rural hospital tax credit
Published October 4, 2016

The Rural Hospital Tax Credit: One State’s Attempt to Save Rural Hospitals

For the past decade, rural hospitals across the country have faced an uphill battle to keep doors open and continue serving their communities.  In many communities, rural hospitals have closed or affiliated with for-profit hospitals to continue providing care to citizens.  In the state of Georgia, lawmakers have created a new tax incentive credit to encourage citizens to fund rural hospitals.  In March 2016, Governor Nathan Deal signed into law the Rural Hospital Tax Credit, a $100 million tax credit program to incentivize individuals and businesses to donate to hospitals in rural communities across the state.

Beginning in 2017, the new incentive program will allow individual and corporate taxpayers to apply for a state income tax credit for contributions to qualifying rural hospitals.  Individuals may claim a credit up to 70% of the contribution to an approved rural hospital, or $2,500, whichever is less (for married filing jointly, the threshold is $5,000).  A corporation or fiduciary taxpayer may claim a tax credit of up to 70% of contributions or 75% of income tax liability.

As determined by the Georgia Department of Community Health (DCH), 48 rural hospitals are eligible as “qualified rural hospital organizations,” allowing them to receive credit-eligible donations from individuals and corporations.  The identified hospitals must submit a financials proxy form and a five-year plan to the DCH by October 17, 2016.  DCH then will publish a ranking of the hospitals in order of financial need by December 1, 2016.

The DCH will determine annually which Georgia hospitals meet the requirements of a “qualified rural hospital organization.”  The current DCH guidelines require that the hospital:

  • Is a critical access hospital or inpatient hospital in a rural county (population of less than 35,000).
  • Is a 501(c)(3) non-profit organization or is operated by a county or municipal hospital authority.
  • Annually files IRS Form 990, participates in and accepts Medicare and Medicaid patients, and provides healthcare services to indigent patients.
  • Has a combination of indigent care, charity care, and bad debt that constitutes at least 10% of a rural hospital’s annual net revenue.

Both rural hospitals and taxpayers must be pre-approved before participating in the Rural Hospital Tax Credit Program.  The overall statewide cap of tax credits will be $50 million in 2017, $60 million in 2018, and $70 million in 2019.  The program is set to expire at the end of 2019.

Will Other States Follow Suit?

Though Georgia currently is the only state offering the rural hospital credit, other legislation has been introduced in Congress to provide assistance to rural hospitals throughout the country.  In July 2015, Missouri Representative Sam Graves introduced the bipartisan H.R. 3225: Save Rural Hospitals Act in hopes of reducing hospital closures.  The act proposes to halt cuts in Medicare to rural hospitals and to provide them with additional funding.

In April 2016, Alabama Congresswoman Terri Sewell and Nevada Representative Cresent Hardy introduced bill H.R. 5133: Rural Health Act of 2016.  Similar to the Rural Hospital Credit, the Rural Health Act was created to strengthen rural hospitals throughout the United States.  The legislation is intended to protect rural hospitals currently serving communities and encourage investment in new rural facilities.  It would require the Department of Health and Human Services to submit an annual report of rural hospitals, including the number and cause of rural hospital closures.

Organizations such as the National Rural Health Association continue to lobby for additional legislation in hopes of “saving” the rural hospital.  Perhaps the new Georgia tax credit is a “step in the right direction.” If you have questions about the Rural Hospital Tax Credit Program, or would like to request a speaker on this topic for your organization or event, contact one of our executives below, (800) 270-9629.

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