FREE RESOURCE • SECTION 45Y

Pre-Construction Compliance Checklist for Section 45Y Projects

What zero-emission energy projects need in place before construction starts — to protect the 5x multiplier on the Clean Electricity Production Credit.

For: Renewable developers, owners, and EPCs

Section-45Y-Pre-Construction-Compliance-Checklist

WHY THIS MOMENT MATTERS

The Section 45Y Clean Electricity Production Credit pays $3 per MWh at the base rate — or $15 per MWh if prevailing-wage and apprenticeship (PWA) requirements are met for ten years from the placed-in-service date. The 5x multiplier is not earned at the modeling stage or at tax-filing. It is earned in the field, every pay period, with audit-defensible evidence — and most of the work to make it audit-defensible has to be set up before the first paycheck is cut. This checklist is the pre-construction posture review we recommend running on every facility chasing the enhanced rate.

A NOTE ON SCOPE

This checklist covers the pre-construction setup of PWA compliance — the foundation that earns the 5x multiplier at the start of the facility’s life. PWA obligations continue throughout the 10-year §45Y credit period whenever alteration or repair work is performed on the facility. That operations-period compliance is covered in our companion 45Y Operations-Period Compliance Checklist. This document also does not cover the separate Domestic Content or Energy Communities bonus adders, the §6418 transfer mechanics, the §48E ITC analogue, or the §45Q/§45V/§45U credits.

Introduction

SkillSmart has spent the past two years working with partners and clients across IRA and state energy tax credit programs as they’ve come online. This checklist captures what we’ve consistently seen matter most — both in planning and pre-con of new tax credit projects and as projects get underway — to help teams strengthen their compliance posture and protect credit eligibility.

Ideally, you’re using during pre-con phase of the project before construction starts. Practically, things move quickly and that’s not always realistic. Either way, the checklist is designed to help.

How to Use This Checklist

■ Work through each section. Check items you can honestly say are done; leave open items that aren’t.
■ Mark items “N/A” in the right column if they genuinely don’t apply (e.g., your project is not in a state with an additional layer).
■ Use the scoring guide at the end to get a quick read on your overall posture.
■ Treat this as a working document. The earlier in pre-construction you run it, the cheaper any gap is to close.

SECTION A

Prevailing-Wage Foundation

Goal: ensure the project has the right wage determinations on file and that coverage scope is unambiguous before any worker is on the clock.

Project address(es) and scope finalized. DOL prevailing-wage determinations obtained for each location (via SAM.gov Wage Determinations) and confirmed against the correct schedule (typically Heavy Construction, but verify).
Wage determinations dated within 90 days of construction start. Plan in place to re-verify annually for multi-year projects.
All construction trades on the project mapped to the correct wage determination crafts (electricians, laborers, operating engineers, ironworkers, etc.). Catch-all classifications avoided.
Coverage scope confirmed in writing: prevailing wage applies to all laborers and mechanics employed by the taxpayer, any contractor, and any subcontractor on construction, alteration, or repair of the qualified facility.
Ten-year horizon planned. PWA applies not just to initial construction but to alteration and repair work for the full ten years of the §45Y credit. Operations-period repair work is in scope and must be tracked.
Site location reviewed for split jurisdictions. If the facility spans counties or wage areas, separate determinations applied where required.

SECTION B

Apprenticeship Setup

Goal: meet the labor-hour percentage, the daily ratio, and the participation requirement, with documented Good Faith Effort if apprentices aren’t available.

Applicable apprenticeship labor-hour percentage confirmed: 12.5% for facilities that began construction in 2023; 15% for those beginning construction in 2024 or later.
Apprentice-to-journeyworker ratio understood as a daily standard, not a project-wide average. Tracking system built around daily compliance per trade.
Registered Apprenticeship Programs (RAPs) identified in the project’s geographic area via the DOL Apprenticeship Finder. Initial outreach made.
Apprenticeship participation requirement met for every contractor and subcontractor with 4 or more employees performing covered work.
Good Faith Effort process documented and dated: written request to RAP(s) at least 45 days before need, plus retention of the program response (or non-response).
Backup plan defined for trades where apprentices cannot be sourced: GFE exception documentation, alternative RAP outreach, schedule contingencies.
Apprenticeship hours tracking integrated with the same timekeeping system that captures total project labor hours — not in a separate spreadsheet.

SECTION C

Contractor & Subcontractor Onboarding

Goal: every contractor and sub at every tier knows they are on a PWA project, has the right contract language, and is delivering the right records.

Master contractor and subcontractor list maintained and refreshed at least monthly. Includes lower-tier subs, not just first-tier.
PWA flow-down clauses included in every contract and subcontract. Template language reviewed by counsel; contains wage-rate obligations, apprenticeship obligations, recordkeeping obligations, and cure-payment obligations.
Each contractor and sub formally notified of PWA requirements in writing before mobilizing to site.
Process in place to collect weekly certified payrolls (Form WH-347 or equivalent) from every covered contractor at every tier — not just the GC.
Compliance review cadence set for contractor records: recommend a quarterly self-audit during construction (at minimum) plus pre-payment checks for each pay application.
Onboarding includes a brief PWA orientation for contractors that have not previously worked under Davis-Bacon or IRA PWA rules — the most common failures are from contractors who simply don’t know the standard.

SECTION D

Recordkeeping Infrastructure

Goal: produce audit-ready records, held in the taxpayer’s name, in a form that can be retrieved quickly and traced from a single hour of labor to the credit claim.

Records retention plan: minimum 6 years from placed-in-service date for PWA records. Recommended: full credit period (10 years) plus 3 years, to cover the longest plausible audit window.
Records maintained in the taxpayer’s own name and possession — not solely held by contractors. If a contractor folds or refuses to produce records at audit, the taxpayer is still on the hook for the credit.
Certified payroll process defined: weekly WH-347 (or equivalent) from every covered contractor and sub, including hours by classification, gross wages, fringe paid, and statement of compliance.
Fringe benefit documentation: distinguish between cash payments and bona fide plan contributions; retain plan documents if claiming bona fide plan credit toward the prevailing wage.
Daily journey-to-apprentice ratio records maintained per trade, not just monthly or weekly summaries.
Timekeeping system meets DOL recordkeeping standards: hours worked by individual, by classification, by day, by project. Time spent in multiple classifications recorded separately.
Records organized for audit retrieval: indexed by project, contractor, pay period, and trade. Goal: any specific record retrievable in under 15 minutes.

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SECTION E

Cure & Correction Process

Goal: catch underpayments and ratio shortfalls early, cure them within the regulatory window, and document the cure so an auditor sees a working program rather than a failure.

Internal self-review process scheduled at least quarterly during construction to identify potential underpayments, classification errors, or apprenticeship-ratio shortfalls.
Correction-payment workflow documented: who calculates the shortfall, who approves the cure payment, how it is paid to the worker, and how the documentation is retained.
Awareness in place of the 30-day cure window: underpayments must be cured within 30 days of becoming aware of them to qualify as timely cure.
Process for paying IRS penalties separately when cure is required: $5,000 per worker for prevailing-wage failures (or $10,000 per worker for intentional disregard); $50 per labor hour for apprenticeship shortfalls (or $500 if intentional).
Cure documentation linked back to the original records so the audit trail shows the failure, the discovery, the cure, and the date — not a discontinuity.

SECTION F

State Stack on Top of Federal

Goal: identify state-level prevailing-wage and apprenticeship layers that operate independently of the IRA, and make sure the project is paying and reporting to whichever standard is higher.

State-level prevailing-wage law identified for each project location (state DOL, DIR, or equivalent agency rules in addition to federal Davis-Bacon).
State-specific apprenticeship requirements identified — some states impose ratios or participation rules beyond federal IRA.
State certified-payroll reporting cadence and form requirements confirmed (state-specific forms vary; some require online submission).
High-impact state checks completed where applicable:
California (DIR / DLSE) — extensive PW framework, online certified-payroll filing, separate apprenticeship rules.
Illinois (CEJA) — prevailing wage and PLAs required on all new renewable projects.
New York (CLCPA) — prevailing wage on clean-energy projects of $100K+.
New Jersey, Massachusetts (SMART), Connecticut, Maryland, Minnesota, Oregon, Washington, Colorado — combinations of state PW and incentive rules vary.
Reconciliation rule applied: pay whichever standard is higher (federal IRA, state PW, or local), and report under whichever standards apply. Document the determination of which rule controls.

SECTION G

Documentation for the Tax Filing

Goal: when the credit is claimed, the labor evidence ties cleanly to the qualified facility, and the certification withstands review.

PWA certification statement drafted: taxpayer’s attestation language prepared in advance of return preparation, signed by an authorized officer.
Records linkage maintained: labor evidence traceable from individual worker-hours to the specific qualified facility for which the credit is claimed.
Tax filing forms identified and prepared (currently Form 7205 for §179D; §45Y filings via Form 3800 and applicable schedules — confirm with tax advisor).
Working relationship with tax preparer or advisor established early, with a documented hand-off package: certified payrolls summary, apprenticeship records, GFE documentation, cure documentation, and any state-stack records.

SECTION H

Tax Equity, Transfer, and Risk-Shifting

Goal: align your compliance posture with what investors, transferees, or insurers will require — and decide deliberately whether to keep monitoring in-house, hire a third party, or carry tax-credit insurance.

Tax-equity investor diligence requirements identified early. Most institutional tax-equity investors now treat third-party compliance monitoring as a standard underwriting condition.
If credits will be transferred under §6418: tax-credit insurance considered. Insurers typically require evidence of a compliance program before binding.
Decision documented on monitoring model: in-house only (lowest cost, highest internal demand), third-party monitor (highest cost, easiest investor underwriting), or hybrid (in-house operations with third-party audit support).

SCORING GUIDE

How Did You Score?

90–100%

Strong posture. Fine-tune the gaps, document what you have, and brief your tax advisor.

70–89%

Solid foundation with known gaps. Prioritize the open items before first paycheck.

Below 70%

Material exposure. Consider a compliance posture review before construction starts.

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FAQ

Section 45Y Pre-Construction Compliance Questions

What is the Section 45Y Clean Electricity Production Credit?

The Section 45Y credit is a per-MWh tax credit for electricity generated by zero-emission facilities placed in service after December 31, 2024. The base credit is approximately $3 per MWh, but facilities that meet prevailing-wage and apprenticeship (PWA) requirements earn the enhanced rate of approximately $15 per MWh — a 5x multiplier. The credit is available for 10 years from the placed-in-service date.

When should I run the pre-construction compliance checklist?

Ideally, run this checklist during the pre-construction phase before any worker is on the clock. The earlier you identify gaps, the cheaper they are to close. If construction has already started, the checklist is still useful — use it to assess your current posture and prioritize remediation before the first audit or credit claim.

What happens if I miss a prevailing wage or apprenticeship requirement?

Failure to meet PWA requirements means the facility earns the base credit ($3/MWh) instead of the enhanced credit ($15/MWh) — a difference of roughly $12 per MWh over 10 years of production. Cure provisions exist: prevailing-wage underpayments carry a $5,000–$10,000 per-worker penalty plus back pay, and apprenticeship shortfalls carry a $50–$500 per-labor-hour penalty. Timely cure within 30 days of discovery can preserve the enhanced rate.

Does the 5x multiplier requirement apply to operations-period repairs?

Yes. PWA requirements apply not just to initial construction but to any alteration or repair work performed on the facility during the full 10-year §45Y credit period. An inverter swap, blade repair, transformer replacement, or repowering event during operations is a PWA-covered event. Our companion Operations-Period Compliance Checklist covers this in detail.

What is a Good Faith Effort for apprenticeship compliance?

A Good Faith Effort (GFE) is documented evidence that you requested apprentices from a Registered Apprenticeship Program at least 45 days before they were needed and either received no response or were told none were available. GFE must be captured at the time of the request, not retroactively. Each trade and each event requires its own GFE if apprentices are unavailable.

How does SkillSmart help with Section 45Y compliance?

SkillSmart’s InSight IQ platform automates wage determination management, daily apprentice ratio tracking, certified payroll collection from every tier of subcontractor, Good Faith Effort documentation, cure workflow management, and audit-ready reporting — all in one configurable system. Every customer gets a dedicated compliance specialist who configures the platform for their specific project requirements.

Can I use this checklist for §48E ITC projects too?

This checklist is designed for §45Y (Clean Electricity Production Credit) projects, but the PWA requirements under §48E (Clean Electricity Investment Tax Credit) follow the same prevailing-wage and apprenticeship standards. The core compliance setup — wage determinations, apprentice ratios, recordkeeping, cure processes — applies to both. The main difference is how the credit is calculated (per-MWh vs. percentage of investment), not how PWA compliance is maintained.

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