Alabama: Mobile Workforce Legislation Creates Income Tax Safe Harbor

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APPLIES TO

All Employers with Employees in AL

EFFECTIVE

January 1, 2026

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Quick Look

  • HB 379 creates an income tax safe harbor for Alabama nonresidents for compensation for services performed in the state.

Discussion

HB 379 creates an income tax safe harbor for Alabama nonresidents for compensation for services performed in the state. Considered as mobile workforce legislation, the exemption applies if the following conditions are met:

  1. The compensation is paid for employment duties performed by the individual in the state in 30 or fewer days per calendar year.
  2. Employment duties were performed in more than one state per calendar year.
  3. Compensation is not paid for duties as a professional athlete, professional entertainer, or public figure.
  4. The nonresident’s home state provides a substantially similar exclusion, does not impose an individual income tax, or the individual’s income is exempt from taxation under the U.S. Constitution or federal statute.

Employers are exempt from withholding taxes from compensation for employees who meet the above requirements. However, if the individual exceeds the 30-day threshold for work performed in the state, then the employer must withhold and remit taxes for the entire period work was performed. To determine if an individual performed duties within the state for a day, more of the individual’s duties must have been performed in Alabama than in any other state during that day. However, time spent in transit is not considered when determining the location of performance of job duties. Additional clarifications are expected from the Alabama Department of Revenue which has been tasked with adopting rules for these requirements.

Action Items

  1. Read the bill here.
  2. Review length of time employees spending performing work in Alabama.
  3. Update payroll withholding processes, if applicable.
  4. Have appropriate personnel trained on the requirements.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2025 ManagEase