Energy Evolution – 45Z Changes Under OBBBA

In this episode of Energy Evolution, hosts Dawn Rhea and Jon Pezzi discuss recent developments in energy regulations and their implications for production facilities.

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Detailed Description of Energy Evolution – 45Z Changes Under OBBBA

00:00:00
Dawn: Hi. Good afternoon. My name is Dawn. I am here with my colleague and fellow partner, Jon Pezzi, to talk to you about some fun things for the energy evolution.

We were both able to chat with Sean in our The Tax Navigator series about the changes from the OBBA, but we want to do something just for energy evolution given all of the questions we’ve been receiving.

00:00:24
Dawn: I think first we’re going to start with 45Z. As we all have discussed, 45Z is a new kid on the block this year. And one of the biggest issues we keep being asked is, do I have to be bothered with this prevailing wage thing and what does it apply to? Jon, what do you tell them?

00:00:41
Jon: Yeah. Unfortunately, OBBBA did not get rid of prevailing wage.

Granted, 45 Z is a credit for production, and so facilities might already be in service, but prevailing wage is still going to apply to two things. You’re looking at alterations and repairs, and that’s basically anything that’s outside of routine maintenance.

00:01:05
Jon: If it’s just in the normal course of business, planned things that require maintenance, great. Prevailing wage, not required.

But anything that is unexpected, repairs, alterations, as we kind of mentioned, prevailing wage is still going to have to be tracked in order for you to continue claiming the max credit.

00:01:27
Dawn: And then, Jon, say I have such a big issue, it’s the warranty guys are coming in. Do I need to bother to ask them about their prevailing wage?

00:01:37
Jon: Absolutely. Again, that’s going to be outside of what’s considered routine maintenance on the facility. You’re going to have to track the prevailing wage again to make sure you’re maximizing the credit.

00:01:47
Dawn: So, it’s for both my employees who deal with repair and alteration and everybody else I bring in from the outside that would deal with repair and alteration, be thinking about getting documentation for prevailing wage.

00:02:00
Jon: Correct. I mean it’s going to include your contractors, subcontractors.

You’re going to want to make sure, as Dawn mentioned, that you’re including in your contracts that they’re going to provide that information so that you can track it, audit it and make sure, again, you’re able to claim the maximum credit.

00:02:15
Dawn: I think that’s probably been one of our biggest questions.

00:02:18
Jon: Oh, absolutely.

00:02:19
Dawn: Other than with 45Z, hey, do we have to have a sale? Do we have to sell it to somebody? And the answer is yes. And technically, the way the law is written is, you have to have that sale in the same year as production.

I don’t know that there’s an appetite to come along and change these rules right now, especially given we can’t even agree on a budget to open the government. But I think we’re kind of stuck with them for now.

00:02:43
Jon: I’m going to guess there’s not any changes to something to fix some of that language, but other crazy things have happened.

00:02:50
Dawn: Absolutely. Thank you so much for joining us on this outing of energy evolution, and we look forward to chatting with you again soon on some other hot topics that we’re hearing about. Thanks.

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