Frequently asked questions about the prevailing wage and apprenticeship under the Inflation Reduction Act

A1. The IRA makes several clean energy tax incentives available to taxpayers that satisfy certain prevailing wage and apprenticeship requirements. In general, a taxpayer that meets the prevailing wage and apprenticeship requirements with respect to a qualified facility, project, property, or equipment, as applicable (referred to generally in these FAQs as a facility) will multiply the base amount of the tax incentive (credit or deduction) by five.

Increased credit and deduction amounts are available for taxpayers satisfying prevailing wage and apprenticeship requirements under the following sections of the Code:

• Section 30C alternative fuel vehicle refueling property credit
• Section 45 renewable electricity production credit
• Section 45Q credit for carbon oxide sequestration
• Section 45V credit for production of clean hydrogen
• Section 45Y clean electricity production credit
• Section 45Z clean fuel production credit
• Section 48 energy credit
• Section 48C qualifying advanced energy project credit
• Section 48E clean electricity investment credit
• Section 179D energy efficient commercial buildings deduction

Increased credit amounts are available for taxpayers satisfying prevailing wage requirements under:

• Section 45L new energy efficient home credit (apprenticeship requirements do not apply)
• Section 45U zero-emission nuclear power production credit (apprenticeship requirements do not apply)

A2. The prevailing wage requirements of the IRA provide that taxpayers must ensure that all laborers and mechanics employed by the taxpayer (or any contractor or subcontractor) on the construction, alteration, or repair of a qualified facility are paid wages at rates that are not less than the prevailing rates determined by the Department of Labor in accordance with subchapter IV of chapter 31 of title 40 of the U.S. Code (the Davis-Bacon Act) for the type of work performed in the geographic area of the facility.

A3. The apprenticeship requirements of the IRA include three components — a labor hours requirement, a ratio requirement, and a participation requirement. Under the labor hours requirement, the taxpayer must ensure that a minimum percentage of the total labor hours performed on the construction, alteration, or repair of a facility are performed by qualified apprentices from a registered apprenticeship program. The applicable percentage is 10% for construction beginning before 2023, 12.5% for construction beginning in 2023, and 15% for construction beginning in 2024 or after. Under the ratio requirement, the taxpayer must ensure that the applicable ratio of apprentices to journeyworkers established by the registered apprenticeship program are met for apprentices working on the facility each day. Under the participation requirement, any taxpayer, contractor, or subcontractor that employs 4 or more individuals at any time during the course of the construction, alteration, or repair of the facility must hire at least one qualified apprentice. 

The apprenticeship requirements only apply with respect to construction, alteration, or repair of a facility that occurs prior to the facility being placed in service. There are no apprenticeship requirements with respect to alterations or repairs after a facility is placed in service.

A4. Yes, there are two statutory provisions that provide for increased credit or deduction amounts without satisfying the prevailing wage and apprenticeship requirements.  They are the one-megawatt exception and the beginning of construction exception.

• Under the one megawatt exception in section 45 a qualified facility that has a maximum net output of less than one megawatt of (as measured in alternating current) is eligible for the increased credit amount without satisfying the prevailing wage and apprenticeship requirements. Similar exceptions apply for a qualified facility with a maximum net output of less than one megawatt (as measured in alternating current) under sections 45Y and 48E, an energy project with a maximum net output of less than one megawatt of electrical (as measured in alternating current) or thermal energy under section 48, and energy storage technology with a capacity of less than one megawatt under section 48E. 
• Under the beginning of construction exception for the credits under sections 30C, 45, 45Q, 45V, 45Y, 48, 48E, and the deduction under 179D, a taxpayer that begins construction or installation of a facility before January 29, 2023, may be eligible for the increased credit or deduction amount without needing to satisfy the prevailing wage and apprenticeship requirements.

A5. Under a transition rule in the final regulations, any work performed before January 29, 2023, is not subject to the prevailing wage and apprenticeship requirements, regardless of whether there is a beginning of construction exception for the applicable credit or deduction.  Under this transition rule, taxpayers must only satisfy the prevailing wage and apprenticeship requirements (as applicable) for construction, alteration, or repair work occurring on or after January 29, 2023.  The transition rule does not alter the beginning of construction exception.  Taxpayers claiming an increased credit amount under sections 30C, 45, 45Q, 45V, 45Y, 48, 48E, or an increased deduction amount under section 179D are excepted from the prevailing wage and apprenticeship requirements if the taxpayer began construction or installation of a facility before January 29, 2023.

A6.  The term construction, alteration, or repair generally means those activities that are considered “construction, prosecution, completion, or repair” as defined by the Davis Bacon Act and U.S. Department of Labor (DOL) guidance thereunder and that are performed with respect to a facility.  Repair work normally includes an activity that improves the facility, either by fixing something that is not functioning properly or by improving upon the facility’s existing condition; involves the correction of individual problems or defects as separate and segregable incidents and is not continuous or recurring; or improves the facility’s structural strength, stability, safety, capacity, efficiency, or usefulness. 

Construction, alteration, or repair work does not include maintenance work after a facility is placed in service. Maintenance is work that is ordinary and regular in nature and designed to maintain existing functionalities of a facility such as regular inspections of the facility, regular cleaning and janitorial work, regular replacement of materials with limited lifespans such as filters and light bulbs, and the regular calibration of equipment. Generally, work that improves the current condition or function of a facility is considered an alteration or repair and not maintenance work. 

A7. For purposes of the prevailing wage requirements, a laborer or mechanic is considered employed by the taxpayer, contractor, or subcontractor if the individual performs the duties of a laborer or mechanic for the taxpayer, contractor, or subcontractor regardless of whether the individual would be characterized as an employee or an independent contractor for other Federal tax purposes. The definition of employed for purposes of the prevailing wage requirements is generally different and broader than the definition used elsewhere in the Code, for example with respect to employment taxes, as well as the associated reporting and withholding obligations.  Laborers and mechanics who are independent contractors for employment tax purposes may be considered employed for purposes of the IRA prevailing wage requirements. 

A1. Prevailing wages must be paid to all laborers and mechanics employed by the taxpayer, contractor, or subcontractor in the construction, alteration, or repair of a facility. The requirement to pay prevailing wages applies to work performed with respect to a qualified facility (or qualified property, project, or equipment, as applicable) within the meaning of the relevant section of the Code. Prevailing wages must also be paid for construction, alteration, or repair work performed at any secondary work site where such work is for specific use at the qualified facility and does not reflect the manufacture or construction of a product made available to the general public and the secondary work site is established specifically for or dedicated exclusively for a specific period of time to the construction, alteration, or repair of the facility. The prevailing wage rates for work performed at any secondary work site is determined based on the geographic area in which the secondary site is located.

Laborers and mechanics are those individuals whose duties are manual or physical in nature (including those individuals who use tools or who are performing the work of a trade).  The terms laborer and mechanic include apprentices and helpers.  The terms do not include individuals whose duties are primarily administrative, executive, or clerical, rather than manual. 

A2. Yes. Unless an exception applies, taxpayers that are seeking an increased credit or deduction amount must ensure that laborers and mechanics employed by the taxpayer, contractor, or subcontractor in the construction, alteration, or repair of a facility are paid prevailing wages (wages at rates that are not less than the prevailing rates determined by the Department of Labor in accordance with the Davis-Bacon Act). 

A1. Under the statute and the final regulations, a prevailing wage is the combination of the basic hourly wage rate and any fringe benefits listed in an applicable wage determination, as determined by the Secretary of Labor in accordance with subchapter IV of chapter 31 of title 40 of the United States Code, also known as the Davis-Bacon Act.  Taxpayers may comply with the prevailing wage provisions by ensuring that each laborer and mechanic performing construction, alteration or repair of a facility is paid the applicable prevailing wage for the classification of work performed entirely as cash wages or by a combination of cash wages and employer-provided bona fide fringe benefits.

A2. General wage determinations are published by the Wage and Hour Division of DOL and available online at the System for Award Management website. If a taxpayer, contractor or subcontractor would like more information on wage determinations, the Wage and Hour Division has published a guide to understanding wage determinations PDF. For more information, please visit DOL's Prevailing Wage and the Inflation Reduction Act.

A3.  If there is no general wage determination for the geographic area of the facility, taxpayers, contractors, or subcontractors may request a supplemental wage determination from the Wage and Hour Division of the Department of Labor. The taxpayer, contractor, or subcontractor should send requests for supplemental wage determinations to the U.S. Department of Labor at, U.S. Department of Labor, Wage and Hour Division, Branch of Construction Wage Determinations, Washington, D.C. 20210, or by email to iraprevailingwage@dol.gov.

A taxpayer, contractor, or subcontractor should make requests for a supplemental wage determination no more than 90 days before the taxpayer expects to execute the contract for the construction, alteration, or repair of the facility with a contractor. In the absence of a contract, the taxpayer, contractor, or subcontractor should make such requests no more than 90 days before construction, alteration, or repair of the facility starts.

Supplemental wage determinations issued by the Wage and Hour Division are effective for 180 calendar days from the date such determinations are issued. If a supplemental wage determination is not incorporated into the contract (or, in the absence of a contract, if construction has not started) during the 180-day period a new supplemental wage determination will need to be requested. 

The request for a supplemental wage determination should contain all relevant information, including: the name of the taxpayer, contractor, or subcontractor requesting the supplemental wage determination or wage rate; the general wage determination(s), if any, applicable to construction, alteration, or repair of the facility; a description of the work to be performed, including the type(s) of construction involved and, if the project involves multiple types of construction, information indicating the expected cost breakdown by type of construction; the geographic area in which the facility is being constructed, altered, or repaired, including the name and address of the facility (if known); the date the taxpayer expects to enter into a contract with a contractor for which a supplemental wage determination is needed; the start date of construction, alteration, or repair at the facility; the labor classification(s) needed for performance of the work on the facility (excluding those for which wage rates are available on an applicable general wage determination); the duties to be performed by each such labor classification on the facility; the proposed wage rate, including any bona fide fringe benefits, for each such labor classification; any additional relevant information otherwise required by forms and instructions published by the U.S. Department of Labor; and any additional information the taxpayer, contractor, or subcontractor wants the U.S. Department of Labor to consider.

A4. If the applicable general wage determination does not include all of the labor classifications that will be needed for the construction, alteration, or repair of the facility, taxpayers, contractors, or subcontractors may request rates for an additional classification from the Wage and Hour Division of the Department of Labor. The taxpayer, contractor, or subcontractor should send requests for prevailing rates for additional classifications to the U.S. Department of Labor at, U.S. Department of Labor, Wage and Hour Division, Branch of Construction Wage Determinations, Washington, D.C. 20210, or by email to iraprevailingwage@dol.gov.

A request for prevailing wage rates for additional classifications can be made any time after a contract for the construction, alteration, or repair of a facility has been executed between the taxpayer and a contractor.  In the absence of a contract, the taxpayer, contractor, or subcontractor should make such requests no more than 90 days before construction, alteration, or repair of the facility starts.  If the taxpayer, contractor, or subcontractor cannot reasonably determine prior to execution of the contract between the taxpayer and the contractor or prior to the start of the construction, alteration, or repair work that an additional classification and wage rate is necessary, the taxpayer, contractor, or subcontractor should make such request as soon as practicable after determining that an additional classification and wage rate is necessary. Any wage rate for an additional classification that is issued applies from the earlier of the date of issuance or the first day in which work in the additional classification was performed.

The request rates for prevailing rates for an additional classification should contain all relevant information, including: the name of the taxpayer, contractor, or subcontractor requesting the supplemental wage determination or wage rate; the general wage determination(s), if any, applicable to construction, alteration, or repair of the facility; a description of the work to be performed, including the type(s) of construction involved and, if the project involves multiple types of construction, information indicating the expected cost breakdown by type of construction; the geographic area in which the facility is being constructed, altered, or repaired, including the name and address of the facility (if known); the date of execution of the contract with a contractor for which a prevailing wage rate for an additional classification is needed; the start date of construction, alteration, or repair at the facility; the labor classification(s) needed for performance of the work on the facility (excluding those for which wage rates are available on an applicable general wage determination); the duties to be performed by each such labor classification on the facility; the proposed wage rate, including any bona fide fringe benefits, for each such labor classification; any additional relevant information required by forms and instructions published by the U.S. Department of Labor; and any additional information the taxpayer, contractor, or subcontractor wants the U.S. Department of Labor to consider.

A5. Yes. If construction, alteration, or repair of the facility takes place in more than one locality (i.e., if an applicable wage determination does not cover the entire geographic area in which construction of the facility will take place), then the taxpayer, contractor, or subcontractor must use the applicable wage determination for the work performed in each geographic area. A taxpayer also is permitted to request a supplemental wage determination with respect to the facility and pay the rates determined by the DOL pursuant to the request. Additionally, more than one wage determination may be applicable where two or more construction types (e.g. Heavy and Building) apply to the construction, alteration or repair of a facility.

A6. The applicable wage determination is the wage determination in effect at the time a contract for the construction, alteration, or repair of the facility is executed by the taxpayer and a contractor. If a taxpayer executes separate contracts with more than one contractor with respect to the construction, alteration, or repair of the facility, then for each such contract, including work performed by subcontractors pursuant to that contract, the applicable wage determinations are those in effect at the time the contract is executed by the taxpayer and the contractor. If no contract exists with respect to the construction, alteration, or repair of the qualified facility (or if the date of execution of the relevant contract cannot be determined), the applicable wage determinations are those in effect at the time the construction, alteration, or repair work starts.

Taxpayers who perform any alteration or repair of a facility after the facility is placed in service must use the applicable wage determination in effect at the time the contract for the alteration or repair work is executed by the taxpayer and a contractor.

The applicable general wage determination generally remains valid for the duration of the work performed with respect to the construction, alteration, or repair of the facility by the taxpayer, contractor, or subcontractor.  Additionally, taxpayers need to update the applicable general wage determination when work on a facility is changed to include additional construction, alteration, or repair work not within the scope of work of the original contract, or to require work to be performed for an additional time period not originally obligated, including where an option to extend the term of a contract for the construction, alteration, or repair is exercised. A new applicable general wage determination is not required if the contractor is simply given additional time to complete its original commitment or if the additional construction, alteration, or repair work in the modification of the contract is merely incidental.

If a taxpayer enters into a contract for alteration or repair work over an indefinite period of time that is not tied to the completion of any specific work, the applicable general wage determinations must be updated annually based on the contract execution date.

A1. The DOL’s Office of Apprenticeship, as well as state apprenticeship agencies, routinely provide technical expertise on registered apprenticeship program matters, including identifying registered apprenticeship programs, and assisting employers seeking to register their own programs.  More information on finding qualified apprentices is available at ​​​​​​ApprenticeshipUSA.

A2. Under the final regulations, apprentices must be paid at not less than the rate specified by the registered apprenticeship program for the apprentice's level of progress expressed as a percentage of the journeyworker hourly rate specified for the apprentice’s classification in the applicable wage determination. Apprentices may be paid at less than the prevailing rate for work performed consistent with the occupation of the registered apprenticeship program if they are:

1. qualified apprentices from a registered apprenticeship program who perform work with respect to the construction, alteration, or repair of a qualified facility; or
2. individuals in the first 90 days of probationary employment as an apprentice in a registered apprenticeship program who have been certified by the DOL’s Office of Apprenticeship or a state apprenticeship agency to be eligible for probationary employment as an apprentice.

In order to pay apprentices at wage rates less than the prevailing rates, the applicable apprentice-to-journeyworker ratio must be met for each day the apprentices perform work on the facility. Additionally, to satisfy the prevailing wage requirements, apprentices must be paid bona fide fringe benefits in accordance with the provisions of the registered apprenticeship program.  If the registered apprenticeship program does not specify the payment of bona fide fringe benefits, apprentices must be paid the full amount of bona fide fringe benefits listed on the wage determination for the applicable classification in cash or in kind.

A3. Under the Good Faith Effort Exception, taxpayers are deemed to satisfy the apprenticeship requirements if they have requested qualified apprentices from a registered apprenticeship program and either:

1. the request was denied for reasons other than the taxpayer, contractor, or subcontractor’s refusal to comply with the established standards and requirements of the registered apprenticeship program, or
2. the registered apprenticeship program failed to respond within five business days of receiving a request.

If the taxpayer, contractor, or subcontractor submits a valid, written request for apprentices to a registered apprenticeship program and the request is denied or not responded to, the taxpayer will be deemed to have exercised a Good Faith Effort with respect to the request for the period described in the request, but not exceeding 365 days (366 days in case of a leap year).  The Good Faith Effort Exception only applies to the specific portion of the request for apprentices that was not responded to or was denied.  The taxpayer will not be deemed to have exercised a Good Faith Effort beyond 365 days (366 days in case of a leap year) of a previously denied request unless the taxpayer submits an additional request.  

A4. Taxpayers, contractors, or subcontractors must submit a written request for qualified apprentices to at least one registered apprenticeship program which:

1. has a geographic area of operation that includes the location of the facility;
2. trains qualified apprentices in the occupation(s) needed to perform construction, alteration, or repair with respect to the facility; and
3. has a usual and customary business practice of entering into agreements with employers for placement of apprentices in the occupation for which they are training, consistent with the standards and requirements set forth in 29 CFR parts 29 and 30, and any subsequent guidance issued by the Department of Labor.

The request must be in writing and sent electronically or by registered mail.  The written request must include the proposed dates of employment, occupation of qualified apprentices needed, location of the work to be performed, number of apprentices needed, the number of labor hours to be performed by the apprentices, and the name and contact information of the taxpayer, contractor, or subcontractor requesting employment of qualified apprentices from the registered apprenticeship program. Reasonable estimates are permissible.

The request must also state that the request for qualified apprentices is made with an intent to employ the qualified apprentices in the occupation for which they are being trained and in accordance with the requirements and standards of the registered apprenticeship program and to employ the qualified apprentices consistent with the number of hours and dates of employment specified in the request. If the employer of the requested qualified apprentices is not the same as the taxpayer, contractor, or subcontractor submitting the request for qualified apprentices, then the request must include the name of the employer.

The Initial request to a registered apprenticeship program for qualified apprentices must be made no later than 45 days before the qualified apprentices are requested to start work.  Any subsequent requests for qualified apprentices made to the same registered apprenticeship program after the initial request must be made no later than 14 days before the qualified apprentices are requested to start work. 

A5. In order to satisfy the Good Faith Effort Exception, taxpayers, contractors, or subcontractors need to submit a request for qualified apprentice to at least one registered apprenticeship program.  While it may be possible for a taxpayer to satisfy all the apprenticeship requirements from one apprenticeship program, it is likely that given the multiple occupations involved in the construction, alteration, or repair of a facility, a taxpayer, contractor, or subcontractor will need to request apprentices from more than one apprenticeship program. This is in part because a registered apprenticeship program typically trains apprentices in a single occupation, whereas more than one occupation will be needed to meet the apprenticeship requirements.

A6. If there is no registered apprenticeship program with a geographic area of operation that includes the location of the facility, taxpayers may be deemed to satisfy the Good Faith Effort Exception for the apprentices they (or the contractor or subcontractor) would have requested for that occupation.  A taxpayer, contractor, or subcontractor that cannot locate a registered apprenticeship program with an area of operation that includes the location of the facility should consider contacting the DOL’s Office of Apprenticeship or relevant State apprenticeship agency for assistance in locating a program.

A7. If the taxpayer, contractor, or subcontractor submits a request as described in Q/A 4 and the request is denied or not responded to, the taxpayer will be deemed to have exercised a Good Faith Effort with respect to the request for a period described in the request but not exceeding 365 days (366 days in case of a leap year) from the date of the request. The taxpayer will not be deemed to have exercised a Good Faith Effort beyond 365 days (366 days in case of a leap year) of a previously denied request unless the taxpayer submits an additional request.

There is no limit on the number of requests a taxpayer, contractor, or subcontractor may submit to one or more registered apprenticeship programs for purposes of being deemed to have exercised a Good Faith Effort.  Additionally, a taxpayer, contractor, or subcontractor is not required to make subsequent requests to the same registered apprenticeship program in order to qualify for the Good Faith Effort Exception.

A8. If the registered apprenticeship program fails to respond to a valid request within five business days after the date on which such registered apprenticeship program received the taxpayer’s (or its contractor or subcontractor) request, then such request is deemed to be denied. A valid response to a request for qualified apprentices is a substantive written reply that agrees, in part or in whole, to the specific requirements in the request.

A9. A registered apprenticeship program’s response that it can partially fulfill the request in the occupation(s) for which it trains qualified apprentices does not constitute a denial of the request with respect to the parts of the request that can be fulfilled. The parts of the request that were denied because they cannot be fulfilled will qualify a taxpayer for the Good Faith Effort Exception with respect to the portion of the request which was denied if the taxpayer, contractor, or subcontractor accepts the requested apprentices that can be fulfilled and the other requirements for the Good Faith Effort exception have been met.

A1. Even if the prevailing wage or apprenticeship requirements were not met during any period of the construction, alteration, or repair of a facility, the statute allows a taxpayer to still be eligible to get the increased credit or deduction amounts by making certain correction and penalty payments. A taxpayer will be deemed to satisfy the prevailing wage requirements if the taxpayer:

1. pays the affected laborers or mechanics the difference between what they were paid and the amount they were required to have been paid, plus interest at the Federal short-term rate (as defined in section 6621) plus 6 percentage points, and
2. pays a penalty to the IRS of $5,000 for each laborer or mechanic who was not paid at the prevailing wage rate in the year.

Under the final regulations, the penalty for failures concerning prevailing wages may not apply if the taxpayer quickly corrects certain limited errors or has a qualifying project labor agreement in place and timely corrects any failures to pay prevailing wages, as detailed in the final regulations. The amount a taxpayer must pay to the laborer or mechanic as well as the penalty to the IRS is increased if the failure is determined to be the result of intentional disregard. 

To cure a failure to meet the apprenticeship requirements, a taxpayer must pay a penalty of $50 multiplied by the total labor hours for which the apprenticeship requirements were not met.  The amount of the penalty with respect to the apprenticeship requirements is also increased to $500 per labor hour if the IRS determines the failure was due to intentional disregard. The penalty for failures concerning apprenticeship requirements may not apply if the taxpayer satisfies the Good Faith Effort Exception or has a qualifying project labor agreement in place.

A2. The facts and circumstances that may be considered in determining whether a failure to satisfy the prevailing wage requirements is due to intentional disregard include (but are not limited to): 

• Whether the failure was part of a pattern of conduct that includes repeated or systemic failures to ensure that the laborers and mechanics were paid wages are rates not less than the applicable prevailing wage rates, including failures to pay prevailing wages as required under other applicable laws; 
• Whether the taxpayer took steps to determine or review the applicable classifications of laborers and mechanics, such as through a quarterly, or more frequent, review of the applicable classifications of laborers and mechanics according to the actual duties performed by those laborers and mechanics; 
• Whether the taxpayer took steps to determine or review the applicable prevailing wage rate(s) for laborers and mechanics to ensure usage of correct rates by all contractors and subcontractors, such as through a quarterly, or more frequent, review of the prevailing wage rates; 
• Whether the taxpayer promptly cured any failures to ensure that laborers and mechanics were paid wages at rates not less than the applicable prevailing rates; 
• Whether the taxpayer has been required to make a penalty payment in previous years; 
• Whether the taxpayer undertook a quarterly, or more frequent, review of wages paid to mechanics and laborers to ensure that wages at rates not less than the applicable prevailing wage rate were paid (including by reviewing payroll information of contractors and subcontractors or by requiring contractors and subcontractors to regularly provide payroll information to the taxpayer or a third party acting on behalf of the taxpayer); 
• Whether the taxpayer included provisions in any contracts entered into with contractors that required the contractors and any subcontractors retained by the contractors to pay laborers and mechanics wages at rates not less than the prevailing wage rates and maintain records to ensure the taxpayer’s compliance with the recordkeeping requirements;  
• Whether the taxpayer posted in a prominent place at the qualified facility or otherwise provided written notice to laborers and mechanics during the construction, alteration, or repair of the qualified facility: (i) of the applicable wage rate(s) as determined by the U.S. Department of Labor for all classifications of work to be performed for the construction, alteration, or repair of the facility, (ii) that in order to be eligible to claim certain tax benefits, employers must ensure that laborers and mechanics are paid wages at rates not less than such wage rates, and (iii) and instructions on how laborers and mechanics may contact the taxpayers’ personnel departments or taxpayers’ managers to report suspected failures to pay prevailing wages and/or suspected failures to classify workers in accordance with applicable wage determinations, employment tax violations, or violations of workplace standard laws without retaliation or adverse action;
• Whether laborers and mechanics were given the opportunity to acknowledge notice provided by the taxpayer, contractor, or subcontractor that in order to be eligible to claim certain tax benefits, taxpayers must ensure that laborers and mechanics employed by the taxpayer, contractor, or subcontractor in the construction of a qualified facility are paid wages at rates not less than prevailing wage rates;
• Whether the taxpayer had in place procedures whereby laborers and mechanics could report suspected failures to pay prevailing wages and/or suspected failures to classify workers in accordance with the wage determination of workers, employment tax violations, or violations of workplace standard laws to appropriate personnel departments or managers without retaliation or adverse action, and whether taxpayer investigated such reports by laborers and mechanics and had internal controls to prevent failures to pay prevailing wages and classify workers in accordance with the wage determination of workers, employment tax violations, and violations of workplace standard laws;
• Whether all laborers and mechanics were provided with a written notice of the rights conferred by the whistleblower provisions of the Taxpayer First Act;
• Whether all laborers and mechanics were provided with paystubs (or access to individual payroll records) reflecting the amount they were paid per pay period (including the specific hourly rate and all deductions from wages);
• Whether the taxpayer investigated any complaints of retaliation or adverse action resulting from, reports of suspected failures to pay prevailing wages and/or classify workers in accordance with applicable wage determinations, employment tax violations, or violations of workplace standard laws and took appropriate actions to remedy any retaliation or adverse action and prevent it from reoccurring;
• Whether the taxpayer, contractor, or subcontractor contracted with contractors who, at the time the work was performed, was known by the taxpayer, contractor, or subcontractor to be debarred by a municipality, state, or the U.S. Department of Labor for violations related to the underpayment of local, state, or federal prevailing wages; and
• Whether the taxpayer failed to maintain and preserve records sufficient to establish compliance with the prevailing wage requirements for relevant tax years.

A3. The facts and circumstances that may be considered in determining whether a failure to satisfy the apprenticeship requirements is due to intentional disregard include (but are not limited to): 

• Whether the failure was part of a pattern of conduct that includes repeated or systemic failures to ensure compliance with the apprenticeship requirements;
• Whether the taxpayer took steps to determine or review the applicable percentage of labor hours required to be performed by qualified apprentices;
• Whether the taxpayer sought to promptly cure any failures;
• Whether the taxpayer has been required to make a penalty payment under paragraph (f)(2) of this section in previous years;
• Whether the taxpayer included provisions in any contracts entered into with contractors that required the employment of qualified apprentices by the contractor and any subcontractors consistent with the labor hour requirement of section 45(b)(8)(A) and the participation requirement of section 45(b)(8)(C) and whether taxpayers regularly reviewed contractors’ and subcontractors’ use of qualified apprentices;
• Whether the taxpayer required contractors and subcontractors to forward to the taxpayer requests to registered apprenticeship programs within five business days of when requests were made;
• Whether the taxpayer made no attempt to comply with the Apprenticeship Requirements;
• Whether the taxpayer developed and used a plan to utilize qualified apprentices in the construction, alteration, or repair of the qualified facility;
• Whether the taxpayer, contractor, or subcontractor regularly followed up with registered apprenticeship programs regarding requests for qualified apprentices;
• Whether the taxpayer, contractor, or subcontractor contacted the Department of Labor’s Office of Apprenticeship or relevant State apprenticeship agency for assistance in locating a registered apprenticeship program;
• Whether the taxpayer had in place procedures whereby individuals could report suspected failures to comply with the Apprenticeship Requirements, without retaliation or adverse action, whether taxpayer investigated such reports by individuals, and whether the taxpayer had internal controls to prevent the failures to comply with the Apprenticeship Requirements;
• Whether the taxpayer investigated complaints of retaliation or adverse action resulting from reports of suspected failures to comply with the Apprenticeship Requirements, and took appropriate actions to remedy any retaliation or adverse action and prevent it from reoccurring; and
• Whether taxpayer failed to maintain and preserve records sufficient to establish compliance with the apprenticeship requirements for relevant tax years.

A4. In general, the requirements to ensure payment of no less than the applicable prevailing wage rates and to satisfy the apprenticeship requirement applies to all taxpayers that claim an increased credit or deduction amount.  Penalties for failures to pay prevailing wages may not apply if a taxpayer employs laborers, mechanics, and apprentices under a qualifying project labor agreement that meets certain requirements, and the taxpayer timely corrects the failure to pay prevailing wages. Penalties for failures to satisfy the apprenticeship requirements do not apply if the work is done pursuant to a qualifying project labor agreement that meets certain requirements.

A5. Taxpayers are required to maintain and preserve sufficient records to establish compliance with the prevailing wage requirements. These records include payroll records for each laborer or mechanic (including each qualified apprentice) employed by the taxpayer, contractor, or subcontractor that reflect the hours worked in each classification and the actual wages and fringe benefits paid to each laborer and mechanic performing construction, alteration, or repair of the facility.  In addition to payroll records otherwise maintained by the taxpayer, records sufficient to demonstrate compliance may include, but are not limited to, identifying information (including addresses, telephone numbers, and email addresses) for laborers and mechanics, the location and type of facility, the labor classification(s) applied to each laborer and mechanic, the applicable wage determination(s), copies of executed contracts for construction, alteration, or repair with any contractor or subcontractor, and records to support contributions to bona fide fringe benefit programs.  If work is done pursuant to a qualifying project labor agreement, the taxpayer must also maintain and preserve records related to that qualifying project labor agreement.  Taxpayers are also required to maintain records of any correction payments made to any laborer or mechanic.

Taxpayers are also required to maintain and preserve records to establish compliance with the apprenticeship requirements.  These records may include copies of any written requests for apprentices by the taxpayer, contractor, or subcontractor, any agreement entered by the taxpayer (or contractor or subcontractor) with a registered apprenticeship program, records reflecting the required ratio of apprentices to journeyworkers prescribed by each registered apprenticeship program from which qualified apprentices are employed, and records reflecting the daily ratio of apprentices to journeyworkers.

A6. Taxpayers may satisfy the recordkeeping requirements in any of the following ways:

1. Taxpayers may collect and physically retain relevant records from every contractor and subcontractor.  The records may have personally identifiable information (PII) redacted to comply with applicable privacy laws.
2. Taxpayers, contractors, and subcontractors may provide relevant records to a third-party vendor to physically retain on behalf of the taxpayer.  The records may have PII redacted to comply with applicable privacy laws.
3. Taxpayers, contractors, and subcontractors may each physically retain the relevant unredacted records for their own employees.

Under all three alternatives, taxpayers will be required to make unredacted records available to the IRS upon request. 

A1. Taxpayers seeking to meet the prevailing wage and apprenticeship requirements are encouraged to take additional actions that can facilitate compliance. These actions include:

• Regularly reviewing payroll records.
• Ensuring any contracts entered into with contractors require that the contractors and their subcontractors adhere to prevailing wage and apprenticeship requirements.
• Regularly reviewing compliance with the prevailing wage and apprenticeship requirements (including the proper worker classifications of laborers and mechanics, the applicable prevailing wage rates, and the percentage of labor hours performed by qualified apprentices).
• Posting information about paying prevailing wages in a prominent and accessible location, or otherwise providing written notice regarding the payment of prevailing wage rates.
• Establishing procedures for individuals to report suspected failures to comply with the prevailing wage and apprenticeship requirements without retaliation or adverse action.
• Investigating reports of suspected failures to comply with the prevailing wage and apprenticeship requirements.
• Contacting the DOL’s Office of Apprenticeship or relevant state apprenticeship agency for assistance in locating registered apprenticeship programs.

A2. Anyone with information about an alleged federal tax law violation, including a suspected violation of the prevailing wage and apprenticeship requirements, can report the suspected violation to the IRS by submitting a Form 3949-A, Information Referral PDF.

Useful information to include with the form includes:

• The nature of the suspected violation(including key words such as “prevailing wage” and/or “apprenticeship” in the “Comments” section);
• Any specific information or evidence about the failure to comply with the prevailing wage and apprenticeship requirements;
• Name or employer identification number of the employer (if available); and
• Address of the job site.

The IRS takes referrals of alleged tax law violations seriously and considers all relevant information on any applicable audit.

The Taxpayer First Act protects employees who report or assist in an investigation regarding underpayment of taxes or any conduct which the employee reasonably believes constitutes a potential violations of tax law or federal law relating to tax fraud. 

Because of taxpayer privacy laws, however, the IRS cannot provide information about the status of an audit or investigation.