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AlabamaSB862025 Regular SessionSenateWALLET

Labor and employment, independent contractors, establishment of portable benefits accounts

Sponsored By: Arthur Orr (Republican)

Enacted

Labor & Employment

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Bill Overview

Analyzed Economic Effects

4 provisions identified: 2 benefits, 0 costs, 2 mixed.

Contractors can deduct benefit account contributions

For tax years beginning after December 31, 2025, qualifying independent contractors get an Alabama income tax deduction. They can deduct 100% of their own contributions and hiring-party contributions to their portable benefit accounts during the tax year. The deduction is an adjustment to income on their individual return. No contribution item can be deducted more than once. This lowers taxable income, not taxes dollar for dollar; savings depend on the contractor's tax situation.

Businesses can deduct contractor benefit contributions

For tax years beginning after December 31, 2025, hiring parties get an Alabama business expense deduction for contractor benefits. They can deduct 100% of their own money contributed as compensation to contractors' portable benefit accounts. This deduction does not cover money withheld from contractor pay. No contribution item can be deducted more than once. Tax savings depend on the hiring party's tax situation.

Contractors get portable benefit accounts

Beginning December 31, 2025, independent contractors can open and own accounts for health coverage, income replacement insurance, life insurance, or retirement. Banks, investment firms, or technology providers and program managers working through those institutions administer the accounts. Anyone, including app-based businesses, can contribute; hiring parties can use their own money, but contributions are not required. Withholding a percentage of contractor pay requires both parties' express written agreement, which must be clear and prominently displayed in a contract or separate notice. Contractors must voluntarily opt in and can opt out anytime; withholding leaves less pay available for other spending.

Benefit contributions cannot establish employee status

Beginning December 31, 2025, hiring parties gain protection against employment claims based on portable benefit contributions made as compensation. Alabama courts cannot treat those contributions as evidence of an employment relationship, including for workers' compensation liability. This limits one basis contractors can use to claim employee protections. Other facts and legal tests can still determine worker status.

Sponsors & Cosponsors

Sponsor

  • Arthur Orr

    Republican • Senate

Cosponsors

  • Greg Albritton

    Republican • Senate

Roll Call Votes

All Roll Calls

Yes: 334 • No: 0

House vote • 4/1/2025

Motion to Read a Third Time and Pass - Adopted Roll Call 591

Yes: 103 • No: 0

House vote • 4/1/2025

Third Reading in Second House

Yes: 103 • No: 0

Senate vote • 2/11/2025

Motion to Read a Third Time and Pass as Amended - Adopted Roll Call 44

Yes: 32 • No: 0

Senate vote • 2/11/2025

Orr motion to Adopt - Adopted Roll Call 43

Yes: 32 • No: 0

Senate vote • 2/11/2025

Orr motion to Adopt - Adopted Roll Call 42

Yes: 32 • No: 0

Senate vote • 2/11/2025

Third Reading in House of Origin

Yes: 32 • No: 0

Actions Timeline

  1. Enacted

    4/10/2025Senate

  2. Delivered to Governor

    4/3/2025Senate

  3. Signature Requested

    4/3/2025House

  4. Enrolled

    4/2/2025Senate

  5. Third Reading in Second House

    4/1/2025House

  6. Motion to Read a Third Time and Pass - Adopted Roll Call 591

    4/1/2025House

  7. Ready to Enroll

    4/1/2025Senate

  8. Reported Out of Committee Second House

    3/19/2025House

  9. Read for the Second Time and placed on the Calendar

    3/19/2025House

  10. Read for the first time and referred to the House Committee on Ways and Means Education

    2/12/2025House

  11. Pending Committee Action in Second House

    2/12/2025House

  12. Third Reading in House of Origin

    2/11/2025Senate

  13. Orr 1st Amendment Offered

    2/11/2025Senate

  14. Orr motion to Adopt - Adopted Roll Call 42

    2/11/2025Senate

  15. Orr 2nd Amendment Offered

    2/11/2025Senate

  16. Orr motion to Adopt - Adopted Roll Call 43

    2/11/2025Senate

  17. Motion to Read a Third Time and Pass as Amended - Adopted Roll Call 44

    2/11/2025Senate

  18. Engrossed

    2/11/2025Senate

  19. Reported Out of Committee House of Origin

    2/5/2025Senate

  20. Read for the Second Time and placed on the Calendar

    2/5/2025Senate

  21. Read for the first time and referred to the Senate Committee on Finance and Taxation General Fund

    2/4/2025Senate

  22. Pending Committee Action in House of Origin

    2/4/2025Senate

Bill Text

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