Treasury Issues Labor Regulations for Clean Energy Tax Credits

clean energy

Treasury Issues Labor Regulations for Clean Energy Tax Credits

With the help of clean energy programs, the Inflation Reduction Act allocates $369 billion to combating climate change.

Initial guidance, outlined by the Treasury Department on Nov. 29, outlines the new wage and apprenticeship standards that businesses must adhere to in order to be eligible for clean energy tax credits under the Inflation Reduction Act.

Treasury Secretary Janet Yellen stated that the historic Inflation Reduction Act, which President Biden signed into law earlier this year, “puts in place tax incentives across the energy sector that will drive renewable energy investment and economic growth while ensuring the jobs created from this investment and growth are good-paying ones, with strong labor protections.” “The clean energy economy that workers are helping to build should benefit them.” The today-announced guidance gives businesses more clarity on how to adhere to the labor standards included in the bill to take full advantage of the available tax credits.

The Inflation Reduction Act, which was signed into law in August, allocates $369 billion to programs promoting clean energy as a means of combating climate change. Tax breaks account for nearly three-quarters of the $270 billion in climate change investment.

Construction on qualifying facilities, projects, items of property, or machinery that meet the requirements must start at least 60 days after the Treasury issues guidance is subject to the law’s requirements. The Treasury Department reports that the guidance, which was released on Wednesday and appeared in the Federal Register, starts the 60-day “clock,” meaning that any qualifying facilities, projects, items of property, or machinery for which construction starts on or after January 29, 2023, will be subject to these requirements.

Companies must pay employees the prevailing wage for their location and job classification in order to be eligible for tax incentives. Prevailing wages are set by the Labor Department and are available on its sam.gov website. The Treasury Department advised businesses to get in touch with the Labor Department’s Wage and Hour Division via email to request labor classifications and wage rates if there isn’t a posted prevailing wage determination for a particular region and/or job classification.

The Treasury Department also notes that in order for businesses to be eligible for the tax incentives, they must hire a specific number of apprentices from registered apprenticeship programs.

The Treasury Department said that the guidance “provides greater specificity regarding the apprenticeship labor hour, ratio, and participation requirements.” “The guidance also describes the good faith effort exception where a taxpayer makes a good faith effort to request qualified apprentices from registered apprenticeship programs.”

The following tax incentives are subject to both the prevailing wage and the apprenticeship requirements:

  • Advanced Energy Project Credit
  • Alternative Fuel Refueling Property Credit
  • Credit for Carbon Oxide Sequestration
  • Clean Fuel Production Credit
  • Credit for the Production of Clean Hydrogen
  • Energy-Efficient Commercial Buildings Deduction
  • Renewable Energy Production Tax Credit
  • Renewable Energy Property Investment Tax Credit

The following tax incentives are also subject to the prevailing wage requirements:

  • New Energy Efficient Home Credit
  • Zero-Emission Nuclear Power Production Credit

The Treasury Department also offered instructions regarding recordkeeping requirements and determining the start date of construction in relation to tax incentives for businesses.

According to the Treasury Department, more proposed regulations pertaining to these requirements will be released in the upcoming months.

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