U.S. Treasury and IRS Finalize Rules Boosting Clean Energy Tax Credits

The U.S. Department of the Treasury and the Internal Revenue Service (IRS) have issued final regulations to implement wage and apprenticeship standards under the , aimed at enhancing clean energy incentives such as the 45Z production credit. This move is part of efforts to foster well-paying jobs and skilled workforce development in the clean energy sector.

Under the finalized rules released on June 18, taxpayers qualifying for the clean energy credits can potentially receive a credit five times the base amount. Treasury Secretary Janet Yellen emphasized the goals behind these regulations, stating, “The IRA's wage and apprenticeship provisions are designed to elevate wages and promote comprehensive training in counties with lower-than-average incomes.”

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The regulations specifically target projects eligible for the 45Z clean fuels credit, which supports the production of sustainable aviation fuel (SAF) and other non-aviation fuels. According to Treasury data, the base credit starts at 35 cents per gallon for SAF and 20 cents per gallon for non-aviation fuels. However, facilities meeting the prescribed wage and apprenticeship criteria can qualify for significantly higher credits, amounting to $1.75 per gallon for SAF and $1 per gallon for non-aviation fuels.

Encouraging compliance with these standards, Treasury and the IRS are urging developers to consider project labor agreements (PLAs). These agreements facilitate adherence to wage and apprenticeship requirements and offer protections against penalties for non-compliance, provided back wages and interest are promptly addressed.

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The rules outline stringent guidelines on prevailing wages, mandating that workers involved in construction, alteration, or repair of facilities receive rates not less than prevailing local standards determined by the U.S. Department of Labor. Additionally, apprenticeship requirements specify labor hour ratios and participation thresholds for qualified apprentices, defined as individuals enrolled in registered apprenticeship programs.

Special provisions within the regulations apply to facilities placed into service before January 1, 2025, and those commencing construction prior to January 29, 2023. These provisions ensure continuity in compliance obligations while supporting ongoing clean energy initiatives.

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In a statement addressing the timeline flexibility, Treasury clarified, “Taxpayers can fulfill criteria for increased credit amounts irrespective of construction commencement dates.” This flexibility aims to sustain momentum in clean energy development across the .

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