A new North Carolina law removes a major barrier that has kept construction and trades businesses from offering benefits to independent contractors.
Most construction and trades owners assume they face a hard choice: hire employees and manage payroll, taxes, and liability, or work with independent contractors and offer nothing beyond the contract price. What many don't know is that a provision buried in North Carolina's S445—the Regulatory Reform Act of 2026—changes that equation starting January 1, 2027.
The new law creates a voluntary portable benefits account system that lets hiring parties (that's you) make tax-deductible contributions directly to independent contractors' benefit accounts. Those accounts can cover health insurance, retirement savings, disability insurance, and other benefits. The critical part: these contributions won't be treated as evidence that the contractor is actually an employee.
Until now, the biggest legal risk in offering benefits to contractors was triggering misclassification liability. If you paid into a contractor's health plan or retirement account, the IRS or the state could argue you were really running an employment relationship—meaning back taxes, penalties, and wage-and-hour exposure. That risk was enough to stop most trades businesses from trying.
S445 removes that barrier. The law explicitly protects hiring parties who contribute to portable benefit accounts from having those contributions used as evidence of employment status. For construction crews, HVAC shops, electrical contractors, plumbing firms, and other trades relying on independent contractors, this opens a practical way to offer real benefits without the legal sword hanging overhead.
If you're a construction or trades business in North Carolina that works with independent contractors—whether full-time or project-based—this applies to you. You're not required to participate. But if you want to attract and retain skilled contractors in a competitive labor market, you now have a legal, tax-efficient tool that didn't exist before.
Contractors themselves benefit too. They get access to benefits they'd otherwise have to buy individually, often at higher cost and with less favorable terms.
The system is voluntary. You decide whether and how much to contribute to a contractor's portable account. Those contributions are tax-deductible for your business. The contractor doesn't report the contributions as taxable income (within IRS limits for qualified benefits). The account travels with the contractor—it's portable, meaning they keep it even if they stop working with you.
The provision is found in Section 17.6 of S445, pages 18–20. It becomes effective January 1, 2027, and applies to taxable years beginning on or after that date.
This is a genuine shift in how North Carolina law treats contractor relationships. It's not a loophole or a gray area—it's explicit statutory permission. If you've wanted to offer benefits to contractors but held back because of legal risk, that risk no longer applies under this framework.
For a detailed, business-specific breakdown of how portable benefit accounts work and what setup looks like, a free guide tailored to construction and trades is available through the North Carolina Construction Industry Association and other trade resources.