[Federal Register Volume 87, Number 229 (Wednesday, November 30, 2022)]
[Notices]
[Pages 73580-73585]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-26108]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

[2022-61]


Prevailing Wage and Apprenticeship Initial Guidance Under Section 
45(b)(6)(B)(ii) and Other Substantially Similar Provisions

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of initial guidance.

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SUMMARY: This notice provides guidance on the prevailing wage and 
apprenticeship requirements that generally apply to certain provisions 
of the Internal Revenue Code (Code), as amended by the Inflation 
Reduction Act of 2022. This notice also serves as the published 
guidance establishing the 60-day period described in those provisions 
of the Code with respect to the applicability of the prevailing wage 
and apprenticeship requirements. Finally, this notice provides guidance 
for determining the beginning of construction of a facility for certain 
credits allowed under the Code, and the beginning of installation of 
certain property with respect to the energy efficient commercial 
buildings deduction under the Code. This notice affects facilities the 
construction of which began, or certain property the installation of 
which began, on or after January 30, 2023. The Department of the 
Treasury (Treasury Department) and the IRS anticipate issuing proposed 
regulations and other guidance with respect to the prevailing wage and 
apprenticeship requirements.

DATES: January 30, 2023 is the date that is 60 days after the Secretary 
of the Treasury or her delegate (Secretary) publishes the guidance 
described in 26 U.S.C. 30C(g)(1)(C)(i), 45(b)(6)(B)(ii), 45Q(h)(2), 
45V(e)(2)(A)(i), 45Y(a)(2)(B)(ii), 48(a)(9)(B)(ii), 
48E(a)(2)(A)(ii)(II) and (a)(2)(B)(ii)(II), and 179D(b)(3)(B)(i).

FOR FURTHER INFORMATION CONTACT: Alexander Scott, CC:PSI:6, Internal 
Revenue Service, 1111 Constitution Avenue NW, Washington, DC 20224, at 
(202) 317-6853 (not a toll-free call).

SUPPLEMENTARY INFORMATION:

Section 1. Purpose

    Public Law 117-169, 136 Stat. 1818 (August 16, 2022), commonly 
known as the Inflation Reduction Act of 2022 (IRA), amended Sec. Sec.  
30C, 45, 45L, 45Q, 45U, 45V, 45Y, 45Z, 48, 48C, 48E, and 179D of the 
Internal Revenue Code (Code) to add prevailing wage and apprenticeship 
requirements to qualify for increased credit or deduction amounts.\1\ 
This notice provides guidance on the prevailing wage and apprenticeship 
requirements that generally apply to those sections of the Code. This 
notice also serves as the published guidance under Sec. Sec.  
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) establishing the 60-day period 
described in such sections with respect to the applicability of the 
prevailing wage and apprenticeship requirements. Finally, this notice 
provides guidance for determining the beginning of construction under 
Sec. Sec.  30C, 45, 45Q, 45V, 45Y, 48, and 48E, and the beginning of 
installation under Sec.  179D solely for purposes of Sec.  
179D(b)(3)(B)(i).
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    \1\ See Sec. Sec.  13101(f), 13102(k), 13104(d), 13105(a), 
13204(a)(1), 13303(a)(1), 13304(d), 13404(d), 13501(a), 13701(a), 
13702(a), and 13704(a) of the IRA.
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    The Department of the Treasury (Treasury Department) and the 
Internal Revenue Service (IRS) anticipate issuing proposed regulations 
and other guidance with respect to the prevailing wage and 
apprenticeship requirements.

Section 2. Background

    .01 Increased Tax Benefits For Satisfying Certain Prevailing Wage 
and Apprenticeship or Construction and Installation Requirements.
    (1) In General. Increased credit amounts are available under 
Sec. Sec.  30C, 45, 45Q, 45V, 45Y, 45Z, 48, 48C, and 48E, and an 
increased deduction is available under Sec.  179D, for taxpayers 
satisfying certain prevailing wage and apprenticeship requirements. 
Increased credit amounts are available under Sec. Sec.  45L and 45U for 
taxpayers satisfying certain prevailing wage requirements. The general 
concepts and provisions relating to the increased tax benefits under 
Sec.  45(b)(6), (7), and (8) are similar to those under each of these 
other Code sections. Therefore, only the relevant provisions under 
Sec.  45(b)(6), (7), and (8) are discussed in section 2.01(2) and (3) 
of this notice.
    (2) Prevailing Wage Requirements. Section 45(b)(7)(A) provides that 
to meet the prevailing wage requirements with respect to any qualified 
facility, a taxpayer must ensure that any laborers and mechanics 
employed by the taxpayer or any contractor or subcontractor in: (i) the 
construction of such facility, and (ii) the alteration or repair of 
such facility (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), are paid 
wages at rates not less than the prevailing rates for construction, 
alteration, or repair of a similar character in the locality in which 
such facility is located as most recently determined by the Secretary 
of Labor, in accordance with subchapter IV of chapter 31 of title 40, 
United States Code (Prevailing Wage Rate Requirements). Section 
45(b)(7)(B) provides correction and penalty mechanisms for a taxpayer's 
failure to satisfy the requirements under Sec.  45(b)(7)(A).

[[Page 73581]]

    (3) Apprenticeship Requirements. Section 45(b)(8)(A)(i) provides 
that to meet the apprenticeship requirements taxpayers must ensure 
that, with respect to the construction of any qualified facility, not 
less than the applicable percentage of the total labor hours of the 
construction, alteration, or repair work (including such work performed 
by any contractor or subcontractor) with respect to such facility is, 
subject to Sec.  45(b)(8)(B), performed by qualified apprentices 
(Apprenticeship Labor Hour Requirements). Under Sec.  45(b)(8)(A)(ii), 
for purposes of Sec.  45(b)(8)(A)(i), 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)(B) provides that the requirement under Sec.  
45(b)(8)(A)(i) is subject to any applicable requirements for 
apprentice-to-journeyworker ratios of the Department of Labor or the 
applicable State Apprenticeship Agency (Apprenticeship Ratio 
Requirements). Section 45(b)(8)(C) provides that each taxpayer, 
contractor, or subcontractor who employs 4 or more individuals to 
perform construction, alteration, or repair work with respect to the 
construction of a qualified facility must employ 1 or more qualified 
apprentices to perform such work (Apprenticeship Participation 
Requirements).
    Under Sec.  45(b)(8)(D)(i), a taxpayer is not treated as failing to 
satisfy the requirements of Sec.  45(b)(8) if: (i) the taxpayer 
satisfies the requirements described in Sec.  45(b)(8)(D)(ii) (Good 
Faith Effort Exception), or (ii) subject to Sec.  45(b)(8)(D)(iii) 
(Intentional Disregard Provision), in the case of any failure by the 
taxpayer to satisfy the requirement under Sec.  45(b)(8)(A) and (C) 
with respect to the construction, alteration, or repair work on any 
qualified facility to which Sec.  45(b)(8)(D)(i)(I) does not apply, the 
taxpayer makes payment to the Secretary of the Treasury or her delegate 
(Secretary) of a penalty in an amount equal to the product of $50 
multiplied by the total labor hours for which the requirement described 
in Sec.  45(b)(8)(A) and (C) was not satisfied with respect to the 
construction, alteration, or repair work on such qualified facility.
    Under the Good Faith Effort Exception described in Sec.  
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 Sec.  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 5 business days after the date 
on which such registered apprenticeship program received such request.
    Under the Intentional Disregard Provision, if the Secretary 
determines that any failure described in Sec.  45(b)(8)(D)(i)(II) is 
due to intentional disregard of the requirements under Sec.  
45(b)(8)(A) and (C), Sec.  45(b)(8)(D)(i)(II) is applied by 
substituting ``$500'' for ``$50.''
    Under Sec.  45(b)(8)(E)(i), 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. This term excludes any hours 
worked by foremen, superintendents, owners, or persons employed in a 
bona fide executive, administrative, or professional capacity (within 
the meaning of those terms in part 541 of title 29, Code of Federal 
Regulations).
    Under Sec.  45(b)(8)(E)(ii), the term ``qualified apprentice'' 
means an individual who is employed by the taxpayer or by any 
contractor or subcontractor and who is participating in a registered 
apprenticeship program, as defined in Sec.  3131(e)(3)(B).
    Section 3131(e)(3)(B) defines a registered apprenticeship program 
as an apprenticeship registered under the Act of August 16, 1937 
(commonly known as the National Apprenticeship Act, 50 Stat. 664, 
chapter 663, 29 U.S.C. 50 et seq.) that meets the standards of subpart 
A of part 29 and part 30 of title 29 of the Code of Federal 
Regulations.\2\
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    \2\ 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. See 87 FR 58269.
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    .02 Beginning of Construction.
    (1) In General. A qualified facility, property, project, or 
equipment, are hereafter referred to as a ``facility'' in this notice. 
A facility generally must meet the prevailing wage and apprenticeship 
requirements to receive the increased credit or deduction amounts under 
Sec. Sec.  30C, 45, 45Q, 45V, 45Y, 48, 48E, and 179D if construction 
(or installation for purposes of Sec.  179D) of the facility begins on 
or after the date 60 days after the Secretary publishes guidance with 
respect to the prevailing wage and apprenticeship requirements of the 
Code.\3\ The IRS has issued notices under Sec. Sec.  45,\4\ 45Q,\5\ and 
48 \6\ (collectively, IRS Notices) that provide guidance for 
determining when construction begins for purposes of Sec. Sec.  45, 
45Q, and 48, respectively, including a safe harbor regarding the 
continuity requirement (described in section 2.02(3) of this notice).
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    \3\ Certain facilities are exempt from the prevailing wage and 
apprenticeship requirements. See, for example, Sec.  45(b)(6)(B)(i).
    \4\ Notice 2013-29, 2013-20 I.R.B. 1085; clarified by Notice 
2013-60, 2013-44 I.R.B. 431; clarified and modified by Notice 2014-
46, 2014-36 I.R.B. 520; updated by Notice 2015-25, 2015-13 I.R.B. 
814; clarified and modified by Notice 2016-31, 2016-23 I.R.B. 1025; 
updated, clarified, and modified by Notice 2017-04, 2017-4 I.R.B. 
541; Notice 2018-59, 2018-28 I.R.B. 196; modified by Notice 2019-43, 
2019-31 I.R.B. 487; modified by Notice 2020-41, 2020-25 I.R.B. 954; 
clarified and modified by Notice 2021-5, 2021-3 I.R.B. 479; 
clarified and modified by Notice 2021-41, 2021-29 I.R.B. 17.
    \5\ Notice 2020-12, 2020-11 I.R.B. 495.
    \6\ Notice 2018-59, 2018-28 I.R.B. 196; modified by Notice 2019-
43; modified by Notice 2020-41; clarified and modified by Notice 
2021-5; clarified and modified by Notice 2021-41.
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    (2) Establishing Beginning of Construction. The IRS Notices 
describe two methods that a taxpayer may use to establish that 
construction of a facility begins: (i) by starting physical work of a 
significant nature (Physical Work Test), and (ii) by paying or 
incurring five percent or more of the total cost of the facility (Five 
Percent Safe Harbor).
    (i) Physical Work Test. Under the Physical Work Test, construction 
of a facility begins when physical work of a significant nature begins, 
provided that the taxpayer maintains a continuous program of 
construction. This test focuses on the nature of the work performed, 
not the amount or the costs. Assuming the work performed is of a 
significant nature, there is no fixed minimum amount of work or 
monetary or percentage threshold required to satisfy the Physical Work 
Test. Physical work of significant nature does not include preliminary 
activities, even if the cost of those preliminary activities is 
properly included in the depreciable basis of the facility.\7\ For 
purposes of the Physical Work Test, preliminary activities include, but 
are not limited to, planning or designing, securing financing, 
exploring, researching,

[[Page 73582]]

obtaining permits, licensing, conducting surveys, environmental and 
engineering studies, or clearing a site.\8\
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    \7\ For Sec.  45, see Notice 2013-29, section 4.02(1); Notice 
2016-31, section 5.03; for Sec.  45Q, see Notice 2020-12, section 
5.03; and for Sec.  48, see Notice 2018-59, section 4.03.
    \8\ For Sec.  45, see Notice 2013-29, section 4.02(1); Notice 
2016-31, section 5.03; for Sec.  45Q, see Notice 2020-12, section 
5.03; and for Sec.  48, see Notice 2018-59, section 4.03.
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    Work performed by the taxpayer and work performed for the taxpayer 
by other persons under a binding written contract \9\ that is entered 
into prior to the manufacture, construction, or production of the 
property for use by the taxpayer in the taxpayer's trade or business 
(or for the taxpayer's production of income) is taken into account in 
determining whether construction has begun.\10\ Both on-site and off-
site work (performed either by the taxpayer or by another person under 
a binding written contract) may be taken into account for purposes of 
demonstrating that physical work of a significant nature has begun. 
Physical work of a significant nature does not include work (performed 
either by the taxpayer or by another person under a binding written 
contract) to produce property that is either in existing inventory or 
is normally held in inventory by a vendor.\11\
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    \9\ For Sec.  45, see Notice 2013-29, section 4.03(1); for Sec.  
45Q, see Notice 2020-12, section 8.02(1); for Sec.  48, see Notice 
2018-59, section 7.03(1).
    \10\ For Sec.  45, see Notice 2013-29, sections 4.01 and 4.03; 
for Sec.  45Q, see Notice 2020-12, section 8.02; and for Sec.  48, 
see Notice 2018-59, section 7.03.
    \11\ For Sec.  45, see Notice 2013-29, section 4.02(2); for 
Sec.  45Q, see Notice 2020-12, section 5.04; and for Sec.  48, see 
Notice 2018-59, section 4.04.
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    (ii) Five Percent Safe Harbor. Under the Five Percent Safe Harbor, 
construction of a facility will be considered as having begun if: (i) a 
taxpayer pays or incurs (within the meaning of Sec.  1.461-1(a)(1) and 
(2)) five percent or more of the total cost of the facility, and (ii) 
thereafter, the taxpayer makes continuous efforts to advance towards 
completion of the facility. All costs properly included in the 
depreciable basis of the facility are taken into account to determine 
whether the Five Percent Safe Harbor has been met.\12\ For property 
that is manufactured, constructed, or produced for the taxpayer by 
another person under a binding written contract with the taxpayer, 
costs incurred with respect to the property by the other person before 
the property is provided to the taxpayer are deemed incurred by the 
taxpayer when the costs are incurred by the other person under the 
principles of Sec.  461.\13\
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    \12\ For Sec.  45, see Notice 2013-29, section 5.01(1); for 
Sec.  48, see Notice 2018-59, section 5.02; and for Sec.  45Q, see 
Notice 2020-12, section 6.02.
    \13\ For Sec.  45, see Notice 2013-29, section 5.01(2); for 
Sec.  48, see Notice 2018-59, section 7.03; for Sec.  45Q, see 
Notice 2020-12, section 8.02.
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    (3) Continuity Requirement and Continuity Safe Harbor. The IRS 
Notices, as clarified and modified by Notice 2021-41, 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 will closely scrutinize a facility and may 
determine that the beginning of construction is not satisfied with 
respect to a facility if a taxpayer does not meet the Continuity 
Requirement.
    The IRS Notices, as subsequently modified and clarified, 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 Sec. Sec.  45 \14\ and 48,\15\ 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 Sec.  45Q.\16\ Certain offshore projects and projects built on 
federal land under Sec. Sec.  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.\17\
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    \14\ Notice 2016-31, section 3.
    \15\ Notice 2018-59, section 6.05.
    \16\ Notice 2020-12, section 7.05.
    \17\ Notice 2021-5. Projects under Sec. Sec.  45 and 48 may also 
be eligible for the extended Continuity Safe Harbors provided for in 
Notices 2020-41 and 2021-41 due to the COVID-19 pandemic depending 
on when construction began with respect to those projects.
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    .03 Recordkeeping.
    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.
    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 Sec.  45(b), including regulations or other 
guidance that provide requirements for recordkeeping or information 
reporting for purposes of administering the requirements of Sec.  
45(b).\18\
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    \18\ See also Sec. Sec.  30C(g)(4), 45L(g)(3), 45Q(h)(5), 
45U(d)(3), 45V(e)(5), 45Y(f), 45Z(e), 48(a)(16), 48E(i), and 
179D(b)(6).
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Section 3. Guidance With Respect to Prevailing Wage Rate Requirements

    .01 How to Satisfy Prevailing Wage Rate Requirements. The 
Prevailing Wage Rate Requirements under Sec.  45(b)(7)(A) and the 
substantially similar provisions set forth in Sec. Sec.  30C, 45L, 45Q, 
45U, 45V, 45Y, 45Z, 48, 48C, 48E, and 179D will be satisfied if:
    (1) The taxpayer satisfies the Prevailing Wage Rate Requirements 
with respect to any laborer or mechanic employed in the construction, 
alteration, or repair of a facility, property, project, or equipment by 
the taxpayer or any contractor or subcontractor of the taxpayer; and
    (2) The taxpayer maintains and preserves sufficient records, 
including books of account or records for work performed by contractors 
or subcontractors of the taxpayer, to establish that such laborers and 
mechanics were paid wages not less than such prevailing rates, in 
accordance with the general recordkeeping requirements under Sec.  6001 
and Sec.  1.6001-1, et seq.
    .02 Prevailing Wage Determinations. If the Secretary of Labor has 
published on www.sam.gov a prevailing wage determination for the 
geographic area and type or types of construction applicable to the 
facility, including all labor classifications for the construction, 
alteration, or repair work that will be done on the facility by 
laborers or mechanics, that wage determination contains the prevailing 
rates for the laborers or mechanics who perform work on the facility as 
most recently determined by the Secretary of Labor in accordance with 
subchapter IV of chapter 31 of title 40, United States Code, as 
identified in Sec.  45(b)(7)(A). The following procedures described in 
section 3.02 of this notice are designed to be used to request an 
unlisted classification only in the limited circumstance when no labor 
classification on the applicable

[[Page 73583]]

prevailing wage determination applies to the planned work.
    If the Secretary of Labor has not published a prevailing wage 
determination for the geographic area and type of construction for the 
facility on www.sam.gov, or the Secretary of Labor has issued a 
prevailing wage determination for the 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, then the taxpayer can 
rely on the procedures established by the Secretary of Labor for 
purposes of the requirement to pay prevailing rates determined by the 
Secretary of Labor in accordance with subchapter IV of chapter 31 of 
title 40, United States Code.\19\ To rely on the procedures to request 
a wage determination or wage rate, and to rely on the wage 
determination or rate provided in response to the request, the taxpayer 
must contact the Department of Labor, Wage and Hour Division via email 
at [email protected] and provide the Wage and Hour Division 
with the type of facility, facility location, proposed labor 
classifications, proposed prevailing wage rates, job descriptions and 
duties, and any rationale for the proposed classifications. The 
taxpayer may use these procedures to request a wage determination, or 
wage rates for the unlisted classifications, applicable to the 
construction, alteration, or repair of the facility. After review, the 
Department of Labor, 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 area in which the facility is located.
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    \19\ The taxpayer is not required to follow any other procedure 
to request a wage determination or a wage rate under Sec.  
45(b)(7)(A), including submission of the Form SF-1444.
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    Questions regarding the applicability of a wage determination or 
its listed classifications and wage rates should be directed to the 
Department of Labor, Wage and Hour Division via email at 
[email protected].
    For purposes of the Prevailing Wage Rate Requirements, the 
prevailing rate for qualified apprentices hired through a registered 
apprenticeship program may be less than the corresponding prevailing 
rate for journeyworkers of the same classification, as described in 29 
CFR 5.5(a)(4)(i).
    For purposes of the Prevailing Wage Requirements for the Sec.  179D 
deduction, the prevailing wage rate for installation of energy 
efficient commercial building property, energy efficient building 
retrofit property, or property installed pursuant to a qualified 
retrofit plan, is determined with respect to the prevailing wage rate 
for construction, alteration, or repair of a similar character in the 
locality in which such property 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.
    .03 Definitions. For purposes of the Prevailing Wage Rate 
Requirement and the associated recordkeeping requirements the following 
definitions apply.
    (1) A taxpayer, contractor, or subcontractor is considered to 
``employ'' an individual if the individual performs services for the 
taxpayer, contractor, or subcontractor in exchange for remuneration, 
regardless of whether the individual would be characterized as an 
employee or an independent contractor for other Federal tax purposes.
    (2) The terms ``wage'' and ``wages'' means ``wages'' as defined 
under 29 CFR 5.2(p), including any bona fide fringe benefits as defined 
therein.
    (3) The term ``laborer or mechanic'' means ``laborer or mechanic'' 
as defined under 29 CFR 5.2(m).
    (4) The term ``construction, alteration, or repair'' means 
``construction, prosecution, completion, or repair'' as defined under 
29 CFR 5.2(j).
    (5) The term ``prevailing wage'' means the wage listed for a 
particular classification of laborer or mechanic on the applicable wage 
determination for the type of construction and the geographic area or 
other applicable wage as determined by the Secretary of Labor.
    (6) The term ``prevailing wage determination'' means a wage 
determination issued by the Department of Labor and published on 
www.sam.gov.\20\
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    \20\ Prevailing wage determinations and the applicable 
procedures are described in section 3.02 of this notice, above.
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    .04 Examples.
    (1) Example 1. A taxpayer employs laborers and mechanics to 
construct a facility. The taxpayer also uses a contractor and 
subcontractor to construct the facility. The Department of Labor has 
issued a prevailing wage determination that applies to the type of 
construction that the laborers and mechanics perform for the county in 
which the facility is located. The taxpayer ensures that the taxpayer, 
contractor, and subcontractor pay each laborer and mechanic a wage rate 
equal to the applicable rates for their respective labor 
classifications listed in this prevailing wage determination. The 
taxpayer maintains records that are sufficient to establish that the 
taxpayer and the taxpayer's contractor and subcontractor paid wages not 
less than such prevailing wage rates. Such records include but are not 
limited to, identifying the applicable wage determination, the laborers 
and mechanics who performed construction work on the facility, the 
classifications of work they performed, their hours worked in each 
classification, and the wage rates paid for the work. Under these 
facts, the taxpayer will be considered to have satisfied the Prevailing 
Wage Rate Requirements with respect to the facility.
    (2) Example 2. The facts are the same as in Example 1, except that 
the Department of Labor has not issued an applicable prevailing wage 
determination for the relevant type of construction and geographic area 
in which the facility is being constructed. The taxpayer contacts the 
Department of Labor, Wage and Hour Division under the procedures 
described in section 3.02 of this notice. After review, the Department 
of Labor, Wage and Hour Division notifies the taxpayer as to the labor 
classifications and wage rates to be used for the type of construction 
work in question in the area in which the facility is located. The 
taxpayer ensures that the taxpayer, contractor, and subcontractor pay 
each laborer and mechanic a wage rate equal to the applicable rates for 
the respective classifications listed in this wage determination.
    The taxpayer maintains records, which include the additional 
prevailing wage rates provided by the Department of Labor to establish 
that the taxpayer and the taxpayer's contractor and subcontractor paid 
wages not less than such prevailing wage rates. Under these facts, the 
taxpayer will be considered to have satisfied the Prevailing Wage Rate 
Requirements with respect to the facility.
    (3) Example 3. The facts are the same as in Example 1, except that 
the Department of Labor has issued a prevailing wage determination that 
applies to the type of construction that the laborers and mechanics are 
hired to perform for the county in which the facility is located, but 
that wage determination does not include a classification of laborer or 
mechanic that will be used to complete the construction work on the 
facility (for example, electrician, carpenter, laborer, etc.). The 
taxpayer contacts the Department of Labor, Wage and Hour Division under 
the procedures

[[Page 73584]]

described in section 3.02 of this notice. After review, including 
confirming that no labor classification on the applicable prevailing 
wage determination that applies to the work exists, the Department of 
Labor, Wage and Hour Division notifies the taxpayer as to the wage rate 
to be paid regarding the additional classification. The taxpayer 
ensures that the taxpayer, contractor, and subcontractor pay each 
laborer and mechanic a wage rate equal to the applicable rates for 
their respective labor classifications listed in the prevailing wage 
determination, including the additional wage rates provided by the 
Department of Labor.
    The taxpayer maintains records, which include the additional wage 
rates provided by the Department of Labor to establish that the 
taxpayer and taxpayer's contractor and subcontractor paid wages not 
less than prevailing wage rates. Under these facts, the taxpayer will 
be considered to have satisfied the Prevailing Wage Rate Requirements 
with respect to the facility.

Section 4. Guidance With Respect to Apprenticeship Requirements

    .01 How to Satisfy Apprenticeship Requirements. A taxpayer 
satisfies the apprenticeship requirements described in Sec.  45(b)(8) 
if:
    (1) The taxpayer satisfies the Apprenticeship Labor Hour 
Requirements, subject to any applicable Apprenticeship Ratio 
Requirements;
    (2) The taxpayer satisfies the Apprenticeship Participation 
Requirements; and
    (3) The taxpayer complies with the general recordkeeping 
requirements under Sec.  6001 and Sec.  1.6001-1, including maintaining 
books of account or records for contractors or subcontractors of the 
taxpayer, as applicable, in sufficient form to establish that the 
Apprenticeship Labor Hour and the Apprenticeship Participation 
Requirements have been satisfied.
    Under the Good Faith Effort Exception,\21\ the taxpayer will be 
considered to have made a good faith effort in requesting qualified 
apprentices if the taxpayer requests qualified apprentices from a 
registered apprenticeship program in accordance with usual and 
customary business practices for registered apprenticeship programs in 
a particular industry.\22\ Pursuant to Sec.  6001 and Sec.  1.6001-1, 
the taxpayer must maintain sufficient books and records establishing 
the taxpayer's request of qualified apprentices from a registered 
apprenticeship program and the program's denial of such request or non-
response to such request, as applicable.
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    \21\ Described in section 2.01(3) of this notice, above.
    \22\ Registered apprenticeship programs can be located using the 
Office of Apprenticeship's partner finder tool, available at https://www.apprenticeship.gov/partner-finder and through the applicable 
State Apprenticeship Agency, https://www.apprenticeship.gov/about-us/state-offices.
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    .02 Definitions. For purposes of the apprenticeship requirements 
the following definitions apply.
    (1) A taxpayer, contractor, or subcontractor is considered to 
``employ'' an individual if the individual performs services for the 
taxpayer, contractor, or subcontractor in exchange for remuneration, 
regardless of whether the individual would be characterized as an 
employee or an independent contractor for other Federal tax 
purposes.\23\
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    \23\ This definition does not alter any of the existing legal 
requirements pertaining to the proper classification of qualified 
apprentices in registered apprenticeship programs as employees for 
purposes of certain Federal laws and regulations.
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    (2) The term ``journeyworker'' means ``journeyworker'' as defined 
under 29 CFR 29.2.
    (3) The term ``apprentice-to-journeyworker ratio'' means the ratio 
described under 29 CFR 29.5(b)(7).
    (4) The term ``construction, alteration, or repair'' means 
``construction, prosecution, completion, or repair'' as defined under 
29 CFR 5.2(j).
    (5) The term ``State Apprenticeship Agency'' means ``State 
Apprenticeship Agency'' as defined under 29 CFR 29.2.
    .03 Example. A taxpayer employs workers and qualified apprentices 
to construct a new facility. Construction of the facility begins in 
calendar year 2023, and the construction of the facility is completed 
in calendar year 2023. To satisfy the apprenticeship labor hour 
requirement, the percentage of total labor hours to be performed by 
qualified apprentices is 12.5 percent for 2023. The total labor hours, 
as defined in Sec.  45(b)(8)(E)(i), for the construction of the 
facility is 10,000 labor hours. The taxpayer employed qualified 
apprentices that performed a total of 1,150 hours of construction on 
the facility. On each day that a qualified apprentice performed 
construction work on the facility for the taxpayer, the applicable 
requirements for apprentice-to-journeyworker ratios of the Department 
of Labor or the applicable State Apprenticeship Agency were met.
    The taxpayer also hired a contractor to assist with construction of 
the facility for 1,000 labor hours of the 10,000 total labor hours. The 
contractor employed qualified apprentices that performed a total of 100 
hours of construction on the facility. On each day that a qualified 
apprentice performed construction work on the facility for the 
contractor, the applicable requirements for apprentice-to-journeyworker 
ratios of the Department of Labor or the applicable State 
Apprenticeship Agency were met.
    The taxpayer ensured that the taxpayer and the contractor each 
employed 1 or more qualified apprentices because the taxpayer and 
contractor each employed 4 or more individuals to perform construction 
work on the qualified facility.
    The taxpayer maintained sufficient records to establish that the 
taxpayer and the contractor hired by the taxpayer satisfied the 
Apprenticeship Labor Hour Requirement of 1,250 total labor hours for 
the facility (12.5% of 10,000 labor hours), and the Apprenticeship 
Ratio and Apprenticeship Participation Requirements. Under these facts, 
the taxpayer will be considered to have satisfied the Apprenticeship 
Labor Hour, Apprenticeship Ratio, and Apprenticeship Participation 
Requirements of the statute with respect to the facility.

Section 5. Determining When Construction or Installation Begins

    To determine when construction begins for purposes of Sec. Sec.  
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 
Sec. Sec.  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 
Sec. Sec.  30C, 45V, 45Y, and 48E. Taxpayers may rely on the Continuity 
Safe Harbor provided the facility is placed in service no more than 
four calendar years after the calendar year during which construction 
began.
    For purposes of Sec.  179D, the IRS will accept that installation 
has begun if a taxpayer generally satisfies principles similar to the 
two tests described in section 2.02 of this notice, above, regarding 
the beginning of construction under Notice 2013-29 (Physical Work Test 
and Five Percent Safe Harbor). The relevant facts and circumstances 
will ultimately be determinative of whether a taxpayer has begun 
installation.

[[Page 73585]]

    For purposes of Sec. Sec.  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.\24\
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    \24\ Described in section 2.02 of this notice, above.
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Section 6. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501 et seq., 
and its attendant regulations, 5 CFR part 1320, require an agency to 
consider the impact of paperwork and other information collection 
burdens imposed on the public. The IRA allows taxpayers to take certain 
increased credit amounts or an increased deduction if they satisfy the 
Prevailing Wage Requirements, and Apprenticeship Requirements, where 
applicable. The Department of Labor will collect the data needed to 
issue wage rates for taxpayers in connection with facilities whose 
construction, alteration, or repair is not subject to one or more 
Davis-Bacon and Related Acts (DBRA), as facilities subject to the DBRA 
are already accounted for in an existing collection approved by 
OMB.\25\ DOL data collections needed to register apprentices and 
apprenticeship programs are accounted for in an existing collection 
approved by OMB.\26\
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    \25\ OMB Control Number 1235-0023.
    \26\ OMB Control Number 1205-0223.
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    Under the PRA, an agency may not collect or sponsor an information 
collection requirement unless it displays a currently valid Office of 
Management and Budget (OMB) control number.\27\ This collection of 
information is approved under OMB Control Number 1235-0034. The 
Department of Labor estimates that it will take an average of 15 
minutes for respondents to complete this collection of information, 
including the time for reviewing instructions, searching existing data 
sources, gathering and maintaining the data needed, and completing and 
reviewing the collection of information. The information that the 
Department of Labor will collect, as discussed in section 3.02 of this 
notice, includes the type of facility, facility location, proposed 
labor classifications, proposed prevailing wage rates, job descriptions 
and duties, and any rationale for the proposed classifications. After 
review, the Department of Labor will notify the taxpayer as to the 
labor classifications and wage rates to be used for the type of work in 
question in the area in which the facility is located. You may view the 
Department of Labor's web page instruction here: https://www.dol.gov/agencies/whd/IRA.
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    \27\ See 5 CFR 1320.8(b)(3)(vi).
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Section 7. Drafting Information

    The principal authors of this notice are Alexander Scott and Jeremy 
Milton of Associate Chief Counsel (Passthroughs & Special Industries). 
However, other personnel from the Treasury Department and the IRS 
participated in its development. For further information regarding this 
notice contact Mr. Scott at (202) 317-6853 (not a toll-free call).

Melanie R. Krause,
Acting Deputy Commissioner for Services and Enforcement.
    Approved: November 23, 2022.
Krishna P. Vallabhaneni,
Tax Legislative Counsel.
[FR Doc. 2022-26108 Filed 11-29-22; 4:15 pm]
BILLING CODE 4830-01-P