The proposed rule to establish regulations for taxpayers to qualify for increased credit and deductions through prevailing wage and registered apprenticeship (RA) requirements represents an important step in expanding RA, particularly in the building and construction trades.

The tax credits and deductions within the Inflation Reduction Act (IRA) that stipulate prevailing wage and registered apprenticeship (PWA) requirements are designed to catalyze employer demand for RA. This industry-level approach can more efficiently scale the RA system than the current model in which apprenticeship practitioners from the Department of Labor’s Office of Apprenticeship (OA), State Apprenticeship Agencies (SAAs), and intermediaries conduct retail-level outreach to individual companies to demonstrate how the training model can meet that company’s workforce needs. Anecdotally, the announcement that these tax provisions will quintuple their value for taxpayers complying with the PWA requirements—part of a suite of tax credits estimated to be worth up to $790 billion through 2033¹—has participation in RA as way to maximize their tax benefits.

The PWA requirements within the clean energy tax credits seem poised to expand the use of apprenticeship in a way that takes advantage of the existing RA system and is not burdensome for taxpayers or employers. At the same time, the language of the IRA has prompted a broad range of compliance questions because the details of the regulations are not always straightforward. The following issues could benefit from further consideration.

• The good faith effort exception to the apprenticeship requirements (section 45(b)(8)(D)(ii)) leaves open numerous situations, described in more detail below, in which the taxpayer could avoid hiring apprentices. These situations could be reduced by » providing clarity about the expectations for nonunion contractors to use apprentices from union-affiliated programs (known as group joint programs) when nonunion programs (known as group nonjoint programs) are not locally available,
  • requiring taxpayers to request apprentices from all third-party apprenticeship programs in the trade (known as group sponsor programs) that could reasonably provide apprentices for that geography, rather than from a single program that may have limited capacity to provide apprentices,
  • limiting the number of good faith effort exceptions available per trade with group programs to two 120-day exceptions (after that, good faith effort exceptions could only be awarded to programs that have submitted registration paperwork but are waiting for OA or SAA approval for reasons unrelated to the taxpayer or contractor demonstrating an ability to implement a program in accordance with RA program requirements), and
  • requiring an appropriate OA or SAA representative to sign off on a taxpayer’s good faith efforts to comply with apprenticeship requirements.
• For taxpayers using Project Labor Agreements (PLAs) to meet PWA requirements, mandating that taxpayers and their contractors comply with all hiring provisions, not just prevailing wage and apprenticeship requirements, could help improve equity in the industry.
• Key recordkeeping practices could help drive both compliance and more effective analysis of the impact of these PWA provisions in IRA tax credits. In particular, practices could include the following:
  • Requiring evidence of good faith efforts at the time of filing to receive the exception could reduce the number of times this exception is incorrectly claimed, particularly if the exception requires the sign-off of OA or SAAs as recommended above.
  • The participation requirement could be documented by providing the ID number for all registered apprentices, whether it be the apprentice’s ID number in OA’s RA database—the Registered Apprenticeship Partners Information Database System (RAPIDS)—or the equivalent SAA ID number. In addition to being a straightforward and verifiable form of documentation, this could provide easier access to IRS and OA analysis and research on the impact of the PWA provisions.

¹ Committee for a Responsible Federal Budget, “IRA Energy Provisions Could Cost Two-Thirds More Than Originally Estimated,” July 6, 2023, https://www.crfb.org/blogs/ira-energy-provisions-could-cost-two-thirds-more-originally-estimated#fn1.