On November 29th, the IRS released Notice 2022-61 providing detailed guidance on the prevailing wage and apprenticeship requirements under the Inflation Reduction Act of 2022 (IRA). Under the IRA certain credits and deductions are increased if prevailing wage requirements are met. These include amended §§ 30C, 45, 45L, 45Q, 45U, 45V, 45Y, 45Z, 48, 48C, 48E, and 179D of the Internal Revenue Code.
This notice provides guidance as to the process for identifying the applicable wage amounts, apprenticeship requirements, and recordkeeping requirements. This includes instructions in determining the wage amounts based on the Department of Labor’s website (sam.gov). Additionally, the IRS provides guidance on the good faith exemption to the apprenticeship requirements under 45(b)(8)(D)(ii).
This guidance was published in the Federal Register on November 30th. For many of the listed programs the requirements start for construction that begins 60 days after Treasury publishes guidance. This means that the rules will be in effect for projects that begin construction on or after January 30, 2023.
Additionally, the IRS provided guidance around how to determine beginning of construction. The IRS confirmed that existing guidance will continue. This existing guidance provides that construction begins when physical work of a significant nature begins, or by following the five percent safe harbor. The five percent safe harbor provides that if five percent or more of the total cost of the project has been expended construction has begun.
Treasury plans on issuing additional regulations on these requirements in the coming months. As these additional requirements are released McGuire Sponsel will continue to review and update our clients on any changes. If you have any questions please reach out to us.
Register for our upcoming webinar: Inflation Reduction Act 4-Months In
Hosted by Dave McGuire
December 15, 2022 • 11AM ET
Attendees will be provided:
—An overview of the tax provisions in the bill
—A practical update on what these mean for taxpayers, including 45L and 179D
—An update on where the IRS stands on regulations
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David McGuire is a leading expert on cost segregation, fixed assets and depreciation law and a co-founder of McGuire Sponsel.
McGuire is an expert on for how tax law affects depreciation. His knowledge in determining asset costs and classifications has held up against IRS scrutiny and has built the firm into a trusted industry partner.