Withholding requirements for loan-out payments (Act 2026-540)
Under Act 2026-540, effective October 1, 2026, a loan-out payment can be included in production expenditures only if the qualified production company withholds and remits Alabama tax at the highest applicable rate on payments for services performed in Alabama. The production company must use one of the following two options:
Option A: Withholding tax. Withhold and remit Alabama withholding tax at the highest rate under Section 40-18-71. The amount withheld is treated as if the loan-out company had withheld it from wages paid to its employees for Alabama services.
Option B: Income tax. Withhold and remit Alabama income tax at the highest rate under Section 40-18-5. For a C corporation, use Section 40-18-31. These withheld amounts satisfy estimated income tax and composite tax obligations, as applicable.
If the production company does not withhold and remit under Option A or Option B, the payment made to a loan-out payment cannot be included as production expenditures in the rebate calculation.
Loan-Out Affidavit and Payment: Process Overview
Step 1: Complete the affidavit and make the payment (done together)
- Fill out the Loan-out Affidavit below.
- Who completes this form: The loan-out company (or its authorized representative) completes and signs this affidavit. The state-certified production company provides its information in Section 1 of the Form.
- When: Submit this affidavit for each qualifying loan-out payment made on or after October 1, 2026, as required by Act 2026-540.
- Before you sign: Make the required Alabama tax payment using the “Procedures for Submitting Loan-Out Payments.” Enter the amount and date in Section 4 and attach your My Alabama Taxes (MAT) payment confirmation.
Step 2: Confirm the payment (as needed)
- Email incentives@revenue.alabama.gov to confirm the payment was applied to the correct account and/or period.
Procedures for submitting loan-out payments
- Go to My Alabama Taxes – https://www.myalabamataxes.alabama.gov/tap/_/#0
- Without logging in, scroll down to the “Payments” box and select the “Make a Payment” link, click in the verification box and click Next
- Under “Taxpayer Information”, select account type Business Income Tax, Individual Income Tax or Pass-Through Entity from the drop-down list
- ID Type, select Federal Employer ID# or Social Security ID# from the drop-down list and enter the applicable number for the production company and click Next
- For “Make a Payment”, select Estimated Payment from the list and click Next
- Select the Filing Period Ending Month and enter Filing Period Year (current year) and click Next
- Enter taxpayer information “Taxpayer Name” and “Taxpayer Address”, click Verify Address and click Next
- Select a Payment Option (Bank Account or Credit Card) and click Next
- Bank Account (ACH Debit Payment)
- Credit Card
- Enter the required bank account and billing information and click Next
- Confirm Submission by entering your email address and click Submit
- If you selected the Credit Card payment option, you will be prompted to fill in additional information in order to Submit Payment
- Please make sure to print your confirmation as proof of payment after submission
For more information, email incentives@revenue.alabama.gov or call 334-353-9789.