Wage Compliance Requirements for Clean Energy Tax Credits
The Inflation Reduction Act of 2022 introduced more than $369 billion in clean energy tax incentives for businesses and individuals. These tax credits and deductions can help companies kickstart or expand their climate-friendly initiatives such as solar energy conversion, energy efficient modifications, and sustainable manufacturing improvements.
While these incentives are exciting for many businesses, there is an important caveat that must be considered. To qualify for the maximum tax benefits, businesses must meet wage and apprenticeship requirements for projects that begin on or after January 30, 2023.
Wage and Apprenticeship Requirements in the Inflation Reduction Act of 2022
Wage and apprenticeship requirements have been standard for government construction projects since the Davis-Bacon Act was first introduced in 1931. Now, private businesses that want to receive enhanced tax benefits under the Inflation Reduction Act of 2022 are subject to the same requirements.
Wage Requirements for Clean Energy Tax Incentives
As detailed in the Inflation Reduction Act of 2022, all contractors and subcontractors – both employees and independent contractors – must be paid at least the prevailing wage for the project’s geographical area.1 The prevailing wage is set by the Secretary of Labor for each location, type of work, and type of employee.
To satisfy this requirement, firms must research the prevailing wages in their area and ensure each of their contracts meet the requirements. In addition, businesses must keep extensive records to prove compliance with this provision.
If a company fails to pay the prevailing wage, substantial penalties apply. These penalties include compensating underpaid workers with interest plus a $5,000 penalty per underpaid worker. If a business is found to have “intentionally disregarded” wage requirements, the penalty is significantly more severe – three times the underpaid amount and $10,000 per worker.1
Apprenticeship Requirements for Clean Energy Tax Incentives
In addition to paying at least prevailing wages, businesses, their contractors, and subcontractors must employ an appropriate number of qualified apprentices. The number of apprentices required for any given job depends on the start date of the project, the total number of employees, and other factors. In addition, companies must ensure that qualified apprentices perform at least a minimum amount of labor hours.
Firms are responsible for confirming the correct number of apprentices are hired, ensuring apprentices perform at least the minimum amount of work in a given project, and keeping extensive documentation to verify compliance with this provision. Failure to meet the requirements or keep sufficient records could result in a penalty of $50 per labor hour not met.1 Intentional disregard increases this penalty to $500 per labor hour.
With the scope of clean energy projects and the severity of penalties for noncompliance, it makes sense for businesses to seek assistance with compliance monitoring. Fortunately for these firms, wage and apprenticeship requirements have existed for nearly a century in the government space, so assistance is readily available.
AmeriNat Compliance Monitoring for Wage and Apprenticeship Requirements
Since 1975, AmeriNat has helped city, county, state, and non-profit clients with compliance monitoring for Davis-Bacon wage and apprenticeship requirements. With the addition of these requirements in the Inflation Reduction Act, we are eager to extend our expertise on these matters to private industry. Here’s what you can expect from our compliance monitoring program:
The AmeriNat Compliance Process
The AmeriNat compliance monitoring program delivers proven results for organizations across the nation. Our process is straightforward, simple for businesses to implement, and robust enough to ensure that requirements are met.
Pre-construction Meeting and Setup
The process begins with a pre-construction meeting. At this meeting, our experienced staff will meet with contractors and subcontractors to establish standards and get them set up with LCPtracker. This software is the gold standard in the construction industry, and we provide access for contractors and subcontractors at no additional cost.
Ongoing Monitoring
As information becomes available, contractors and subcontractors upload materials related to pay and apprenticeships. At least weekly, our experienced auditors review this information to ensure all requirements are met. If issues arise, we notify the general contractor and owner / developer promptly, so problems can be corrected as quickly as possible.
Post-construction and Audit Support
During and after a project, AmeriNat supports our clients with recordkeeping. These records help our clients prove their due diligence was performed during the construction process and applicable wage and apprenticeship requirements were met.
While wage compliance audits are rare, they do occur. With compliance monitoring services by AmeriNat, businesses can rest easy. In more than forty years of business, projects we monitor have never received a finding from a wage compliance audit.
Why choose AmeriNat compliance monitoring?
AmeriNat has been assisting government and non-profit organizations with wage and apprenticeship requirements for more than four decades. Now private businesses can also benefit from our:
· Decades of experience. Our team has the experience to handle construction projects large and small, complex and simple. No matter what project a company is undertaking, we can verify that wage and apprenticeship requirements are met. In more than forty years of business, projects we monitor have never received a finding from a wage compliance audit.
· Innovative technology. With AmeriNat, all payroll and compliance information is centralized in one intuitive software. This minimizes work for contractors and ensures that businesses and AmeriNat auditors have access to the relevant information when they need it. AmeriNat provides access to LCPtracker to contractors and subcontractors at no additional cost.
· Attentive, knowledgeable staff. Our auditors are thorough and experienced. If an issue arises, they will catch it quickly and provide the right solution. In addition, businesses that work with us always receive top-notch customer service.
· Proven track record. With hundreds of satisfied customers, businesses can rest assured that AmeriNat has the experience to handle their compliance monitoring needs.
Get started with AmeriNat Wage Compliance Monitoring
Let us help your company qualify for the available clean energy tax incentives while avoiding costly audits and penalties. To learn more about AmeriNat, or to get started with compliance monitoring, contact us today.
References:
1 Public Law 117-169, “The Inflation Reduction Act of 2022”, August 16, 2022. Accessed from https://www.congress.gov/117/plaws/publ169/PLAW-117publ169.pdf