FISCAL NOTE
Date Requested: February 26, 2026
Time Requested: 10:48 AM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1766 |
Comm. Sub. Eng. |
HB4009 |
|
|---|
| CBD Subject: |
Banking and Finance |
|---|
|
FUND(S):
General Revenue Fund
Sources of Revenue:
General Fund
Legislation creates:
Decreases Existing Revenue, Increases Existing Expenses
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The stated purpose of the original bill is to create the Portable Benefit Account Act.
The bill establishes the Voluntary Portable Benefits Plan Act (the Act). The Act provides that any person or entity, including an internet or application-based company, may voluntarily contribute funds to a portable benefit account for an independent contractor who resides in West Virginia or performs actual work in West Virginia. “Portable benefit plan” means a benefit plan administered by a third-party portable benefit plan provider chosen by the independent contractor and assigned to a beneficiary rather than to a hiring party. At a minimum, the plans must offer health insurance, income replacement insurance, disability insurance, life insurance, and retirement benefits.
The bill creates three income tax modifications. The modifications are effective for taxable years beginning on or after January 1, 2026. The Personal Income Tax modification for contributions allows for a subtraction from federal adjusted gross income equal to the amount a West Virginia taxpayer contributes to a voluntary portable benefit plan for the taxable year in which the payment is made. The amount is deductible only to the extent that the amount is not allowable as a deduction when arriving at the taxpayer’s federal adjusted gross income for the taxable year. A Personal Income Tax modification is also available for recipients of contributions to the extent the amount is includable when arriving at the taxpayer’s federal adjusted gross income for the taxable year. The Corporation Net Income Tax modification is authorized as a deduction from federal taxable income for the taxable year in which the contribution was made, but only to the extent the amount is not allowable as a deduction when arriving at the taxpayer’s federal taxable income for the taxable year.
The Internal Revenue Service (IRS) considers independent contractors to be self-employed. The general rule is that an individual is an independent contractor if the person for whom the services are performed has the right to control or direct only the result of the work and not what will be done and how it will be done. Contributions made by a company to an independent contractor’s portable benefits account are generally considered taxable income by the IRS. Additionally, any interest income earned by funds in a portable benefits account is considered taxable income for federal purposes. The IRS and United States Department of Labor may consider the provision of benefits to independent contractors as evidence of an employee-employer relationship, potentially triggering worker reclassification and penalties. Currently, under federal law, there are several options for self-employed taxpayers (and others) to deduct retirement plan contributions and medical expenses from their federal adjusted gross income. However, there are limitations placed on the amounts which can be deducted. According to the TY 2022 IRS Statistics of Income (SOI) for West Virginia, 73,190 returns reported self-employment tax, 2,520 returns reported self-employed retirement plan contributions, and 9,450 reported self-employed health insurance deductions.
According to our interpretation, the bill, if passed, would reduce General Revenue Fund collections by an undeterminable amount beginning in FY2027.
Additional administrative costs incurred by the State Tax Division would be $68,450 in FY2027 and $44,800 in subsequent fiscal years.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2026
Increase/Decrease
(use"-") |
2027
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
68,450 |
44,800 |
| Personal Services |
0 |
44,800 |
44,800 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
1,650 |
0 |
| Other |
0 |
22,000 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
The bill establishes the Voluntary Portable Benefits Plan Act (the Act). The Act provides that any person or entity, including an internet or application-based company, may voluntarily contribute funds to a portable benefit account for an independent contractor who resides in West Virginia or performs actual work in West Virginia. “Portable benefit plan” means a benefit plan administered by a third-party portable benefit plan provider chosen by the independent contractor and assigned to a beneficiary rather than to a hiring party. At a minimum, the plans must offer health insurance, income replacement insurance, disability insurance, life insurance, and retirement benefits.
The bill creates three income tax modifications. The modifications are effective for taxable years beginning on or after January 1, 2026. The Personal Income Tax modification for contributions allows for a subtraction from federal adjusted gross income equal to the amount a West Virginia taxpayer contributes to a voluntary portable benefit plan for the taxable year in which the payment is made. The amount is deductible only to the extent that the amount is not allowable as a deduction when arriving at the taxpayer’s federal adjusted gross income for the taxable year. A Personal Income Tax modification is also available for recipients of contributions to the extent the amount is includable when arriving at the taxpayer’s federal adjusted gross income for the taxable year. The Corporation Net Income Tax modification is authorized as a deduction from federal taxable income for the taxable year in which the contribution was made, but only to the extent the amount is not allowable as a deduction when arriving at the taxpayer’s federal taxable income for the taxable year.
The Internal Revenue Service (IRS) considers independent contractors to be self-employed. The general rule is that an individual is an independent contractor if the person for whom the services are performed has the right to control or direct only the result of the work and not what will be done and how it will be done. Contributions made by a company to an independent contractor’s portable benefits account are generally considered taxable income by the IRS. Additionally, any interest income earned by funds in a portable benefits account is considered taxable income for federal purposes. The IRS and United States Department of Labor may consider the provision of benefits to independent contractors as evidence of an employee-employer relationship, potentially triggering worker reclassification and penalties. Currently, under federal law, there are several options for self-employed taxpayers (and others) to deduct retirement plan contributions and medical expenses from their federal adjusted gross income. However, there are limitations placed on the amounts which can be deducted. According to the TY 2022 IRS Statistics of Income (SOI) for West Virginia, 73,190 returns reported self-employment tax, 2,520 returns reported self-employed retirement plan contributions, and 9,450 reported self-employed health insurance deductions.
According to our interpretation, the bill, if passed, would reduce General Revenue Fund collections by an undeterminable amount beginning in FY2027.
Additional administrative costs incurred by the State Tax Division would be $68,450 in FY2027 and $44,800 in subsequent fiscal years.
Memorandum
The stated purpose of the original bill is to create the Portable Benefit Account Act.
The bill provides protection against worker misclassification. Under current law, providing employment-based benefits to independent contractors risks reclassifying those workers as employees. This bill dictates that contributions to a portable benefit account may not be used as criterion for determining a worker’s employment classification under various state laws, including the Human Rights Act, Wage Payment and Collection Act, Unemployment Compensation, Workers Compensation, and state taxes (except for the newly created modifications). It expressly prohibits the creation, use or contribution to portable benefits accounts from being used in lawsuits to establish an employer-employee relationship or vicarious liability.
Person submitting Fiscal Note: Peter Shirley
Email Address: RADfiscal@wv.gov