construction workers on a road project
Associated Builders and Contractors has submitted comments regarding the Inflation Reduction Act, seeking clear guidance for companies seeking tax breaks as part of the new law.
Photo courtesy of Phi Duong

ABC seeks clear guidance on Inflation Reduction Act implementation

With various headwinds facing the construction industry, ABC worries the IRA could stunt projects if not enacted properly.

November 9, 2022

The Associated Builders and Contractors (ABC), Washington, D.C., has submitted comments to the U.S. Department of Treasury and the Internal Revenue Service (IRS) regarding the implementation of tax credits for clean energy construction projects funded by the Inflation Reduction Act (IRA), contingent upon new prevailing wage, apprenticeship and domestic content requirements.

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

“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,” ABC Vice President of Regulatory, Labor and State Affairs Ben Brubeck says. “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 notice seeking comments from stakeholders regarding the implementation of these aspects of the IRA by Nov. 4. Opposed by ABC, the IRA was signed into law Aug. 16 and provides more than $369 billion in tax credits for the construction of solar, wind, hydrogen, carbon sequestration, electric vehicle charging stations and other clean energy projects. Developers and taxpayers can receive a bonus tax credit 500 percent greater than a baseline tax credit of 6 percent, but to do so, they must pay Davis-Bacon prevailing wages and use apprentices enrolled in government-registered apprenticeship programs.

“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,” Brubeck says. “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.

The Treasury and apprenticeship provisions apply to projects that begin construction 60 days after the Treasury Department publishes guidance concerning these new requirements, which could come by the end of 2022.

“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.”