A buried provision in North Carolina's Regulatory Reform Act of 2026 removes a major legal barrier that has kept restaurants from helping their gig workers and contractors.
Most North Carolina restaurant owners don't realize they've been operating under a legal catch-22: they wanted to help independent contractors and gig workers pay for health insurance or retirement savings, but doing so risked triggering an employment classification that neither party wanted.
That changed on January 1, 2027, when Section 17.6 of S445—the Regulatory Reform Act of 2026—created a new portable benefits account system. Here's what it means for your restaurant.
Under the new provision, restaurants and other businesses can now make tax-deductible contributions directly into independent contractors' benefit accounts. These accounts can cover health insurance, retirement savings, disability insurance, and other benefits.
The critical part: these contributions are not treated as evidence of an employment relationship. That was the barrier before. The IRS and state labor agencies historically viewed employer-funded benefits as a sign that a worker should be classified as an employee, not a contractor. Restaurants that tried to help faced potential reclassification audits and back-tax liability.
S445 eliminates that risk by creating a safe harbor. You can fund these accounts voluntarily, take the tax deduction, and neither you nor the contractor faces the legal exposure that previously made this arrangement too risky.
This applies to restaurants that work with independent contractors—delivery drivers, freelance kitchen staff, event catering crews, or other workers classified outside the traditional employment relationship. It also applies to gig-economy arrangements.
The accounts are voluntary. You decide whether to participate. Contractors aren't required to accept contributions. But if you do set up accounts, the tax treatment is now clear and protected.
The provision became effective January 1, 2027, and applies to taxable years beginning on or after that date. If your restaurant's tax year runs January through December, this affects your 2027 returns and beyond. If you operate on a different fiscal year, check with your accountant on the exact application date for your situation.
The full text appears in Section 17.6 of S445, pages 18–20, if you want to review the legislative language with your tax advisor or attorney.
If you've been hesitant to offer benefits support to contractors because of classification risk, that barrier is now gone. You can structure contributions in a way that's transparent and legally protected. This may help you attract and retain quality independent workers in a competitive labor market.
It's worth discussing with your accountant or HR advisor to understand whether a portable benefits account makes sense for your operation and how to set one up properly.
For more detail on how this applies to your specific restaurant situation, a free business-specific guide is available through the North Carolina Restaurant and Lodging Association and other industry resources.