Table of Contents
- Introduction
- What is the Good Faith Effort Exception?
- How to Qualify for the Good Faith Effort Exception
- The 365 Day Rule
- How Many Apprenticeship Requests are Required?
- Conclusion
Introduction
The contents of this blog have been transcribed from our YouTube video.
Under the Inflation Reduction Act, clean energy projects come with a lot of opportunity, but also a couple of compliance hurdles. One of the trickiest? The apprenticeship requirements tied to those attractive tax credits.
But what happens if you try to hire apprentices and can’t get a response? That’s where the Good Faith Effort Exception comes in. We’re walking you through everything you need to know to make sure you’re on solid ground.
What is the Good Faith Effort Exception?
To claim full tax credits under the Inflation Reduction Act, you need to meet both the prevailing wage and apprenticeship requirements. But, if you’ve genuinely tried to hire apprentices and run into roadblocks, the Good Faith Effort Exception might cover you. This exception allows your project to remain compliant if you meet specific criteria.
How to Qualify for the Good Faith Effort Exception
There are two ways this exception is granted.
1. The request was denied for reasons other than the taxpayer, contractor, or subcontractor’s refusal to comply with the established standards and requirements of the registered apprenticeship program, or
2. The registered apprenticeship program failed to respond within five business days of receiving a request.
So, the keys to remember are: you qualify for the exception if your apprentice request was denied, but not because you refused to follow the program’s rules or if the registered apprenticeship program just didn’t respond to your request within five business days.
It’s important to note, though, that there is a clock on this exception. It isn’t forever.
The 365 Day Rule
Once your valid written request is submitted and either denied or ignored, you’re covered for up to 365 days—366 in a leap year. After that, you’ll need to submit a new request to remain in compliance.
And here’s a common mistake to avoid: The exception only applies to the portion of the request that was denied or unanswered. If you need more apprentices later, you’ll need to repeat the process.
How Many Apprenticeship Requests are Required?
There is no limit on the number of requests you may submit to one or more registered apprenticeship programs for qualification under the Good Faith Effort.
Subsequent requests to the same registered apprenticeship program are also not required in order to qualify for the Good Faith Effort Exception.
Conclusion
So, what’s the bottom line? The Good Faith Effort Exception isn’t just a loophole, it’s a safeguard for contractors who have exerted their commitments to complying with the apprenticeship requirements. By documenting your outreach, understanding the timelines, and staying proactive, you can protect your project and your tax credits.