The Inflation Reduction Act of 2022 introduced powerful energy-related tax incentives under Sections 179D, 45L, and 48E of the Internal Revenue Code. These provisions provide additional rewards for projects that meet prevailing wage and, in some instances, apprenticeship requirements. They offer substantial financial benefits for energy-efficient construction, multifamily residential development, and renewable energy installations.

• Building owners can obtain up to $5.81 per square foot in deductions for 2025 projects by constructing energy-efficient buildings or reducing the energy use of existing buildings. This benefit is available under Section 179D.
• Multifamily homebuilders can obtain up to $5,000 per dwelling unit in credits for homes certified as Zero Energy Ready Homes, or $2,500 per unit for homes meeting ENERGY STAR requirements. These credits are available under Section 45L and apply to multifamily homes as well as single-family and manufactured homes. Multifamily homebuilders must meet prevailing wage requirements to claim these higher credit amounts.
• Energy developers and property owners can qualify for a 30% bonus investment tax credit for clean energy projects such as solar, wind, and energy storage. This incentive, available under Section 48E, rewards projects that meet prevailing wage and apprenticeship requirements. Projects under 1 megawatt (or equivalent) automatically qualify for the bonus credit.

To secure these higher benefits, the IRS requires documented compliance with prevailing wage and apprenticeship rules. This includes proof of wage rates by classification and location, fringe benefit allocations, apprentice ratios and hours, correction payments and penalties if applicable, and audit-ready records. Failure to properly document these requirements can result in losing the maximum credit or deduction.

It is critical to use an automated system for prevailing wage documentation. Our partner eBacon offers a compliance-focused payroll and fringe management platform designed for contractors and developers working on government and energy-incentivized projects. The platform automates wage calculations by pulling federal and state prevailing wage rates and applying them to payroll, generates certified payroll reports such as WH-347 for Davis-Bacon and IRA compliance, and manages fringe benefit allocations to reduce taxable payroll while maintaining compliance. It also creates a complete audit trail with detailed records of wage determinations, hours worked, and benefit allocations, and supports correction tracking by documenting back payments and penalties.

ICS Tax provides innovative tax planning strategies and specializes in energy efficiency and renewable energy incentives, including Sections 179D, 45L, and 48E. These services benefit those in the construction, real estate, and energy development industries. Together with eBacon and your tax advisors, we can identify, document, and deliver credits and incentives that reduce tax liabilities and increase profitability.