Jobsite Data Powers Apprenticeship Tax Credits

by | Apr 23, 2024

utility jobsite management

Jobsite Data Essential for Apprenticeship Tax Credits

The Inflation Reduction Act includes tax credit incentives to encourage the use of apprentices on federally funded renewable energy projects. But claiming these credits – up to 30% of wages – requires jobsite data like that provided by Safe Site Check In.

apprenticeship tax credits

Apprenticeship Tax Credits Eligibility Basics

The federal government in the IRA of 2022 funds renewable energy projects to accelerate the transition to clean/non-carbon energy. Because the renewable energy sector requires more skilled workers than are available today, the act includes provisions to encourage the use of qualified apprentices. 

Eligible projects include construction, modification or repair of large scale utility projects like solar or wind farms.

The credit can be claimed on a business tax return beginning at 6% of the wages paid to apprentices. But by meeting prevailing wage requirements for all workers – employees, contractors and subcontractors – and increasing the use of registered apprentices, the total credit rises to 30%. Prevailing wage rules are published by the DOL and any apprentices must be registered with the DOL as well.

Jobsite Data Needed for Claiming Apprenticeship Tax Credits

Taxpayers can claim the increased credit by meeting the prevailing wage and apprenticeship requirements. To do so, taxpayers must maintain and preserve records related to the employment of laborers,  mechanics, and apprentices, including the records of any contractor or subcontractor. Examples include each laborer or mechanic’s hourly rates, hours worked, deductions from wages, and actual wages paid, among other records.

Financial data proving payment of prevailing wages will come out of payroll and a/p accounting records. (Prevailing wage requirements are nothing new, and we won’t discuss them here – see the federal DOL site and the state labor departments where you do business.)

Apprenticeship Tax Credits Requirements

The apprenticeship requirements of the IRA include three components — a labor hours requirement, a ratio requirement, and a participation requirement. 

  1. Under the labor hours requirement, the taxpayer must ensure that, depending on when construction began, 12.5% or 15% of the total labor hours performed in the construction, alteration, or repair of the facility are performed by qualified apprentices from a registered apprenticeship program. 
  2. Under the ratio requirement, the taxpayer must ensure that the applicable ratio of apprentices to journeyworkers established by the registered apprenticeship program are met for apprentices working on the facility each day. 
  3. Under the participation requirement, any taxpayer (or contractor or subcontractor) that employs 4 or more laborers or mechanics in the construction, alteration, or repair of the facility must also hire at least one qualified apprentice. 

Section 45(b)(8)(E)(i) defines “labor hours” as the “total number of hours devoted to the performance of construction, alteration, or repair work by any individual employed by the taxpayer or by any contractor or subcontractor, and exclud[ing] any hours worked by foremen, superintendents, owners, or persons employed in a bona fide executive, administrative, or professional capacity (within the meaning of those terms in part 541 of title 29, Code of Federal Regulations).”   

You need to track all non-employee/subcontractor hours worked by trade workers. That means you need the jobsite data for not only apprentices but journeymen as well, whether they are employee or contractor. Worker categorization is key — jobsite manager hours are excluded! 

Use Safe Site Check In to Meet Apprenticeship Tax Credits Requirements

To meet the requirements, configure Safe Site Check In as follows:

  • Onboard all workers and provide them a digital badge for use on a project site.
  • If they are an apprentice, include proof of registration in their worker profile record.
  • Record worker status – employee or sub, apprentice or journeyman, manager or trade – in their profile record as well.
  • Have all workers check-in and check-out from project sites every shift.
  • Safe Site Check In’s daily log spreadsheets will provide the data you need to claim the maximum credit:
    • Labor hours worked by apprentices vs all workers
    • Ratio of #apprentices to all types of non-management workers
    • The minimum participation requirement (one apprentice when 4 or more workers)

Records proving you meet prevailing wage requirements will come from your payroll and accounts payable records. But recording jobsite hours worked for employees, contractors and subcontractors will come from Safe Site Check In’s digital badging and daily log automation.

Evolving Rules on Eligibility

Monitor updates from the following government and industry websites for evolving rules and clarifications:

Many states also offer their own apprenticeship incentives. Look into what might be available in your region:

https://www.apprenticeship.gov/investments-tax-credits-and-tuition-support/state-tax-credits-and-tuition-support)