The IRS has recently introduced Form 7220, Prevailing Wage and Apprenticeship (PWA) Verification and Corrections, to report compliance with PWA requirements for claiming increased tax credits or deductions. This form is important because it verifies adherence to PWA rules, enabling taxpayers to access significantly boosted incentives, such as the fivefold increase in the §179D deduction or the full 30% §48E credit on projects over 1MW, potentially adding millions in tax savings for qualifying projects.

The §179D Energy Efficient Commercial Buildings Deduction allows a deduction for energy-efficient improvements in commercial buildings, with a base amount of $0.50 to $1.00 per square foot before inflation adjustments. This increases fivefold, up to $5.00 per square foot, for projects meeting the necessary prevailing wage and apprenticeship (PWA) requirements during construction and ensuring a percentage of labor hours (10% to 15%) are performed by qualified apprentices from registered programs. PWA applies to projects where construction begins after January 29, 2023. Projects started prior to this date are exempt and can claim the increased deduction without meeting PWA standards. For §179D, Form 7220 is required when seeking the fivefold bonus for projects meeting the PWA requirements.

Section 48E, the Clean Electricity Investment Credit, provides an investment tax credit for qualified clean electricity generation facilities (e.g., solar) and energy storage technology placed in service after December 31, 2024. While projects less than 1 MW are exempt from the PWA requirements to get the fivefold bonus, projects over 1MW receive a base credit of 6% of qualified investments, rising to 30% with PWA compliance during construction. Form 7220 is mandatory for projects over 1MW claiming the bonus; smaller projects (under 1MW) are exempt from PWA requirements and still qualify for the fivefold bonus.

Form 7220 also supports PWA bonuses for other incentives, such as §45Q carbon oxide sequestration credit and §30C alternative fuel vehicle refueling property credit. ICS Tax understands the complexities of PWA and has successfully qualified clients for maximum deductions and credits. We ensure every claim is accurate, complete, and fully aligned with IRS requirements.