Internal Revenue Bulletin 2023-39 (PDF rendition): IRS Notices

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Bulletin No. 2023–39
September 25, 2023
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
Notice 2023-63, page 919.
Notice 2023-63 announces the IRS’ intent to issue regulatory
guidance to address issues regarding specified research or
experimental expenditures under § 174. Notice 2023-63
also provides interim guidance regarding these expenditures.
This includes definitions of relevant terms; in addition to rules
for allocation of costs, software development, research pro-
vided under contract, disposition of property, long term con-
tracts, and cost-sharing transactions. Finally, Notice 2023-63
requests comments for issues regarding the interim guidance
provided.
REG-100908-23, page 931.
The proposed regulations describe the rules for satisfying
the prevailing wage and registered apprenticeship require-
ments to qualify for increased credit or deduction amounts
under the Internal Revenue Code. In addition, the proposed
regulations provide correction and penalty procedures
for taxpayers to be deemed to satisfy the prevailing wage
and registered apprenticeship requirements. The proposed
regulations also describe recordkeeping and reporting
requirements related to the prevailing wage and registered
apprenticeship requirements.
Finding Lists begin on page ii.

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Introduction
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The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
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To the extent practicable, pertinent cross references to these
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September 25, 2023 Bulletin No. 2023–39

Part III
Guidance on Amortization
of Specified Research or
Experimental Expenditures
under Section 174
Notice 2023-63
SECTION 1. OVERVIEW
This notice announces that the
Department of the Treasury (Treasury
Department) and the Internal Revenue
Service (IRS) intend to issue proposed
regulations (forthcoming proposed regu-
lations) addressing (1) the capitalization
and amortization of specified research or
experimental (SRE) expenditures under
§ 174 of the Internal Revenue Code
(Code)
1
, as amended by Public Law 115-
97, 131 Stat. 2054 (Dec. 22, 2017), com-
monly referred to as the Tax Cuts and
Jobs Act (TCJA), (2) the treatment of
SRE expenditures under § 460, and (3)
the application of § 482 to cost sharing
arrangements involving SRE expendi-
tures. The Treasury Department and the
IRS intend to propose rules in the forth-
coming proposed regulations consistent
with the interim guidance provided in sec-
tions 3 through 9 of this notice. Section
10 of this notice provides that taxpayers
may rely on the interim guidance provided
in sections 3 through 9 of this notice prior
to the publication date of the forthcom-
ing proposed regulations in the Federal
Register. Section 11 of this notice requests
comments, including comments on spe-
cific issues and issues not addressed in
this notice.
The guidance in this notice does not
apply for purposes of determining whether
an expenditure paid or incurred for tax-
able years beginning before January 1,
2022, is a research or experimental expen-
diture under § 174 as in effect for taxable
years beginning before January 1, 2022
(former § 174). This notice provides
guidance regarding expenditures that are
treated as SRE expenditures under § 174
and, therefore, affects expenditures that
may be treated as SRE expenditures for
purposes of § 41(d)(1)(A) and § 1.41-4(a)
(2)(i). However, this notice is not intended
to change the rules for determining eligi-
bility for or computation of the research
credit under § 41 and the regulations
thereunder, including rules for “research
with respect to computer software,” and
the definitions of “qualified research” and
“qualified research expenses.”
SECTION 2. BACKGROUND
.01 Prior law treatment of research or
experimental expenditures.
(1) In general. Former § 174 was first
enacted in 1954 to provide certainty to
taxpayers regarding the treatment of oth-
erwise capitalizable research or experi-
mental expenditures with no determinable
useful life. See H.R. Rep. No1337, 83d
Cong., 2d Sess. 28 (1954); S. Rep. No.
1622, 83d Cong., 2d Sess. 33 (1954).
Before the enactment of former § 174,
courts consistently held that the law
required capitalization of product research
and development costs, including pro-
duction costs of tangible property used
in the research process. Under such prior
law, expenditures related to a taxpayer’s
research and experimentation generally
were capitalized and held in suspense until
the taxpayer could determine (1) whether
or not the research had failed; and (2) if
the research was successful, whether or
not the research resulted in property that
had a useful life determinable with rea-
sonable accuracy.
Former § 174 allowed taxpayers to
elect to deduct research or experimental
expenditures paid or incurred in connec-
tion with a trade or business as currently
deductible expenses, to capitalize and
amortize such expenditures over a period
of not less than 60 months, or to charge
such expenditures to capital account.
(2) Definition of research or experi-
mental expenditures under former § 174.
The provisions of § 1.174-2 address the
scope and definition of research or exper-
imental expenditures under former § 174.
Specifically, § 1.174-2(a)(1) provides
that the term “research or experimental
expenditures” means those expenditures
incurred in connection with a taxpayer’s
trade or business that represent research
and development costs in the experimen-
tal or laboratory sense, and generally
includes all such costs incident to the
development or improvement of a product
or a component or subcomponent of the
product, as well as the costs of obtaining
a patent. Expenditures represent research
and development costs in the experimen-
tal or laboratory sense if they are for activ-
ities intended to discover information that
would eliminate uncertainty concerning
the development or improvement of a
product. Section 1.174-2(a)(3) defines the
term “product” to include any pilot model,
process, formula, invention, technique,
patent, or similar property, and includes
products to be used by the taxpayer in its
trade or business as well as products to be
held for sale, lease, or license.
Section 1.174-2(a)(10) and (b)(3)
generally provide that former § 174 also
applies to expenditures paid or incurred
by a taxpayer for research or experimen-
tation carried on by another person or
organization (such as a research institute,
foundation, engineering company, or sim-
ilar contractor) on behalf of the taxpayer,
provided that such expenditures are made
at the taxpayer’s order and risk. However,
§ 1.174-2 does not explicitly address
expenditures paid by a contractor for
research or experimentation carried on for
another person or organization.
Section 1.174-2(a) also provides guid-
ance on expenditures that are not subject
to former § 174, including costs paid or
incurred in the production of a product
after the elimination of uncertainty con-
cerning the development or improvement
of the product, and expenditures for: qual-
ity control testing, efficiency surveys,
management studies, consumer surveys,
advertising or promotions, the acquisition
of another’s product, and research in con-
nection with literary, historical or similar
projects. In addition, § 1.174-2(b) and
former § 174(c) provide that any expen-
diture for the acquisition or improvement
1
Unless otherwise specified, all “section” or “§” references are to sections of the Code or the Income Tax Regulations (26 CFR part 1).
Bulletin No. 2023–39 919 September 25, 2023

of land or depreciable property to be
used in connection with the research or
experimentation and of a character which
is subject to the allowance under § 167
or § 611 are not research or experimental
expenditures. However, allowances for
depreciation and depletion with respect
to such property are treated as research
or experimental expenditures. Finally,
§ 1.174-2(c) and former § 174(d) pro-
vide that the provisions of former § 174
are not applicable to any expenditures
paid or incurred for the purpose of ascer-
taining the existence, location, extent, or
quality of any deposit of ore, oil, gas, or
other mineral.
(3) Software development. Prior to the
effective date of the TCJA amendments
to former § 174, section 5 of Rev. Proc.
2000-50, 2000-2 C.B. 601, permitted tax-
payers to treat costs to develop computer
software that were not otherwise treated
as research or experimental expenditures
under former § 174 as currently deduct-
ible expenses or capital expenditures
that are amortized over 60 months or 36
months. Accordingly, under section 5
of Rev. Proc. 2000-50, costs to develop
computer software that did not otherwise
meet the definition of research or exper-
imental expenditures under former § 174
were afforded generally similar treat-
ment to research or experimental expen-
ditures under former § 174. Rev. Proc.
2000-50 does not define software devel-
opment or otherwise describe software
development activities. See also Kellett
v. Commissioner, T.C. Memo. 2022-62
(discussing, and questioning the statutory
support for, deduction of software devel-
opment expenditures under Rev. Proc.
2000-50).
.02 Treatment of research or experi-
mental expenditures under the TCJA.
(1) Requirement to capitalize and
amortize SRE expenditures. Section
13206(a) of the TCJA amended former
§ 174 for amounts paid or incurred in tax-
able years beginning after December 31,
2021. For such amounts, § 174(a)(1) dis-
allows deductions for SRE expenditures,
except as provided in § 174(a)(2). Section
174(a)(2) requires taxpayers to charge
SRE expenditures to capital account and
allows amortization deductions of such
capitalized expenditures ratably over the
applicable § 174 amortization period,
beginning with the midpoint of the taxable
year in which such expenditures are paid
or incurred. As used in this notice, the term
“applicable § 174 amortization period”
refers to a 5-year (60-month) period in
the case of SRE expenditures attributable
to domestic research or a 15-year (180-
month) period in the case of SRE expen-
ditures attributable to foreign research, as
defined in section 3.03 of this notice.
(2) Definition of SRE expenditures.
Section 174(b), as amended by section
13206(a) of the TCJA, defines “SRE
expenditures” to mean, with respect to any
taxable year beginning after December
31, 2021, research or experimental expen-
ditures that are paid or incurred by the
taxpayer during such taxable year in con-
nection with the taxpayer’s trade or busi-
ness. See Snow v. Commissioner, 416 U.S.
500 (1974) (“in connection with” a trade
or business is broader than “in carrying
on” a trade or business).
(3) Software development. Section
13206(a) of the TCJA added new § 174(c)
(3) to require that any amount paid or
incurred in connection with the devel-
opment of any software in taxable years
beginning after December 31, 2021, be
treated as a research or experimental
expenditure (and thus an SRE expenditure
to the extent paid or incurred by the tax-
payer during the taxable year in connec-
tion with the taxpayer’s trade or business).
(4) Amortization deductions for dis-
posed of, retired, or abandoned property.
Section 13206(a) of the TCJA added new
§ 174(d) to provide that deductions of
SRE expenditures may not be taken on
account of the disposition, retirement, or
abandonment of property with respect to
which such SRE expenditures are paid or
incurred. If such property is disposed of,
retired, or abandoned during the applica-
ble § 174 amortization period, § 174(d)
requires that the amortization deductions
for such SRE expenditures continue over
that period.
(5) Other changes to former § 174.
Section 13206(a) of the TCJA redesig-
nated former § 174(c) to § 174(c)(1) and
former § 174(d) to § 174(c)(2), removed
former § 174(e), which provided that only
reasonable expenditures are considered
research or experimental expenditures
under former § 174, and also removed
former § 174(f), which contained
cross-references to basis adjustments
under § 1016(a)(14) and to an election for
10-year amortization under § 59(e).
(6) Change in method of accounting.
(a) TCJA requirement. Section 13206(b)
of the TCJA requires taxpayers to apply
the provisions of § 174, as amended by
section 13206(a) of the TCJA, as a change
in method of accounting for purposes of
§ 481, initiated by the taxpayer and made
with the consent of the Secretary of the
Treasury or her delegate, and applied on
a cutoff basis to SRE expenditures paid or
incurred in taxable years beginning after
December 31, 2021. Thus, no adjustments
under § 481(a) are permitted or required
with respect to research or experimental
expenditures paid or incurred in taxable
years beginning before January 1, 2022.
(b) Procedural guidance. On December
12, 2022, the Treasury Department and
the IRS issued Rev. Proc. 2023-8, 2023-3
I.R.B. 407, to provide procedures for
taxpayers to obtain automatic consent to
change methods of accounting to com-
ply with § 174, as amended by the TCJA.
On December 29, 2022, the Treasury
Department and the IRS issued Rev. Proc.
2023-11, 2023-3 I.R.B. 417, to modify
and supersede Rev. Proc. 2023-8. The
change in method of accounting provided
by Rev. Proc. 2023-11 was subsequently
included in section 7.02 of Rev. Proc.
2023-24, 2023-28 I.R.B. 1207. Section
7.02 of Rev. Proc. 2023-24 implements
the requirement imposed by § 13206(b) of
the TCJA that a taxpayer must make this
change in method of accounting on a cut-
off basis if the change was made during
the taxpayer’s first taxable year beginning
after December 31, 2021. However, sec-
tion 7.02 of Rev. Proc 2023-24 provides
that a taxpayer making the change for a
taxable year subsequent to the taxpay-
er’s first taxable year beginning after
December 31, 2021, is required to make
that change with a modified § 481(a)
adjustment that takes into account only
SRE expenditures paid or incurred in
taxable years beginning after December
31, 2021. Section 7.02(7) of Rev. Proc.
2023-24 also provides that a taxpayer
that changes its method of accounting for
SRE expenditures under the revenue pro-
cedure will receive limited audit protec-
tion. Specifically, audit protection will not
apply for expenditures paid or incurred in
September 25, 2023 920 Bulletin No. 2023–39

Bulletin No. 2023–39 921 September 25, 2023
taxable years beginning before January 1,
2022. Audit protection also will not apply
for expenditures paid or incurred in tax-
able years beginning after December 31,
2021, if a change in method of accounting
is made for the taxable year immediately
subsequent to the first taxable year begin-
ning after December 31, 2021. See section
10.02 of this notice for additional proce-
dural guidance the Treasury Department
and IRS intend to issue.
SECTION 3. CAPITALIZATION
AND AMORTIZATION OF SRE
EXPENDITURES
.01 Purpose. The Treasury Department
and the IRS intend to propose rules in
forthcoming proposed regulations consis-
tent with the interim guidance provided in
this section 3, which provides taxpayers
with clarity regarding the requirement in
§ 174(a) to capitalize and amortize SRE
expenditures and the treatment of short
taxable years.
.02 Requirement to capitalize and
amortize SRE expenditures. Taxpayers
are required to capitalize SRE expendi-
tures (as defined in section 4.02(2) of this
notice) and amortize such expenditures
ratably over the applicable § 174 amorti-
zation period beginning with the midpoint
of the taxable year in which such expendi-
tures are paid or incurred.
.03 Definition of foreign research. The
term foreign research means any research
conducted outside the United States, the
Commonwealth of Puerto Rico, or any
U.S. territory or other possession of the
United States. See §§ 174(a)(2)(B) and
41(d)(4)(F).
.04 SRE expenditures attributable to
foreign research. Taxpayers must look to
where the SRE activities (as defined in sec-
tion 4.02(4) of this notice) are performed
to determine whether the corresponding
SRE expenditures are attributable to for-
eign research for purposes of section 3.02
of this notice.
.05 Definition of midpoint. Except as
provided in section 3.06 of this notice,
for purposes of determining when amor-
tization begins under § 174(a)(2)(B) and
section 3.02 of this notice, the term mid-
point means the first day of the seventh
month of the taxable year in which the
SRE expenditures are paid or incurred.
See section 7.03 of this notice for interim
guidance with respect to SRE expendi-
tures that relate to property disposed of
before the midpoint of the taxable year in
which such SRE expenditures are paid or
incurred.
.06 Short taxable years.
(1) In general. The amortization deduc-
tion for a short taxable year is based on
the number of months in the short taxable
year. If a short taxable year includes part
of a month, the entire month is included in
the number of months in the taxable year,
but the same month may not be counted
more than once. If a taxpayer has two suc-
cessive short taxable years and the first
short taxable year ends in the same month
that the second short taxable year begins,
the taxpayer should include that month in
the first short taxable year and not in the
second short taxable year.
(2) Midpoint for short taxable years.
The midpoint of a short taxable year is
the first day of the midpoint month. In the
case of a short taxable year with an even
number of months (as determined under
section 3.06(1) of this notice), the mid-
point month is determined by dividing the
number of months in the short taxable year
by two and then adding one (for example,
for a short taxable year consisting of ten
months, the midpoint month is the sixth
month of the short taxable year ((10 / 2)
+ 1 = 6)). In the case of a short taxable
year with an odd number of months (as
determined under section 3.06(1) of this
notice), the midpoint month is the month
for which there are an equal number of
months before and after such month (for
example, for a short taxable year consist-
ing of seven months, the mid-point month
is the fourth month of the short taxable
year).
.07 Example.
(1) Facts. Taxpayer is a calendar-year taxpayer
that incorporated and began operations on October
17, 2022. In 2022, Taxpayer paid or incurred $60,000
in SRE expenditures that were not attributable to for-
eign research. Taxpayer has no short taxable years
after its initial taxable year.
(2) Analysis. Taxpayer has a short taxable
year that begins on October 17, 2022, and ends on
December 31, 2022, and thus is treated as having a
three-month taxable year under section 3.06(1) of
this notice. The midpoint month is November, and
thus November 1, 2022, will be treated as the mid-
point under section 3.06(2) of this notice. In 2022,
Taxpayer amortizes $2,000 of SRE expenditures
($60,000 / 60 months × 2 months). In taxable years
2023 through 2026, each a full 12-month taxable
year, Taxpayer amortizes $12,000 ($60,000 / 60
months × 12 months) each year, or $48,000 total.
In 2027, Taxpayer amortizes the remaining $10,000
($60,000 / 60 months × 10 months).
SECTION 4. SCOPE OF
SECTION 174
.01 Purpose. The Treasury Department
and the IRS intend to propose rules in forth-
coming proposed regulations consistent
with the interim guidance provided in this
section 4, which provides taxpayers with
clarity in determining whether expendi-
tures are SRE expenditures subject to capi-
talization and amortization under § 174.
.02 Definition of SRE expenditures and
other relevant terms. For purposes of this
notice:
(1) Terms used in § 1.174-2. Unless
otherwise provided, all terms used in this
notice have the same meaning as those in
§ 1.174-2. For example, the term product
has the meaning set forth in § 1.174-2(a)
(3).
(2) SRE expenditures defined. The term
SRE expenditures means, with respect to
any taxable year beginning after December
31, 2021, research or experimental expen-
ditures (as defined in section 4.02(3) of
this notice), which are paid or incurred
by the taxpayer during such taxable year
in connection with the taxpayer’s trade or
business.
(3) Research or experimental expendi-
tures defined. The term research or exper-
imental expenditures means expenditures
that—
(a) satisfy the requirements under
§ 1.174-2 to be research or experimental
expenditures, or
(b) are paid or incurred in connection
with the development of any computer
software (as provided in section 5 of
this notice), regardless of whether such
expenditures are research or experimental
expenditures under § 1.174-2.
See section 6 of this notice for rules to
determine whether expenditures paid or
incurred pursuant to a contract meet the
definition of research or experimental
expenditures under this section 4.02(3).
(4) SRE activities defined. The term
SRE activities means—
(a) software development activities
described in section 5.03 of this notice, or
(b) research or experimental activities
described in § 1.174-2 (that is, activities

September 25, 2023 922 Bulletin No. 2023–39
in the experimental or laboratory sense
intended to discover information that
would eliminate uncertainty concern-
ing the development or improvement or
appropriate design of a product or a com-
ponent or subcomponent of a product).
.03 Identification and allocation of
SRE expenditures. As provided in sec-
tion 4.02(2) and (3) of this notice, SRE
expenditures include expenditures that
satisfy the requirements under § 1.174-2
or are paid or incurred in connection with
the development of any computer soft-
ware, regardless of whether such software
expenditures satisfy the requirements
under § 1.174-2. Section 1.174-2(a)(1) and
(5) provide that research or experimen-
tal expenditures under § 1.174-2 include
all costs incident to the development or
improvement of a product, a component of
a product, or subcomponent of a product,
as applicable (that is, research or exper-
imental expenditures under § 1.174-2
include all costs incident to SRE activi-
ties described in section 4.02(4)(b) of this
notice). Section 4.03(1) of this notice pro-
vides a non-exhaustive list of examples of
the types of costs that are incident to SRE
activities described in section 4.02(4)(b)
of this notice or paid or incurred in con-
nection with software development activ-
ities described in sections 4.02(4)(a) and
5.03 of this notice. In other words, section
4.03(1) of this notice provides a non-ex-
haustive list of examples of the types of
costs that are SRE expenditures. Section
4.03(2) of this notice provides a list of
costs that are not permitted or required to
be treated as SRE expenditures, regardless
of whether they may be incident to SRE
activities described in section 4.02(4) of
this notice. Section 4.03(3) of this notice
provides interim guidance addressing
the allocation of costs, including those
described in section 4.03(1) of this notice,
to SRE activities.
(1) Examples of costs that are SRE
expenditures. The types of costs that are
considered incident to SRE activities
described in section 4.02(4)(b) of this
notice or paid or incurred in connection
with software development activities
described in sections 4.02(4)(a) and 5.03
of this notice include but are not limited
to:
(a) Labor costs. Labor costs of full-time, part-
time, and contract employees and independent
contractors who perform, supervise, or directly sup-
port SRE activities. Labor costs include all elements
of compensation other than severance compensation,
such as basic compensation, stock-based compensa-
tion, overtime pay, vacation pay, holiday pay, sick
leave pay, payroll taxes, pension costs, employee
benefits, and payments to a supplemental unemploy-
ment benefit plan.
(b) Materials and supplies costs. Costs of
materials and supplies, including tools and equip-
ment that are not depreciable under § 168, which
are used or consumed in the performance of SRE
activities or in the direct support of SRE activities.
For example, a cost described in § 1.162-3, relating
to the cost of a material or supply, may be an SRE
expenditure.
(c) Cost recovery allowances. Depreciation,
amortization, or depletion allowances with respect to
property used in the performance of SRE activities
or in the direct support of SRE activities, includ-
ing property placed in service in a taxable year that
begins on or before December 31, 2021. For exam-
ple, depreciation with respect to a test bed used in the
performance of SRE activities, or allocable deprecia-
tion with respect to a facility in which SRE activities,
or services that directly support SRE activities, are
performed.
(d) Patent costs. Costs of obtaining a patent, such
as attorneys’ fees expended in making and perfecting
a patent application.
(e) Certain operation and management costs.
Rent, utilities, insurance, taxes, repairs and main-
tenance costs, security costs, and similar overhead
costs with respect to facilities, equipment and other
assets used in the performance of SRE activities or in
the direct support of SRE activities.
(f) Travel costs. Travel costs for the perfor-
mance of SRE activities or the direct support of SRE
activities.
(2) Costs that are not treated as SRE
expenditures. The following costs are
not permitted or required to be treated as
SRE expenditures, regardless of whether
they may be incident to SRE activities
described in section 4.02(4)(b) of this
notice or paid or incurred in connection
with software development activities
described in sections 4.02(4)(a) and 5.03
of this notice:
(a) Costs paid or incurred by general
and administrative service departments
(or functions) that only indirectly support
or benefit SRE activities (for example,
services of payroll personnel in prepar-
ing salary checks of research personnel,
services of human resources personnel
who hire research personnel, or services
of accounting personnel who account for
research expenses);
(b) Interest on debt to finance SRE
activities;
(c) Costs paid or incurred for activities
described in section 5.05 of this notice;
(d) Costs to input content into a
website;
(e) Costs for website hosting that
involve the payment of a specified, peri-
odic fee to an Internet service provider in
return for hosting a website on its server(s)
connected to the Internet;
(f) Costs to register an Internet domain
name or trademark;
(g) Costs listed in § 1.174-2(a)(6)
(i)-(vii);
(h) Amounts representing amortization
of SRE expenditures; and
(i) Amounts representing amortization
of research or experimental expenditures
paid or incurred in taxable years begin-
ning before January 1, 2022.
(3) Allocation method. To determine
total SRE expenditures for a taxable year,
taxpayers must allocate costs, including
the types of costs described in section
4.03(1) of this notice, to SRE activities
on the basis of a cause-and-effect rela-
tionship between the costs and the SRE
activities or another relationship that
reasonably relates the costs to the bene-
fits provided to the SRE activities. The
allocation method used for one type of
cost may be different than the allocation
method used for another type of cost.
However, the allocation method used for
each type of cost must be applied on a
consistent basis. For example, a taxpayer
that consistently allocates labor costs
described in section 4.03(1)(a) of this
notice to SRE activities by multiplying
such labor costs by the ratio of the total
time the person or people actually spent
performing, supervising, or directly sup-
porting SRE activities during the taxable
year to the total time the person or peo-
ple spent performing all services for the
taxpayer during the taxable year, meets
the requirements in this section 4.03(3).
Similarly, a taxpayer that consistently
allocates facility cost recovery allow-
ances described in section 4.03(1)(c) of
this notice to SRE activities by multi-
plying such cost recovery allowances by
the ratio of the square footage of the area
used to conduct or directly support SRE
activities to the total square footage of
the facility, meets the requirement of this
section 4.03(3). An allocation method
for a particular type of cost that meets
the requirements of this section 4.03(3)
may not be appropriate for purposes of

Bulletin No. 2023–39 923 September 25, 2023
allocating that same type of cost under
other sections of the Code.
(4) Example. The following example
illustrates the rules set forth in section
4.03 of this notice.
(a) Facts. Company A, a calendar year tax-
payer, is engaged in the business of manufacturing
chemical products. On January 1, 2023, Company
A begins a research project to develop a new prod-
uct. This research project constitutes an SRE activ-
ity. Company A does not undertake any other SRE
activities during its 2023 taxable year. Company A is
comprised of six departments: (1) the Manufacturing
Department, (2) the Research Department, (3) the
Engineering Department, (4) the Legal Department,
(5) the Personnel Department, and (6) the Accounting
Department. The Manufacturing Department does
not provide any support services to the Research
Department. The Personnel Department provides
indirect support services to the Research Department
by hiring research personnel and preparing their pay-
checks but does not directly support any aspect of
the research project. The Accounting Department
provides indirect support services to the Research
Department by paying Research Department
invoices and accounting for research costs but does
not directly support any aspect of the research proj-
ect. The Engineering Department provides direct
support services to the Research Department with
respect to the research project by collaborating with
the Research Department to develop the new prod-
uct. The Legal Department provides direct support
services to the Research Department with respect to
the research project by preparing patent applications
for the new product. Company A owns the following
assets, each of which is used, in whole or in part,
to perform research or directly support the research
project:
DescriptionDepartment(s)Depreciation for 2023
10,000 square foot facilityThe Manufacturing Department occupies 5,000 square feet of the
facility. The other departments each occupy 1,000 square feet.
$200,000
Computers, furniture, and equipment used exclusively for the
research project
Research Department$150,000
Computers, furniture, and equipment used by the Engineering
Department
Engineering Department$100,000
Computers and furniture used by the Legal DepartmentLegal Department$20,000
In addition to interest on debt used to finance opera-
tions and research and costs specific to the Manufacturing,
Personnel, and Accounting Departments, Company A
incurs the following costs during its 2023 taxable year:
DescriptionDepartment(s)Total Cost
Materials and supplies used exclusively for the research projectResearch Department$50,000
Materials and supplies used by the Engineering DepartmentEngineering Department$40,000
Materials and supplies used by the Legal DepartmentLegal Department$10,000
Labor costs of Research Department employees and their direct
supervisor, each of which spends 100% of their time on the
research project
Research Department$600,000
Labor costs of all Engineering Department employees, each of
which spends 20% of their time on the research project
Engineering Department$200,000
Labor costs of all Legal Department employees, each of which
spends 10% of their time on the research project
Legal Department$100,000
Electricity for the facilityThe Research Department and the Manufacturing Department
consume large amounts of electricity relative to the other
departments. The Research Department uses 100,000 kilowatt-
hours of electricity. The Manufacturing Department uses 220,000
kilowatt-hours of electricity. The other departments each use
20,000 kilowatt-hours of electricity.
$200,000
Other utilities and overhead costs for the facilityAll departments benefit from such costs in proportion to square
footage occupied
$100,000
Other miscellaneous overhead costs incurred by the Research
Department
Research Department$50,000
Other miscellaneous overhead costs incurred by the Engineering
Department
Engineering Department$50,000
Other miscellaneous overhead costs incurred by the Legal
Department
Legal Department$50,000
(b) Analysis. Pursuant to section 4.03(1) of
this notice, Company A determines that the costs
described in the tables in section 4.03(4)(a) are the
types of costs that are incident to SRE activities
described in section 4.02(4) of this notice. Pursuant
to section 4.03(2)(a) of this notice, Company A deter-
mines that the costs incurred by the Manufacturing,
Personnel, and Accounting Departments are not
treated as SRE expenditures because the activities
of those departments are not SRE activities and
such costs either do not, or only indirectly, support
or benefit SRE activities. Similarly, pursuant to
section 4.03(2)(b) of this notice, Company A deter-
mines that interest on debt used to finance operations
and research is not treated as an SRE expenditure.
Pursuant to section 4.03(3) of this notice, Company
A determines its total SRE expenditures for 2023 by
allocating the costs described in the tables in section
4.03(4)(a) of this notice to its SRE activities on the
basis of a cause-and-effect relationship between the
costs and the SRE activities or another relationship

September 25, 2023 924 Bulletin No. 2023–39
that reasonably relates the costs to the benefits pro-
vided to the SRE activities as provided in the follow-
ing table. This allocation method generally relates
the costs described in the tables in section 4.03(4)
(a) of this notice to SRE activities on the basis of
total labor hours spent on such activities; however,
for certain costs, Company A determines that a dif-
ferent allocation method more appropriately relates
the costs to the benefits that they provide to the SRE
activities, such as an allocation method based on the
relative square footage of each department. As noted
in section 4.03(4)(a), employees in the Research
Department spent 100% of their time on SRE activi-
ties, employees in the Engineering Department spent
20% of their time on SRE activities, and employees
in the Legal Department spent 10% of their time on
SRE activities.
DescriptionAllocation MethodAmount of SRE
Expenditure
Depreciation on facility - $200,000Research Department: $20,000 ($200,000 × 1,000/10,000 square feet ×
100% of time spent by Research Department on research project)
+
Engineering Department: $4,000 ($200,000 × 1,000/10,000 square feet ×
20% of time spent by Engineering Department on research project)
+
Legal Department: $2,000 ($200,000 × 1,000/10,000 square feet × 10%
of time spent by Legal Department on research project)
$26,000
Depreciation on computers, furniture, and equipment used by
the Research Department exclusively for the research project
- $150,000
$150,000 × 100% use for research project$150,000
Depreciation on computers, furniture and equipment used by
the Engineering Department - $100,000
$100,000 × 20% of time spent by Engineering Department employees on
the research project
$20,000
Depreciation on computers and furniture used by the Legal
Department - $20,000
$20,000 × 10% of time spent by Legal Department employees on the
research project
$2,000
Materials and supplies used exclusively by the Research
Department for the research project - $50,000
$50,000 × 100% use for research project$50,000
Materials and supplies used by the Engineering Department
- $40,000
$40,000 × 20% of time spent by Engineering Department employees on
the research project
$8,000
Materials and supplies used by the Legal Department - $10,000$10,000 × 10% of time spent by Legal Department employees on the
research project
$1,000
Labor costs of Research Department employees and their direct
supervisor - $600,000
$600,000 × 100% of time spent by Research Department employees on
the research project
$600,000
Labor costs of Engineering Department employees - $200,000$200,000 × 20% of time spent by Engineering Department employees on
the research project
$40,000
Labor costs of Legal Department employees - $100,000 $100,000 × 10% of time spent by Legal Department employees on the
research project
$10,000
Electricity for the facility - $200,000Research Department $50,000 ($200,000 × 100,000/400,000 kilowatt-
hours used for research project)
+
Engineering Department $2,000 ($200,000 × 20,000/400,000 kilowatt-
hours used by Engineering Department × 20% of time spent by
Engineering Department employees on the research project)
+
Legal Department $1,000 ($200,000 × 20,000/400,000 kilowatt-hours
used by Legal Department × 10% of time spent by Legal Department
employees on research project)
$53,000
Other utilities and overhead costs for the facility - $100,000Research Department $10,000 ($100,000 × 1,000/10,000 square feet ×
100% of time spent by Research Department on research project)
+
Engineering Department $2,000 ($100,000 × 1,000/10,000 square feet ×
20% of time spent by Engineering Department on research project)
+
Legal Department $1,000 ($100,000 × 1,000/10,000 square feet × 10% of
time spent by Legal Department on research project)
$13,000
Other miscellaneous overhead costs incurred by the Research
Department - $50,000
$50,000 × 100% of time spent by Research Department employees on the
research project
$50,000
Other miscellaneous overhead costs incurred by the
Engineering Department - $50,000
$50,000 × 20% of time spent by Engineering Department employees on
the research project
$10,000
Other miscellaneous overhead costs incurred by the Legal
Department - $50,000
$50,000 × 10% of time spent by Legal Department employees on the
research project
$5,000
Total SRE Expenditures$1,038,000

Bulletin No. 2023–39 925 September 25, 2023
.04 Consistency requirement. SRE
expenditures must be treated consistently
for purposes of all provisions under subtitle
A of the Code (subtitle A). Thus, expendi-
tures that are defined as SRE expenditures
under section 4.02(2) of this notice must
be treated as SRE expenditures for all pur-
poses under subtitle A. Such expenditures
may not be treated as ordinary and neces-
sary expenses under § 162 or capitalized
under § 195, § 263(a), § 263A, or § 471.
The amortization deductions arising from
such SRE expenditures must also be allo-
cated and apportioned consistent with the
rules under §§ 1.861-8 and 1.861-17.
SECTION 5. SOFTWARE
DEVELOPMENT
.01 Purpose. The Treasury Department
and the IRS intend to propose rules in
forthcoming proposed regulations consis-
tent with the interim guidance provided in
this section 5, which provides taxpayers
with clarity in determining whether cer-
tain activities constitute software develop-
ment for purposes of § 174(c)(3).
.02 Defined terms. For purposes of this
notice:
(1) Computer software. The term
computer software generally means any
computer program or routine (that is, any
sequence of code) that is designed to cause
a computer to perform a desired function
or set of functions, and the documenta-
tion required to describe and maintain
that program or routine. The code may be
stored on a computing device, affixed to
a tangible medium (for example, a disk
or DVD), or accessed remotely via a pri-
vate computer network or the Internet, for
example, via cloud computing. Computer
software generally includes system soft-
ware, programming software, application
software, embedded software, and all
forms and media in which the software
is contained, whether written, magnetic,
or otherwise. Computer software also
generally includes computer programs of
all classes, for example, operating sys-
tems, executive systems, software moni-
tors, compilers and translators, assembly
routines, and utility programs as well as
application programs.
Computer software includes a com-
puter program, a group of programs,
and upgrades and enhancements (as
defined in section 5.02(2) of this notice).
Computer software also includes any
incidental and ancillary rights that are
necessary to effect the acquisition of the
title to, the ownership of, or the right to
use the computer software, and that are
used only in connection with that specific
computer software. Computer software
includes software developed for use by
the taxpayer in its trade or business or
for sale or licensing to others. Computer
software does not include any data or
information base described in § 1.197-
2(b)(4) unless the database or item is in
the public domain and is incidental to a
computer program. For example, cus-
tomer lists or client files are not included
in computer software unless such items
are in the public domain and incidental
to a computer program. Additionally,
computer software does not include any
procedures that are external to the com-
puter’s operation.
(2) Upgrades and enhancements. The
term upgrades and enhancements gen-
erally means modifications to existing
computer software that result in additional
functionality (enabling the software to per-
form tasks that it was previously incapa-
ble of performing), or materially increase
speed or efficiency of the software.
.03 Activities that are treated as soft-
ware development. Activities that are
treated as software development for pur-
poses of § 174 generally include but are
not limited to:
(1) Planning the development of the
computer software (or the upgrades and
enhancements to such software), includ-
ing identification and documentation of
the software requirements;
(2) Designing the computer software
(or the upgrades and enhancements to
such software);
(3) Building a model of the computer
software (or the upgrades and enhance-
ments to such software);
(4) Writing source code and converting
it to machine-readable code;
(5) Testing the computer software (or
the upgrades and enhancements to such
software) and making necessary modifica-
tions to address defects identified during
testing, but only up until the point in time
that:
(a) In the case of computer software
developed for use by the taxpayer in its
trade or business, the computer software
is placed in service; and
(b) In the case of computer software
developed for sale or licensing to others,
technological feasibility has been estab-
lished, product masters(s) have been pro-
duced, and the computer software is ready
for sale or licensing to others; and
(6) In the case of computer software
developed for sale or licensing to others
(or the upgrades and enhancements to
such software), production of the product
master(s).
.04 Software development activities
related to purchased computer software.
In the case of upgrades and enhancements
to purchased computer software, the prin-
ciples set forth in section 5.03 of this
notice apply. However, the purchase and
installation of purchased computer soft-
ware, including the configuration of pre-
coded parameters to make such software
compatible with the business and reengi-
neering the business to make it compati-
ble with the purchased software, and any
planning, designing, modeling, testing, or
deployment activities with respect to the
purchase and installation of such soft-
ware, are not activities that constitute soft-
ware development for purposes of § 174.
.05 Activities that are not treated as
software development. The following
activities associated with software devel-
opment projects are not treated as soft-
ware development for purposes of § 174:
(1) Computer software developed by
a taxpayer for use in its trade or busi-
ness. In the case of computer software
that is developed for use by the taxpayer
in its trade or business (or upgrades and
enhancements to such software):
(a) Training employees and other
stakeholders that will use the computer
software;
(b) Maintenance activities after the
computer software is placed in service
that do not give rise to upgrades and
enhancements (for example, corrective
maintenance to debug, diagnose, and fix
programming errors);
(c) Data conversion activities, except
for activities to develop computer soft-
ware that facilitate access to existing data
or data conversion; and
(d) Installing the computer software
and other activities relating to placing the
computer software in service.

September 25, 2023 926 Bulletin No. 2023–39
(2) Computer software developed for
sale or licensing to others. In the case of
computer software that is developed for
sale or licensing to others (or upgrades
and enhancements to such software),
activities that occur after such software
(or upgrades and enhancements to such
software) is ready for sale or licensing
to others, such as marketing and promo-
tional activities, maintenance activities
that do not give rise to upgrades and
enhancements, distribution activities (for
example, making the software available
via remote access), and customer support
activities.
SECTION 6. RESEARCH
PERFORMED UNDER CONTRACT
.01 Purpose. The Treasury Department
and the IRS intend to propose rules in
forthcoming proposed regulations consis-
tent with the interim guidance provided in
this section 6, which provides taxpayers
with clarity in determining whether costs
paid or incurred for research performed
under contract are SRE expenditures
under § 174.
.02 Defined terms. For purposes of this
section 6:
(1) Research provider. The term
research provider means the party that
contracts with a research recipient (as
defined in section 6.02(2) of this notice)
to:
(a) perform research services for the
research recipient with respect to an SRE
product, or
(b) develop an SRE product (as defined
in section 6.02(4) of this notice) that
the research recipient acquires from the
research provider.
(2) Research recipient. The term
research recipient means the party that
contracts with the research provider to:
(a) perform research services for the
research recipient with respect to an SRE
product, or
(b) develop an SRE product that the
research recipient acquires from the
research provider.
(3) Financial risk. The term financial
risk means the risk that the research pro-
vider may suffer a financial loss related to
the failure of the research to produce the
desired SRE product.
(4) SRE product. The term SRE prod-
uct means any pilot model, process,
formula, invention, technique, patent,
computer software, or similar property
(or a component thereof) that is subject
to protection under applicable domes-
tic or foreign law. For example, mere
know-how gained by a research provider
through the performance of research ser-
vices for a research recipient that is not
subject to protection under applicable
domestic or foreign law does not give
rise to an SRE product in the hands of the
research provider.
.03 Treatment of costs paid or incurred
by research recipient. The treatment of
costs paid or incurred by the research
recipient is governed by the principles set
forth in § 1.174-2(a)(10) and (b)(3).
.04 Treatment of costs paid or
incurred by research provider. If the
research provider bears financial risk
under the terms of the contract with the
research recipient, then costs paid or
incurred by the research provider that
are incident to the SRE activities (see
section 4.03 of this notice) performed
by the research provider under the con-
tract are SRE expenditures. However,
even if the research provider does not
bear financial risk under the terms of the
contract with the research recipient, if
the research provider has a right to use
any resulting SRE product in the trade or
business of the research provider or oth-
erwise exploit any resulting SRE product
through sale, lease, or license, then costs
paid or incurred by the research provider
that are incident to the SRE activities
performed by the research provider under
the contract are SRE expenditures of the
research provider for which no deduction
is allowed except as provided in § 174(a)
(2), regardless of whether the research
recipient is required to treat its costs as
SRE expenditures under section 6.03 of
this notice. For purposes of the preceding
sentence, a research provider will not be
treated as having a right to use the SRE
product in the trade or business of the
research provider or otherwise exploit
the SRE product through sale, lease, or
license if such right is available to the
research provider only upon obtain-
ing approval from another party to the
research arrangement that is not related
to the research provider within the mean-
ing of § 267 or § 707.
.05 Example. The following example
illustrates the rules set forth in section 6
of this notice.
(1) Facts. Company C engages Company D, a
contractor located in the United States, to develop an
SRE product for use in Company C’s trade or busi-
ness. The activities undertaken by Company D are
undertaken upon Company C’s order, and Company
D makes no performance guarantees with respect to
the SRE product. Company C will pay Company D
a fixed sum of $25,000 plus an amount equivalent to
Company D’s actual expenditures. Company D does
not have any right to use or otherwise exploit any
resulting SRE product. In 2023, Company D incurs
$125,000 of expenditures to successfully develop the
product in the United States, and Company C pays to
Company D $150,000 pursuant to the terms of the
contract.
(2) Analysis. Under section 6.04 of this notice,
Company D may not treat the $125,000 of expen-
ditures it incurs to develop the SRE product on
behalf of Company C as SRE expenditures under
§ 174 because (i) Company D does not bear finan-
cial risk, and (ii) Company D does not have any
right to use or otherwise exploit any resulting SRE
product. Under section 6.03 of this notice, the
$150,000 paid by Company C is an amount paid
to another party for research or experimentation
undertaken on Company C’s behalf under § 1.174-
2(a)(10) and (b)(3) and is thus an SRE expenditure
under section 4.02(2) of this notice. The applicable
§ 174 amortization period is 5 years (60 months)
because the research is performed by Company D
in the United States. Company C’s location is not
relevant for determination of the applicable § 174
amortization period.
SECTION 7. DISPOSITION,
RETIREMENT, OR
ABANDONMENT OF PROPERTY
.01 Purpose. The Treasury Department
and the IRS intend to propose rules in
forthcoming proposed regulations consis-
tent with the interim guidance provided in
this section 7, which provides taxpayers
with clarity in determining the treatment
of unamortized SRE expenditures if prop-
erty with respect to which such expendi-
tures are paid or incurred is disposed of,
retired, or abandoned in certain transac-
tions during the applicable § 174 amorti-
zation period.
.02 In general. Except as provided in
section 7.04 of this notice, if any property
with respect to which SRE expenditures
are paid or incurred is disposed of, retired,
or abandoned during the applicable
§ 174 amortization period, no recovery is

Bulletin No. 2023–39 927 September 25, 2023
allowed with respect to the unamortized
SRE expenditures on account of such
disposition, retirement, or abandonment,
and the taxpayer that disposed of, retired,
or abandoned such property continues to
amortize such expenditures under § 174
over the remainder of the applicable § 174
amortization period. For purposes of this
section 7, the term unamortized SRE
expenditures means the amount of any
SRE expenditures paid or incurred by the
corporation (or its predecessor), less the
amount of any amortization deductions
previously allowed to the corporation (or
its predecessor) under § 174.
.03 Transactions occurring before the
midpoint of the taxable year. An amorti-
zation deduction is allowed under § 174
for SRE expenditures even if such expen-
ditures relate to property that is disposed
of, retired, or abandoned prior to the
midpoint of the taxable year in which
such expenditures are paid or incurred.
Accordingly, such expenditures are sub-
ject to the rules in sections 7.02 and 7.04
of this notice.
.04 Transaction in which corporation
ceases to exist.
(1) Transaction described in § 381(a).
If a corporation ceases to exist for Federal
income tax purposes in a transaction or
series of transactions described in § 381(a),
the acquiring corporation will continue to
amortize the distributor or transferor cor-
poration’s unamortized SRE expenditures
over the remainder of the distributor or
transferor corporation’s applicable § 174
amortization period beginning with the
month of transfer.
(2) Transaction not described in
§ 381(a).
(a) In general. Except as provided in
section 7.04(2)(b), if a corporation ceases
to exist for Federal income tax purposes
in a transaction or series of transactions to
which § 381(a) does not apply, the corpo-
ration is allowed a deduction equal to the
unamortized SRE expenditures in its final
taxable year.
(b) Anti-abuse exception. Section
7.04(2)(a) of this notice does not apply if
a principal purpose of the transaction(s)
described in section 7.04(2)(a) of this
notice is to claim a deduction for the
unamortized SRE expenditures.
.05 Examples. The following examples
illustrate the rules set forth in section 7 of
this notice.
(1) Sale of property with respect to which SRE
expenditures were incurred.
(a) Facts. Company X, an accrual method, cal-
endar-year taxpayer, incurs $100,000 in SRE expen-
ditures in 2023 for research performed in the United
States. On September 30, 2025, Company X sells
the property with respect to which such expenditures
were incurred to Company Y and recognizes gain
under § 1001.
(b) Analysis. In 2023, Company X amortizes
$10,000 (10% × $100,000). See section 3.05 of this
notice. In 2024, Company X amortizes $20,000
(20% × $100,000). In 2025 through 2028, Company
X ratably amortizes the remaining $70,000
($100,000 – $10,000 – $20,000) notwithstanding
Company X’s disposition of the assets with respect
to which Company X’s SRE expenditures were
incurred. Company Y does not amortize any portion
of the SRE expenditures originally paid or incurred
by Company X. Company X does not factor its
unamortized SRE expenditures into the computa-
tion of gain or loss under § 1001. See section 7.02
of this notice.
202320242025202620272028
Company X amortization %10%20%20%20%20%10%
Company X Dollar amount$10,000$20,000$20,000$20,000$20,000$10,000
(c) Applicable asset acquisition. The results would
be the same as in section 7.05(1)(b) of this notice if the
sale of property with respect to which the SRE expen-
ditures were incurred were part of an applicable asset
acquisition within the meaning of § 1060(c).
(d) Section 351 exchange. The results would
be the same as in section 7.05(1)(b) of this notice
if X transferred the property with respect to which
the SRE expenditures were incurred in an exchange
described in § 351.
(2) Section 381(a) transaction.
(a) Facts. The facts are the same as in section
7.05(1)(a) of this notice, except that, on October 16,
2025, Company X is acquired by Company Z, an
accrual method, calendar-year taxpayer, in a transac-
tion described in § 381(a).
(b) Analysis. In 2023, Company X amortizes
$10,000 (10% × $100,000). See section 3.05 of this
notice. In 2024, Company X amortizes $20,000
(20% × $100,000). In 2025, Company X amortizes
$15,000 ((9 months/12 months) × 20% × $100,000),
and Company Z amortizes $5,000 ((3 months/12
months) × 20% × $100,000). See sections 3.06(1),
7.02, and 7.04(1) of this notice. In 2026 through
2028, Company Z ratably amortizes the remaining
$50,000 ($100,000 – $10,000 – $20,000 – $15,000
– $5,000).
202320242025202620272028
Company X amortization %10%20%15%0%0%0%
Company Z amortization %0%0%5%20%20%10%
Company X Dollar amount$10,000$20,000$15,000
Company Z Dollar amount$5,000$20,000$20,000$10,000
SECTION 8. LONG-TERM
CONTRACTS UNDER § 460
.01 Purpose. The Treasury Department
and the IRS are providing this interim
guidance to provide taxpayers with infor-
mation about a proposed revision to the
regulations under § 460 in forthcom-
ing proposed regulations regarding how
to apply the percentage-of-completion
method (PCM) to account for income
from long-term contracts when allocable
contract costs include SRE expenditures.
.02 Background. Section 460(a) gener-
ally requires use of the PCM to account for

September 25, 2023 928 Bulletin No. 2023–39
taxable income from a long-term contract.
Section 1.460-4(b)(2)(i) provides that
under the PCM, the portion of the contract
price a taxpayer must report in a tax year
corresponds to the ratio of incurred alloca-
ble contract costs to total estimated alloca-
ble contract costs. This ratio represents the
portion of a contract considered completed
for purposes of the PCM. Under the PCM,
a taxpayer generally deducts allocable
contract costs as they are incurred. As pro-
vided by § 1.460-4(b)(2)(iv), an increase
in the percentage of the contract price to
be reported is matched by deduction of
the incurred costs that cause the increase.
Under the current § 460 regulations in
§ 1.460-5(b)(2)(vi), allocable contract
costs include research or experimental
expenses, other than independent research
and development expenses. Thus, when
these expenses are incurred, they increase
the portion of a contract considered com-
pleted and the percentage of the contract
price required to be reported. The current
§ 460 regulations were drafted when a
taxpayer could deduct currently research
or experimental expenses under former
§ 174. Section 174(a), as amended by the
TCJA, requires that SRE expenditures be
charged to capital account and deducted
over the applicable § 174 amortization
period. As a result, the current § 460 reg-
ulations provide that incurred research or
experimental expenses increase the per-
centage of the contract price required to
be reported, although § 174(a) prevents
a corresponding current deduction of
incurred SRE expenditures. The resulting
mismatch of contract price and contract
costs is inconsistent with the contem-
plated operation of the PCM.
.03 Treatment of SRE expenditures
under § 460. The Treasury Department
and the IRS anticipate issuing proposed
regulations that would amend the existing
§ 460 regulations, including § 1.460-5(b)
(2)(vi), to provide that the costs alloca-
ble to a long-term contract accounted
for using the PCM include amortization
of SRE expenditures under § 174(a)(2)
(B), rather than the capitalized amount of
such expenditures, and that such amorti-
zation is treated as incurred for purposes
of determining the percentage of contract
completion as deducted. The amendments
would not apply to expenditures previ-
ously capitalized under § 59(e)(2)(B) or
under former § 174(b), or to independent
research and development expenditures,
as defined in § 460(c)(5), which are not
allocable contract costs. Research or
experimental expenditures that are not
independent research and development
expenditures, however, would remain
subject to allocation under § 460(c)
(1) regardless of whether they are SRE
expenditures.
SECTION 9. COST SHARING
REGULATIONS AT § 1.482-7
.01 Purpose. The Treasury Department
and the IRS are providing this interim
guidance to provide taxpayers with
information about a proposed revision
to § 1.482-7(j)(3)(i) in forthcoming pro-
posed regulations.
.02 Background. Section 1.482-7(j)(3)
(i) addresses cost sharing transaction pay-
ments (CST Payments) between controlled
participants in a cost sharing arrangement
(CSA) that are made to ensure that each
controlled participant’s share of intangible
development costs (IDCs) is in proportion
to its share of reasonably anticipated ben-
efits from exploitation of the developed
intangibles (RAB share). Section 1.482-
7(j)(3)(i) generally provides that CST
Payments reduce deductible IDCs borne
by the controlled participant to which the
CST Payments are owed. Any amount of
CST Payment in excess of such deduct-
ible IDCs is treated as in consideration
for the use of land and tangible property
furnished for purposes of the CSA by the
controlled participant to which the CST
Payment is owed. CST Payments gen-
erally are considered the payor’s costs
of developing intangibles at the location
where such development is conducted.
See also § 1.482-7(j)(3)(iii), Example 1.
.03 Anticipated revisions to § 1.482-7(j)
(3)(i).
(1) The Treasury Department and the
IRS anticipate issuing proposed regu-
lations that would replace the second
through fourth sentences of § 1.482-7(j)
(3)(i) with rules providing that CST
Payments owed to a controlled participant
reduce:
(a) The amount of the category of IDCs
borne directly by that participant that are
required to be charged to capital account,
and
(b) The amount of the category of IDCs
borne directly by that participant that are
not described in section 9.03(1)(a) of this
notice and that are deductible.
(2) CST Payments not in excess of the
payor’s RAB share of the total amount of
the IDCs in both categories described in
section 9.03(1)(a) and (b) of this notice
reduce the amount of each such category
of IDCs in the same proportion that the
total amount of the IDCs in each category
bears to the total amount of IDCs in both
categories. CST Payments in excess of the
payor’s RAB share of the total amount of
IDCs in both categories described in sec-
tion 9.03(1)(a) and (b) of this notice will
be treated as income.
.04 Examples. The examples provided
below illustrate the anticipated revisions
to § 1.482-7(j)(3)(i).
(1) Example 1.
(a) Facts. U.S. Parent (USP) and its wholly
owned Foreign Subsidiary (FS) form a CSA to
develop a miniature widget, the Small R. Based on
RAB shares, USP agrees to bear 40% and FS agrees
to bear 60% of the IDCs incurred during the term
of the agreement. USP incurs $100,000 of IDCs to
perform research in the United States annually and
FS incurs $100,000 of IDCs to perform research in
country X annually. USP’s IDCs are required under
U.S. Federal income tax rules to be charged to capital
account and amortized ratably over the 5-year appli-
cable § 174 amortization period beginning with the
midpoint of the taxable year in which such expen-
ditures are paid or incurred, and FS’s IDCs incurred
in country X are required under U.S. Federal income
tax rules to be charged to capital account and amor-
tized ratably over the 15-year applicable § 174 amor-
tization period beginning with the midpoint of the
taxable year in which such expenditures are paid or
incurred.
(b) Analysis. Of the total IDCs of $200,000,
USP’s share is $80,000 ($200,000 × 40%) and FS’s
share is $120,000 ($200,000 × 60%) so that FS must
make a payment to USP of $20,000 ($120,000 –
$100,000). The CST Payment reduces USP’s IDCs
in the United States that are required to be charged
to capital account by $20,000. Accordingly, USP is
required to charge $80,000 to capital account, all of
which is required to be amortized over 5 years, while
FS is required to charge $120,000 to capital account,
$100,000 of which is required to be amortized over
15 years, and $20,000 of which is required to be
amortized over 5 years.
(2) Example 2.
(a) Facts. The facts are the same as in Example
1, except that the $100,000 of IDCs borne by USP
consist of (1) $5,000 of IDCs incurred by USP in
the United States that are required to be charged
to capital account and amortized ratably over the
5-year applicable § 174 amortization period begin-
ning with the midpoint of the taxable year in which
such expenditures are paid or incurred, (2) $5,000
of deductible IDCs, and (3) $90,000 of arm’s length

Bulletin No. 2023–39 929 September 25, 2023
rental charge, as described in § 1.482-7(d)(1)(iii), for
the use of USP’s facility in the United States.
(b) Analysis. As in Example 1, of the total IDCs
of $200,000, USP’s share is $80,000 and FS’s share
is $120,000, so that FS must make a payment to
USP of $20,000. The $20,000 CST Payment from
FS to USP will first be treated as reducing the
$5,000 of IDCs that are required to be charged to
capital account and the $5,000 of deductible IDCs
pro rata to the extent of FS’s RAB share of such
IDCs. Because the IDCs required to be charged
to capital account make up 50% of the combined
amount of IDCs chargeable to capital account and
the deductible IDCs directly borne by USP (i.e.,
$5,000 = 50% × $10,000), and because FS’s RAB
share of the total amount of IDCs in both catego-
ries is $6,000 (i.e., 60% × $10,000), $3,000 of the
$20,000 CST Payment reduces USP’s IDCs charge-
able to capital account, $3,000 of the CST Payment
reduces USP’s deductible IDCs, and the remaining
$14,000 ($20,000 – $6,000) of the CST Payment is
treated as income.
(3) Example 3.
(a) Facts. The facts are the same as in Example
1, except that the $100,000 of IDCs borne by USP
consist of (1) $15,000 of IDCs incurred by USP in
the United States that are required to be charged
to capital account and amortized ratably over the
5-year applicable § 174 amortization period begin-
ning with the midpoint of the taxable year in which
such expenditures are paid or incurred, (2) $45,000
of deductible IDCs, and (3) $40,000 of arm’s length
rental charge, as described in § 1.482-7(d)(1)(iii), for
the use of USP’s facility in the United States.
(b) Analysis. As in Example 1, of the total
IDCs of $200,000, USP’s share is $80,000 and
FS’s share is $120,000, so that FS must make a
payment to USP of $20,000. The $20,000 CST
Payment from FS to USP will first be treated as
reducing the $15,000 of IDCs that are required to
be charged to capital account and the $45,000 of
deductible IDCs pro rata to the extent of FS’s RAB
share of such IDCs. Because the IDCs required to
be charged to capital account make up 25% (that
is, $15,000 / ($15,000 + $45,000)) of the combined
amount of IDCs chargeable to capital account
and deductible IDCs directly borne by USP, and
because the deductible IDCs make up 75% (that is,
$45,000 / ($15,000 + $45,000)) of the combined
amount of IDCs chargeable to capital account and
deductible IDCs directly borne by USP, 25% of the
$20,000 CST Payment, or $5,000, reduces USP’s
IDCs chargeable to capital account, and 75%, or
$15,000, reduces USP’s deductible IDCs. Because
all $20,000 of the CST Payment is applied against
deductible IDCs directly borne by USP and IDCs
incurred by USP that are chargeable to capital
account, there is no amount of the CST Payment
that is treated as income.
SECTION 10. APPLICABILITY
DATES
.01 In general. It is anticipated that
the forthcoming proposed regulations
will provide that rules consistent with the
rules described in sections 3 through 9 of
this notice would apply for taxable years
ending after September 8, 2023. Except
as otherwise provided in this section
10.01, prior to the publication date of the
forthcoming proposed regulations in the
Federal Register, a taxpayer may choose
to rely on the rules described in sections
3 through 9 of this notice, including for
expenditures paid or incurred in tax-
able years beginning after December 31,
2021, provided the taxpayer relies on all
the rules in sections 3 through 9 of this
notice and applies them in a consistent
manner. However, taxpayers may not rely
on the rules in section 7 of this notice for
SRE expenditures paid or incurred with
respect to property that is contributed to,
distributed from, or transferred from a
partnership.
.02 Additional procedural guid-
ance. The Treasury Department and IRS
intend to issue guidance in the Internal
Revenue Bulletin (see § 601.601(d) of
the Procedural Rules) to provide proce-
dures for taxpayers to obtain automatic
consent to change methods of accounting
to comply with this notice. Until the issu-
ance of such procedural guidance, tax-
payers may rely on section 7.02 of Rev.
Proc. 2023-24 to change their methods of
accounting under § 174 to comply with
this notice. The Treasury Department and
IRS anticipate issuing updated procedures
that will address situations in which tax-
payers have, prior to the issuance of this
notice, changed methods of accounting
to comply with § 174 as amended by the
TCJA but whose treatment of SRE expen-
ditures is not entirely consistent with this
notice. Unless specifically authorized by
the Commissioner of Internal Revenue
or by statute, a taxpayer may not request,
or otherwise make, a retroactive change
in method of accounting by filing an
amended return. See Rev. Rul. 90-38,
1990-1 C.B. 57; Rev. Rul. 2023-8, 2023-
18 I.R.B. 801.
SECTION 11. REQUEST FOR
COMMENTS
.01 Comments regarding guidance
provided in this notice. The Treasury
Department and the IRS request com-
ments on issues arising from the interim
guidance set forth in this notice. In addi-
tion to general comments regarding the
provisions of this notice, the Treasury
Department and the IRS request com-
ments to address the following issues:
(1) Scope of § 174 (section 4 of this
notice).
(a) Whether additional guidance is
needed regarding identifying expenditures
allocable to SRE activities and allocating
such expenditures to SRE activities.
(b) Whether simplified methods or safe
harbors should be provided for identifying
expenditures allocable to SRE activities
and allocating such expenditures to SRE
activities. If so, what methods or safe
harbors should be provided? Are special
methods needed for government research
contracts?
(2) Software development (sections 4
and 5 of this notice).
(a) The definition of computer software
is based on section 2 of Rev. Proc. 2000-
50 and § 1.197-2(c)(4)(iv). Is there a more
appropriate definition under the Financial
Accounting Standards Board Accounting
Standards Codifications (ASCs) or an
appropriate industry standard that should
be used instead? If so, what ASC or indus-
try standard definition should be used?
Additionally, to what extent should ASC
guidance or an appropriate industry stan-
dard be used to determine activities that
are software development activities, and
costs that are software development costs,
for purposes of § 174?
(b) What examples of costs that are,
or are not, software development costs
would be helpful to include in the forth-
coming proposed regulations?
(c) Are special rules and examples
needed to determine what activities
related to developing a website would be
software development?
(3) Research performed under contract
(section 6 of this notice).
(a) Should the rules for determining
whether a party to a research contract has
SRE expenditures under § 174 be similar
to the funded research rules under § 41(d)
(4)(H)?
(b) Are special rules needed for service
or manufacturing production contracts
with the government, including § 460
long-term contracts?
(c) Are there other factors that should
be considered in determining whether
a party to a research contract has SRE
expenditures?

September 25, 2023 930 Bulletin No. 2023–39
(d) Are special rules or safe harbors
needed to determine if research performed
under a contract is foreign research (for
example, where a research recipient pays
the research provider for research that is
performed by the research provider both
inside and outside the U.S.)?
(e) Are special rules needed for con-
tracts with related foreign research pro-
viders and recipients?
(4) Disposition, retirement, or aban-
donment of property (section 7 of this
notice). What, if any, changes to the rules
in section 7 of this notice are appropriate
to address potential abuses?
(5) Long-term contracts under § 460
(section 8 of this notice). In the case of
SRE expenditures allocable to long-term
contracts accounted for under the PCM
set forth in § 460, do estimated total
allocable contract costs include all SRE
expenditures that directly benefit or are
incurred by reason of the performance of
the long-term contract or, alternatively,
only that portion of the SRE expendi-
tures expected to be amortized during
the term of the contract? Under the first
alternative, a taxpayer would be required
to report any remaining portion of the
contract price not previously reported
by the tax year following the tax year
in which the contract is completed, not-
withstanding that some portion of the
SRE expenditures remain unamortized.
See § 460(b)(1).
.02 Comments regarding rules not
included in this notice. The Treasury
Department and the IRS continue to study
issues that are not addressed in this notice,
including but not limited to whether the
general requirements governing record
retention under § 1.6001-1 are adequate
for purposes of substantiating expendi-
tures under § 174, whether the definition
of “pilot model” under § 1.174-2(a)(4)
should be amended, and whether and how
§ 59(e) applies to § 174 expenditures.
In addition to requests for comments on
these issues, the Treasury Department and
the IRS request comments on the follow-
ing specific issues not addressed by this
notice:
(1) Under what circumstances should
unamortized SRE expenditures con-
tinue to be amortized or accelerated with
respect to property that is contributed to,
distributed from, or transferred from a
partnership?
(2) Under what circumstances should
unamortized SRE expenditures continue
to be amortized or accelerated with respect
to property of a partnership that is a party
to a merger, consolidation, division, or
liquidation, or that otherwise terminates
under § 708 and the regulations thereun-
der? Is there potential for abuse as a result
of allowing a deduction for unamortized
SRE expenditures in the final year of a
partnership that liquidates or otherwise
terminates? If so, what rules are appropri-
ate to address such abuse?
(3) Should special rules apply to
start-up companies or small taxpayers? If
so, how should § 174 be applied in such
cases?
(4) Sections 280C(c)(1)(B) and
56(b)(2)(A) each refer to an “amount
allowable as a deduction” for quali-
fied research expenses or basic research
expenses (in the case of § 280C(c)(1)
(B)), and § 174(a) (in the case of § 56(b)
(2)(A)). On the one hand, § 174(a)(1)
(as amended by the TCJA) does not
allow a deduction for qualified research
expenses or basic research expenses
because such expenses are required to be
charged to capital account. On the other
hand, § 174(a)(2) allows an amortization
deduction with respect to the capitalized
amount of such expenses. Should the
“amount allowable as a deduction” ref-
erences in §§ 280C(c)(1)(B) and 56(b)(2)
(A) be interpreted to refer to the amortiza-
tion deduction allowed under § 174(a)(2)
or to $0, which is the deduction allowed
for the qualified research expenses or
basis research expenses under § 174(a)
(1)? The Treasury Department and IRS
request comments on this interpretation
and how to resolve any potential issues
that might arise by applying the same
interpretation to both §§ 280C(c)(1)(B)
and 56(b)(2)(A).
.03 Procedures for submitting com-
ments.
(1) Deadline. Written comments should
be submitted by November 24, 2023.
Consideration will be given, however,
to any written comment submitted after
November 24, 2023, if such consideration
will not delay the issuance of the forth-
coming proposed regulations.
(2) Form and manner. The subject line
for the comments should include a refer-
ence to Notice 2023-63. All commenters
are strongly encouraged to submit com-
ments electronically. However, comments
may be submitted in one of two ways:
(a) Electronically via the Federal
eRulemaking Portal at www.regulations.
gov (type IRS-2023-0040 in the search
field on the regulations.gov homepage to
find this notice and submit comments); or
(b) By mail to: Internal Revenue
Service, CC:PA:LPD:PR (Notice 2023-
63), Room 5203, P.O. Box 7604, Ben
Franklin Station, Washington, D.C.,
20044.
(3) Publication of comments. The
Treasury Department and the IRS will
publish for public availability any com-
ment submitted electronically or on paper
to its public docket on www.regulations.
gov.
SECTION 12. EFFECT ON OTHER
DOCUMENTS
As a result of the TCJA amendments to
§ 174 and the rules in sections 3 through
5 of this notice, section 5 of Rev. Proc.
2000-50 is obsolete.
SECTION 13. DRAFTING AND
CONTACT INFORMATION
The principal author of this notice
is Bruce Chang of the Office of the
Associate Chief Counsel (Income Tax
and Accounting). Other personnel from
the Treasury Department and the IRS par-
ticipated in its development. For further
information regarding this notice, please
contact Mr. Chang at (202) 317-4870 (not
a toll-free number). For further informa-
tion regarding corporate matters in sec-
tion 7 of this notice, please contact Austin
Diamond-Jones of the Office of Associate
Chief Counsel (Corporate) at (202) 317-
5085 (not a toll-free number). For fur-
ther information regarding section 9 of
this notice, please contact Annette Ofori
of the Office of Associate Chief Counsel
(International) at (202) 317-4910 (not a
toll-free number).

Bulletin No. 2023–39 931 September 25, 2023
Part IV
Increased Credit or
Deduction Amounts
for Satisfying Certain
Prevailing Wage and
Registered Apprenticeship
Requirements
REG-100908-23
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemak-
ing and public hearing.
SUMMARY: This document contains
proposed regulations regarding increased
credit or deduction amounts available for
taxpayers satisfying prevailing wage and
registered apprenticeship (collectively,
PWA) requirements established by the
Inflation Reduction Act of 2022 (IRA).
These proposed regulations would affect
taxpayers intending to satisfy the PWA
requirements for increased Federal income
tax credits or deductions. These proposed
regulations would also affect taxpay-
ers intending to satisfy the prevailing
wage requirements for increased Federal
income tax credit amounts that do not have
associated apprenticeship requirements.
Additionally, these proposed regulations
would affect taxpayers who initially fail
to satisfy the PWA or prevailing wage
requirements and subsequently comply
with the correction and penalty proce-
dures in order to be deemed to satisfy the
PWA or prevailing wage requirements.
Finally, the proposed regulations address
specific PWA or prevailing wage record-
keeping and reporting requirements. The
proposed regulations would affect taxpay-
ers intending to claim increased credit or
deduction amounts pursuant to the IRA,
including those intending to make elec-
tive payment elections for available credit
amounts, and those intending to transfer
increased credit amounts. This document
also provides notice of a public hearing on
the proposed regulations.
DATES: Written or electronic comments
and requests for a public hearing must be
received by October 30, 2023. A public
hearing on these proposed regulations is
scheduled to be held on November 21,
2023, at 10 a.m. ET. Requests to speak
and outlines of topics to be discussed
at the public hearing must be received
by October 30, 2023. If no outlines are
received by October 30, 2023, the pub-
lic hearing will be cancelled. Requests to
attend the public hearing must be received
by 5 p.m. ET on November 17, 2023. The
public hearing will be made accessible to
people with disabilities. Requests for spe-
cial assistance during the hearing must be
received by November 16, 2023.
ADDRESSES: Commenters are strongly
encouraged to submit public comments
electronically via the Federal eRulemak-
ing Portal at https://www.regulations
(indicate IRS and REG-100908-23) by
following the online instructions for sub-
mitting comments. Requests for a public
hearing must be submitted as prescribed
in the “Comments and Requests for a
Public Hearing” section. Once submitted
to the Federal eRulemaking Portal, com-
ments cannot be edited or withdrawn. The
Department of the Treasury (Treasury
Department) and the IRS will publish for
public availability any comments sub-
mitted to the IRS’s public docket. Send
paper submissions to: CC:PA:LPD:PR
(REG-100908-23), Room 5203, Internal
Revenue Service, P.O. Box 7604, Ben
Franklin Station, Washington, DC 20044.
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, the Office of Associate
Chief Counsel (Passthroughs & Special
Industries) at (202) 317-6853 (not a toll-
free number); concerning submissions of
comments or the public hearing, Vivian
Hayes at (202) 317-6901 (not a toll-free
number) or by email to publichearings@
irs.gov (preferred).
SUPPLEMENTARY INFORMATION:
Background
I. Overview
This document contains proposed
regulations to amend the Income Tax
Regulations (26 CFR part 1) under sec-
tions 30C, 45, 45L, 45U, 45V, 45Y, 45Z,
48C, 48E, and 179D of the Internal Revenue
Code (Code) and proposed amendments to
the Income Tax Regulations (26 CFR part
1) under sections 45Q and 48 (proposed
regulations). The Inflation Reduction Act
of 2022 (IRA), Public Law 117-169, 136
Stat. 1818 (August 16, 2022), amended
sections 30C, 45, 45L, 45Q, 48, 48C,
and 179D to provide increased credit or
deduction amounts for taxpayers who sat-
isfy certain requirements and added sec-
tions 45U, 45V, 45Y, 45Z, and 48E to the
Code to provide new credits, which also
contain provisions for increased credit
amounts for taxpayers who satisfy certain
requirements. Increased credit amounts
are available under sections 30C, 45,
45Q, 45V, 45Y, 45Z, 48, 48C, and 48E,
and an increased deduction is available
under section 179D, for taxpayers satis-
fying certain prevailing wage and regis-
tered apprenticeship (PWA) requirements.
Increased credit amounts are available
under sections 45L and 45U for taxpayers
satisfying certain prevailing wage require-
ments.
1
The IRA includes correction and
penalty provisions available in certain sit-
uations if taxpayers have failed to satisfy
the PWA requirements, and they are not
otherwise eligible for the increased credit
or deduction because they do not qualify
for an exception.
The increased credit amounts are also
generally available under sections 45, 45Y,
48, and 48E with respect to certain facili-
ties with a maximum net output (or capac-
ity for energy storage technology under
1
The increased credit provisions in sections 45L and 45U do not contain apprenticeship requirements. For simplicity, where possible, the preamble to the proposed regulations uses the acro-
nym PWA to refer to the prevailing wage and apprenticeship requirements generally, including the prevailing wage requirements in sections 45L and 45U.

September 25, 2023 932 Bulletin No. 2023–39
section 48E) of less than one megawatt
(One Megawatt Exception). Additionally,
increased credit and deduction amounts
are available under sections 30C, 45, 45Q,
45V, 45Y, 48, 48E and 179D if beginning
of installation or beginning of construc-
tion (BOC) occurs before January 29,
2023 (BOC Exception).
II. Prior Guidance
On October 24, 2022, the Treasury
Department and the IRS issued Notice
2022-51, 2022-43 I.R.B. 331, requesting
comments on aspects of the increased
credits and deduction amounts enacted
by the IRA, including the PWA provi-
sions. Section 3.01 of Notice 2022-51
requested comments regarding the appli-
cability of subchapter IV of chapter 31
of title 40 of the United States Code,
which is commonly known as the Davis-
Bacon Act; the special correction and
penalty procedures generally provided
for under section 45(b)(7)(B); any doc-
umentation or substantiation that should
be required to show compliance with
the prevailing wage requirements; and
any other topics relating to the prevail-
ing wage requirements that may require
guidance. Section 3.02 of Notice 2022-51
requested comments addressing factors to
be considered in regard to the appropri-
ate duration of employment of individu-
als for construction, alteration, or repair
work for purposes of the Participation
Requirement; clarification regarding the
Good Faith Effort Exception; factors to
be considered in administering and pro-
moting compliance with the Good Faith
Effort Exception; whether methods exist
to facilitate reporting requirements for the
Good Faith Effort Exception; documenta-
tion or substantiation taxpayers maintain
or could create to demonstrate compliance
with the apprenticeship requirements or
the Good Faith Effort Exception; and any
other topics relating to the apprenticeship
requirements that may require guidance.
Comments received in response to Notice
2022-51 were considered in the drafting
of these proposed regulations.
On November 30, 2022, the Treasury
Department and the IRS published Notice
2022-61. 87 FR 73580, corrected in 87 FR
75141 (Dec. 7, 2022). Notice 2022-61 pro-
vided guidance on the PWA requirements
that generally apply under sections 30C,
45, 45L, 45Q, 45U, 45V, 45Y, 45Z, 48,
48C, and 48E, and 179D. Additionally,
Notice 2022-61 established the 60-day
period described in sections 30C(g)(1)(C)
(i), 45(b)(6)(B)(ii), 45Q(h)(2), 45V(e)(2)
(A)(i), 45Y(a)(2)(B)(ii), 48(a)(9)(B)(ii),
48E(a)(2)(A)(ii)(II) and (a)(2)(B)(ii)(II),
and 179D(b)(3)(B)(i). Specifically, Notice
2022-61 started the 60-day period applica-
ble for determining if taxpayers qualify for
the increased credit or deduction amounts
by satisfying the BOC Exception. To be
eligible for the BOC Exception, as indi-
cated in Notice 2022-61, taxpayers must
have begun construction or installation of
a facility (as defined in Notice 2022-61)
before January 29, 2023. Finally, Notice
2022-61 provided guidance for determin-
ing the beginning of construction under
sections 30C, 45, 45Q, 45V, 45Y, 48, and
48E, and the beginning of installation
under section 179D.
III. Inflation Reduction Act
A. In general
Prior to enactment of the IRA, the
Code provided for certain temporary cred-
its and deductions with respect to energy
related facilities, projects, equipment,
and investments under sections 30C, 45,
45L, 45Q, 48, 48C, and 179D. Congress
had extended these provisions multiple
times and for varying types of qualified
facilities, energy projects, equipment, and
investments. The IRA further amended
these sections, generally adjusting the
credit or deduction amounts, expiration
dates, and qualifying activities. Under the
IRA, Congress also enacted new credits
under sections 45U, 45V, 45Y, 45Z, (pro-
duction tax credits) and 48E (investment
tax credit).
The IRA provides increased credit or
deduction amounts that generally apply
for taxpayers who satisfy (i) certain PWA
requirements regarding the construc-
tion, installation, alteration, or repair of
a qualified facility, qualified property,
qualified project, or qualified equipment,
or with respect to certain facilities, (ii)
the One Megawatt Exception, or (iii) the
BOC Exception. Generally, if a taxpayer
satisfies the PWA requirements or meets
the One Megawatt Exception or the BOC
Exception, the amount of credit or deduc-
tion determined is equal to the otherwise
determined amount of the underlying
credit or deduction multiplied by five.
B. PWA provisions
1. In General
The principal PWA requirements are set
forth in section 45(b)(6), (7), and (8). In gen-
eral, section 45(b)(6) provides the increased
credit amount for taxpayers satisfying the
PWA requirements or meeting one of the
exceptions, section 45(b)(7) provides the
prevailing wage requirements (Prevailing
Wage Requirements), and section 45(b)(8)
provides the apprenticeship requirements
(Apprenticeship Requirements).
2
Section 45 provides a credit for taxpay-
ers producing and selling electricity from
renewable resources to unrelated persons
during the taxable year (section 45 credit).
The section 45 credit is generally equal to
0.3 cents multiplied by the kilowatt hours
of electricity (i) produced by the taxpayer
from qualified energy resources and at a
qualified facility during the 10-year period
beginning on the date the facility was orig-
inally placed in service, and (ii) sold by
the taxpayer to an unrelated person during
the taxable year. If a taxpayer satisfies the
PWA requirements, the One Megawatt
Exception, or the BOC Exception, then
the credit determined under section 45(a)
for electricity produced at a qualified
facility is multiplied by five.
2. Prevailing Wage Requirements
Under section 45(b)(6), in the case of
a qualified facility that satisfies the PWA
2
The prevailing wage requirements in sections 30C(g), 45L(g), 45Q(h), 45U(d), 45V(e), 48(a)(10), 48C(e), and 179D(b) are substantially similar to the requirements provided under
section 45(b)(7). Sections 45Y(g)(9) and 45Z(f)(6)(A) adopt by cross-reference the Prevailing Wage Requirements under section 45(b)(7). Section 48E(d)(3) adopts by cross-reference the
Prevailing Wage Requirements under section 48(a)(10). Section 48(a)(10) provides for a special 5-year recapture rule that applies for purposes of the prevailing wage requirements with
respect to sections 48 and 48E.

Bulletin No. 2023–39 933 September 25, 2023
requirements of section 45(b)(7) and (b)
(8), the One Megawatt Exception, or the
BOC Exception, the credit under section
45(a) “shall be equal to such amount mul-
tiplied by five.” Section 45(b)(7)(A) pro-
vides that with respect to any qualified
facility, the taxpayer shall ensure that any
laborers and mechanics employed by the
taxpayer or any contractor or subcontrac-
tor in – (i) the construction of such facility,
and (ii) with respect to any taxable year,
for any portion of such taxable year that
is within the 10-year period beginning
on the date the qualified facility is orig-
inally placed in service, the alteration or
repair of such facility, shall be paid wages
at rates not less than the prevailing rates
for construction, alteration, or repair of a
similar character in the locality in which
such facility is located as most recently
determined by the Secretary of Labor, in
accordance with subchapter IV of chapter
31 of title 40, United States Code.
3. Correction and Penalty Related to
Failure to Satisfy Prevailing Wage
Requirements
Under section 45(b)(7)(B), a taxpayer
who is not eligible for the One Megawatt
Exception or the BOC Exception and
fails to satisfy the Prevailing Wage
Requirements under section 45(b)(7)(A) is
“deemed” to have satisfied those require-
ments if, for “any laborer or mechanic
who was paid wages at a rate below the
[required prevailing rate] for any period”
during any year of the construction, alter-
ation, or repair of the facility, the taxpayer
makes a correction payment to the laborer
or mechanic and pays a penalty to the
Secretary of the Treasury or her delegate
(Secretary). Under section 45(b)(7)(B)(i)
(I), the amount of the correction payment
is the sum of (i) the difference between
the amount of wages paid to the laborer or
mechanic during the period and the amount
of wages required to be paid to the laborer
or mechanic during that period in order to
meet the Prevailing Wage Requirements;
and (ii) interest on the amount under (i) at
the underpayment rate established under
section 6621 (determined by substitut-
ing “6 percentage points” for “3 percent-
age points” in section 6621(a)(2)) for the
applicable period.
Under section 45(b)(7)(B)(i)(II), the
amount of the penalty is “$5,000 multi-
plied by the total number of laborers and
mechanics who were paid wages at a rate
below the [prevailing wage] rate described
in [section 45(b)(7)(A)] for any period”
during the year. Deficiency procedures do
not apply “with respect to the assessment
or collection” of this penalty pursuant to
section 45(b)(7)(B)(ii).
Under section 45(b)(7)(B)(iii), if the
Secretary determines that the failure to
satisfy the Prevailing Wage Requirements
is due to “intentional disregard” of those
requirements, then the correction payment
to the laborer or mechanic is three times
the amount that would otherwise be deter-
mined under section 45(b)(7)(B)(i)(I), and
$10,000 is substituted for $5,000 in calcu-
lating the penalty under section 45(b)(7)
(B)(i)(II).
Section 45(b)(7)(B)(iv) provides that,
“pursuant to rules issued by the Secretary,
in the case of a final determination by
the Secretary with respect to any fail-
ure . . . to satisfy [the Prevailing Wage
Requirements],” the correction and pen-
alty provisions do not apply, “unless the
payments . . . are made by the taxpayer on
or before the date which is 180 days after
the date of such determination.”
4. Apprenticeship Requirements
Under section 45(b)(8), in order to
satisfy the Apprenticeship Requirements,
certain requirements with respect to
labor hours, apprentice-to-journeyworker
ratios, and participation by apprentices
must be satisfied.
3
a. Labor Hours Requirement
Section 45(b)(8)(A)(i) provides that
“[t]axpayers shall ensure that, with respect
to construction of any qualified facility,
not less than the applicable percentage of
the total labor hours of the construction,
alteration, or repair work (including such
work performed by any contractor or
subcontractor) with respect to such facil-
ity shall, subject to [section 45(b)(8)(B)]
be performed by qualified apprentices”
(Labor Hours Requirement).
For purposes of the Labor Hours
Requirement, section 45(b)(8)(A)(ii) pro-
vides that the applicable percentage is: (i)
in the case of a qualified facility the con-
struction of which begins before January
1, 2023, 10 percent, (ii) in the case of
a qualified facility the construction of
which begins after December 31, 2022,
and before January 1, 2024, 12.5 percent,
and (iii) in the case of a qualified facility
the construction of which begins after
December 31, 2023, 15 percent.
Section 45(b)(8)(E)(i) defines “labor
hours” as the “total number of hours
devoted to the performance of construc-
tion, alteration, or repair work by any
individual employed by the taxpayer or
by any contractor or subcontractor, and
exclud[ing] any hours worked by fore-
men, superintendents, owners, or persons
employed in a bona fide executive, admin-
istrative, or professional capacity (within
the meaning of those terms in part 541 of
title 29, Code of Federal Regulations).”
Section 45(b)(8)(E)(ii) defines “quali-
fied apprentice” as “an individual who is
employed by the taxpayer or by any con-
tractor or subcontractor and who is par-
ticipating in a registered apprenticeship
program, as defined in section 3131(e)
(3)(B).” Section 3131(e)(3)(B) defines a
registered apprenticeship program as an
apprenticeship program registered under
the Act of August 16, 1937 (commonly
known as the National Apprenticeship
Act, 50 Stat. 664, chapter 663, 29 U.S.C.
50 et seq.) that meets the standards of sub-
part A of part 29 and part 30 of title 29 of
the Code of Federal Regulations.
4

b. Ratio Requirement
Under section 45(b)(8)(B), the Labor
Hours Requirement is subject to any
applicable requirements for appren-
tice-to-journeyworker ratios of the U.S.
3
Sections 30C(g)(3), 45Q(h)(4), 45V(e)(4), 45Y(g)(10), 45Z(f)(7), 48(a)(11), 48C(e)(6), 48E(d)(4), and 179D(b)(5) cross-reference the apprenticeship requirements in section 45(b)(8).
Sections 45L and 45U do not have apprenticeship requirements.
4
Effective November 25, 2022, 29 CFR part 29 is no longer divided into subparts A and B because subpart B (Industry Recognized Apprenticeship Programs) was rescinded in a final rule
published on September 26, 2022 (87 FR 58269).

September 25, 2023 934 Bulletin No. 2023–39
Department of Labor (DOL) or the appli-
cable State apprenticeship agency (Ratio
Requirement).
c. Participation Requirement
Under section 45(b)(8)(C), each tax-
payer, contractor, or subcontractor who
employs four or more individuals to per-
form construction, alteration, or repair
work with respect to the construction of
a qualified facility must employ one or
more qualified apprentices to perform
such work (Participation Requirement).
5. Exceptions to Apprenticeship
Requirements
a. In general
Under section 45(b)(8)(D)(i), a tax-
payer is not treated as failing to sat-
isfy the Apprenticeship Requirements
in section 45(b)(8) if: (i) the taxpayer
satisfies the requirements described
in section 45(b)(8)(D)(ii) (Good Faith
Effort Exception), or (ii) in the case of
any failure by the taxpayer to satisfy the
Labor Hours Requirement under sec-
tion 45(b)(8)(A) and the Participation
Requirement under section 45(b)(8)(C),
the taxpayer makes a penalty payment
to the Secretary (Apprenticeship Cure
Provision).
b. Good Faith Effort Exception
Under the Good Faith Effort Exception
provided by section 45(b)(8)(D)(ii), a
taxpayer is deemed to have satisfied
the Apprenticeship Requirements with
respect to a qualified facility if the tax-
payer has requested qualified apprentices
from a registered apprenticeship program,
as defined in section 3131(e)(3)(B), and:
(i) such request has been denied, pro-
vided that such denial is not the result
of a refusal by the taxpayer or any con-
tractors or subcontractors engaged in the
performance of construction, alteration,
or repair work with respect to such qual-
ified facility to comply with the estab-
lished standards and requirements of the
registered apprenticeship program, or (ii)
the registered apprenticeship program
fails to respond to such request within
five business days after the date on which
such registered apprenticeship program
received such request.
c. Apprenticeship Cure Provision
Under section 45(b)(8)(D)(i)(II), if
the Good Faith Effort Exception does
not apply, then the taxpayer will not be
treated as failing to satisfy the Labor
Hours Requirement or the Participation
Requirement if the taxpayer makes a
penalty payment to the Secretary in an
amount equal to the product of $50 mul-
tiplied by the total labor hours for which
the Labor Hours Requirement or the
Participation Requirement was not sat-
isfied with respect to the construction,
alteration, or repair work on the qualified
facility. Under section 45(b)(8)(D)(iii), if
the Secretary determines that the failure
was due to intentional disregard of the
Labor Hours Requirement or Participation
Requirement, then the penalty amount
increases to $500 multiplied by the total
labor hours for which the requirement was
not satisfied.
C. One Megawatt Exception
Under the One Megawatt Exception in
section 45(b)(6)(B)(i), a qualified facility
that has a maximum net output of less than
one megawatt (as measured in alternating
current) is eligible for the increased credit
amount. A qualified facility’s nameplate
capacity determines whether the facil-
ity meets the One Megawatt Exception.
Similar exceptions apply for a qualified
facility under sections 45Y(a)(2)(B)(i)
and 48E(a)(2)(A)(ii)(I) with a maximum
net output of less than one megawatt (as
measured in alternating current); a qual-
ified project under section 48(a)(9)(B)(i)
with a maximum net output of less than
one megawatt of electrical (as measured
in alternating current) or thermal energy;
and energy storage technology under sec-
tion 48E(a)(2)(B)(ii)(I) with a capacity of
less than one megawatt.
D. Beginning of Construction Exception
Under the BOC Exception in sec-
tion 45(b)(6)(B)(ii), a qualified facility
the construction of which began prior to
the date that is 60 days after the Secretary
publishes guidance with respect to the
requirements of section 45(b)(7)(A) and
(8) is eligible for the increased credit
amount in section 45(b)(6). On November
30, 2022, the IRS and the Treasury
Department published Notice 2022-61,
providing guidance with respect to the
PWA requirements in section 45(b)(7)
(A) and (8), including initial guidance for
determining the beginning of construc-
tion for section 45 and other credits and
the beginning of installation under sec-
tion 179D. Therefore, if a taxpayer began
construction or installation of a facility
5

before January 29, 2023, then the taxpayer
is eligible for the increased credit amount
without satisfying the PWA requirements,
provided the taxpayer is otherwise eligi-
ble for the credit. Similar exceptions apply
under sections 30C, 45Q, 45V, 45Y, 48,
48E, and 179D.
For purposes of determining when
construction or installation begins, Notice
2022-61 incorporates by reference the
notices issued under sections 45, 45Q, and
48 (collectively, IRS Notices).
6
The IRS
Notices describe two methods of estab-
lishing that construction of a facility has
begun: (i) starting physical work of a sig-
nificant nature (Physical Work Test), and
(ii) paying or incurring five percent or
more of the total cost of the facility (Five
Percent Safe Harbor).
The IRS Notices, as clarified and
modified by Notice 2021-41, 2021-29
I.R.B. 17, provide that for purposes of
the Physical Work Test and Five Percent
Safe Harbor, taxpayers must demonstrate
either continuous construction or contin-
uous efforts (Continuity Requirement)
regardless of whether the Physical Work
Test or the Five Percent Safe Harbor was
used to establish the beginning of con-
struction. Whether a taxpayer meets the
Continuity Requirement under either test
is determined by the relevant facts and
circumstances.
5
Notice 2022-61 defines “facility” as qualified facility, property, project, or equipment.
6
Notice 2013-29, 2013-20 I.R.B. 1085 (section 45); Notice 2020-12, 2020-11 I.R.B. 495 (section 45Q); Notice 2018-59, 2018-28 I.R.B. 196 (section 48).

Bulletin No. 2023–39 935 September 25, 2023
The IRS Notices, as subsequently
clarified and modified, also provide for
a “Continuity Safe Harbor” under which
a taxpayer will be deemed to satisfy the
Continuity Requirement provided a qual-
ified facility is placed in service no more
than four calendar years after the calen-
dar year during which construction of
the qualified facility began for purposes
of sections 45 and 48, and no more than
six calendar years after the calendar year
during which construction of the quali-
fied facility or carbon capture equipment
began for purposes of section 45Q. For
purposes of the Continuity Safe Harbor,
certain offshore projects and projects built
on Federal land under sections 45 and 48
satisfy the Continuity Requirement if such
a project is placed into service no more
than 10 calendar years after the calendar
year during which construction of the
project began.
Until the Treasury Department and the
IRS issue further guidance on determining
when construction or installation begins,
taxpayers may continue to rely on the
guidance provided in Notice 2022-61 and
the IRS Notices. Specifically, to determine
when construction begins for purposes of
sections 30C, 45V, 45Y, and 48E, princi-
ples similar to those under Notice 2013-
29 regarding the Physical Work Test and
Five Percent Safe Harbor apply, and tax-
payers satisfying either test will be con-
sidered to have begun construction. In
addition, principles similar to those pro-
vided in the IRS Notices regarding the
Continuity Requirement for purposes of
sections 30C, 45V, 45Y, and 48E apply.
Whether a taxpayer meets the Continuity
Requirement under either test is deter-
mined by the relevant facts and circum-
stances. Similar principles to those under
section 3 of Notice 2016-31 regarding the
Continuity Safe Harbor also apply for pur-
poses of sections 30C, 45V, 45Y, and 48E.
Taxpayers may rely on the Continuity
Safe Harbor with respect to those sections,
provided the facility is placed in service
no more than four calendar years after the
calendar year during which construction
began.
For purposes of section 179D, instal-
lation of energy efficient commercial
building property has begun if a taxpayer
generally satisfies principles similar to
the two tests described in section 2.02 of
Notice 2022-61 regarding the beginning
of construction under Notice 2013-29
(Physical Work Test and Five Percent Safe
Harbor). The relevant facts and circum-
stances will ultimately determine whether
a taxpayer has begun installation.
For purposes of sections 45, 45Q,
and 48, the IRS Notices will continue to
apply under each respective Code sec-
tion, including application of the Physical
Work Test and Five Percent Safe Harbor,
and the rules regarding the Continuity
Requirement and Continuity Safe Harbors.
IV. Davis-Bacon Act
The Davis-Bacon Act (40 U.S.C. 3141
et seq.) (DBA), enacted in 1931, requires
the payment of minimum prevailing
wages determined by the DOL to labor-
ers and mechanics working on contracts
entered into by Federal agencies and the
District of Columbia that are in excess
of $2,000 and are for the construction,
alteration, or repair of public buildings
and public works. The Copeland Act,
Public Law 73-324 (40 U.S.C. 3145), was
enacted in 1934 to add a requirement that
contractors working on contracts covered
by the DBA submit weekly certified pay-
roll records to the contracting agency for
work performed on the contract. Congress
has included DBA requirements in other
laws, often referred to as the Davis-Bacon
Related Acts (Related Acts), under which
Federal agencies provide assistance for
construction projects through grants,
loans, insurance, and other methods.
The Wage and Hour Division of the
DOL is responsible for administering the
DBA and has adopted regulations for the
determination of prevailing wages as well
as compliance with and enforcement of
DBA labor standards requirements under
29 CFR parts 1, 3, and 5.
Section 3142 of the DBA requires that
Federal agencies entering into contracts
covered by the DBA include the require-
ments of the DBA in the contract, including
the requirement to incorporate the appli-
cable wage determinations that set forth
the prevailing wages to be paid to laborers
and mechanics performing work, and the
Copeland Act, 40 U.S.C. 3145, sets forth
the requirement to submit certified weekly
payroll records to the contracting Federal
agency. Under regulations implementing
the DBA (29 CFR parts 1 and 5), the con-
tracting agency and the Wage and Hour
Division have responsibility to ensure
compliance with prevailing wage require-
ments by engaging in periodic audits or
investigations of contracts, including
examination of payroll data.
The Wage and Hour Division deter-
mines the wage rates that are “prevailing”
for purposes of section 3142(b) of the
DBA for each classification of covered
laborers and mechanics on similar proj-
ects in the geographic area in which work
is to be performed. A prevailing wage is
the combination of the basic hourly rate
and any fringe benefit rate listed on the
wage determination. The Wage and Hour
Division generally makes its determi-
nations of the prevailing rates based on
survey information provided by contrac-
tors and other interested parties. The pre-
vailing wage determinations made by the
Wage and Hour Division are published
on the DOL-approved website for wage
determinations (currently https://www.
sam.gov).
Under the DBA, contracting agencies
follow specified procedures for incorpo-
rating wage determinations into covered
contracts. The applicable prevailing wage
determination generally applies for the
duration of the contract.
In accordance with the DBA, certain
apprentices may be paid wages at a lower
wage rate than journeyworker laborers
and mechanics. Under 29 CFR 5.5(a)(4),
an apprentice from a registered apprentice
program may be paid at not less than the
rate specified in the registered program
for the apprentice’s level of progress in
the apprenticeship program, expressed
as a percentage of the journeyworker
hourly rate specified in the applicable
wage determination. Apprentices may
also be paid bona fide fringe benefits in
accordance with the provisions of the
registered apprenticeship program, but
if the registered apprenticeship program
does not specify bona fide fringe benefits,
apprentices must be paid the full amount
of bona fide fringe benefits listed on the
wage determination for the applicable
classification.
Sections 3143 and 3144 of the DBA
also provide for certain enforcement
authority and remedies to ensure com-
pliance with payment of prevailing wage

September 25, 2023 936 Bulletin No. 2023–39
rates. When a contracting agency or the
Wage and Hour Division finds there has
been an underpayment of wages, the con-
tracting agency and the Wage and Hour
Division can seek to recover the under-
payments from the contractor respon-
sible, including but not limited to the
prime contractor. If the underpayment of
wages to laborers and mechanics is not
promptly remedied, then the contracting
agency may withhold payments that are
otherwise due under the contract or under
another contract with the same prime con-
tractor in order to compensate the labor-
ers and mechanics for the underpayments.
Contractors who have been found to have
disregarded their obligations to employ-
ees and subcontractors, including by vio-
lating prevailing wage requirements, may
also be subject to debarment from future
Federal contracts under 40 U.S.C. 3144(b)
and 29 CFR 5.12.
Explanation of Provisions
I. Overview
A. Incorporation of certain DBA
guidance
Under section 45(b)(7)(A), the
increased credit is available with respect
to a qualified facility if a taxpayer ensures
that laborers and mechanics are “paid
wages at rates not less than the prevailing
rates. . . in accordance with [the DBA].”
The phrase “in accordance with” means
“in agreement or harmony with; in con-
formity to; according to.”
7
In interpreting
the “in accordance with” language, the
Treasury Department and the IRS propose
to incorporate in these regulations certain
requirements of the DBA that are relevant
for the purposes of section 45(b)(7)(A)
and the intent of the IRA, and that are nec-
essary for, and consistent with, sound tax
administration.
Under the DBA, a contractor must
agree to pay prevailing wages at the com-
mencement of the project as a condition
of a Federal contract award. Conversely,
under section 45, the requirements related
to payment of prevailing wages are gen-
erally triggered at the beginning of con-
struction and continue during the entire
course of a project, but the requirement
becomes binding only when a tax return
claiming the increased credit is filed. The
Code does not require taxpayers who do
not seek an increased credit under sec-
tion 45(b)(6) to pay prevailing wages in
the construction, alteration, or repair of a
facility.
The proposed regulations seek to strike
the appropriate balance in determining
when DBA requirements are relevant for
purposes of the PWA requirements and
when they are not. The proposed regula-
tions would incorporate DBA statutory
and regulatory guidance that is relevant
for purposes of claiming the increased
tax credit and consistent with sound tax
administration. For example, the proposed
regulations would largely adopt DBA
guidance relating to wage determinations
and the meaning of pertinent terms such
as “laborer” and “mechanic”; “construc-
tion, alteration, or repair”; “wages”; and
“employed”. The proposed regulations
would not adopt DBA guidance if the
result of doing so would not be in further-
ance of sound tax administration or the
aims of the IRA. For example, the pro-
posed regulations would not incorporate
the rules under the DBA regarding provi-
sions required to be included in contracts,
those provisions related to the reporting
of certified payroll records by contractors
to contracting agencies, and the various
enforcement processes that are available
to the DOL and the contracting agencies
to address noncompliance. Additionally,
the DBA’s $2,000 monetary coverage
threshold has not been incorporated.
8
The statutory language of the IRA does
not reflect any intent to include excep-
tions from the PWA requirements, other
than the One Megawatt Exception and
the BOC Exception. Consequently, the
Treasury Department and the IRS have not
proposed a rule exempting Tribal govern-
ments or the Tennessee Valley Authority
(TVA) from the PWA requirements in sec-
tion 45. The Treasury Department and the
IRS request comments on the need for any
exceptions, including for Tribal govern-
ments or the TVA, from the PWA require-
ments in addition to those expressly
described in the statute. Such comments
should detail the specific circumstances
requiring the proposed exception as well
as how its design would limit its applica-
tion only to those circumstances.
In addition, the Treasury Department
and the IRS will hold Tribal consultation
specifically to address the prevailing wage
and apprenticeship requirements in these
proposed regulations, which will inform
the development of the final regulations.
See part VI. of the Special Analyses
section.
B. Applicability of PWA requirements to
the taxpayer
The proposed regulations would pro-
vide that in order to earn the increased
credit under section 45(b)(6) by satis-
fying the PWA requirements, the tax-
payer would be solely responsible for:
(i) ensuring that the relevant laborers and
mechanics are paid wages not less than the
prevailing rate whether employed directly
by the taxpayer, or by a contractor, or a
subcontractor, and (ii) ensuring that the
Apprenticeship Requirements are sat-
isfied. The proposed regulations would
also provide that the taxpayer would be
solely responsible for the PWA record-
keeping requirements, the correction and
penalty provisions under the Prevailing
Wage Requirements, and the Good Faith
Effort Exception and penalty provisions
under the Apprenticeship Requirements.
However, nothing in these proposed reg-
ulations is intended to supersede require-
ments that might otherwise apply to a
taxpayer, contractor, or subcontractor by
State or Federal law.
Generally, the proposed regulations
would define the term “taxpayer” to
mean any taxpayer as defined in sec-
tion 7701(a)(14), including applicable
entities described in section 6417(d)(1)
(A). This will generally be the entity
that claims the credit (as increased under
7
In accordance with, OxfOrd English dictiOnary, https://www.oed.com/search/dictionary/?scope=Entries&q=in+accordance+with (last visited Aug. 8, 2023); see Accordance, MErriaM-
WEbstEr’s cOllEgiatE dictiOnary (11
th
ed. 2006) (“agreement, conformity”).
8
The Treasury Department and the IRS interpret the One Megawatt Exception as addressing small business taxpayers who would be excluded under the $2,000 minimum contract requirement
under the DBA.

Bulletin No. 2023–39 937 September 25, 2023
section 45(b)(6)), or makes an election
under section 6417 with respect to such
credit amount on a Federal income tax
return. The section 45 credit, including
the increased credit amount available
under section 45(b)(6), is an eligible credit
subject to the newly enacted section 6418.
Section 6418 allows “eligible taxpay-
ers” to elect to transfer certain credits to
unrelated taxpayers rather than using the
credits against their Federal income tax
liabilities. In the case of credits trans-
ferred under section 6418, these proposed
regulations would provide that the term
“taxpayer” also means the eligible tax-
payer that determines the eligible credit to
be transferred and makes a transfer elec-
tion under section 6418 to transfer any
specified credit portion (including 100
percent) of an eligible credit determined
with respect to any eligible credit property
of such eligible taxpayer for any taxable
year.
Section 6418(a) provides that, in the
case of an eligible taxpayer that elects to
transfer all (or any specified portion) of
an eligible credit determined with respect
to the taxpayer for any taxable year to an
unrelated transferee taxpayer, the trans-
feree taxpayer specified in such election
(and not the eligible taxpayer) is treated as
the taxpayer with respect to such credit (or
such portion thereof).
The Treasury Department and the IRS
published proposed regulations in the
Federal Register (88 FR 40496 (June 21,
2023)) that would implement the statutory
provisions of section 6418 (6418 Proposed
Regulations). As explained in the 6418
Proposed Regulations, the Treasury
Department and the IRS view inclusion
of the word “determined” as instructive.
Only credits determined with respect to
an eligible taxpayer can be transferred by
the eligible taxpayer. The 6418 Proposed
Regulations would provide that Code sec-
tions relating to the determination of an
eligible credit, such as sections 49 and
50(b), generally impact the amount of an
eligible credit that an eligible taxpayer can
transfer. A transferee taxpayer is generally
not subject to those Code sections, but
a transferee taxpayer is subject to Code
sections that would limit the amount of an
eligible credit that is allowed, such as sec-
tions 38(c) and 469. In making a transfer
election, the 6418 Proposed Regulations
also would require an eligible taxpayer
to report the determined credit as part
of the taxpayer’s return, including filing
properly completed credit source forms, a
properly completed Form 3800, General
Business Credit, and a schedule showing
the amount of eligible credit transferred
for each eligible credit property.
The 6418 Proposed Regulations also
would apply with respect to the entire
credit determined under section 45, where
the amount of credit determined would
include increased credit amounts avail-
able under section 45(b)(6). As the rules
for determining an eligible credit apply
to the eligible taxpayer and not the trans-
feree taxpayer under section 6418, these
proposed regulations would provide con-
sistency with respect to the rules relating
to the determination of the section 45
credit. Thus, while a transferee taxpayer
would claim a transferred eligible credit
(or portion thereof) on a tax return, the
requirements of section 45 relevant to
determining the credit, including the cor-
rection and penalty provisions described
in section 45(b)(7)(B) and 45(b)(8)(D),
would remain with the eligible taxpayer
who determined the credit. The Treasury
Department and the IRS request com-
ments on the application of the PWA
penalty and cure provisions, including to
transferees and eligible taxpayers, in the
context of transferred credits.
II. Prevailing Wage Requirements Under
Section 45(b)(7)(A)
A. In general
Section 45(b)(7)(A) requires that tax-
payers who are seeking an increased
credit ensure that laborers and mechanics
employed by the taxpayer, or any con-
tractor or subcontractor in the construc-
tion, alteration, or repair of a facility are
paid wages at rates that are not less than
the prevailing rates determined by the
DOL in accordance with the DBA.
9
The
proposed regulations would provide that
a taxpayer would satisfy the Prevailing
Wage Requirements with respect to the
construction, alteration, or repair of a
facility by ensuring that all laborers and
mechanics employed by the taxpayer, or
any contractor or subcontractor, in the
construction, alteration, or repair of a
facility are paid wages at rates that are not
less than the prevailing rates determined
by the DOL in accordance with the DBA.
The proposed regulations would largely
incorporate the definitions of contrac-
tor and subcontractor from the DBA and
would provide that: (i) a contractor would
be any person that enters into a contract
with the taxpayer for the construction,
alteration, or repair of a qualified facility,
and (ii) a subcontractor would be any con-
tractor that agrees to perform or be respon-
sible for the performance of any part of a
contract entered into with the taxpayer (or
contractor) with respect to the construction,
alteration, or repair of a facility.
Consistent with the DBA and 29
CFR 5.2, and solely for purposes of the
Prevailing Wage Requirements, the pro-
posed regulations would provide that a
laborer or mechanic would be considered
employed by the taxpayer, contractor, or
subcontractor if the individual performs
the duties of a laborer or mechanic for
the taxpayer, contractor, or subcontrac-
tor (as applicable), regardless of whether
the individual would be characterized as
an employee or an independent contrac-
tor for other Federal tax purposes. The
definition of employed for purposes of
the Prevailing Wage Requirements would
generally be different and broader than
the definition used elsewhere in the Code,
for example with respect to employment
taxes, as well as the associated reporting
and withholding obligations. Laborers and
mechanics who are independent contrac-
tors for employment tax purposes may be
considered employed for purposes of the
Prevailing Wage Requirements. Whether
an individual is considered employed
for purposes of the Prevailing Wage
Requirements and these proposed regu-
lations is not relevant when determining
whether an individual is an employee
9
The requirement to pay prevailing wages with respect to alteration or repair applies for any portion of a taxable year that is within the 10-year period beginning on the date the qualified
facility is placed in service.

September 25, 2023 938 Bulletin No. 2023–39
or an independent contractor for other
Federal tax purposes.
B. Determining the prevailing wage rate
1. In General
Under the proposed regulations, pre-
vailing wage rates would be determined
by the DOL in accordance with the DBA
when they are issued and published by
the DOL as a general wage determina-
tion or when issued to a taxpayer as part
of a supplemental wage determination or
pursuant to a request for a wage rate for
an additional classification. The proposed
regulations would require taxpayers to
use the general wage determination in
effect when the construction of the facil-
ity begins but would not require taxpayers
to update the applicable prevailing wage
rates during construction of the facility in
the event a new general wage determina-
tion is published by the DOL after con-
struction of the facility begins. However,
a new general wage determination would
be required to be used when a contract is
changed to include additional, substantial
construction, alteration, or repair work not
within the scope of work of the original
contract, or to require work to be per-
formed for an additional time period not
originally obligated, including where an
option to extend the term of a contract
for the construction, alteration, or repair
is exercised. This is consistent with DOL
guidance under the DBA, which generally
requires the contracting agency to incor-
porate the applicable wage determinations
as part of the contract that is awarded to
the contractor with the applicable rates
valid through the duration of the contract.
The proposed regulations also would pro-
vide that taxpayers would need to update
the applicable wage rate(s), as necessary,
with respect to any alteration or repair of
a facility that begins after the facility has
been placed in service. Taxpayers would
do this by ensuring that wages are paid for
such alteration or repair based on the gen-
eral wage determination in effect when the
alteration or repair begins.
2. General Wage Determinations
The proposed regulations would pro-
vide that a general wage determination
would be one issued and published by
the DOL that includes a list of wage and
bona fide fringe benefit rates determined
to be prevailing for laborers and mechan-
ics for the various classifications of
work performed with respect to a speci-
fied type of construction in a geographic
area. Generally, the DOL determines the
prevailing rate based on wage rate data
submitted by contractors, contractors’
associations, labor organizations, public
officials, and other interested parties. In
general, the proposed regulations would
provide that taxpayers would need to use
the general wage determination(s) pub-
lished by the DOL under the DBA on a
DOL approved website, to determine the
applicable prevailing wage rates. The cur-
rent approved website for publishing gen-
eral wage determinations is https://www.
sam.gov.
The proposed regulations would
largely incorporate the definition of wages
from 29 CFR 5.2 for the Prevailing Wage
Requirements. Under 29 CFR 5.2, wages
are defined as the basic hourly rate of pay;
any contribution irrevocably made by a
contractor or subcontractor to a trustee or
to a third person pursuant to a bona fide
fringe benefit fund, plan, or program; and
the rate of costs to the contractor or sub-
contractor that may be reasonably antici-
pated in providing bona fide fringe benefits
to laborers and mechanics pursuant to an
enforceable commitment to carry out a
financially responsible plan or program,
which was communicated in writing to the
laborers and mechanics affected. Whether
amounts are wages for purposes of the
Prevailing Wage Requirements is not rel-
evant in determining whether amounts are
wages or compensation for other Federal
tax purposes.
3. Supplemental Wage Determinations
and Rates for Additional Classifications
The proposed regulations would pro-
vide special procedures for the limited
circumstances in which a general wage
determination does not provide an appli-
cable wage rate(s) for the work to be
performed on the facility. These circum-
stances include when no general wage
determination has been issued for the
geographic area or for the specified type
of construction, or when the Secretary of
Labor has issued a general wage determi-
nation for the relevant geographic area
and type of construction, but one or more
labor classifications necessary for the con-
struction, alteration, or repair work that
will be done on the facility by laborers or
mechanics is not listed as part of that deter-
mination. The proposed regulations would
provide that under these circumstances,
a taxpayer, contractor, or subcontractor
would need to request a supplemental
wage determination or request a prevail-
ing wage rate for an additional classifica-
tion from the DOL. A taxpayer satisfies
section 45(b)(7)(A) by ensuring that
laborers and mechanics are paid wages at
rates not less than the rates determined by
the DOL pursuant to a request for a sup-
plemental wage determination or pursuant
to a request for a prevailing wage rate for
an additional classification.
The DOL has advised the Treasury
Department and the IRS that most taxpay-
ers will likely not need to use the process
for requesting a supplemental wage deter-
mination or request a rate for an additional
classification because of the availability of
general wage determinations. The request
for a prevailing wage rate for an additional
classification would only be appropriate
when the work to be performed by the
classification is not performed by a clas-
sification in the applicable general wage
determination and the classification is
used in the area by the construction indus-
try. In addition, a prevailing wage rate for
an additional classification would only be
approved when the proposed wage rate,
including any bona fide fringe benefits,
bears a reasonable relationship to the wage
rates contained in the general wage deter-
mination. A request for a prevailing wage
rate for additional classification would not
be permitted to be used to split, subdivide,
or otherwise avoid application of classifi-
cations listed in a general wage determina-
tion. Under the proposed regulations, the
procedures for requesting a supplemental
wage determination or a prevailing wage
rate for an additional classification from
the DOL would correspond to the provi-
sions of 29 CFR 1.5(b) and 5.5(a)(1)(iii).
The Treasury Department and the IRS
expect that the construction of some facil-
ities may span two or more adjacent geo-
graphic areas, and more than one general
wage determination could apply to the

Bulletin No. 2023–39 939 September 25, 2023
facility. In such circumstances, a taxpayer
would be able to satisfy the Prevailing
Wage Requirements by ensuring that
laborers and mechanics are paid wages at
the highest rate for each classification pro-
vided under the general wage determina-
tions. A taxpayer would also be permitted
to request a supplemental wage determi-
nation with respect to the facility and pay
the rates determined by the DOL pursuant
to the request.
The proposed regulations would also
provide a special rule for qualified facil-
ities located offshore so taxpayers would
not need to request a supplemental wage
determination for offshore facilities. In
lieu of requesting a supplemental wage
determination for a facility located in an
offshore area within the outer continen-
tal shelf of the United States, a taxpayer,
contractor, or subcontractor would be
permitted to rely on the general wage
determination for the relevant category of
construction that is applicable in the geo-
graphic area closest to the area in which
the qualified facility will be located.
The process for requesting a supple-
mental wage determination or a prevailing
wage rate for an additional classification
provided for in the proposed regula-
tions would be consistent with the pro-
cess described in Notice 2022-61 while
addressing the different context of the
PWA regime wherein taxpayers, contrac-
tors, and subcontractors, rather than a
contracting agency, will seek additional
wage rates for purposes of complying
with the Prevailing Wage Requirements
of section 45. Under the DBA, the request
for a project wage determination appli-
cable under 29 CFR 1.5(b) or for a con-
formance under 29 CFR 5.5(a)(1)(iii) is
made by the contracting agency rather
than the contractor and will often occur
after the contracting agency and the con-
tractor have conferred about the need for
the project wage determination or for
the conformance of an additional clas-
sification. Because there is no contract-
ing agency in the tax credit regime, the
proposed regulations would set forth an
analogous process for taxpayers, con-
tractors, and subcontractors to request
a supplemental wage determination, or
a request for a prevailing wage rate for
an additional classification, by submit-
ting the request and supporting material
directly to the Wage and Hour Division
of the DOL.
The proposed regulations would pro-
vide that the request for a supplemen-
tal wage determination or a request for
a prevailing wage rate for an additional
classification would need to include infor-
mation consistent with the information
that is required to be provided by a con-
tracting agency when requesting a project
wage determination or a conformance for
purposes of the DBA. This information
would include a description of the type
of work to be performed, the geographic
area where the facility is located, the
start date for the construction, alteration,
or repair of the facility, the labor classi-
fication(s) needed for performance of the
work on the facility for which wage rates
are not available on an applicable general
wage determination, pertinent wage pay-
ment information that may be available
with respect to the classifications, and any
information the taxpayer wants the DOL
to consider for determining the applica-
ble classifications and prevailing wage
rates. After review, the Wage and Hour
Division will notify the taxpayer as to the
labor classifications and wage rates to be
used for the type of work in question in
the geographic area in which the facility
is located.
The proposed regulations would adopt,
by cross reference, the review and appeal
procedures available to any interested
party under the DBA with respect to
wage determinations generally. Any inter-
ested party would be able to seek recon-
sideration and review of a supplemental
wage determination, or a prevailing wage
rate for an additional classification, by
the DOL Administrator of the Wage and
Hour Division and appeal any decision
of the Administrator of the Wage and
Hour Division to the DOL Administrative
Review Board.
In general, the Treasury Department
and the IRS expect that supplemental
wage determinations and requests for pre-
vailing wage rates for an additional clas-
sification will be requested no more than
90 days prior to the beginning of the con-
struction, alteration, or repair of the facil-
ity, as applicable. However, the Treasury
Department and the IRS recognize that
taxpayers may not reasonably determine
until after construction, alteration, or
repair begins that a supplemental wage
determination or request for a prevailing
wage rate for an additional classifica-
tion is necessary. In these instances, the
Treasury Department and the IRS would
expect taxpayers, contractors, or sub-
contractors to make a request as soon as
practicable after determining the need for
a supplemental wage determination or
prevailing wage rate for additional classi-
fications. The proposed regulations would
provide that when a supplemental wage
determination or a prevailing wage rate
for an additional classification is issued
by the DOL after construction, alteration,
or repair of the facility has begun, the
applicable prevailing rates would apply
retroactively to the date that the applica-
ble construction, alteration, or repair work
that is the subject of the request began.
The taxpayer would be required to ensure
that wages (including bona fide fringe
benefits where appropriate) are paid at
appropriate prevailing wage rates to all
laborers and mechanics performing work
on the project from the first day on which
work is performed in the classification.
The Treasury Department and the IRS
request comments on the proposed proce-
dures for requesting supplemental wage
determinations and prevailing wage rates
for additional classifications.
C. Paying wages in accordance with an
applicable wage determination
1. In General
Under the proposed regulations, the
applicable wage determination for a
type of construction in a geographic area
would provide the prevailing wage rates
that apply to laborers or mechanics for
the construction, alteration, or repair of a
facility in that geographic area. The pro-
posed regulations would provide that for
purposes of satisfying the Prevailing Wage
Requirements, all laborers and mechan-
ics would need to be paid in the time and
manner consistent with the regular pay-
roll practices of the taxpayer, contractor,
or subcontractor, as applicable. For pur-
poses of satisfying section 45(b)(7)(A),
the proposed regulations would provide
that a taxpayer would need to ensure that
the wages paid to laborers and mechanics
employed by the taxpayer, contractor, or

September 25, 2023 940 Bulletin No. 2023–39
subcontractor on the construction, alter-
ation, or repair of the facility must be “not
less than the prevailing rates. . . in the
locality in which such facility is located.”
The proposed regulations would define the
terms: (i) laborer and mechanic, (ii) types
of construction, (iii) construction, alter-
ation, or repair, and (iv) locality, generally
consistent with the DBA definitions.
The proposed regulations would define
the terms “laborer” and “mechanic” as
those individuals whose duties are man-
ual or physical in nature. Laborers and
mechanics would include apprentices
and helpers. Working forepersons who
devote more than 20 percent of their time
during a workweek to laborer or mechanic
duties and who do not meet the criteria for
exemption under 29 CFR part 541 would
also be considered laborers and mechan-
ics for the time spent conducting laborer
and mechanic duties. However, laborers
and mechanics would not include individ-
uals whose duties are primarily adminis-
trative, executive, or clerical, and persons
employed in a bona fide executive, admin-
istrative, or professional capacity as those
terms are defined in 29 CFR part 541. The
Treasury Department and the IRS request
comments on the treatment of working
forepersons or owners performing the
duties of laborers and mechanics under
certain circumstances, and other execu-
tive or administrative personnel who also
perform duties of a manual or physical
nature, in the construction, alteration, or
repair of a qualified facility.
The proposed regulations would pro-
vide that the type of construction would
be the general category of construction
as established by the DOL for the publi-
cation of general wage determinations.
Specific types of construction currently
include building, residential, heavy, and
highway. The Treasury Department and
the IRS contemplate that the construction,
alteration, or repair of most facilities eli-
gible for the increased credit under sec-
tion 45(b)(6) would be either building or
heavy construction.
The proposed regulations would pro-
vide that the term construction, alteration,
or repair would generally mean construc-
tion, prosecution, completion, or repair
as provided under 29 CFR 5.2. Under
this definition, construction, alteration,
or repair would mean all types of work
performed at the location of the facility
and includes, but is not limited to: con-
structing, altering, remodeling, installing
of items fabricated offsite; painting and
decorating; and manufacturing or furnish-
ing of materials, articles, and supplies or
equipment at the location of the facility.
Additionally, the proposed regulations
would provide that construction, alter-
ation, or repair would not include main-
tenance work that occurs after the facility
is placed in service. Under the proposed
regulations, maintenance would be work
that is ordinary and regular in nature and
designed to maintain existing functional-
ity of a facility as opposed to an isolated
or infrequent repair of a facility to restore
specific functionality or adapt it for a
different or improved use. Further, the
proposed regulations would provide that
this definition of construction, alteration,
or repair would be solely for purposes of
the PWA requirements and has no bearing
on any other provision under the Code,
including any determination of construc-
tion, alteration, repair, or maintenance
under section 162 or 263.
The proposed regulations would pro-
vide that a locality or geographic area
would be the county, independent city,
or other civil subdivision of the State
in which the facility or secondary site
is located. Geographic area would also
include offshore areas, including areas
located within the outer continental shelf
of the United States, and the U.S. ter-
ritories. If construction, alteration, or
repair is performed in multiple counties,
independent cities, or other civil subdivi-
sions, then the geographic area would also
include all counties, independent cities, or
other civil subdivisions in which the work
will be performed.
Under section 45(b)(7)(A)(ii), the pre-
vailing wage rates that are required to be
paid with respect to such construction,
alteration, or repair are determined by
reference to “the prevailing rates for con-
struction, alteration, or repair of a similar
character in the locality in which such
facility is located.” The proposed regula-
tions would also use the DBA’s “site of
the work” definition to clarify the scope of
the requirement under section 45(b)(7)(A)
to pay prevailing wage rates. Under the
DBA, the requirement to pay prevailing
wages is limited by statute to laborers and
mechanics “employed directly on the site
of the work.” 40 U.S.C. 3142. By com-
parison, section 45(b)(7)(A)(i) and (ii)
requires the payment of prevailing wages
generally in the “construction of [a quali-
fied] facility” and the “alteration or repair
of such facility.” Over the years, the DOL
has updated its rules to address develop-
ments in the construction industry that
have enabled contractors to build large
portions of a building or project on one or
more secondary sites away from the pri-
mary site of the work. The DBA rules now
provide that a secondary construction site
is considered part of the site of the work,
if a significant portion of a building or
work is constructed at the secondary site
for specific use in the designated building
or work and the site either was established
specifically for the performance of the
covered contract or project or dedicated
exclusively, or nearly so, to the covered
contract or project. 29 CFR 5.2.
The Treasury Department and the IRS
view the DBA’s site of the work require-
ment to be helpful for purposes of inter-
preting the language in section 45(b)(7)
(A) that the applicable prevailing wage
rates for the construction, alteration, or
repair of the facility are rates not less than
those prevailing “in the locality in which
such facility is located.” As with certain
construction subject to the DBA, the
Treasury Department and the IRS expect
that taxpayers similarly may use multi-
ple construction sites in the construction,
alteration, or repair of a facility and in
certain cases prefabricate large portions
of the facility offsite for later installation
at the facility’s location. Some of these
secondary sites will be dedicated solely to
the construction of a facility while others
may service multiple clients and facili-
ties. While the language of section 45(b)
(7)(A) could be interpreted to support an
expansive reading of construction such
that all construction of a facility, wher-
ever located and however small, is sub-
ject to the Prevailing Wage Requirements,
such a reading would result in signifi-
cantly broader coverage than under the
DBA and likely would entail substantial
compliance costs and discourage taxpay-
ers from seeking the increased credits
or deduction available under the IRA.
Thus, the Treasury Department and the
IRS understand the DBA approach to

Bulletin No. 2023–39 941 September 25, 2023
“site of the work” to strike an appropri-
ate balance between the requirements of
section 45(b)(7)(A) and existing construc-
tion practices and thus propose to largely
adopt the DBA approach for purposes of
defining the scope of the Prevailing Wage
Requirements.
Therefore, under the proposed regula-
tions, taxpayers would be subject to the
requirement to ensure that laborers and
mechanics are paid not less than prevailing
wage rates with respect to the construc-
tion, alteration, or repair at the locality
in which the facility is located, which
would be defined to include any second-
ary sites where a significant portion of the
construction, alteration, or repair of the
facility occurs, provided that the second-
ary site either was established specifically
for, or dedicated exclusively for a specific
period of time to, the construction, alter-
ation, or repair of the facility.
Under 29 CFR 1.6(b)(1), the prevail-
ing wage rate that applies to laborers or
mechanics engaged in the construction,
alteration, or repair work at a secondary
site is determined by the geographic area
of the secondary site. The proposed regu-
lations would similarly provide that when
a secondary site is established specifically
for, or dedicated exclusively for a specific
period of time to, the construction, alter-
ation, or repair of the facility, the prevail-
ing wage rate applicable to laborers and
mechanics engaged in the construction,
alteration, or repair of the facility at the
secondary site would be determined by
the applicable wage rate for that laborer or
mechanic classification based on the geo-
graphic area of the secondary site.
2. Wages for Apprentices
Section 45(b)(8)(E)(ii) provides gener-
ally that a qualified apprentice is an indi-
vidual who is employed by the taxpayer,
contractor, or subcontractor and who is
participating in a registered apprenticeship
program, as defined in section 3131(e)(3)
(B). For purposes of the DBA, an appren-
tice may also include an individual in the
first 90 days of probationary employment
as an apprentice in a registered appren-
ticeship program, who is not individu-
ally registered in the program, but who
has been certified by the DOL’s Office of
Apprenticeship or a State apprenticeship
agency (where appropriate) to be eligi-
ble for probationary employment as an
apprentice.
A registered apprenticeship program
is a program that has been registered by
the DOL’s Office of Apprenticeship or a
recognized State apprenticeship agency,
pursuant to the basic standards and
requirements in 29 CFR parts 29 and 30.
Program registration is evidenced by a
Certificate of Registration or other written
indicia of registration.
The proposed regulations would adopt
29 CFR 5.5(a)(4)(i) allowing the payment
of wages that differ from the applicable
prevailing wage rate to apprentices who
are participating in a registered apprentice-
ship program. The proposed regulations
would also provide that the calculation
of the apprentice wage rate would be in
accordance with 29 CFR 5.5(a)(4)(i).
For purposes of determining whether
apprentices may be paid the apprentice
wage rate rather than the full prevailing
wage for other laborers and mechanics
of the same classification, the proposed
regulations would provide the appren-
tice must be participating in a registered
apprentice program as demonstrated
by a written apprenticeship agreement
with the registered apprenticeship pro-
gram containing the terms and condi-
tions of the employment and training of
the apprentice. The terms and conditions
of the agreement would be required to
comply with 29 CFR 29.7. The regis-
tered apprenticeship program would be
required to be registered with the DOL or
a recognized State apprenticeship agency
in accordance with 29 CFR parts 29 and
30. If the apprentice is working in a clas-
sification that is not in an occupation that
is part of the registered apprenticeship
program, to satisfy the Prevailing Wage
Requirements, the apprentice would need
to be paid the full prevailing wage for
laborers or mechanics for that classifica-
tion in that location.
The proposed regulations would pro-
vide that taxpayers and contractors or sub-
contractors who employ apprentices who
are not in a registered apprenticeship pro-
gram or who employ apprentices in excess
of applicable ratios permitted by the regis-
tered apprenticeship program would need
to pay those apprentices the full prevail-
ing wage rate listed for the classification
of the work performed in the applicable
wage determination.
D. Correction and penalty provisions
1. General Rule
Under section 45(b)(7)(B)(i) and the
proposed regulations, taxpayers would
cure a failure to meet the Prevailing Wage
Requirements by making the correction
and penalty payments described in Section
III.B.3. Section 45(b)(7)(B)(i) provides
that “[i]n the case of any taxpayer which
fails to satisfy the requirement under sub-
paragraph (A)... such taxpayer shall be
deemed to have satisfied such requirement
under such subparagraph with respect to
such facility for any year if, with respect
to any laborer or mechanic who was paid
wages at a rate below the [prevailing rate]
for any period during such year,” the tax-
payer makes the applicable correction
payments and pays the penalty. The phrase
“[i]n the case of any taxpayer which fails
to satisfy the requirement under subpara-
graph (A)...for any period” suggests that
a failure to pay prevailing wages imme-
diately triggers the applicability of the
correction and penalty provisions if the
increased credit is claimed on a return
after a facility is placed in service. The
proposed regulations would require the
payment of prevailing wages at the time
work is performed with respect to the con-
struction, alteration, or repair of a facility
in order to claim the increased credit. The
proposed regulations would also provide
that the requirement becomes binding
only when the increased credit is claimed
on a return. This is consistent with tax
administration regarding the underlying
credit.
Thus, the correction and penalty pay-
ment requirements of section 45(b)(7)
(B)(i) would become applicable to a tax-
payer upon the occurrence of the taxpay-
er’s failure to satisfy the Prevailing Wage
Requirements of section 45(b)(7)(A),
which occurs whenever wages are paid to
a laborer or mechanic below the prevail-
ing wage rates. That failures will occur,
and the obligation to make correction
and penalty payments will have arisen,
during the course of the construction,
alteration, or repair of a qualified facility
must be viewed in the context of taxpayers

September 25, 2023 942 Bulletin No. 2023–39
not needing to satisfy the Prevailing
Wage Requirements in the absence of
an increased credit being claimed on a
return. Thus, the proposed regulations
would provide that the obligation to make
correction payments and pay the penalty
would not become binding until a return is
filed claiming the increased credit, and the
proposed regulations would not require
payment of the correction payment or the
penalty until the time the increased credit
is claimed. The earliest time that a taxpayer
can make a penalty payment to the IRS is
at the time of filing a tax return claiming
the increased credit. However, taxpayers
would retain the option of making correc-
tion payments to laborers and mechan-
ics at any time after the initial payments
were made and in advance of the filing of
a tax return claiming the increased credit
in order to limit the amount of additional
interest the taxpayer must pay at the ele-
vated rates set forth in section 45(b)(7)(B)
(i)(I)(bb).
In general, taxpayers would be obli-
gated to make any necessary correction
payments to any laborer and mechanic on
or before the date a return is filed claim-
ing an increased credit amount. A tax-
payer would also be obligated to make
any penalty payments owed with respect
to a failure to meet the Prevailing Wage
Requirements at the time a return is filed
claiming the increased credit amount.
Under the proposed regulations, whether
taxpayers make the necessary correction
payments and pay the penalty amounts
promptly is one of the facts and circum-
stances that would be considered for
purposes of the increased penalties for
intentional disregard. The proposed regu-
lations would also provide a deadline for
a taxpayer’s ability to use the correction
and penalty provisions to rectify a fail-
ure to comply with the Prevailing Wage
Requirements when the IRS makes a final
determination that a taxpayer has failed to
satisfy the Prevailing Wage Requirements.
Under section 45(b)(7)(B)(iv), once the
IRS makes a final determination that a tax-
payer has failed to satisfy the Prevailing
Wage Requirements, the taxpayer must
make the correction and penalty payments
within 180 days after the final determi-
nation to be eligible to for the increased
credit. The proposed regulations would
clarify that this final determination would
come in the form of a notice sent by the
IRS.
As provided in section 45(b)(7)(B)(ii),
under the proposed regulations, deficiency
procedures would not apply to any penalty
payment required to be made in connec-
tion with a failure to meet the Prevailing
Wage Requirements. The proposed regu-
lations would clarify that although defi-
ciency procedures would not apply to the
penalty payment, deficiency procedures
would apply to any determination by the
IRS disallowing a taxpayer’s claim for the
increased credit.
2. Special Circumstances Involving
Correction and Penalty Payments
Section 45(b)(7)(B)(i) states that a tax-
payer will be deemed to satisfy the pre-
vailing wage requirement “if, with respect
to any laborer or mechanic who was paid
wages at a rate below the rate described
in such subparagraph for any period
during such year, such taxpayer— makes
payment to such laborer or mechanic...”
in the amount of the correction payment
and makes the required penalty payment
to the IRS. The Treasury Department and
the IRS are aware that the construction
of a qualified facility may occur over the
course of several years and some taxpay-
ers who fail to meet the Prevailing Wage
Requirements may be unable to locate all
laborers and mechanics to which the cor-
rection payment must be made. However,
section 45(b)(7)(B)(i) does not excuse
taxpayers from the requirement to make
the correction payment, even if the tax-
payer is unable to locate the laborer or
mechanic. The proposed regulations
would not provide for an exception to the
statutory requirement.
The Treasury Department and the
IRS expect that taxpayers will be able to
establish correction payments even when
a former laborer or mechanic cannot be
located. In general, States have developed
specific rules for the payment of wages to
former laborers and mechanics who can-
not be located. These rules can include dil-
igence requirements to locate the laborer
or mechanic, information reporting obli-
gations to relevant State agencies on the
amount of unclaimed wages, and require-
ments to remit any unclaimed wage
amounts to State control as unclaimed
property after defined holding periods.
Taxpayers may also be able to establish
that correction payments were made by
demonstrating compliance with any with-
holding and information reporting require-
ments with respect to the payments. The
Treasury Department and the IRS request
public comments concerning appropriate
rules for situations in which laborers and
mechanics who are owed wages cannot be
located and how taxpayers may establish
that they have made the correction pay-
ment described in section 45(b)(7)(B)(i)
(I).
The Treasury Department and the
IRS expect that some taxpayers will
have made requests to the DOL for a
supplemental wage determination or a
prevailing wage rate for an additional
classification. It is possible that the
DOL’s response to these requests will not
be issued until after laborers and mechan-
ics have started working on the facility.
The laborers and mechanics who are the
subject of the requests will have already
been engaged in the construction, alter-
ation, or repair, and may have already
been paid wages below the rates later
determined to be prevailing by the DOL.
In this circumstance, the proposed regu-
lations would provide that the taxpayer
would not be considered to have failed to
meet the Prevailing Wage Requirements
with respect to any mechanics or labor-
ers whose wage rate was subject to the
request and who were paid below the pre-
vailing wage rate before the determina-
tion by the DOL if the taxpayer requests
the supplemental wage determination or
prevailing wage rate for an additional
classification before the beginning of
construction (or as soon as practicable
after the start of construction) and makes
a correction payment within 30 days
of the determination to each laborer or
mechanic equal to the difference between
the amount of wages paid to such laborer
or mechanic before the determination
and the amount of wages required by the
Prevailing Wage Requirements to be paid
to such laborer or mechanic during such
period. This exception is intended to mit-
igate a rule that would require taxpayers
to make correction and penalty payments
for failures to pay a prevailing wage rate
that could not be timely determined by
the taxpayer.

Bulletin No. 2023–39 943 September 25, 2023
As previously described, for purposes
of transfers pursuant to section 6418, the
proposed regulations would clarify that
the requirement to make correction and
penalty payments would continue to apply
to an eligible taxpayer who (i) transfers
an increased credit amount under sec-
tion 45(b)(6) as part of a specified credit
portion and (ii) fails to meet the prevail-
ing wage requirement of section 45(b)(7)
(A) with respect to such increased credit
amount. Additionally, the proposed regu-
lations would provide that the obligation to
satisfy the Prevailing Wage Requirements
would not become binding on an eligible
taxpayer until the earlier of: (i) the filing
of the eligible taxpayer’s return for the
taxable year for which the specified credit
portion is determined with respect to the
eligible taxpayer, or (ii) the filing of the
return of the transferee taxpayer for the
year in which the specified credit portion
is taken into account.
The proposed regulations would also
provide that a taxpayer who determines
the underlying credit amount would have
no obligation to comply with the correc-
tion and penalty provisions if the IRS
later determines that the taxpayer was not
entitled to the increased credit amount.
Additionally, if the taxpayer does not cor-
rect and, therefore, is not subsequently
granted the increased credit amount, no
penalty is assessed under section 45(b)(7)
(B).
3. Intentional Disregard
Section 45(b)(7)(B)(iii) provides that if
the failure to ensure that the laborers and
mechanics are paid at the prevailing wage
rate is found to be due to intentional dis-
regard, then the amount of the correction
payment is tripled and the amount of the
penalty payment is doubled. The proposed
regulations would provide that failures to
meet the Prevailing Wage Requirements
would be due to intentional disregard if
they are knowing or willful, which is a
determination that must be made by con-
sidering all relevant facts and circum-
stances. The proposed regulations would
provide a non-exhaustive list of facts that
may be relevant to this determination.
The proposed regulations would
explain that the facts and circumstances
would include consideration of whether
the failure was part of a pattern of con-
duct and whether the taxpayer has been
required to pay the penalty in previous
years. The Treasury Department and
the IRS believe that failures that occur
despite a taxpayer exercising reason-
able diligence weigh against a finding of
a knowing or willful failure. Under the
proposed regulations, taxpayers would
demonstrate reasonable diligence by tak-
ing appropriate steps to determine the
applicable classifications and wage rates
and by seeking to promptly correct any
failures when discovered. Last, the pro-
posed regulations would seek to draw
from behavior that is generally required
of contractors under the DBA and that the
Treasury Department and the IRS believe
would be best practices of taxpayers
seeking to comply with the Prevailing
Wage Requirements. These behaviors
would include posting prevailing wage
rates in a prominent place for the dura-
tion of the construction, alteration, or
repair or otherwise notifying employees
of the applicable prevailing wage rates;
incorporating provisions in any contracts
entered with contractors that require
payment of prevailing wage rates by
the contractors and any subcontractors;
and undertaking quarterly, or more fre-
quent, reviews of wages paid to laborers
and mechanics to ensure that prevail-
ing wages are being paid. The Treasury
Department and the IRS request com-
ments on additional criteria that might be
used as part of a facts and circumstances
analysis of intentional disregard in this
context.
The proposed regulations would also
provide that there would be a rebuttable
presumption against a finding of inten-
tional disregard if the taxpayer makes the
correction and penalty payments before
receiving a notice of an examination
with respect to a return that claimed the
underlying increased credit. The presump-
tion of no intentional disregard would be
intended to encourage taxpayers who
discover a failure to meet the Prevailing
Wage Requirements after filing a return to
use the correction and penalty provisions
promptly.
The Treasury Department and the IRS
request comments on intentional disre-
gard, including but not limited to addi-
tional criteria that might be used as part
of a facts and circumstances analysis of
intentional disregard and the applicabil-
ity of a presumption against a finding of
intentional disregard in certain situations.
4. Penalty Waiver
In general, the IRS may exercise its
discretion to waive or decline to assert
penalties in the interest of sound tax
administration. The proposed regula-
tions would use that discretion to pro-
vide limited penalty waivers for instances
in which the failures to pay prevailing
wages to laborers and mechanics for the
construction, alteration, or repair of a
facility were small in amount or occurred
in a limited number of pay periods. The
Treasury Department and the IRS would
use the waiver authority in a manner that
assists taxpayers seeking to be eligible
for the increased credit while remaining
consistent with the statutory requirement
to ensure that laborers and mechanics are
paid at prevailing wage rates.
The Treasury Department and the IRS
understand that taxpayers intending to pay
prevailing wage rates may make payroll
errors. These errors are likely to range in
scope and frequency. It is also possible that
taxpayers may make classification errors
with respect to work that is performed by
certain laborers or mechanics. The pro-
posed regulations would seek to account
for these likelihoods while continuing to
ensure that laborers and mechanics are
paid according to the applicable prevail-
ing wage rates.
The proposed regulations would pro-
vide that the penalty payment require-
ment would be waived with respect to the
construction, alteration, or repair per-
formed by a laborer or mechanic during
a calendar year if (i) the taxpayer makes
the required correction payment (back
wages and interest) by the earlier of (a)
30 days after the taxpayer became aware
of the error or (b) the date on which the
tax return claiming the increased credit
is filed; and (ii) either: (a) the laborer or
mechanic is paid below the prevailing
wage rate for not more than 10 percent
of all pay periods of the calendar year (or
part thereof) during which the laborer or
mechanic worked on the construction,
alteration, or repair of the facility; or
(b) the difference between the amount

September 25, 2023 944 Bulletin No. 2023–39
the laborer or mechanic was paid for the
calendar year (or part thereof) during
which the laborer or mechanic worked
on the construction, alteration, or repair
of the facility and the amount required
to be paid by the Prevailing Wage
Requirements for the calendar year
is not greater than 2.5 percent of the
amount required under the Prevailing
Wage Requirements. The proposed reg-
ulations would use calendar years to
measure any failures because taxpayers,
contractors, and subcontractors per-
forming construction may have different
taxable years and laborers and mechan-
ics are generally paid on a calendar year
basis. The Treasury Department and the
IRS request comments on the proposed
use of calendar years in place of taxable
years for this purpose.
Pre-hire project labor agreements may
be used to incentivize stronger labor
standards and worker protections in the
types of construction projects for which
taxpayers may seek the increased credit,
and having a project labor agreement in
place may also help ensure compliance
with PWA requirements. For these rea-
sons, the proposed regulations would
also provide that the penalty payment
requirement would not apply with respect
to a laborer or mechanic employed under
a project labor agreement that meets
certain requirements and any correction
payment owed to the laborer or mechanic
is paid on or before a return is filed
claiming an increased credit amount. The
Treasury Department and the IRS request
comments on the proposed treatment of
project labor agreements, other ways
taxpayers might use project labor agree-
ments to meet the PWA requirements,
and the definition of a qualifying project
labor agreement.
The proposed regulations would use
the IRS’s general enforcement discretion
to allow taxpayers to correct limited fail-
ures to pay prevailing wages if the taxpay-
ers pay the mechanics and laborers back
wages and interest in a timely manner
before the increased credit is claimed. The
proposed regulations would not provide
for waiver of the penalty after a return has
been filed claiming the increased credit.
The proposed regulations would seek to
create incentives for taxpayers to self-cor-
rect and promptly pay prevailing wages.
III. Apprenticeship Requirements
A. In general
To satisfy the requirements of sec-
tion 45(b)(8), taxpayers must ensure
that, with respect to the construction of
any qualified facility, the Labor Hours
Requirement, Ratio Requirement, and
Participation Requirement are satisfied.
The proposed regulations would clar-
ify the interaction among these require-
ments. The proposed regulations would
explain that the Labor Hours Requirement
generally would be subject to the Ratio
Requirement. The proposed regulations
would further explain that the Participation
Requirement would apply in addition to
the Labor Hour Requirement and the Ratio
Requirement. Therefore, in order to meet
the requirements of section 45(b)(8), a
taxpayer generally would be subject to all
three components of the Apprenticeship
Requirements. If a taxpayer satisfies the
applicable Labor Hours Requirement but
fails the Participation Requirement, then
the taxpayer would not be eligible for the
increased credit unless the taxpayer com-
plies with the penalty provisions of sec-
tion 45(b)(8)(D) with respect to the total
hours that are not met with respect to the
Participation Requirement or meets the
Good Faith Effort Exception.
1. Labor Hours Requirement
The proposed regulations would
reiterate that under the Labor Hours
Requirement, the taxpayer must ensure
that the “applicable percentage” of the
total labor hours are performed by quali-
fied apprentices.
The Treasury Department and the IRS
understand that certain jurisdictions and
trades have developed pre-apprenticeship
programs that are designed to help indi-
viduals prepare for and succeed in reg-
istered apprenticeship programs but that
are not registered with the DOL under
the Act of August 16, 1937 (commonly
known as the “National Apprenticeship
Act”; 50 Stat. 664, chapter 663; 29
U.S.C. 50 et seq.). Section 45(b)(8)(E)(ii)
defines a qualified apprentice as an indi-
vidual who is employed by the taxpayer
or by any contractor or subcontractor
and who is participating in a registered
apprenticeship program, which is defined
in section 3131(e)(3)(B) as apprentice-
ship programs that are registered under
the National Apprenticeship Act. Thus,
under the proposed regulations, pre-ap-
prenticeship programs would not qualify
as registered apprenticeship programs for
purposes of section 45(b)(8) and hours
worked as part of a pre-apprenticeship
program would not count towards the
Labor Hour Requirement.
2. Ratio Requirement
Under the Ratio Requirement, a tax-
payer must ensure that any applicable
apprenticeship-to-journeyworker ratio is
satisfied. Section 45(b)(8)(B) provides
that the applicable apprenticeship-to-jour-
neyworker ratio is determined by reference
to the ratios of the DOL or the applicable
State apprenticeship agency. Under 29
CFR part 29, registered apprenticeship
programs prescribe a numeric ratio of
apprentices to journeyworkers in their
standards of apprenticeship. This ratio is
intended to ensure that there are enough
journeyworkers to oversee the work of
apprentices. The Treasury Department
and the IRS understand that the DOL and
State apprenticeship agencies review and
approve the prescribed ratio requirements.
As stated in Notice 2022-61, the appli-
cable ratios set by registered apprentice-
ship programs generally apply on a daily
basis. The proposed regulations reiter-
ate this requirement and would provide
that the applicable ratio established by
the apprenticeship program would need
to be satisfied each day during construc-
tion, alteration, or repair of the qualified
facility for which apprentice labor hours
are being claimed. This means that the
number of apprentices would not be per-
mitted to exceed the number set forth in
the ratio because the ratio sets the mini-
mum number of journeyworkers needed
for each apprentice, to ensure adequate
safety and supervision. For example, for
a 1:1 apprentice to journeyworker ratio,
having two apprentices and three journey-
workers on a given day would satisfy the
ratio requirement whereas having three
apprentices and two journeyworkers on a
given day would not.
The proposed regulations would pro-
vide that if the Ratio Requirement is not

Bulletin No. 2023–39 945 September 25, 2023
met on any day, then registered appren-
tices in excess of the applicable ratio
who perform work on a facility would be
required to be paid the full prevailing wage
rate for the hours worked for purposes
of the Prevailing Wage Requirement.
Additionally, the hours worked by the
apprentices on a day where the applica-
ble ratio was not satisfied would not be
counted as apprentice hours for purposes
of calculating the applicable percentage
under the Labor Hours Requirement.
For purposes of the Ratio Requirement,
the proposed regulations would adopt the
DOL definition of journeyworker in 29
CFR 29.2, which defines a journeyworker
as a laborer or mechanic who has attained
a level of skill, abilities and competencies
recognized within an industry as hav-
ing mastered the skills and competencies
required for the occupation. A mentor,
technician, specialist, or other skilled
individual who has documented sufficient
skills and knowledge of an occupation,
either through formal apprenticeship or
through practical on-the-job experience
and formal training may also be a jour-
neyworker. The Treasury Department
and the IRS request comments on the
application of the Ratio Requirement for
purposes of satisfying the Apprenticeship
Requirement.
3. Participation Requirement
The Treasury Department and the IRS
propose to interpret the Participation
Requirement as designed to prevent tax-
payers from satisfying the Labor Hours
Requirement by only hiring apprentices
to preform one type of work and instead
encourages taxpayers to use apprentices
across the full range of work performed
with respect to the facility. The pro-
posed regulations would clarify that the
Participation Requirement would be sat-
isfied as long as the taxpayer, contractor,
or subcontractor employs one or more
apprentices to perform work on the facil-
ity and would not be a daily requirement.
The proposed regulations would also clar-
ify that it would be the responsibility of
the taxpayer to ensure that any contractor
or subcontractor performing work on the
facility with four or more employees who
perform such work on the facility has hired
one or more apprentices in accordance
with the Participation Requirement of
section 45(b)(8)(C). Taxpayers who fail
to meet the Participation Requirement
would be subject to the penalty provisions
of section 45(b)(8)(D) even if the taxpayer
otherwise satisfies the applicable Labor
Hours Requirement unless the Good Faith
Effort Exception applies.
B. Exceptions
1. In General
Section 45(b)(8)(D) and the pro-
posed regulations would allow taxpay-
ers who fail to meet the Apprenticeship
Requirements to nonetheless qualify
for the increased credit by curing their
failures. To cure a failure to meet the
Apprenticeship Requirements, taxpayers
would be required to satisfy the Good Faith
Effort Exception from the Apprenticeship
Requirements or pay a penalty if they
do not qualify for the Good Faith Effort
Exception.
2. Good Faith Effort Exception
Section 45(b)(8)(D)(ii) provides
that taxpayers are deemed to satisfy the
Apprenticeship Requirements if they have
requested qualified apprentices from a
registered apprenticeship program and
such request has been denied for reasons
other than the taxpayer, contractor, or sub-
contractor’s refusal to comply with the
program’s standards and requirements,
or if the program fails to respond within
five business days of receiving a request.
Notice 2022-61 provided that taxpay-
ers could satisfy the Good Faith Effort
Exception if the taxpayer requested quali-
fied apprentices “in accordance with usual
and customary business practices for reg-
istered apprenticeship programs in a par-
ticular industry.”
The Treasury Department and the IRS
believe that additional guidance explain-
ing the “usual and customary” standard
would be useful. The proposed regulations
would require the taxpayer, contractor, or
subcontractor to make a written request
to at least one registered apprenticeship
program that has a geographic area of
operation that includes the location of the
facility, or that can reasonably be expected
to provide apprentices to the location of
the facility, trains apprentices in the occu-
pation(s) needed by the taxpayer, con-
tractors, or subcontractors performing
construction, alteration, or repair with
respect to the facility, and has a usual and
customary business practice of entering
into agreements with employers for the
placement of apprentices in the occupa-
tion for which they are training, pursuant
to its standards and requirements.
The Treasury Department and the IRS
anticipate that a taxpayer may need to sub-
mit a request to more than one apprentice-
ship program in order to meet the Good
Faith Effort Exception based on the size of
the project, the number of contractors or
subcontractors and the anticipated number
of labor hours for which apprentices are
needed. Although it may be possible for
a taxpayer to meet all of its Labor Hours
Requirement from one apprenticeship
program, it is likely that given the multiple
occupations involved in the construction,
alteration, or repair of a qualified facility,
the taxpayer would need to request appren-
tices from more than one apprenticeship
program in order to satisfy the Labor
Hours Requirement and the Participation
Requirement with respect to that facility.
This is in part because a registered appren-
ticeship program typically trains appren-
tices in a single occupation, whereas more
than one occupation may be needed to
meet the Labor Hours Requirement and
the Participation Requirement. A tax-
payer, contractor, or subcontractor would
be expected to estimate the number of
apprentices needed and the occupations
for which they are needed, and to submit
its request for apprentices accordingly.
The proposed regulations would
require the written request to include infor-
mation concerning the dates of employ-
ment, the occupation or classification
needed, the location and type of work to
be performed, the number of apprentices
needed, the number of hours the appren-
tices will work, and the name and contact
information of the person requesting the
apprentices. The written request would
also be required to include a statement that
the request for apprentices is made with an
intent to employ apprentices in the occu-
pation for which they are being trained
and in accordance with the requirements
and standards of the registered appren-
ticeship program. The Good Faith Effort

September 25, 2023 946 Bulletin No. 2023–39
Exception’s requirement to request quali-
fied apprentices from a registered appren-
ticeship program would necessitate that
the taxpayer ascertain its workforce needs
to determine how many qualified appren-
tices it needs to employ in order to meet
the Apprenticeship Requirements, iden-
tify registered apprenticeship programs
in the occupations needed by the tax-
payer and its contractors and subcontrac-
tors, and demonstrate capacity to employ
apprentices in the occupations for which
apprentices are requested.
A denial of a request by a taxpayer,
contractor, or subcontractor for a qualified
apprentice would not automatically qual-
ify the taxpayer for the Good Faith Effort
Exception. The proposed regulations
would require the taxpayer, contractor,
or subcontractor to submit an additional
request within 120 days of a previously
denied request. The proposed regulations
would also clarify that a denial of a request
means that the registered apprenticeship
program denied the request in its entirety.
A registered apprenticeship program’s
response that it could partially fulfill the
request in the occupation(s) for which it
trains apprentices would not constitute a
denial of the request with respect to the
parts of the request that could be fulfilled.
Under the proposed regulations, the
Good Faith Effort Exception would be
specific to the request for apprentices
made by the taxpayer, contractor, or
subcontractor, including the number of
apprentice hours for which the request for
apprentices has been made to a registered
apprenticeship program. Thus, the Good
Faith Effort Exception would apply to the
specific portion of the request for appren-
tices that was denied or not responded to
and would be subject to the requirement
to submit an additional request after 120
days. The Treasury Department and the
IRS request comments on this proposed
approach.
Consistent with section 45(b)(8)(D)
(ii)(I), the proposed regulations would
require that the request cannot have been
denied because of a refusal of the taxpayer
or any contractor or subcontractor to com-
ply with the requirements and standards of
the apprenticeship program. For example,
if a registered apprenticeship program
requires a requesting employer to enter
into an agreement with the registered
apprenticeship program, then a denial of
the request because the employer refused
to enter into the agreement would not be
a valid denial for purposes of the Good
Faith Effort Exception. Section 45(b)(8)
(D)(ii) provides that taxpayers may also
be deemed to satisfy the Good Faith Effort
Exception if a registered apprenticeship
program fails to respond to a request for
a qualified apprentice. The proposed reg-
ulations explain that an acknowledgement
of receipt by a registered apprenticeship
program would constitute a response for
purposes of section 45(b)(8)(D)(ii)(II),
and a taxpayer would be unable to rely
upon the Good Faith Effort Exception in
such circumstances.
The Treasury Department and the
IRS understand that apprenticeship pro-
grams are not uniform across industries
and localities, including the manner and
processes by which apprentices may be
requested and supplied for purposes of sat-
isfying the Apprenticeship Requirements.
The Treasury Department and the IRS also
understand that in many cases employers
are sponsors of registered apprenticeship
programs and directly employ apprentices.
In those instances, a taxpayer, contrac-
tor, or subcontractor would likely obtain
apprentices to meet the labor hours and
participation requirements through their
own registered apprenticeship programs
rather than requesting apprentices from
other registered apprenticeship programs.
In addition, the Treasury Department
and the IRS are aware that the DOL’s
Office of Apprenticeship, as well as State
apprenticeship agencies, routinely pro-
vide technical expertise on registered
apprenticeship program matters, includ-
ing identifying registered apprentice-
ship programs, and assisting employers
seeking to register their own programs.
10

The Treasury Department and the IRS
request comments on whether and how
the proposed Good Faith Effort Exception
might take into account a situation where
a taxpayer contacts the DOL’s Office of
Apprenticeship or the appropriate State
apprenticeship agency regarding their
apprenticeship request, in addition to con-
tacting a specific registered apprentice-
ship program or programs. The Treasury
Department and the IRS also request com-
ments on how the proposed Good Faith
Effort Exception will align with current
practices with respect to utilization of
apprentices in the construction, alteration,
or repair of facilities. In particular, the
Treasury Department and the IRS request
comments on the role of collective bar-
gaining agreements, project labor agree-
ments, and other agreements to satisfy the
request for apprentices under the Good
Faith Effort Exception.
3. Opportunity to Cure
If a taxpayer does not qualify for the
Good Faith Effort Exception under sec-
tion 45(b)(8)(D)(ii), section 45(b)(8)(D)
(i)(II) provides that the taxpayer is not
treated as failing to satisfy the require-
ments of section 45(b)(8)(A) and (C)
if the taxpayer pays a penalty to the
Secretary. The proposed regulations
explain that, with respect to failures to sat-
isfy the Labor Hours Requirement or the
Participation Requirement, the amount of
the penalty would be equal to $50 mul-
tiplied by the total labor hours for which
the taxpayer failed to meet the Labor
Hours Requirement and the Participation
Requirement. The proposed regulations
would provide that the total labor hours
by which the taxpayer failed to meet the
Labor Hours Requirement would be cal-
culated by subtracting the total labor hours
worked by all qualified apprentices con-
sistent with the Ratio Requirement from
the total labor hours that should have been
worked by qualified apprentices under
section 45(b)(8)(A)(ii) to satisfy the appli-
cable percentage.
Section 45(b)(8)(C) does not spec-
ify the number of hours that apprentices
must work to satisfy the Participation
Requirement. The proposed regula-
tions would address this issue by pro-
viding that the number of labor hours
that an apprentice was required to work
for purposes of calculating the penalty
for failing to satisfy the Participation
Requirement would be equal to the total
10
Information is available at https://www.apprenticeship.gov/about-us/apprenticeship-system.

Bulletin No. 2023–39 947 September 25, 2023
number of labor hours performed for the
taxpayer, contractor, or subcontractor
during construction, alteration, or repair
of the facility divided by the total num-
ber of individuals employed by that tax-
payer, contractor, or subcontractor who
performed construction, alteration, or
repair work on the facility. This calcu-
lation would be specific to the taxpayer,
contractor, or subcontractor who failed to
meet the Participation Requirement. For
example, if the taxpayer failed to meet
the Participation Requirement, then the
penalty would be calculated with refer-
ence to the total number of labor hours
performed only by those individuals who
worked directly for the taxpayer, and
would not include the labor hours worked
by any individuals who worked directly
for a contractor or subcontractor that sat-
isfied the Participation Requirement.
If the taxpayer failed to meet both
the Labor Hours Requirement and the
Participation Requirement, then the pen-
alty would equal the sum of the penalty
for the failure to meet the Labor Hours
Requirement plus the penalty for failure
to meet the Participation Requirement.
If the failure to meet the Labor
Hours Requirement or the Participation
Requirement is determined to be the result
of intentional disregard, then the amount
of the penalty payment is enhanced ten-
fold – from $50 to $500 per labor hour.
The proposed regulations would provide
that failures to meet the Apprenticeship
Requirements would be due to intentional
disregard if they are knowing or willful,
considering all relevant facts and circum-
stances. The proposed regulations would
provide a non-exhaustive list of facts
and circumstances that may be relevant
to determining whether the failure was
knowing or willful.
The proposed regulations would also
provide the penalty payment require-
ment for failures to meet the Labor
Hours Requirement or the Participation
Requirement would not apply if there is in
place a project labor agreement that meets
certain requirements.
The proposed regulations also state
that there would be a rebuttable presump-
tion against a finding of intentional dis-
regard if the taxpayer makes the penalty
payments before receiving a notice of an
examination with respect to the claim for
the increased credit. The presumption of
no intentional disregard is intended to
incentivize taxpayers who initially fail to
meet the Apprenticeship Requirements to
make use of the cure provision promptly.
Consistent with the correction and
penalty payments under the Prevailing
Wage Requirements, the hiring of quali-
fied apprentices is a factor in the taxpay-
er’s eligibility for the increased credit
and therefore applicable to determining
the credit. Additionally, although the
Apprenticeship Requirements must be
satisfied contemporaneously with the
construction, alteration, or repair of the
qualified facility and before the filing of
the taxpayer’s tax return, the obligation to
meet the Apprenticeship Requirements is
not binding on the eligible taxpayer until
the earlier of: (i) the filing of the eligible
taxpayer’s return for the taxable year for
which the specified credit portion is deter-
mined with respect to the eligible tax-
payer, or (ii) the filing of the return of the
transferee taxpayer for the year in which
the specified credit portion is taken into
account. As a result, the proposed regu-
lations would provide that a penalty pay-
ment that is required to retain the increased
credit because of the failure of the eligible
taxpayer to satisfy the Apprenticeship
Requirements would remain the responsi-
bility of the eligible taxpayer following a
transfer of a specified credit portion pur-
suant to section 6418.
IV. Other Code Sections Applying PWA
Provisions for Increased Credit and
Deduction Amounts
A. Section 30C
Section 30C provides a credit for the
cost of any qualified alternative fuel vehi-
cle refueling property placed in service
during the taxable year. For properties
placed in service before January 1, 2023,
the credit is equal to 30 percent. For prop-
erties placed in service after December 31,
2022, the credit is equal to 30 percent (6
percent for property of a character sub-
ject to depreciation). If a taxpayer satis-
fies the PWA requirements or the BOC
Exception, then the credit determined
under section 30C(a) for any qualified
alternative fuel vehicle refueling property
of a character subject to an allowance for
depreciation that is part of such project is
multiplied by five.
To satisfy the Prevailing Wage
Requirements under section 30C(g)(2)
(A), a taxpayer must ensure that any labor-
ers and mechanics employed by the tax-
payer or any contractor or subcontractor
in the construction of any qualified alter-
native fuel vehicle refueling property that
is part of such project are paid wages at
rates not less than the prevailing rates for
construction, alteration, or repair of a sim-
ilar character in the locality in which the
project is located. Section 30C(g)(2)(B)
provides that rules similar to section 45(b)
(7)(B) apply for purposes of the correc-
tion and penalty related to the failure to
satisfy the Prevailing Wage Requirements.
Section 30C(g)(3) provides that rules sim-
ilar to section 45(b)(8) apply for purposes
of the Apprenticeship Requirements.
The proposed regulations would pro-
vide that if a taxpayer satisfies the PWA
requirements, then the credit determined
under section 30C(a) for any qualified
alternative fuel vehicle refueling property
of a character subject to an allowance for
depreciation that is part of such project
would be multiplied by five.
B. Section 45L
Section 45L provides a credit for a
qualified new energy efficient home (qual-
ified home) that is constructed by an eli-
gible contractor and acquired by a person
from that eligible contractor for use as a
residence during the taxable year. Under
section 45L(b)(2), a qualified home is a
dwelling unit located in the United States,
the construction of which is substantially
completed after August 8, 2005, and that
meets the energy saving requirements of
section 45L(c). Under section 45L(b)(1),
an eligible contractor is the person who con-
structed the qualified home, or in the case
of a qualified home that is a manufactured
home, the manufactured home producer of
that home. For a qualified home acquired
after December 31, 2022, and before
January 1, 2033, that is part of a building
eligible to participate in the Energy Star
Multifamily New Construction Program
and meets the energy saving requirements
under section 45L(c)(1)(A), the credit is
$500 ($2,500 if the taxpayer satisfies the
Prevailing Wage Requirements). For a

September 25, 2023 948 Bulletin No. 2023–39
qualified home acquired after December
31, 2022, and before January 1, 2033,
that is part of a building eligible to par-
ticipate in the Energy Star Multifamily
New Construction Program and meets
the energy saving requirements under
section 45L(c)(1)(B), the credit is $1,000
($5,000 if the taxpayer satisfies the
Prevailing Wage Requirements).
To satisfy the Prevailing Wage
Requirements under section 45L(g)(2)
(A), a taxpayer must ensure that any
laborers and mechanics employed by the
taxpayer or any contractor or subcontrac-
tor in the construction of any qualified
home described in section 45L(a)(2)(B)
are paid wages at rates not less than the
prevailing rates for construction, alter-
ation, or repair of a similar character in
the locality in which the qualified home
is located. Section 45L(g)(2)(B) provides
that rules similar to section 45(b)(7)(B)
apply for purposes of the correction and
penalty related to the failure to satisfy the
Prevailing Wage Requirements. There are
no Apprenticeship Requirements with
respect to section 45L.
The proposed regulations would
provide that if a taxpayer satisfies the
Prevailing Wage Requirements, then for a
qualified home that is part of a building
eligible to participate in the Energy Star
Multifamily New Construction Program
acquired after December 31, 2022, and
before January 1, 2033, the credit would
be $2,500 if the qualified home meets the
energy saving requirements under sec-
tion 45L(c)(1)(A), and the credit would
be $5,000 if the qualified home meets the
energy saving requirements under sec-
tion 45L(c)(1)(B).
C. Section 45Q
Section 45Q provides a credit for the
capture and sequestration of qualified
carbon oxide. The credit is the sum of
the specified dollar amount, as provided
by section 45Q(a) or (b), multiplied by
the metric ton of each qualified carbon
oxide specified under section 45Q(a).
If a taxpayer satisfies the PWA require-
ments or the BOC Exception with respect
to any qualified facility or any carbon
capture equipment placed in service at
that facility, then the credit determined
under section 45Q(a) is multiplied by
five. For carbon capture equipment that
will be placed in service at a qualified
facility, the construction of which begins
on or after January 29, 2023, the section
45Q(a) credit is multiplied by five only
if the PWA requirements are satisfied
with respect to both the qualified facility
and the carbon capture equipment. For
carbon capture equipment, the construc-
tion of which begins on or after January
29, 2023, that will be placed in service
at a qualified facility, the construction of
which began before January 29, 2023, the
PWA requirements apply only to the car-
bon capture equipment.
To satisfy the Prevailing Wage
Requirements under section 45Q(h)(3)
(A), the attributable taxpayer described
in section 45Q(f)(3)(A) and §1.45Q-1(h)
(1) must ensure that any laborers and
mechanics employed by the taxpayer or
any contractor or subcontractor in: (i) the
construction of any qualified facility and
any carbon capture equipment placed in
service at that facility, and (ii) the alter-
ation or repair of that facility or equip-
ment (with respect to any taxable year,
for any portion of such taxable year that
is within the 12-year period beginning
on the date the facility or equipment is
originally placed in service), are paid
wages at rates not less than the prevail-
ing rates for construction, alteration, or
repair of a similar character in the local-
ity in which that facility and equipment
are located. Section 45Q(h)(3)(B) pro-
vides that rules similar to section 45(b)(7)
(B) apply for purposes of the correction
and penalty related to the failure to sat-
isfy the Prevailing Wage Requirements.
Section 45Q(h)(4) provides that rules sim-
ilar to section 45(b)(8) apply for purposes
of the Apprenticeship Requirements.
The proposed regulations would pro-
vide rules based on the statutory rules.
D. Section 45U
Section 45U provides a credit for
electricity produced by the taxpayer at a
qualified nuclear power facility and sold
by the taxpayer to an unrelated person
during the taxable year. Generally, for
taxable years beginning after December
31, 2023, the credit is equal to the amount
by which the product of 0.3 cents multi-
plied by the kilowatt hours of electricity
produced by the taxpayer at a qualified
nuclear power facility and sold by the
taxpayer to an unrelated person during
the taxable year, exceeds the applicable
“reduction amount” for such taxable year
that is determined under section 45U(b)
(2). If a taxpayer satisfies the Prevailing
Wage Requirements, then the credit deter-
mined under section 45U(a) for a qual-
ified nuclear power facility is multiplied
by five.
To satisfy the Prevailing Wage
Requirements under section 45U(d)(2)
(A), a taxpayer must ensure that any
laborers and mechanics employed by the
taxpayer or any contractor or subcontrac-
tor in the alteration or repair of any quali-
fied nuclear power facility are paid wages
at rates not less than the prevailing rates
for alteration or repair of a similar char-
acter in the locality in which that facility
is located. Section 45U(d)(2)(B) provides
that rules similar to section 45(b)(7)(B)
apply for purposes of the correction and
penalty related to the failure to satisfy the
Prevailing Wage Requirements. There are
no Apprenticeship Requirements with
respect to section 45U.
The proposed regulations would
provide that if a taxpayer satisfies the
Prevailing Wage Requirements, then the
credit determined under section 45U(a)
for any qualified nuclear power facility
would be multiplied by five.
E. Section 45V
Section 45V provides a credit for the
production of qualified clean hydrogen
by the taxpayer during the taxable year
at a qualified clean hydrogen produc-
tion facility during the 10-year period
beginning on the date the facility was
originally placed in service. In general,
for hydrogen produced after December
31, 2022, the credit is the product of the
kilograms of qualified clean hydrogen
produced multiplied by the applicable
amount. The applicable amount is equal
to the applicable percentage of $0.60,
which is determined under section 45V(b)
(2). If a taxpayer satisfies either the PWA
requirements, or the BOC Exception
and the Prevailing Wage Requirements
for alterations or repairs occurring after
January 29, 2023, then the credit amount
determined under section 45V(a) for any

Bulletin No. 2023–39 949 September 25, 2023
qualified clean hydrogen produced by
the taxpayer during the taxable year at a
qualified clean hydrogen production facil-
ity is multiplied by five. A taxpayer must
satisfy the Prevailing Wage Requirements
with respect to an alteration or repair that
occurs after January 29, 2023, notwith-
standing the BOC Exception regarding the
construction of that qualified facility.
To satisfy the Prevailing Wage
Requirements under section 45V(e)(3)
(A), a taxpayer must ensure that any
laborers and mechanics employed by the
taxpayer or any contractor or subcontrac-
tor in: (i) the construction of any qualified
clean hydrogen production facility, and
(ii) the alteration or repair of that facility
(with respect to any taxable year, for any
portion of such taxable year that is within
the 10-year credit period beginning on the
date that the facility was originally placed
in service),
11
are paid wages at rates not
less than the prevailing rates for con-
struction, alteration, or repair of a simi-
lar character in the locality in which that
facility is located. Section 45V(e)(3)(B)
provides that rules similar to section 45(b)
(7)(B) apply for purposes of the correc-
tion and penalty related to the failure to
satisfy the Prevailing Wage Requirements.
Section 45V(e)(4) provides that rules sim-
ilar to section 45(b)(8) apply for purposes
of the Apprenticeship Requirements.
The proposed regulations would pro-
vide that if a taxpayer satisfies either the
PWA requirements, or the BOC Exception
and the Prevailing Wage Requirements
for alterations or repairs occurring after
January 29, 2023, then the credit amount
determined under section 45V(a) for any
qualified clean hydrogen produced by the
taxpayer during the taxable year at a qual-
ified clean hydrogen production facility
would be multiplied by five.
F. Section 45Y
Section 45Y provides a credit for clean
electricity produced by the taxpayer at a
qualified facility and sold to an unrelated
person, or in the case of a qualified facil-
ity which is equipped with a metering
device which is owned and operated by
an unrelated person, sold, consumed, or
stored by the taxpayer during the taxable
year, for facilities placed in service after
December 31, 2024. Generally, the credit
for any taxable year is the product of the
kilowatt hours of electricity multiplied
by 0.3 cents. If a taxpayer satisfies the
PWA requirements, the One Megawatt
Exception, or the BOC Exception, then the
applicable amount under section 45Y(a)
(2) equals 1.5 cents.
Section 45Y(g)(9) provides that
rules similar to section 45(b)(7) apply
for purposes of the Prevailing Wage
Requirements. Section 45Y(g)(10) pro-
vides that rules similar to section 45(b)(8)
apply for purposes of the Apprenticeship
Requirements.
The proposed regulations would pro-
vide that if a taxpayer satisfies the PWA
requirements, then the applicable amount
under section 45Y(a)(2) would equal 1.5
cents.
G. Section 45Z
Section 45Z provides a credit for clean
transportation fuel produced by the tax-
payer at a qualified facility after December
31, 2024, and sold to an unrelated person
in a manner described in section 45Z(a)
(4). Generally, the credit is the product of
the applicable amount (determined under
section 45Z(a)(2)) per gallon(s) of trans-
portation fuel multiplied by the emission
factor for the fuel (determined under sec-
tion 45Z(b)). If a taxpayer satisfies the
PWA requirements (modified for qualified
facilities placed in service before January
1, 2025), then the applicable amount
determined under section 45Z(a)(2)(B) is
$1.00, otherwise the applicable amount is
20 cents.
In general, section 45Z(f)(6)(A) pro-
vides that rules similar to section 45(b)(7)
apply for purposes of the Prevailing Wage
Requirements. However, section 45Z(f)
(6)(B) provides a special rule for qualified
facilities placed in service before January
1, 2025. Under section 45Z(f)(6)(B), the
Prevailing Wage Requirements do not
apply with respect to construction of that
facility but do apply to the alteration or
repair of that facility with respect to any
taxable year beginning after December
31, 2024, for which the section 45Z credit
is allowed with respect to that facility.
Section 45Z(f)(7) provides that rules sim-
ilar to section 45(b)(8) apply for purposes
of the Apprenticeship Requirements.
The proposed regulations would pro-
vide that if a taxpayer satisfies the PWA
requirements, then the applicable amount
determined under section 45Z(a)(2)(B)
would equal $1.00.
H. Section 48
Section 48 provides a credit for an
energy property placed in service during a
taxable year. For properties placed in ser-
vice after December 31, 2022, the credit
is generally six percent of the basis of
property described in section 48(a)(2)(A)
(i) and two percent of the basis of property
described in section 48(a)(2)(A)(ii). If a
taxpayer satisfies the PWA requirements,
the One Megawatt Exception, or the BOC
Exception, then the credit determined
under section 48(a) for the basis of each
energy property placed in service during
the taxable year is multiplied by five.
To satisfy the Prevailing Wage
Requirements under section 48(a)(10)
(A), a taxpayer must ensure that any
laborers and mechanics employed by
the taxpayer or any contractor or sub-
contractor in: (i) the construction of any
energy project, and (ii) the alteration or
repair of that energy project (for the five-
year period beginning on the date such
project is originally placed in service),
are paid wages at rates not less than the
prevailing rates for construction, alter-
ation, or repair of a similar character in
the locality in which that energy project
is located. Section 48(a)(10)(B) provides
that rules similar to section 45(b)(7)
(B) apply for purposes of the correction
and penalty related to the failure to sat-
isfy the Prevailing Wage Requirements.
Section 48(a)(10)(C) provides a special
recapture rule with respect to alterations
11
Section 45V(e)(3)(A)(ii) requires the payment of wages at prevailing rates “with respect to any taxable year, for any portion of such taxable year which is within the period described in
subsection (a)(2)”, with respect to the alteration or repair of such facility. There is no “period described in subsection (a)(2).” The Treasury Department and the IRS propose to interpret
the reference to “subsection (a)(2)” as a reference to section 45V(a)(1) where the 10-year credit period is identified, and the proposed regulations would apply to the period described in
section 45V(a)(1).

September 25, 2023 950 Bulletin No. 2023–39
or repairs that occur during the five-year
period after the energy project is placed
in service if that taxpayer does not satisfy
the Prevailing Wage Requirements. In
general, the section 48(a)(10)(C) recap-
ture is determined under similar rules to
those provided for in section 50. Subject
to the section 48(a)(10)(C) recapture, the
taxpayer is deemed at the time the quali-
fied energy project is placed in service to
satisfy the Prevailing Wage Requirements
for alterations or repairs for the five-year
period beginning after such project is
originally placed in service. Section 48(a)
(11) provides that rules similar to sec-
tion 45(b)(8) apply for purposes of the
Apprenticeship Requirements.
The proposed regulations would pro-
vide that if a taxpayer satisfies the PWA
requirements, then the credit determined
under section 48 for any qualified energy
project would be multiplied by five.
I. Section 48C
Section 48C provides a credit for
a qualified investment in a qualifying
advanced energy project for that tax-
able year (Section 48C Credit). The
IRA added section 48C(e) to the Code,
extending the Section 48C Credit to pro-
vide an additional Section 48C Credit
allocation of $10 billion. Generally, the
credit amount for Section 48C Credits
allocated pursuant to section 48C(e) is
equal to six percent of the basis of the
eligible property. If a taxpayer satis-
fies the PWA requirements, then the
credit amount determined under sec-
tion 48C(a) is 30 percent.
To satisfy the Prevailing Wage
Requirements under section 48C(e)(5)
(A), a taxpayer must ensure that with
respect to a qualifying advanced energy
project, any laborers and mechanics
employed by the taxpayer or any contrac-
tor or subcontractor in the re-equipping,
expansion, or establishment of a manu-
facturing facility are paid wages at rates
not less than the prevailing rates for con-
struction, alteration, or repair of a simi-
lar character in the locality in which the
project is located. Section 48C(e)(5)(B)
provides that rules similar to section 45(b)
(7)(B) apply for purposes of the correc-
tion and penalty related to the failure to
satisfy the Prevailing Wage Requirements.
Section 48C(e)(6) provides that rules sim-
ilar to section 45(b)(8) apply for purposes
of the Apprenticeship Requirements.
The Treasury Department and the IRS
issued Notice 2023-18, 2023-10 I.R.B.
508, and Notice 2023-44, 2023-25 I.R.B.
924, to provide guidance under sec-
tion 48C(e). These notices provide a pro-
cess for the IRS to allocate Section 48C
Credits. To prevent an overallocation
of Section 48C Credits, section 5.07 of
Notice 2023-18 requires a taxpayer that
applies for a Section 48C Credit allocation
at the 30 percent credit amount to confirm
that the taxpayer intends to satisfy the
PWA requirements. Section 5.07 of Notice
2023-18 additionally requires that when
the taxpayer provides notification that it
placed the project in service, the taxpayer
must also confirm that it satisfied the PWA
requirements.
The proposed regulations would pro-
vide that if a taxpayer satisfies both the
PWA requirements and the PWA confir-
mation requirements provided in Notice
2023-18 (or any subsequent guidance),
then the credit amount for Section 48C
Credits allocated pursuant to sec-
tion 48C(e) would be equal to 30 percent.
J. Section 48E
Section 48E provides a clean electric-
ity investment credit for the investment
in qualified facilities and energy storage
technology placed in service for the tax-
able year after December 31, 2024. The
credit is generally six percent of the qual-
ified investment. If a taxpayer satisfies the
PWA requirements, the One Megawatt
Exception, or the BOC Exception, then
the credit amount determined under sec-
tion 48E(a) for a qualified investment is
30 percent.
Section 48E(d)(3) provides that
rules similar to section 48(a)(10) apply
for purposes of the Prevailing Wage
Requirements. Section 48E(d)(4) pro-
vides that rules similar to section 45(b)(8)
apply for purposes of the Apprenticeship
Requirements.
The proposed regulations would pro-
vide that if a taxpayer satisfies the PWA
requirements, then the credit amount
determined under section 48E(a) for a
qualified investment would be equal to 30
percent.
K. Section 179D
Section 179D(a) provides a deduction
for the cost of energy efficient commer-
cial building property placed in service
during the taxable year. Section 179D(f)
provides an alternative deduction for
energy efficient building retrofit property
(alternative deduction). For taxable years
beginning after December 31, 2022, sec-
tion 179D(b) provides that the deduction
cannot exceed the excess (if any) of the
product of the applicable dollar value, and
the square footage of the building, over
the aggregate amount of deductions under
section 179D(a) and section 179D(f) with
respect to the building for the three tax-
able years immediately preceding the tax-
able year (or for any taxable year ending
during the four-taxable-year period end-
ing with such taxable year, if the deduc-
tion is allowed to a person other than the
taxpayer). The alternative deduction is an
amount equal to the lesser of the “excess”
described in section 179D(b) (determined
by substituting “energy use intensity” for
“total annual energy and power costs”) or
the aggregate adjusted basis (determined
after taking into account all adjustments
with respect to the taxable year other than
the reduction under section 179D(e)) of
energy efficient building retrofit property
placed in service by the taxpayer pursuant
to a qualified retrofit plan. The applicable
dollar value is $0.50 increased by $0.02
(but not above $1.00) for each percentage
point by which the total annual energy
and power costs (or energy use inten-
sity, in the case of the alternative deduc-
tion) for the building are certified to be
reduced by a percentage greater than 25
percent. If a taxpayer satisfies the PWA
requirements or the beginning of installa-
tion exception, then the applicable dollar
value of the deduction determined under
section 179D(b)(2) is $2.50 increased by
$0.10 (but not above $5.00).
To satisfy the Prevailing Wage
Requirements under section 179D(b)
(4)(A), a taxpayer must ensure that any
laborers and mechanics employed by the
taxpayer or any contractor or subcon-
tractor in the installation of any property
are paid wages at rates not less than the
prevailing rates for construction, alter-
ation, or repair of a similar character
in the locality in which the property is

Bulletin No. 2023–39 951 September 25, 2023
located. Section 179D(b)(4)(B) provides
that rules similar to section 45(b)(7)
(B) apply for purposes of the correction
and penalty related to the failure to sat-
isfy the Prevailing Wage Requirements.
Section 179D(b)(5) provides that rules
similar to section 45(b)(8) apply for pur-
poses of the Apprenticeship Requirements.
The proposed regulations would pro-
vide that if a taxpayer satisfies the PWA
requirements, then the applicable dol-
lar value of the deduction determined
under section 179D(b)(2) would be $2.50
increased by $0.10 (but not above $5.00).
V. Recordkeeping Requirements
A. In general
Section 45(b)(12) authorizes the
Secretary to issue such regulations or
other guidance as the Secretary deter-
mines necessary to carry out the purposes
of section 45(b), including regulations or
other guidance that provide requirements
for recordkeeping or information report-
ing for purposes of administering the
requirements of section 45(b).
Section 6001 provides that every per-
son liable for any tax imposed by the Code,
or for the collection thereof, must keep
such records as the Secretary may from
time to time prescribe. Section 1.6001-
1(a) provides that any person subject to
income tax must keep such permanent
books of account or records, including
inventories, as are sufficient to establish
the amount of gross income, deductions,
credits, or other matters required to be
shown by such person in any return of
such tax. Section 1.6001-1(e) provides
that the books and records required by
§1.6001-1 must be retained so long as
the contents thereof may become mate-
rial in the administration of any Internal
Revenue law.
B. Recordkeeping with respect to
Prevailing Wage Requirements
The Copeland Act requires contrac-
tors and subcontractors subject to the
DBA to submit certified weekly payroll
records reflective of work performed
on a covered contract to the contracting
agency. This requirement to comply with
the DBA is statutory and inherent in the
award of a contract and the submission of
weekly payroll records becomes part of
the terms of the awarded contract. In con-
trast, under section 45(b)(7)(A), although
the requirement to pay prevailing wages
is triggered by the beginning of construc-
tion and continues over the entire course
of a project, the requirement to pay pre-
vailing wages becomes binding only
when a tax return claiming the increased
credit is filed. Thus, because the increased
credit is not claimed until the time of fil-
ing a return, which will only occur after
a qualified facility is placed in service,
the proposed regulations would not adopt
the Copeland Act requirement to report
payroll records to the IRS on a weekly
basis in advance of claiming an increased
credit. The Treasury Department and
the IRS understand that adoption of the
Copeland Act reporting regime for pur-
poses of section 45(b)(7)(A) would not
assist the IRS with administering the
provision.
Instead, the proposed regulations
would provide that taxpayers would be
required to establish compliance with
the Prevailing Wage Requirements at the
time a return claiming the increased credit
is filed. The proposed regulations would
provide that a taxpayer would be required
to do so on such forms and in such man-
ner as the Commissioner provides in IRS
forms, publications, or other guidance.
The Treasury Department and the IRS
expect that taxpayers will be required to
report at the time of filing a return the fol-
lowing information: (i) the location and
type of qualified facility; (ii) the applica-
ble wage determinations for the type and
location of the facility; (iii) the wages paid
(including any correction payments) and
hours worked for each of the laborer or
mechanic classifications engaged in the
construction, alteration, or repair of the
facility; (iv) the number of workers who
received correction payments; (v) the
wages paid and hours worked by qual-
ified apprentices for each of the laborer
or mechanic classifications engaged in
the construction, alteration, or repair of
the facility; (vi) the total labor hours for
the construction, alteration, or repair of
the facility by any laborer or mechanic
employed by the taxpayer or any contrac-
tor or subcontractor; and (vii) the total
credit claimed.
The DBA has comprehensive record-
keeping requirements that assist the
DOL in its oversight of Prevailing Wage
Requirements. The DBA recordkeeping
regime is consistent with what the IRS
would ordinarily expect taxpayers to pre-
serve to be able to substantiate that the
Prevailing Wage Requirements have been
satisfied. The proposed regulations would
impose recordkeeping requirements that
are generally consistent with the record-
keeping requirements under the DBA
regime for purposes of the Prevailing
Wage Requirements.
The proposed regulations would
require taxpayers to maintain and preserve
sufficient records to establish compliance
with the requirement that all laborers and
mechanics were paid wages at rates not
less than the applicable prevailing rates.
Records sufficient to establish compli-
ance would include payroll records that
reflect the hours worked in each classifi-
cation and the wages paid to each laborer
and mechanic performing construction,
alteration, or repair work on the facil-
ity (including any correction payments
made to each laborer and mechanic). The
Treasury Department and the IRS expect
that most taxpayers will use contractors
and subcontractors in the construction,
alteration, or repair of facilities and that
construction may occur for several years
before a facility is placed in service. The
proposed regulations would provide that it
would be the responsibility of the taxpayer
to maintain payroll records that reflect
the wages paid to labors and mechanics
engaged in the construction, alteration, or
repair of the qualified facility, regardless
of whether the laborers and mechanics are
employed by the taxpayer, a contractor, or
a subcontractor. The proposed regulations
would also impose recordkeeping require-
ments related to correction and penalty
payments.
The proposed regulations include a
non-exhaustive list of facts and circum-
stances that would be relevant to the IRS
in determining whether a failure to meet
the Prevailing Wage Requirements was
due to intentional disregard. To demon-
strate that a failure was not due to inten-
tional disregard, taxpayers would need to
maintain and preserve records sufficient to
document the failure and the actions they
took to prevent, mitigate, or remedy the

September 25, 2023 952 Bulletin No. 2023–39
failure (for example, records demonstrat-
ing that the taxpayer regularly reviewed
payroll practices, included requirements
to pay prevailing wages in contracts with
contractors, and posted prevailing wage
rates in a prominent place on the job site).
The proposed regulations would also
waive penalties for certain limited fail-
ures. To the extent taxpayers intend to rely
on these penalty waiver provisions, they
would need to maintain records sufficient
to demonstrate when a failure occurred
and proof that the taxpayer made the
required correction payment.
C. Recordkeeping with respect to
Apprenticeship Requirements
The proposed regulations would require
taxpayers subject to the Apprenticeship
Requirements to maintain sufficient records
to establish compliance with the Labor
Hours Requirement, Ratio Requirement,
and Participation Requirement. Records
sufficient to establish compliance with
the Apprenticeship Requirements include
copies of any written requests for appren-
tices by the taxpayer, contractor, or sub-
contractor, any agreement entered by the
taxpayer, contractor, or subcontractor with
a registered apprenticeship program, docu-
ments reflecting any registered apprentice-
ship program sponsored by the taxpayer,
contractor, or subcontractor, documents
verifying participation in a registered
apprenticeship program by each appren-
tice, records reflecting the required ratio of
apprentices to journeyworkers prescribed
by each registered apprenticeship pro-
gram from which qualified apprentices are
employed, records reflecting the daily ratio
of apprentices to journeyworkers, and the
payroll records for any work performed
by apprentices. The proposed regulations
provide that it would be the responsibility
of the taxpayer to maintain the relevant
records for each apprentice engaged in the
construction, alteration, or repair on the
qualified facility, regardless of whether the
apprentice is employed by the taxpayer, a
contractor, or a subcontractor.
D. Recordkeeping for credits transferred
under section 6418
Because an eligible taxpayer determines
any increased credit amount applicable to
the prevailing wage and apprenticeship
requirements, the general recordkeeping
requirements under these proposed regula-
tions would remain with an eligible taxpayer
who transfers a specified credit portion that
includes an increased credit amount. The
increased credit amount that is determined
by an eligible taxpayer would be reported
on the applicable forms on the return of the
eligible taxpayer. The minimum required
documentation to be provided to the trans-
feree taxpayer is a separate requirement
under the 6418 Proposed Regulations that
does not impact the requirements in these
proposed regulations.
VI. Effect on Other Documents
The provisions of sections 3 and 4 of
Notice 2022-61 would be obsoleted for
facilities, property, projects, or equipment
the construction, or installation of which
begins after the date the Treasury Decision
adopting these regulations as final regula-
tions is published in the Federal Register.
The proposed regulations would not oth-
erwise affect Notice 2022-61.
VII. Proposed Applicability Date
These regulations are proposed to
apply to facilities, property, projects, or
equipment placed in service in taxable
years ending after the date these regula-
tions are published as final in the Federal
Register and the construction or installa-
tion of which begins after the date these
regulations are published as final regula-
tions in the Federal Register. However,
taxpayers may rely on these proposed
regulations with respect to construction
or installation of a facility, property, proj-
ect, or equipment beginning on or after
January 29, 2023, and on or before the
date these regulations are published as
final regulations in the Federal Register,
provided, that beginning after the date
that is 60 days after August 29, 2023, tax-
payers follow the proposed regulations in
their entirety and in a consistent manner.
Special Analyses
I. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(44 U.S.C. 3501-3520) (PRA) generally
requires that a federal agency obtain the
approval of the Office of Management
and Budget (OMB) before collecting
information from the public, whether such
collection of information is mandatory,
voluntary, or required to obtain or retain
a benefit.
The collections of information in
these proposed regulations would include
reporting, recordkeeping, and third-party
disclosure requirements. These collec-
tions are required for purposes of claiming
an increased credit or deduction amount;
and are necessary for the IRS to validate
that taxpayers have met the regulatory
requirements and are entitled to claim
the increased credit amounts. The likely
respondents are individual, business,
trust and estate filers, and tax-exempt
organizations.
The proposed regulations would set
forth procedures for requesting supple-
mental wage determinations and wage
rates for additional classifications from
the DOL. This collection is approved by
OMB under the DOL’s Control Number
1235-0034. This IRS proposed regulation
does not alter any of the DOL collections
approved under this control number.
The proposed regulations would include
requirements to keep records sufficient to
demonstrate that PWA requirements have
been met as detailed in §1.45-12. For
purposes of the PRA, the recordkeeping
requirements of §1.45-12 are considered
general tax records. These general tax
records are approved annually under 1545-
0074 for individuals/sole proprietors, 1545-
0123 for business entities, and 1545-0047
for tax-exempt organizations. IRS will seek
OMB approval under a new OMB Control
Number (1545-NEW) for the burden for
trust and estate filers.
The proposed regulations would
include reporting requirements that tax-
payers provide a statement with the tax
return that claims an increased credit or
deduction amount that includes aggregate
information as detailed in §1.45-12. The
Secretary may issue forms and instructions
in future guidance for the purpose of meet-
ing these reporting requirements. These
reporting requirements will be covered
under 1545-0074 for individuals/sole pro-
prietors, 1545-0123 for business entities.
IRS will solicit public comments on this
requirement and the associated burden for

Bulletin No. 2023–39 953 September 25, 2023
trusts and estates filers as reflected below;
and will seek OMB approval under a new
OMB Control Number (1545-NEW) for
trust and estate filers.
The proposed regulations would
include third-party disclosures that
include notifying laborers and mechanics
of the applicable prevailing wage rates
as detailed in §1.45-7. The proposed reg-
ulations would also include third-party
disclosures for taxpayers requesting the
dispatch of apprentices from a registered
apprenticeship program as detailed in
§1.45-8. IRS will solicit public comment
on this requirement and associated burden
for all filers reflected below; and will seek
OMB approval under a new OMB Control
Number (1545-NEW) for all filers for the
disclosure requirement.
The collections of information con-
tained in this notice of proposed rulemak-
ing has been submitted to the Office of
Management and Budget for review in
accordance with the Paperwork Reduction
Act. Commenters are strongly encouraged
to submit public comments electronically.
Written comments and recommendations
for the proposed information collection
should be sent to https://www.reginfo.
gov/public/do/PRAMain, with copies
to the Internal Revenue Service. Find
this particular information collection by
selecting “Currently under Review - Open
for Public Comments” then by using the
search function. Submit electronic sub-
missions for the proposed information
collection to the IRS via email at pra.com-
ments@irs.gov (indicate REG-100908-
23 on the Subject line). Comments on
the collection of information should be
received by October 30, 2023. Comments
are specifically requested concerning:
Whether the proposed collection of
information is necessary for the proper
performance of the functions of the IRS,
including whether the information will
have practical utility. The accuracy of
the estimated burden associated with
the proposed collection of information.
How the quality, utility, and clarity of
the information to be collected may be
enhanced. How the burden of complying
with the proposed collection of informa-
tion may be minimized, including through
the application of automated collection
techniques or other forms of informa-
tion technology; and estimates of capital
or start-up costs and costs of operation,
maintenance, and purchase of services to
provide information.
The IRS estimates that 70 trust and
estates may claim the increased credit and
that it could take approximately 40 hours
to compile the data needed for the state-
ment attached to their return.
Estimated total annual reporting and
recordkeeping burden for trusts and
estates filers: 2,800 hours.
Estimated average annual burden per
respondent: 40 hours.
Estimated number of respondents: 70.
Estimated frequency of responses:
Annual.
The IRS estimates that 70,000 filers
may claim the increased credit and that
it could take approximately two hours to
display the prevailing wage rates and to
request the dispatch of apprentices.
Estimated total annual third-party dis-
closure burden for all other filers: 140,000
hours.
Estimated average annual burden per
respondent: Two hours.
Estimated number of respondents:
70,000.
Estimated frequency of responses:
Once.
An agency may not conduct or sponsor,
and a person is not required to respond to,
a collection of information unless it dis-
plays a valid control number assigned by
the Office of Management and Budget.
II. Regulatory Flexibility Act
The Regulatory Flexibility Act (5
U.S.C. 601 et seq.) (RFA) imposes certain
requirements with respect to Federal rules
that are subject to the notice and comment
requirements of section 553(b) of the
Administrative Procedure Act (5 U.S.C.
551 et seq.) and that are likely to have a
significant economic impact on a sub-
stantial number of small entities. Unless
an agency determines that a proposal is
not likely to have a significant economic
impact on a substantial number of small
entities, section 603 of the RFA requires
the agency to present an initial regulatory
flexibility analysis (IRFA) of the proposed
rule. The Treasury Department and the IRS
have not determined whether the proposed
rule, when finalized, will likely have a sig-
nificant economic impact on a substantial
number of small entities. This determi-
nation requires further study. However,
because there is a possibility of significant
economic impact on a substantial number
of small entities, an IRFA is provided in
these proposed regulations. The Treasury
Department and the IRS invite comments
on both the number of entities affected
and the economic impact on small entities.
Pursuant to section 7805(f), this notice of
proposed rulemaking has been submitted
to the Chief Counsel of Advocacy of the
Small Business Administration for com-
ment on its impact on small business.
A. Need for and objectives of the rule
The proposed regulations would pro-
vide guidance to taxpayers intending to
satisfy the PWA requirements to qualify
for an increased credit or deduction under
sections 30C, 45, 45Q, 45V, 45Y, 45Z, 48,
48C, 48E, and 179D and for those tax-
payers intending to satisfy the Prevailing
Wage Requirements to qualify for the
increased credit under sections 45L and
45U. The proposed regulations would pro-
vide needed guidance for taxpayers on the
use of wage determinations issued by the
DOL, on the time and manner for report-
ing compliance with the PWA require-
ments, as well as needed definitions. The
proposed regulations would also provide
guidance concerning correction and pen-
alty payments that can be made by taxpay-
ers who initially fail to satisfy the PWA
requirements in order to qualify for the
increased credit and deduction amounts.
The Treasury Department and the
IRS intend and expect that the increased
credit amount of five times the base credit
for taxpayers that ensure the payment
of paying prevailing wages and hiring
apprentices in the construction, alteration,
or repair of qualified facilities provides
financial incentives that will beneficially
impact various industries involved in the
production of and investment in clean
energy. These proposed regulations would
provide clarifying guidance that will assist
taxpayers seeking to comply with the stat-
utory prevailing wage and apprenticeship
requirements in order to take advantage
of the financial incentives. The Treasury
Department and IRS expect that the
increased credit amounts available to tax-
payers as financial incentives will exceed

September 25, 2023 954 Bulletin No. 2023–39
the costs of the additional recordkeeping
and reporting obligations that would be
imposed on taxpayers by these proposed
regulations.
The Treasury Department and the IRS
also expect the financial incentives for
taxpayers to ensure payment of prevail-
ing wage rates and using apprentices will
deliver benefits across the economy by cre-
ating increased opportunities for contrac-
tors and subcontractors as well as laborers
and mechanics to become involved in
clean energy production. Allowing these
increased credits and an increased deduc-
tion for taxpayers who satisfy prevailing
wage and apprenticeship requirements
will incentivize expansion of clean energy
resources and will reduce economy wide
greenhouse gas emissions.
B. Affected small entities
The RFA directs agencies to provide
a description of, and where feasible, an
estimate of, the number of small entities
that may be affected by the proposed
rules, if adopted. The Small Business
Administration’s Office of Advocacy
estimates in its 2023 Frequently Asked
Questions that 99.9 percent of American
businesses meet its definition of a small
business. The applicability of these pro-
posed regulations does not depend on
the size of the business, as defined by
the Small Business Administration. As
described more fully in the preamble to
this proposed regulation and in this IRFA,
section 45 and these proposed regulations
may affect a variety of different enti-
ties across several different green energy
industries as there are 12 different credits
with increased credit amount provisions.
Although there is uncertainty as to the
exact number of small businesses within
this group, the current estimated number
of respondents to these proposed rules
is 70,000 taxpayers as described in the
Paperwork Reduction Act section of the
preamble. The Treasury Department and
the IRS expect to receive more informa-
tion on the impact on small businesses
through comments on this proposed rule.
C. Impact of the rules
The proposed regulations provide
rules for how taxpayers can satisfy the
PWA requirements in order to seek the
increased credits under section 45 as well
as the increased credit or deduction avail-
able under sections 30C, 45L, 45Q, 45U,
45V, 45Y, 45Z, 48, 48C, 48E, and 179D.
Taxpayers that seek to claim the increased
credit or deduction will have administra-
tive costs related to reading and under-
standing these proposed rules, as well
as increased costs for the recordkeeping
and reporting requirements necessary
to establish compliance with the PWA
requirements. The costs will vary across
different-sized taxpayers and across the
type of facilities and projects in which
such taxpayers are engaged.
The Prevailing Wage Requirements
would require the taxpayer to obtain the
published wage determination issued
by the DOL for the county in which the
facility is located. To the extent a wage
determination does not include a required
classification, or if no wage determination
has been published, the taxpayer would
be required to contact the DOL to obtain
a supplemental wage determination or a
wage rate for an additional classification.
The taxpayer would be required to ensure
that any contractor or subcontractor that
works on the construction, alteration, or
repair of a facility has paid hourly wages
in accordance with the wage determi-
nation for each classification required to
complete such work. In order to be eligi-
ble for certain proposed cure provisions,
the taxpayer would be required to know or
be able to determine whether the laborers
and mechanics employed for construc-
tion, alteration, or repair of the facility
were paid in accordance with the appli-
cable wage determination. Additionally,
the taxpayer would be required to retain
records sufficient to establish compli-
ance with these proposed regulations for
as long as may be relevant. The Treasury
Department and the IRS expect that
some of the recordkeeping that would be
required under these proposed rules will
be consistent with recordkeeping require-
ments already imposed under the DBA
and the Fair Labor Standards Act, 29
U.S.C. 201 et seq.
For the Apprenticeship Requirements,
the taxpayer, contractor, and subcontrac-
tor, would be required to contact a regis-
tered apprenticeship program for purposes
of requesting the dispatch of qualified
apprentices to work on the construction,
alteration, or repair of the facility. Whether
or not the registered apprenticeship pro-
gram dispatches apprentices, the taxpayer
would be required to retain records to
establish compliance with these proposed
regulations for as long as may be relevant.
The taxpayer claiming the increased
credit would be required to report the
payment of prevailing wages and the uti-
lization of apprentices consistent with
the forms and instructions of the IRS.
Although the Treasury Department and
the IRS do not have sufficient data to
determine precisely the likely extent of
the increased costs of compliance, the
estimated burden of complying with the
recordkeeping and reporting requirements
are described in the Paperwork Reduction
Act section of the preamble.
D. Alternatives considered
The Treasury Department and the IRS
considered alternatives to the proposed
regulations. The proposed regulations
were designed to minimize burdens for
taxpayers while ensuring that laborers
and mechanics are paid the applicable
wage rates and that the IRS has sufficient
information to administer the increased
credits and deduction provisions. The
proposed regulations would not adopt the
DBA requirement of submitting weekly
certified payroll records to the IRS. The
Treasury Department and IRS determined
that submission of weekly payroll records
to the IRS by taxpayers would not assist
the IRS with the efficient administration
of the increased credit provisions. The
Treasury Department and the IRS also
considered a requirement that taxpay-
ers submit payroll records for all labor-
ers and mechanics at the time of filing a
return that claims an increased credit. The
Treasury Department and the IRS deter-
mined that per laborer and per mechanic
payroll records would not provide the IRS
with useful information and would also
involve substantial burdens for taxpayers
to report such information.
Comments are requested on the require-
ments in the proposed regulations, includ-
ing specifically, whether there are less
burdensome alternatives that ensure the
IRS has sufficient information to admin-
ister the increased credit claimed under

Bulletin No. 2023–39 955 September 25, 2023
section 45 as well as the increased credit
and deduction amounts that are claimed
under sections 30C, 45L, 45Q, 45U, 45V,
45Y, 45Z, 48, 48C, 48E, and 179D.
E. Duplicative, overlapping, or
conflicting Federal rules
For energy facilities built under con-
tracts with the Federal Government, or
with Federal financial or other assistance
provided under a Davis-Bacon Related
Act, the proposed regulations may over-
lap with the rules under the DBA, 29 CFR
parts 1, 5, and 7. In all other instances,
the proposed regulations would not dupli-
cate, overlap, or conflict with any relevant
Federal rules. The Treasury Department
and the IRS invite input from interested
members of the public about identifying
and avoiding overlapping, duplicative, or
conflicting requirements.
III. Section 7805(f)
Pursuant to section 7805(f), this
notice of proposed rulemaking has been
submitted to the Chief Counsel for the
Office of Advocacy of the Small Business
Administration for comment on its impact
on small business.
IV. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates
Reform Act of 1995 (UMRA) requires
that agencies assess anticipated costs and
benefits and take certain other actions
before issuing a final rule that includes
any Federal mandate that may result in
expenditures in any one year by a State,
local, or Tribal government, in the aggre-
gate, or by the private sector, of $100
million (updated annually for inflation).
This proposed rule does not include any
Federal mandate that may result in expen-
ditures by State, local, or Tribal govern-
ments, or by the private sector in excess of
that threshold.
V. Executive Order 13132: Federalism
Executive Order 13132 (Federalism)
prohibits an agency from publishing
any rule that has federalism implica-
tions if the rule either imposes substan-
tial, direct compliance costs on State and
local governments, and is not required
by statute, or preempts State law, unless
the agency meets the consultation and
funding requirements of section 6 of the
Executive order. This proposed rule does
not have federalism implications and does
not impose substantial direct compliance
costs on State and local governments or
preempt State law within the meaning of
the Executive order.
VI. Executive Order 13175: Consultation
and Coordination With Indian Tribal
Governments
Executive Order 13175 (Consultation
and Coordination With Indian Tribal
Governments) prohibits an agency from
publishing any rule that has Tribal impli-
cations if the rule either imposes substan-
tial, direct compliance costs on Indian
Tribal governments, and is not required
by statute, or preempts Tribal law, unless
the agency meets the consultation and
funding requirements of section 5 of the
Executive order.
The Treasury Department and the IRS
will hold a consultation with Tribal lead-
ers related to the prevailing wage and
apprenticeship requirements in these pro-
posed regulations, which will inform the
development of the final regulations.
VII. Regulatory Planning and Review
Pursuant to the Memorandum
of Agreement, Review of Treasury
Regulations under Executive Order 12866
(June 9, 2023), tax regulatory actions
issued by the IRS are not subject to the
requirements of section 6 of Executive
Order 12866, as amended. Therefore,
a regulatory impact assessment is not
required.
Comments and Public Hearing
Before these proposed amendments to
the regulations are adopted as final regula-
tions, consideration will be given to com-
ments regarding the notice of proposed
rulemaking that are submitted timely to
the IRS as prescribed in the preamble
under the ADDRESSES section. The
Treasury Department and the IRS request
comments on all aspects of the proposed
regulations. All comments will be made
available at https://www.regulations.gov.
Once submitted to the Federal eRulemak-
ing Portal, comments cannot be edited or
withdrawn.
A public hearing has been scheduled
for November 21, 2023, beginning at 10
a.m. ET, in the Auditorium at the Internal
Revenue Building, 1111 Constitution
Avenue, NW., Washington, DC. Due to
building security procedures, visitors
must enter at the Constitution Avenue
entrance. In addition, all visitors must
present photo identification to enter the
building. Because of access restrictions,
visitors will not be admitted beyond
the immediate entrance area more than
30 minutes before the hearing starts.
Participants may alternatively attend the
public hearing by telephone.
The rules of 26 CFR 601.601(a)(3)
apply to the hearing. Persons who wish
to present oral comments at the hearing
must submit an outline of the topics to be
discussed and the time to be devoted to
each topic by October 30, 2023. A period
of 10 minutes will be allotted to each
person for making comments. An agenda
showing the scheduling of the speakers
will be prepared after the deadline for
receiving outlines has passed. Copies of
the agenda will be available free of charge
at the hearing. If no outline of the topics
to be discussed at the hearing is received
by October 30, 2023, the public hearing
will be cancelled. If the public hearing is
cancelled, a notice of cancellation of the
public hearing will be published in the
Federal Register.
Individuals who want to testify in
person at the public hearing must send
an email to publichearings@irs.gov to
have your name added to the building
access list. The subject line of the email
must contain the regulation number REG-
100908-23 and the language TESTIFY in
Person. For example, the subject line may
say: Request to TESTIFY in Person at
Hearing for REG-100908-23.
Individuals who want to testify by
telephone at the public hearing must send
an email to publichearings@irs.gov to
receive the telephone number and access
code for the hearing. The subject line
of the email must contain the regulation
number REG-100908-23 and the language
TESTIFY Telephonically. For exam-
ple, the subject line may say: Request to

September 25, 2023 956 Bulletin No. 2023–39
TESTIFY Telephonically at Hearing for
REG-100908-23.
Individuals who want to attend the
public hearing in person without testify-
ing must also send an email to publichear-
ings@irs.gov to have your name added to
the building access list. The subject line
of the email must contain the regulation
number REG-100908-23 and the language
ATTEND In Person. For example, the
subject line may say: Request to ATTEND
Hearing in Person for REG-100908-23.
Requests to attend the public hearing
must be received by 5:00 p.m. EST on
November 17, 2023.
Hearings will be made accessible to
people with disabilities. To request special
assistance during a hearing please contact
the Publications and Regulations Branch
of the Office of Associate Chief Counsel
(Procedure and Administration) by send-
ing an email to publichearings@irs.gov
(preferred) or by telephone at (202) 317-
6901 (not a toll-free number) by at least
November 15, 2023.
Statement of Availability of IRS
Documents
Guidance cited in this preamble is pub-
lished in the Internal Revenue Bulletin and
is available from the Superintendent of
Documents, U.S. Government Publishing
Office, Washington, DC 20402, or by visit-
ing the IRS website at https://www.irs.gov.
Drafting Information
The principal author of these proposed
regulations is the Office of the Associate
Chief Counsel (Passthroughs and Special
Industries). However, other personnel
from the Treasury Department and the
IRS participated in the development of the
proposed regulations.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and record-
keeping requirements.
Proposed Amendments to the
Regulations
Accordingly, the Treasury Department
and the IRS propose to amend 26 CFR
part 1 as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 is amended by adding entries for
§§1.30C-3, 1.45-6 through 1.45-8, 1.45-
12, 1.45L-3, 1.45Q-6, 1.45U-3, 1.45V-3,
1.45Y-3, 1.45Z-3, 1.48-13, and 1.179D-3
in numerical order to read in part as
follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.30C-3 also issued under 26
U.S.C. 30.
* * * * *
Section 1.45-6 also issued under 26
U.S.C. 45.
Section 1.45-7 also issued under 26
U.S.C. 45.
Section 1.45-8 also issued under 26
U.S.C. 45.
Section 1.45-12 also issued under 26
U.S.C. 45.
* * * * *
Section 1.45L-3 also issued under 26
U.S.C. 45L.
* * * * *
Section 1.45Q-6 also issued under 26
U.S.C. 45Q.
Section 1.45U-3 also issued under 26
U.S.C. 45U.
Section 1.45V-3 also issued under 26
U.S.C. 45V.
Section 1.45Y-3 also issued under 26
U.S.C. 45Y.
Section 1.45Z-3 also issued under 26
U.S.C. 45Z.
* * * * *
Section 1.48-13 also issued under 26
U.S.C. 48.
* * * * *
Section 1.179D-3 also issued under 26
U.S.C. 179D.
* * * * *
Par. 2. Sections 1.30C-1 through
1.30C-3 are added to read as follows:
§§1.30C-1 - 1.30C-2 [Reserved]
§1.30C-3 Rules relating to the
increased credit amount for prevailing
wage and apprenticeship.
(a) In general. If any qualified alter-
native fuel vehicle refueling project
placed in service during the taxable year
satisfies the requirements in paragraph
(b) of this section, the credit determined
under section 30C(a) for any qualified
alternative fuel vehicle refueling property
of a character subject to an allowance for
depreciation that is part of such project is
multiplied by five.
(b) Qualified project requirements. A
qualified alternative fuel vehicle refueling
project satisfies the requirements of this
paragraph (b) if it is one of the following—
(1) A project the construction of which
began prior to January 29, 2023; or
(2) A project that meets the prevailing
wage requirements of section 45(b)(7) and
§1.45-7, the apprenticeship requirements
of section 45(b)(8) and §1.45-8, and the
recordkeeping and reporting requirements
of §1.45-12.
(c) Applicability date. This section applies
to projects placed in service in taxable years
ending after [date final rule publishes in the
Federal Register], and the construction of
which begins after [date final rule publishes
in the Federal Register].
Par. 3. Sections 1.45-0 through 1.45-
12 are added to read as follows:
Sec.
* * * * *
1.45-0 Table of contents.
1.45-1 - 1.45-5 [Reserved]
1.45-6 Increased credit amount.
1.45-7 Prevailing wage requirements.
1.45-8 Apprenticeship requirements.
1.45-9 - 1.45.11 [Reserved]
1.45-12 Recordkeeping and reporting.
* * * * *
§1.45-0 Table of contents.
This section lists the table of contents
for §§1.45-1 through 1.45-12.
§§1.45-1 - 1.45-5 [Reserved]
§1.45-6 Increased credit amount.
(a) In general.
(b) Qualified facility requirements.
(c) Definition of nameplate capacity
for purposes of determining maximum net
output under section 45(b)(6)(B)(i).
(d) Applicability date.
§1.45-7 Prevailing wage requirements.
(a) In general.
(b) Wage determinations.
(c) Curing a failure to satisfy the pre-
vailing wage requirements.

Bulletin No. 2023–39 957 September 25, 2023
(d) Definitions.
(e) Applicability date.
§1.45-8 Apprenticeship requirements.
(a) In general.
(b) Labor hours requirement.
(c) Application of apprentice-to-jour-
neyworker ratio.
(d) Participation requirement.
(e) Exceptions to the Apprenticeship
Requirements.
(f) Definitions.
(g) Applicability date.
§§ 1.45-9 - 1.45-11 [Reserved]
§1.45-12 Recordkeeping and reporting.
(a) In general.
(b) Recordkeeping for prevailing wage
and apprenticeship requirements.
(c) Recordkeeping for prevailing wage
requirements.
(d) Recordkeeping for apprenticeship
requirements.
(e) Applicability date.
§§1.45-1 - 1.45-5 [Reserved]
§1.45-6 Increased credit amount.
(a) In general. If a qualified facility
(as defined in section 45(d)) satisfies the
requirements in paragraph (b) of this sec-
tion, the amount of the renewable elec-
tricity production credit determined under
section 45(a) (after the application of
sections 45(b)(1) through (5)) is equal to
the credit determined under section 45(a)
multiplied by five.
(b) Qualified facility requirements. A
qualified facility satisfies the requirements
of this paragraph (b) if it is one of the fol-
lowing –
(1) A facility with a maximum net out-
put (as determined under paragraph (c) of
this section) of less than one megawatt (as
measured in alternating current);
(2) A facility the construction of which
began prior to January 29, 2023; or
(3) A facility that meets the prevailing
wage requirements of section 45(b)(7) and
§1.45-7, the apprenticeship requirements
of section 45(b)(8) and §1.45-8, and the
recordkeeping and reporting requirements
of §1.45-12.
(c) Definition of nameplate capacity
for purposes of determining maximum net
output under section 45(b)(6)(B)(i). For
purposes of determining whether a facil-
ity has a maximum net output of less than
one megawatt (as measured in alternating
current) for purposes of section 45(b)(6)
(B)(i), nameplate capacity is determina-
tive. Nameplate capacity for an electri-
cal generating unit means the maximum
electrical generating output in megawatts
(MW) that the unit is capable of producing
on a steady state basis and during contin-
uous operation under standard conditions,
as measured by the manufacturer and
consistent with the definition provided
in 40 CFR 96.202. Where applicable,
the International Standard Organization
(ISO) conditions are used to measure the
maximum electrical generating output or
usable energy capacity.
(d) Applicability date. This section
applies facilities placed in service in tax-
able years ending after [date final rule
publishes in the Federal Register], and
the construction of which begins after
[date final rule publishes in the Federal
Register].
§1.45-7 Prevailing wage requirements.
(a) In general. In order for the
increased credit under section 45(b)(6)
(B)(iii) with respect to any qualified
facility to be claimed, the taxpayer must
satisfy the requirements of section 45(b)
(7) and this section (the “Prevailing
Wage Requirements”) by ensuring that
all laborers and mechanics employed by
the taxpayer or any contractor or subcon-
tractor in the construction of such facil-
ity, and with respect to any taxable year,
for any portion of such taxable year that
is within the 10-year period beginning
on the date the facility was placed in
service, the alteration or repair of such
facility, are paid wages at rates not less
than the prevailing rates for construction,
alteration, or repair of a similar character
in the locality in which such facility is
located. Prevailing rates are those rates
most recently determined by the Secretary
of Labor in accordance with 40 U.S.C.
chapter 31, subchapter IV (Davis-Bacon
Act), and as set forth in paragraphs (b)
(2) and (3) of this section. For purposes
of determining the increased credit under
section 45(b)(6) for a taxable year, the
Prevailing Wage Requirements applicable
to alteration or repair work with respect to
the taxable year(s) in which the alteration
or repair of the qualified facility occurs
apply. See paragraph (d) of this section for
definitions of terms used in this section.
(b) Wage determinations—(1) In gen-
eral. A taxpayer satisfies the Prevailing
Wage Requirements if the taxpayer ensures
that laborers and mechanics employed by
the taxpayer or any contractor or subcon-
tractor in the construction, alteration, or
repair of a facility are paid wages at rates
not less than those set forth in the appli-
cable wage determination issued by the
Secretary of Labor pursuant to 40 U.S.C.
3142, 29 CFR part 1, and other imple-
menting guidance for the specified type of
construction in the geographic area where
that facility is located. When the con-
struction, alteration, or repair of a facility
occurs in more than one geographic area,
the taxpayer, contractor, or subcontractor
must use the applicable wage determi-
nation for the work performed in each
geographic area. Subject to the require-
ments of this section, the applicable wage
determination is a general wage deter-
mination described in paragraph (b)(2)
of this section (including any additional
classifications and wage rates described in
paragraph (b)(3) of this section), or a sup-
plemental wage determination described
in paragraph (b)(3) of this section.
(2) General wage determinations.
Except as provided in paragraph (b)(3) of
this section, to satisfy the Prevailing Wage
Requirements described in paragraph (a)
of this section, taxpayers must ensure that
laborers and mechanics employed by the
taxpayer or any contractor or subcontrac-
tor in the construction, alteration, or repair
of a facility are paid wages at rates not
less than those set forth in the applicable
general wage determination(s) published
by the U.S. Department of Labor on the
approved website. The applicable general
wage determination is the wage determi-
nation in effect for the specified type of
construction in the geographic area when
the construction, alteration, or repair of
the facility begins.
(3) Supplemental wage determinations
and rates—(i) Use of supplemental wage
determinations and rates. In the event
the Secretary of Labor has not published

September 25, 2023 958 Bulletin No. 2023–39
a general wage determination for the rel-
evant geographic area and type of con-
struction for the facility, or the Secretary
of Labor has issued a general wage deter-
mination for the relevant geographic area
and type of construction, but one or more
labor classifications for the construction,
alteration, or repair work that will be done
on the facility by laborers or mechanics is
not listed, the taxpayer must ensure that
laborers and mechanics employed by the
taxpayer or any contractor or subcontrac-
tor in the construction, alteration, or repair
of a facility are paid wages at rates not
less than those set forth in a supplemen-
tal wage determination or in an additional
classification and wage rate issued to the
taxpayer by the U.S. Department of Labor
upon request by the taxpayer, contractor,
or subcontractor in accordance with para-
graph (b)(3)(ii) of this section. A taxpayer,
contractor, or subcontractor may also
request a supplemental wage determina-
tion if the location of the facility involves
work by covered laborers and mechanics
that spans more than one contiguous geo-
graphic areas.
(ii) Request for supplemental wage
determinations and additional classifica-
tions and rates—(A) Manner of making
request. A taxpayer, contractor, or subcon-
tractor requesting a supplemental wage
determination or additional classification
and wage rate under paragraph (b)(3)(i)
of this section must submit the request
to the U.S. Department of Labor at, U.S.
Department of Labor, Wage and Hour
Division, Branch of Construction Wage
Determinations, Washington, D.C. 20210,
by email at IRAprevailingwage@dol.gov,
or such other address as may be prescribed
in guidance and instructions issued by
the Administrator of the Wage and Hour
Division of the U.S. Department of Labor
(Wage and Hour Division). A taxpayer,
contractor, or subcontractor should make
such requests no more than 90 days before
the beginning of construction, alteration,
or repair, as appropriate (or as soon as
practicable after the start of construction,
alteration, or repair, in the instance where
the taxpayer, contractor, or subcontractor
cannot reasonably determine prior to the
start of construction, alteration, or repair
that a supplemental wage determination
or an additional classification and wage
rate is necessary). After review, the Wage
and Hour Division will notify the tax-
payer, contractor, or subcontractor as to
the supplemental wage determination or
the labor classifications and wage rates to
be used for the type of work in question in
the geographic area in which the facility
is located.
(B) Required information. The request
for a supplemental wage determination
or additional classification and wage rate
must include the following information:
(1) The name of the taxpayer, contrac-
tor, or subcontractor requesting the sup-
plemental wage determination or wage
rate;
(2) The general wage determination(s),
if any, applicable to construction, alter-
ation, or repair of the facility;
(3) A description of the work to be per-
formed, including the type(s) of construc-
tion involved and, if the project involves
multiple types of construction, informa-
tion indicating the expected cost break-
down by type of construction;
(4) The geographic area in which the
facility is being constructed, altered, or
repaired, including the name and address
of the facility (if known);
(5) The start date of construction, alter-
ation, or repair at the facility;
(6) The labor classification(s) needed
for performance of the work on the facility
(excluding those for which wage rates are
available on an applicable general wage
determination);
(7) The duties to be performed by each
such labor classification on the facility;
(8) The proposed wage rate, including
any bona fide fringe benefits, for each
such labor classification;
(9) Any pertinent wage payment infor-
mation that may be available;
(10) Any additional relevant infor-
mation otherwise required by forms
and instructions published by the U.S.
Department of Labor; and
(11) Any additional information the
taxpayer wants the U.S. Department of
Labor to consider.
(iii) Special rule for qualified facili-
ties located offshore. If a general wage
determination is not available, in lieu of
requesting a supplemental wage determi-
nation for a facility located in an offshore
area within the outer continental shelf of
the United States, a taxpayer, contractor,
or subcontractor may rely on the general
wage determination for the relevant cate-
gory of construction that is applicable in
the geographic area closest to the area in
which the qualified facility will be located.
(4) Reconsideration and review. A
taxpayer may seek reconsideration and
review by the Administrator of the Wage
and Hour Division of a general wage
determination, or a determination issued
with respect to a request for a supple-
mental wage determination or additional
classification and wage rate in accordance
with the procedures set forth in 29 CFR
1.8 and 5.13 and any subsequent guid-
ance issued by the U.S. Department of
Labor. A taxpayer may appeal the deci-
sion of the Administrator of the Wage and
Hour Division to the U.S. Department of
Labor’s Administrative Review Board in
accordance with the procedures set forth
in 29 CFR part 7 and any subsequent
guidance issued by the U.S. Department
of Labor. Questions regarding wage deter-
minations and rates may be referred to
the Administrator of the Wage and Hour
Division.
(5) Timing of wage determination.
The applicable prevailing wage rates on
a general wage determination are those
in effect at the time construction, alter-
ation, or repair of the facility begins, and
generally remain valid for the duration of
the work performed with respect to the
construction, alteration, or repair of the
facility by the taxpayer, contractor, or
subcontractor. Taxpayers who perform
any alteration or repair of a facility after
the facility is placed in service must use
the applicable wage determination in
effect at the time the alteration or repair
work begins. A new wage determination
would be required to be used when work
on a facility is changed to include addi-
tional construction, alteration, or repair
work not within the scope of work of the
original project, or to require work to be
performed for an additional time period
not originally obligated, including where
an option to extend the term of a contract
for the construction, alteration, or repair
is exercised. General wage determina-
tions published on the U.S. Department of
Labor approved website contain no expi-
ration date and remain valid until revised,
superseded, or canceled. Any supple-
mental wage determination or additional
classification and wage rate issued under

Bulletin No. 2023–39 959 September 25, 2023
paragraph (b)(3) of this section applies
from the time the taxpayer begins the con-
struction, alteration, or repair of the facil-
ity. If a supplemental wage determination
or additional classification and wage rate
is issued after construction, alteration, or
repair of the facility has begun, the appli-
cable prevailing rates apply retroactively
to the date construction began.
(6) Payment of wages. All laborers and
mechanics working on a qualified facil-
ity must be paid in the time and manner
consistent with the regular payroll prac-
tices of the taxpayer, contractor, or sub-
contractor. The payment of wages must
be made without subsequent deduction or
rebate on any account (except such pay-
roll deductions as are required by the law
or permitted by regulations issued by the
Secretary of Labor), and must consist of
the full amount of wages (including bona
fide fringe benefits or cash equivalents
thereof) due at time of payment computed
at rates not less than those contained in
the applicable wage determination of the
Secretary of Labor. A taxpayer may dis-
charge its wage obligations for the pay-
ment of wages by paying the full amount
in cash, by making payments to a bona
fide fringe benefit provider or incurring
costs for bona fide fringe benefits, or by
a combination thereof. The taxpayer is
solely responsible for ensuring that labor-
ers and mechanics are paid wages not less
than the prevailing rate whether employed
directly by the taxpayer, a contractor, or
a subcontractor in the construction, alter-
ation, or repair of the facility for purposes
of claiming the increased credit under
section 45(b)(6). The rules set forth in 29
CFR 5.25 through 5.33, and subsequent
guidance issued by the U.S. Department
of Labor apply with respect to costs for
bona fide fringe benefits that may be cred-
ited for purposes of the payment of wages.
(7) Apprentices—(i) Rate of pay.
Apprentices who perform work with
respect to the construction, alteration,
or repair of a facility consistent with the
requirements of section 45(b)(8) and
§1.45-8 and individuals in the first 90
days of probationary employment as an
apprentice in a registered apprenticeship
program who have been certified by the
U.S. Department of Labor’s Office of
Apprenticeship or a State apprenticeship
agency to be eligible for probationary
employment as an apprentice, may be
paid at less than the predetermined rate
for the work they perform when they are
employed pursuant to and individually reg-
istered in a bona fide apprenticeship pro-
gram registered with the U.S. Department
of Labor’s Office of Apprenticeship, or
with a State apprenticeship agency recog-
nized by the U.S. Department of Labor’s
Office of Apprenticeship. Every appren-
tice must be paid at not less than the rate
specified by the registered apprentice-
ship program for the apprentice’s level of
progress, expressed as a percentage of the
journeyworker hourly rate specified for
the apprentice’s classification in the appli-
cable wage determination. If the appren-
tice is working in a classification that is
not part of the occupation of the registered
apprenticeship program, the apprentice
must be paid at the full applicable wage
rate determination for laborers or mechan-
ics working in that classification. Any
individual listed on payroll at an appren-
ticeship wage, who is not registered with
a registered apprenticeship program, must
be paid not less than the applicable wage
rate on the wage determination for the clas-
sification of work actually performed to
satisfy the Prevailing Wage Requirements.
In the event the U.S. Department of
Labor’s Office of Apprenticeship or a
State apprenticeship agency recognized
by the U.S. Department of Labor’s Office
of Apprenticeship withdraws approval of
an apprenticeship program, the taxpayer,
contractor, or subcontractor will no longer
satisfy the Prevailing Wage Requirements
by paying apprentices less than the appli-
cable predetermined rate for the work
performed until an acceptable program is
approved.
(ii) Bona fide fringe benefits. To sat-
isfy the Prevailing Wage Requirements,
apprentices must be paid bona fide fringe
benefits in accordance with the provisions
of the registered apprenticeship program.
If the apprenticeship program does not
specify the payment of bona fide fringe
benefits, apprentices must be paid the full
amount of bona fide fringe benefits listed
on the wage determination for the applica-
ble classification in cash or in kind.
(iii) Apprenticeship ratio. The allow-
ance for payment of wages to apprentices
at rates less than the applicable prevail-
ing wage rates determined by the U.S.
Department of Labor is subject to any
applicable ratio of apprentices to jour-
neyworkers required under the registered
apprenticeship program and consistent
with section 45(b)(8)(B) and §1.45-8. Any
apprentice performing work on the job site
in excess of the ratio permitted under the
registered program or the ratio applicable
to the geographic area of the facility pur-
suant to 29 CFR 5.5(a)(4)(i) must be paid
not less than the applicable wage rate on
the wage determination for the work actu-
ally performed to satisfy the Prevailing
Wage Requirements.
(iv) Reciprocity of ratios and wage
rates. If a taxpayer, contractor, or sub-
contractor is performing construction,
alteration, or repair work on a facility in a
geographic area other than the geographic
area in which an apprenticeship program
is registered, the ratios and wage rates
(expressed in percentages of the journey-
worker’s hourly rate) applicable within
the geographic area in which the construc-
tion, alteration, or repair work is being
performed must be observed. If there is no
applicable ratio or wage rate for the geo-
graphic area of the facility, the ratio and
wage rate (expressed in percentages of
the journeyworker’s hourly rate) specified
in the registered apprenticeship program
standard must be observed.
(c) Curing a failure to satisfy the pre-
vailing wage requirements—(1) In gen-
eral. If a taxpayer fails to ensure that all
laborers and mechanics employed by the
taxpayer or any contractor or subcontrac-
tor in the construction, alteration, or repair
of a qualified facility are paid wages at
rates not less than those set forth in the
applicable wage determination(s), such
taxpayer will be deemed to have satisfied
the Prevailing Wage Requirements with
respect to such facility for any year if the
taxpayer makes the correction and penalty
payments provided in paragraphs (c)(1)(i)
and (ii) of this section.
(i) Correction payment. The taxpayer
must pay any laborer or mechanic who
was paid wages at a rate below the rate
described in paragraph (b) of this section
for any pay period during such year an
amount equal to the sum of:
(A) The difference between the amount
of wages paid to such laborer or mechanic
for all hours worked during such period
and the amount of wages required to be

September 25, 2023 960 Bulletin No. 2023–39
paid to such laborer or mechanic pursu-
ant to paragraph (a) of this section for all
hours worked during such period; and
(B) Interest on the amount determined
under paragraph (c)(1)(i)(A) of this sec-
tion at the Federal short-term rate as deter-
mined under section 6621 but substituting
“6 percentage points” for “3 percentage
points” in section 6621(a)(2).
(ii) Penalty payment. The taxpayer
must pay a penalty equal to $5,000 mul-
tiplied by the total number of laborers and
mechanics who were paid wages at a rate
below the rate described in paragraph (b)
of this section for any period during such
year.
(iii) Correction and penalty payments
not required if taxpayer ineligible for
increased credit under section 45(b)(6)(B)
(iii). If the taxpayer claims the increased
credit under section 45(b)(6)(B)(iii) and
does not satisfy the Prevailing Wage
Requirements for the claimed increased
credit amount, then the obligation to make
correction and penalty payments under
paragraphs (c)(1)(i) and (ii) of this section
applies in order for the taxpayer to retain
the credit. If the IRS determines that a tax-
payer claiming the increased credit under
section 45(b)(6)(B)(iii) failed to meet the
Prevailing Wage Requirements and the
taxpayer does not make the correction and
penalty payments provided in paragraphs
(c)(1)(i) and (ii) of this section, then no
penalty is assessed under paragraph (c)(1)
(ii) of this section, and the taxpayer is not
entitled to the increased credit under sec-
tion 45(b)(6)(B)(iii). Taxpayers that are
not entitled to claim the increased credit
amount may still be entitled to the base
amount of the renewable electricity pro-
duction credit under section 45(a) if they
meet the requirements to claim the credit.
(iv) Correction and penalty payments
in the event of a transfer pursuant to sec-
tion 6418. To the extent an eligible tax-
payer, as defined in section 6418(f)(2), has
determined an increased credit amount
under section 45(b)(6) and transferred
such increased credit amount as part of
a specified credit portion, the obligation
to make correction and penalty payments
under paragraphs (c)(1)(i) and (ii) of this
section remains with the eligible taxpayer.
The obligation for an eligible taxpayer to
satisfy the Prevailing Wage Requirements
becomes binding upon the earlier of the
filing of the eligible taxpayer’s return for
the taxable year for which the specified
credit portion is determined with respect
to the eligible taxpayer, or the filing of the
return of the transferee taxpayer for the
year in which the specified credit portion
is taken into account. If the IRS deter-
mines that the eligible taxpayer failed to
meet the Prevailing Wage Requirements
and the eligible taxpayer does not then
make the correction and penalty payments
provided in paragraphs (c)(1)(i) and (ii) of
this section, then no penalty is assessed
under paragraph (c)(1)(ii) of this section,
and the eligible taxpayer is not entitled to
the increased credit amount determined
under section 45(b)(6)(B)(iii). Section
6418 and the regulations in this part under
section 6418 control for determining the
impact of an eligible taxpayer’s failure to
cure on any transferee taxpayer. The eli-
gible taxpayer that is not entitled to claim
the increased credit amount may still be
entitled to the base amount of the renew-
able electricity production credit under
section 45(a) if they meet the require-
ments to claim the credit.
(v) Examples. The provisions of this
paragraph (c)(1) may be illustrated by
the following examples, which do not
take into account any possible applica-
tion of the enhanced correction and pen-
alty payment requirements in the case of
intentional disregard under paragraph (c)
(3) of this section, the exception for wages
paid before a determination by the U.S.
Department of Labor under paragraph (c)
(5) of this section, or the penalty waiver
under paragraph (c)(6) of this section. In
each example, assume that the taxpayer
uses the calendar year as the taxpayer’s
taxable year.
(A) Example 1. Taxpayer A begins construction
of a qualified facility on February 3, 2023. The facil-
ity is placed in service on October 10, 2023, and A
claims the increased credit under section 45(b)(6)
on its 2023 tax return. Laborer X was employed in
the construction, alteration, or repair of the facility
in calendar year 2023 for 20 weeks and was paid on
a weekly basis. X was paid wages below the prevail-
ing wage rate for all pay periods in calendar year
2023. All other laborers and mechanics were paid at
the prevailing wage rate. The aggregate difference
between the amount of wages X was paid and the
amount required to be paid under paragraph (a) of
this section is $400 (i.e., X worked 20 weeks during
the year and was underpaid by $20 in each of those
weeks). The amount of the correction payment A
must make to X is equal to $400 plus interest from the
date of each underpayment at the rate as determined
under section 6621 but substituting “6 percentage
points” for “3 percentage points” in section 6621(a)
(2). The total number of laborers underpaid for any
period in 2023 was one, so the total amount of the
penalty payment that A must pay to the IRS to retain
the increased credit is $5,000.
(B) Example 2. Taxpayer B begins construction
of a qualified facility on January 30, 2023. The
facility is placed in service on February 2, 2024.
Taxpayer B files a claim for the increased credit
under section 45(b)(6) with its 2024 tax return.
Taxpayer B paid workers on a biweekly basis. Five
laborers employed in the construction of the facility
were paid wages below the prevailing wage rates
in 2023, with the difference between the amount
they were paid and the amount of wages required
to be paid under paragraph (a) of this section being
$500 per laborer. One of those laborers remained
employed in the construction of the facility in 2024
and was paid wages below the prevailing wage
rate, with the difference between the amount the
laborer was paid and the amount of wages required
to be paid under paragraph (a) of this section being
$100. All other laborers and mechanics involved in
the construction, alteration, or repair of the facil-
ity were paid at the prevailing wage rates. B must
make correction payments of $500 plus interest
from the date of each underpayment at the rate as
determined under section 6621 but substituting
“6 percentage points” for “3 percentage points”
in section 6621(a)(2) to each of the five laborers
that were underpaid in 2023, and a correction pay-
ment of $100 plus interest from the date of each
underpayment at the rate as determined under sec-
tion 6621 but substituting “6 percentage points”
for “3 percentage points” in section 6621(a)(2) to
the laborer that was underpaid in 2024. The total
amount of the penalty payment that B must pay to
the IRS to retain the increased credit is $30,000,
which includes $5,000 for each of the laborers
underpaid in 2023 and $5,000 for the one laborer
underpaid in 2024.
(C) Example 3. Taxpayer B begins construction
of a qualified facility on January 30, 2023. The facil-
ity is placed in service on February 2, 2024. Taxpayer
B files a claim for the increased credit under sec-
tion 45(b)(6) with its 2024 tax return. Taxpayer B
paid workers on a biweekly basis. Laborer X was
employed by the taxpayer in the construction of the
facility for 22 weeks in 2023 was paid wages below
the prevailing wage rates for the first 20 weeks of
her employment in the amount of $500 (i.e., X was
underpaid $50 in each of the 10 biweekly periods).
For the last biweekly pay period, Taxpayer B paid
X the correct prevailing rate for the work performed
during the period, plus $500 for the amounts that
were underpaid in the first 10 periods. All other
laborers and mechanics involved in the construc-
tion, alteration, or repair of the facility were paid at
the prevailing wage rates. Taxpayer B is required to
make a correction payment to X in the amount of
the interest from the date of each underpayment. To
retain the increased credit, B must make a penalty
payment of $5,000 to the IRS with respect to Laborer
X.
(2) Deficiency procedures not to apply.
The penalty payment required by para-
graph (c)(1)(ii) of this section may be

Bulletin No. 2023–39 961 September 25, 2023
assessed and collected without regard to
the deficiency procedures provided by
subchapter B of chapter 63 of the Code.
Any determination by the IRS disallow-
ing a claim for the increased credit under
section 45(b)(6) will be subject to the
deficiency procedures of subchapter B of
chapter 63.
(3) Intentional disregard—(i)
Application of section 45(b)(7)(B)(iii).
If the IRS determines that any failure to
satisfy the Prevailing Wage Requirements
in paragraph (a) of this section is due to
intentional disregard of the requirement—
(A) The correction payment under para-
graph (c)(1)(i) of this section is increased
to three times the sum determined in para-
graph (c)(1)(i) of this section; and
(B) The penalty payment under para-
graph (c)(1)(ii) of this section is increased
to $10,000 multiplied by the total number
of laborers and mechanics who were paid
wages at a rate below the rate described
in paragraph (b) of this section for any
period during such year.
(ii) Meaning of intentional disregard.
A failure to ensure that any laborer or
mechanic employed in the construction,
alteration, or repair of a qualified facility
is paid wages at the prevailing wage rate is
due to intentional disregard if it is know-
ing or willful.
(iii) Facts and circumstances consid-
ered. The facts and circumstances that
are considered in determining whether
a failure to satisfy the Prevailing Wage
Requirements is due to intentional disre-
gard include, but are not limited to—
(A) Whether the failure was part of a
pattern of conduct that includes repeated
or systemic failures to ensure that the
laborers and mechanics were paid wages
at or above the applicable prevailing wage
rate;
(B) Whether the taxpayer failed to take
steps to determine the applicable classifi-
cations of laborers and mechanics;
(C) Whether the taxpayer failed to
take steps to determine the applicable
prevailing wage rate(s) for laborers and
mechanics;
(D) Whether the taxpayer promptly
cured any failures to ensure that laborers
and mechanics were paid wages not less
than the applicable prevailing rates;
(E) Whether the taxpayer has been
required to make a penalty payment under
paragraph (c)(1)(ii) of this section in pre-
vious years;
(F) Whether the taxpayer undertook
a quarterly, or more frequent, review of
wages paid to mechanics and laborers to
ensure that wages not less than the appli-
cable prevailing wage rate were paid;
(G) Whether the taxpayer included pro-
visions in any contracts entered into with
contractors that required the contractors
and any subcontractors retained by the
contractors to pay laborers and mechanics
at or above the prevailing wage rates and
maintain records to ensure the taxpayer’s
compliance with recordkeeping require-
ments set forth in §1.45-12;
(H) Whether the taxpayer posted in a
prominent place at the facility or other-
wise provided written notice to laborers
and mechanics during the construction,
alteration, or repair of the facility, of the
applicable wage rate(s) as determined by
the U.S. Department of Labor for all clas-
sifications of work to be performed for
the construction, alteration, or repair of
the facility, and that in order to be eligible
to claim certain tax benefits, employers
must ensure that laborers and mechanics
are paid wages at rates not less than such
wage rates; and
(I) Whether the taxpayer had in place
procedures whereby laborers and mechan-
ics could report suspected failures to pay
prevailing wages and/or suspected failures
to classify workers in accordance with the
wage determination of workers to appro-
priate personnel departments or managers
without retaliation or adverse action.
(iv) Rebuttable presumption of no
intentional disregard. If a taxpayer makes
the correction and penalty payments
required by paragraphs (c)(1)(i) and (ii)
of this section before receiving notice of
an examination from the IRS with respect
to a claim for the increased credit under
section 45(b)(6), the taxpayer will be
presumed not to have intentionally disre-
garded the Prevailing Wage Requirements
in paragraph (a) of this section.
(4) Limitation on the availability of
cure—(i) 180-day limit. In the case of
a final determination by the IRS with
respect to any failure by the taxpayer to
satisfy the Prevailing Wage Requirements
in paragraph (a) of this section, the cure
provision in paragraph (c)(1) of this sec-
tion does not apply unless the correction
and penalty payments described in para-
graphs (c)(1)(i) and (ii) of this section are
made by the taxpayer on or before the
date that is 180 days after the date of such
determination.
(ii) Final determination. For purposes
of paragraph (c)(4)(i) of this section, a
final determination occurs on the date the
IRS sends to the taxpayer a notice stat-
ing that the taxpayer has failed to satisfy
the Prevailing Wage Requirements under
paragraph (a) of this section.
(5) Exception for wages paid before
a wage determination by the U.S.
Department of Labor. If a taxpayer has
requested a supplemental wage determi-
nation or an additional classification and
wage rate from the U.S. Department of
Labor in accordance with paragraph (b)(3)
(ii) of this section and the U.S. Department
of Labor makes a wage determination
after the construction, alteration, or repair
of the facility has started, the taxpayer
will not be considered to have failed to
meet the Prevailing Wage Requirements
under paragraph (a) of this section with
respect to wages paid to any mechanic or
laborer whose wage rate was subject to the
request and who was paid below the pre-
vailing wage rate before the determination
by the U.S. Department of Labor if the
taxpayer makes a payment within 30 days
of the determination to each laborer or
mechanic equal to the difference between
the amount of wages paid to such laborer
or mechanic before the determination and
the amount of wages required to be paid
to such laborer or mechanic pursuant to
paragraph (a) of this section during such
period.
(6) Waiver of the penalty—(i)
Availability of waiver. The penalty pay-
ment required by paragraph (c)(1)(ii) of
this section to cure a failure to satisfy the
Prevailing Wage Requirements in para-
graph (a) of this section is waived with
respect to a laborer or mechanic employed
in the construction, alteration, or repair of
a qualified facility during a calendar year
if the taxpayer makes the correction pay-
ment required by paragraph (c)(1)(i) of
this section by the earlier of 30 days after
the taxpayer became aware of the error or
the date on which the increased credit is
claimed under section 45(b)(6), and:
(A) The laborer or mechanic is paid
wages at rates less than the amount

September 25, 2023 962 Bulletin No. 2023–39
required to be paid under paragraph (b) of
this section for not more than 10 percent
of all pay periods of the calendar year (or
part thereof) during which the laborer or
mechanic was employed in the construc-
tion, alteration, or repair of the qualified
facility; or
(B) The difference between the
amount the laborer or mechanic was paid
during the calendar year (or part thereof)
and the amount required to be paid under
paragraph (b) of this section is not greater
than 2.5 percent of the amount required
to be paid under paragraph (b) of this
section.
(ii) Project labor agreements. The pen-
alty payment required by paragraph (c)
(1)(ii) of this section to cure a failure to
satisfy the Prevailing Wage Requirements
in paragraph (a) of this section shall not
apply with respect to a laborer or mechanic
employed in the construction, alteration,
or repair work of a qualified facility if the
work is done pursuant to a pre-hire col-
lective bargaining agreement with one or
more labor organizations that establishes
the terms and conditions of employ-
ment for a specific construction project
(Qualifying Project Labor Agreement)
and any correction payment owed to any
laborer or mechanic is paid on or before
the date on which the increased credit is
claimed under section 45(b)(6). In order to
be considered a Qualifying Project Labor
Agreement, such agreement must at a
minimum:
(A) Bind all contractors and sub-
contractors on the construction project
through the inclusion of appropriate spec-
ifications in all relevant solicitation provi-
sions and contract documents;
(B) Contain guarantees against strikes,
lockouts, and similar job disruptions;
(C) Set forth effective, prompt, and
mutually binding procedures for resolving
labor disputes arising during the term of
the project labor agreement;
(D) Contain provisions to pay prevail-
ing wages;
(E) Contain provisions for referring
and using qualified apprentices consistent
with section 45(b)(8)(A) through (C) and
guidance issued thereunder; and
(F) Be a collective bargaining agree-
ment with one or more labor organizations
(as defined in 29 U.S.C. 152(5)) of which
building and construction employees
are members, as described in 29 U.S.C.
158(f).
(iii) Examples. The provisions of this
paragraph (c)(6) may be illustrated by the
following examples, which do not take
into account any possible application of
the enhanced correction and penalty pay-
ment requirements in the case of inten-
tional disregard under paragraph (c)(3)
of this section or the exception for wages
paid before a determination by the U.S.
Department of Labor under paragraph
(c)(5) of this section. In each example,
assume that the taxpayer uses the calendar
year as the taxpayer’s taxable year.
(A) Example 1. Taxpayer A begins construction
of a qualified facility on February 1, 2023. The facil-
ity is placed in service on October 10, 2023, and
A claims the increased credit under section 45(b)
(6) on its 2023 tax return filed on April 18, 2024.
Taxpayer A employs laborer W in the construction
of the facility for a total of 36 weekly pay periods.
Taxpayer A pays W at or above the prevailing wage
rate for all pay periods except for the pay periods
ending on April 8, April 22, and May 20. Under
the applicable prevailing wage rate, W should have
been paid a total of $35,000 in 2023, but was instead
paid only $30,000. Taxpayer A ensures that all other
laborers and mechanics employed in the construc-
tion, alteration, or repair of the facility are paid at
the prevailing wage rate. Taxpayer A becomes aware
of the failure on June 1, 2023, and on June 19, 2023,
A pays W the correction payment required by para-
graph (c)(1)(i) of this section. The penalty waiver
applies to A. Although the difference between the
amount W was paid in 2023 and the amount required
to be paid under the applicable prevailing wage rate
was $5,000, which is 14.29% of the amount required
to be paid under the applicable prevailing wage rate,
W was paid below the prevailing wage rate for only
three out of 36 pay periods, or 8.3%. Furthermore,
A made the correction payment within 30 days of
discovering the failure on June 1, 2023, and before
filing the tax return claiming the increased credit on
April 18, 2024.
(B) Example 2. Taxpayer B begins construction
of a qualified facility on February 1, 2024. The facil-
ity is placed in service on October 10, 2024, and B
claims the increased credit under section 45(b)(6) on
its 2024 tax return filed on April 15, 2025. Taxpayer
B hires contractor M to assist in the construction, and
contractor M employs laborer X in the construction
of the facility for a total of 36 pay periods. M pays X
at or above the prevailing wage rate for all pay peri-
ods except for the pay periods ending on February 24
and March 2. Under the applicable prevailing wage
rate, X should have been paid a total of $50,000 in
2024, but was instead paid only $49,000. All other
laborers and mechanics employed in the construc-
tion, alteration, or repair of the facility are paid at the
prevailing wage rate. B learns on January 1, 2025,
that X was not paid at the prevailing wage rate, and
on January 19, 2025, B pays X the correction pay-
ment required by paragraph (c)(1)(i) of this section.
The penalty waiver applies to B. Y was paid below
the prevailing wage rate for two out of 36 pay peri-
ods, or 5.5%, and the difference between the amount
X was paid in 2024 and the amount required to be
paid under the applicable prevailing wage rate was
$1,000, which is only 2% of the amount required to
be paid under the applicable prevailing wage rate.
Although B did not learn that that M was paying X
below the prevailing wage rate until after the end
of the year, once B learned of the underpayment,
B made the correction payment within 30 days and
before filing the tax return claiming the increased
credit on April 15, 2025.
(C) Example 3. Taxpayer C begins the construc-
tion of a qualified facility on April 5, 2024. The facil-
ity is placed in service on December 1, 2024, and C
claims the increased credit under section 45(b)(6) on
its 2024 tax return filed on April 15, 2025. Taxpayer
C employs laborer Y in the construction of the facil-
ity for a total of 35 pay periods. Due to a failure to
classify workers in accordance with the wage deter-
mination, C pays Y below the prevailing wage rate
for all 35 pay periods. Under the applicable prevail-
ing wage rate, Y should have been paid $65,000 in
2024, but was instead paid only $63,500. All other
laborers and mechanics employed in the construc-
tion, alteration, or repair of the facility were paid at
the prevailing wage rate. Taxpayer C becomes aware
of the failure on January 10, 2025, and on January
20, 2025, C pays Y the correction payment required
by paragraph (c)(1)(i) of this section. The penalty
waiver applies to C. Although Y was paid below
the prevailing wage rate 100% of the pay periods Y
worked in 2024, the difference between the amount
Y was paid in 2024 and the amount required to be
paid under the applicable prevailing wage rate was
$1,500, which is only 2.3% of the amount required
to be paid under the applicable prevailing wage rate.
Additionally, once C learned of the underpayment,
C made the correction payment within 30 days and
before filing the tax return claiming the increased
credit on April 15, 2025.
(D) Example 4. Taxpayer D begins construc-
tion of a qualified facility on August 29, 2024. The
facility is placed in service on June 30, 2025, and D
claims the increased credit under section 45(b)(6) on
its 2025 tax return. Taxpayer D employs laborer Z in
the construction of the facility for a total of 25 weekly
pay periods in 2025. Taxpayer D pays Z at or above
the prevailing wage rate for all pay periods except
for the pay periods ending on March 15, May 10,
and June 14. Under the applicable prevailing wage
rate, Z should have been paid $25,000 in 2025, but
was instead paid only $20,000. Taxpayer D ensures
that all other laborers and mechanics employed in
the construction, alteration, or repair of the facility
are paid at the prevailing wage rate. Taxpayer D has
in place a pre-hire collective bargaining agreement,
but the agreement does not contain a provision for
referring and using qualified apprentices. Taxpayer
D becomes aware of the failure to pay Z at the pre-
vailing wage rate on June 30, 2025, and on July 4,
2025, D pays Z the correction payment required
by paragraph (c)(1)(i) of this section. The penalty
waiver does not apply to D. The difference between
the amount Z was paid in 2025 and the amount
required to be paid under the applicable prevailing
wage rate was $5,000, which is 20% of the amount
required to be paid under the applicable prevailing

Bulletin No. 2023–39 963 September 25, 2023
wage rate. Z was paid below the prevailing wage rate
for three out of 25 pay periods, or 12%. D does not
have in place a qualifying project labor agreement
because the pre-hire collective bargaining agreement
does not contain a provision for referring and using
qualified apprentices as required by paragraph (c)
(6)(ii)(E) of this section. Although the correction
payment was made within 30 days of discovering
the failure on June 30, 2025, and before filing the
tax return claiming the increased credit on April 15,
2026, Taxpayer D failed to satisfy the requirements
of paragraphs (c)(6)(i)(A) and (B) or paragraph (c)
(6)(ii) of this section.
(d) Definitions. Solely for purposes
of this section, the following definitions
apply:
(1) Bona fide fringe benefits. The term
bona fide fringe benefits means fringe
benefits described in 29 CFR part 5. Bona
fide fringe benefits include medical or
hospital care, pensions on retirement or
death, compensation for injuries or illness
resulting from occupational activity, or
insurance to provide any of the foregoing;
unemployment benefits; life insurance,
disability insurance, sickness insurance,
or accident insurance; vacation or holi-
day pay; defraying costs of apprenticeship
or other similar programs; or other bona
fide fringe benefits (each as described in
29 CFR part 5 and other U.S. Department
of Labor guidance). Consistent with 29
CFR 5.29, bona fide fringe benefits do not
include benefits required by other Federal,
State, or local law.
(2) Construction, alteration, or
repair—(i) In general. The term con-
struction, alteration, or repair generally
means construction, prosecution, comple-
tion, or repair as defined in 29 CFR 5.2.
Construction, alteration, or repair does not
include work that is ordinary and regu-
lar in nature that is designed to maintain
and preserve existing functionalities of a
facility after it is placed in service. Work
designed to maintain and preserve func-
tionality of a facility after it is placed in
service includes basic maintenance such
as regular inspections of the facility, regu-
lar cleaning and janitorial work, replacing
materials with limited lifespans such as
filters and light bulbs, and the calibration
of any equipment. However, such work
that occurs before the facility is placed
in service may constitute construction
for which prevailing wages must be paid
in order to claim the increased credit.
Maintenance does not include work that
improves a facility, adapts it for a different
use, or restores functionality as a result of
inoperability. This definition has no bear-
ing on any other sections of the Code,
including any determination of construc-
tion, alteration, repair, or maintenance
under section 162 or 263.
(ii) Example. Taxpayer T employs a
contractor X to construct a 500 mega-
watt solar farm that is a qualified facility
under section 45. X employs numerous
laborers and mechanics during construc-
tion and ensures that wages are paid to
the laborers and mechanics at not less
than the prevailing rate for the geographic
area of the solar farm, as set forth in the
applicable wage determination. After the
solar farm is placed in service, an inverter
malfunctions and requires a replacement
part. T employs laborers and mechan-
ics to replace the malfunctioning part to
restore the inverter’s functionality. The
replacement work is not considered ordi-
nary maintenance, and T must ensure
those laborers and mechanics engaged in
the replacement work are paid wages not
less than the prevailing rate for the geo-
graphic area of the solar farm to satisfy the
Prevailing Wage Requirements.
(3) Contractor. The term contractor
means any person that enters into a con-
tract with the taxpayer for the construc-
tion, alteration, or repair of a qualified
facility.
(4) Employed. The term employed
means performing the duties of a laborer
or mechanic for the taxpayer, contractor,
or subcontractor (as applicable), regard-
less of whether the individual would be
characterized as an employee or an inde-
pendent contractor for other Federal tax
purposes.
(5) General wage determination. The
term general wage determination means
a wage determination issued by the U.S.
Department of Labor and published on the
approved website. A general wage deter-
mination provides the minimum hourly
wage rates (both the basic hourly rate of
pay and bona fide fringe benefit rates)
that the U.S. Department of Labor has
determined are prevailing for laborers and
mechanics in specified types of construc-
tion in a given geographic area.
(6) Geographic area and locality.
The terms geographic area and local-
ity mean the county, independent city,
or other civil subdivision of the State in
which the facility is located. The terms
geographic area and locality also include
areas located offshore of the United States
and within the outer continental shelf of
the United States and the U.S. territo-
ries. If construction, alteration, or repair
work is performed in multiple counties,
independent cities, or other civil subdivi-
sions, the geographic area may include all
counties, independent cities, or other civil
subdivisions in which the work will be
performed. The locality in which a facil-
ity is located is the primary construction
site of the facility, defined as the physical
place or places where the facility will be
placed in service and remain. The locality
of the facility also includes secondary con-
struction site(s), where a significant por-
tion of the facility is constructed, altered,
or repaired provided that such construc-
tion is for specific use at that facility and
does not simply reflect the manufacture or
construction of a product made available
to the general public, and provided further
that the site is either established specifi-
cally for, or dedicated exclusively for a
specific period of time to, the construc-
tion, alteration, or repair of the facility.
A significant portion means one or more
entire portion(s) or module(s) of the facil-
ity, such as a completed room or structure,
with minimal construction work remain-
ing other than the installation and/or final
assembly of the portions or modules at the
place where the facility will be placed in
service and remain. A significant portion
does not include materials or prefabricated
component parts. A specific period of
time means a period of weeks, months, or
more, and does not include circumstances
where a site at which multiple facilities
are in progress is shifted exclusively so to
a single facility for a few hours or days
in order to meet a deadline. The locality
of the facility also includes any adjacent
or virtually adjacent dedicated support
sites, including job headquarters, tool
yards, batch plants, borrow pits, and sim-
ilar facilities of a taxpayer, contractor, or
subcontractor that are established specif-
ically for or dedicated exclusively to the
construction, alteration, or repair of the
facility, and adjacent or virtually adjacent
to either a primary construction site or a
secondary construction site.
(7) Laborer and mechanic. The
terms laborer and mechanic mean those

September 25, 2023 964 Bulletin No. 2023–39
individuals whose duties are manual or
physical in nature (including those indi-
viduals who use tools or who are per-
forming the work of a trade). The terms
laborer and mechanic include apprentices
and helpers. The terms do not apply to
individuals whose duties are primarily
administrative, executive, or clerical,
rather than manual. Persons employed
in a bona fide executive, administrative,
or professional capacity as defined in 29
CFR part 541 are not deemed to be labor-
ers or mechanics. Working forepersons
who devote more than 20 percent of their
time during a workweek to laborer or
mechanic duties, and who do not meet the
criteria for exemption of 29 CFR part 541,
are considered laborers and mechanics
for the time spent conducting laborer and
mechanic duties.
(8) Subcontractor. The term subcon-
tractor means any contractor that agrees
to perform or be responsible for the per-
formance of any part of a contract entered
into with the taxpayer (or the taxpayer’s
contractor) with respect to the construc-
tion, alteration, or repair of a facility.
(9) Taxpayer. The term taxpayer means
any taxpayer as defined in section 7701(a)
(14), including applicable entities
described in section 6417(d)(1)(A). In
the case of a credit transferred under sec-
tion 6418, the term taxpayer means the eli-
gible taxpayer that determines the eligible
credit to be transferred and makes a trans-
fer election under section 6418 to transfer
any specified credit portion (including 100
percent) of an eligible credit determined
with respect to any eligible credit property
of such eligible taxpayer for any taxable
year.
(10) Type of construction. The type of
construction is the general category of
construction as established by the U.S.
Department of Labor for the publication
of general wage determinations. Specific
types of construction may include, but are
not limited to, building, residential, heavy,
and highway.
(11) Wages. The term wages gener-
ally means wages as defined in 29 CFR
5.2. In general, wages means the basic
hourly rate of pay; any contribution irre-
vocably made by a taxpayer, contractor,
or subcontractor to a trustee or to a third
person pursuant to a bona fide fringe
benefit fund, plan, or program; and the
rate of costs to the taxpayer, contractor,
or subcontractor that may be reasonably
anticipated in providing bona fide fringe
benefits to laborers and mechanics pur-
suant to an enforceable commitment to
carry out a financially responsible plan or
program, provided the commitment was
communicated in writing to the labor-
ers and mechanics affected. Whether
amounts are wages for prevailing wage
purposes is not relevant in determining
whether amounts are wages or compen-
sation for other Federal tax purposes.
(e) Applicability date. This section
applies to facilities placed in service in
taxable years ending after [date final rule
publishes in the Federal Register], and
the construction of which begins after
[date final rule publishes in the Federal
Register].
§1.45-8 Apprenticeship requirements.
(a) In general. Except as provided in
paragraph (e) of this section, a taxpayer
claiming or transferring (under sec-
tion 6418) the increased credit amount
under section 45(b)(6)(B)(iii) with
respect to any qualified facility must sat-
isfy the requirements of section 45(b)
(8) and this section (the “Apprenticeship
Requirements”). The taxpayer is
solely responsible for ensuring that the
Apprenticeship Requirements are satis-
fied. See paragraph (f) of this section for
definitions of terms used in this section.
(b) Labor hours requirement—(1)
Percentage of total hours. A taxpayer
claiming or transferring (under sec-
tion 6418) the increased credit amount
under section 45(b)(6) must ensure that
qualified apprentices (hired by the tax-
payer, contractor, or subcontractor)
perform not less than the applicable per-
centage of the total labor hours of the
construction, alteration, or repair work
(including work performed by any con-
tractor or subcontractor) of any qualified
facility, subject to the apprentice-to-jour-
neyworker ratio described in paragraph
(c) of this section.
(2) Applicable percentage. For pur-
poses of paragraph (b)(1) of this section,
the applicable percentage is—
(i) 10 percent in the case of a qualified
facility, the construction of which begins
before January 1, 2023;
(ii) 12.5 percent in the case of a qual-
ified facility, the construction of which
begins after December 31, 2022, and
before January 1, 2024; and
(iii) 15 percent in the case of a qualified
facility, the construction of which begins
after December 31, 2023.
(c) Application of apprentice-to-jour-
neyworker ratio—(1) In general. The
labor hours requirement under paragraph
(b) of this section is subject to any appli-
cable requirements for apprentice-to-jour-
neyworker ratios of the U.S. Department
of Labor or the applicable State appren-
ticeship agency.
(2) Ratio. The allowable ratio of
apprentices-to-journeyworkers on the job
site in any occupation and its correspond-
ing classification on any day must comply
with the applicable apprentice-to-journey-
worker ratio of the registered apprentice-
ship program in accordance with 29 CFR
part 29.
(3) Failure to meet ratio requirements.
For purposes of section 45(b)(8)(B), if on
any day the ratio of apprentices to jour-
neyworkers exceeds the ratio established
in accordance with paragraph (c)(2) of
this section, and subject to the require-
ments of the registered apprenticeship
program, the labor hours performed by
any qualified apprentice in excess of the
ratio may not be counted as hours per-
formed by apprentices for purposes of the
labor hours requirement of paragraph (b)
of this section.
(d) Participation requirement. Each
taxpayer, contractor, or subcontractor
who employs four or more individuals to
perform construction, alteration, or repair
work with respect to the construction of
a qualified facility must employ one or
more qualified apprentices to perform
work with respect to the construction,
alteration, or repair of the facility.
(e) Exceptions to the Apprenticeship
Requirements. If a taxpayer fails to sat-
isfy the Apprenticeship Requirements in
paragraph (a) of this section with respect
to the construction of any qualified facil-
ity or with respect to the alteration or
repair of a facility, the taxpayer will
nonetheless be deemed to have satisfied
the Apprenticeship Requirements if the
taxpayer has made a good faith effort to
meet the Apprenticeship Requirements
as described in paragraph (e)(1) of

Bulletin No. 2023–39 965 September 25, 2023
this section (the “Good Faith Effort
Exception”) or made the penalty payment
provided in paragraph (e)(2) of this sec-
tion for any failures to which the Good
Faith Effort Exception does not apply.
(1) Good Faith Effort Exception—(i)
In general. A taxpayer is deemed to have
satisfied the Apprenticeship Requirements
of this section with respect to a request for
qualified apprentices if the taxpayer meets
the following requirements:
(A) Request for apprentices. The tax-
payer, contractor, or subcontractor must
submit a written request for qualified
apprentices to at least one registered
apprenticeship program, as defined in
paragraph (f)(4) of this section, which
has a geographic area of operation that
includes the location of the facility, or to a
registered apprenticeship program that can
reasonably be expected to provide appren-
tices to the location of the facility; trains
apprentices in the occupation(s) needed to
perform construction, alteration, or repair
with respect to the facility; and has a usual
and customary business practice of enter-
ing into agreements with employers for
the placement of apprentices in the occu-
pation for which they are training, pur-
suant to its standards and requirements.
Such request must be in writing and sent
electronically or by registered mail.
(1) Content of request. The request of
the taxpayer, contractor, or subcontrac-
tor must include the proposed dates of
employment, occupation of apprentices
needed, location of the work to be per-
formed, number of apprentices needed, the
expected number of labor hours to be per-
formed by the apprentices, and the name
and contact information of the taxpayer,
contractor, or subcontractor request-
ing employment of apprentices from the
registered apprenticeship program. The
request must also state that the request
for apprentices is made with an intent to
employ apprentices in the occupation for
which they are being trained and in accor-
dance with the requirements and standards
of the registered apprenticeship program.
(2) Duration of request. If the taxpayer,
contractor, or subcontractor submits a
request in accordance with paragraph (e)
(1)(i)(A) of this section and the request is
denied or not responded to, the taxpayer
will be deemed to have exercised a Good
Faith Effort with respect to the request for
a period of 120 days from the date of the
request. The taxpayer will not be deemed
to have exercised a Good Faith Effort
beyond 120 days of a previously denied
request unless the taxpayer submits an
additional request.
(B) Denial of request. If a taxpayer,
contractor, or subcontractor submits a
request in accordance with paragraph (e)
(1)(i)(A) of this section and the request
is denied, the taxpayer will be deemed to
satisfy the requirements of section 45(b)
(8)(A) through (C), provided that such
denial is not the result of a refusal by the
taxpayer or any contractors or subcon-
tractors engaged in the performance of
construction, alteration, or repair work
with respect to such qualified facility to
comply with the established standards and
requirements of the registered apprentice-
ship program. The denial of a request is
only valid for purposes of establishing a
Good Faith Effort with respect to the por-
tion(s) of the request that were denied.
(C) Failure to respond. If the regis-
tered apprenticeship program fails to
respond to a request submitted in accor-
dance with paragraph (e)(1)(i)(A) of this
section within five business days after the
date on which such registered apprentice-
ship program received the taxpayer’s (or
its contractor or subcontractor) request,
then such request is deemed to be denied.
Acknowledgement, whether in writing or
otherwise, by the registered apprentice-
ship program of receipt of such request
submitted in accordance with paragraph
(e)(1)(i)(A) of this section is a sufficient
response for purposes of this paragraph
(e)(1)(i)(C).
(ii) Examples. The provisions of para-
graph (e)(1) of this section may be illus-
trated by the following examples.
(A) Example 1. Taxpayer A submits a request to a
registered apprenticeship program by email. The reg-
istered apprenticeship program responds three days
later, but reply emails from the registered appren-
ticeship program are auto forwarded to taxpayer A’s
spam or junk mail folder. Taxpayer A claims that the
registered apprenticeship program failed to respond
within five business days and claims the good faith
effort exception. Taxpayer A would not qualify for
the Good Faith Effort Exception of this section
because the registered apprenticeship program did
respond within five business days.
(B) Example 2. Contractor C makes a request
for qualified apprentices from a registered appren-
ticeship program outside the geographic area of the
qualified facility and the registered apprenticeship
program cannot reasonably be expected to provide
apprentices to the location of the facility. As a
result, Contractor C’s request is denied. Contractor
C’s request would not qualify for the Good Faith
Effort Exception of this section because the regis-
tered apprenticeship program could not reasonably
be expected to provide apprentices to the location of
the facility.
(C) Example 3. Contractor D submits a request
to a registered apprenticeship program. The regis-
tered apprenticeship program requires contractors to
enter into an agreement to partner with that regis-
tered apprenticeship program. Contractor D refuses
to enter into the agreement and as a result, the regis-
tered apprenticeship program denies the Contractor
D’s request. Contractor D’s request would not qual-
ify for the Good Faith Effort Exception of this sec-
tion because Contractor D refused to comply with
the established standards of the registered appren-
ticeship program.
(D) Example 4. Contractor E enters into an
agreement with a registered apprenticeship program
with standards of apprenticeship for a specific occu-
pation. Contractor E then requests apprentices from
that registered apprenticeship program for a differ-
ent occupation in which they do not have standards
of apprenticeship or an agreement. Contractor E’s
request would not qualify for the Good Faith Effort
Exception of this section.
(E) Example 5. Taxpayer F, a tax equity inves-
tor in the partnership that owns the facility, makes
a request to a registered apprenticeship program.
Taxpayer F’s request is denied because it was not
made with an intent to employ apprentices in the
occupation for which they are being trained and in
accordance with the requirements and standards of
the registered apprenticeship program. Rather, the
contractor (or subcontractor) that will employ and
train the apprentices in the construction, alteration,
or repair of the facility is the proper party to request
apprentices from the registered apprenticeship pro-
gram. Taxpayer F’s request would not qualify for the
Good Faith Effort Exception of this section.
(F) Example 6. Contractor G submits a request
for apprentices from a registered apprenticeship
program. Contractor’s request states that it seeks
to employ four apprentices for a period of 180
days for a total of 4,160 hours (1,040 hours x four
apprentices). The registered apprenticeship pro-
gram informs Contractor G that it can supply two
apprentices for the 26 weeks and denies the request
for the other two apprentices. Contractor G does
not submit any additional requests for apprentices
from a registered apprenticeship program after 120
days. Contractor G’s request would qualify for the
Good Faith Effort Exception of 693 hours for each
of the two requested apprentices that were denied for
the 120-day period after the request was submitted
(120/180 x 1,040 hours = 693 hours for each denied
apprentice). The request would not qualify for the
Good Faith Effort Exception of this section after
120 days because Contractor G did not submit an
additional request with respect to the portion of the
request that was denied.
(2) Penalty payment—(i) In gen-
eral. The taxpayer must pay the Internal
Revenue Service (IRS) a penalty equal to
$50 multiplied by the total labor hours

September 25, 2023 966 Bulletin No. 2023–39
for which the requirements described in
paragraph (b) or (d) of this section were
not satisfied with respect to the construc-
tion, alteration, or repair work on such
qualified facility to retain the increased
credit.
(A) Total labor hours for which the
percentage requirement is not met. For
failures to meet the percentage of total
labor hours requirement in paragraph (b)
(1) of this section, the total labor hours for
which the requirement was not satisfied is
calculated as the difference between the
total labor hours that would be required
to meet the applicable percentage under
paragraph (b)(2) of this section and the
total labor hours actually worked by all
qualified apprentices consistent with
the applicable ratio of apprentices to
journeyworkers.
(B) Total labor hours for which the par-
ticipation requirement is not met. For fail-
ures to meet the participation requirement
in paragraph (d) of this section, the total
labor hours for which the requirement was
not satisfied is calculated as the total labor
hours of construction, alteration, or repair
worked by all individuals employed by the
taxpayer, contractor, or subcontractor who
failed to meet the participation require-
ment of the qualified facility divided by
the number of individuals employed by
the taxpayer, contractor, or subcontractor
who performed construction, alteration, or
repair work on the facility.
(C) Penalty payment not required if
taxpayer ineligible for increased credit
under section 45(b)(6)(B)(iii). If the tax-
payer claims the increased credit under
section 45(b)(6)(B)(iii) and does not sat-
isfy the Apprenticeship Requirements
for the claimed increased credit amount,
then the obligation to make the penalty
payment under paragraph (e)(2)(i) of this
section applies. If the IRS determines that
a taxpayer claiming the increased credit
under section 45(b)(6)(B)(iii) failed to
meet the Apprenticeship Requirements
and the taxpayer does not make the pen-
alty payment required under this para-
graph (e)(2)(i), then no penalty is assessed
under this paragraph (e)(2)(i), and the tax-
payer is not entitled to the increased credit
under section 45(b)(6)(B)(iii). Taxpayers
that are not entitled to claim the increased
credit amount may still be entitled to the
base amount of the renewable electricity
production credit under section 45(a) if
they meet the requirements to claim the
credit.
(D) Examples. The provisions of this
paragraph (e)(2)(i) may be illustrated by
the following examples, which do not
take into account any possible application
of the exception for Good Faith Effort
Exception under paragraph (e)(1) of this
section, the enhanced penalty payment
requirement in the case of intentional
disregard under paragraph (e)(2)(ii) of
this section, or the inapplicability of the
penalty in the case of a qualifying project
labor agreement under paragraph (e)(2)(v)
of this section. In each example, assume
that the taxpayer uses the calendar year as
the taxpayer’s taxable year.
(1) Example 1. Taxpayer A begins construction
of a qualified facility on April 1, 2023. The facility is
placed in service on April 1, 2025, and A claims the
increased credit on its 2025 tax return. All individuals
who performed the construction, alteration, or repair
work were employed directly by taxpayer A, includ-
ing one qualified apprentice. At the time A claims the
increased credit, a total of 50,000 labor hours were
spent on the construction, alteration, or repair work
of the facility, 6,000 of which were performed by
qualified apprentices. Taxpayer A has satisfied the
participation requirement because A has employed
at least one apprentice. Taxpayer A failed to satisfy
the percentage requirement under paragraph (b)(2)
of this section because less than 12.5% of the total
labor hours were performed by qualified apprentices.
Qualified apprentices must have performed at least
6,250 labor hours, so the total labor hours by which
the percentage requirement was not satisfied is 250.
To cure A’s failure to meet the percentage require-
ment, A must pay a penalty of $12,500.
(2) Example 2. Taxpayer B begins construction
of a qualified facility on February 10, 2023. The
facility is placed in service on February 10, 2026,
and B claims the increased credit on its 2026 tax
return. B employs 10 individuals to perform con-
struction, alteration, or repair work of the facility,
two of whom are qualified apprentices. Taxpayer B
also hires contractor M, who employs five individ-
uals to perform construction, alteration, or repair
work of the facility, none of whom are qualified
apprentices. At the time B claims the increased
credit, a total of 50,000 labor hours were spent on
the construction, alteration, or repair work of the
facility, 6,500 of which were performed by qual-
ified apprentices. Of the total 50,000 labor hours,
33,000 labor hours were performed by individuals
employed by B and 17,000 labor hours were per-
formed by individuals employed by M. B has sat-
isfied the percentage requirement under paragraph
(b)(2) of this section because more than 12.5% of
the total labor hours were performed by qualified
apprentices. B failed to satisfy the participation
requirement under paragraph (d) of this section
because contractor M employed five individuals
but no qualified apprentices. The total labor hours
for which the participation requirement was not
satisfied is 3,400, which is equal to the total labor
hours performed by individuals employed by M
(17,000) divided by the number of individuals
employed by M (five). To cure B’s failure to meet
the Apprenticeship Requirements, B must pay a
penalty of $170,000.
(3) Example 3. Taxpayer C begins construction
of a qualified facility on January 1, 2024. The facil-
ity is placed in service on January 1, 2025, and C
claims the increased credit on its 2025 tax return.
C employs 15 individuals to perform construction,
alteration, or repair work of the facility, none of
whom is a qualified apprentice. Taxpayer C also
hires contractor N, who employs five individuals to
perform construction, alteration, or repair work of
the facility, one of whom is a qualified apprentice.
At the time C claims the increased credit, a total
of 20,000 labor hours were spent on the construc-
tion, alteration, or repair work of the facility, 1,000
of which were performed by qualified apprentices.
Of the 50,000 total labor hours, 15,000 labor hours
were performed by individuals employed by C and
5,000 labor hours were performed by individuals
employed by N. C failed to satisfy the percentage
requirement under paragraph (b)(2) of this sec-
tion because less than 15% of the total labor hours
were performed by qualified apprentices. Qualified
apprentices must have performed at least 3,000 labor
hours, so the total labor hours by which the percent-
age requirement was not satisfied is 2,000. C also
failed to satisfy the participation requirement under
paragraph (d) of this section because C employed 15
individuals but zero qualified apprentices. The total
labor hours for which the participation requirement
was not satisfied is 1,000, which is equal to the total
labor hours performed by individuals employed by
C – 15,000 – divided by the number of individu-
als employed by C – 15. The total labor hours by
which C failed to meet the percentage and partici-
pation requirements is 3,000. To cure C’s failure to
meet the Apprenticeship Requirements, C must pay
a penalty of $150,000.
(4) Example 4. Taxpayer D begins construction
of a qualified facility on April 1, 2023. The facility
is placed in service on January 1, 2024, and D files a
claim for the increased credit with its 2024 tax return.
D does not employ any individuals to perform con-
struction, alteration, or repair work of the facility, but
hires contractors O, P, and Q. Contractor O employs
10 journeyworkers who work 10,000 hours and one
qualified apprentice who works 400 hours. Contractor
P employs four journeyworkers who work 4,000
hours and five qualified apprentices who work 2,000
hours. Contractor Q employs three journeyworkers
who work 3,000 hours and one qualified apprentice
who works 400 hours. The registered apprenticeship
program for all of the apprentices has prescribed a
1:1 apprentice to journeyworker ratio. For each day,
all journeyworkers and apprentices employed by the
contractors are on the job site. The contractors have
satisfied the participation requirement because they
each employed one or more qualified apprentices. The
total labor hours are 19,800 hours, and the total hours
worked by qualified apprentices are 2,800. However,
Contractor P employed one apprentice in excess of
the apprentice-to-journeyworker ratio (five qualified
apprentices: four journeyworkers) that was prescribed
by the apprenticeship program. Because Contractor

Bulletin No. 2023–39 967 September 25, 2023
P employed one apprentice in excess of the appren-
tice-to-journeyworker ratio, 400 of the apprentice
hours worked by Contractor P do not count towards
the labor hour requirement. Thus, Taxpayer D has
failed to meet the percentage requirement because
only 2,400 hours worked by apprentices are counted
for purposes of the percentage requirement. The total
labor hours by which D failed to meet the percentage
requirement is 75 (19,800 total hours x 12.5% - 2,400
apprentice hours). To cure D’s failure to meet the
Apprenticeship Requirements, D must pay a penalty
of $3,750.
(ii) Intentional disregard—(A)
Application of section 45(b)(8)(D)(iii). If
the IRS determines that any failure to sat-
isfy the Apprenticeship Requirements in
paragraph (b) or (d) of this section is due
to intentional disregard of those require-
ments, the amount of the penalty payment
under paragraph (e)(2) of this section is
increased to $500 multiplied by the total
labor hours for which the requirements
described in paragraph (b) or (d) of this
section were not satisfied with respect to
the construction, alteration, or repair work
on such qualified facility.
(B) Meaning of intentional disregard.
A failure to satisfy the Apprenticeship
Requirements of paragraph (b) or (d) of
this section is due to intentional disregard
if it is knowing or willful.
(C) Facts and circumstances consid-
ered. The facts and circumstances that
are considered in determining whether
a failure to satisfy the Apprenticeship
Requirements is due to intentional disre-
gard include, but are not limited to—
(1) Whether the failure was part of a
pattern of conduct that includes repeated
and systemic failures to comply with the
Apprenticeship Requirements;
(2) Whether the taxpayer failed to take
steps to determine the applicable percent-
age of labor hours required to be per-
formed by qualified apprentices;
(3) Whether the taxpayer sought to
promptly cure any failures;
(4) Whether the taxpayer has been
required to make a penalty payment under
paragraph (e)(2) of this section in previ-
ous years;
(5) Whether the taxpayer included pro-
visions in any contracts entered into with
contractors that required the employment
of apprentices by the contractor and any
subcontractors consistent with the labor
hour requirement of section 45(b)(8)(A)
and the participation requirement of sec-
tion 45(b)(8)(C); and
(6) Whether the taxpayer made no
attempt to comply with the Apprenticeship
Requirements.
(D) Rebuttable presumption of no
intentional disregard. If a taxpayer makes
the penalty payment required by para-
graph (e)(2) of this section before receiv-
ing notice of an examination from the IRS
with respect to a claim for the increased
credit under section 45(b)(6), the tax-
payer will be presumed not to have inten-
tionally disregarded the Apprenticeship
Requirements in paragraphs (b) and (d) of
this section.
(iii) Deficiency procedures to apply.
The penalty payment required by para-
graph (e)(2) of this section is subject to
deficiency procedures of subchapter B of
chapter 63 of the Code.
(iv) Penalty payments in the event
of a transfer pursuant to section 6418.
To the extent an eligible taxpayer, as
defined in section 6418(f)(2), has deter-
mined an increased credit amount under
section 45(b)(6) and transferred such
increased credit amount as part of a
specified credit portion, the obligation
to make a penalty payment under para-
graph (e)(2)(i) of this section remains
with the eligible taxpayer. The obliga-
tion for an eligible taxpayer to satisfy the
Apprenticeship Requirements becomes
binding upon the earlier of the filing of
the eligible taxpayer’s return for the tax-
able year for which the specified credit
portion is determined with respect to
the eligible taxpayer, or the filing of the
return of the transferee taxpayer for the
year in which the specified credit portion
is taken into account. If the IRS deter-
mines that the eligible taxpayer failed to
meet the Apprenticeship Requirements
and the eligible taxpayer does not then
make the penalty payments provided in
paragraph (e)(2)(i) of this section, then
no penalty is assessed under paragraph
(e)(2)(i) of this section, and the eligible
taxpayer is not entitled to the increased
credit amount determined under section
45(b)(6)(B)(iii). Section 6418 and the
regulations in this part under section
6418 control for determining the impact
of an eligible taxpayer’s failure to cure
on any transferee taxpayer.
(v) Project labor agreements. The pen-
alty payment required by paragraph (e)(2)
(i) of this section to cure a failure to satisfy
the Apprenticeship Requirements in para-
graphs (b) and (d) of this section shall not
apply with respect to the construction,
alteration, or repair work of a qualified
facility if the work is done pursuant to a
Qualifying Project Labor Agreement as
defined in § 1.45-7(c)(6)(ii).
(f) Definitions. Solely for purposes
of this section, the following definitions
apply:
(1) Journeyworker. The term jour-
neyworker means an individual who has
attained a level of skill, abilities, and com-
petencies recognized within an industry as
having mastered the skills and competen-
cies required for the occupation. Use of
the term may also refer to a mentor, tech-
nician, specialist or other skilled individ-
ual who has documented sufficient skills
and knowledge of an occupation, either
through formal apprenticeship or through
practical on-the-job experience and for-
mal training.
(2) Labor hours. The term labor hours
means the total number of hours devoted
to the performance of construction, alter-
ation, or repair work by any individ-
ual employed by the taxpayer or by any
contractor or subcontractor. Labor hours
do not include hours worked by fore-
men, superintendents, owners, or persons
employed in bona fide executive, admin-
istrative, or professional capacities (as
defined in 29 CFR part 541).
(3) Qualified apprentice. The term
qualified apprentice means an individual
who is employed by the taxpayer or by
any contractor or subcontractor who is
participating in a registered apprentice-
ship program. Participating in a registered
apprentice program means the apprentice
has entered into a written agreement with
a registered apprenticeship program con-
taining the terms and conditions of the
employment and training of the appren-
tice and has been registered as an appren-
tice with the U.S. Department of Labor’s
Office of Apprenticeship or a State
apprenticeship agency during the time
period in which work is performed by the
apprentice for the taxpayer, contractor, or
subcontractor.
(4) Registered apprenticeship program.
A registered apprenticeship program
means a program that has been regis-
tered by the U.S. Department of Labor’s
Office of Apprenticeship or a recognized

September 25, 2023 968 Bulletin No. 2023–39
State apprenticeship agency, pursuant to
the National Apprenticeship Act and its
implementing regulations for registered
apprenticeship at 29 CFR parts 29 and
30, as meeting the basic standards and
requirements of the Department of Labor
for approval of such program for Federal
purposes. Registration of a program is evi-
denced by a Certificate of Registration or
other written indicia.
(5) State apprenticeship agency. The
term State apprenticeship agency means
an agency of a State government that
has responsibility and accountability for
apprenticeship within the State and that
has been recognized and authorized by
the U.S. Department of Labor’s Office
of Apprenticeship to register and oversee
apprenticeship programs and agreements
for Federal purposes.
(6) Taxpayer. The term taxpayer has
the same meaning as in §1.45-7(d)(9).
(g) Applicability date. This section
applies to facilities placed in service in
taxable years ending after [date final rule
publishes in the Federal Register], and
the construction of which begins after
[date final rule publishes in the Federal
Register].
§§1.45-9 - 1.45.11 [Reserved]
§1.45-12 Recordkeeping and reporting.
(a) In general. The increased credit
must be claimed in such form and manner
as may be prescribed in Internal Revenue
Service forms or instructions or in publica-
tions or guidance published in the Internal
Revenue Bulletin. See §601.601 of this
chapter. Consistent with sections 45 and
6001, a taxpayer claiming or transferring
(under section 6418) an increased credit
under section 45(b)(6)(A) must retain
records sufficient to establish compli-
ance with the applicable requirements in
section 45(b)(6)(B), as applicable. In the
case of any increased credit transferred
under section 6418, the requirement to
maintain and preserve sufficient records
demonstrating compliance with the appli-
cable prevailing wage and apprenticeship
requirements remains with the eligible
taxpayer that determined and transferred
the credit. For definitions of terms used in
this section, see §1.45-7(d) with respect
to the prevailing wage requirements, and
§1.45-8(f) with respect to the apprentice-
ship requirements.
(b) Recordkeeping for prevailing
wage and apprenticeship requirements.
With respect to each qualified facility for
which a taxpayer is claiming or transfer-
ring (under section 6418) an increased
credit under section 45(b)(6)(A), unless
section 45(b)(6)(B)(i) or 45(b)(6)(B)(ii)
applies, the taxpayer must maintain and
preserve records sufficient to demonstrate
compliance with the applicable prevailing
wage and apprenticeship requirements in
§§1.45-7 and 1.45-8, respectively. At a
minimum, those records include payroll
records for each laborer and mechanic
(including each qualified apprentice)
employed by the taxpayer, contractor, or
subcontractor in the construction, alter-
ation, or repair of the qualified facility.
(c) Recordkeeping for prevailing
wage requirements. In addition to payroll
records otherwise maintained by the tax-
payer, records sufficient to demonstrate
compliance with the applicable prevailing
wage requirements in §1.45-7 may include
the following information for each laborer
and mechanic (including each qualified
apprentice) employed by the taxpayer, a
contractor, or subcontractor with respect
to each qualified facility:
(1) Identifying information, including
the name, social security or tax identifica-
tion number, address, telephone number,
and email address;
(2) The location and type of qualified
facility;
(3) The labor classification(s) the tax-
payer applied to the laborer or mechanic
for determining the prevailing wage rate
and documentation supporting the appli-
cable classification, including the applica-
ble wage determination;
(4) The hourly rate(s) of wages paid
(including rates of contributions or costs
for bona fide fringe benefits or cash equiv-
alents thereof) for each applicable labor
classification;
(5) Records to support any contribution
irrevocably made on behalf of a laborer or
mechanic to a trustee or other third person
pursuant to a bona fide fringe benefit pro-
gram, and the rate of costs that were rea-
sonably anticipated in providing bona fide
fringe benefits to laborers and mechanics
pursuant to an enforceable commitment to
carry out a plan or program described in
40 U.S.C. 3141(2)(B), including records
demonstrating that the enforceable com-
mitment was provided in writing to the
laborers and mechanics affected;
(6) The total number of labor hours
worked per pay period;
(7) The total wages paid for each pay
period (including identifying any deduc-
tions from wages);
(8) Records to support wages paid to
any apprentices at less than the applicable
prevailing wage rates, including records
reflecting the registration of the appren-
tices with a registered apprenticeship
program and the applicable wage rates
and apprentice-to-journeyworker ratios
prescribed by the apprenticeship program;
and
(9) The amount and timing of any
correction payments and documentation
reflecting the calculation of the correction
payments.
(d) Recordkeeping for apprentice-
ship requirements. Records sufficient to
demonstrate compliance with the appli-
cable apprenticeship requirements in
§1.45-8 may include the following infor-
mation for each apprentice employed by
the taxpayer, contractor, or subcontractor
with respect to each qualified facility:
(1) Any written requests for the
employment of apprentices from regis-
tered apprenticeship programs, including
any contacts with the U.S. Department
of Labor’s Office of Apprenticeship or
a State apprenticeship agency regarding
requests for apprentices from registered
apprenticeship programs;
(2) Any agreements entered into with
registered apprenticeship programs with
respect to the construction, alteration, or
repair of the facility;
(3) Documents reflecting the stan-
dards and requirements of any registered
apprenticeship program, including the
applicable ratio requirement prescribed by
each registered apprenticeship program
from which taxpayers, contractors, or sub-
contractors employ apprentices;
(4) The total number of labor hours
worked by apprentices; and
(5) Records reflecting the daily ratio of
apprentices to journeyworkers.
(e) Applicability date. This section
applies to facilities placed in service in
taxable years ending after [date final rule
publishes in the Federal Register], and

Bulletin No. 2023–39 969 September 25, 2023
the construction of which begins after
[date final rule publishes in the Federal
Register].
Par. 4. Sections 1.45L-1 through
1.45L-3 are added to read as follows:
§§1.45L-1 - 1.45L-2 [Reserved]
§1.45L-3 Rules relating to the
increased credit amount for prevailing
wage.
(a) In general. With respect to a quali-
fied new energy efficient home described
in section 45L(a)(2)(B), the credit deter-
mined under section 45L(a)(2)(B)(i) is
$2,500 and the credit determined under
section 45L(a)(2)(B)(ii) is $5,000 if the
qualified new energy efficient home
described in section 45L(a)(2)(B)—
(1) Meets the requirements under sec-
tion 45L(c)(1)(A) or 45L(c)(1)(B), as
applicable;
(2) Is constructed by an eligible contractor;
(3) Is acquired by a person for use as a
residence during the taxable year; and
(4) Satisfies the prevailing wage
requirements of section 45(b)(7) and
§1.45-7, and the recordkeeping and
reporting requirements of §1.45-12.
(b) Definitions—(1) Qualified new
energy efficient home. For purposes of this
section, a qualified new energy efficient
home means a qualified new energy effi-
cient home described in section 45L(b)(2).
(2) Eligible contractor. For purposes of
this section, an eligible contractor means
an eligible contractor described in sec-
tion 45L(b)(1).
(c) Applicability date. This section
applies to qualified new energy efficient
homes acquired for use in taxable years
ending after [date final rule publishes in
the Federal Register], and the construc-
tion of which begins after [date final rule
publishes in the Federal Register].
Par. 5. Section 1.45Q-6 is added to
read as follows:
§1.45Q-6 Rules relating to the
increased credit amount for prevailing
wage and apprenticeship.
(a) In general. If the requirements in
paragraph (b) of this section are satis-
fied with respect to any qualified facility
or any carbon capture equipment placed
in service at that facility, then the credit
determined under section 45Q(a) is mul-
tiplied by five.
(b) Qualified facility and carbon cap-
ture equipment requirements. The require-
ments of this paragraph (b) are satisfied
if any of the following requirements are
met —
(1) With respect to a qualified facil-
ity the construction of which begins on
or after January 29, 2023, and any car-
bon capture equipment placed in service
at such facility, the taxpayer meets the
prevailing wage requirements of sec-
tion 45(b)(7) and §1.45-7 with respect to
such facility and equipment, the appren-
ticeship requirements of section 45(b)(8)
and §1.45-8 with respect to the construc-
tion of such facility and equipment, and
the recordkeeping and reporting require-
ments of §1.45-12;
(2) With respect to any carbon cap-
ture equipment the construction of which
begins on or after January 29, 2023, and
which is installed at a qualified facility
the construction of which began prior to
such date, the taxpayer meets the prevail-
ing wage requirements of section 45(b)(7)
and §1.45-7 with respect to such equip-
ment, the apprenticeship requirements of
section 45(b)(8) and §1.45-8 with respect
to the construction of such equipment, and
the recordkeeping and reporting require-
ments of §1.45-12; or
(3) The construction of carbon capture
equipment begins prior to January 29,
2023, and such equipment is installed at a
qualified facility the construction of which
begins prior to January 29, 2023.
(c) Applicability date. This section
applies to facilities or equipment placed
in service in taxable years ending after
[date final rule publishes in the Federal
Register], and the construction of
which begins after [date final rule pub-
lishes in the Federal Register].
Par. 6. Sections 1.45U-1 through
1.45U-3 are added to read as follows:
§§1.45U-1 - 1.45U-2 [Reserved]
§1.45U-3 Rules relating to the
increased credit amount for prevailing
wage.
(a) In general. If a qualified nuclear
power facility satisfies the prevailing
wage requirements of section 45(b)(7)
and §1.45-7 in the alteration or repair of
such facility, and the recordkeeping and
reporting requirements of §1.45-12, then
the amount of the zero-emission nuclear
power production credit for the taxable
year is equal to the credit amount deter-
mined under section 45U(a) multiplied by
five.
(b) Applicability date. This section
applies to qualified nuclear power facil-
ities that produce and sell electricity
during the taxable year and the alter-
ation or repair of which occurs after
[date final rule publishes in the Federal
Register].
Par. 7. Sections 1.45V-1 through
1.45V-3 are added to read as follows:
§§1.45V-1 - 1.45V-2 [Reserved]
§1.45V-3 Rules relating to the
increased credit amount for prevailing
wage and apprenticeship.
(a) In general. If any qualified clean
hydrogen production facility satisfies
the requirements in paragraph (b) of this
section, then the amount of the credit for
producing qualified clean hydrogen deter-
mined under section 45V(a) with respect
to qualified clean hydrogen described in
section 45V(b)(2) is equal to the credit
amount determined under section 45V(a)
multiplied by five.
(b) Qualified clean hydrogen produc-
tion facility requirements. A qualified
clean hydrogen production facility satis-
fies the requirements of this paragraph (b)
if it is one of the following —
(1) A facility the construction of which
began prior to January 29, 2023, and that
meets the prevailing wage requirements of
section 45(b)(7) and §1.45-7 with respect
to an alteration or repair of the facility
that occurs after January 29, 2023 (to
the extent applicable), and that meets the
recordkeeping and reporting requirements
of §1.45-12; or
(2) A facility that meets the prevailing
wage requirements of section 45(b)(7) and
§1.45-7, the apprenticeship requirements
of section 45(b)(8) and §1.45-8, and the
recordkeeping and reporting requirements
of §1.45-12.
(c) Applicability date. This section
applies to facilities placed in service in

September 25, 2023 970 Bulletin No. 2023–39
taxable years ending after [date final rule
publishes in the Federal Register], and
the construction of which begins after
[date final rule publishes in the Federal
Register].
Par. 8. Sections 1.45Y-1 through
1.45Y-3 are added to read as follows:
§§1.45Y-1 - 1.45Y-2 [Reserved]
§1.45Y-3 Rules relating to the
increased credit amount for prevailing
wage and apprenticeship.
(a) In general. If any qualified clean
electricity production facility satisfies
the requirements in paragraph (b) of
this section, the amount of the credit
for producing clean electricity deter-
mined under section 45Y(a)(2) equals
1.5 cents.
(b) Qualified clean electricity pro-
duction facility requirements. A qualified
facility satisfies the requirements of this
paragraph (b) if it is one of the following
—
(1) A facility with a maximum net out-
put of less than one megawatt (as mea-
sured in alternating current);
(2) A facility the construction of which
began prior to January 29, 2023; or
(3) A facility that meets the prevailing
wage requirements of section 45(b)(7) and
§1.45-7, the apprenticeship requirements
of section 45(b)(8) and §1.45-8, and the
recordkeeping and reporting requirements
of §1.45-12.
(c) Applicability date. This section
applies to facilities placed in service in
taxable years ending after [date final rule
publishes in the Federal Register], and
the construction of which begins after
[date final rule publishes in the Federal
Register].
Par. 9. Sections 1.45Z-1 through
1.45Z-3 are added to read as follows:
§§1.45Z-1 - 1.45Z-2 [Reserved]
§1.45Z-3 Rules relating to the
increased credit amount for prevailing
wage and apprenticeship.
(a) In general. If any qualified facil-
ity for clean fuel production satisfies the
requirements in paragraph (b) of this
section, the clean fuel production credit
determined under section 45Z(a) is mul-
tiplied by five.
(b) Qualified facility for clean fuel pro-
duction. A qualified facility for clean fuel
production satisfies the requirements of
this paragraph (b) if it is one of the fol-
lowing —
(1) A qualified facility that begins con-
struction on or after January 29, 2023,
and is placed in service after December
31, 2024, that meets the prevailing wage
requirements of section 45(b)(7) and
§1.45-7, the apprenticeship requirements
of section 45(b)(8) and §1.45-8, and the
recordkeeping and reporting requirements
of §1.45-12; or
(2) A qualified facility that is placed in
service before January 1, 2025, that meets
the prevailing wage requirements of sec-
tion 45(b)(7) and §1.45-7, the appren-
ticeship requirements of section 45(b)
(8) and §1.45-8, and the recordkeeping
and reporting requirements of §1.45-12,
with respect to any alteration or repair of
the facility with respect to any taxable
year beginning after December 31, 2024,
for which the credit is allowed under
section 45Z.
(c) Applicability date. This section
applies to facilities placed in service in
taxable years ending after [date final rule
publishes in the Federal Register], and
the construction of which begins after
[date final rule publishes in the Federal
Register].
Par. 10. Section 1.48-13 is added to
read as follows:
§1.48-13 Rules relating to the increased
credit for prevailing wage and
apprenticeship.
(a) In general. If a qualified energy
project satisfies the requirements in para-
graph (b) of this section, the amount of
the energy credit determined under sec-
tion 48(a), after the application of sec-
tions 48(a)(1) through (8), and 48(a)(15),
is equal to the credit determined under
section 48(a) (section 48 credit) multi-
plied by five.
(b) Qualified energy project require-
ments. A qualified energy project satisfies
the requirements of this paragraph (b) if it
is one of the following —
(1) A project with a maximum net out-
put of less than one megawatt (as mea-
sured in alternating current) or thermal
energy;
(2) A project the construction of which
began prior to January 29, 2023; or
(3) A project that meets the prevail-
ing wage requirements of section 48(a)
(10)(A) and §1.45-7(b)-(d), the appren-
ticeship requirements of section 45(b)(8)
and §1.45-8, and the recordkeeping and
reporting requirements of §1.45-12.
(c) Special rule applicable to gen-
eral prevailing wage requirements—(1)
In general. In addition to satisfying the
prevailing wage requirements under
§1.45-7(b) through (d), a taxpayer must
ensure that any laborers and mechanics
employed (within the meaning of §1.45-
7) by the taxpayer or any contractor or
subcontractor in the construction of such
energy project, and for the five-year
period beginning on the date such proj-
ect is placed in service, the alteration or
repair of such project, are paid wages at
rates not less than the prevailing rates
for construction, alteration, or repair of a
similar character in the locality in which
such project is located as most recently
determined by the Secretary of Labor, in
accordance with 40 U.S.C. chapter 31,
subchapter IV. Subject to recapture under
paragraph (c)(3) of this section, for pur-
poses of determining the increased credit
amount under section 48(a)(9)(B)(iii), the
taxpayer is deemed to satisfy the prevail-
ing wage requirements at the time such
project is placed in service.
(2) Exception. For purposes of satisfy-
ing the wage requirements of paragraph
(b)(3) of this section, §1.45-7(a) does not
apply.
(3) Recapture. The increased section 48
credit amount is subject to recapture for
any project that does not satisfy the pre-
vailing wage requirements in §1.45-7 with
respect to an alteration or repair of such
project for the five-year period begin-
ning on the date such project is originally
placed in service (but which does not cease
to be investment credit property within the
meaning of section 50(a) of the Code).
(d) Applicability date. This section
applies to projects placed in service in
taxable years ending after [date final rule
publishes in the Federal Register], and

Bulletin No. 2023–39 971 September 25, 2023
the construction of which begins after
[date final rule publishes in the Federal
Register].
Par. 11. Sections 1.48C-1 through
1.48C-3 are added to read as follows:
§§1.48C-1 - 1.48C-2 [Reserved]
§1.48C-3 Rules relating to the
increased credit amount for prevailing
wage and apprenticeship.
(a) In general. If any qualifying
advanced energy project satisfies the
prevailing wage requirements of sec-
tion 45(b)(7) and §1.457, the apprentice-
ship requirements of section 45(b)(8)
and §1.45-8, and the recordkeeping and
reporting requirements of §1.45-12, the
qualifying advanced energy project credit
determined under section 48C(a) for any
taxable year with respect to credits allo-
cated pursuant to section 48C(e) is an
amount equal to 30 percent of the quali-
fied investment for the taxable year.
(b) Applicability date. This section
applies to qualifying advanced energy
projects placed in service in taxable years
ending after [date final rule publishes in
the Federal Register], and the construc-
tion of which begins after [date final rule
publishes in the Federal Register].
Par. 12. Sections 1.48E-1 through
1.48E-3 are added to read as follows:
§§1.48E-1 - 1.48E-2 [Reserved]
§1.48E-3 Rules relating to the
increased credit for prevailing wage
and apprenticeship.
(a) In general. If any clean electric-
ity investment with respect to a qualified
facility or energy storage technology sat-
isfies the requirements in paragraph (b) of
this section, the applicable percentage of
the qualified clean electricity investment
credit determined under section 48E(a) for
the taxable year equals 30 percent.
(b) Qualified clean electricity invest-
ment requirements. A qualified clean
electricity investment satisfies the require-
ments of this paragraph (b) if it is one of
the following —
(1) A facility with a maximum net out-
put of less than one megawatt (as mea-
sured in alternating current);
(2) A facility the construction of which
began prior to January 29, 2023;
(3) A facility that meets the prevailing
wage requirements of §1.48-13(c), the
apprenticeship requirements of section
45(b)(8) and §1.45-8, and the record-
keeping and reporting requirements of
§1.45-12;
(4) Energy storage technology with a
capacity of less than one megawatt;
(5) Energy storage technology the con-
struction of which began prior to January
29, 2023; or
(6) Energy storage technology that sat-
isfies the prevailing wage requirements of
§1.48-13(c), the apprenticeship require-
ments of section 45(b)(8) and §1.45-8,
and the recordkeeping and reporting
requirements of §1.45-12.
(c) Applicability date. This section
applies to facilities and energy storage
technologies placed in service in tax-
able years ending after [date final rule
publishes in the Federal Register], and
the construction of which begins after
[date final rule publishes in the Federal
Register].
Par. 13. Sections 1.179D-1 through
1.179D-3 are added to read as follows:
§§1.179D-1 - 1.179D-2 [Reserved]
§1.179D-3 Rules relating to the
increased deduction for prevailing
wage and apprenticeship.
(a) In general. If any energy efficient
commercial building property, energy
efficient building retrofit property, or
property installed pursuant to a qualified
retrofit plan satisfies the requirements in
paragraph (b) of this section, the appli-
cable dollar value for determining the
maximum amount of the deduction under
section 179D(b)(2) is multiplied by five.
(b) Certain energy efficient commercial
building property requirements. Energy
efficient commercial building property,
energy efficient building retrofit property,
or property installed pursuant to a qualified
retrofit plan satisfies the requirements of this
paragraph (b) if it is one of the following —
(1) Property the installation of which
began prior to January 29, 2023; or
(2) Property that meets the prevailing
wage requirements of section 45(b)(7) and
§1.45-7, the apprenticeship requirements
of section 45(b)(8) and §1.45-8, and the
recordkeeping and reporting requirements
of §1.45-12.
(c) Applicability date. This section
applies to property placed in service in
taxable years ending after [date final rule
publishes in the Federal Register], and the
installation of which begins after [date final
rule publishes in the Federal Register].
Douglas W. O’Donnell,
Deputy Commissioner for Services and
Enforcement.
(Filed by the Office of the Federal Register August
29, 2023, 8:45 a.m., and published in the issue of the
Federal Register for August 30, 2023, 88 FR 60018)

Bulletin No. 2023–39 i September 25, 2023
Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).
Clarified is used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion. It
is not used where a position in a prior rul-
ing is being changed.
Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modified is used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified and clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transactions.
This term is most commonly used in a ruling
that lists previously published rulings that
are obsoleted because of changes in laws or
regulations. A ruling may also be obsoleted
because the substance has been included in
regulations subsequently adopted.
Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a
period of time in separate rulings. If the
new ruling does more than restate the sub-
stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previous-
ly published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
Suspended is used in rare situations
to show that the previous published rul-
ings will not be applied pending some
future action such as the issuance of new
or amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current
use and formerly used will appear in
material published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.

September 25, 2023 ii Bulletin No. 2023–39
Numerical Finding List
1
Bulletin 2023–39
Announcements:
2023-18, 2023-30 I.R.B. 366
2023-19, 2023-30 I.R.B. 367
2023-20, 2023-30 I.R.B. 368
2023-17, 2023-31 I.R.B. 412
2023-21, 2023-31 I.R.B. 413
2023-22, 2023-32 I.R.B. 429
2023-23, 2023-34 I.R.B. 569
2023-24, 2023-35 I.R.B. 661
2023-25, 2023-37 I.R.B. 821
2023-26, 2023-37 I.R.B. 822
2023-28, 2023-37 I.R.B. 823
Notices:
2023-29, 2023-29 I.R.B. 1
2023-45, 2023-29 I.R.B. 317
2023-47, 2023-29 I.R.B. 318
2023-37, 2023-30 I.R.B. 359
2023-50, 2023-30 I.R.B. 361
2023-51, 2023-30 I.R.B. 362
2023-54, 2023-31 I.R.B. 382
2023-53, 2023-32 I.R.B. 424
2023-55, 2023-32 I.R.B. 427
2023-57, 2023-34 I.R.B. 560
2023-58, 2023-34 I.R.B. 563
2023-59, 2023-34 I.R.B. 564
2023-52, 2023-35 I.R.B. 650
2023-61, 2023-35 I.R.B. 651
2023-62, 2023-37 I.R.B. 817
2023-56, 2023-38 I.R.B. 824
2023-63, 2023-39 I.R.B. 919
Proposed Regulations:
REG-124123-22, 2023-30 I.R.B. 369
REG-124930-21, 2023-31 I.R.B. 431
REG-120730-21, 2023-33 I.R.B. 491
REG-134420-10, 2023-34 I.R.B. 571
REG-109348-22, 2023-35 I.R.B. 662
REG-120727-21, 2023-36 I.R.B. 670
REG-122793-19, 2023-38 I.R.B. 829
REG-100908-23, 2023-39 I.R.B. 931
Revenue Procedures:
2023-31, 2023-25 I.R.B. 386
2023-26, 2023-33 I.R.B. 486
2023-27, 2023-35 I.R.B. 655
2023-17, 2023-37 I.R.B. 819
Revenue Rulings:
2023-13, 2023-32 I.R.B. 413
2023-14, 2023-33 I.R.B. 484
Revenue Rulings:—Continued
2023-15, 2023-34 I.R.B. 559
2023-15, 2023-34 I.R.B. 559
2023-16, 2023-37 I.R.B. 796
2023-17, 2023-37 I.R.B. 798
Treasury Decisions:
9976, 2023-30 I.R.B. 354
9977, 2023-31 I.R.B. 375
9978, 2023-32 I.R.B. 415
9979, 2023-35 I.R.B. 602
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2023–27 through 2023–52 is in Internal Revenue Bulletin
2023–52, dated December 27, 2023.

Bulletin No. 2023–39 iii September 25, 2023
Finding List of Current Actions on
Previously Published Items
1
Bulletin 2023–39
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2023–27 through 2023–52 is in Internal Revenue Bulletin
2023–52, dated December 27, 2023.

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