Ala. Admin. Code r. 281-3-1-.08

Current through Register Vol. 43, No. 1, October 31, 2024

Section 281-3-1-.08 - Production Expenditures

(1)Additional Production Expenditures. In addition to the items listed in the Act, the term Production Expenditures shall also include expenditures Expended in Alabama that are directly used in a State-Certified Production, including, but not limited to, the following items:

(a) Expenditures listed in the Chart of Production Expenditures, found in Ala. Admin. Coder. 281-3-1-09.

(b) Expenditures for a CPA to perform the Final Incentive Audit, but only to the extent the CPA is physically present in the State of Alabama while performing the Final Incentive Audit.

(c) Expenditures for any equipment or other item that is brought into the State of Alabama: if said equipment or other item is rented or otherwise procured directly from an Alabama Based Company, subject to the conditions set forth in subparagraph 1, below.

1. There is a rebuttable presumption that an expenditure paid or incurred by a Qualified Production Company to an Alabama-Based Company shall not qualify as a Production Expenditure if:

(i) The Alabama-Based Company is a Related Party with respect to the Qualified Production Company;

(ii) The Alabama-Based Company does not, in the ordinary course of its business, sell, rent, or otherwise procure goods or services of a nature that is similar to the subject of the Production Expenditure;

(iii) The Alabama-Based Company does not have an established physical location in the State of Alabama that operates with regular business hours, as evidenced by a prior presence of at least one year, or a planned future presence of not less than one year; or

(iv) The Alabama-Based Company does not charge a mark-up or other form of premium or fee, consistent with industry standards, on the product, good, or service it is procuring for, or on behalf of, the Qualified Production Company.

2.Example: A Qualified Production Company needs a widget. Widgets are not available within the State of Alabama. An Alabama-Based Company, which is unrelated to the Qualified Production Company and has had its principal place of business physically located in the State of Alabama for the past 3 years, may import the widget into Alabama and then rent the widget to the Qualified Production Company for use in a State-Certified Production. If the procurement of the widget, or similar device, is in the normal course of the Alabama-Based Company's business, the payment to the Alabama-Based Company by the Qualified Production Company for the use of the widget shall qualify as a Production Expenditure, as shall any mark-up, premium, or other fee charged by the Alabama-Based Company associated with the procurement of the widget.

3. A Qualified Production Company may submit a written application or request to the Office that this presumption not be applied with respect to a particular expenditure paid to an Alabama-Based Company, and the Office shall consider such written application or request on a case-by-case basis.

(d)Payroll and Other Personnel Expenditures.

1. The Qualified Production Company shall maintain records confirming the residency of all employees in order to determine the proper percentage of payroll to apply to the Qualified Production Company's Rebate. The Declaration of Residency Form provided by the Office shall constitute indicia of an employee being a Resident of Alabama.

2. Salary, wages or other compensation for services which qualify as an Above-the-Line Expenditure paid to a nonresident of Alabama for services performed within Alabama associated with a State-Certified Production, on which Alabama income tax has been withheld and paid or estimated income taxes have been paid, qualify for a Rebate equal to 25% of the first $1,000,000 payment to each nonresident person multiplied by the ratio of total number of days worked in Alabama on the State-Certified Production to the total number of days of employment by the Qualified Production Company or work otherwise performed on the State-Certified Production. Salary, wages or other compensation for services which qualify as a Below-the-Line Expenditure paid to a nonresident of Alabama for services performed within Alabama associated with a State-Certified Production, on which Alabama income tax has been withheld and paid or estimated income taxes have been paid, qualify for a Rebate equal to 25% of the first $500,000 payment to each nonresident person multiplied by the ratio of total number of days worked in Alabama on the State-Certified Production to the total number of days of employment by the Qualified Production Company or work otherwise performed on the State-Certified Production. Notwithstanding the above, if a nonresident person receives salary, wages or other compensation for services that constitute Above-the-Line Expenditures and Below-the-Line Expenditures, the total amount of payments eligible for the 25% Rebate shall not exceed $1,000,000.

3. Payments to a Loan-Out Company that employs a nonresident person providing services on a State-Certified Production, where such person owns the Loan-Out Company in whole or in part, shall qualify as Production Expenditures for the first $1,000,000.00 of Above-the-Line Expenditures to the extent that the payments directly relate to the performance of services within the State of Alabama on a State-Certified Production; provided that Alabama estimated state income taxes have been paid related to such payments, by either the Loan-Out Company or a third party payroll company. Payments to a Loan-Out Company that employs a nonresident person providing services on a State-Certified Production, where such person owns the Loan-Out Company in whole or in part, shall qualify as Production Expenditures for the first $500,000.00 of Below-the-Line Expenditures to the extent that the payments directly relate to the performance of services within the State of Alabama on a State-Certified Production; provided that Alabama estimated state income taxes have been paid related to such payments, by either the Loan-Out Company or a third party payroll company. Notwithstanding the above, if a Loan-Out Company receives compensation for the services of a nonresident person who receives salary, wages or other compensation for services that constitute Above-the-Line Expenditures and Below-the-Line Expenditures the total amount of payments eligible for the 25% Rebate shall not exceed $1,000,000. A payment to a Loan-Out Company shall be a Production Expenditure qualifying for a Rebate of 35% if such person for whose services payment is made is a Resident of Alabama.

(i)Example. A Qualified Production Company hires an actor to star in a State-Certified Production. The entire filming of the State-Certified Production will occur within the State of Alabama and the actor will only perform services within the State of Alabama. The actor is the sole shareholder of Actor, Inc., a C-corporation that employs the actor. All payments made by the Qualified Production Company for the actor's services are made to Actor, Inc. Because the only services provided by the actor were performed in Alabama, for a payment made by the Qualified Production Company to Actor, Inc. for the actor's services to qualify as a Production Expenditure, Actor, Inc. estimated income taxes must have been paid related to such payments.

(e) Any other expenditure of a Qualified Production Company Expended in Alabama for production purposes as may be determined from time to time by the Office.

Ala. Admin. Code r. 281-3-1-.08

New Rule: Filed August 13, 2012; effective September 17, 2012.

Amended by Alabama Administrative Monthly Volume XXXIII, Issue No. 05, February 27, 2015, eff. 3/19/2015.

Author: Department of Commerce/Alabama Film Office

Statutory Authority:Code of Ala. 1975, §§ 41-7A-40 through -48.