Labor: elective compensation under the Inflation Reduction Act of 2022.

Senator Cortese’s measure would create a narrow, time-limited mechanism that allows taxpayers, employers, contractors, or subcontractors involved in certain renewable-energy facilities to voluntarily make elective retroactive wage payments to workers in order to qualify for enhanced tax incentives under the Inflation Reduction Act of 2022.

The bill defines an elective retroactive wage payment as a voluntary payment to workers who performed work on a qualified renewable energy facility, for the purpose of supporting eligibility for IRA incentives, and sets specific conditions. The facility must qualify for IRA tax incentives. The payment must be to workers who performed installing, modifying, repairing, or replacing solar panels, inverters, battery energy storage systems, transformers, and related components at the eligible facility. The facility must not be a public works project and would not be subject to the Davis-Bacon Act if the IRA incentives are pursued, and the payment must be voluntary and in addition to wages otherwise paid. The provision applies to renewable-energy facility construction or repairs commenced on or after January 1, 2023 and completed by December 31, 2024, and the article remains in effect only until January 1, 2029.

Key details specify the mechanics of the elective retroactive wage payments, including that the payment does not, by itself, constitute violations of various California labor code provisions and that the arrangement must comply with applicable IRA provisions and IRS guidance. The measure also excludes certain claims (retaliation, misclassification, and other violations unrelated to the wage payments for IRA-related tax incentives) and clarifies that enforcement authority remains with the Labor Commissioner. The proposal adds the new authority through an urgency statute with immediate effect.

In terms of implementation and policy context, the bill adds Article 4 to the Labor Code to govern this elective compensation framework and situates it within the broader goals of advancing renewable-energy deployment while leveraging federal incentives. The measure interprets the interaction between California labor standards and the Inflation Reduction Act as a pathway to facilitate project financing and adherence to IRA wage-related incentive requirements, while preserving the state enforcement framework for wages and ensuring limited duration and scope. The urgency designation underscores the intent to preserve access to IRA credits amid evolving federal clean-energy programs.