Alabama Mobile Workforce Legislation Goes Live

Because the remote workforce has now become a fixture of the modern economy, providing a uniform safe harbor to ease the compliance burdens on both traveling employees and their employers, when those employees travel for work purposes in multiple states, is a trend that should continue to spread across the states. Alabama last year became the sixth state to enact a mobile workforce safe harbor very similar to the model legislation drafted by the Council On State Taxation (COST), the AICPA, and the American Payroll Association, and designed to provide a bright-line test and a 30-day safe harbor for both employees and their employers when those employees who are not residents of the state spend a limited time working in Alabama. Act 2025-334 (H.B. 379) became effective January 1, 2026. 

Alabama’s Mobile Workforce Safe Harbor

Until this year, Alabama was one of many states that could require an employer to withhold and a nonresident employee to file a state income tax return if the employee spent even one day performing services within the state. While the Alabama Department of Revenue (AL DOR) apparently has not aggressively enforced the one day rule in practice, a controversial 2023 decision by the Alabama Tax Tribunal involving a remote worker, Bollinger v. AL DOR, illustrated the growing compliance burden for employers with employees temporarily working in a state in which they are not a resident.

Act 2025-334 provides that compensation paid to a nonresident individual is not subject to Alabama payroll tax withholding by the employer, and the employee is exempt from Alabama’s income tax, if all the following conditions are satisfied:

• The compensation was for employment duties performed in this state on 30 or fewer days in the calendar year;
• the nonresident individual performed employment duties in more than one state during the calendar year; and
• the nonresident individual’s state of residence either provides a “substantially similar exclusion” (e.g., Louisiana and Georgia) or does not impose an individual income tax (e.g., Tennessee, Texas or Florida), or the individual’s income is otherwise exempt from taxation by Alabama law or under the U.S. Constitution or specific federal statute.

Parallel with the model legislation, and common among the states with similar safe harbors, the exemption from income tax and relief from withholding does not apply to three classes of highly compensated individuals: professional athletes, professional entertainers, and public figures who receive compensation on a per-event basis. On the other hand, the length of the threshold is a divisive topic among the states. For example, the Multistate Tax Commission developed its own model in response to the initial federal proposal, but it offers only a 20-day threshold. Thanks to efforts by our friends at COST, the Alabama Society of CPAs (ASCPA), the AICPA, and several state business associations, an amendment was adopted in the House Ways and Means Education Committee to increase the threshold to 30 days, in line with the model legislation.

Once the 30-day threshold is exceeded in any given calendar year, however, the employer is required to begin withholding and remit Alabama income taxes for every day (including the first 30 days) the employee performs employment duties in Alabama. Another important feature of the 2025 act and the model legislation is the mandatory waiver of interest and penalties if the employer failed to withhold Alabama income tax but meets either of the following conditions:

• Reliance on information from a “time and attendance system” that tracks where employees perform services on a daily basis (which is maintained at the discretion of the employer), or
• Reliance on the employee’s annual determination of time the employee expects to spend working in Alabama (with appropriate carve-outs for collusion or actual knowledge of fraud on the part of the employee in making such determination).

Finally, another important feature is an exemption for employers who send nonresident employees into Alabama to conduct disaster relief efforts on a temporary basis — regardless of the number of days spent performing services in Alabama. The disaster relief exemption is supplemental to the exemptions in Alabama’s version of the Facilitating Business Response to State Declared Disasters Act, enacted in 2014, which only applies to disaster or emergency work on “infrastructure” owned or operated by a registered business, municipalities, county or public utility corporation. Thanks to the ASCPA-sponsored amendment, all nonresident individuals who provide disaster relief services in Alabama will now be covered by the exemption, regardless of the 30-day threshold.

Although a Congressional solution that applies a uniform threshold and exemptions across all states is more desirable from an efficiency and compliance standpoint, the federal solution has proven elusive so far. In the meantime, COST has indicated that its efforts to enact 30-day safe harbor mobile workforce legislation on a state-by-state basis will continue, even as it strongly supports the renewed Congressional efforts. 

If readers have any questions regarding the content of this newsletter please contact Bruce Ely at bely@bradley.com or Jimmy Long at jelong@bradley.com.