IRA prevailing wage and apprenticeship rules, at a glance.
The federal rules for the clean energy credits, checked against IRS and Treasury sources on November 9, 2026. When your tax advisor asks for proof, we hand it over.
| Topic | Federal Rule | Source |
|---|---|---|
| Why it matters | Meeting the requirements multiplies the base credit or deduction by five. Facilities with a maximum net output under one megawatt, and facilities whose construction began before January 29, 2023, get the higher credit without meeting the PWA requirements. | IRS PWA FAQ, General requirements, Q1 and Q4 |
| Covered credits | Sections 30C, 45, 45Q, 45V, 45Y, 45Z, 48, 48C, 48E, and 179D. Sections 45L and 45U carry the prevailing wage requirement only. | IRS PWA FAQ, General requirements, Q1 |
| Who must be paid prevailing wages | Laborers and mechanics employed by the taxpayer, its contractors, and its subcontractors. The prevailing wage is the base hourly rate plus fringe benefits on the Department of Labor wage determination, published on SAM.gov. Fringe can be paid as cash or as bona fide benefits. | IRS PWA FAQ, Prevailing wage requirements Q2 and wage determinations Q1 and Q2 |
| Alteration and repair after placed in service | Prevailing wages also apply to alteration and repair work for 10 years after a section 45 facility is placed in service, and for 5 years after a section 48 project is placed in service. For a section 48 project, a failure in that period can trigger recapture of the increased credit, with a 5-year recapture period. Routine maintenance is not covered. The apprenticeship requirements do not apply after a facility is placed in service. | 26 CFR 1.45-7(a)(1); 26 CFR 1.48-13(c); IRS PWA FAQ, General requirements Q3 and Q6 |
| Correcting an underpayment | The taxpayer pays each underpaid worker the shortfall plus interest at the federal short-term rate plus 6 percentage points, and pays the IRS a penalty of $5,000 per underpaid worker. If the IRS finds intentional disregard, the worker payment triples and the penalty is $10,000 per worker. After a final IRS determination of a failure, these payments must be made within 180 days. | 26 CFR 1.45-7(c)(1), (c)(3), and (c)(4) |
| Penalty waiver | The $5,000 penalty is waived on two conditions. First, the worker is paid the correction by the last day of the first month after the calendar quarter of the underpayment. Second, the worker was underpaid in no more than 10% of the year’s pay periods, or by no more than 5% of the year’s required wages. A separate exception covers work under a qualifying project labor agreement. | 26 CFR 1.45-7(c)(6) |
| Apprentice labor hours | Qualified apprentices must perform a set share of total construction labor hours: 10% if construction began before 2023, 12.5% if it began in 2023, and 15% if it began in 2024 or later. | 26 CFR 1.45-8(b) |
| Daily ratio | The apprentice-to-journeyworker ratio set by the registered apprenticeship program is tested each day. Apprentice hours above the ratio on a day do not count toward the labor hours requirement. | 26 CFR 1.45-8(c) |
| Participation | Each taxpayer, contractor, or subcontractor that employs four or more individuals on the construction must employ at least one qualified apprentice. | 26 CFR 1.45-8(d) |
| Good Faith Effort | The apprenticeship requirements can be treated as met if a registered program denied a written request, or did not answer it within five business days. A denial doesn’t count if it resulted from the taxpayer’s, a contractor’s, or a subcontractor’s refusal to comply with the program’s standards. A request covers up to 365 days. After that, a new request is needed. | 26 CFR 1.45-8(f)(1) |
| Apprenticeship penalty | $50 per labor hour for which the requirements were not met, or $500 per labor hour if the IRS finds intentional disregard. | 26 CFR 1.45-8(f)(2) |
| Records | The taxpayer must keep records that show compliance, including payroll records for each laborer and mechanic and apprenticeship records such as labor hours and daily ratios. Completed WH-347 forms can be part of those records. The taxpayer may keep contractor records itself, use a third-party vendor, or let each contractor keep its own, but unredacted records must be available to the IRS on request. The rules set no fixed retention period: records are kept as long as they may become material to the tax. | 26 CFR 1.45-12; 26 CFR 1.6001-1(e) |
| 2025 law change for wind and solar | Public Law 119-21 (July 4, 2025) ends the section 45Y and 48E credits for wind and solar facilities that are placed in service after December 31, 2027, and whose construction began after July 4, 2026. The IRS notice on this change does not address the PWA rules. | IRS Notice 2025-42, Internal Revenue Bulletin 2025-36 |
That is a lot of rules for one project. DSPTCH tracks them every pay period, and our team will run the whole thing for you.
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