Alabama Administrative Code › Title 281 - ALABAMA DEPARTMENT OF COMMERCE, FORMERLY ALABAMA DEVELOPMENT OFFICE AND ALABAMA TOURISM DEPARTMENT/ALABAMA FILM OFFICE › Chapter 281-3-1 - ALABAMA FILM OFFICE INCENTIVES › Section 281-3-1-.08 - Production Expenditures

Current through Register Vol. 42, No. 9, June 28, 2024
(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.