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Project Labor Agreements: A Best Practice for Clean Energy Projects Seeking to Meet IRA Wage and Apprenticeship Standards

By Deputy Secretary of the Treasury Wally Adeyemo and Acting Assistant Secretary of Labor Julie Su

The Biden-Harris Administration’s Investing in America agenda is making historic investments in the clean-energy economy—and in the American workers who are building it. As part of that agenda, the landmark Inflation Reduction Act (IRA) provides significant tax incentives to clean energy projects that pay good wages and create registered apprenticeship opportunities for people to gain valuable work experience. 

The Treasury Department and Internal Revenue Service today released final rules implementing key provisions of the IRA so the jobs created in the clean energy economy are good-paying, high-quality jobs and support a robust, diverse pipeline of highly-skilled and trained workers to take on the historic opportunities created by President Biden’s Investing in America agenda. 

The IRA’s prevailing wage and registered apprenticeship (PWA) provisions are intended to increase pay for the people working on IRA clean energy projects, most of which are in counties with below-average median household incomes. The IRA’s investments are already creating jobs and lowering energy costs in communities that have long been held back by lack of investment, and these rules will help ensure that workers can continue to benefit from the clean energy transition.

The IRA’s PWA requirements apply to many of the new and expanded tax credits for deployment of wind, solar, nuclear, hydrogen, and other clean energy technologies. If the PWA requirements are met, the credit amount is increased fivefold. This provides a significant financial incentive for taxpayers to pay good wages and hire registered apprentices for construction, alteration, and repair work on clean energy projects by enhancing the value of the credit.                                                                                      

Both of our agencies encourage developers to consider Project Labor Agreements (PLAs) to help them comply with the PWA requirements. Indeed, the final rules include special provisions for this pathway. PLAs are a type of pre-hire collective bargaining agreement unique to the construction industry. PLAs are negotiated between one or more construction unions and one or more construction employers to establish the terms and conditions for employment on a specific construction project. PLAs can help developers deliver projects on time and on budget and help quickly and efficiently fund the clean energy future.

Based on public comments, and in consultation with the Department of Labor, the Treasury Department and the IRS recognize that PLAs can help taxpayers comply with the IRA’s PWA requirements. Accordingly, the final rules provide that taxpayers with qualifying PLAs in place will not have to pay penalties if the IRS finds that they have any PWA violations, as long as they promptly pay workers the back wages and interest that those workers are owed.  Additionally, the IRS will take into account whether a taxpayer has a qualifying PLA—and evidence, including statements from counterparties, of whether a qualifying PLA was complied with—when conducting audits. 

PLAs Have Important Benefits for Workers and Project Developers 

To qualify for the special provisions in the final rules, a PLA must meet certain requirements tailored to the unique context of the IRA’s PWA provisions. A qualifying PLA must, at a minimum:

  • Be a collective bargaining agreement with one or more labor organizations of which building and construction employees are members;
  • Bind all contractors and subcontractors on the construction project; 
  • Contain guarantees against strikes, lockouts, and similar job disruptions; 
  • Set forth effective, prompt, and mutually binding grievance procedures for resolving labor disputes;
  • Contain provisions to pay wages at or above prevailing wage rates; and
  • Contain provisions for referring and using registered apprentices consistent with the overall PWA requirements.

PLAs that include these terms benefit workers, taxpayers, and employers alike, including by promoting compliance with the IRA’s PWA requirements. Parties to a qualifying PLA can also include additional terms to help them achieve their desired results. 

Qualifying PLAs can help ensure compliance with PWA requirements while delivering projects on time and on budget. Moreover, qualifying PLAs can provide ongoing monitoring and administration by union officials, effective grievance and dispute resolution mechanisms, and notice to workers of their wage rates. For these reasons, PLAs already have a long record of increasing compliance with other worker protection laws—and we believe they will do the same here. Together, these tools promote increased and more timely compliance with the PWA requirements, helping to ensure that workers receive a fair day’s pay for a hard day’s work and helping taxpayers remain in compliance with the IRA’s PWA provisions.

PLAs also provide other valuable benefits to taxpayers, project developers, employers, and workers. PLAs help to organize complex construction projects—as many IRA clean energy projects will be—and to ensure efficient and timely completion. For example, qualifying PLAs require no-strike, no-lockout clauses that help prevent costly delays associated with labor unrest. By requiring all parties to enter into one agreement that contains universal terms that govern construction work, PLAs can streamline the administration of large projects. At the same time, PLAs provide strong worker protections and enforcement mechanisms for addressing labor violations, can improve worker safety and health, and often contain terms that support programs that maintain and grow a diverse skilled workforce. 

The Final Rules Include Special Provisions for the Use of PLAs to Help Ensure PWA Compliance 

Recognizing that PLAs may help taxpayers comply with the IRA’s PWA requirements, the final rules include special provisions for taxpayers using qualifying PLAs for the construction of clean energy projects. 

First, the final rules provide that taxpayers with qualifying PLAs in place are not subject to penalties. In general, taxpayers that claim IRA tax credits including the PWA increase but fail to meet the PWA requirements can still receive the full tax credit if they make a correction payment of back wages and interest to their workers and pay a penalty payment to the IRS. Taxpayers who intentionally disregard the PWA requirements will face significantly increased penalties. However, in recognition of PLAs’ benefits in encouraging compliance with the IRA’s PWA requirements, the final rules provide that penalties do not apply with respect to a laborer or mechanic employed in the construction, alteration, or repair work of a facility, provided that correction payments are made to workers by the time the PWA increase is claimed. By contrast, taxpayers without PLAs in place may face penalties if they fail to meet the PWA requirements, including even bigger penalties if they intentionally disregarded the PWA requirements.

In addition, the preamble to the final rules explains that the IRS will take into account on examination whether a taxpayer has a qualifying PLA in place and would consider books and records substantiating that a qualifying PLA is being complied with as an indication that the project is complying with the PWA requirements. Records that would support substantiating PWA compliance could include attestations by all counterparties to the qualifying PLA – for example, participating labor unions – that a taxpayer is in compliance with its terms. 

As described above, PLAs have built-in worker protections and enforcement mechanisms that will help taxpayers comply with the PWA requirements, including terms requiring the payment of prevailing wages and hiring of apprentices consistent with the PWA requirements. These built-in features can be a useful tool in ensuring compliance with the PWA requirements. 


The IRS takes enforcement of federal tax law seriously, including for the IRA tax credits’ PWA requirements, and the IRS is working on a memorandum of understanding with DOL to be signed by the end of the year to support the IRS’s efforts in ensuring compliance with the PWA requirements. PLAs help ensure the type of high-road labor practices that the PWA requirements in the IRA are trying to encourage, including the payment of prevailing wages and hiring of apprentices. PLAs provide benefits to taxpayers, project developers and workers alike.