The Internal Revenue Service issued Notice 2023-18 to establish the Inflation Reduction Act program to allocate $10 billion of section 48C (Qualifying Advanced Energy Product Credit) credits for qualified investments in eligible qualifying advanced energy projects (the section 48C(e) program). The term “qualifying energy project” means a project that re-equips, expands or establishes an industrial or manufacturing facility for the production or recycling of specified advanced energy property, like fuel cells, microturbines or energy storage systems and components; re-equips any industrial or manufacturing facility with equipment designed to reduce greenhouse gas emissions by at least 20 percent; or re-equips, expands or establishes an industrial facility for the processing, refining or recycling of critical materials.
Per this notice, to receive funding through the section 48C(e) program, contractors must meet the prevailing wage and apprenticeship requirements SWACCA lobbied to get included in the Inflation Reduction Act. With regard to the prevailing wage requirements, contractors must ensure that any laborers and mechanics employed by the contractor or subcontractor in the re-equipping, expansion or establishment of a manufacturing facility that is part of a qualifying advanced energy 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.
With regard to apprenticeship, contractors are required to ensure that not less than the “applicable percentage” of the total labor hours of the construction, alteration or repair work must be performed by “qualified apprentices” in a “registered” apprenticeship program. The “applicable percentage” of total labor hours is 10 percent for construction that began before Jan. 1, 2023; 12.5 percent for construction that begins after Dec. 31, 2022, and before Jan. 1, 2024; and 15 percent for construction that begins after Dec. 31, 2023. Moreover, each 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.
A taxpayer that satisfies the prevailing wage and apprenticeship requirements may claim a credit that is equal to 30 percent of the qualified investment for such taxable year, with respect to any qualified energy project. An individual that fails to satisfy the prevailing wage and apprenticeship requirements generally may only claim a credit equal to 6 percent of the taxpayer’s qualified investment for such taxable, with respect to any qualified advanced energy project.
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