The D.C. Download, August 2022

August 17 2022

Government, Legislative Affairs, TAUC News

In this month’s issue of the D.C. Download we cover the CHIPS Act, the newly signed Inflation Reduction Act (IRA), the Worker Flexibility and Choice Act, and the House Education and Labor Committee’s work on the Worker Heat Protection Bill.

After more than a year of on-and-off negotiations between moderate Senator Joe Manchin (D-WV) and Majority Leader Chuck Schumer, Vice President Kamala Harris cast the tie-breaking vote to advance a partisan budget reconciliation package. The Inflation Reduction Act (IRA) includes more than $700 billion in new taxes, including a 15% corporate minimum rate and prescription drug price controls for Medicare recipients. The House has now passed the measure, and President Biden signed the legislation into law on August 16th.

Here is an exclusive update from TAUC on the policy and regulatory issues of vital interest to contractors and the union construction and maintenance industry in Washington, DC.

President Biden Signs CHIP Act into Law

Last week, President Biden signed the Creating Helpful Incentives to Produce Semiconductors for America (CHIPS) Act into law. The legislation provides $52 billion in federal investments to bolster domestic semiconductor production, including grants and investment tax credits to incentivize the construction of manufacturing facilities in the U.S. The CHIPS Act received overwhelming bipartisan support in both the House and Senate. TAUC and its partners in the Construction Employers of America worked to ensure that the final legislation included Davis-Bacon prevailing wage protections for construction worker undertaken on manufacturing facilities constructed with federal assistance made available under this bill.

Energy Provisions Included in the IRA

As mentioned earlier, the House is slated to consider the Senate-passed reconciliation legislation – the “Inflation Reduction Act” (IRA). The package includes approximately $369 billion in clean energy and climate-related investments through tax incentives that encourage energy efficiency and reduced carbon emissions. The legislation includes strong Davis-Bacon prevailing wage protections and apprenticeship utilization requirements and incentives to the clean energy and decarbonization tax credits included in the bill.

The following clean energy tax credits are included in the package:

• Production Tax Credits:
  • Clean Hydrogen Production Tax Credit (45V) – Creates a new 10-year incentive for construction of new facilities and retrofitting of existing facilities for clean hydrogen production with four tiers and a maximum of 4 kilograms of CO2 equivalent (CO2e) per kilogram of hydrogen (H2). Projects must begin construction by 2033.
  • Advanced Manufacturing Production Tax Credit (45X) — Creates a tax credit for the production of clean energy technology components that are produced in the United States or by a U.S. possession. Eligible components include solar components, wind turbine and offshore wind components, inverters, many battery components, and the critical minerals needed to produce these components. The credit begins to phase out in 2029 and phases out completely in 2032.
  • Nuclear Power Production Tax Credit (45U) — Provides a nuclear power production credit of 1.5 cents multiplied by kilowatt hours (kWh) of electricity produced minus 80% of the facility’s gross recipients in excess of 2.5 cents per kWh. Becomes available to facilities already in service in 2024 and ends after 2032.
  • Extends the existing production tax credit for applicable renewable energy sources. This tech-specific PTC ends in 2024 and is replaced by the new tech-neutral Clean Electricity PTC (45Y) which begins in 2025. Revives the PTC for solar facilities which ended in 2006 and extends to 2024. Extends the date of construction for geothermal, wind, closed- and open-loop biomass, landfill gas, municipal solid waste, hydropower, and marine and hydrokinetic facilities to 2024. Includes a 10% bonus for meeting domestic manufacturing requirements for steel, iron, or manufactured components.
  • New Clean Electricity Production Tax Credit (45Y) — Established, tech-neutral PTC replaces the above Renewable Electricity Production Tax Credit once it phases out at the end of 2024. 45Y is an emissions-based incentive that is neutral and flexible between clean electricity technologies.
  • Creates a PTC credit of 1.5 cents per kWh of electricity produced and sold or stored at facilities placed into service after 2024 with zero or negative GHG emissions.
    • Applies a 10% bonus for meeting domestic manufacturing requirements for steel, iron, or manufactured components.
    • Applies a 10% bonus for projects located in low-income communities or on Tribal land;
    • 20% bonus for projects located in low-income residential buildings or part of low-income economic benefit projects.
    • Facilities may use carbon capture, utilization, and storage (CCUS) to reach qualifying emissions levels.
    • Credits are set to phase out the later of 2032 or when emission targets are achieved (i.e., the electric power sector emits 75% less carbon than 2022 levels). Facilities will be able to claim a credit at 100% value in the first year, then 75%, then 50%, and then 0%.
• Investment Tax Credits:
  • Extension of Energy Investment Tax Credit (Section 48) — Extends the existing energy investment tax credit for applicable energy projects. This tech-specific ITC ends in 2024 for most technologies and is replaced by the new tech-neutral Clean Electricity ITC (48D), which begins in 2025.
    • Extends date of construction in most cases to 2024 and maintains a 10% or 30% credit.
    • Maintains 30% credit for solar energy property, geothermal property, fiber-optic solar property, fuel cell property, microturbine property, small wind property, offshore wind property, combined heat and power property, and waste energy recovery property constructed before January 1, 2025.
    • Creates 30% credit for energy storage technology biogas property, microgrid controllers, dynamic glass, and linear generators constructed before January 1, 2025.
    • Extends 10% credit for microturbine projects constructed before January 1, 2025.
    • 30% credit for geothermal heat pump projects constructed before January 1, 2033. Credit reduces to 26% in 2033 and 22% in 2034.
    • Applies a 10% bonus for meeting domestic manufacturing requirements for steel, iron, or manufactured components.
  • New Clean Electricity Investment Tax Credit (48D) – Establishes a new tech-neutral ITC replacing Energy ITC once it phases out at the end of 2024. The new credit is an emissions-based incentive that is neutral and flexible between clean electricity technologies.
    • Creates an ITC credit of 30% of the investment in the year the facility is placed in service.
    • Applies a 10% bonus for meeting domestic manufacturing requirements for steel, iron, or manufactured components.
  • Advanced Energy Project Credit (48C) — Extends the 30% investment tax credit to clean energy projects to strengthen domestic energy manufacturing and support the production and recycling of clean energy products. It also expands to include projects at manufacturing facilities that want to reduce their GHG emissions by at least 20%. Tax credit is funded at $10 billion for eligible projects and can be applied to low-carbon industrial heat, carbon capture, transport, utilization and storage systems, and equipment for recycling, waste reduction, and energy efficiency.
• Fuel Tax Credits:
  • Clean Fuel Production Credit (45Z) — Creates a new technology neutral 2-year tax credit for low-carbon transportation fuel with a maximum credit of $1 per gallon (or $1.75 per gallon for sustainable aviation fuel) multiplied by an emissions factor calculated proportional to a maximum emission rate standard of 50 kilograms of CO2e per 1 million British thermal units (BTU).
  • Sustainable Aviation Fuel (SAF) Credit (40B) — Creates an incentive to lower aviation transportation emissions.
  • Extension of Second-Generation Biofuel Incentives through 2024.
  • Extension of Biodiesel and Renewable Diesel Credit

Worker Flexibility and Choice Act

Bipartisan legislation has been introduced in the House would amend federal wage and hour laws and the tax code to create a new type of work arrangement. The worker flexibility arrangements authorized in the Worker Flexibility and Choice Act would allow businesses to continue treating their workers as independent contractors. It would also provide safe harbor to employers for liabilities related to misclassification of employees as independent contractors. The legislation would exempt these workers from wage and hour requirements such as minimum wage and overtime. The agreements authorized under the legislation would supersede state and local laws regarding worker classification laws.

House Education and Labor Committee Advances Worker Heat Protection Bill

Last month, the House Education and Labor Committee advanced H.R.2193: the Asuncion Valdivia Heat Illness and Fatality Prevention Act on a party-line vote. The bill would require
the Department of Labor (DOL) to issue an occupational safety or health standard to prevent exposure to excessive heat in the workplace. It would also mandate training and education initiatives to mitigate heat-related issues. If enacted, the legislation would expedite the Occupational Safety and Health Administration’s (OSHA) ongoing heat rule formulation process.

Senate Appropriators Releases FY23 Labor Spending Bill

Last month, Senate Appropriations Chairman Pat Leahy (D-VT) released fiscal year 2023 (FY23) spending bills, including the Labor, Health and Human Services, Education, and Related Agencies funding bill.

The legislation includes:

• $2.05 billion for Worker Protection Agencies, an increase of $216 million over FY22 enacted levels, including:
• $288 million for the Wage and Hour Division ($37.1 million over FY22); and
• $688 million for OSHA ($88 million over FY22)
• $2.95 billion for Workforce Innovation and Opportunity Act State Grants ($80 million above the FY 2022); and
• $300 million for Registered Apprenticeships ($65 million above the FY 2022)

Despite progress in the House and the Senate releasing its spending bills, Congress is unlikely to advance a full FY23 spending package before the end of the fiscal year this fall. Republican and Democratic leaders remain at odds over topline spending totals and defense versus non-defense spending increases. Thus, lawmakers plan on enacting a stopgap measure – called a continuing resolution (CR) – to avert a government shutdown.