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Transcript Available of IRS Hearing on Energy Credit Regs

NOV. 21, 2023

Transcript Available of IRS Hearing on Energy Credit Regs

DATED NOV. 21, 2023
[Editor's Note:

This transcript arrived too late to be reviewed for errors. A corrected version will replace it when available.






Washington, D.C.

Tuesday, November 21, 2023


For IRS:


Senior Technician Reviewer

Associate Chief Counsel

For U.S. Department of Treasury:

Attorney-Adviser (OTP)

In-Person Speakers:

CFO Services

Clean Fuels Alliance America

Associated Builders and Contractors

Coalition for Energy Efficient Jobs & Investment


Mechanical Contractors Association of America

Solar Energy Industries Association


North America's Building Trades Unions

FuelCell Energy Inc.

Independent Electric Contractors

Telephonic Speakers:

Baker Botts LLP



Climate Jobs Rhode Island

Climate Jobs Illinois

Texas Climate Jobs Project

Climate Jobs Massachusetts

* * * * *


(10 a.m.)

MR. SCOTT: We're here today for the public hearing regarding proposed regulations under part 1 of title 26 of the Code of Federal Regulations. The proposed regulations provide rules on increased credit and deduction amounts, enacted as part of the Inflation Reduction Act for taxpayers satisfying certain prevailing wage and apprenticeship requirements for PWA.

The PWA requirements are set forth primarily under section 45 of the Internal Revenue Code. Sections 30C, 45L, 45Q, 45U, 45Z, 45Y, 45ZZ; section 48, 48C, 48E; and section 179D also provide for increased credit or deduction amounts and, generally, cross-reference section 45 for applicable prevailing wage and apprenticeship rules. The regulation project number is REG-100908-23.

My name is Alexander Scott. I'm an attorney in the Office of Chief Counsel, and I'm also one of the panelists at today's hearing. The other panelists are Rachel Levy, associate chief counsel; Kevin Gillin, senior technician reviewer; both in the Office of Chief Counsel, and Kimberly Wojcik, Treasury attorney with Treasury's Office of Tax. Our hearing will have 18 speakers who previously requested to speak. Each speaker will have 10 minutes to present their comments. For those speakers present in the room, there is a timer at the podium that will count down from 10 minutes to alert the speaker of how much time remains. For those speakers participating on the telephone, a member of the panel, me, will notify you when you have one minute left. The panel members may then pose questions to the speaker. The in-person speakers will testify first, followed by the speakers on the telephone. Persons joining by telephone are in listen-only mode, and those testifying will be unmuted at the appropriate time. The order of speakers is as follows: Nick Panko, on behalf of CFO Services; Kirk Kovarik, Clean Fuels Alliance America; Michael Evans, Coalition for Energy Efficient Jobs & Investment; Timothy Jacobs, on behalf of himself; James Gaffney, Earl Pomeroy, and John McNerney on behalf of the Mechanical Contractors Association of America; Deborah Kobes, on behalf of herself; Esmeralda Aguilar, on behalf of North America's Building Trades Unions; Charles Zdebski, on behalf of FuelCell Energy Inc; Jason Todd, on behalf of Independent Electric Contractors. Then for the telephonic speakers: Barbara de Marigny, on behalf of Baker Botts LLP; David Fialkov, on behalf of NATSO; George Hershman, on behalf of SOLV Energy LLC; Michael Roles, on behalf of Climate Jobs Rhode Island; Joe Duffy, on behalf of Climate Jobs Illinois; Leonard Aguilar, on behalf of Texas Climate Jobs Project; Ryan Murphy on behalf of Climate Jobs Massachusetts; and then Michael Altman, on behalf of the Associated Builders and Contractors; and Ryan Murphy, on behalf of Solar Energy Industries Association.

Would Nick Panko like to come up and testify first on behalf of CFO Services?

MR PANKO: Well, thank you very much for having me today. I appreciate everybody here on the panel. I think from the PWA regulations that have been proposed, some of the comments I'd like to make today are just thinking about how do we maintain the compliance in the future since a lot of these projects that we are providing a bonus by meeting these PWA requirements. I'm just thinking long-term because most of these, if they're placed in service any time soon, we have that compliance probably coming out three, four years from now. So I'd like to talk about the penalty and cure provisions, the treating of, you know, floor persons, or owners, or other executives into the PWA, and also comment on the additional criteria for intentional disregard; and then, also, the apprenticeship ratio requirement, and then talking about the 120 days.

So again, thinking about three, four years from now, how do we kind of maintain that compliance and, especially, with the level of, not only for the taxpayer but for the taxpayer's contractors and subcontractors, there is a good amount of documentation that needs to be kept on the taxpayer's behalf to do that.

So with the prevailing wage requirement, I think the proposed regs are clear and communicate that, you know, that the contractor, the subcontractors, all of their information is at the responsibility of the taxpayer to maintain it to meet these PWA requirements. It will be a challenge at any level of job, be it a large job or a small job, it will require taxpayers to really maintain those records because some contractors don't do it. It's something that's out there, but I get the idea is if we're going to provide a bonus, there has to be some level of substantiation to that.

So I think, it is appreciated that there are waivers for penalties and provisions for procuring wage deficiencies. I think that is actually helpful, because then it's — I think there's going to be a lot of instances where maybe one person or another person didn't get paid the right amount depending on the amount that's kind of in the DOL tables, but I do appreciate there are — it's not just a harsh penalty, it's all or nothing. There are kind of provisions to procure that out.

On the apprenticeship requirements, in terms of the penalties and the waivers, and those things, I think, having to measure it on the job level will be very challenging. I think a lot of people will fall or fail to [do?] that because it's going to be very difficult, either if it's welders, laborers, plumbers, or whatever that might be, I think that will be a challenge for that; and so, one of the recommendations that we would make is that if we can look at it from a group standpoint. I don't know if we can group them by the contractor or the subcontractor, but there's another (inaudible), with the measurement by the job category will be a challenge. So depending on the size of the project, the location of the project, if it's, you know, type of contractors and subcontractors, that will be a challenge. So the apprenticeship requirement, I think, most jobs will have — not everybody's going to meet that on most jobs.

On the transferable specified credit applications on penalties, the, you know, DOT 45-7C puts the obligation on the eligible taxpayer and to making that transaction; but it does also say that if with the transferee files that tax return for the specified credit, those PWAs become binding. The challenge will be is if there's a fiscal filer and a calendar filer, and if my fiscal filer is the transferee and I'm going to file before my eligible taxpayer files that return, that could lock in that eligible taxpayer. Our recommendation is the obligation should just apply to the eligible taxpayer when they file for that return because they have to put the credit on the return, even if it's transferable; and the mechanics for that, I think, it should just be for the eligible taxpayer.

In terms of the working floor persons, owners, and others, I think, that that will create another layer of complexity if we include those people to prove the — to document the weekly activities, to prove that 20 percent threshold. I think it's impractical to keep them in the calculations. At the same time, it might help the taxpayer. I don't know without kind of going through the facts and circumstances. So maybe, it's only applying to individuals that are not exempt and not applying to the other individuals that are listed in the comments. I'm kind of requesting that.

Then on the intentional disregard, I think, that the — I know that, you know, the penalties are ratcheted up if there is intentional disregard and, again, the taxpayer relying on contractors and subcontractors to satisfy some of these requirements, it will create another layer of administration that maybe is not intended, but it will happen. That the only things that if the penalties are still required even if the taxpayer self (phonetic) mediates, and only provides 30 days from when the taxpayer becomes aware. It's a short time frame but, you know, again to provide corrective action to avoid the penalty, I think, it's just, again, trying to prove that facts and circumstances, so the intentional disregard isn't the first place we go in IRS exam, it'll be kind of — it'll have to be really clear that there is an intentional disregard; and then 45-7C3 and 3g about if an employee makes an investigation or reports a failure of the taxpayer are paying these. Again, I think, that is, you know, somewhat of like a whistleblower. I think that can — I don't know. I don't know what that's going to look like on a job. That could create something that doesn't need to be there and then pushes the taxpayer into the intentional disregard penalties while all the other requirements are already higher enough to meet this bonus, I don't think that needs to be in there, that component.

On the employment records, calendar year versus taxable year, I think, calendar year since all our employment records are on a calendar-year basis, I think, that would make sense. I would be in agreement to keeping it as a calendar year. It will not be, you know, it won't be helpful to the fiscal filers, but that's OK.

Apprenticeship ratio requirement. This one will — again, back to the comment on compliance. In trying to work on these jobs and placing them in service, and all the other things we have to do on one of these, you know, jobs, be it at 45(b), 48(c), whatever that might be, the ratio requirement applied to each day for the construction, repair, and alteration of the qualified facility, that seems really unreasonable. That is, you can have many instances and we can all think of a thousand instances where an apprenticeship, an extra apprenticeship shows up, or the journeyman doesn't show up and the ratio gets all messed up for one day. So this is back to the comment. I think most taxpayers, if you look at each individual day, will not meet the ratio requirement at some point during the job. It's just practically speaking, it won't work out there. So I think, if there's a way to adjust that — and one of our recommendations is that if the taxpayer satisfies the ratio requirement for, say, let's say, at least 90 percent of the working days of the job, they've satisfied the ratio requirement. Some sort of safe harbor, so to speak, might be helpful because I think having it each day and each measurement each day, I think, there'll be taxpayers that are falling under that; and, in addition, 45-8C3 and 45-7b, it's unclear of which apprentice is paying the additional payment if they are outside that ratio and they're not including those labor hours. So it's just unclear which apprentice, because there could be multiple apprentices on that, and so then if you're outside the ratio, you're not supposed to pay that apprentice.

And then last is the additional requests for the good-faith effort exemption. I point to example F, that's 45 — and example F, if scope changes during that 120 days, it's unsure of what, you know, if we need — it'll say scope changes — they have to add something else and more apprenticeships have to come in, what has to happen. So again, maybe just a clarification and I thought example F could be clarified of what happens if my scope changed and how would I satisfy the 120 days good-faith effort exemption?

I appreciate the effort you guys have put into this. This is not easy to give us a standard to jump over to get into. The bonus for these credits? But I will take any questions that you might have on the comments.

MR. SCOTT: Thank you very much for your testimony. I'll open the panel to questions. Thank you. Thank you very much. We'll have Kurt Kovarik, on behalf of Clean Fuels Alliance America.

MR. KOVARIK: Good morning. Thank you for this opportunity to testify on behalf of these important regulations. Again, my name is Kurt Kovarik. I'm vice president of federal affairs for the Clean Fuels Alliance America, with the U.S. trade association representing the entire biodiesel, renewable diesel, and sustainable aviation fuel supply chains, including producers, feedstock suppliers, and fuel distributors.

Clean Fuels has a diverse membership. It includes more than 100 companies in nearly all 50 states, varying from Fortune 100 companies to small family-owned producers serving the on- and off-road applications of rail, marine, aviation, and heating oil markets. Our fuels are made from an increasingly diverse mix of resources such as recycled cooking oil, distillers' corn oil, soybean and canola oils, and animal fats. The clean fuels industry is a proven, integral part of America's clean energy future. Clean Fuels serves as the industry's primary organization for technical, environmental, and quality assurance programs, and is the strongest voice for its advocacy, communications, and market development.

Our members are leaders among the U.S. companies investing in new biodiesel, renewable diesel, and sustainable aviation fuel capacity. They are investing in infrastructure, generating new jobs, and increasing economic opportunities for growers, fuel producers, and other economic sectors. The biodiesel/renewable diesel industry is on a path to sustainably double the market to 6 billion gallons annually by 2030, eliminating at least 35 million metric tons of CO2 equivalent greenhouse gas emissions annually. With advancements in feedstock, we will reach 15 billion gallons by 2050 or sooner. According to the most recent data from the Argonne National Laboratories, greenhouse gases, regulated emissions, and energy use in technologies are the GREET model. The average gallon of biodiesel or renewable diesel reduces emissions by approximately 74 percent compared to petroleum.

Additionally, since 2010, the use of our fuels has avoided 143.8 million metric tons of carbon. Our fuels reduced more than just greenhouse gas emissions. Biodiesel, renewable diesel, also reduce criteria pollutants from existing diesel engines, reducing health and environmental impacts in major trucking corridors, warehouse distribution centers, and other diesel hot spots close to major population centers. This means that using these fuels today will also lower healthcare impacts and costs for all populations living in and near those areas, including minority, low-income, and indigenous populations.

It's important to note that the heavy-duty trucking, freight, home heating, aviation, and maritime sectors have few near- or midterm carbon reduction strategies other than advanced biofuels and may not have a serious alternative to liquid biofuels in our lifetime. Low-carbon liquid fuels are the lowest-cost option toward decarbonization that can be used in every diesel-fueled application and every engine technology. It cannot be overlooked that the heavy-duty sector will continue to rely on the internal combustion engines when you consider the longer, full useful-life requirements of existing diesel engines and the decades it will take to pursue across-the-board electrification and other decarbonization strategies. The United States will need these fuels in the future to meet the nation's clean air and energy goals, as nearly every forecast predicts growing demand for diesel and jet fuel as people and freight continue to move. These fuels are among the cleanest and lowest-carbon fuels available today to help reduce greenhouse gas emissions now, and available to meet President Biden's near- and long-term climate goals, particularly in hard decarbonized sectors.

Clean Fuels recently published a study, “The Economic Impact of Biodiesel on the U.S. Economy of 2022,” conducted by LMC International. The study finds that based on 2021 market data, the biodiesel/renewable diesel industry produced 3.1 billion gallons and generated $23.2 billion in economic activity while supporting 75,000 jobs, paying $3.6 billion in annual wages in the United States. For every 100-million-gallon increase in domestic clean fuel production, the direct, indirect, and induced economic activity increases by [$]1.09 billion and U.S. jobs grew by over 3,000. The largest economic and employment benefits occur in the farming, oilseed processing, and fuel production sectors.

Clean Fuels is extremely grateful for the opportunity to testify in the guidance for prevailing wage and apprenticeship requirements. Clean Fuels, and its members, look forward to continued cooperation with Treasury, IRS, and other government entities in advancing decarbonization efforts and ensuring that the historic investments made in the Inflation Reduction Act are taken advantage of to fuel a transition of low-carbon economy.

Our members look forward to working with the government actors to enforce compliance with PWA requirements and ensure that clean energy investments produce good, high-paying American jobs, given that it is extremely important that guidance on the PWA requirements aligns with the goals of the IRA and is implemented in a way that rewards investment in clean energy and the American workforce.

Clean Fuels wishes to direct attention to four areas where further guidance is needed. First, our reading the guidance leads us to believe that it may, incidentally, create a class of facilities that would fail to receive the full credit even if they fully comply with PWA requirements. The guidance appears to state that to receive the full credit for satisfying the PWA requirements, a facility must either begin construction after January 29, 2023, or be placed in service before 2025. This would preclude facilities that begin construction before January 29, 2023, and are placed in service after 2025 from qualifying for the credit. That would likely exclude a substantial number of facilities, as construction of these projects often takes years to complete, especially given permitting and supply chain barriers.

If implemented in this manner, facilities that went above and beyond the satisfied PWA requirements at the earlier stages of construction, despite limited guidance, would be punished, potentially undermining the faith in the PWA process and incentivizing companies to err against premature compliance in the future. This confusion can be fixed with a simple remedy. Treasury should clarify that any facility placed in service after 2024, regardless of when construction began, should qualify for the full credit if they comply with the PWA requirements.

Second, the guidance appears to make section 45Z one of the only clean energy credits that fails to offer an exemption from PWA requirements for facilities that begin construction before adequate time has been given for them to review the PWA guidance. Many other clean energy credits maintain this exemption because it is unfair to require taxpayers to comply with PWA requirements that they do not fully understand. Many taxpayers began construction on facilities based upon the incentives in the IRA before guidance had been issued on the PWA requirements, and entered into binding contracts that do not satisfy the revised PWA requirements.

Once again, if our reading is correct, the current guidance would harm early movers that quickly responded to the clean energy incentives enacted by the IRA and may make other taxpayers think twice before they make any clean energy investments prior to the issuance of final guidance.

The guidance does include an exemption for facilities placed in service prior to 2025, but given long construction timelines, a substantial number of facilities that began construction prior to January 29, 2023, may still be subject to PWA requirements for which guidance had not been published when the construction of that facility began. This can be remedied by adding an exemption for compliance with PWA requirements for facilities that began construction prior to January 29, 2023.

Third, the guidance does not provide sufficient clarity on responsibility for PWA violations by third parties. Further guidance would clarify the definition of “intentionally disregarding” to ensure taxpayers that they will not be held responsible for labor violations of third parties. Guidance should consider degrees of separation between the taxpayer and contracted parties responsible for fulfilling the PWA requirements. Guidance could, potentially, consider safe harbors for such scenarios.

Fourth, the guidance does not provide enough clarity on whether prevailing wage and apprenticeship requirements are met in a year where no alterations or repairs are performed on a qualified facility. For example, imagine that a taxpayer wishes to claim the credit for the production of clean fuels in 2025 for a facility placed in service in 2024, but the facility did not undergo any repairs or alteration in 2025. Would the taxpayer satisfy the prevailing wage and apprenticeship requirements in 2025? The guidance is unclear on this, creating uncertainty that could raise project costs and undermine transition to clean fuels.

With that I will conclude, express my gratitude and thanks for having the opportunity to represent Clean Fuels and our members here today, to testify on this important issue. If there's any way that Clean Fuels and any of our members can be a resource for the formulation of further IRA implementation measures, we want to be available and are willing to help wherever possible. Thank you for this time.

MR. SCOTT: Thank you. Open.

MR KOVARIK: Possible. Thank you for this time.

MR. SCOTT: Thank you. Open questions for panelists? Next, we'll have Michael Evans on behalf of the Coalition for Energy Efficient Jobs & Investment.

MR. EVANS: Good morning. My name is Mike Evans. I'm a partner at the KNL Gates Law Firm and I'm testifying on behalf of the Coalition for Energy Efficient Jobs & Investment. The coalition comprises a broad range of stakeholders interested in the section 179D energy-efficient commercial buildings deduction, and members of the coalition have been actively utilizing the deduction since the deduction was first established in 2005. Thanks for the opportunity to testify.

In its previously submitted comment letter, the coalition made several comments regarding the application of various apprenticeship requirements. These comments are pretty straightforward and they're similar to many others that you've received, so I won't repeat them here. I will instead focus on one point. We urge the administration to recognize that in the context of the 179D allocation system, the application of prevailing wage requirement and apprenticeship requirements is unique, is especially difficult, and may require a different approach.

To put this point in perspective, the Inflation Reduction Act applied prevailing wage and apprenticeship requirements to 12 separate tax incentives. Eleven are tax credits. In these 11 cases, the application of the prevailing of the labor requirements is pretty straightforward. The entity earning the credit, typically the owner of the project, is responsible for ensuring compliance, whether the owner claims the credit or transfers it. Section 179D is an exception. It operates differently. By way of reminder, section 179D provides not a credit, but instead a deduction whose value varies. Further, section 179D is not subject to either direct-pay or transferability. Instead, section 179D takes a different approach to maximize the utility of the incentive. It provides that in the case of a governmental or tax-exempt entity, the secretary, quote, "shall allow the allocation of the deduction to the person primarily responsible for designing the property in lieu of the owner of such property." In other words, a governmental or tax-exempt entity may allocate the deduction to the design professional, typically the architect or engineer. Further quote, "such person shall be treated as the taxpayer for purposes of the deduction."

Turning to the labor requirements, section 179D(b)(3) provides that in order for the enhanced deduction to apply, the installation of the relevant property must satisfy prevailing wage and apprenticeship requirements. Further, rules similar to under section 45(b)(7) and 45(b)(8) apply, making the taxpayer liable for any recapture and payment and penalty amounts. So in the case of a section 179D project that does not involve an allocation, the system operates the same way as under the 11 tax credit provisions. The private owner of the facility, which typically is a commercial building, is responsible for assuring that the contractors and subcontractors it hires comply with the labor requirements. Again, pretty straightforward.

The problem comes when there's an allocation, that is, when a governmental or tax-exempt entity is undertaking energy-efficient improvements subject to section 179D and it's allocating the deduction to a design professional. The provisions quoted above could be interpreted to mean that the design professional, that is, the architect or engineer designing the project deemed to be the taxpayer, is responsible for assuring that the project contractors and subcontractors pay prevailing wage rates and meet the apprenticeship requirements needed to obtain the enhanced deduction.

This is, on its face, a mismatch. Simply put, the designer is involved only in the design of the project, not the installation. Indeed, the designer typically has no contractual relationship with the contractors and subcontractors, and the designer is not providing manual or physical labor. It will be difficult or impossible for the designer to assure compliance by completely unrelated entities with which it has no contractual relationship. As a result, if this situation is not addressed, the utilization of section 179D could decline significantly, because of uncertainty about the availability of the allocated deduction, and about potential recapture and penalties, and the relevant governmental and tax-exempt entities, the owners, may have little economic incentive to help the designer meet the requirements because the risk outweighs the economic benefits.

To address this problem, we urge that you make clear that in the case of a project involving an allocation of the section 179D deduction to a governmental, I'm sorry by a governmental or tax-exempt entity, the design professional, that is, the architect or engineer, is not responsible for ensuring compliance with the labor requirements. This would provide a narrow solution to a unique problem and it would allow the IRA amendments to section 179D to achieve their primary purpose of encouraging more energy-efficient building improvements. Thanks for your attention and thanks for your hard work implementing this important law.

MR. SCOTT: Thank you. Questions from panelists? Thank you very much.

MR. EVANS: Thank you.

MR. SCOTT: Next, we'll have Timothy Jacobs on behalf of himself.

MR. JACOBS: Good morning. I am Tim Jacobs, a partner at Hunton Andrews Kurth in Washington, D.C. I have practiced law in the renewable energy tax credit area for more than 18 years and have filed comments on the PWA rules for a number of key stakeholders. I would like to focus on four specific areas that require clarification.

First, further guidance should clarify that the apprenticeship rules apply only to the construction period prior to the placed-in-service date of a qualified facility. The statute, section 45(b)(8), states in at least three places that those rules apply. Quote, "with respect to the construction of the qualified facility, which read in conjunction with the prevailing wage rules in section 45(b)(7),” would indicate strongly that apprenticeship rules apply only to the period through the placed-in-service date and not after that date during the 10-year or 12-year credit period or the five-year ITC recapture period. Indeed, it appears that in the recently released section 48 ITC proposed rules confirm that the apprenticeship rules are limited to the construction period and not to alteration or repair work that occurs after the placed-in-service date.

However, the PWA regulations that are before us today are silent on this issue, creating uncertainty. There are sound policy reasons why Congress should be viewed as indicating its intent with respect to the language, aforementioned, as limiting the apprenticeship rules. In this manner, a recent Tax Notes article entitled “Apprentices and Emergency Repairs” is informative. The key takeaway is that it is impractical or indeed impossible to engage apprentices in the post-placed-in-service-date context. Treasury should clarify this issue as quickly as possible.

Second, further guidance should clarify the meaning of “alteration and repair.” While the proposed regulations recognize that basic maintenance and similar work is not covered by PWA, the regulations do not provide sufficient clarity. Examples in the regulations actually create considerable uncertainty and confusion. On the one hand, basic maintenance is illustrated by such things as regular cleaning and janitorial work and replacing filters and lightbulbs, which have little relevance to clean energy projects and are unhelpful illustrations. On the other hand, the regulations describe the replacement of a part in a malfunctioning solar inverter as a covered repair, therefore subject to PWA requirements. This example suggests too much.

In the labor context, covered Davis-Bacon work is often distinguished from work covered by the Service Contract Act. Under the latter, authorities describe simple and standard replacements of equipment or other property, minor repair work, and similar work as SCA work, and not Davis-Bacon covered work. Repair or replacement of portions of a utility system to accomplish routine day-to-day service or maintenance work has also been described as service contract work and not Davis-Bacon work. It is Davis-Bacon that is incorporated or referenced by the prevailing wage and apprenticeship statute. The Service Contract Act by definition does not apply. On the other hand, the Davis-Bacon authorities speak in terms of major work, major replacements, and repairing major damage or failure of property or equipment. The same notion of incidental repairs and replacements is actually found in the tax rules. The section 263 capitalization rules describe, quote, "the replacement of damaged or worn parts of the unit of property with comparable and commercially available replacement parts," unquote, should be made in the PDFA and the final rules. Alteration and repair work should be relatively limited and a rare occurrence.

Third point, further guidance should clarify and afford flexibility to any taxpayers' recordkeeping obligations, recognizing that taxpayers likely will not be the direct employers of laborers and mechanics and may not even be on the scene at the time of the work. The proposed regulations state that the taxpayer is solely responsible for the PWA recordkeeping requirements and list out what is described as, quote, "minimum records for this purpose." The minimum records include payroll records and items such as Social Security numbers, other personal identifying information, as well as hourly rates tied to each laborer and mechanic. I also note here that the proposed regulations for elective transfers require, quote, "minimum required documentation," unquote, inclusive of substantiating that the PWA requirements are met. The recordkeeping requirements imposed on the taxpayer create significant burdens and raise a number of potential legal issues relating to privacy, exchange of personal identifying information, and even antitrust issues.

The requirement for the taxpayer to retain large volumes of competitively sensitive information for extended periods of time, some cases up to 13 or 15 years or more. across multiple projects, contractors, subcontractors, and numerous employees, has created great concern within the industry. This stands in contrast to the Davis-Bacon rules, which do recognize these types of concerns. In most cases, recordkeeping is maintained at the contractor-subcontractor level, including with respect to such sensitive information as Social Security numbers, and I would cite the 29 CFR 5.5(a)(3)(i). Further guidance should recognize these concerns and offer flexibility to the taxpayer and to affected contractors and subcontractors. For example, by allowing the direct employer of the laborer and mechanic or any contractor to maintain the required payroll records and confidential employee information subject to contractual provisions requiring the maintenance and reservation of the records and permitting access to such records by the IRS as part of a duly issued audit request. And/or allowing third-party vendors to act as a repository for sensitive company and employee information.

Fourth point, further guidance should clarify the start date of the PWA rules. The proposed regulations use the term “beginning of construction,” which is a tax term of art, and also the term “construction/alteration/repair,” a Davis-Bacon defined term, in a manner that is not clear and often interchangeably. The immediate concern is that because of the differences between beginning of construction for tax purposes, and construction for Davis-Bacon purposes, that PWA may apply to projects to commence some work in 2022 and perhaps years earlier, even before the enactment of the IRA.

On this issue, I noted a number of key clarifications. One, consistent with informal Treasury comments made recently, further guidance should be clear that the PWA rules apply going forward from January 29, 2023, and there is no need to look back to work that occurs prior to that date. Two, preliminary activities, such as site clearing, excavation, demolition, and removal of existing property, do not constitute beginning of construction for tax purposes, but may be construction for Davis-Bacon purposes. It is not clear under the proposed regulations, however, whether preliminary activities are covered by the PWA rules. On the one hand, the proposed regulations adopt a definition of construction/alteration/repair under the Davis-Bacon regulations, and on the other hand, the proposed regulations and Notice 2022-61 recognize that the tax beginning-of-construction rules apply. To be consistent, the tax rules should be followed at least with respect to the start date of PWA, and selection of the proper wage determination and preliminary activities should not be treated as construction.

I also agree with the comments that were made by Clean Fuels with respect to 45Z. I think there is a key omission from the regulations and there should be an inclusion of the language, “a facility, the construction of which began prior to January 29, 2023.” And the point being that consistent with Notice 2022-61 and the beginning-of-construction rules, the PWA rules should be grandfathered in that circumstance. I would also note with respect to the section 48(c) credit, that there is essentially no guidance regarding the start date and no beginning-of-construction requirement noted in the statute. 48(c) credit applies to industrial and manufacturing facilities. We would ask that there be clarification provided on 48(c) and it apply only after January 29, 2023.

MR. SCOTT: Thank you. Any questions from panelists? Thank you. Next we'll have James Gaffney, Earl Pomeroy, and John McNerney on behalf of Mechanical Contractors Association of America.

MR. POMEROY: Good morning. Some time ago, I served on the Ways and Means Committee. I always appreciated the IRS and their testimony. This morning I appreciate the chance to testify to you. I'm here representing the Mechanical Contractors Association of America. It's a specialty construction employer trade association representing mechanical, construction, and service contractors who are operating under building trades. Collective bargaining agreements work primarily with local unions, principally the National Plumbers and Pipefitters Union.

Now, I will briefly spell out the principal point we want to drive home today, but yield the bulk of our time to our expert, Jim Gaffney, owner and CEO of a second-generation HVAC contractor doing business out of Philly. The Inflation Reduction Act creates the most significant new federal incentive for clean energy projects ever enacted. A hugely important dimension of this legislation is its commitment to build back the construction workforce of this country, ensuring labor capacity for projects of this size and complexity. I must tell you, this morning there's considerable agreement across the construction industry that the rules, as originally proposed by the IRS with Labor Department input, will not be able to deliver the results that you are trying to achieve. The principal point is compliance review. Relying on back-end post-project compliance will fall short of achieving the goals that you have for these projects.

Compliance review taking place in audits after project completion leave so many critical uncertainties hanging over the projects: the planning, the bidding, project performance, all these phases that you've got a level of risk that discourages project participation in the first place. Notwithstanding the new substantial federal tax incentives. These uncertainties are significant and will discourage contractor interest. When it comes to the goal of ensuring prevailing wage and apprenticeship requirements are met, when you do this after the fact — we say back home, “The calf's out of the barn.” It's too late to ensure workers are actually receiving the benefits they deserve as the work proceeds on a project.

We think a new regulatory model encouraging prevailing wage and apprenticeship compliance from the outset of the project, in the project planning and acquisition procurement phases, is the only way to ensure the Department of Labor and the IRS are fully pursuing and achieving the statutory and policy aims of the Inflation Reduction Act. IRS and DOL should reconsider ways to add specificity in the qualifying project planning and procurement phases to ensure that prime and subcontract bidding and contracting agreements reflect the full complexity of the PWA performance agreements. We believe IRS and DOL should consider ways to adopt a private letter ruling type pre-award compliance review that will provide incentives for qualifying project owners to write full compliance specifications into their contract bidding documents, in a manner similar to the incentives allowed in the current proposal for owner use in project labor agreements.

For more specifics on the MCAA position, from a union signatory mechanical contractor who's had long experience in public- and private-sector project work in Pennsylvania, New Jersey, I'd like to introduce Jim Gaffney, president of Goshen Mechanical Construction in Westchester, Pennsylvania, and MCAA's chairman of the Government Affairs Committee. Thank you.

MR. GAFFNEY: Good morning, IRS commissioners, and thank you, Earl. As Congressman Pomeroy noted, I'm Jim Gaffney, the second, actually third, generation small business specialty mechanical contractor in the Philadelphia area. Our company's done construction projects and mechanical systems maintenance on larger facilities, primarily in the Pennsylvania and New Jersey area. We do a lot of work in the city of Philadelphia and that work primarily is 100 percent union.

I have a primary responsibility in my local MCA association Philadelphia for industry relations, working with union sector and open shop contractors on all types of issues affecting public construction in the commonwealth of Pennsylvania, and I've long been national MCAA's lead adviser on Davis-Bacon public contracting issues here in D.C. The Biden administration energy project policy is laudable and worthy, and the market is eager for much more specific regulatory guidance from the IRA and the DOL, which is absolutely essential to meet the statutory and public policy aim of the IRA. I am active in my community and I serve on the community college board, as well as a joint management/apprenticeship training center that trains apprentices, and on the college board that considers large-scale construction awards for the campus facilities. Many of them are entitled to the IRA PWA tax increases.

Robust competition for qualifying projects depends on specific regulatory guidance for quality construction firms to assess the project performance risks and costs and commit resources for competing for that work. Simply put, my competitors in the industry, both union sector and open shop contractors, comment to me openly that much more must be done in the regulatory sphere to answer the very broad, deep, liability issues surrounding the project flowdown of the complex and poorly directed PWA requirements in those projects, from the owner to the primes and subs, for them to understand and price the compliance risks on these jobs. Competent large-scale union signatory firms have compliance fairly readily assured because their collective bargaining agreements, joint apprenticeship training, sponsorship, and participation virtually assures compliance. Because in virtually all cases the collective bargaining wage and benefit rates in the CBA will meet or exceed the prevailing rate in any market, in any area, in the country, and sponsorship and participation in joint apprenticeship programs assure access to apprentices by JAT referral-participating employees in their main crafts.

LAC's regulatory and compliance guidance may well cede the market to low-road contractors over high-quality firms that would perform qualifying projects much more competently and productively. In a pre-project solicitation, IRS private-letter-ruling-like process, the owner would submit the construction documents with the project construction work broken down by craft along the lines of the Construction Specifications Institute master form document specifications for major categories of work, along with the estimates of work hours and job classifications and apprentice hours supporting each element of the construction work. The application will be submitted to a joint IRS/DOL wage and hour, Office of Apprenticeship/clean air energy policy project working group that would review each element of the work, list out the proper work classifications and the wage determinations for each sector of the specifications, spot any that are missing at an early stage and provide them to the Office of Apprenticeship, will list all applicable JATCs for each craft in the projected workforce area. Perhaps more than one JATC for each craft in both DOL-registered states and SAC states, too, and perhaps even have DOL OA gain the preliminary commitment to supply apprentices for that project. The pre-project acquisition planning information of the PWA compliance specifications will be sent back from IRS to the project owner intending to claim the PWA credits, to then be incorporated in the qualifying project bidding documents by the owner of all prime contracts and subcontracted bidders to incorporate in their bids.

I bring with you today that I keep hearing everyone saying how hard and how difficult this process would be. This is my specification book. There's not a project that I don't bid, public sector, private sector. And in that book, is the bid documents that come from the designers and the engineers and anything that has to be met in the complete project. Prevailing wages. There's a section on every county that the work's being done for the prevailing wages on specifics there. If this process can be put into this specification, I truly feel that what the administration, what the IRS, and what DOL really want to implement here, it will get done properly. If it does not, I just don't know where it will go.

I'll be straight-up. There's a lot of work out there. We just bid a $200 million college project and only had one bidder on two trades. This is a great process and great opportunity for this to work for everyone in our field. Please help and assist us get this in the front-end of the project.

I want to thank you all for doing this and if you have any questions, we have our general counsel here, John McNerney, Earl Pomeroy, and myself that could answer anything you have for us. Thank you so much for your time.

MR. SCOTT: Thank you. Any questions from the panelists? Thank you. Next, we'll have Deborah Kobes on behalf of herself.

MS. KOBES: Good morning and thank you for the opportunity to testify as part of this public hearing regarding regulations on the prevailing wage and apprenticeship requirements established in the Inflation Reduction Act. The proposed rule represents an important step in expanding registered apprenticeships, particularly in the building and construction trades. My name is Deborah Kobes and I'm a senior fellow at the Urban Institute focused on scaling, improving, and building equity in the registered apprenticeship system. My career has focused on apprenticeship for 15 years, including serving as the interim vice president for the Center for Apprenticeship and Work-Based Learning at Jobs for the Future, and as the first staff member of the national nonprofit Emerald Cities Collaborative. I began my career at the Urban-Brookings Tax Policy Center, and so I have particular expertise and interest in rules that sit at the intersection of tax and apprenticeship policy. All views expressed today are my own, and they should not be attributed to the Urban Institute, its trustees, or its funders.

I would like to begin by recognizing the value of the proposed apprenticeship requirements. Apprenticeship is a powerful training model. Urban's research shows that for every dollar invested in apprenticeship, it has a return for employers of $1.44, and apprenticeships similarly benefit a diverse array of workers by helping them gain access to high-demand and high-wage careers. In my conversations with state leaders, industry intermediaries, and apprenticeship practitioners, I've already seen that the proposed rule is driving industry demand for registered apprenticeships. The combination of labor hours and participation requirements could be a powerful strategy for spurring a breadth and depth of demand for apprenticeship among employers.

I will start with some background and then provide five opportunities to strengthen the good-faith-effort exception for the apprenticeship provision and close with opportunities to improve compliance with project labor agreement provisions. While apprenticeship is a proven model that is widespread in the construction industry, and the regulations could further expand its use, some elements of the regulations are —


MR. SCOTT: Thank you everyone for your patience.

MS. KOBES: All right, thank you.

MR. SCOTT: Let's get resettled and I'll start your time.

MS. KOBES: OK, so, as I said, many apprentices are in group joint or non-joint programs. Considered another way, 74.4 percent of construction apprenticeship programs that year were individual programs, and they were almost entirely non-joint. As currently written, the regulations seemed designed primarily with the realities of group joint programs in mind. There are opportunities to create greater clarity in the regulations to engage in other types of apprenticeship programs, as well as the possibility to consider launching individual programs as part of a good-faith effort to engage in apprenticeships. There's also an opportunity to consider the role of federal and state registered apprenticeship staff in navigating these opportunities.

I'd like to focus most of my statement on opportunities to strengthen the good-faith-effort exception because this exception is critical in determining the minimum threshold for what taxpayers and contractors are required to do to gain access to the maximum tax credits. The language could be clarified in five ways to make compliance easier, by reducing confusion while narrowing the good-faith-effort exception, so it is awarded only when all common paths to engaging in apprenticeship have been attempted.

First, the language is ambiguous about the expectations for making a request to an apprenticeship program that can be reasonably expected to provide apprentices in a number of circumstances. While group joint programs span the entire country, that is not true for non-joint or nonunion programs. ABC and IEC, the largest providers of nonunion registered apprenticeship programs in the trades, have large geographies that currently lack registered apprenticeship programs or offer them only for one or two trades. The total extent of the gaps in supply of apprenticeship programs is unclear. The IRS could consider clarifying what nonunion contractors in these locations that lack group non-joint programs should do to access the credit. Do they automatically qualify for the exception, which might undermine the goal of expanding apprenticeships? Can they request apprentices from a joint program and indicate that they will take on apprentices quote, "in accordance with the requirements and standards of the registered apprenticeship program," unquote but without unionizing? The IRS could address these uncertain situations more explicitly to reduce the burden of navigating the regulation and ensure more consistent adoption of apprenticeships.

Second, the exception currently only requires a taxpayer to request apprentices from a single program. However, the request is not burdensome to make. The written request could be distributed to one or multiple programs with comparable effort. Requiring taxpayers to request apprentices from all group programs for the relevant trade and geography could increase apprenticeship adoption, rather than granting exceptions when a single program has limited capacity, even if other local programs could meet the taxpayer's need.

Third, the regulations only require taxpayers to request apprentices from a group program. However, as I mentioned earlier, there are many individual program sponsors in the construction industry. This means that taxpayers and contractors could use or adapt many existing program standards without undue burden in the registration process. The IRS could consider limiting the good-faith exceptions to two 120-day periods. If no group program is available, or has capacity to provide apprentices, then the taxpayer or contractor could have sufficient time in those 240 days to set up their own apprenticeship program and serve as an individual sponsor.

Fourth, the federal Office of Apprenticeship and state apprenticeship agencies have staff across the country that regularly help employers navigate the registered apprenticeship system and operate apprenticeship programs. They understand their local landscapes, broker connections among apprenticeship stakeholders, and provide technical assistance to employers. The IRS could consider expanding the role of Office of Apprenticeship and state apprenticeship agencies in ensuring good-faith efforts, and it could provide resources to these agencies for their role in credit implementation.

Fifth, the proposed regulations describe many reporting and documentation requirements, as we've heard already, but it is unclear what must be provided at the time of filing to qualify for the good-faith-effort exception or to demonstrate compliance. To minimize its overuse and therefore maintain the full impact and reach of the apprenticeship provisions, the IRS could consider requiring upfront documentation to receive the exception. One straightforward way to achieve this would be to have an Office of Apprenticeship or state apprenticeship agency representative sign off on the tax filing that the taxpayer has engaged in good-faith efforts in apprenticeship. For those not taking the exception, the apprentice ID numbers in the Department of Labor's apprenticeship database, or RAPID, would be a straightforward and verifiable form of documentation to include within the reporting requirements. It also has the added benefit of facilitating research on the impact of apprenticeship provisions in these tax credits.

Finally, I'd like to close with another topic within these regulations, the use of project labor agreements to meet the prevailing wage and apprenticeship requirements. While project labor agreements are not used evenly across the country, a subset called community workforce agreements have been deployed in a number of cities and states, and they can meet local diversity, equity, inclusion, and accessibility goals. Community workforce agreements add local and targeted hiring provisions to their other requirements, their wage requirements, for groups such as people from low-income communities, or justice-involved people, or graduates of recognized pre-apprenticeship programs. These provisions are intended to be paired with the wage and related requirements outlined in these regulations. The IRS could consider requiring that taxpayers comply with all project labor agreement provisions, including local and targeted hiring requirements, in addition to wage provisions, in order to use the project labor agreement in place of other PWA requirements. This could help advance an equitable construction workforce in the clean energy space.

Thank you again for advancing these valuable regulations and for the space to provide comments today, as well as the more detailed comments I submitted in writing. I look forward to the final rule and to continue to examine the impact on expanding high-quality registered apprenticeship programs across the country. Thank you.

MR. SCOTT: Thank you. Any questions from the panel? The panel sincerely appreciates your patience and rolling with the punches a little bit here. Next was Esmeralda Aguilar on behalf of North America's Building Trades Unions.

MS. AGUILAR: Good afternoon. My name is Esmeralda Aguilar. I am a shareholder at the law firm of Sherman Dunn in Washington, D.C. And I am appearing today on behalf of North America's Building Trades Unions, its 14 affiliated national and international unions, and the more than 3 million men and women in construction that we represent. For nearly a century, NABTU and its affiliates have successfully advocated for prevailing wage protections on both federal and federally assisted projects. This is because we understand that prevailing wage protections will ensure and preserve labor standards to the benefit of all construction workers, both union and nonunion. We also understand the value of registered apprenticeship programs. Together, NABTU's affiliates and their construction industry partners operate more than 1,600 registered programs across the United States.

These programs have helped hundreds of thousands of workers find quality careers, family-sustaining careers, in the construction industry. And so the effective implementation of the IRA's labor standards are an issue of profound importance for NABTU and the men and women who will be called upon to build these clean energy projects of the future. NABTU commends Treasury for the progress it's made in bringing these labor standards into fruition. NABTU commends Treasury for the tireless and continuous efforts in carrying out these labor standards implementation. As we discussed in our comments, many of Treasury's proposed regulations will go a long, long way towards implementing prevailing wage and apprenticeship requirements. There is, however, a void. A void with respect to front-end compliance, monitoring, and enforcement.

In its current form, the proposed regulatory framework functions much like an honor system in that compliance is largely based on recordkeeping. Knowing what we know about rampant law-breaking in the construction industry, NABTU urges Treasury in the strongest terms that the proposed rule undergo revision to address this void. Wage theft and worker exploitation are widespread in the construction industry. According to DOL's Wage and Hour Division, the construction industry consistently ranks among the top three industries for noncompliance with wage and hour and safety and health laws. And why is this? Well, in construction, contracts are typically awarded to the lowest bidder. This leads to aggressive competition and razor-thin profit margins. Unfortunately, too many contractors respond to these competitive pressures using illegal means. As a result, the construction industry is awash with unlawful practices, practices that include wage theft, the exploitation of undocumented workers, employee misclassification, and craft misclassification, just to name a few examples.

Studies show that by ignoring state and federal labor laws, unscrupulous contractors can save up to 30 percent, if not more, on labor costs. As a result, the M.O. in construction is one of lawbreaking. Given these realities, it is imperative that Treasury utilize its broad statutory authority under the IRA to implement a robust front-end monitoring system to ensure compliance with labor standards. And Treasury need not reinvent that wheel. It should and can look to DOL's well-established enforcement model as a guide. To ensure that the intent of Congress is fulfilled, NABTU urges Treasury to implement the following key measures.

First, Treasury should require that the taxpayers who plan to claim a bonus credit for labor standards compliance notify Treasury of that intent before construction begins or shortly thereafter. Treasury should require taxpayers to submit such notifications through the prefiling registration system that it has created for elective pay and credit transfer procedures. A registration requirement will promote transparency and enable Treasury to identify early on those projects subject to labor standards and monitor and audit those projects for compliance.

Second, Treasury should require the taxpayers to ensure that all solicitations, contracts, and subcontracts for construction, include provisions setting forth the applicable labor standards, including the applicable Davis-Bacon wage determination for that project.

Third, the taxpayer should ensure that workers are put on notice early on of their right to the prevailing wage. Without direct front-end notice, there will be no way for workers to know what they are entitled to. There will be no way for workers to know when they are being shorted. Taxpayers should therefore be required, in addition, to post Davis-Bacon posters throughout the job site at the designated entrances, and they should also require that their contractors and subcontractors provide a written notification to workers setting forth their classification and the applicable prevailing wage rate for that classification.

Fourth, the taxpayer must be responsible for collecting weekly certified payroll reports and periodic apprentice labor-hour reports from contractors and subcontractors for review and ultimate submission to Treasury. Some of my co-panelists suggest that such reporting requirements are burdensome and difficult, perhaps to implement, and to that I respond that these reporting requirements are nothing new. They have been around since 1934 when the Copeland Act was implemented, and much of the information that is contained in these reports is information that contractors are already required to keep as part of their payroll and FLSA obligations.

Fifth, Treasury must regularly review certified payroll reports and labor-hour reports, conduct periodic job site visits, and interview workers to ensure that the information that is produced or provided through these documents is in fact accurate.

Sixth, Treasury must establish a complaint procedure that workers and the representatives may use to report noncompliance, and Treasury should work with DOL on enforcement efforts.

Finally, to conserve scarce resources and streamline monitoring efforts, Treasury should treat project labor agreements as evidence of compliance with the IRA's labor standards. Specifically, a taxpayer that certifies to Treasury that construction work on a qualified project is subject to a PLA should be entitled to a presumption of compliance given that, No. 1, PLAs ensure that construction workers are paid at or above the prevailing wage. No. 2, PLAs ensure apprenticeship utilization and 3, PLAs provide for labor standards enforcement through grievance and arbitration procedures. It is well settled that an administrative agency may establish a rebuttal presumption through rulemaking where there is a rational connection between the proved and inferred facts.

Here, such a presumption exists and is permissible because a rational connection exists between the fact that PLAs ensure wages at or above the prevailing wage, PLAs promote apprenticeship utilization, and the presumption, which is IRA compliance. In addition to promoting good jobs and workforce development, PLAs promote efficiency. In fact, PLAs are so effective that they have been used in the private sector and public sector for over 100 years. President Biden issued an executive order promoting PLAs as an efficiency tool, and countless federal agencies currently encourage PLAs in their notices of funding opportunities for federal assistance programs.

In closing, I defer to NABTU's written comments to highlight a number of other important recommendations for labor standards implementation. NABTU appreciates Treasury's commitment to promoting good jobs and apprenticeship pathways for the construction industry, and we look forward to working with you. Thank you for the opportunity to express these views.

MR. SCOTT: Thank you. Any questions from the panelists? Thank you. Next, we have Charles Zdebski on behalf of FuelCell Energy Inc.

MR. ZDEBSKI: Good morning, I am Charles Zdebski with the law firm Cozen O'Connor and I'm here to testify on behalf of FuelCell Energy Inc. We thank the Treasury and the commission for its efforts on these important regulations, and we greatly appreciate the opportunity to amplify and highlight our written comments here today. I want to first talk a little bit about the background of FuelCell Energy and its expertise on the issues we're facing; highlight two concerns that FuelCell Energy has with the regulations; and propose two alternatives. I'll also note that my wife and I have six kids, so I'm keenly aware of the importance of maximizing tax credits and tax deductions.

FuelCell Energy is proud to be among the companies that have been dedicated to clean energy innovations since its inception in 1969. Its current product portfolio includes two dynamic electrochemical platforms, molten carbonate and solid oxide. Both platforms can support power generation and combine heat and power applications, carbon dioxide capture, and hydrogen generation from a variety of fuels, including natural gas, renewable biogas, and hydrogen. Both of these fuel cell systems are currently on the market and operational and deployed in many places. FuelCell Energy is also currently commercializing a solid oxide electrolyzer that will produce hydrogen from power and water, which will be well suited to partner with renewable energy projects and our hydrogen storage infrastructure.

FuelCell Energy recently accomplished the inception and commencement of service of a project known as the Tri-gen Project. In 2023, we established the Tri-gen project in the Port of Long Beach, California. Tri-gen Project takes natural gas and produces three things: hydrogen, electricity, and water. In partnership with Toyota, Toyota is using all three resources to power its operations at the port, to fuel hydrogen vehicles, and to operate a car washing facility. The Tri-gen Project provides a good backdrop for FuelCell Energy's comments on this NPRM. Work on the Tri-gen Project began on September 1, 2021. After more than two years, FuelCell Energy reached a substantial completion milestone on September 13, 2023.

During that time, a multitude of people worked on the Tri-gen Project. FuelCell Energy had one major contractor responsible for the project, which in turn engaged five to seven major subcontractors, which then engaged a number of smaller subcontractors. At peak times, there were from 70 to more than 100 people laboring on the project, with an average of 35 people working daily. And even today, after the substantial completion milestone, people continue to perform ongoing work on the Tri-gen Project. FuelCell Energy takes no issue with the substantive requirements as to prevailing wage and apprenticeship and understands and accepts that those are both legally required to be imposed on projects for them to qualify for increased credit or deduction amounts.

FuelCell Energy, however, has concerns with the significant confidentiality issues and proprietary and trade secret information problems that the current regulations invoke. First, companies such as FuelCell will face difficult, if not insurmountable, obstacles in obtaining payroll information for all those engaged on a project such as the Tri-gen Project. As I described, that project involved numerous persons, hundreds of persons, over a period of more than two years. Obtaining payroll information for all of these workers would require obtaining personal identifying information, which may also be protected by federal and state privacy laws. For example, as a prior speaker noted, such payroll records may include Social Security numbers, may also include information related to age, sex, religion, race or national origin, birthdate, et cetera.

FuelCell Energy would be in the position of having to obtain that information. And even if it's not made confidential by statute or regulation, many employers may have written policies agreed to between them and their employees which preclude disclosure of such information to third parties like FuelCell.

Second, that information contemplated by the rules is likely proprietary financial and trade secret information and in fact is the very sort of information that contractors and subcontractors like to keep confidential and don't share with FuelCell. What we find out about is what we are being charged for the wages for those employees, and it's built into the price. The contractors and subcontractors do not tell FuelCell Energy what they are paying their employees, so that would be problematic to obtain.

And third, even if the rules are enacted, we have the concern that they would be subject to FOIA requests to the IRS. So we then turn to, if we can access those records, the recordkeeping, and administrative burdens involved with improving compliance with the PWA requirements those would be imposing.

First, we would have to obtain all of those payroll records. While it may be true that some large companies and others can press a button and have ADT produce records, many smaller companies and local companies, which are the exact sort of companies that the administration wants FuelCell Energy to work with, don't have those records readily available.

Second, the taxpayer, and it could be FuelCell Energy, or project, that we transfer the credits to, would have to review the records to ensure the prevailing wage requirements and apprenticeship hours have been met. Some speakers have suggested that this be done prior to the project starting and that it be done in an ongoing way. Ultimately, this is putting the taxpayer in the long-term and continuing role of being a regulator and ensuring the accuracy of all of the information provided by all of the contractors and subcontractors.

Third, taxpayers such as FuelCell Energy would be faced with the prospect of enforcing the prevailing wage and apprenticeship requirements. If, for example, we receive reports from companies, contractors, or subcontractors, and we're doing it in an ongoing way, and we identify a problem, we'd need to take action. And that action could require legal action, which could require a very long time.

In fact, at FuelCell Energy, we just don't have the resources to obtain and monitor and police these sorts of requirements. It would actually require FuelCell Energy to hire one or more full-time employees. So we have two suggested alternatives. Echoing a little bit of what has been said here earlier, this appears to be an issue of first impression for the IRS. That is, how does a taxpayer collect and review and monitor and vouch for the payroll records of all employees of all contractors and subcontractors? We ask that the IRS recognize and accommodate the immense burdens and responsibilities that be placed in complying with these regulations.

First, we suggest that the commission should allow taxpayers like FuelCell Energy to rely on written certifications or attestations from contractors and subcontractors that they are indeed complying with the PWA requirements. If the taxpayer has such certifications or attestations and is reasonably relying on them, then the taxpayer does not need to maintain and collect the payroll data. The IRS allows taxpayers to rely on such certifications or attestations for other tax obligations, such as withholding under the Foreign Investment and Real Property Tax Act, or FIRPA.

Second, as it's also been discussed earlier, the IRS should allow taxpayers to rely on robust and express contractual provisions with their contractors and their subcontractors that warrant and require strict adherence to the IRS's goals and standards and the prevailing wage and apprenticeship regulations. An earlier speaker suggested that the contracts would require that the records be maintained. I think that's right. In this way, should the IRS ever question the legitimacy of a taxpayer's claims for credit, the taxpayer can ensure that the parties with primary and real-time responsibility for the records have them and can provide access to them. Indeed, perhaps the IRS could require a combination of these two things, specific contractual provisions requiring the parties to adhere to requirements and certification and attestations.

In conclusion, FuelCell Energy is the type of company that is at the forefront of the renewable energy transition and the current administration's efforts to focus on hydrogen as part of a clean energy economy. We are grateful for the regulations that have been put forward and the opportunity to address them. We want to be the company that follows through on the regulations and implements great projects like the Tri-gen Project. And we ask the commission to work with us to do that.

MR. SCOTT: Thank you. We thank you for the time. We appreciate your testimony. Questions from the panelists? Thank you very much. Next, we'll have Jason Todd on behalf of Independent Electric Contractors. And this will be our last in-person speaker.

MR. TODD: Good morning. My name's Jason Todd. I'm with the Independent Electrical Contractors. I'm vice president of government affairs. Thank you for the opportunity of participating in this morning's public hearing on IRA's “Increased Credit or Deduction Amounts for Satisfying Certain Prevailing Wage and Requirements — Apprenticeship Requirements.” As you may know, IEC submitted detailed comments on the proposed rule on October 30, 2023, but this morning I want to specifically address our concerns with the notice of proposed rulemaking's good-faith-effort exception and our opposition to the incentivizing our project labor agreements. Established in 1957, IEC is comprised of 52 chapter associations representing 4,000 company members and over 8,000 electrical workers. IEC is the nation's premier trade association representing America's independent electrical systems contractors. IEC National aggressively works with the industry to establish a competitive environment for the (inaudible), a philosophy that promotes the concept of free enterprise, open competition, and economic opportunity for all. For 65 years, IEC has been at the forefront of providing highly skilled electricians through its registered apprenticeship program. An IEC apprentice is able to earn while they learn, incurs little to no debt, and enters into a well-paying job upon graduation. In addition to being certified by DOL's Office of Apprenticeship and (inaudible) state apprenticeship council, the American Council on Education, it is recommended that the students that graduate IEC's apprenticeship program be eligible for 46 semester hours of college credit. IEC is also a member of DOL's Registered Apprenticeship College Consortium, a national network of post-secondary institutions, employers' unions, and associations working to create opportunities for our apprentice graduates when they want to further enhance their skills by completing an associate or bachelor's degree. RACC members have their programs evaluated by a third-party organization to determine the college credit value of the apprenticeship completion certificate. During the 2023-2024 school year, IEC's shop contractors and chapters will educate over 16,000 apprentices across the country. Our No. 1 goal is to make sure we have the best qualified electrical workforce that abides by the highest safety standards in the industry. As you may know, the construction industry faces significant worker shortage. Research by the Associated Builders and Contractors documents this where they estimate the industry needs approximately a half a million additional workers on top of the typical hiring pace in order to meet project demands. Meanwhile, the Associated General Contractors report that 85 percent of construction firms indicate they have an open position they are trying to fill and among these, 88 percent are having trouble filling at least some of these positions. Their survey also found that 61 percent of contractors report having projects delayed due to labor shortages. Not helping the situation is that according to a 2021 survey of 29,000 Gen Z high school and college students, only 16.7 percent reported an interest in entering the construction industry, which ranks second to last. And specifically for electrical, the BLS, Bureau of Labor Statistics, estimates that the U.S. currently needs approximately 80,000 new electricians every year over the next 10 years. IEC's chapters and contractor members are thoroughly invested in the registered apprenticeship program for the development of this workforce, and while IEC applauds IRS' efforts for the difficult task of crafting rules in what is unprecedented merger of labor and tax law enacted through the IRA, we are concerned that with many of the NPRM's requirements as it related to the good-faith-effort exception. In a letter dated November 4, 2022, to Commissioner Rettig, we urged IRS to hold listening sessions with various stakeholders so as to completely understand the law's impact on the industry. To our knowledge, no such listening sessions were held, but appreciate today's hearing just the same. In crafting the apprenticeship requirements of the IRA, it would appear that Congress recognized the industry's workforce shortages, which was why the good-faith effort exception was included in the law. However, in our review of the GFEE — good-faith effort exception provisions, as mentioned earlier, the NPRM appears — the IRS appears to not take into account the IEC model registered apprenticeship in which a registered apprentice is employed by the contractor and receives his or her education at the IEC chapter. Rather, the proposed guidelines only appear to be tailored to contractors that obtain apprentices from a registered apprenticeship program affiliated with the union. Therefore, it is unclear if there is a scenario where an IEC contractor could qualify for the good-faith effort exception. The tenets of the proposed rule to meet the good-faith effort exception refer to a process by which a taxpayer or contractor contacts the registered apprenticeship program and if he or she does not hear back in five days or the RACC cannot provide the apprentices as requested, it qualifies for the GFEE for 120 days. There are instances where an IEC contractor will contact the chapter for apprentices. Under current practices, chapters don't usually have a pool of individuals waiting to be employed by a contractor member. Given the workforce shortages and the significance of IEC's registered apprenticeship program, we are puzzled as how and why the IRS ignored the customary practices of its registered apprentice program for purposes of the GFEE. IEC urges IRS to take into account this model of apprenticeship in its final rule to potentially make its members eligible for the good-faith effort exception. IEC's also concerned with the IRS including in the proposed rule provisions that would defer (phonetic) to a taxpayer contractor or subcontractor to avoid penalty payments for violating certain apprenticeship and prevailing wage requirements should the project operate under a project labor agreement[PLA]. A PLA is a job-site-specific collective bargaining agreement on unions of the construction industry that typically requires companies to sign and recognize the unions as representative of their employees on that job, use the union hiring hall to obtain most or all of its construction labor, and exclusively hire union-affiliated apprenticeship program, follow union work rules and pay into union benefits and multiemployer pension plans that nonunion employees can't access. For nonunion contractors, this forces them to pay double benefits in the existing plans and new plans and puts them at a significant competitive disadvantage and exposes them to unfunded multiemployer pension plan liabilities. The PLAs also typically require construction workers to pay union dues and/or join a union if they want to receive union benefits and work on a PLA project. IEC supports the ability of a contractor to voluntarily sign a PLA if it so chooses. It's unreasonable to expect the vast majority of nonunion contractors, which make up to 90 percent of the industry, to do so. IEC finds it curious as to why this was included in the proposed rule since nowhere in the statutory language of the IRA does it mention PLAs nor does the proposed rule provide data to back up any of the implied benefits of signing a PLA. If Congress had wanted to include a PLA incentive in the IRA, it would have done so. We believe IRS should not be taking upon itself to incentivize or coerce the signing of PLAs at the prospect of possibly avoiding a potential penalty or receiving any added benefits. We feel this recommendation is a prime example of proposing or could create a two-tiered system in which a contractor could receive an additional punishment simply because it chooses to sign a PLA or not to sign a PLA. IEC firmly believes that any taxpayer contractor that violates the law should receive equal punishment regardless of whether there is a PLA in place or not and we recommend IRS remove any language incentivizing the signing of a PLA from its rules. Thank you for the opportunity to participate this morning and we hope you will take into account our concerns outlined here this morning as well as our written comments.

MR. SCOTT: Thank you. Any questions from the panel? Thank you very much for your testimony. That concludes our in-person speakers. We are going to take a quick five-minute break for the panel and those in the room. We are going to recommence the hearing at 11:40 a.m. Eastern time. Thank you. Thank you very much for your patience. We're going to recommence the hearing with the telephonic speakers. We're going to begin with Barbara de Marigny on behalf of Baker Botts LLP.

MS. DE MARIGNY: Thank you. Can you hear me?

MR. SCOTT: Yes, we can, thank you.

MS. DE MARIGNY: Thank you for the opportunity to testify on this important rulemaking regarding labor requirements for clean energy tax incentives. My name is Barbara de Marigny and I am a partner in the tax department of the law firm of Baker Botts LLP. We represent clients in all aspects of the energy industry and are working with many clients for whom it is crucial to secure the enhanced credit amounts through compliance with the PWA requirements. We have carefully reviewed the proposed regulations with our client and have submitted two separate letters to comment on issues we have identified in the proposed regulation. One with respect to the proposed regulation under section 45Q and one with respect to the proposed regulation under section 45Z. I would like to first address proposed Treasury Regulation Section 1.45Q-6. Code section 45Q provides a credit for carbon capture and sequestration, and under new subsection 45Q(h), the credit amount is enhanced if the PWA requirements are complied with. A typical carbon capture project involves an emitting facility, such as a power plant or other industrial facility, and carbon capture equipment to capture the emissions of that facility. Code section 45Q(h)(2)(A) requires that the PWA requirements be met with respect to any qualified facility the construction of which begins on or after January 29, 2023, as well as with respect to any carbon capture equipment placed into service at such facility. Thus, the PWA requirements must be satisfied not solely with respect to the construction of the carbon capture equipment, but also with respect to the construction of the qualified emitting facility. If this requirement is interpreted to mean that the PWA requirements must be satisfied with respect to the construction of the facility before it is known or even expected to be part of a carbon capture project, then taxpayers constructing industrial facilities or power plants would need to satisfy the PWA requirements just to be eligible for claiming the full credit amount if they eventually decided to engage in carbon capture activity. As an example of the problem, consider a taxpayer that begins construction of a chemical facility on or after January 29, 2023. The operations of the chemical facility will release a stream of carbon dioxide into the atmosphere, but at the time of construction the taxpayer does not have technology that will permit it to isolate and capture the carbon dioxide. So, having no plans for carbon capture or to claim the 45Q tax credit, the taxpayer does not comply with the PWA requirements. But several years later it develops the needed technology and constructs a completed carbon capture process train and it complies with the PWA requirements in that construction. But because it had not complied with the PWA requirements in building the original facility, it could be viewed as being ineligible for the full credit amount, and also, moreover, in situations such as this when it may be years after the facility construction has occurred that PWA compliance is determined to be needed, curing the failure to comply is likely a practical impossibility. So the taxpayer may then very well abandon the idea of adding carbon capture equipment if it will be ineligible for the enhanced credit amount. In our comment letter we offered three possible alternative means by which the proposed regulation could be revised to resolve this problem. First, the regulation could address the issue by providing that if a completed carbon capture process train is not part of the original planning and design of a qualified facility, then the taxpayer will be deemed to have satisfied the PWA requirements for the facility if it satisfies the PWA requirements with respect to the carbon capture equipment. Alternatively, the PWA compliance could be required of only those facilities that included installation of a completed carbon capture process train in their original planning and design. And a final alternative would be to provide that regardless of whether carbon capture was in the original planning and design, compliance with the PWA requirements for the carbon capture equipment is deemed to be satisfaction of the PWA requirements for this facility. Regardless of the manner of of revising the proposed regulations, we urge you to promulgate final regulations that address and resolve this issue. Now, I would like to turn to proposed Treasury Regulation section 1.45Z-3. Section 45Z provides a credit for production of clean fuels, and accessing the full 45Z credit amount is contingent on compliance with the PWA requirements. For clean fuel projects currently under construction, certainty as to the ability to satisfy the PWA requirements is crucial, since receipt of the full credit amount is what makes these projects economically viable. Section 45Z(f)(6)(B) provides an exception to PWA compliance for facilities that are placed in service before 2025. In contrast, all of the other clean energy credits other than section 45Z excuse PWA compliance for facilities that began construction prior to January 29, 2023. We have spoken with companies who are actively involved in the construction of large clean fuel projects that began construction in 2022. They entered into numerous construction contracts before any PWA guidance was available. But building a clean fuel production facility usually takes several years, even assuming no supply chain or permitting delays. These companies will not meet the 2025 placed-in-service deadline in order to be excused from the PWA requirements. Requiring them to comply with the PWA requirements, even though they began construction before the IRS issued guidance on those requirements, presents an impossible hurdle for them since the work was performed under contracts that were signed up before PWA guidance was ever available and that do not require the contractor to provide the requisite wage and hour information. As an example of this problem with contracts signed before PWA guidance, we are aware of numerous contractors who have flatly refused to provide even the most basic payroll data after multiple requests. To give these taxpayers the certainty that they need that they can receive the full credit amount, we strongly urge revision of the proposed — and we strongly urge, and as two other speakers this morning have also urged — revision of the proposed regulation to provide relief in the form of either a beginning-of-construction exception for facilities that began construction before January 29, 2023, or an exception for construction work performed pursuant to preexisting construction contracts; that is, construction contracts that were entered into prior to January 29, 2023. The second and the last aspect of the proposed regulation I would like to call to your attention is in proposed Treasury Regulation Section 1.45Z-3(b)(1), which awards the full credit amount for facilities that comply with the PWA requirements, but only if they began construction on or after January 29, 2023. Under the statute, any facility that complies with the PWA requirements receives the full credit amount regardless of when it began construction. Under the regulation as proposed, however, a facility that complies with the PWA requirements in all its aspects would only be eligible to receive the full credit amount if it began construction on or after January 29, 2023. Thus, the proposed regulation would prevent taxpayers from receiving the enhanced credit amount even though they fully comply with the PWA requirements just because they began construction before January 29, 2023. We are aware of facilities that began construction before January 29, 2023, and that do not expect to meet the deadline for placed in service before 2025. Therefore, they are currently incurring considerable expense to monitor and ensure PWA compliance. Yet, unless the regulation is revised, they would be precluded from receiving the enhanced credit amount.

MR. SCOTT: Thank you very much for your testimony. I'm sorry. Excuse me.

MS. DE MARIGNY: Thank you.

MR. SCOTT: Your time has elapsed.

MS. DE MARIGNY: Oh, thank you very much. I appreciated the opportunity to testify and I'm very happy to answer any questions you may have.

MR. SCOTT: Thank you very much. Any questions from our panelists? Thank you. Next, we'll have David Fialkov on behalf of American's Travel Centers and Truck Stops, or NATSO.

MR. FIALKOV: Thank you for the opportunity to testify on this important rulemaking regarding labor requirements. There are several tax incentives enacted under the Inflation Reduction Act. My name is David Fialkov, and I serve as the executive vice president of government affairs at NATSO, the national trade association representing America's travel centers, truck stops and off-highway transportation energy retailers. The typical travel center is located within a quarter mile of the interstate system and is essential to the free flow of people and goods and energy throughout the United States.

Similar to the written public comments that NATSO submitted, and building off of the testimony that just concluded my testimony, is focused exclusively on what is understood to be an unintended drafting error in proposed regulations. Section 1.40 5-3B1 regarding the application of the prevailing wage and apprenticeship or PWA requirements to the clean fuel production credit of section 45 of NATSO, urges the Treasury Department to remove the language "begins construction on or after January 29th, 2023." From the regulation when the proposed regulations are finalized. That phrase was not provided for in the statutory language of section 45, as interpreted by a JCT explanation of 45B that was prepared in connection with an April 2023 House Committee on Ways and Means hearings, or in the preamble to the proposed regulation.

Further inclusion of that phrase in the regulations would take away tax benefits for facilities that were placed in service before January 29th, 2023, but otherwise qualify for the tax benefit, a result not contemplated by the statutory language. Therefore, NATSO respectfully request the removal of that language, so that section 45-V is implemented in a manner consistent with congressional intent and the underlying statutory language. Section 45-ZF6 and section 45-ZF7 provide for two rules to delineate taxpayers subject to the PWA requirement, for purposes of obtaining the increased alternative amount. Under the general rule. To obtain the increased alternative amount, the transportation fuel must be produced at a qualified facility that satisfies the prevailing wage requirements in section 45-B7, and the apprenticeship requirements in section 45-B8. Under the special rule for facilities placed in service before Jan. 1, 2025.

The prevailing wage requirements of section 45-B7 and the apprenticeship requirements of section 45-B8 do not apply to the construction of the facility but do apply to the alteration and repairs of the facility with respect to taxable year beginning after December 31st, 2024, for which a section 45-Z credit is allowed. Notably, the statutory provisions do not reference or impose any requirement regarding a specific beginning of construction date of a qualified facility for purposes of qualification for the increased alternative amount. Both the JCT (phonetic) explanation of the provision and the preamble to the proposed regulations, like the statutory language of section 45-Z itself, explain the application of these two rules without any mention of a requirement regarding a specific beginning-of-construction date of a qualified facility for purposes of qualification for the increased alternative amount.

Therefore, simply stated, the application of the increased alternative amount is solely dependent on the date a qualified facility is placed in service. Facility is placed in service after December 31st, 2024. Must satisfy the requirements under the general rule. Whereas facilities that are placed in service before December 31st, 2024, are only required under the special rule to satisfy the PWA requirements with respect to subsequent alterations or repairs to the facility. With respect to the general rule, the proposed regulations add a beginning-of-construction requirement that is not found in the statute. Proposed Treasury Regulations Section 1.45C-3B1 provides that "a qualified facility that begins construction on or after January 29th, 2023, and is placed in service after December 31st, 2024," that satisfies the PWA requirements qualifies for the alternative amount.

Thus, in addition to being placed in service after December 31st, 2024, a qualified facility must also begin construction on or after January 29th, 2023. As a result, a qualified facility that is placed in service after December 31st, 2024, but begins construction before January 29th, 2023, is not eligible for the increased alternative amount under either the general rule or the special rule, even if it satisfies the PWA requirements. This new beginning of construction requirement, however, is not found in the statutory language of section 45, nor is it mentioned in the JCP explanation or the preamble. The statutory language of section 45-Z and the JCP explanation and the preamble interpreting that statutory language are all consistent in that they do not reference or impose any beginning of construction requirement for purposes of qualification of the increased alternative amount.

Thus, any facility that complies with the PWA requirements should receive the increased alternative amount, regardless of when it began construction. However, under the regulation, as proposed, even if a qualified facility complies with the PWI requirements, if it began construction before January 29th, 2023, and was placed in service after December 31st, 2024, it would not be eligible to receive the increased alternative amount. Thus, the regulation is proposed would prevent some taxpayers from receiving the increased applicable amount, even if they fully comply with the PWA requirement. The imposition of this beginning-of-construction requirement is contrary to congressional intent, as evidenced by the statutory language of section 45-Z as interpreted by the Joint Committee on Taxation and Treasury and IRS themselves in the preamble that so is aware of facilities for which construction began prior to January 29th, 2023, and are not expected to be placed into service until after December 31st, 2024.

These facilities are currently spending tens of millions of dollars to comply with the respective PWA requirements, in accordance with the statute. Thus, the insertion of this beginning-of-construction requirement will deny tax benefits to these facilities that the statute would clearly provide. The proposed imposition of the beginning-of-construction requirement in proposed Treasury regulation, section 1.45Z-3B1 is not provided for in the statutory language of section 45, as interpreted by the Joint Committee, Treasury, and the IRS. Therefore, it is respectfully submitted that removal of the beginning-of-construction requirement is necessary so that section 45Z is implemented consistent with congressional intent. Thank you for the opportunity to testify today. I'm happy to answer any questions that you may have.

SPEAKER: Thank you. Any questions from our panelists? Thank you very much. Next, we'll have George Hershman, on behalf of SOLV Energy, LLC.

MR. HERSHMAN: Well, I'll be the first to say good afternoon and thank you for allowing me to testify today. My name is George Hershman. I am the CEO of SOLV Energy. SOLV is an engineering, procurement, and construction company, operations and maintenance company, and solar services company working at a utility scale level throughout the United States. The company, headquartered in San Diego, California, employed over 2,500 people across the country last year. Many of them unionized workers. SOLV is responsible for the construction of more than 11 gigawatts of solar energy projects, and its operations and maintenance division manages approximately 10 gigawatts of commercial and utility scale solar across 28 states.

SOLV is a recognized leader in the solar energy industry and will be affected by the prevailing wage and apprenticeship requirements. Addressing the prevailing wage requirements. First, the applicable prevailing wage determination should be the wage determination in effect at the time of the prime contract. In contrast, the proposed regulations would require that the applicable prevailing wage determination be that in effect at the time construction begins. This approach conflicts with the standard for determining prevailing wage under the Davis-Bacon Act and the Department of Labor's prior guidance regarding prevailing wage compliance, which required employers to use the most up-to-date wage determination at the time the taxpayer enters into the prime contract.

The proposed standards will undermine the construction of new projects if prevailing wage rates are not known until months after the signing of contracts to build a project. Bid costs will increase and some contractors and subcontractors will refuse to bid altogether. Treasury's rule, accordingly, will undermine construction of the clean energy projects. The IRA was supposed to incentivize. The proposed regulation should be modified to state that such determinations are made based on the prevailing wage determination in effect at the time of contract. Next, Treasury should clarify when updated, prevailing wage determinations need to be applied to a solar project. The proposed regulations state that new wage determinations would be required to be used when work on a facility is changed to include additional construction. The standard for setting a new prevailing wage determination included in the proposed regulations lacks clarity.

Solar construction, like many other construction projects, often involves hundreds of change orders, timeline extensions, and other minor adjustments throughout the life of the project. Under the Davis-Bacon Act, the general rule is that prevailing wage determinations are determined at the time of contract and apply throughout the life of a construction contract. Treasury should clarify that only cardinal changes in an IRA-covered project require an adjustment to prevailing wage rates and a departure from this rule. Cardinal change doctrine is well established in construction law. Using the doctrine ensures that only material and significant changes to the scope or timing of a project require an update to prevailing wage rates.

And will align Treasury's final rule with existing law. SOLV appreciates Treasury's efforts in conjunction with DOL to provide supplemental wage determinations or additional classifications for geographic areas or jobs for which there is not a current wage classification. However, the proposed regulations' rigid requirement that such requests be made no more than 90 days before the beginning of construction is unworkable. Entities like ours need reliable wage determination at the bidding stage to accurately assess labor costs and price projects.

Treasury should revise its final rule to allow for submissions regarding supplemental wage determination or classifications up to 24 months prior to construction. SOLV also appreciates Treasury's efforts to define the term “construction, alteration, and repair.” But Treasury should clarify the meaning of this phrase. Solar facilities utilize a broad range of technology to generate, store, and transmit solar energy. The commissioning of this equipment requires engineers and other contractors to test computer systems and other technology. Treasury should clarify that their work is not construction, alteration, or repair. Treasury should also confirm that pre-construction preliminary work is not construction, alteration, or repair.

It is well established under the Davis-Bacon Act that preliminary site evaluation work is not construction. Thus, soil boring for the formulation of engineering plans and specifications, designs, and the conduct of site investigation is preliminary work that is not part of the construction process. Finally, Treasury should clarify which post-commissioning work consultation constitutes repair or maintenance. Operations and maintenance providers ensure that solar projects operate properly and efficiently following commissioning. For example, during routine module maintenance, the operations and maintenance provider may determine that a module is functioning at reduced capacity and conduct preventative maintenance by replacing a component.

Similarly, inverters must be replaced if diagnostic equipment indicates the inverter will require attention soon. These maintenance activities do not restore the overall functionality of the system or particular module or inverter. Instead, they improve overall system efficiency. The limited scope of this work is not the type that normally would be considered construction or repair under the Davis-Bacon Act. When performed under a maintenance or support contract, Treasury should clarify this work is not construction, alteration, or repair. Addressing now the penalty correction mechanism. SOLV agrees with Treasury's decision to waive or decline to assert penalties in the interest of sound tax administration.

However, SOLV believes Treasury's proposed regulation should be modified to be more administratively feasible and better capture those instances where an administrative waiver is appropriate. Treasury's proposed proposal to waive penalties where the underpayment occurred in no more than 10 percent of all pay periods of the calendar year, or where the difference in amount paid and the required wage is not greater than 2.5 per cent —

SPEAKER: One minute remaining.

MR. HERSHMAN: — would not fully capture the range of errors that would justify a waiver. Treasury should establish easy-to-understand benchmarks. Treasury should increase the proposed threshold to — of two underpayments that occur on or not more than greater than three pay periods, or 20 percent of all pay periods in a calendar year, or that do not exceed greater than 5,000 or 5 percent of all amounts required to be paid in a calendar year. These slightly higher thresholds, which are still low, will make the penalty waiver provisions more useful to employ. These changes would also simplify the administration of the waiver process and better incentivize entities to self-correct. SOLV also requested Treasury modify certain requirements related to the waiver penalties for work performed under project labor.

SPEAKER: Excuse me. The panel thanks you.

MR. HERSHMAN: Thank you.

SPEAKER: The panel thanks you for your testimony. Your 10-minute time has elapsed. Do we have any questions from our panelists? Thank you very much. Next, we'll have Michael Roles on behalf of Climate Jobs Rhode Island.

MR. ROLES: Good afternoon. Thank you for the opportunity to speak on this notice of proposed rulemaking. My name is Michael Roles, and I am the policy director for Climate Jobs Rhode Island. We're a coalition of more than 30 unions, environmental organizations, and community organizations. We advocate for a just transition to a clean energy economy in Rhode Island, emphasizing equitable pathways to family sustaining careers and clean energy. My comments today are intended to enhance the written comments that we submitted a few weeks ago.

Labor standards are at the heart of the IRA's goal to develop a clean energy economy that creates good union jobs. We know that effective compliance and enforcement of these labor standards will be crucial to achieve these aims, and we commend Treasury for developing regulations that recognize the major compliance and enforcement challenge it faces. I'll highlight four recommendations to strengthen compliance and enforcement of these standards and ensure that the promise of the era is realized. One: front-end compliance. Two: utilizing CDAs or PLAs as a presumption of compliance. Three: apprenticeship standards. And four: co-enforcement as a model.

First, we appreciate the significant steps Treasury has taken to shore up enforcement of the labor standards. We urge Treasury, however, to go further in addressing the significant lack of front-end compliance mechanisms. The proposed compliance and enforcement framework is operative only once the taxpayer files for the increased credit a long time after construction work is completed, and once workers and apprentices have long since moved on. In Rhode Island, for example, workers and our state agencies continually experience instances where contractors and subcontractors try to skirt existing federal and state labor laws.

In a given week the Rhode Island Department of Labor and Training inspects job sites, and many times they find violations where workers have been misclassified as independent contractors, or experiences where workers don't receive the final week's pay. In many of these examples, this happens when an out-of-state LLC is set up for a specific construction project and closes business once the project is completed, which has made it very difficult to apply existing penalties for wage theft and worker misclassification on these contractors.

Another example is one of the facilities in our region that is assembling components for offshore wind. Foreign workers were found employed by a subcontractor on site without the proper work visas and permits. We urge Treasury to require taxpayers to provide notice of the intention to claim the increased credit by meeting labor standards. Treasury should expand the prefiling registration process that has been issued under temporary regulations for effective pay, allowing the public access to a transparent register of projects seeking the increased credit. Further, taxpayers should be required to submit a sworn labor compliance report on a monthly basis, which balances the need for ongoing monitoring with the burden on the taxpayer.

Without these measures, and we've seen before, workers and other stakeholders may not have any awareness that their employer, the taxpayer, was supposed to be paying prevailing wages and utilizing registered apprentices. Second, we appreciate the significant step Treasury took by providing that penalty payments would be waived for projects subject to a qualified PLA. We urge you to go further by allowing PLAs and CBAs to be a presumption of compliance with the labor standards. PLAs enhanced financial predictability and certainty for developers, and indirectly enlist labor organizations which must ensure compliance with the terms of the agreement as part of a stakeholder enforcement model.

Third, we thank Treasury for their hard work developing compliance standards for the apprenticeship provisions within its rulemaking. We strongly support ensuring that only non-provisional apprenticeship programs that are registered with the Department of Labor or a state apprenticeship agency, and already have a track record of graduating apprentices. We've experienced examples of contractors and subcontractors setting up their own new apprenticeship programs, with no track record of success in their own efforts to try and meet certain apprenticeship standards for specific construction projects.

Fourth, we urge Treasury to work with the Department of Labor to adopt a co-enforcement framework that enlists state and local agencies, labor unions, and labor-adjacent organizations to scale up compliance and enforcement of the labor standards. A co-enforcement approach capitalizes on the unique and specialized knowledge of these partners, including their access to information and trust relationships with worker communities. Climate Jobs Rhode Island has had multiple discussions with our Rhode Island Department of Labor and Training, which is our state labor department and is the entity that oversees prevailing wage compliance among many other oversight and investigatory powers.

And while that agency was unable to make it to this hearing, they have asked that I convey their support for my testimony, as well as their position that deputizing local regulatory agencies to oversee federal program standards is an established and proven effective model for meeting the policy aims of these programs and that, in this particular case, would likely be the only way to truly effectuate the very important goals of this program. The prevailing wage and apprenticeship utilization requirements in the Inflation Reduction Act will help ensure that our shared investments in building a clean energy economy support high road family support and clean energy careers. Public investments should be leveraged for the public good.

If Treasury gets this right, this will lead to a once-in-a-generation opportunity to spur projects that lead to pathways out of poverty for communities and workers who need them most. Our simple recommendations will go a long way in fostering compliance with these critical labor standards, reducing the burdens on Treasury and ensuring that communities and workers reap the economic benefits that the IRA is intended to deliver. Thank you.

SPEAKER: Thank you. Any questions from our panelists? Our next speaker will be Joe Duffy on behalf of Climate Jobs Illinois.

MR. DUFFY: Hi. Can you hear me? All right, good afternoon everyone, and thank you to the Treasury Department for the opportunity to speak at this hearing. My name is Joe Duffy and I'm the executive director of Climate Jobs Illinois.

Climate Jobs Illinois is a coalition of unions advocating for a clean energy economy, deal (phonetic 00:00:21) with the climate crisis, create good union jobs, and advance equity. Climate Jobs Illinois is directed by a coalition representing hundreds of thousands of union workers across Illinois and is made up of 12 individual state affiliates that comprise their executive committee. Our governing board is made up of leadership from the Illinois AFL-CIO, the Chicago Federation of Labor, and the Cook County construction and building trades.

We were formed back in 2020 in advance of negotiations around the comprehensive energy policy in Illinois, and in 2021 we passed that comprehensive energy policy called The Climate Equitable Jobs Act also known as CEGA. This state legislation has the highest labor standards in the country on clean energy projects. They are requiring prevailing wage on all projects that receive renewable energy credits and project labor agreements and all utility scale wind and solar. These labor standards as well as the labor standards in the IRA ensure that we build this clean energy economy and organized labor can lead in addressing climate change by creating high-quality family-sustaining jobs that spur economic development while reducing carbon emissions. I point this out because as a result, we have some experience in Illinois when it comes to enforcement of labor standards.

As you all know labor standards are at the heart of IRA's goals to develop a clean energy economy that also creates good union jobs. We know that effective compliance and enforcement of these labor standards are essential to achieve these aims. We commend (phonetic) Treasury for developing regulations that recognize the major compliance and the enforcement challenges it faces.

Clean energy is booming across Illinois. As the data available at the beginning of this month, over 48,000 clean energy projects have utilized renewable energy credits and have been energized according to our state agency, the Illinois Power Agency, with an additional 21,000 projects in the queue that hopefully will be energized here shortly.

I also want to highlight a few recommendations to strengthen compliance and enforcement of these standards to ensure the promise of the IRA is realized. First, we urge Treasury to go further in addressing the significant lack of funds and compliant tools. The proposed compliance and enforcement framework is operative only once a taxpayer files for this increased credit. Many years after the construction work is completed, and once workers and apprentices have long since moved on. This will create significant obstacles to meaningfully provide remedies for workers impacted by taxpayer noncompliance.

In Illinois, for example, in coordination with our state's Labor Department, the Illinois attorney general's office, and the state comptroller's office, contractors need to submit certified payroll for working on a project that requires prevailing wage to be paid. This allows us to track and monitor projects to ensure workers are getting paid their fair share and compliance happening in real time. Without these front-end compliance measures, workers and other stakeholders may not have any awareness that their employer is supposed to be paying a prevailing wage and utilizing registered apprentices. These challenges and violations may be more likely to go unchecked on nonunion projects where there is no relationship with organized labor that can aid in co-enforcement.

We urge Treasury to require taxpayers to provide notice of intention to claim the increased credit by meeting labor standards. Treasury should expand the prefiling registration process that have been issued under temporary regulation for elective pay allowing the public access to transparent registry of projects seeking the increased credit.

Further, taxpayers should be required to submit a sworn labor compliance report at a monthly basis similar to what we do in Illinois, which balances the need for ongoing monitoring.

Second, we appreciate the significance that Treasury took by providing penalty payments would be waived for projects subject to qualified project labor agreements. We urge you to go further by allowing PLAs to be a safe harbor for compliance with labor standards. PLAs, as many of the other speakers have pointed out, enhance financial predictability and certainty for developers and indirectly in less labor organizations which must ensure compliance with the terms of the agreement. This would also allow the agency to focus resources on projects that don't have relationships with unions.

Third, we urge Treasury to work with the Department of Labor to adopt a co-enforcement framework that enlists state and local agencies, labor unions, and labor-adjacent organization scale of compliance and enforcement of labor standards similar to what we do in Illinois. The co-enforcement approach capitalizes on unique and specialized knowledge of these partners, including their access to information and trust in the communities.

In closing, the prevailing wage and apprenticeship utilization requirements in the Inflation Reduction Act will help ensure that our shared investments in building a clean energy economy will also support high road clean energy jobs and careers. Simple recommendations will go a long way in fostering compliance with these critical labor standards, reduce the burden on Treasury and ensuring the workers reap the economic benefits the IRA is intended to deliver. Thank you very much.

MODERATOR: Thank you. Any questions from our panelists? Thank you for your testimony. Our next speaker will be Leonard Aguilar on behalf of Texas Climate Jobs Project.

MR. AGUILAR: Hello, can you guys hear me?

MODERATOR: Yes, we can.

MR. AGUILAR: Okay, all right, I appreciate that. Thank you to the Department of Treasury for the opportunity to speak at this public hearing on the Notice of Proposed Rule Making for the Inflation Reduction Act prevailing wage and registered apprenticeship requirements.

My name is Leonard Aguilar, and I am the secretary treasurer of the Texas AFL-CIO, here on behalf of Texas Climate Jobs Project, coalition of unions advocating for a pro-labor, pro-climate agenda. You have heard from many on the call this morning that have talked about the important issues, and I will just talk about a few more, talking about how important it is and how the impact of the IRA has been in the state of Texas.

Clean energy is booming across Texas, and our members are at work building utility-scale clean energy projects, but we also face challenges in Texas. We're unique. Texas is navigating the growing racial and economic inequality and worsening safety standards. Texas is the only state in the U.S. that doesn't require employers to provide workers' compensation insurance. And Texas has the highest number of deaths in the country. As we develop a clean energy economy, we must use every tool possible to ensure that the IRA addresses these issues for working families in Texas and across the country.

I won't go over many of the things that you have already heard, but I can tell you from personal experience registered apprenticeship programs are critical pathways to make the families sustaining careers for workers in Texas and across the country. In my firsthand experience I am a product of the registered apprenticeship program. Without getting into too much detail about that program and what it did for me, it gave me a sense of security, something that I did not have when I was working nonunion before I got into the union.

In this registered program I was more than a worker. I was part of a true program that invested in my future as a journeyworker. The security that had security — the security of not having to worry about being on a safe job site, not having to worry about having my paycheck would be good on Friday, or having to worry about my family's health because we had medical insurance which allowed me to focus on my work. We were working for contractors that made investments in their workforce.

PLAs and CBAs provide key assurances for health and safety protections for workers in Texas. Like I said, we're the deadliest state in the country, and to ensure prevailing wage and apprenticeship utilization requirements are met. As in the PLA project that I had the opportunity to work in in San Antonio, the Toyota plant was constructed under a PLA. In my career as a member of UA Local 142 in San Antonio, Texas, that was the best project that I ever worked on.

Worker safety — a skilled and trained workforce that is tied to a registered apprenticeship program helped make this project run on time and under budget. In Texas we have some local municipalities that have levels of enforcement, local enforcement on projects. Unfortunately our state political environment does not allow us to have these rules at the state level. This is why we need help in securing these enforcement procedures.

Earlier we heard on this call that we have a shortage of labor. I would like to say maybe we don't have a shortage of labor and we have a shortage of contractors that want to give and pay fair wages with benefits that would be an incentive for workers to join. One job should be enough.

Thank you for your time. I appreciate your work on this topic and happy Thanksgiving.

MODERATOR: Thank you. Any questions from our panelists? We thank you for your testimony. Next is Michael Altman on behalf of Associated Builders and Contractors.

MR. ALTMAN: Good afternoon. Thank you for holding this hearing and the opportunity for me to testify regarding the increased credit or deduction in accounts (phonetic) to satisfy certain prevailing wage and registered apprenticeship requirements proposed rule.

My name is Michael Altman. I am the manager of federal regulatory affairs for Associated Builders and Contractors. ABC is a national construction industry trade association representing more than 22,000 member companies across all specialties in the industry. ABC and our vendors believe construction work should be procured on the basis of merit regarding of labor affiliation.

Historically, many ABC members have successfully built all aspects of clean and renewable energy projects under the pre-IRA tax code, such as solar, wind, geothermal, carbon sequestration, and other types of clean energy construction. However, we are concerned that the PWA requirements in the proposed rule may pose a challenge to our members' ability to continue to compete for these projects.

ABC contactors as well as the clean energy developers of projects potentially eligible for IRA tax credits have inundated ABC with questions regarding the IRS's prior guidance and as well as the latest proposed rules. Clean energy stakeholders need complete, clear, and timely guidance on all the new issues raised by the proposed rule. Unfortunately, the current MPRM (phonetic) still fails to give proper guidance to industry stakeholders and in many respects departs from limited statutory authority of the IRA which mainly disconnects (phonetic) in delays on the clean energy construction projects.

First, ABC is concerned about the IRA's imposition of prevailing wage requirements. The IRA and the proposed rules implementation of these requirements rely on deeply flawed DOL prevailing wage determinations likely to needlessly increase construction costs and delay clean energy construction projects as well as discourage participation from small businesses.

While we recognize that these requirements are unfortunately mandated by statute, the proposed rule can still implement these prevailing wage requirements of improved clarity to avoid additional confusion and delays, the clean energy contractors and developers that are inexperienced with prevailing wage compliance. For example, the DOL applies union work rules and job descriptions to any prevailing wage classifications for which the union wage rate is found to prevail in the DOL's wage determination process. Often these job duties are not published anywhere except perhaps in union collective bargaining agreements. They're generally not available to the public when a contractor is bidding on a project.

ABC strongly recommends that the IRS clarifies its guidance to state the taxpayers and contractors on IRA projects will not be penalized for failing to conform to job descriptions that are not published by the DOL and/or the union whose wage scales are found to be prevailing.

ABC is also concerned that the proposed rule states that wage determinations take effect when construction begins. Applicable DOL wage rates should be established for the life of the project when construction contracts are awarded, as long as construction begins within a reasonable time frame, consistent with current DOL rules. It may take months for a project to break ground after a contract is awarded to a general contractor. The application of new wage rates following a contract award will disrupt contractors' bids and project financing and create needless uncertainty and financial risk.

Moving on to the proposed rules of apprenticeship requirements, the imposition of unprecedented registered apprenticeship program participation requirements on private construction projects both certain concerns regarding registered apprenticeship program or RAPs capacity and sufficient availability of registered apprentices.

ABC and many ABC members support RAPs as an important part of an all-the-above approach to workforce development in the construction industry. However, the vast majority of the construction industry and ABC's membership participate in workforce development strategies outside of the RAP system. ABC has broad concerns that the current RAP system cannot accommodate the influx of industry demands for participants in RAPs, many regional marketplaces, and trades because of new infrastructure spending, and regulations.

ABC's data indicates that over [half a] million construction workers are needed to be hired in 2023 alone and that RAPs may not be sufficient to meet that need. IRS can somewhat mitigate this concern by providing clarity on apprenticeship requirements. ABC supports, and the final rule should clarify, the IRA does not impose a total labor hour percentage of apprenticeship workers on individual contractors or subcontractors, and that the total labor hour requirement instead applies to the overall project.

ABC also recommends that the IRS enact additional flexibility that permits the contractor to choose apprenticeship ratios from either the state or the RAP is registered or the state where the IRA project in question is being performed. This would help multistate contractors navigate complicated regulations and burdensome paperwork that impacts labor productivity.

Let's also point out that the good-faith and effort exception in the proposed rule as currently defined is unlikely to be useful or practical for most nonunion contractors, which make up the vast majority of the construction industry and employs more than 88 percent of the U.S. construction work force. Union contractors can request apprentices from a local union hall that are then assigned to the projects. Nonunion contractors typically enroll their own employees and outside RAPs operated by trade associations like ABC or established an in-house RAP. The IRS should clarify how the proposed good-faith effort exception might work for registered apprenticeship programs that do not share a pool of apprentices — and almost all nonunion companies do not have access to such a pool.

Regarding the penalty and cure provisions of the proposed rule, ABC appreciates the creation of a waiver for the prevailing wage penalty. We just recommend that the time frame be changed from 30 days to 90 days after the taxpayer becomes aware of the error. In most circumstances, especially with new and potentially unclear guidance clean energy contractors are learning to deal with, it will take more than 30 days to sort out some of the unintentional errors that are likely to happen.

Perhaps one of the most concerning aspects of the proposed rule in our view is the promotion of project labor agreements allowing taxpayers to avoid severe and intentional disregard penalties if they have required contractors to sign a PLA covering construction work on the project. ABC is strongly opposed to waiving penalties if developers require PLAs. This violates the plain text of the IRA, which includes no PLA requirement and so it does not authorize a waiver of intentional violations based on the discriminatory requirements of a PLA.

The provision arbitrarily establishes unequal treatment for intentional violations made by union contractors versus nonunion contractors who are much less likely to execute PLAs. Typical PLA mandates, whether accomplished by requirements for government entities or coerced through regulatory incentives, as in the case in this proposed rule, discourage competition from nonunion contractors who employ the overwhelming majority of all construction workers and deny jobs to their existing workforce through common PLA provisions.

Your typical PLA and nonunion companies must obtain most or all of their employees from union hiring halls. PLAs typically require nonunion companies to obtain apprentices exclusively from union-registered apprenticeship programs. This will only exacerbate the existing shortage, as discussed, the registered apprentices to work on IRA projects. PLAs also require contractors to follow inefficient union work rules and abandon approaches such as multiscaling that can lead to significant labor cost savings. PLAs may even discourage competition, I'm sorry, from some unionized contractors as well by interfering with existing union CBAs.

Numerous size examples, as outlined in the written comments (phonetic) submitted, demonstrate that PLAs increased costs from 12 to 20 percent and do not provide the purported benefits that resolving labor management disputes or improving safety quality or project delivery. Ultimately policies like those in the proposed rule coercing PLAs are a solution in search of a problem. Contractors remain free to negotiate these agreements if they are truly beneficial.

Finally, the IRA's imposition of PWA requirements introduces novel and civil regulatory familiarization costs, paperwork burden, and other compliance costs that will particularly impact small businesses that have a lower ability to absorb these increased costs. ABC recommends that the IRS conduct additional research to fully understand the massive impact this proposal will have on small businesses.

I would also like to just briefly address the testimony of prior commentators calling on the IRS to establish additional ongoing compliance monitoring and payroll certification requirements. ABC disagrees with these proposals and would urge the IRS to avoid imposing additional compliance burdens that will further discourage contractors and especially small businesses from bidding on IRA projects.

I would also address prior commentators calling on IRS to impose requirements that would block contractors from establishing new in-house registered apprenticeship programs to meet IRA requirements. We strongly disagree with this, as all RAPs must comply with federal requirements, and we would urge IRS to continue allowing any qualified RAP to fulfill IRA requirements to ensure the maximum number of apprentices are available to meet the immense need.

I appreciate the opportunity to comment at this hearing. ABC has concerns regarding the IRA's implementation. Our members will be critical to ensuring efficient construction of critical clean energy infrastructure. We stand ready to facilitate additional industry outreach and collaboration on these important issues. Thank you.

MODERATOR: Thank you for your testimony. Any questions from our panelists? Our last speaker will be Ryan Servais on behalf of Solar Energy Industry Association.

MR. SERVAIS: Good afternoon. My name is Ryan Servais and I'm the director of regulatory affairs and counsel for the Solar Energy Industry Association. SEIA (phonetic) has over 1,200 members supporting more than a quarter of a million good-paying jobs, including development and construction of large-scale solar facilities that are going to be subject to prevailing wage and apprenticeship requirements.

On behalf of our member companies, INCS (phonetic) appreciate the significant efforts that Treasury and IRS implement the IRA prevailing wage and apprenticeship requirements. We also appreciate the opportunity to testify today.

The solar industry is deeply committed to helping the nation meet the renewable energy targets set forth by President Biden and adjust to the Inflation Reduction Act (phonetic). The solar industry is growing rapidly to meet these targets and need a well-trained, expanded workforce to keep pace with this growth. To reach 30 percent of all U.S. electricity generation in 2030, the solar industry will need 800,000 new workers for a total workforce of well over 1 million workers.

To further development of the solar workforce, SEIA recommends Treasury and IRS prioritize clarifying the application of prevailing wage requirements that it is possible to determine the costs in renewable energy facilities well in advance of construction. Additionally, Treasury and IRS should better outline the apprenticeship requirements and congressional intent and the realities of construction timelines to promote apprenticeship programs which are a time-tested intelligence tool for workers' development. Advancing clean energy investment activities that will basically reduce greenhouse gas emissions that cause climate change represent a rare opportunity to simultaneously advance three top administration priorities, including promoting environmental justice, combating climate crisis, and creating new jobs.

Turning to prevailing wages successively, as I mentioned it's critical for taxpayers, contractors, and subcontractors to be able to determine the cost of labor to construct a solar facility. This is necessary well in advance to beginning construction. Yet several provisions in the proposed rule make it impossible to determine this accurately (phonetic). First, the proposal does not have a mechanism for taxpayers, contractors, and subcontractors to confirm they've made a correct labor classification determination. While the proposal does provide a mechanism to request by any DOL supplemental wage determination on the prevailing wage determination does not exist for specific PI (phonetic) wage classification. The proposed rule provides neither guidance for classifying workers nor a mechanism to confirm a labor classification appropriate. It is challenging then to find the correct labor classification for many activities necessary to construct a solar facility. For example, a large-scale solar facilities, a handful of labor classifications, affects a photo of opaque nodules for racking (phonetic) systems. The precise classification that affects these nodules for specific projects are based actually on geographic regions of the country, varies over time within regions, and is very based on the availability of workers in a given trade.

It is critical that the feds and the IRA fill this gap by identifying the proper labor classification for specific individuals and activities — it is a major, main point for the solar energy industry. SEIA strongly recommends Treasury and IRS, in partnership with the Department of Labor, provide technical assistance to taxpayers, contractors, and subcontractors making regulatory classification of workers (phonetic). Second, the proposed rule would allow entities to request the supplemental wage determination no more than just days before beginning construction of a facility. It's far too short. The prevailing wage determination is the single most important input to determine the cost of labor to construct the solar facility. It is necessary to know this cost at the bidding stage. And putting that into context to construct the solar facility takes place far more than 90 days before beginning construction.

SEIA recommends Treasury and IRS extend this period to request this supplemental wage determination to one year before a bid is due or alternatively SEIA prefers the beginning of construction to ensure the taxpayers, contractors, and subcontractors can accurately determine the cost of labor to construct the facility.

Third, the proposed rule would apply the prevailing wage determination in effect at the time construction begins. It is unworkable because the cost of labor can change significantly between the binding commitment for construction and the act of beginning construction.

SEIA recommends Treasury and IRS change the applicable wage determination to the effect at the time of a binding commitment for construction, which would align with the present Davis-Bacon Act requirements.

Fourth, the proposed rule would require a new wage determination to be adopted from work in facilities changes to include work not within the scope of work with the initial project. It is unclear exactly what changes would be required in the adoption of the new prevailing wage determination. While SEIA supports the Treasury and IRS proposals, we generally do not require the adoption of an updated prevailing wage determination published during construction and Davis-Bacon requirements. SEIA recommends Treasury and IRS clarify the updated wage determination need not be adopted in the event of a project change or changes that do not constitute a "hardened change."

The proposed rule requires that prevailing wages must be paid for construction alteration of repair for a period after (inaudible) and service. While SEIA supports Treasury and IRS to find a construction rate alteration and repair to exclude certain ordinary and regular maintenance, SEIA recommends Treasury and IRS clarify ordinary and routine maintenance to include certain routine tasks like the replacing of the photo opaque nodules, batteries, and other components that keep these facilities working at existing status and preventing failure performance tasks.

Turning now to apprenticeship requirements; SEIA recognizes that apprenticeship is critical to attract and retain a skilled renewable energy work force. However, taxpayers, contractors, and subcontractors must be able to determine how to comply with the apprentice requirements. SEIA recommends the following things.

First, in defining the labor hours requirement, the proposed rule does not explicitly state the requirement applies only with respect to construction prior to the facility being placed in service. This is action is clear that the labor hours requirement only applies with respect to construction of the facility and the MPR&C (phonetic) I believe (inaudible) but but it is the lack of specificity in the actual regulation that has created some confusion. In is felt this confusion, SEIA recommends Treasury and IRS make more explicit in regulation to the apprenticeship labor hours requirement only applies with respect to construction of four of the facilities placed in service, not with respect to the activities that occur after the facilities are placed in service.

Second, the proposed rule would limit the exercise of the good-faith effort exception to 120 days from the date of a request for apprentices. This fixed 120-day duration is not root in the (inaudible) and it would undermine the workforce development goals in the statute if apprentices that became available with short notice need to be (inaudible) without proper planning.

We recognize the apparent concern that long-term projects are not excepted from apprenticeship requirements on the basis of a single initial denial. We propose the following alternatives to fix the 120-day duration of a request for apprentices.

We recommend placing the IRS to update the requirements for a valid request for apprentices to include the actual period of construction during which activities suitable for apprentices will be performed. Additionally, we recommend Treasury and IRS update the requirements for a valid denial of apprentices to include the period during which the registered apprenticeship program will eventually have apprentices available. We could say the good-faith effort exception could then be tied to the exact period that apprentices are unavailable, which would sometimes exceed, or they may often be less than, 120 days. This could simultaneously address the above concern while making for a more predictable and therefore useful good-faith effort exception.

Third, the proposed rule provides for the good-faith effort exception established by if the good-faith effort exception is denied provided that such denial is at the request of the refusal to comply with the established standards and requirements of the registered apprenticeship program. The proposed rule doesn't define this approach (phonetic). To ensure apprentices are widely available and able to take advantage of a wide range of creative development undertakings.

SEIA recommendations for Treasury and IRS to finally establish standards and requirements of the registered apprenticeship program to include the satisfaction of certain regulatory and programmatic requirements, the maximum that these conditions need not immediately relate to the training work.

Thanks for the opportunity to provide these comments and thanks to listening to me here as the last commentator. SEIA looks forward to continuing to work with you to implement the prevailing wage and apprenticeship requirements, and I would be happy to field any questions that you all have. Thanks.

MODERATOR: Thank you for your comments. Any questions from the panelists? All right, thank you all very much. This concludes the hearing on the proposed regulations regarding the PWA requirements. I would like to thank everyone for attending, especially our speakers who took the time to write comments today. The panel wishes everyone a happy Thanksgiving. Thank you.

(Whereupon, at 12:44 p.m., the HEARING was adjourned.)

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