State of Alaska >  Department of Revenue >  Alaska Film Office > 
FAQ
Text Size: A+ | A- | A       Text Only

Alaska Film Office – FAQ’s


These FAQ’s provide general information about the film production tax incentive program. Alaska statutes prevail over information presented here. The information provided in these FAQ’s is intended for basic guidance of the steps to participate in the program and are not intended to, nor do they, replace the official statutes which contain complete details and requirements of the program. All applicants, or their representatives, are expected to read the statutes to become familiar with the process. These guidelines are subject to review and may be changed as necessary. In no way, do these guidelines replace the statutory language nor reflect any predetermined intent prior to the regulation process.

Sections:


GENERAL QUESTIONS



  • What is the Alaska Film Office?


  • Effective July 1, 2013, the Alaska Film Office was moved from the Department of Commerce to the Department of Revenue. The film office employs an executive director, a tax auditor and an accounting technician and as a group administers the film production tax incentive program. This responsibility includes but is not limited to the production qualification review process, recommendations to the film commission, review and audit of final applications, credit issuance, credit transfers, and credit utilization tracking, and an audit function to recover damages.

  • What are the walk-in hours of operation and location of the film office?


  • The office is open Monday through Friday, except holidays, from 8:00am – 4:30pm. The film office is located within the tax division on the 5th floor of the Atwood Building in downtown Anchorage. The address (also mailing address) is 550 W. 7th Avenue, Suite 500, Anchorage, AK 99501 and the main phone number is 907-269-6620.

  • What is the Alaska Film Incentive Review Commission?


  • The Alaska Film Incentive Review Commission was created in the Department of Revenue effective July 1, 2013. The membership of the commission consists of the commissioner of commerce, community, and economic development, the commissioner of natural resources, the commissioner of revenue, and the commissioner of labor and workforce development. The duties of the film commission can be found in statute under AS 44.25.145.

  • What is the Film Production Promotion Program?


  • Effective July 1, 2013 the Alaska Film Production Promotion Program (AFPPP) was established in the Department of Commerce, Community, and Economic Development, and designed to provide production assistance by guiding film directors, makers, and producers to resources that fit their artistic and budgetary needs. This includes information and assistance with filming locations, rules and regulations, transportation, crew, talent, and support services. Producers should review information at http://film.alaska.gov/ and contact the AFPPP Development Specialist, Dave Worrell at 907-269-8491 or david.worrell@alaska.gov for preliminary information on filming in Alaska. The AFPPP also works with organizations in the private sector for the expansion and development of film production industries in the state, certifies the Alaska film production internship training programs, promotes the employment of program interns by eligible productions, and promotes Alaska as an appropriate location for film production.

  • What does "best interest of the state" mean?


  • Best interest of the state means that the producer and the production do not violate the best interest criteria dictated in statute. The Alaska Film Incentive Review Commission shall consider the effect of the production on both the immediate and long-term prospects for the film industry in the state; both the immediate and long-term prospects for the employment of Alaska residents; both the immediate and long-term prospects for the economy of the state; the public perception of state policy on the utilization and development of the natural resources of the state; and the immediate and long-term prospects for the fiscal health of the state. This is not a black and white answer and there are many considerations when determining if a production is not contrary to the best interest of the state. It is important that the production does not violate the criteria under AS 44.25.115(c) which lists types of productions that are never eligible. It is also important that a production’s content is not contrary to the Administration’s natural resource policy. It is important that the producer and the production comply with all state and federal laws and regulations during the entire production. The film office and the commission may also consider the producer and the production’s state and federal law compliance when the production hires contractors or other service providers when determining if a production is in the best interest of the state. For example, vendors providing services for the production should be legitimate businesses properly licensed to do business in the state, and miners spotlighted in unscripted television productions should have proper mining permits and mining licenses. In determining if a production is in the best interest of the state, it is important to note that a majority vote of the commission is required to approve a qualification and the final award of a tax credit.

  • How much money does the producer need to spend in qualified expenditures to be eligible for a tax credit?


  • For a film production to be eligible for a tax credit the producer must have $75,000 or more in qualified expenditures in a consecutive 36-month period.

  • When is the application fee due and how is it calculated?


  • A film producer shall submit an application fee at the time an application for qualification is submitted. The application fee is not subject to refund and must be received before an application can be considered complete. The application fee is equal to 0.2% of the estimated total qualified expenditures to be incurred in the state, with a minimum fee of $200 and a maximum fee of $5,000.

  • What are the payment options for paying the application fee?


  • An applicant can pay the application fee by check made payable to the Department of Revenue, by using the online payment options at http://www.tax.alaska.gov/, or by wire transfer to the State of Alaska. There are Wire Transfer Instructions available on the film office website http://tax.alaska.gov/AlaskaFilmOffice/programs/CreditProgram.aspx under miscellaneous forms.

  • How is the qualifying start date to begin incurring expenses determined?


  • The qualifying start date is determined when a completed application for qualification is submitted to the film office. Applicants may request a later start date, but not a date prior to the date a completed application is submitted. If no date is selected, the qualification period will begin on the date the completed application for qualification is received. The qualification period to incur all production expenses for the film credit is 36-consecutive months which begin on the date determined to be the qualifying start date.

  • What is the qualification period that a producer has to incur qualified expenses?


  • A production has three years from the official qualification start date approved by the film office which is generally determined by the receipt of a completed application.

  • What types of productions are not allowed no matter what?


  • The following productions are never eligible regardless of the production costs: news, weather, or current events programming; productions produced primarily for industrial, corporate, or institutional purposes and for internal use; advertisements, infomercials or any other production that solicits funds (except for a commercial television advertisement produced for national distribution); political advertisements; or productions containing sexually explicit conduct.

  • What are the narrower requirements for an advertisement?


  • Commercial television advertisements must be produced for national distribution to be considered eligible for a film credit. Any other advertisements, infomercials, or any other production that solicits funds will not be eligible regardless the production costs. The distribution is an important requirement and evidence (letters of commitment, contracts, and other legal agreements) will be requested by the film office.

  • What is the definition of "Film"?


  • Film is defined as television, commercials, and videos.

  • What is the total production budget?


  • The total production budget includes all production costs, from pre-production all the way through post-production, including qualifying expenditures and non-qualifying expenditures. The total estimated budget must be reported on the applications.

  • What is the incentive credit for the first episodic scripted television series?


  • The incentive credit for the first episodic scripted television series is an additional extra credit bonus of 6% of total qualified expenditures incurred in the state. The production becomes eligible for this extra credit incentive after 16 episodes have been completed and are ready for television broadcast. Please notify the film office if interested in this opportunity.

  • What information about producers who qualify for a tax credit is made public?


  • The film office is unable to disclose any information about the producers or any productions that apply to qualify for a film tax credit. Under Alaska Statute 43.05.230 it is unlawful for a current or former officer, employee, or agent of the state to divulge the amount of income or the particulars set out or discussed in a report or return made under this title, without a statutory exception. Therefore, because of the confidentiality rules that are in place for the Department of Revenue, information provided on a film production application for qualification, film production tax credit program correspondence, information provided on a film production final application for the award of a tax credit, information provided by the certified public accountant providing expenditure verification services, information about the issuance, transfer or utilization of a film tax credit, or other taxpayer information will not be disclosed, unless in aggregate. In addition to protection under AS 43.05.230, the legislators identified further the importance of confidentiality under the new law AS 44.25.120(c) which reads that information submitted in an application for qualification is confidential and is not subject to inspection or copying under AS 40.25.110 - 40.25.125. The only exception is allowed under AS 43.98.030(a) which allows the department to publish the name and contact information for each person provided a transferable tax credit. This information will be published on the website under “Public Reporting” as we award tax credits under AS 44.25.190: http://tax.alaska.gov/AlaskaFilmOffice/programs/PublicReporting.aspx There is a plethora of historical information that was made public when the program was housed in Commerce (2008-2013) that is still available on their promotion program website at http://film.alaska.gov/reports/.

  • What is the Alaska Permanent Fund (PFD)?


  • The PFD is an annual dividend that is paid out to qualifying Alaska residents, from the Alaska Permanent Fund http://pfd.alaska.gov/. This fund was established under the Alaska State Constitution to dedicate a portion of oil related revenues received by the state to income producing investments. The film credit statute mandates that all ATL non-residents or ATL residents that fail to meet the eligibility requirements for a PFD under AS 43.23.005(a)(2) – (7) will receive 5% instead of 30% for the base credit percent. For more information, refer to the residency affidavit available on the website under forms at .

  • What is a rural community?


  • A “rural area” is defined as a community in the state with a population of 1,500 or less or a community with a population of 10,000 or less that is not connected by road or rail to Anchorage or Fairbanks. The bonus is to incentivize spending in a rural community; therefore, there must be an actual community. There is a list of rural communities that follow the statutory definition available on the film office website. If a community is not listed, the film office can help make the determination.

  • What is the extra credit bonus for filming in a rural community?


  • The extra credit bonus for filming in a rural community is an additional 6% credit on top of the base credit for qualified expenditures made in a rural area. It is important to understand that the credit bonus for expenses made in the rural community is for the actual money spent that goes directly into that rural community. In most cases, this will simply be the food and lodging, community transportation (taxi, rental cars, boat charters), and perhaps fuel purchased in the community. The money must directly benefit the community. Costs paid to helicopters or bush planes are allowable if the company is established and operates in the community. Wages earned are only allowable for the added bonus if the wages are being paid to a resident of that community.

  • What is the extra credit bonus for filming during the winter months?


  • The extra credit bonus for filming during winter months is an additional 2% credit on top of the base credit for qualified expenditures made between October 1 and March 30. The expense qualifies because the activity was performed (expense incurred) during the winter months and not because the expense was paid for during the winter months.

CREDIT - QUALIFICATION PROCESS



  • Can an application for qualification be submitted electronically?


  • Yes, applicants can email their qualification applications and attachments to the Executive Director of the film office, Kelly Mazzei at kelly.mazzei@alaska.gov. The application fee still needs to be paid in order for the received application to be considered “complete”.

  • What is a “completed” application for qualification?


  • See “Applicant Checklist” on page 6 of the Application of Qualification. Forms are available at http://tax.alaska.gov/AlaskaFilmOffice/programs/CreditProgram.aspx. A completed application must provide the following items: the application must be complete (all boxes must be filled in), the application must be signed by an authorized individual, there must be an attached budget that clearly identifies expenditures to be made in Alaska including an estimated start date, completion, and filming dates, the detailed budget should break out the totals reported on page four of the application, a distribution plan must be attached, the application must include a list of rural filming locations if applying for the rural credit, there needs to be a synopsis, treatment, or script of the proposed production the applicant must have an Alaskan business license, if the applicant is an out-of-state corporation or LLC, the entity is registered with the Alaska Department of Commerce, Community and Economic Development, and the application fee is attached to the application. An area of confusion has been page 3 of the application for qualification. This page must be filled out completely and all ATL personnel reported, even if the wages are not being claimed for a credit. Any and all other information the film office may require to determine the producer’s qualification for a credit and the estimated amount of the credit may also be required.

  • What is the timeline for approving an application for qualification?


  • Applications are processed in the order that they are received by the film office. Once the film office has finished its review and the executive director has made a recommendation to approve or reject, the film commission votes to approve or reject. A majority vote is required in order to approve any production for qualification. Currently, the film commission meets monthly. Generally, the entire process can take approximately 60 days which is the reason the film office encourages the applicant to submit a thoughtful complete application, in order to avoid further examination delays and to preserve a receive date that can be used as the qualifying start date, regardless of the date the commission votes to approve. The film office will work with the applicant throughout the process.

  • Is an Alaska business license required on the application for qualification?


  • Yes. The statute requires the production company to have a valid Alaska business license during the entire production. Out-of-state LLCs and corporations must register with the Alaska Department of Commerce, Community, and Economic Development, Division of Corporations, Business and Professional Licensing prior to applying for the business license. Information about business licenses and registration is available at http://commerce.alaska.gov/dnn/cbpl/Home.aspx or on the film office website http://tax.alaska.gov/AlaskaFilmOffice/programs/CreditProgram.aspx under the credit program tab/state laws. The Alaska business license number must be provided on Page 1 of the application. It is the responsibility of the production company to ensure that a business license is renewed if it expires during the production.

  • What do the estimated dates of the production schedule mean?


  • The production schedule is a project plan of how the production budget will be spent over a given timescale for every phase of filmmaking. On the application for qualification, this is broken out into Pre-Production, Production, and Post-Production as well as the Estimated Start and End Dates for the Alaska portion of the production. The first date of principal photography in Alaska and the projected number of days of principal photography in Alaska are also required to be provided. The dates must be provided and the film office will evaluate the timeline for reasonableness and its relationship to the dates provided on the budget, in addition to the accuracy of any seasonal credit bonus being claimed. All dates should be reported in US standard format mm/dd/yy.

  • What should be claimed on page 4, line 4n “Other” on the applications?


  • Page 4, line 4n “Other” should include expenditures made by a production that are directly related to the production, incurred in the state, that are for real or tangible property, fees, services, or state or municipal taxes, but that do not fall into any of the explicitly listed categories on page 4. If a production is claiming expenses on page 4, line 4n “Other,” the film office requires an attached schedule to be provided, detailing expense descriptions and amounts for each expense claimed. Eligibility of these expenses will be determined by the film office. Report loan-out company payments on this line for ATL residents who are eligible for the PFD and loan-out compensation paid for BTL residents and BTL non-residents. Loan-out company compensation should NOT be reported under “Wages” category. As a side note, ATL non-residents paid through a loan-out company should be reported on line 4o.

  • What is the detailed budget that is required to be included with the application of qualification?


  • The detailed budget is the budget that relates to the production listed on the application. The detailed budget should clearly identify expenditures to be made in Alaska. This should also include the estimated filming dates and a list of the proposed cast. The detailed budget should break-out the totals reported on page 4 of the application for qualification. We want to see how the applicant arrived at the estimated numbers reported on the application. The budget must reflect dates for the extra seasonal credit and name the communities if claiming a credit bonus for filming in a rural community. The more detailed information that can be provided on the budget and application, the less likely the film office will have to request more information which can result in a delay in the processing of the application.

  • What is the Distribution Plan?


  • The distribution plan is required to be provided with the application for qualification and needs to include specific information on who will see the production, where it will be seen, and when. In addition, applicants submitting an application for a “Commercial Television Advertisement” must show evidence through letters of intent or other proof that the commercial television advertisement will be broadcast nationally.

  • What is a Notice of Qualification?


  • A notice of qualification is issued to the producer by the film office after the Alaska Film Incentive Review Commission approves by a majority vote an application for qualification. The notice of qualification will include a determination by the film office of the estimated film production tax credit for which the production qualifies and state the 36-consecutive month qualification period in which to incur expenses that will be eligible for the tax credit. The notice of qualification will also inform the applicant to follow all state and federal laws and regulations throughout the production period.

  • Is receipt of a notice of qualification a guarantee that a final tax credit will be awarded?


  • No, the notice of qualification is not a guarantee that a final tax credit will be awarded. Under AS 44.25.125 the producer must satisfy all requirements under AS 44.25.100 - 44.25.190 to be awarded a film credit. Among these requirements are: the requirement to be in the best interest of the state, the requirement to include the Alaska Film Office logo and the words, “Filmed in Alaska with the Support of the State of Alaska” in the end credits of each qualified film, and the requirement to be compliant with all applicable federal and state laws and regulations. Federal and state law compliance includes but is not limited to: business license requirements, labor laws, permitting laws, public streets and parks laws, wildlife laws, and transportation laws. Visit the State Laws section of the film office’s website http://tax.alaska.gov/AlaskaFilmOffice/programs/CreditProgram.aspx for more information on state laws.

QUALIFIED EXPENDITURES



  • What is a qualified expenditure?


  • Qualified expenditures are expenditures made by a production company licensed to business in the state in connection with a film production approved by the film office. Qualified expenditures must be directly related to the production and be incurred in the state. Incurred in the state shall mean the activity that is being performed. Only expenditures that are ordinary, reasonable, and not in excess of fair market value and that are for real or tangible property, fees, services, or state or municipal taxes shall be considered. Please reference Sec.44.25.130 for a list of expenditures that may and may not be considered qualified expenditures.

  • What does “incurred in the state” mean?


  • "Incurred in the state" means "the activity" that is being performed. For example, if a specialized camera is rented in California and brought to Alaska to be used in a production applying for a tax credit, the expenditure will qualify because the “activity” of using the camera is taking place in Alaska, and of course, this must be directly related to the production and not in excess of FMV. Refer to the FAQ about the extra bonus credit for expenses made in a rural community (must be spent directly into the community).

  • What does “directly related to the production” mean?


  • Directly related to the production means the qualified expense must be associated with the production that is applying for the credit.

  • What does “ordinary, reasonable, and not in excess of fair market value” mean?


  • “Ordinary, reasonable, and not in excess of fair market value” means: necessary and non-extravagant; commonplace and standard for the industry; not extreme or excessive given the circumstances; and not for more than the amount which an unobligated and unrelated seller and buyer would have exchanged for in the market. The CPA’s should check this when providing expense verification services and related party transactions will be looked at closely.

  • Are application fees considered qualified expenditures for the film tax credit?


  • No, the application fee is not a production expense, and therefore not considered a qualified expenditure.

  • Can a payroll services company be used that is not an Alaskan business?


  • Yes, an applicant can use any payroll services company they wish; however the cost will not be considered eligible for the tax credit because the statute specifically requires a payroll services company to be an Alaskan Business which meets the definition of Alaska Business under Sec.44.25.190(1). The incentive is increased for using an Alaskan payroll services company by allowing the base of 30% but the technical potential of receiving an additional 50% of the total cost because this is one of three Alaska spend categories specifically chosen by statute for the bonus. Theoretically, the total credit allowed is 80% of costs for processing qualified payroll and related expenditures.

  • Can a production services company be used that is not an Alaskan business?


  • Yes, an applicant can use any production services company they wish, however to be considered eligible for the tax credit the fees for using the production services company must meet the same expenditure eligibility requirements that are stated under AS 44.25.130.

  • Do all vendors need to have an Alaska Business license?


  • Businesses who are conducting business in Alaska are required to hold a business license. There is no qualifying business license requirement for vendors except for the three categories specified and defined in the statute (intrastate travel, musicians, and payroll services). The CPA must verify the business license status of these items. The CPA does not verify that any other vendors have Alaskan business licenses. The producer does need to follow all the laws of the state during the production, but only the laws that he is responsible for (i.e., land permits, labor laws, etc.). The statute states that the producer must follow all laws; it does not state that the vendors paid by the producer must follow all state laws. The compliance/accountability will be later during the best interest of the state determination. For example, if it turns out that the producer only hired, or made a habit of hiring only businesses in the state that were operating without a valid business license, (or if the producer only spotlighted people mining without mining licenses), then it could be determined that that particular production wasn’t in the best interest of the state. We want to encourage the producer at the time of qualification that it could be in their best interest to follow all laws and hire legitimate businesses. Loan-out companies should be properly licensed to do business in the state if they are being used for a production’s personnel.

  • What is the credit calculation percentage for intrastate transportation and shipping?


  • Intrastate transportation and shipping are the costs of moving both people and things within the state of Alaska. To be considered a qualified expenditure under intrastate transportation, both the origin and destination locations must be in Alaska, the costs must be incurred in Alaska, and the service must be provided by an Alaskan Business which meets the definition of Alaska Business under Sec.44.25.190(1). The incentive is increased for intrastate transportation and shipping by allowing the base of 30% but the technical potential of receiving an additional 50% of the total cost because this is one of three Alaska spend categories specifically chosen by statute for the bonus. Theoretically, the total credit allowed is 80% of intrastate transportation. As a reminder, the transportation must be directly related to the production and not in excess of FMV.

  • What is the credit calculation percentage for interstate transportation and shipping?


  • In calculating the tax credit for interstate transportation, including cast and crew travel, report only 50% of qualified interstate transportation expenses. The credit is calculated by allowing 30% on 50% of the total costs. Interstate transportation must meet the same criteria as other qualified expenditures by being directly related to the production and not in excess of FMV. Interstate transportation and shipping are the costs of moving both people and things to, and from, the state of Alaska. To be considered a qualified expenditure under interstate transportation, the mode of transport must touch down in or take off from Alaska. If there are multiple legs of the transportation only the leg of the transport that touches down in or takes off from Alaska will be considered a qualified expenditure, unless all legs of the flight were purchased as part of a single ticket, booked at one time though an airline or agent, with no deliberate layovers. Expenses to get to the airport in a state other than Alaska to fly to Alaska are not incurred in Alaska and do not qualify. In addition, the cost for meals incurred on a plane or in an airport not on the ground in Alaska are not eligible expenses because the costs were not incurred in Alaska and are not costs of travel. This will be further defined in regulations and is subject to change.

  • Are travel agency fees eligible for the tax credit?


  • Yes, travel agency fees are considered a qualified expenditure as a cost of traveling. Travel agency fees must be incurred in Alaska in order to qualify, therefore travel agency fees paid to an in-state travel agency for interstate or intrastate travel would qualify. Travel agency fees paid to an out-of-state agency for travel to or from Alaska can be considered to be a part of the cost to travel, thus allowing the cost to be treated the same as other interstate transportation costs at 50% of the total costs. The allowable 50% is because the film office assumes that 50% of the cost of travel is incurred in Alaska for travel to and from Alaska. This will be further defined in regulations and is subject to change.

  • What is Alaska Ground Spend?


  • Alaska Ground Spend is a spend category on the applications used when calculating the credit. It is the total amount of qualified expenditures directly related to the production that does not include wages or transportation. This can include items such as the costs of set construction and operation, costs of wardrobes, make-up, accessories, costs associated with photography, sound, lighting, editing, the rental of facilities and equipment, leasing of vehicles, costs of food and lodging, costs of digital or tape editing, costs of a payroll services company, and other items.

  • What are the three spend categories that must be provided by an Alaska Business as defined by statute?


  • The three spend categories are in short payroll, music, and intrastate travel. To elaborate, the costs for processing qualified payroll and related expenditures, and interstate travel must be provided by an Alaska business to be considered a qualified expense. The cost of music must be performed, composed, or recorded by an Alaska musician, or released or published by an Alaska business to be considered a qualified expense.

  • What is the definition of Alaska Business?


  • An Alaskan Business is defined by statute as a person who holds a current Alaska business license; a person who provides goods or services under the name as appearing on the person's current Alaska business license; and a person who has maintained a place of business within the state staffed by the person or an employee of the person for a period of six months immediately preceding the date the goods or services were provided.

  • How much money does the producer need to spend in qualified expenditures to be eligible for a tax credit?


  • For a film production to be eligible for a tax credit the producer must have $75,000 or more in qualified expenditures in a consecutive 36-month period.

  • What is the qualification period that a producer has to incur qualified expenses?


  • A production has three years from the official qualification start date approved by the film office which is generally determined by the receipt of a completed application.

  • Are the CPA fees considered qualified expenditures?


  • No, CPA fees incurred for expenditure verification services are not production costs, but rather a cost related to the acquisition of a tax credit, and therefore not considered a qualified expenditure.

  • Are there other production costs that are not ever considered qualified expenditures?


  • Yes, all expenditures must be ordinary, reasonable, and not in excess of fair market value that are for real or tangible property, fees, services or state or municipal taxes. In addition, expenditures that may not be considered qualified expenditures include: costs related to the acquisition, determination, transfer, or use of a film production tax credit; post-production expenditures for marketing and distribution; production financing, depreciation, and amortization costs, and other costs that are not cash or cash equivalent expenditures directly attributable to production costs incurred in the state; amounts that are later reimbursed or reasonably anticipated to be reimbursed, resulting in a reduction in production costs; amounts that are reasonably anticipated to be recovered through subsequent sale or other realization of value by disposal of an asset that has been claimed as a qualified expenditure; amounts that are paid to a person or entity as a result of participation in profits from the exploitation of the production; or costs incurred in the purchase of real or tangible property for which a qualified expenditure has, at any time, been claimed.

  • Is still photography allowed?


  • Yes, but only if it is an ordinary part and in conjunction with a “motion” filming. It must be directly related to the “motion” production and incurred in the state. However, still photography expenses will not be allowed if used in any postproduction activities that include marketing and distribution.

WAGES, SERVICES & LOAN-OUT COMPANIES



  • What is the definition of “Above-the-Line” personnel?


  • Above-the-Line (ATL) personnel include producers, directors, writers and the principal actors, and the entities that represent them. The “principal actors” means the five highest compensated actors or entities representing them (loan-out companies). This information is necessary and must be provided on page 3 of the application for qualification even if a credit is not being claimed for the wages. Report the Alaska portion of the production of ATL wages for the credit on page 4 of the application. Please reference the Alaska Residency Affidavit available on the website under forms to verify that the ATL wages qualify for the Alaskan resident credit incentive. The ATL resident credit incentive has a stricter residency requirement in order to receive the 30% credit and must meet the definition for being eligible for the Alaska Permanent Fund Dividend (PFD). For ATL residents not eligible for the PFD or for ATL non-residents, the credit is 5% (plus increases) instead of 30%.

  • What is the definition of “Below-the-Line” personnel?


  • For the purposes of the Alaska film incentive program, the Below-the-Line personnel (BTL) are defined as all personnel who do not meet the definition of ATL. They are referred to as BTL, because they appear after the ATL subtotal in a production’s budget. Examples of BTL positions include: cast and talent that are not ATL, unscripted television talent, production manager, assistant director, other producers, field producers, assistant producers, script supervisor, location manager, production accountant, costume designer, makeup artist, hair stylist, director of photography, production designer, set decorator, gaffer, grip, special effects coordinator, craft service, caterer, transportation coordinator, editor, composer, property master, and construction coordinator. The BTL personnel receive a 30% credit, and an additional 20% for Alaskan residents that meet the lessor residency requirements (not PFD necessarily). Please refer to the Alaska Residency Affidavit available of the website under forms.

  • Do unscripted television shows have ATL personnel?


  • Yes. The definition for ATL personnel includes producers, directors, writers and principal actors. Most unscripted television shows consider the stars of their show to be spotlighted talent and not actual actors; therefore most unscripted television budgets report the talent as BTL talent, and not ATL. In order for the ATL personnel to be eligible for the ATL resident wage credit, the talent must clearly be a professional actor. The film office will consider a variety of factors when making a determination and we will want to see the script, or perhaps that the talent is a member of SAG or has acted in other productions, for example. All productions should report an executive producer, and some will have a director and a screenwriter.

  • What is the Alaska Residency Affidavit?


  • The Alaska Residency Affidavit must be submitted for all Alaska resident wages claimed on the final application. The form is used to verify the Alaska residency requirement for personnel claiming to be an Alaskan resident and to determine if they are eligible for the Permanent Fund Dividend, for purposes of all ATL resident wages.

  • What is the Alaska Permanent Fund (PFD)?


  • The PFD is an annual dividend that is paid out to qualifying Alaska residents, from the Alaska Permanent Fund http://pfd.alaska.gov/. This fund was established under the Alaska State Constitution to dedicate a portion of oil related revenues received by the state to income producing investments. The film credit statute mandates that all ATL non-residents or ATL residents that fail to meet the eligibility requirements for a PFD under AS 43.23.005(a)(2) – (7) will receive 5% instead of 30% for the base credit percent. For more information, refer to the residency affidavit available on the website under forms.

  • What is the difference between wages and contracted services?


  • Wages are expenses paid to individuals that have been subjected to payroll taxes. Contracted services are expenses paid to individuals that have not been subjected to any payroll taxes, such as someone that will receive a Form 1099 type of tax document for the income received for services. Wages may have a different credit percent depending on who the wages are being paid to. Generally, there is an extra added incentive of 20% (total 50%) when hiring Alaskan residents through payroll. If the same service was paid to a vendor by a Form 1099, the credit is paid at 30%, rather than 50%. In addition, all Alaskan resident wages are allowed an extra 50% (100% total) when calculating any ATL non-resident wages (5% + 50% of resident wages + 50% of Alaskan payroll services company, intrastate travel, and Alaskan musicians). Wages are defined as salaries, wages, compensation, and related benefits for services where the payment is run through the production’s payroll system, there is traditional employer tax withholding, and there is an employer/employee relationship as commonly recognized under labor and Internal Revenue Service rules. This also applies if the production uses a payroll services company. Contracted services are reported under “Ground Spend” and the credit is calculated at the 30% base rate with no add-ons. Form 1099 contracted compensation should be reported in the category where it fits best. For example, an editor (working in Alaska, incurred in the state and directly related to the production) can be reported under the spend category of “Editing”. If the editor does more than just editing, perhaps reporting the expense under “Other” is better. It is in the best interest of the production company to hire legitimate people/businesses. There is more detail on vendors and business licensing under the CPA tab on the website.

  • Are vendors required to have an Alaskan Business License in order for an expense to be eligible for a tax credit?


  • There is a development regarding the issue of vendor business licensing. After further review, this is what it comes down to: Under AS 44.25.125(d) it talks about the duties of the CPA. In general, the CPA must verify that the expenses on the detailed cost report qualify under AS 44.25.130 and that there is no outstanding balance due a person in the state. AS 44.25.130 describes qualified expenditures and lists expenses that may qualify along with expenses that do not qualify. The CPA must be familiar with this statute and the key language of qualified expenditures: The producer must have an Alaskan business license, must be directly related to the production, must be incurred in the state (the activity performed), and must be ordinary, reasonable and not in excess of FMV. There is no business license requirement for vendors except for the three categories specified and defined in the statute (intrastate travel, musicians, and payroll services). The CPA must verify the business license status of these items. The CPA does not verify that any other vendors have Alaskan business licenses. The producer does need to follow all the laws of the state during the production, but only the laws that he is responsible for (i.e., land permits, labor laws, etc.). The statute states that the producer must follow all laws; it does not state that the vendors paid by the producer must follow all state laws. The compliance/accountability will be later during the best interest of the state determination. For example, if it turns out that the producer only hired, or made a habit of hiring only businesses in the state that were operating without a valid business license, (or if the producer only spotlighted people mining without mining licenses), then it could be determined that that particular production wasn’t in the best interest of the state. We want to encourage the producer at the time of qualification that it could be in their best interest to follow all laws and hire legitimate businesses. Businesses doing business in Alaska should be properly licensed. More detail about various state laws is available on the website.

  • How is a “Loan-Out” company treated?


  • Loan out companies are often used by highly paid personnel such as producers, directors and actors to receive payments for their services. The production pays the loan-out company a negotiated fee and the loan-out company “loans” the individual to the production. Above-the-Line (ATL) personnel, by Alaska definition, include producers, directors, writers and the principal actors. The “principal actors” means the five highest compensated actors or entities representing them. Loan-out companies are referred to in the statute as the “entities representing” the principal actors, director, producers, or other related cast and crew. This is an important clarification in order to correctly calculate the credit. Loan-out company representation must be disclosed on the application for qualification. On page 3 of the application, all ATL personnel including the principal actors must be reported even if the person is represented by a third party loan-out company. On page 4 of the application for qualification and on page 3 of the final application, payments made through a loan-out company are reported under Section 4 Ground Spend. The same incentive rules apply for ATL non-residents (5% + increases). Report ATL non-resident compensation paid through a loan-out company on line 4o. Report BTL resident and non-resident compensation paid through a loan-out company on line 4n. Do not report loan-out company compensation under wages.

  • What is the credit calculation percentage for BTL wages paid to residents and non-residents?


  • The base credit calculation percentage for all BTL wages is 30%, with an additional 20% extra credit bonus for resident wages. In effect, Alaska resident hire also collects an additional 50% as an increase to the credit calculation for ATL non-resident.

CREDIT - FINAL APPLICATION PROCESS



  • Can a final application, cost report, CPA materials and other required documents be submitted electronically?


  • Yes. In fact it is preferred. The package can be emailed to the Executive Director of the film office, Kelly Mazzei at kelly.mazzei@alaska.gov.

  • What is the review process for an application for the final award of a tax credit?


  • When the production cost report and final application are submitted by a producer, the executive director and audit staff of the film office shall review and verify the information included on the production cost report. An auditor in the film office will thoroughly review the cost report and the adjustments made during the CPA verification service. The auditor will request additional information to randomly test the qualified expenditures and review all documents for reasonableness. The film office hopes to provide guidelines in the future for the CPA’s and the production companies. After the auditor’s review, consultation with staff and final review, the executive director shall determine the amount of the credit for which the producer may qualify and make a recommendation to the commission as to the amount of the credit to be awarded. The commission may approve the credit amount recommended by the executive director, adjust the amount of the credit, deny all or part of the credit, or return the production cost report to the executive director for additional review. Contact Matt Jordan at matt.jordan@alaska.gov for more information.

  • Is a Certified Public Accountant (CPA) required to verify expenses?


  • Yes. After completion of the production, with the submission of the Final Credit Application, the producer shall provide the film office with a production cost report detailing the qualified expenditures of the production, with verification by an independent certified public accountant, licensed in the state and approved by the film office, that the costs claimed in the report are qualified expenditures under AS 44.25.130 and that there is no outstanding balance for a qualified expenditure that is due to a person in the state. For more information, go to http://tax.alaska.gov/AlaskaFilmOffice/programs/CPA.aspx. The independent certified public accountant providing verification under this subsection may not engage in the sale, assignment, exchange, conveyance, or other transfer of a tax credit certificate that includes a credit based on the qualified expenditures that are verified by that independent certified public accountant. If the independent certified public accountant providing verification under this subsection subsequently engages in the sale, assignment, exchange, conveyance, or other transfer of a credit for which a qualified expenditure was verified by that independent certified public accountant, the film office may require the producer providing the production cost report to have the qualified expenditures verified by an independent certified public accountant licensed in the state that is not engaged in the sale, assignment, exchange, conveyance, or other transfer related to a credit for the qualified expenditures. Contact Matt Jordan at matt.jordan@alaska.gov.

  • What happens if there are any outstanding obligations to a person in the state?


  • Outstanding obligations will not be considered qualified expenditures. Further, the film office may withhold the award of a tax credit under this section if the office determines that there are filed, but unresolved, legal actions in the state involving the producer or production.

CREDIT – ISSUANCE AND TRANSFER



  • How is the final tax credit issued?


  • After the film office determines the amount of a final tax credit and approval is received by the Alaska Film Incentive Review Commission, a transferable film production tax credit certificate is mailed to the producer.

  • How can a person tell the difference between a credit issued under the former program and a credit issued under the new program?


  • Credits issued under the “old” program will have on the face of the certificate a 3-year expiration date from the date of original issue, rather than a 6-year expiration date for credits issued under the “new” program. The language on the certificate will describe which tax types the credit can be used against which will also indicate which program it was issued under. Contact Amy Franz at amy.franz@alaska.gov for more information.

  • What is the procedure for transferring (selling) a tax credit?


  • A producer may sell, assign, exchange, convey or otherwise transfer in whole or part, a film production tax credit certificate by submitting a Form 707 Request for Approval of Transfer of Film Production Tax Credit http://tax.alaska.gov/AlaskaFilmOffice/programs/CreditProgram.aspx with the original film production tax credit certificate attached. After the film office receives Form 707, and it is reviewed for accuracy and completeness, a new credit certificate is issued. The department commits to issuing credit transfers within 30-days after receiving the request; however the average turnaround time is 2-3 days. Form 707 offers the options of mailing the new certificate directly to the purchaser or back to the seller. If requested, the film office will hold the credit certificate for an in-person pickup. Contact Amy Franz at amy.franz@alaska.gov for more information.

  • Does the film office reissue a tax credit if the original is lost or stolen?


  • The film office does not reissue tax credit certificates. If the credit certificate has been lost or stolen, the owner of the credit certificate must provide an affidavit, notarized and signed under penalty of perjury that the credit has been lost or stolen. The affidavit must include the credit certificate number, the date it was issued, the amount of the credit, the words “under penalty of perjury” when signing in front of a notary public, and words to the effect of “if the original credit certificate is found, that it will be returned to the film office or that it will be shredded”. A lost or stolen certificate is different from an unused balance when only a partial amount of a credit is utilized against a tax liability. The film office does not reissue credits for unused balances; however the unused amount is tracked by the film office and available to be used against future tax or to be transferred. When using an unused balance from a prior year, please report the amount of the credit being claimed on the appropriate line of the tax return and attach a copy of the original credit certificate and a schedule of the “carry forward”. Contact Amy Franz at amy.franz@alaska.gov for more information.

  • Is there any information to facilitate the buy/sell market of film tax credits?


  • This is a work-in-progress. By statute, the department shall publish the name and contact information for each person (film producer) provided a transferable tax credit certificate. The department will publish on the website under “Public Reporting” http://tax.alaska.gov/AlaskaFilmOffice/programs/PublicReporting.aspx the producer’s name and contact information as a credit certificate is awarded. Due to the strict confidentiality disclosure rules under AS 43.05.230, the department is unable to publish additional contact information about taxpayers who are interested in purchasing film tax credits. If a taxpayer is interested in having contact information available on the website as an interested potential purchaser of film tax credits, please contact Kelly Mazzei at kelly.mazzei@alaska.gov for more information about providing a waiver to disclose confidential taxpayer information. If a film producer is interested in having information published prior to the award of a final tax credit, please contact Kelly Mazzei for more information.

CREDIT- UTILIZATION



  • What tax types can the film tax credit be used against?


  • Effective July 1, 2013, the film tax credit may be used against several tax types which include AS 21.09.210 (insurance premiums tax), AS 21.66.110 (title insurance premiums tax), AS 43.20 (corporate net income tax), AS 43.55 (oil and gas production tax), AS 43.56 (oil and gas exploration production and pipeline property tax), AS 43.65 (mining license tax), AS 43.75 (fisheries business), and AS 43.77 (fishery resource landing tax). For film tax credits issued for productions that qualified prior to July 1, 2013, the credit can only be used against a corporate net income tax. The original credit certificate must be attached to the tax return when the tax return is filed. Contact Amy Franz at amy.franz@alaska.gov for more information.

  • What is the procedure for claiming a credit against a tax liability?


  • The film tax credit must be used within six years after being originally issued whether sold, assigned, exchanged, conveyed, or otherwise transferred. The credit may not be used for a tax period which is prior to the issuance date of the certificate if not sold, or prior to the date of transfer if sold. The original film production tax credit certificate must be attached to the tax form filed, and a schedule showing the credit being carried forward must be attached if the whole amount of the credit is not being used. Please contact the appropriate office as outlined below for the tax type for which the tax credit will be used for detailed instructions regarding the utilization of a film tax credit.

    AS 21.09.210Insurance Premiums Tax907-465-2584
    AS 21.66.110Title Insurance Premiums Tax907-465-2584
    AS 43.20Corporate Income Tax907-465-3153
    AS 43.55Oil and Gas Production Tax907-269-1037
    AS 43.56Oil and Gas Property Tax907-269-1027
    AS 43.65Mining License Tax907-269-1017
    AS 43.75Fisheries Business Tax907-465-2371
    AS 43.77Fishery Resource Landing Tax907-465-2371