Category: blog

Categories
blog

The OBBBA Notice on Inflation Reduction Act Prevailing Wage Requirements

Image showing lawmakers discussing the OBBBA notice on prevailing wage requirements

Table of Contents

Introduction

The Inflation Reduction Act (IRA) introduced transformative clean energy tax incentives, including bonus credits for projects that meet specific labor standards. Among these, the prevailing wage and apprenticeship requirements have become central to maximizing certain tax benefits. Recently, the One Big Beautiful Bill Act (OBBBA) introduced new updates (Notice 2025-42) on August 15, 2025 that reshape how these labor rules apply, specifically under Sections 45Y and 48E. This blog explores the original IRA framework, its impact on taxpayers, and the nuanced changes brought by Notice 2025-42.

Prior IRS Guidance: Beginning of Construction – A Quick Overview

Under the IRA, prevailing wage and apprenticeship requirements must be met to qualify for enhanced tax credits. Failure to comply may result in penalties and the loss of bonus credit eligibility. For a full debrief on how this affects projects, visit our YouTube series.

The credits directly addressed in the OBBBA BOC notice include:

  • Clean Electricity Production Credit (§45Y)
  • Clean Electricity Investment Credit (§48E)

The prevailing wage requirement mandates that workers be paid at least the wage rates set by the U.S. Department of Labor.

Under the proposed IRS guidance, the beginning of construction date determines if prevailing wage and apprenticeship (PWA) requirements apply to the construction of a qualified facility. Under the Beginning of Construction (BOC) Exception, a qualified facility which began construction prior to January 29, 2023 is eligible for the increased credit amounts without meeting PWA requirements.

The IRA initial guidance (87 FR 73580) specified that the BOC date could be determined under the following methods:

  • The Physical Work Test
    • Verifies that “physical work of a significant nature” has begun. This takes into account work performed by the taxpayer or subcontractors prior to the manufacture, construction, or production of the applicable wind or solar facility. The test focuses on the type of work, not its cost or volume. This includes both off-site and on-site work, such as:
      • Manufacturing of components, mounting equipment, support structures (e.g., racks, rails, inverters, transformers), and other power conditioning equipment
  • The Five Percent Safe Harbor
    • Defines beginning of construction as the period when:
      • (i) A taxpayer pays or incurs (within the meaning of § 1.461-1(a)(1) and (2)) five percent or more of the total cost of the facility
  • The Continuity Requirement and Continuity Safe Harbor
    • Under the Physical Work Test and Five Percent Safe Harbor, taxpayers must demonstrate continuous construction or continuous efforts regardless of which method was used to establish the beginning of construction (see section 2.02(3) of Notice 2022-61).
    • The Continuity Safe Harbor provides that the continuity requirement will be considered met if the facility is placed in service within a certain time frame, outlined in the applicable tax credit.

The OBBBA’s Changes – Notice 2025-42

The following rules set forth by the OBBBA have an effective date of September 2, 2025 for applicable wind and solar facilities. Thus, projects that began before this date are not subject to this update.

Wind and solar projects that begin construction within 12 months of the OBBBA’s enactment (prior to July 5, 2026), can still qualify for the full credit with no placed-in-service deadline. For any wind and solar projects that fall outside of this one-year safe harbor, the OBBBA shortens the timeline for these projects to qualify for the credits, requiring these facilities to be placed in service by December 31, 2027.

The OBBBA modifies the beginning of construction regulations for the §45Y and §48E tax credits to prevent artificial manipulation or acceleration of eligibility. Key changes include:

  • Restricting the “Beginning of Construction” determination to the Physical Work Test only
    • The “Five Percent Safe Harbor” is not applicable to most facilities for this purpose and may only be used for low-output solar facilities (1.5 megawatts or less).
  • Maintaining the Continuity Requirement, which is satisfied if continuous physical work is performed.
    • There are specified excusable disruptions to a continuous program of construction, such as weather delays, permitting issues, or supply shortages (see section 4.02 of Notice 2025-42).

Exception: Continuity Safe Harbor

A taxpayer is deemed to satisfy the continuity requirement if the facility is placed in service by the end of the calendar year that is no more than four years after the year construction began.

If the facility is not placed in service within that four-year window, whether the continuity requirement is met will be determined based on facts and circumstances.

Example from Notice 2025-42:

  • If construction begins on August 20, 2025, and the facility is placed in service by December 31, 2029, the Continuity Safe Harbor is satisfied.
  • If the facility is placed in service after January 1, 2030, the IRS will evaluate whether the continuity requirement was met. July 5, 2026, marks the cut-off for beginning construction to claim the §45Y and §48E tax credits, so taxpayers seeking to earn these credits must do so before the termination date. This termination applies to applicable wind and solar facilities.

The OBBBA Update’s Effects on You

The new BOC rules under Notice 2025-42 apply to wind and solar projects that do not begin construction before September 2, 2025, under prior IRS guidance. Projects that begin construction before that date, including those relying on the 5% Safe Harbor, will remain governed by the prior IRS guidance on BOC.

For projects starting after September 2, 2025, taxpayers and developers must rely solely on the Physical Work Test as outlined in Notice 2025-42 to establish construction start dates (aside from low-output solar facilities) and must meet continuity requirements to retain eligibility for §45Y and §48E credits.

The July 5, 2026, cutoff is another critical milestone: projects that begin construction after this date and are placed in service after December 31, 2027, will no longer qualify for enhanced tax credits. Therefore, many taxpayers and developers will be pushing to get their project’s BOC date established prior to July 5, 2026, and must be aware of these new guidelines. Projects that start after July 5, 2026, will need to ensure that they are well-planned and on track to be placed in service prior to December 31, 2027.

Understanding these changes and planning accordingly is essential for maximizing incentives and avoiding disqualification, especially when it comes to the newly established deadlines. As the regulatory landscape evolves, staying informed and proactive will be key to successful clean energy project development. Alliant is here to assist you with all things prevailing wage to help you maximize your credit.

Need assistance? Feel free to contact us for solutions catered your projects.

Categories
blog

Canada’s Clean Technology Investment Tax Credit (Overview)

Image showing two colleagues discussing data working and tablet, laptop with on Construction Site project, green energy and solar panel concept.
Two colleagues discussing data working and tablet, laptop with on Construction Site project, green energy and solar panel concept.

Table of Contents

Intro

The Clean Technology Investment Tax Credit (CT ITC) is a refundable credit designed to reward businesses that invest in eligible clean tech equipment, from solar panels and heat pumps to zero-emission vehicles and energy storage systems. In this blog, we’ll break down how the credit works, who qualifies, the labour requirements (prevailing wage and apprenticeship), penalties, and best practices.

What is the CT ITC?

The CT ITC is a refundable tax credit for investments in new clean technology (CT) property in Canada. These properties can include the construction of:

  • equipment to generate electricity from solar, wind, and water energy,
  • stationary electricity storage equipment that does not use any fossil fuel in operation,
  • EV charging equipment,
  • and more (see the list of the other property types)

What are the Labour Requirements?

The Labour Requirements include 1) the Prevailing Wage Requirements and 2) the Apprenticeship Requirements. Each of these two requirements have their own segments that work toward compliance (see Canada Labour Standard Regulations (C.R.C., c. 986) and Clean Economy Tax Credits: Labour Requirements, as updated by Bill C-59). The segments under the Prevailing Wage Requirements include:

  • Paying Prevailing Wages and
  • Proper Recordkeeping

The segments under the Apprenticeship Requirements include:

  • Apprentice Workforce Target Percentage
  • Proof of a Reasonable Effort
  • Proper Recordkeeping

Prevailing Wage Requirements – Paying Prevailing Wages

All contractors are expected to pay workers for their work on the preparation or installation. Contractors should note that if they’re bringing in subcontractors or tiered contractors, these parties will have to be informed of their responsibility to pay prevailing wages. Prevailing wages are set by an eligible collective agreement (ECA) that applies to the covered workers.

A “covered worker” is one that meets the following. They are a worker:

  • Who is performing under the preparation or installation of a clean technology property,
  • Whose work duties are primarily manual or physical in nature, and
  • Who is not an administrative, clerical or executive employee, or a business visitor to Canada (within the meaning of section 187 of the Immigration and Refugee Protection Regulations)

An eligible collective agreement (ECA) is:

  • The most recent multi-employer collective bargaining agreement negotiated with a trade union that is an affiliate of Canada’s Building Trades Unions (CBTU) for a given trade in a region or province.
  • A project labour agreement established with a trade union in accordance with applicable provincial law that covers the work associated with the investments eligible for specified tax credits. It includes the wages and benefits for covered workers in a given trade that are at least equal to the regular wages (without taking into account overtime) and benefits provided. This is pulled from the most recent multi-employer collective bargaining agreement negotiated with a trade union that is an affiliate of the CBTU that would have applied had the project labour agreement not been in place.

If the covered workers you are using do not have an available eligible collective agreement, then the prevailing wage requirements are met if the covered workers are compensated in an amount at least equal to the amount of wages (without taking into account overtime) and benefits (vacation, pension, health, and welfare) required to be provided for employees under an ECA that most closely aligns with the covered worker’s scope of work and location.

The collective agreements can be accessed through sources like the Canada’s Building Trades Unions website, or directly from trade unions that are affiliates of the CBTU.

The CBTU site provides a portal that allows you to access collective agreements. First, you’ll navigate to the site, click on “Get Access Now”, register or log in, and locate the collective agreements from there.

Contractors are required to communicate to their employees that prevailing wages are in effect for the project, and they must also provide direction for how employees can report to the CRA (Canada Revenue Agency) any failures to pay prevailing wages.

Prevailing Wage Requirements – Proper Recordkeeping

To verify that contractors are properly paying prevailing wages for this project, contractors are being instructed to maintain payroll records for all covered workers, alongside the ECA or project labour agreement used to determine applicable wage rates. The ECA that is used must have some kind of basis for why it was chosen. When documenting the ECA used, it is important to note:

  • The name(s) of the ECAs obtained
  • The list of ECAs that were used to determine compensation, including regular wages and benefits
  • Reasoning why certain agreements and/or wage schedules within those agreements were or were not used
  • The ECA is active and not expired

Contractors must also note:

  • The efforts made to ensure sub-contractors were aware of the requirements.
  • The efforts made to ensure sub-contractors conveyed the labour requirements to any tiered contractors.
  • Whether a project labour agreement that covers the work associated with the ITC was signed.
  • How the information was communicated to covered workers.
  • If projects were under construction prior to November 28, 2023, that a review was made to verify that prevailing wage requirements were met starting from November 28, 2023.

Apprenticeship Requirements – Apprentice Workforce Target Percentage

The apprenticeship requirement notes that apprentices registered in a Red Seal trade work at least 10% of the total hours that are worked during the year by Red Seal workers. A Red Seal worker is a skilled tradesperson who has received certification, so an apprentice would be one undergoing the process of training to receive certification.

The 10% labour hours percentage threshold must be met or surpassed across the cumulative hours by all covered work on the project. A lower percentage may be applicable if there is a law or collective agreement that restricts the percentage of apprentices below 10%. For the lower percentage exemption, you must make efforts to come as close as possible to meeting the 10% without breaking the other applicable rules.

For example,

  • An employer required 11 electricians to complete an installation. Under an applicable collective agreement, at the most, there can only be 1 apprentice for every 10 journeypersons on site.
  • If they all work the same number of hours per day, then the highest possible percentage of hours performed by apprentices would be 9%.
  • The employer would still be compliant with the apprenticeship requirements because it is required by the collective agreement.

Contractors must also abide by any applicable apprentice supervision requirement under their union agreement. At minimum, a daily 1:1 ratio of journeymen to apprentices should be practiced if not otherwise indicated by a union agreement to prevent potential unsupervised apprentice violations.

Apprenticeship Requirements – Proof of a Reasonable Effort

The basis of the apprenticeship requirement is that a “reasonable effort” is made to meet or exceed the 10% threshold. In the event that the 10% is not met, a contractor must have proof that they demonstrated attempts to meet the percentage requirement. Under this “deeming rule” the following are required to be met at least every 4 months:

  • Advertise
    • Post a bona fide job advertisement, seeking sufficient apprentices to perform those hours of labour at the designated work site.
    • The advertisement must include a commitment to facilitate participation of apprentices in a Red Seal trade program, and a statement that the job opportunity is open to both existing employees and new hires.
    • This job advertisement must be open and readily accessible on the Job Bank website of the Government of Canada and at least 2 other websites either on a continuous basis throughout the year or for at least 30 days from the time of posting.
  • Communicate
    • Communicate with a trade union and at least one secondary school or post-secondary educational institution for the purpose of facilitating the hiring of the apprentice positions described in the job advertisement.
    • If the designated work site is outside of Quebec, the trade union must be an affiliate of Canada’s Building Trades Unions (CBTU).
    • If the designated work site is in Quebec, the trade union must be recognized under applicable provincial law.
  • Confirm
    • Receive a confirmation in writing from the trade union that the trade union has provided as many apprentices as reasonably possible for work at the designated work site during the installation year, unless the trade union fails to respond within 5 business days of a request.
  • Consider
    • Review and duly consider all applicants received in response to the advertisement for apprenticeship opportunities that are offered directly by you, and take reasonable steps to ensure that other applicants are reviewed and duly considered.

If the percentage requirement is not met, and there is no valid proof of a reasonable effort made to acquire apprentices, then the contractor may be deemed non-compliant with the apprenticeship requirements.

Penalties

If you fail to meet the prevailing wage and apprenticeship requirements after electing into them, you may face an addition to tax for prevailing wages not paid, addition to tax for apprenticeship hours not met, and a gross negligence penalty.

Prevailing Wage Penalty

  1. Daily Penalty for Underpayment

If a covered worker was not paid the prevailing wage during the installation taxation year, you will be subject to a daily penalty of $20 per affected worker per day, unless gross negligence is determined.

This rate applies for 2023 and will be adjusted annually for inflation starting in 2024.

  • Corrective Measure: Top-Up Amount

You may also be required to pay a top-up amount to each affected worker, as determined in a notification from the Minister. This top-up represents the difference between:

  • The prevailing wage that should have been paid, and
  • The actual wage paid during the year plus interest

You have one year from the date you receive the notification to pay this amount in full. Failure to pay this amount in the time due results in a penalty of 120% of the top-up amount determined for each covered worker.

If you have not been grossly negligent, you will still be able to claim the ITC at the regular credit rate, even if the above addition to tax provisions for prevailing wage apply.

Apprenticeship Penalty

  1. Penalty for Apprenticeship Hour Shortfalls

If you do not meet the required number of apprentice labour hours in Red Seal trades, you will be liable to pay a dollar amount multiplied by the difference between the total hours of labour that were required to be performed by apprentices registered in a Red Seal trade, and the total hours of labour that were actually performed by apprentices registered in Red Seal trades, plus any other hours of labour for which you met the apprenticeship requirements.

For example, the 2023 dollar amount is $50.

  • $50 (2023 rate) × (Required apprentice hours − Actual apprentice hours performed by registered Red Seal apprentices)
  • Minus any additional hours that exceeded the required threshold (if applicable)

The $50 base amount will be adjusted annually for inflation starting in 2024.

Sample Calculation:

Required apprentice hours: 1,000

Actual apprentice hours: 800

Shortfall: 200 hours

Penalty: 200 × $50 = $10,000 (adjusted if after 2023)

If you have not been grossly negligent, you will still be able to claim the ITC at the regular credit rate, even if the above addition to tax provisions for prevailing wage apply.

Gross Negligence Penalty

If you intentionally fail to meet the prevailing wage or apprenticeship requirements, or if your failure occurs under circumstances amounting to gross negligence, the following consequences apply:

Disqualification from Full Credit

  • You will be disentitled to the regular tax credit rate.
  • You may claim only the reduced credit rate, even if you initially elected to meet the labour requirements.

50% Penalty on Credit Overclaim

  • You must pay a penalty equal to 50% of the difference between the amount of CT ITC claimed at the regular rate, and the amount you would have been entitled to under the reduced rate.

If gross negligence is determined, you will not be subject to the usual daily penalties, top-up payments, or apprenticeship hour shortfall taxes. Additionally, the 50% penalty and reduced rate are your only consequences under tax law in this case.

Getting Support

Verifying that all requirements are met is essential to avoid credit reductions and costly penalties. We understand that gathering comprehensive documentation across every facet of your project can be overwhelming. That’s where Alliant steps in.

Our team takes the weight off your shoulders by embedding our advanced technology and tailored solutions directly into your workflow. We help you stay ahead of compliance challenges through proactive monitoring and hands-on support.

Whether you need training, on-demand consulting, or full-scale oversight from inception to completion, Alliant delivers end-to-end guidance exactly where you need it most. If you have any questions, feel free to contact us.

Categories
blog

Inflation Reduction Act Good Faith Effort Exception Explained

Image showing technicians working inflation reduction act good faith effort exception

Table of Contents

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.

Categories
blog

Top 5 Prevailing Wage Misconceptions Contractors Must Avoid

Image showing a construction crane and in a city skyline

Table of Contents

Introduction

The contents of this blog have been transcribed from our YouTube video.

Avoid costly compliance mistakes. Learn the top 5 prevailing wage misconceptions and how to stay on the right side of the law.

Prevailing wage requirements can admittedly be complicated and confusing to follow. Regulations can vary based on funding type, type of facility being constructed, and location of work being performed amongst a variety of other factors. Although the requirements differ depending on the applicable prevailing wage laws, there are common misconceptions that are found amongst contractors on all types of projects.

Misconception 1: “Prevailing wage doesn’t apply to me”

Once prevailing wage is effective on a project, the body responsible for upholding prevailing wage requirements can enumerate the requirement in their contracts. In certain cases, prevailing wage applies even if it’s not explicitly stated in the contract.

Under the Inflation Reduction Act, the taxpayer attempting to claim the increased credits is responsible for making sure all contractors on the project are paying prevailing wages to their employees and meeting the apprenticeship requirements. The taxpayer will be required to submit documentation showing that these requirements were met in order to receive the increased credit.

A question our team frequently receives is: “Do independent contractors or material suppliers need to be paid prevailing wage?” In California, an employee’s job title on a project does not affect their prevailing wage requirement applicability. If they complete physical labor on the project site, they must be paid prevailing wages for the classification of work performed. Under the Davis Bacon Act, material suppliers become subject to prevailing wage if employees engage in construction work at the site of the work. Their laborers and mechanics employed at the site of the work would be subject to Davis-Bacon labor standards in the same manner as those employed by any other contractor or subcontractor.

Misconception 2: “Only government projects mandate prevailing wage compliance”

There are prevailing wage projects that exist outside of a federal scope. State-by-state and local prevailing wage laws, even down to the city, can apply to a project. Alternately, the Inflation Reduction Act prevailing wage requirements applies to all clean energy projects, including private projects, where the increased credit is being claimed by the taxpayer on the project. Under the IRA, the funding source does not decide the applicability of prevailing wage requirements – the facility being constructed does.

Misconception 3: “Compliance means just paying the prevailing wage rate”

While paying the prevailing wage rate is a piece of the puzzle, it isn’t the only thing that decides if a contractor is compliant. Keeping adequate records or complete documentation of your efforts to pay the prevailing wage is another factor. This documentation can include check stubs, time cards, fringe benefit remittances, authorizations from employees allowing deductions from their pay, and a myriad of other forms of documentation.

The purpose is to have accurate records that paint the full picture of how an employee received their pay, so keeping this paper trail is a major part of prevailing wage requirements. This can also include records showing that any additional requirements were met, such as the employment of apprentices.

Misconception 4: “Prevailing wage rates are fixed and don’t change”

Though it varies widely depending on the applicable prevailing wage law, prevailing wage rates can change due to multiple factors. Some states or localities require annual increases issued on the same date each year, while other wage determinations include periodic increases throughout the year and footnotes indicating percentage additions to the rate of pay.

In another instance, if an employee is being paid as a laborer, but they assist an Electrician and handle equipment specific to the Electrician’s scope of work, this employee may be owed an Electrician’s rate of pay for their time spent completing Electrician work.

Prevailing wage rate changes can occur for several reasons, and it’s best practice to verify your rates and what may potentially cause your rates to change with the awarding body or project owner.

Misconception 5: “The contractor is responsible only for their direct employees”

In many cases, if a contractor hires a subcontractor, and additional subcontractors are hired to work on the project under them, the contractor would be liable for ensuring that all subcontractors working on the project under them are paying prevailing wages. Contractors can face penalties of different varieties, like underpayment interest or a per hour penalty for not meeting certain requirements. Including specific prevailing wage clauses in contracts is one of the most useful tools for upholding prevailing wage requirements at all levels of a project.

Conclusion

As prevailing wage regulations evolve, remaining aware of the changes and understanding the complexities helps avoid costly mistakes. As you work toward compliance, make sure you avoid these misconceptions. Need help navigating prevailing wage compliance? Contact our team for expert guidance

Categories
blog

When Do You Pay Minimum Wage vs. Prevailing Wage? Key Differences Explained

Infographic explaining key differences between prevailing wage and minimum wage

Table of Contents

Introduction

The contents of the following blog come from our YouTube video.

With the applicability of prevailing wages expanding across industries and increasingly complicated regulations, it’s easy to get caught in the confusion of what wages apply when trying to figure out what you owe your workers. While minimum wages and prevailing wages are similar in concept, there are key differences between the two. Learn when to pay minimum wage or prevailing wage, how they differ, and how to stay compliant with labor laws on your projects.

What Is Minimum Wage and When Does It Apply?

A minimum wage is the lowest wage an employer can legally pay to their employees. Minimum wages can exist on different area levels, like federal, state, and local levels. The minimum wage is always applicable to employers in an area, and employers are required to pay the highest of the active minimum wages in their area. For example, if the federal minimum wage is $7.25, the state minimum wage is $14.50, and the city minimum is $15.25, the employer should pay $15.25, the highest of the three.

Understanding Prevailing Wage Requirements

While a minimum wage is applicable to areas, prevailing wages are applicable to specific trades. Prevailing wages are typically collected from the union wages in an area, typically gathered from local data. For example, a project subject to prevailing wage would require that an employer pays their workers, laborers, and mechanics the wages set for the trade they work in. Prevailing wages typically set a unique rate for each classification or trade. For example, laborers may be owed $24.00 and electricians may be owed $50.00.

When Do You Pay Minimum Wage vs. Prevailing Wage?

SCENARIO: A contractor has received federal funding for a project in 2015. They found that their project is subject to federal prevailing wages, the Davis-Bacon Act, and these wages have been set for the project.

In 2015, they owed $9 under the local minimum wage and $12 under the prevailing wage. In 2020, the local minimum wage became $13, but the prevailing wages were still $12.

Although the prevailing wage for the trade is $12, the employer must meet the minimum wage and pay $13.

Conclusion

It’s best practice to evaluate the highest rate you may be obligated to pay to avoid potential penalties or legal implications for underpayments. Be sure to review the minimum wages for your area and prevailing wages for your project to make sure you’re paying your employees in accordance with the legal requirements for the project. Have any questions? Let’s get in touch.

Helpful Links

Federal Minimum Wage: https://www.dol.gov/general/topic/wages/minimumwage

Davis-Bacon Act Prevailing Wage Determinations: https://sam.gov/wage-determinations

Categories
blog

The Hidden Risks of Ignoring Labor Compliance: Why Payroll Records Alone Won’t Save You

Infographic showing what prevailing wage auditors request and what compliance firms review

Introduction

Prevailing wage compliance isn’t just about checking a box—it’s a critical safeguard that ensures workers receive fair wages while protecting contractors from costly violations. Yet, one of the biggest pitfalls companies face in prevailing wage and apprenticeship compliance is the misconception that payroll records alone tell the full story.

Many businesses assume that submitting payroll records is enough to satisfy compliance requirements. But in reality, payroll records can be manipulated, contain errors, or, they can miss key information. Without supporting documentation like pay stubs, time cards, fringe benefit remittances, and other forms of verification, proving that prevailing wages have actually been paid becomes nearly impossible. This misunderstanding can lead to audits, penalties, and even legal trouble—risks that no company wants to face.

The Costly Consequences of Overlooking Compliance

Failing to properly document prevailing wage payments can result in:

  • Loss of Tax Credits/Funding – Funding earned with prevailing wage provisions within the project may be lost when prevailing wage requirements aren’t met.
  • Financial Penalties – Agencies conducting audits won’t hesitate to issue heavy fines when compliance isn’t fully demonstrated.
    • ex. IRS issues a penalty of $5,000 for each laborer or mechanic who was not paid at the prevailing wage rate in the year under the Inflation Reduction Act.
  • Project Delays or Disqualifications – Non-compliance can halt work or even disqualify companies from future bidding opportunities.
  • Legal Liability – In worst-case scenarios, businesses may face legal action for misrepresenting wage payments.

These consequences don’t fall solely on the contractors working on the project. Even if a group isn’t performing work on-site, that doesn’t mean they are exempt from adhering to prevailing wage requirements. Higher-level parties tied to a project with prevailing wage funding—such as within the IRA, for example—are liable for all penalties accrued by contractors if they are capturing IRA credits. This differs from public works projects, where the contractor is penalized directly.

Common Mistakes

In our 20+ years of experience, we have seen a wide range of mistakes. Some of the most common mistakes we’ve witnessed made on payroll records alone include, but are not limited to:

  • Incorrect Prevailing Wage Rates
  • Misclassification
  • Mis-reported Hours
  • Missing Employee Benefits
  • Unauthorized “Other” Deductions
  • Incorrect Overtime Issuance
  • Missing Statement of Compliance
  • Incorrect Project Information

When these mistakes are made, the liability varies depending on the project type. For IRA, liability would fall upon the taxpayer, whereas on public works projects, liability can come down directly to contractors. Generally, consequences can be faced at all levels, and it is upon the contractors, developers, and EPCs involved to make sure these errors are corrected, restitution is paid, and that substantial evidence is provided to prove the accuracy on the records.

Projects can last anywhere from weeks to years, and the document collection process over the course of a project should be clarified as early as possible to prevent potential back-logging of completed work. One of the largest challenges groups face is a lack of timely documentation review, as some tend to only conduct review quarterly. It’s best practice to detect non-compliance early on to prevent issues from stacking and becoming costly or difficult to resolve. Regular, proactive documentation reviews help identify discrepancies before they escalate. Establishing a clear process for document collection and compliance checks from assists with smoother project execution and minimizes the risk of penalties or delays.se, check out our video tutorial here.

Why Hiring a Seasoned Labor Compliance Firm Matters

Navigating prevailing wage requirements is complex, and missing a single critical detail can put your company at risk. A seasoned labor compliance firm ensures that your documentation is airtight—verifying every aspect of wage payment, benefits, and worker classifications to protect your company from compliance pitfalls. Here’s what an experienced compliance firm brings to the table:

Experience – Connecting with a team that’s seen it all matters. You want to know that you are aligning with people that have a track record of compliant projects and the knowledge needed to meet your needs. Having years of experience equips experts with the skills of knowing exactly what to look for and having a wealth of knowledge that can only come from time in the space.

Comprehensive Documentation Review – Payroll records are just the beginning. A compliance firm verifies that the submitted time cards, pay stubs, and all cumulative supporting documentation align with reported wages. At Alliant, the documents we collect include, but are not limited to, certified payroll reports, apprenticeship documentation, itemized wage statements, payroll deduction authorization forms, fringe payment verification, and all supplemental prevailing wage documentation.

Audit Prevention Strategies – By proactively addressing compliance gaps, expert consulting firms help businesses avoid costly penalties. This assists in saving time and creates a safeguard if experts are added onto the project before it even starts.

Expert Guidance – With evolving regulations, a compliance firm ensures you’re always ahead of changes, keeping your business compliant and secure. Prevailing wage is constantly changing and can be confusing. Having a team dedicated to remaining up-to-date with prevailing wage laws to answer your questions is paramount to securing your project’s protection.

Secure Your Compliance Before Auditors Step In

Businesses that underestimate the importance of thorough compliance documentation risk financial and reputational damage. Payroll records alone don’t represent a project’s prevailing wage and apprenticeship compliance—comprehensive supporting documentation is the key to proving wages have been properly paid.

Don’t let compliance confusion put your company in jeopardy. Our team specializes in guiding businesses through prevailing wage requirements to ensure full compliance. Reach out today to safeguard your projects and avoid unnecessary risks.

Categories
blog

What is a Prevailing Wage Determination?

Table of Contents

Introduction

When prevailing wage regulations become applicable on your project at a federal, state, or local level, one crucial aspect that contractors and subcontractors need to understand is the concept of prevailing wage determinations. This guide will walk you through what prevailing wage determinations are, why they are important, and how they impact your projects.

What is a Prevailing Wage Determination?

A prevailing wage determination is a list of wage rates and fringe benefits for each classification of laborers and mechanics. These determinations are issued by the governing body enacting your applicable prevailing wage oversight type. For example, the U.S. Department of Labor (DOL) publishes the determinations under the Davis-Bacon Act. The purpose of prevailing wage determinations is to ensure that workers on federally funded or assisted construction projects are paid wages that are comparable to those paid for similar work in the local area where the project is taking place.

How Do I Use a Prevailing Wage Determination?

Employers and contractors utilize prevailing wage determinations to inform them on how much their workers are owed in accordance with the prevailing wage regulation on their project. Most prevailing wage determination lists include the following: 

  • Classification/Job Title
    • The list of classifications on a prevailing wage determination are what you should be titling your employees on payroll. To know which classification best suits your employees, you must match the scope of work that your employees are performing with the classification that best suits that title. The scope of work consists of the activities being performed, tools being used, and materials being handled. Misclassifying your employees can pose a great risk to your compliance.
  • Base Hourly Rate
    • This is the base rate expected to be paid to your employees, which can be perceived as a minimum wage specific to this classification.
  • Fringe Benefits
  • Overtime Owed
  • Footnotes
    • Footnotes can include crucial information regarding workers’ pay, like potential increases to their wage amounts, differences in how overtime is applicable by the hour, and payments required for travel and subsistence amongst a variety of other potential notes. Reviewing all parts of a prevailing wage determination prevents potentially missing amounts owed to your workers and getting penalized for underpayments.

To see how this is used in a practical sense, check out our video tutorial here.

How Are Prevailing Wage Rates Determined?

Under the Davis-Bacon Act, the Department of Labor conducts surveys to collect wage and fringe benefit data from construction projects in various regions. Based on this data, the DOL establishes prevailing wage rates for different classifications of laborers and mechanics. A similar process can be found across other prevailing wage oversight types, whether that be at the state or local level. These rates are updated periodically to reflect changes in local wage standards.

How Do I Find My Prevailing Wage Determination?

To know which determination to use on your project, you must verify how wage determinations are pulled depending on your type. Take a look at the following types as an example:

  • FEDERAL EXAMPLE. Davis-Bacon Act – Wage Determinations are dependent on:
    • Construction Type (Heavy, Highway, Building, Residential)
    • Contract Award Date
    • Locality (e.g. the County the project is based in)
  • REGULATION EXAMPLE. Inflation Reduction Act – Wage Determinations are dependent on:
    • Negotiated Contract Date
      • In the absence of a contract or contract execution date, the date used instead is the day construction starts
    • Locality (e.g. the County the project is based in)
  • STATE EXAMPLE. California – Wage Determinations are dependent on:
    • Construction Type (Heavy, Highway, Building, Residential)
    • Bid Advertisement Date
    • Locality (e.g. the County the project is based in)

If you are unsure of how to locate the prevailing wage determination for your project, or need specific questions answered, we can put you in touch with an expert who can address all your prevailing wage needs. Reach out now to get the clarification you need. 

Compliance with Prevailing Wage Determinations

Contractors working on prevailing wage projects must adhere to the wage rates specified in the prevailing wage determinations. This includes paying workers at least the minimum wage rates and providing the required fringe benefits. It’s important that these wages are not only paid to the employees but are demonstrating compliance with the prevailing wage requirements.

Conclusion

Understanding prevailing wage determinations is essential for contractors and subcontractors at all levels on prevailing wage projects. By complying with these determinations, contractors can ensure fair treatment of workers and avoid potential penalties for non-compliance. As a contractor, staying informed about prevailing wage rates and requirements will help you confidently bid on and complete federal projects while upholding high labor standards. 

Categories
blog

The Role of Prevailing Wage Compliance in Disaster Recovery Work

Two environmental engineers wearing safety helmets and reflective jackets examine pollution on a shoreline near an industrial facility. One takes notes on a laptop while the other points at waste materials.

Table of Contents

Introduction

When natural disasters strike, construction becomes a crucial part of the recovery process. The work done by construction companies is vital for clearing debris, repairing infrastructure, rebuilding homes, and bringing back the essence of community. With the recent tragedy of the LA County wildfires, the rush to contain the fire and ensure the safety of the affected communities has been paramount. As contractors are brought in to aid in repairing affected areas, it’s beneficial to remember the applicable prevailing wage laws, especially when construction is funded by federal, state, or local government.

The Department of Labor (DOL) has previously urged recovery employers to avoid wage violations in light of the severe weather and the calamities of 2024.  The department has offered a Natural Disaster Compliance Assistance Toolkit, providing workers and employers with resources for disaster recovery work. Among these resources is the requirement to adhere to prevailing wage laws as a part of employer responsibilities.

California State Prevailing Wage Laws and the Davis-Bacon Act Federal Prevailing Wage Laws are the most prevalent types of regulation applicable to California wildfire recovery. California has received federal assistance to boost the containment of the wildfires, and further government assistance with recovery at a local level may be anticipated. It’s important to remain informed about these laws and how government funding may come into effect with construction efforts to rebuild communities.  

When is Prevailing Wage Applicable?

In California, prevailing wage takes effect on Public Works projects, which includes the Construction, alteration, demolition, installation, or repair work done under contract and paid in whole or in part out of public funds (Labor Code 1720).

Under the Davis-Bacon Act, the federal prevailing wage laws apply to contractors and subcontractors performing on federally funded or assisted contracts in excess of $2,000 for the construction, alteration, or repair (including painting and decorating) of public buildings or public works.

What are the Key Factors of Prevailing Wage Compliance?

Requirements differ between the California and Davis-Bacon Act prevailing wage laws, but there are a few general best practices to keep in mind as you walk through your compliance journey. Some of these include:

  • Paying Prevailing Wages
    • Wage Determinations are lists of classifications/trades/job titles that include their rates and benefits owed. These prevailing wages may include footnotes that change the rate a classification is owed, like overtime, travel and subsistence, etc.
  • Properly Classifying Employees
    • With the nature of construction work, employees may be performing a variety of tasks. Each classification has a unique scope of work, including set of equipment being handled and materials being used. If an employee performs the scope of work for more than one classification, they would be owed the rates for all types of work performed. It’s best practice to keep accurate records of work being performed and paying the correct classification to avoid potential underpayments.
  • Maintain Accurate, Detailed Recordkeeping
    • All payment records that assist in painting the full picture of employees’ pay are key to proving the prevailing wages are being paid. Some of these documents may include, but are not limited to, time sheets, certified payroll reports, pay stubs/itemized wage statements, payroll deduction authorization forms, benefit summaries, etc.

Prevailing wage doesn’t stop there – there’s a wide variety of expectations for documentation maintenance, required forms/certification, payment processes, and more. For additional insight on California and Davis-Bacon Act prevailing wage, you can visit our YouTube channel for detailed overviews and step-by-step tutorials on document completion and prevailing wage compliance.

With prevailing wage compliance, contractors not only adhere to legal requirements but also support fair labor practices and contribute to the overall wellbeing of the workforce involved in disaster recovery efforts. In times of crisis, communities come together to rebuild and heal. As contractors play a pivotal role in these efforts, it’s essential to approach the work with sensitivity and empathy. The impact of the wildfires on people’s lives is profound, and ensuring fair labor practices can contribute to the broader recovery process.

Categories
blog

What to Know About the New WH-347 Form

Download the WH-347 form here

Table of Contents

Introduction

The WH-347 form is a weekly certified payroll report template for contractors to use on projects subject to the Davis-Bacon and related Acts. While the use of the form itself by contractors is optional, it contains information that is required to be maintained under the Davis-Bacon Act, and its use can ease the payroll process.

The form was recently revised, and knowing how to properly complete the form with the changes in mind is key to verifying that you are compliant with the DBA payroll reporting requirement. Walk through the major differences side by side and how to complete each section below.


Old WH-347
New WH-347

Basic Information Section

The “Basic Information” section containing basic info about the contractor, project, and payroll have taken a new table format. All information on the old form still remains on the new one, with the new addition of the “Wage Determination No.”.


Old WH-347

New WH-347
  • Wage Determination No. – DBA projects have a “Wage Determination” set for the project, which is a list of applicable wages and fringe benefits for all trades that would be on the project, dependent on factors like the Contract Award Date and project location. The Wage Determination No. would be the General Decision Number found at the top of your wage determination page

The remainder of the information on the Basic Information includes:

  • Project Name
  • Project Location: The address of the project site.
  • Project No. or Contractor No.
  • Certified Payroll No.: A sequential number for the week’s submission. For example, if this is the first payroll, the Certified Payroll No. would be 1. For the following week, it would be 2, etc.
  • Week Ending Date: The date of the last day of the recorded pay period. For example, if a payroll week ran from 2/10/25 – 2/16/25, the week ending date would be 2/16/25.
  • Prime Contractor’s/Subcontractor’s Business Name: Your business name.
  • Prime Contractor’s/Subcontractor’s Business Address: The address of your business location.

Employee Information Section


Old WH-347
New WH-347

The information under Column 1 of the old form has been broken out into separate columns of the new form. The No. of Withholding Exemptions column from the old form was removed, and the (J) Journeyworker (RA) Registered Apprentice column and Worker Entry No. columns were added.

  • (J) Journeyworker (RA) Registered Apprentice: Write in J if the employee is a journeyworker. Write in RA if the employee is a registered apprentice, meaning they are undergoing an apprenticeship program with a registered institution.
  • Worker Entry No. – The sequential number of the employee listed. For example, the employee listed in the first row would be Entry No. 1, the second would be 2, etc.

The remainder of the information maintained in this section includes:

  • Worker Last Name
  • Worker First Name
  • Worker Middle Initial
  • Worker Identifying No.: A unique identifier, such as the last four numbers of their Social Security Number or an employee ID number.
  • Labor Classification: The classification or trade title as it correlates with the one listed in the wage determination. Examples include Carpenter, Electrician (Cable Splicer), Operator: Power Equipment (Tunnel Work) Group 3, etc.

Work Week Hours


Old WH-347
New WH-347
 

All areas under this section remain the same, with a few slight positioning adjustments of the Straight Time and Overtime hours.

  • Days of the Work Week
    • Top: Ex. M, Tu, W, Th, F, Sa, Su
    • Bottom: Ex. 2/10, 2/11, 2/12, 2/13, 2/14, 2/15, 2/17
    • Work weeks aren’t required to occur on a Monday – Sunday structure and would follow the date range of your pay period.
  • Hours Worked Each Day
    • ST (Straight Time) – Number of hours worked at a regular, non-overtime rate for each day.
    • OT (Overtime) – Number of hours worked past the straight time rate for each day.
  • Total Hours Worked for Week

Payment Section


Old WH-347
New WH-347

All areas from the old form were maintained with the addition of two new columns, the Total Fringe Benefit Credit column and the Payment in Lieu of Fringe Benefits column.

  • Total Fringe Benefit Credit – The total gross fringe benefit credit earned across all hours worked within the week. Ex. $20 in fringes x 30 hours = $600
  • Payment in Lieu of Fringe Benefits – The cash amount a worker earned instead of fringe benefits. This is separate from the base rate earned in cash.

The remaining fields include:

  • Hourly Wage Rate Paid for
    • ST (Straight Time): The hourly straight time rate the worker is being paid in accordance with their classification.
    • OT (Overtime): One and a half times the base hourly rate.
  • Gross Amount Earned: The sum of all earnings across the base hourly rate and fringes for the project.
  • Gross Amount Earned for All Work: The sum of all earnings across the base hourly rate and fringes for all projects this employee is contracted on that would reflect the pay stub.
  • Deductions for All Work:
    • Tax Withholdings: All applicable taxes, including those that are mandated federally, locally, etc.
    • FICA: Federal Insurance Contributions Act – federal social security and Medicare contributions.
    • Other: All other potential deductions authorized by the employee. If the amount is specific to a single deduction, it must be described under the “Additional Remarks” on page 2 of the form. If there are several deductions under the “other” category (ex. life insurance, pension, etc.), an addendum must be submitted that itemizes each deduction with a description and amount for each.
  • Total Deductions: The sum of all deductions.
  • Net Pay to Worker for All Work: The actual dollar amount paid to the worker for all hours worked across all projects during the week.

Notice and Public Burden Statement


Old WH-347

New WH-347

The statement at the bottom of the page has been revised, but the basis of the content includes:

  • The Requirement to Submit Payroll Weekly (The Copeland Act (40 U.S.C. § 3145)
  • The Requirement to Include All Required Information on Payroll (29 C.F.R. § 5.5(a)(3)(ii))
  • The Requirement to Sign a “Statement of Compliance”, Noting That Payroll is Accurate Under Penalty of Perjury
  • Acknowledgment of Time Commitment Required to Complete Form

Page 2

The second page of the WH-347 received a complete revamp:


Old WH-347

New WH-347

Both versions contain a Statement of Compliance, but the second version separates the statements with certifications of Proper Payment, Accurate Payroll and Obligation to Supply Records, Work Performed, Apprentices, Fringe Benefits, and Deductions.

Authorized Certifier Information

  • Project Name
  • Project Location
  • Project No. or Contract No.
  • Payroll No.
  • Week Ending Date
  • Prime Contractor’s/Subcontractor’s Business Name
  • Certifying Official’s Name and Title – This individual should verify that they were given authorization by a party to certify all information included on the payroll report. Their name and title/position should be written in.

Certifications

  • Box 1, Certification of Proper Payment
  • Box 2, Certification of Accurate Payroll and Obligation to Supply Records
  • Box 3, Certification of Work Performed
  • Box 4, Certification of Apprentices: If apprentices are employed during the work week, the programs that they’re registered under, the body that the program is registered with, OA (DOL’s Office of Apprenticeship) or SAA (State Apprenticeship Agency), and the name of the labor classification working.
    • If not applicable, leave the box unchecked and enter “N/A” under the blank sections.
  • Box 5, Certification of Fringe Benefits
    • If you’re claiming an hourly credit for contributions to benefit plans, funds or programs, this box should be checked with the following information completed:
    • Name of Worker
    • FB Name: Fringe Benefit Name (Ex. Anthem)
    • FB Type: Fringe Benefit Type (Ex. Health Insurance)
    • Plan No.
    • Funded or Unfunded
    • Hourly Credit
    • Total Hourly Credit
    • Per the DOL, if more than six bona fide fringe benefits are provided to the workers for which the contractor is claiming a credit, submit an addendum for each providing the information requested in this section.
  • Box 6, Certification of Deductions

Additional Remarks and Signature

  • Additional Remarks: Optional space for additional information on deductions, hourly cost of fringe benefits, or explanations.
  • Signature of Certifying Official, Date, Telephone Number, and Email Address: The Statement of Compliance must be signed by the contractor or subcontractor, or their agent who paid or supervised the payment of the workers under the contract during the weekly time period covered by the form. Enter the phone number and email address of the individual who is signing the statement and the date signed. Legally valid electronic signatures are acceptable. A legally valid electronic signature includes any electronic process that indicates acceptance of the certified payroll record and includes an electronic method of verifying the signer’s identity. Note: Photocopies or scanned copies of signatures do not satisfy this requirement.

Getting Assistance with the WH-347

Verifying that all boxes are filled correctly to remain in compliance with the Davis-Bacon Act is only part of the compliance process. Having the supplemental documentation to prove that everything reported on the payroll form is the major key to confirming that prevailing wage payments have been met. Verifying proper completion for several weeks of payroll and a wide range of employees may be difficult, and enlisting a team to assist in reviewing documentation would alleviate the stress of reviewing paperwork. We’ll put you in touch with a team of prevailing wage experts who can meet you where you’re at with your current needs – whether it be education with prevailing wage trainings, as-needed support, or full project oversight from start to finish. Get in touch now to secure your projects.

Categories
blog

Penalty Protection with Prevailing Wage Training

Table of Contents

Introduction

Falling victim to penalties or a loss in tax credits are critical symptoms of a lack of prevailing wage compliance. In the construction industry, understanding the nuances of prevailing wage laws is crucial. But why should project owners and contractors invest in prevailing wage training courses? Here’s a breakdown of the key benefits:

1. Compliance with Regulations

Navigating the complex web of prevailing wage regulations can be daunting. The boost in construction regulation, ranging anywhere from public projects to securing tax credits for clean energy projects, are often met with a prevailing wage requirement. Training courses provide comprehensive knowledge of prevailing wage, helping contractors avoid costly compliance violations and legal penalties. Prevailing wage laws can be heavily coated in jargon, and prevailing wage training eases the potential issue of personal knowledge clashing with regulation.

2. Avoid Costly Penalties

Mistakes in wage payments can lead to audits, penalties, and damaged reputations. Training courses teach best practices for record-keeping and reporting, minimizing risks and ensuring smooth project operations. The federal prevailing wage regulation (Davis-Bacon Act), for example, cites violations of misclassification, failure to pay full prevailing wage, including fringe benefits, for all hours worked (including overtime hours), incomplete or inaccurate recordkeeping, and failure to submit certified payrolls weekly. There are other penalized violations on top of this, and being aware of the requirements on the prevailing wage type for your project can assist in avoiding scrutiny and penalties on your project.

3. Enhanced Job Performance

Knowledge is power. Contractors and project owners who understand prevailing wage requirements can verify that their projects are protected from penalties. These courses cover topics like proper documentation, wage determinations, and fringe benefit calculations, ensuring that everyone is on the same page with the regulations set forth by the governing body. With trainings being consistently offered, construction teams can remain up-to-date with resources that are readily available when needed, especially in a climate where changes in prevailing wage regulation occur on a frequent and unpredictable basis.

4. Customized Education

Courses can be tailored to meet the needs of your knowledge level. From monthly webinars to personalized trainings, Alliant is home to the experts of the prevailing wage industry. Our team is equipped to build lessons and answer questions for you and others who may be working on your prevailing wage projects, relieving you of the stress of gathering information. Whether you own a project, or would like to contract into one, Alliant has the training material to fit you. We can assign you to a trainer to assist you with your needs, you can review our upcoming webinars, or access our free educational resources.

5. Competitive Advantage

Contractors who are well-versed in prevailing wage laws can bid more confidently on public projects. This training gives them a competitive edge, as they can avoid underestimating costs and ensure accurate, compliant bids. Plus, they can attract clients who value transparency and expertise.

Conclusion

Investing in prevailing wage training courses is not just about compliance; it’s about building a stronger, more knowledgeable workforce that can confidently tackle public projects. These courses empower contractors and workers alike, ensuring everyone benefits from fair wage practices. So, take the first step towards success and enroll in a prevailing wage training course today!