Skip to main content

Inflation Reduction Act Tax Policies Undermine Taxpayer Investments in Clean Energy Construction Projects

By November 7, 2022November 8th, 2022No Comments
WASHINGTON, Nov. 7—Associated Builders and Contractors has submitted comments to the U.S. Department of Treasury and the Internal Revenue Service regarding implementation of tax credits for clean energy construction projects funded by the Inflation Reduction Act, contingent upon new controversial prevailing wage, apprenticeship and domestic content requirements.

“The IRA’s unprecedented expansion of anti-competitive prevailing wage, apprenticeship and domestic content requirements through the federal tax code onto private clean energy projects will disrupt the marketplace of contractors who successfully and safely build solar, wind, electric vehicle charging stations and other clean energy projects across America,” said Ben Brubeck, ABC vice president of regulatory, labor and state affairs. “That, in turn, hurts taxpayers because these new requirements will undermine efficient taxpayer investment in clean energy projects and result in needless construction delays and added costs that will ultimately be passed along to energy ratepayers and consumers.

“Unless Treasury provides thorough guidance through a formal notice and comment period, the likely result of these new policies will be fewer clean energy construction projects and less private investment, which would undermine President Biden’s goals of creating well-paying, middle-class jobs across America while reducing carbon emissions,” said Brubeck. “Developers, taxpayers, contractors and subcontractors need clear and specific guidance on how these new provisions will be implemented so developers can decide whether the tax credits are worth the significant risks and penalties, and large and small business contractors and subcontractors can decide whether to bid on and perform such work.”

On Oct. 5, Treasury and the IRS issued a request for comments notice inviting interested stakeholders to submit feedback in response to agency questions regarding implementation of these aspects of the IRA by Nov. 4. Opposed by ABC, the IRA was signed into law on Aug. 16, and provides over $369 billion in tax credits for the construction of solar, wind, hydrogen, carbon sequestration, electric vehicle charging stations and other clean energy projects. Developers/taxpayers can receive a bonus tax credit 500% greater than a baseline tax credit of 6%, but this is conditioned on requirements that project contractors pay Davis-Bacon prevailing wages and utilize apprentices enrolled in government-registered apprenticeship programs.

The wage and apprenticeship provisions apply to projects that begin construction 60 days after Treasury has published relevant guidance concerning these new requirements. It has been reported that Treasury intends to issue guidance by the end of the year, so this aspect of the IRA may affect certain clean energy construction projects as early as March 2023.

Treasury’s request for comments was issued as the construction industry faces significant headwinds including severe supply chain disruptions, unprecedented materials cost inflation of 41% since the onset of the COVID-19 pandemic, declining investment in structures, a shortage of 650,000 skilled workers and problematic Biden administration policies.

“As outlined in ABC’s comments, Treasury needs to work with industry to set simple and efficient regulations for these new requirements through a formal notice and comment period or risk exacerbating the many headwinds facing the construction industry,” said Brubeck. “If rushed and unclear, Treasury guidance will needlessly increase costs for contractors and taxpayers and ultimately delay and stop new clean energy projects.”