SB86 Alabama 2025 Session

Summary

Primary Sponsor

Arthur OrrSenator

Republican

Session

2025 Regular Session

Title

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

Summary

SB86 creates portable benefit accounts for independent contractors and allows tax-advantaged contributions from hiring parties and contractors.

What This Bill Does

The bill establishes portable benefit accounts owned by independent contractors and managed by a portable benefit account provider (such as banks, investment firms, or tech providers). It allows contributions to these accounts from hiring parties or contractors, with rules to ensure contributions funded as compensation do not create an employment relationship or workers’ compensation liability, and requires voluntary opt-in with written agreements. Starting with tax year 2026, hiring parties can deduct their contributions as a business expense and contractors can deduct 100% of contributions they or the hiring party make as an adjustment to income, with no double deductions. The act takes effect on December 31, 2025.

Who It Affects

• Independent contractors who own portable benefit accounts and may receive contributions to fund various benefit plans.
• Hiring parties (employers or clients) who may contribute funds to portable benefit accounts as a form of compensation and may receive tax deductions for those contributions.

Key Provisions

• Creates an Act called the Portable Benefits Act and adds definitions for Bank, Hiring Party, Portable Benefit Account, and Portable Benefit Account Provider.
• Authorizes the establishment and ownership of Portable Benefit Accounts funded by independent contractors or hiring parties to fund health, income replacement, life, and retirement benefits.
• Allows contributions by hiring parties or independent contractors, with specific conditions to ensure contributions do not create an employment relationship and are voluntary with written agreements and opt-in mechanisms.
• Allows tax deductions for contributions beginning in tax year 2026: hiring parties may deduct their contributions as a business expense, and contractors may deduct 100% of contributions by the hiring party plus their own contributions as an adjustment to income, with no double counting.
• Defines effective date as December 31, 2025.

AI-generated summary using openai/gpt-5-nano on Feb 22, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Labor & Employment