The Prevailing Wage & Apprenticeship (PWA) bonus credits under the Inflation Reduction Act are a bonus credit that is quite beneficial to project owners. While everyone likes the credit, only a few actually take the time to understand what it actually is and the intricacies that surround it.
There is a general lack of understanding of this, as some project owners consider this just to be compliant with the Davis-Bacon prevailing wage provisions. While there are some aspects that are shared, overall, there are a lot of other factors in play.
If the compliance isn’t up to the mark, there could be severe penalties in place, but documenting the PWA requirements can be complex, as there are so many rules. If you want to score the enhanced tax credits (up to 5x the base credit), you need to be compliant.
In this article, we’re going to give you some expert tips to streamline the documentation for PWA requirements compliance.
Understand What Documentation Is Required (Before Starting Construction)
You need to determine what documentation is required before you start construction. First, you need to make sure that the rules even apply to you in the first place. For example, the PWA requirements do not apply to infrastructure projects less than 1 MW or to projects that began before January 29, 2023.
If you fall under the category where the requirements do apply, you need to identify all types of work that are covered. For instance, construction, alteration, and repair during the credit period are covered under the PWA requirements, but not maintenance and supply-only contracts.
Once these aspects are clear, make sure to document the construction start date, which locks the agreed wage rates unless the scope of the contract changes. However, salaries for long-term service contracts need to be updated every year.
Build a Documentation-First Compliance Plan
Now that the documentation requirements are clear, you need to understand one thing: the PWA is as much a documentation process as it is a labor compliance process. The IRA is a tax law, not a labor law. While it states that the PWA requirements are in accordance with Davis-Bacon, words like “laborer,” “mechanic,” “site of work,” and “prevailing wage” carry the same meaning.
However, the requirements themselves are quite different from Davis-Bacon, mainly because PWA has three levels of apprenticeship requirements, demands payment of fines for noncompliance, and sets stricter rules for recordkeeping. If you’re the project owner, you bear the ultimate responsibility for settling any noncompliance fines before submitting the loan application. Keep in mind that the IRS, not the Department of Labor, conducts audits for this.
To keep everything on track, the best practice is to integrate the requirements into bidding contracts from Day 1.
Best Practices for Prevailing Wage Documentation
The prevailing wage rate locks at the construction start and should be refreshed only if the project scope changes or long-term service agreements require annual updates. To stay compliant, ensure that contractors retain the following:
- Payroll records
- Classification of mechanics/laborers
- Hours worked by task/category
- Wages paid, including fringe benefits
Keep in mind that an intentional disregard factor is at play, meaning that knowing or willful noncompliance can result in significant penalties. The best way to avoid this is to implement a quarterly compliance review cycle. Additionally, make sure to document the following without fail:
- Back payments
- Penalty payments
- Supporting evidence and timelines
Best Practices for Apprenticeship Documentation
Remember that there are three types of apprenticeship tests:
- Labor hour test: 12–15% of total hours by qualified apprentices
- Participation requirement: Employers with ≥4 workers must use at least one apprentice
- Ratio requirement: Daily apprentice-to-journeyworker ratios
Make sure you have all the apprentice program enrollment records and credentials intact; this would be handy later on. Another thing to keep in mind is to track each contractor separately in a spreadsheet, marking how much they’re compliant and their project-level metrics.
Do not forget to document good-faith effort requests and responses (valid for one year if apprentices are unavailable).
Avoid Common Documentation Mistakes
Now, there are some common documentation mistakes you need to avoid. They are:
| Mistake | What’s Really Happening | Why It Causes Trouble |
| Thinking Davis-Bacon paperwork is enough | Teams assume the same documents used for Davis-Bacon will automatically meet PWA rules. | PWA asks for more—things like tracking penalties, curing underpayments quickly, and monitoring apprenticeship rules. So relying only on Davis-Bacon paperwork leaves big gaps. |
| Using spreadsheets and manual checks | People supervise compliance by updating Excel sheets or checking a few random hours here and there. | This almost always leads to mistakes. The IRS needs complete, accurate data, not samples. Manual tracking also becomes chaotic when multiple contractors are involved. |
| Mixing PWA documents with IRS audit documents | All payroll data (with personal information) gets stored together, instead of separating what’s needed for PWA vs. an IRS audit. | PWA filings must not include personal info, but IRS audits do need it. Mixing them risks privacy violations and messy corrections later. |
| Ignoring commissioning work | Teams assume commissioning is “operations,” not “construction,” so they skip apprenticeship tracking during this phase. | The IRS considers commissioning part of construction. Skipping documentation here often leads to apprenticeship noncompliance. |
| Waiting too long to collect records from contractors | EPCs and subcontractors are asked for documents only at the end of the project. | By then, things are missing, people have moved on, and errors can’t be fixed within the cure window. Late collection is one of the biggest reasons projects lose out on credits. |
Conclusion
The PWA is as much a documentation-intensive task as a labour task. While the credit line is indeed impressive, there are a lot of factors requiring documentation, which prove that you comply with all the PWA requirements. Also, tax credit insurance can help lower the risk of not following PWA rules. If the buyer isn’t sure that the seller can meet its indemnity duty if the IRS challenges it, they should get tax credit insurance. The buyer can get enough tax credit insurance to cover the cost of the penalty if the IRA does levy one.
