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Evolutionary Pictures LLC



On January 25, 2015, the Department partially approved the Taxpayer’s claim for a film production tax credit, and denied the remaining part of the Taxpayer’s claim for that credit.  On April 14, 2015, the Taxpayer protested the Department’s partial denial of the credit, arguing that it was legally entitled to an additional claim under the credit.  The Taxpayer is a movie production company that made a movie in New Mexico.  The Taxpayer purchased the acting services of out-of-state actors from a super loan-out and payroll processing company that had an office location in Albuquerque during the filming of the movie.  The Taxpayer paid this company at least twenty million dollars for the services of the out-of-state actors, and received the maximum five-million dollar credit for those payments for performing artists’ services.  In addition to paying for the artists’ wages, the Taxpayer also paid the company a payroll processing fee and reimbursement for gross receipts taxes.  On February 3, 2014, the Taxpayer filed an application for a film production tax credit.  The Department denied the portion of the claim for the Taxpayer’s reimbursement of gross receipts tax and payroll processing fees because the Taxpayer had already maximized the credit for payment for the services of performing artists.  The issue in the protest is whether the Taxpayer’s payments to the company are direct production expenditures subject to a general 25% cap, or expenditures for the services of performing artists subject to a five million dollar cap.  The Hearing Officer found that, though the Taxpayer’s payment of payroll processing fees and reimbursements of gross receipts tax were not payments to the artists themselves, they were part of the payment for the services rendered by the performing artists, which are subject to the five million dollar cap that the Taxpayer had already exhausted.  The Taxpayer’s protest was denied.