Prevailing Wage and Apprenticeship Verification:  New Form 7220 is Key to Multiplying Benefit Five-Fold  

The Inflation Reduction Act (IRA) established increased benefit levels for energy-efficient incentives that may only be obtained when Prevailing Wage and Apprenticeship Requirements are satisfied.  On 1/8/2026, the IRS released Form 7220, Prevailing Wage and Apprenticeship (PWA) Verification and Corrections.  Taxpayers must use the new Form 7220 to document satisfaction of PWA Requirements, thereby unlocking a five-fold increase in incentive benefit.   

What are the Prevailing Wage and Apprenticeship (PWA) Requirements?

PREVAILING WAGE RATE REQUIREMENT   

The “Prevailing Wage” requirement states that all mechanics and laborers on a project must be paid no less than the prevailing wages required to be paid for federal construction work.   

The exact wage will vary based on exact job description and geographic location.  Per Notice 2022-61, taxpayers may rely on the wage determinations published on www.sam.gov.  

APPRENTICESHIP REQUIREMENTS   

Taxpayers must satisfy three sets of requirements regarding apprenticeships:   

1. Apprenticeship Labor Hour Requirement: Qualified Apprentices must be used for certain minimum percentages of the total hours worked on a construction project.    
2. Apprentice/Journeyworker Ratio Requirement The applicable ratio of apprentices to journeyworkers established by the registered apprenticeship program must be met each day. 
3. Apprenticeship Participation Requirement: If a taxpayer employs 4 or more individuals in a construction project, the taxpayer must also employ one or more qualified Apprentices. 

IMPORTANT TIMING NOTE: 

The PWA requirements only apply to facilities for which construction begins on/after 1/30/2023. If construction began prior to this date, the project may be “grandfathered” in, and able to claim higher benefit rates without needing to meet PWA requirements.  

Why are the PWA Requirements So Significant?  

Successfully meeting the PWA Requirements results in an automatic five-fold increase in an incentive’s value.  

Many taxpayers believe the 5x benefit is well worth the extra effort.  Obtaining that 5x benefit successfully requires a good amount of documentation – and the new Form 7220.  

The New Form 7220: Key Components  

The Form breaks down as follows:  

• Part I: General Project/Property Details   
• Part II: Prevailing Wages Paid: Listing of every contractor/subcontractor with EIN, number of laborers employed, and wages paid 
• Part III: Apprenticeship Requirements: Listing of every contractor/subcontractor with EIN, number of apprentices employed, and wages paid  
• Part IV: Calculation of corrections and penalties if PWA Requirements were not satisfied  
• Part V: Good Faith Effort Apprenticeship Exception: Documents unsuccessful attempts to find qualified apprentices  

Successful completion of Form 7220 requires significant documentation.  It’s crucial to choose an energy incentives consultant that understands how to compile and organize the required materials needed to support your claim.  

Form 7220 must be attached to any return in which a taxpayer is claiming a PWA enhancement for a credit/deduction (i.e. 179D, 45L, ITC, 30C, etc.) 

A separate Form 7220 must be filed for each project or property.    

Exemptions 

As mentioned above, if construction began prior to 1/30/2023, you are eligible for the 5x benefit without meeting the PWA Requirements.  As such, Form 7220 does not need to be completed.   

Similarly, if your project has a maximum net output of less than one megawatt, you are exempt from PWA Requirements and eligible for the 5x benefit with no Form 7220 required.   

The Right Partner 

The additional complexity Form 7220 brings means it’s more important than ever to select the right energy professional.  To claim that 5x bonus benefit, documentation must be buttoned up and accompanied by meticulous reporting that complies with all IRS standards.   

Capstan Tax Strategies is here to help.