On August 16, 2022, President Biden signed into law the Inflation Reduction Act (IRA) of 2022. Among many other provisions, the IRA contains a new federal 30% tax credit for private construction, alteration or repair of qualifying clean energy projects, including solar, wind, geothermal, carbon sequestration, and electric vehicle charging stations. In order to qualify for the new tax credit, however, taxpayer owners/developers and their construction contractors and subcontractors are required to comply with the federal prevailing wage provisions of the Davis-Bacon Act. They are also required to employ pre-set work hour percentages of government-registered apprentices on all covered projects.
The IRA creates a significant expansion of federal prevailing wage and apprenticeship requirements onto private construction projects. It is possible that a significant percentage of the tax credit value will be eaten up by the increased cost of construction resulting from these new provisions. There is considerable uncertainty as to how the newly required provisions will be implemented by the Treasury and Labor Departments in future regulatory guidance. Nonunion contractors in particular are concerned that the increased costs and uncertainty will discriminate against the employers of 87% of U.S. construction workforce that is not unionized, thereby exacerbating the construction industry’s skilled labor shortage in the clean energy construction marketplace.
The prevailing wage and...
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