Alert

Georgia Rural Hospital Organizations Expenses Credit Update

May 16, 2018

The Rural Hospital Organizations (“RHO”) tax credit was enacted and became law effective January 1, 2017. The statute provides a tax credit for individuals and corporate donors to qualified rural hospital organizations. On May 2, 2018, Governor Nathan Deal signed House Bill 769, which amended the tax credit.

The changes to the legislation, which become effective July 1, 2018, include increasing the amount of the credit from 90% of the donation to 100% of the donation and extending the sunset date from December 31, 2019, to December 31, 2021.

So what’s the real benefit? Taxpayers making a donation to an RHO get a federal charitable contribution deduction and a Georgia tax credit. Taxpayers who pay tax in Georgia and itemize deductions should consult their tax advisor on the benefits of this tax credit for their unique situations.

All contributions must be approved by the State Revenue Commissioner before claiming the credit. The aggregate amount of rural hospital tax credits available is limited to $60 million in 2018 for all taxpayers. In addition, no more than $4 million ($2 million by individuals and $2 million max by corporations) may be contributed to any one rural hospital in any tax year. To date, approximately $12 million of the credit has been claimed. The DOR has indicated that the 100% tax credit will be retroactively applied for the January 1 through June 30 contributions if the cap has not been reached by June 30. Otherwise, it appears that contributions made from January 1 through June 30, 2018 are subject to the prior tax limits as mentioned above.

It is expected that these tax credits will be quickly consumed. Taxpayers interested in pursuing such credits are encouraged to submit a pre-approval application as soon as possible. Applications may be submitted through the Department of Revenue’s Georgia Tax Center or through programs such as the Georgia HEART Hospital Program. Taxpayers may select from the list of approved RHOs listed here or allow the state to designate your funds to a rural hospital. Once approved by the Georgia Department of Revenue, taxpayers pay the full contribution to the rural hospital organization within 60 days of approval.

In order to claim the credit, a letter of confirmation (Georgia Form IT-QRHOE-RHO1), received from the RHO, must be attached to the taxpayer’s electronically filed 2018 tax return. Unused credits may be carried forward for 5 years.

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[1] Since only 90% of the contribution amount qualifies, to obtain the maximum credit, you must donate more than the credit amount  (i.e., for single, you must contribute $5,556 to get a $5,000 credit).
[2] Id.