Impacts of the Inflation Reduction Act on Contractors in PA
by: Mike Mullen, East Coast Sales Consultant Beneco, part of FuturePlan by Ascensus
The Inflation Reduction Act is here. We all have our thoughts on it but, there are some important things for contractors to be aware of regarding the legislation as public work picks up.
1. Tax Credits – yes, the government is giving contractors tax credits to work on projects that fall under the clean energy initiative that the Inflation reduction Act aims to support as of January 29th, 2023. A few examples include but are not limited to:
- Alternative Fuel Refueling Property Credit
- Production Tax Credit
- Credit for Carbon Oxide Sequestration
- Credit for Production of Clean Hydrogen
- Clean Fuel Production Credit
(Consult the DOL for more information regarding exactly how much these credits are worth and where to bid on these jobs)
2. To qualify, certain guidelines must be met. Those two guidelines relate to utilization of apprentices and Prevailing Wages.
Per the guidelines, any contractor working on projects under the Inflation Reduction Act must ensure that both the proper ratio of qualified apprentices is utilized and that prevailing wages are paid to workers for the duration of the project. Pennsylvania’s regulations say non-joint (merit shop) programs are required to have 4 journeyworkers employed per apprentice, after the first apprentice is hired. In simple terms, a 4:1 ratio of workers to apprentices on any qualified job site.
Prevailing Wages are a combination of standard hourly pay and fringe benefit dollars paid to specific classes of employees. They apply to any person on a public works job site whose responsibilities are manual or physical in nature. Essentially, anyone on a job site doing physical labor or operating machinery. The law states that the prevailing wage fringe dollars can be paid as either cash on a check or, the cash value of the fringe dollars into benefits such as a 401(k), Health & Welfare, Vacation Pay/PTO or qualified apprenticeships. There are significant tax advantages to utilizing fringe dollars to fund benefits.
An important note to consider with Prevailing Wages- the certified payroll reporting and general oversight of public projects are heavily monitored and scrutinized. A hot topic you may have seen per chapter president Dave Sload speaks on what can happen for something as simple as a worker misclassification. Penalties can be severe and can result in prison time. The benefits of working on Prevailing Wage projects in addition to these tax credits include higher average base pay and steady work during economic downturns. (The government is funding public projects for infrastructure heavily under President Biden’s Infrastructure Bill from 2021). With respect to the regulations and heavy scrutiny on Prevailing Wage projects, you will want to make sure you take advantage of all tools at your disposal to make sure you can bid on, win and stay working on the projects under the Inflation Reduction Act.
There are people and resources within the chapter who can help navigate the process and keep you compliant. Do not hesitate to reach out to chapter leadership to point you in the right direction or, reach out to those individuals directly. We all want to see our fellow members succeed, stay working and take advantage of as many of these tax credits as possible.
Posted May 9, 2023