The Inflation Reduction Act is here. We all have our own thoughts on it, but there are some important things for contractors to be aware of regarding the legislation as public work ramps up.

Tax Credits the Inflation Reduction Act Supports

Contractors can receive tax credits for working on projects under the clean energy initiative that the Inflation Reduction Act supports, effective as of January 29th, 2023. A few examples include but are not limited to:

• • Alternative Fuel Refueling Property Credit
  • Production Tax Credit
  • Credit for Carbon Oxide Sequestration
  • Credit for Production of Clean Hydrogen
  • Clean Fuel Production Credit

(Consult the Department of Labor for more information regarding exactly how much these credits are worth and where to bid on these projects.)

Qualifications

To qualify for tax credits, several guidelines must be met. Two of those guidelines relate to the utilization of apprentices and prevailing wages.

Per guidelines, contractors working on projects under the Inflation Reduction Act must ensure they use the proper ratio of qualified apprentices and pay prevailing wages to workers for the project duration. State regulations provide the parameters for non-joint (merit shop) program requirements on the ratio of workers to be employed per apprentice after the first apprentice is hired. For example, in Pennsylvania, a 4:1 ratio of workers to apprentices on any qualified job site. The regulation varies from state to state and by worker classification. Make sure to check your state DOL website for the rule in your area.

Prevailing wages combine standard hourly pay and fringe benefits paid to specific classes of employees. They apply to any person whose responsibilities are manual or physical in nature on a public works job site. According to the law, fringe dollars can be paid as cash on a check or the cash value of fringe dollars into benefits like a 401(k), health and welfare, vacation pay/PTO, or qualified apprenticeships. There are tax advantages to using fringe dollars to fund benefits.

It is crucial to note that certified payroll reporting and general oversight of public projects are heavily monitored and scrutinized. Even something as simple as worker misclassification can lead to severe penalties that could result in prison time. Nonetheless, working on prevailing wage projects brings higher average base pay and steady work during economic downturns. With the government heavily funding public projects under President Biden’s Infrastructure Bill from 2021, you would want to take advantage of all tools to bid on, win, and stay working on projects under the Inflation Reduction Act.

There are people and resources in your area who can help navigate the process and keep you compliant, but feel free to reach out to Beneco directly. We all want to see Americans succeed, continue to work, and maximize their tax credits.