Meeting prevailing wage rates under the Inflation Reduction Act (IRA) involves specific requirements to ensure compliance. These requirements generally apply to laborers and mechanics involved in the construction, alteration, or repair of qualified facilities.
Requirements for Meeting Prevailing Wage Rates
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Who Must Be Paid Prevailing Wages?
- Prevailing wages must be paid to all laborers and mechanics employed by the taxpayer, contractor, or subcontractor on the construction, alteration, or repair of a qualified facility.
- The definition of employed for prevailing wage purposes is broader and includes individuals who may be classified as independent contractors for other tax purposes.
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Prevailing Wage Rates
- The prevailing wage rates are determined by the U.S. Department of Labor in accordance with the Davis-Bacon Act.
- Rates are specific to the geographic area and type of work being performed.
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Secondary Sites
- Prevailing wages must also be paid for work performed at secondary sites if such work is specifically for use at the qualified facility and the site is dedicated to that facility for a certain period.
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Exceptions for Increased Credits
- Taxpayers can claim increased credits without meeting prevailing wage requirements if the facility produces less than one megawatt or if construction began before January 29, 2023.
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Recordkeeping and Compliance
- Taxpayers must meet specific recordkeeping requirements to claim increased credits or deductions.
- Failure to comply may result in penalties, especially if it is determined that there was intentional disregard of the requirements.
By adhering to these guidelines, taxpayers can ensure compliance with the prevailing wage requirements of the IRA and potentially qualify for increased tax credits or deductions.
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