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Treasury & IRS Issues Guidance on Wage and Apprenticeship Requirements for Enhanced Tax Benefits

December 12, 2022

The Treasury Department (Treasury) and Internal Revenue Service (IRS) have released Notice 2022-61 which provides taxpayers with information on how to satisfy the prevailing wage and apprenticeship requirements for enhanced tax benefits under the Inflation Reduction Act (IRA).

When created, the IRA devised several new standards and revised tax incentives to promote clean energy projects. Among the incentives, Congress required that taxpayers meet prevailing wage and apprenticeship standards in constructing a project to foster job growth in the energy section. This Notice helps establish the initial guidance needed for implementing the IRA.

The Notice guides how taxpayers, such as contractors, builders, developers, and owners of clean energy facilities, receive the deduction amounts or increased tax credits by satisfying the wage and apprenticeship requirements. The guidance includes examples of what constitutes a prevailing wage and the determination of qualified apprenticeships.

This Notice also serves as the published guidance establishing the 60 days described in those provisions of the Code concerning prevailing wage and apprenticeship requirements. This Notice affects construction or installation, which begins on or after January 30, 2023.

This is a link to the Notice; https://www.govinfo.gov/content/pkg/FR-2022-11-30/pdf/2022-26108.pdf  The Treasury and the IRS anticipate issuing other guidance and proposed regulations concerning the prevailing wage and apprenticeship requirements.

Notice of Minimum Wage Rate Change for Federal Contracts in January 2023

November 14, 2022

The U.S. Department of Labor, Wage and Hour Division (WHD) announced a minimum wage increase for workers performing work on or in connection with federal contracts covered by Executive Order (E.O.) 14026, Increasing the Minimum Wage for Federal Contractors. This rate change is effective January 1, 2023, increasing the minimum wage for covered employees to $16.20 per hour.

President Biden issued E.O. 14026, which raised the hourly minimum wage to $15.00 per hour, beginning on January 30, 2022, with annual adjustments planned for inflation after that in amounts determined by the Secretary of Labor.

Currently, workers working on covered federal contracts are paid a minimum wage of $15.00 per hour. By January 30, 2023, all agencies must implement the $16.20 minimum wage into all new contract solicitations. Additionally, agencies must implement the new higher rate into existing contracts when parties exercise their option to extend.

DOL Issues NPRM Revising Guidance Determining Worker Classification Under FLSA

November 03, 2022

The U.S. Department of Labor, Wage and Hour Division (WHD) published a Notice of Proposed Rule Making (NPRM) revising their guidance and addressing the distinction between an independent contractor and an employee under the Fair Labor Standards Act (FLSA). The proposed guidance seeks to improve the determination process for classifying workers to avoid employee misclassification.

The NPRM rescinds the prior rule, issued in January 2021, and replaces it with an analysis for determining employee or independent contractor status that is more consistent with judicial precedent and the FLSA’s purpose. The proposed changes mean no longer using “core factors” in determining worker classification but instead returning to conducting a “totality-of-the-circumstances” analysis in which the economic reality factors are each given full consideration and not assigned predetermined weight.

A worker’s classification as an employee or an independent contractor makes a considerable difference regarding their rights under the FSLA. Therefore, the WHD believes the new rule would protect worker rights and provide consistency for regulated entities.

Parties interested in submitting comments to this NPRM should do so by the December 13th deadline. More details regarding this NPRM as well as details for submitting comments can be found at Federalregister.gov and https://www.dol.gov/agencies/whd/flsa/misclassification/rulemaking.

Treasury Seeks Input on Credit Enhancements Under the IRA When Meeting Prevailing Wage and Apprenticeship Requirements

October 24, 2022

The U.S. Treasury and the Internal Revenue Service have issued Notice 2022-51 seeking taxpayer comments regarding specific provisions of the Internal Revenue Code, as amended or added by the Inflation Reduction Act of 2022 (IRA). The Notice marks a critical first step in the formal process of implementing this legislation.

Notice 2022-51 requests comments on how taxpayers may qualify for increased credit or deduction amounts if prevailing wage and apprenticeship requirements are satisfied, bonus credit amounts if specific domestic content requirements are met, or increased credit for investment in energy communities.

Comments received in response to this Notice will help to inform the development of guidance implementing the provisions of the IRA. Therefore, those interested in providing feedback should follow the instructions in the Notices and reply as soon as possible, ideally by November 4, 2022. This is a link to the Notice; https://www.irs.gov/pub/irs-drop/n-22-51.pdf.

Read The Latest Edition Of The Contractors Plan Retirement Newsletter.

October 20, 2022

The purpose of this quarterly newsletter is to provide a deeper dive into retirement topics, helping you better prepare for upcoming and important events. We will also cover happenings in the retirement industry that may potentially have an impact on your plan. We hope you find this information both informative and useful.

Click Here To Read The Fall 2022 Retirement Newsletter.

Overview of SBA Annual Agency Procurement Scorecards

September 19, 2022

The Small Business Administration (SBA) Office of Policy, Planning and Liaison recently published its annual procurement scorecard assessing how well federal agencies did in reaching their 2021 Small Business (SB) contracting goals. The SBA works with 24 agencies annually to establish their prime and subcontracting goals, and their scorecard grades are based on the agreed-upon goals.

The annual scorecard is an assessment tool to measure how well federal agencies reach their small business and socio-economic prime contracting and subcontracting.

Overall, in 2021, agencies reached their prime contracting goals for small businesses, small disadvantaged businesses, and service-disabled veteran-owned small businesses. However, agencies did not meet goals in small businesses located in Historically Underutilized Business Zones (HUBZones) nor with small woman-owned businesses.

Agency scorecard grades consist of their achievements in four areas, and each area is graded by percentage, with 50% from Prime Contracting. Letter grades are then given to reflect what percent of their goals were met or exceeded. The agencies with the highest scoring letter grade (+A) include Commerce, DHS, DOL, EPA, GSA, Interior, NCR, NSF, OPM, SBA, and State. The lowest scoring agencies include HHS and Treasury; both scored a letter grade of “B.” HUD can in with the lowest grade of a “C,” but that is improved from the “D” they earned the previous year.

The Agency Scorecard can be found at Scorecard Landing (sba.gov).

July 2022 Construction Spending

September 07, 2022

The U.S. Census Bureau announced construction spending for July 2022 was at a seasonally adjusted annual rate of $1,773 billion, 0.4% below the revised estimate of $1,784 billion in June. However, construction spending in July was up 9% compared to last year.

While private construction spending in July was $1,424 billion, 0.8% below the revised June estimate, public construction spending was $353 billion, 1.5% above the revised June estimate. One of the vital contributors to public construction was highway construction at $103 billion, 4.3% above the revised June estimate of $98 billion.

In the first seven months of this year, the total construction value was $1,014 billion, 10.8% above for the same period in 2021. Compared to July 2021, highway construction through July 2022 was up 0.3% to $54 billion.

More information may be found by clicking here.

The Inflation Reduction Act of 2022; Impacts on Prevailing Wage and Other Requirements

August 04, 2022

Last week, Senate Democrats released the draft of the Inflation Reduction Act of 2022 (the Act), which is intended to achieve deficit reduction and fight inflation. The Act includes several provisions connected to renewable energy tax incentives. If adopted, it would expand the number of eligible construction projects, impact prevailing wage requirements, and could alter how businesses qualify for tax credits.

Essentially, the Act would reestablish the full investment tax credit (ITC) rate of 30% for ITC-eligible facilities that satisfy the prevailing wage and apprenticeship requirements. It also extends the production tax credit (PTC) rate of 1.5 cents per kilowatt-hours for construction projects beginning before January 1, 2025.

The Act would also adopt new provisions extending the ITC and PTC for projects placed in service in 2025 or later in which construction begins before 2033. Finally, the Act defines “projects” as those with zero greenhouse gas emission rates.

Furthermore, the ITC and PTC would implement additional requirements to qualify for the full credit. These other requirements include (1) satisfying specific prevailing wage requirements for wages paid to employees (contractors and subcontractors alike) for the construction and maintenance of facilities and (2) minimum thresholds for employment of apprentices (for both contractors and subcontractors) in connection with the construction and maintenance of facilities.

At this time, Senate Democrats intend to vote on the Act through the budget reconciliation process, permitting the legislation to pass with a majority vote in the Senate. President Biden has announced his support of the Act, but it still needs to garner enough support to pass both chambers.

The U.S. Department of Labor (DOL) Published a Proposed Rule to Implement the Executive Order on Nondisplacement of Qualified Workers

July 26, 2022

The U.S. Department of Labor published a Proposed Rule to Implement President Joe Biden’s Executive Order (EO) reinstating the Nondisplacement of Qualified Workers Under Service Contracts.

The EO and DOL proposed rule reinstates a policy that requires successor federal contractors, in certain circumstances, to offer a right of first refusal of employment to employees working under the predecessor contract.

The EO requires DOL to develop this regulation and the FAR Council to create a contract clause to apply to new solicitations. Since the EO was signed, “agencies are strongly encouraged” to include the new contract clause in solicitations before the FAR clause is final.

Employees working on predecessor contracts covered by the Service Contract Act, and meeting other requirements, who would be terminated as a result of the contract’s end, should be offered by the successor “a right of first refusal of employment under this contract in positions for which those employees are qualified.”

A copy of the Notice of Proposed Rulemaking can be found here: https://www.federalregister.gov/documents/2022/07/15/2022-14967/nondisplacement-of-qualified-workers-under-service-contracts

Can We Build It? Not With Michigan’s Prevailing-Wage Mandate

July 22, 2022

Gov. Whitmer defies the law to reimpose a rule favoring unions in big state construction projects.

The builders I work with are used to Michigan putting the thumb on the scale for labor unions. But we never expected Gov. Gretchen Whitmer to go so far as to disregard the law. She has unilaterally imposed a prevailing-wage mandate on the biggest state construction projects, even though the state Legislature officially ended this policy in 2018. The nonunion construction companies I represent are no longer able to compete for these contracts fairly and openly. And we aren’t the only losers. Ms. Whitmer is lawlessly sticking it to taxpayers, too.

Read the entire article here: https://www.wsj.com/articles/can-we-build-it-not-in-michigan-we-cant-union-prevailing-wage-mandate-construction-taxpayers-governor-whitmer-11658437152