Prevailing wage and apprenticeship rules: why a solar credit is 6% or 30%

By the Tax Field Guide editorial team. Published 2026-10-26. Facts checked 2026-10-26. Related strategies: Solar Investment Credits, Purchased Energy Credits.

Education only; not tax, legal or investment advice. Tax rules change, and how they apply depends on your facts. No outcome is guaranteed.

The headline "30% solar tax credit" is really a 6% base credit multiplied by five. The multiplier is earned by meeting the prevailing wage and apprenticeship (PWA) requirements, or by fitting an exception.¹² For an investor, the difference between 6% and 30% can be most of the value of a deal, so the PWA paperwork deserves as much attention as the equipment.

The two requirements

• Prevailing wage. Laborers and mechanics employed by the taxpayer, its contractors and subcontractors in the construction of the facility (and in alteration or repair work during the 5 years after it is placed in service) must be paid at least the prevailing wage rates set by the U.S. Department of Labor for the area and type of construction.¹³
• Apprenticeship. Depending on when construction began, 10% to 15% of total labor hours must be performed by qualified apprentices from a registered apprenticeship program; the program's apprentice-to-journeyworker ratio must be met each day; and each contractor employing four or more people on the project must employ at least one apprentice.³ The apprenticeship requirements apply during construction.⁴

Meeting both increases the base amounts of the credits by five times: from 6% to 30% for the §48E investment credit, and from 0.3 to 1.5 cents per kWh (inflation adjusted) for the §45Y production credit.¹²⁵

Exceptions

The IRS lists two limited exceptions where the five-times amount is available without meeting PWA:¹

1. facilities with a maximum net output of less than 1 megawatt; and
2. facilities that began construction before January 29, 2023.

Fixing a failure: correction and penalty payments

A failure is not always fatal. Under the regulations, a taxpayer that underpaid wages can still claim the increased credit by paying the workers the difference plus interest and paying the IRS a penalty of $5,000 per underpaid worker (higher amounts apply for intentional disregard). For an apprenticeship shortfall, the cure is a penalty of $50 per labor hour that missed the requirement, unless the good faith effort exception applies. These are reported on Form 7220 and Form 4255.³⁴

If the credit was increased for PWA and prevailing wages are not paid for alteration or repair work during the 5 years after the project is placed in service, part of the increased credit can be recaptured.⁴ See solar ITC recapture.

What an investor or credit buyer should ask for

1. Is the 30% rate based on PWA compliance, the under-1-megawatt exception, or the pre-2023 construction exception?
2. Certified payroll records for every contractor and subcontractor, and the wage determinations used.
3. Apprentice labor-hour logs and the registered apprenticeship program details, or good faith effort documentation.
4. Who bears the cost of correction and penalty payments if a shortfall is found later.

A seller who cannot produce these records is asking you to take the PWA risk. See questions to ask a tax credit broker.

Common questions

Why is the solar tax credit 6% instead of 30%?

The base §48E credit is 6%. It increases five times, to 30%, if the project meets the prevailing wage and apprenticeship requirements, has a maximum net output under 1 megawatt, or began construction before January 29, 2023.

Do small solar projects need to meet prevailing wage rules?

Facilities with a maximum net output of less than 1 megawatt can get the increased amount without meeting the prevailing wage and apprenticeship requirements.

What happens if a contractor did not pay prevailing wages?

The taxpayer can generally still claim the increased credit by making correction payments to the workers with interest and paying a penalty to the IRS, reported on Form 7220 and Form 4255.

Education only; not tax, legal or investment advice. Talk to a qualified professional before acting.

Sources

1. IRS, Prevailing wage and apprenticeship requirements, https://www.irs.gov/credits-deductions/prevailing-wage-and-apprenticeship-requirements
2. IRS, Clean Electricity Investment Credit, https://www.irs.gov/credits-deductions/clean-electricity-investment-credit
3. IRS, Instructions for Form 7220 (12/2025), https://www.irs.gov/instructions/i7220
4. IRS, Instructions for Form 4255 (12/2025), https://www.irs.gov/instructions/i4255
5. IRS, Clean Electricity Production Credit, https://www.irs.gov/credits-deductions/clean-electricity-production-credit