Eligible contractor. For purposes of this section, an eligible 
contractor means an eligible contractor described in section 45L(b)(1).
    (c) Applicability date. This section applies to qualified new 
energy efficient homes acquired for use in taxable years ending after 
[date final rule publishes in the Federal Register], and the 
construction of which begins after [date final publishes in the Federal 
Register].
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 the construction of which 
begins on or after January 29, 2023, and any carbon capture equipment 
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 
such facility and equipment, the apprenticeship requirements of section 
45(b)(8) and Sec.  1.45-8 with respect to the construction of such 
facility and equipment, and the recordkeeping and reporting 
requirements of Sec.  1.45-12;
    (2) With respect to any carbon capture equipment the construction 
of which begins on or after January 29, 2023, and which is installed at 
a qualified facility the construction of which began prior to such 
date, the taxpayer meets the prevailing wage requirements of section 
45(b)(7) and Sec.  1.45-7 with respect to such equipment, the 
apprenticeship requirements of section 45(b)(8) and Sec.  1.45-8 with 
respect to the construction of such equipment, and the recordkeeping 
and reporting requirements of Sec.  1.45-12; or
    (3) The construction of carbon capture equipment begins prior to 
January 29, 2023, and such equipment is installed at a qualified 
facility the construction of which begins prior to January 29, 2023.
    (c) Applicability date. This section applies to facilities or 
equipment placed in service in taxable years ending after [date final 
rule publishes in the Federal Register], and the construction of which 
begins after [date final rule publishes in the Federal Register].
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 in 
the alteration or repair of such facility, 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) Applicability date. This section applies to qualified nuclear 
power facilities that produce and sell electricity during the taxable 
year and the alteration or repair of which occurs after [date final 
rule publishes in the Federal Register].
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 
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 an alteration or repair of 
the facility that occurs 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.
    (c) Applicability date. This section applies to facilities placed 
in service in taxable years ending after [date final rule publishes in 
the Federal Register], and the construction of which begins after [date 
final rule publishes in the Federal Register].

[[Page 60053]]

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)(2) equals 1.5 cents.
    (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.
    (c) Applicability date. This section applies to facilities placed 
in service in taxable years ending after [date final rule publishes in 
the Federal Register], and the construction of which begins after [date 
final rule publishes in the Federal Register].
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 for clean fuel production 
satisfies the requirements in paragraph (b) of this section, the clean 
fuel production credit determined under section 45Z(a) is multiplied by 
five.
    (b) Qualified facility for clean fuel production. A qualified 
facility for clean fuel production satisfies the requirements of this 
paragraph (b) if it is one of the following--
    (1) A qualified facility that begins construction on or after 
January 29, 2023, and 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; 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, 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 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.
    (c) Applicability date. This section applies to facilities placed 
in service in taxable years ending after [date final rule publishes in 
the Federal Register], and the construction of which begins after [date 
final rule publishes in the Federal Register].
0
Par. 10. Section 1.48-13 is added to read as follows:


Sec.  1.48-13  Rules relating to the increased credit for prevailing 
wage and apprenticeship.

    (a) In general. If a qualified energy project satisfies the 
requirements in paragraph (b) of this section, the amount of the energy 
credit determined under section 48(a), after the application of 
sections 48(a)(1) through (8), and 48(a)(15), is equal to the credit 
determined under section 48(a) (section 48 credit) multiplied by five.
    (b) Qualified energy project requirements. A qualified energy 
project satisfies the requirements of this paragraph (b) if it is one 
of the following--
    (1) A project with a maximum net output of less than one megawatt 
(as measured in alternating current) or thermal energy;
    (2) A project the construction of which began prior to January 29, 
2023; or
    (3) A project that meets the prevailing wage requirements of 
section 48(a)(10)(A) and Sec.  1.45-7(b)-(d), 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) Special rule applicable to general prevailing wage 
requirements--(1) In general. In addition to satisfying the prevailing 
wage requirements under Sec.  1.45-7(b) through (d), a taxpayer must 
ensure that any laborers and mechanics employed (within the meaning of 
Sec.  1.45-7) by the taxpayer or any contractor or subcontractor in the 
construction of such energy project, and for the five-year period 
beginning on the date such project is placed in service, the alteration 
or repair of such project, 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 project is located as most 
recently determined by the Secretary of Labor, in accordance with 40 
U.S.C. chapter 31, subchapter IV. Subject to recapture under paragraph 
(c)(3) of this section, for purposes of determining the increased 
credit amount under section 48(a)(9)(B)(iii), the taxpayer is deemed to 
satisfy the prevailing wage requirements at the time such project is 
placed in service.
    (2) Exception. For purposes of satisfying the wage requirements of 
paragraph (b)(3) of this section, Sec.  1.45-7(a) does not apply.
    (3) Recapture. The increased section 48 credit amount is subject to 
recapture for any project that does not satisfy the prevailing wage 
requirements in Sec.  1.45-7 with respect to an alteration or repair of 
such project for the five-year period beginning on the date such 
project is originally placed in service (but which does not cease to be 
investment credit property within the meaning of section 50(a) of the 
Code).
    (d) Applicability date. This section applies to projects placed in 
service in taxable years ending after [date final rule publishes in the 
Federal Register], and the construction of which begins after [date 
final rule publishes in the Federal Register].
0
Par. 11. 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 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, 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.
    (b) Applicability date. This section applies to qualifying advanced 
energy projects placed in service in taxable years ending after [date 
final rule publishes in the Federal Register], and the construction of 
which begins after [date final rule publishes in the Federal Register].
0
Par. 12. Sections 1.48E-1 through 1.48E-3 are added to read as follows:

[[Page 60054]]

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


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

    (a) In general. If any clean electricity investment with respect to 
a qualified facility or energy storage technology satisfies the 
requirements in paragraph (b) of this section, the applicable 
percentage of the qualified clean electricity investment credit 
determined under section 48E(a) for the taxable year equals 30 percent.
    (b) Qualified clean electricity investment requirements. A 
qualified clean electricity investment 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;
    (3) A facility that meets the prevailing wage requirements of Sec.  
1.48-13(c), the apprenticeship requirements of section 45(b)(8) and 
Sec.  1.45-8, and the recordkeeping and reporting requirements of Sec.  
1.45-12;
    (4) Energy storage technology with a capacity of less than one 
megawatt;
    (5) Energy storage technology the construction of which began prior 
to January 29, 2023; or
    (6) Energy storage technology that satisfies the prevailing wage 
requirements of Sec.  1.48-13(c), 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) Applicability date. This section applies to facilities and 
energy storage technologies placed in service in taxable years ending 
after [date final rule publishes in the Federal Register], and the 
construction of which begins after [date final rule publishes in the 
Federal Register].
0
Par. 13. 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, energy efficient building retrofit property, or property 
installed pursuant to a qualified retrofit plan satisfies the 
requirements in paragraph (b) of this section, the applicable dollar 
value for determining the maximum amount of the deduction under section 
179D(b)(2) is multiplied by five.
    (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) 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) Applicability date. This section applies to property placed in 
service in taxable years ending after [date final rule publishes in the 
Federal Register], and the installation of which begins after [date 
final rule publishes in the Federal Register].

Douglas W. O'Donnell,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2023-18514 Filed 8-29-23; 8:45 am]
BILLING CODE 4830-01-P


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