Interest on a prevailing-wage correction payment is compounded daily

Plain-English summary

This is a brief internal email answering a compliance question about the prevailing wage and apprenticeship (PWA) rules, which certain clean-energy tax credits require employers to meet. If a worker was paid less than the required prevailing wage, the employer can preserve the credit by making a "correction payment" that includes interest. The team asked how that interest is calculated, because the regulations do not spell out whether it is simple interest or compounding. Chief Counsel, with Procedure and Administration concurring, confirmed that the standard approach applies: the interest is compounded daily. Daily compounding is the general federal rule for interest on tax underpayments, so a correction payment for underpaid prevailing wages follows the same method. The answer is short advice meant to be folded into a presentation for the compliance team.

Ruling snapshot

• Question: Is interest on a prevailing-wage underpayment correction payment simple or daily-compounding?
• Outcome: advice given (daily compounding)
• Key authorities: General federal interest rules under IRC §§ 6621 and 6622 (daily compounding)

Full text (IRS public release)

ID:         CCA_2024121809425348                                 [Third Party Communication:

UILC:       9999.00-00                                           Date of Communication: Month DD, YYYY]

Number: 202452013
Release Date: 12/27/2024
From: ---------------------
Sent: Friday, September 6, 2024 12:00:45 PM
To: -----------------------------------------
Cc: ---------------------------------------------------------------------
Bcc:
Subject: RE: PWA compliance presentation


Hi ----------and --------,

Following up regarding the CAP team’s remaining question. Our response, confirmed by
P&A, is below:

         IRS Question #1: With regards to the interest calculation for underpayment of the
         wages, the regulations do not make clear whether the interest calculation is
         simple, daily compounding, etc. Our understanding is the standard approach is
         daily compounding but confirmation would be helpful.

         Response: We agree with your understanding of the interest calculation. Daily
         compounding would be used to calculate the interest for a correction payment,
         resulting from an underpayment of prevailing wages.

Please let me know if you have any questions or would like to discuss our response. Our
responses to the CAP team’s two questions will be incorporated into our presentation to
the CAP team on September 25th.

Thanks,
-------