A quiet provision in North Carolina's 2026 regulatory reform bill gives construction and trades owners a tax incentive to fund benefits for contract workers—but most don't know it exists.
Most construction and trades owners assume that offering benefits to independent contractors and gig workers costs them money with no tax relief. That assumption just changed—and almost nobody knows about it yet.
Buried in S445, the Regulatory Reform Act of 2026, is a provision that lets hiring parties—including small construction firms—deduct contributions they make to portable benefit accounts for independent contractors from their North Carolina taxable income. It also exempts those contributions from state withholding requirements. Starting January 1, 2027, this becomes real tax savings.
Here's the scenario: You're a construction company or trades business that works with independent contractors or gig workers. You want to offer them some form of benefit—health coverage, retirement savings, or similar portable benefits that move with them from job to job. Under the old rules, you'd pay for it out of after-tax dollars, and the IRS treated it like any other business expense.
Under S445's Section 17.6.(b), effective for taxable years beginning January 1, 2027 or later, your contributions to these portable benefit accounts now qualify as a tax deduction on your North Carolina state return. That's the first piece.
The second piece is equally important: those contributions are exempt from state withholding requirements under Section 17.6.(d). In plain English, you don't have to withhold state taxes on money you contribute to a contractor's portable benefit account. That directly reduces the tax cost of setting up these benefits.
This applies to any hiring party in North Carolina—sole proprietors, LLCs, corporations—that voluntarily contributes to portable benefit accounts for workers classified as independent contractors. It's particularly relevant for construction firms, HVAC contractors, electricians, plumbers, and other trades that regularly use contract labor.
The provision doesn't require you to offer benefits. It's voluntary. But if you do, the tax incentive makes it financially smarter than it was before.
The effective date is January 1, 2027. If you're considering whether to offer portable benefits to your contract workforce, this changes the math. The tax deduction and withholding exemption reduce your net cost significantly.
Before year-end 2026, it's worth talking to your accountant or tax advisor about whether this makes sense for your business. They can model what the deduction saves you and help you understand what qualifies as a "portable benefit account" under the law.
This isn't a subsidy or a grant. It's a tax provision that recognizes the value of portable benefits in a workforce where contract labor is standard. For trades and construction businesses, it's a material change to the cost of competing for contract workers.
Source: S445, Regulatory Reform Act of 2026, Section 17.6.(b) and (d), Page 20; effective January 1, 2027.