For many years, due to demographic, economic, and health care industry challenges, Georgia’s rural hospitals have been facing a financial crisis. This crisis jeopardizes the access of rural Georgians to adequate health care.
In response, in 2016, the Georgia General Assembly passed, and Governor Nathan Deal signed into law, Senate Bill (“SB”) 258, legislation that, effective January 1, 2017, awards Georgia income tax credits to individual and corporate taxpayers who contribute to qualified rural hospital organizations (“RHOs”) located in Georgia.
As of January 1, 2018, 58 rural hospitals are eligible to participate in the RHO expense tax credit program. Of those hospitals, 58 are participating in the Georgia HEART Hospital Program to assist them with the marketing and administration of the RHO expense tax credit program. Together, these hospitals and Georgia HEART are Helping to Enhance Access to Rural Treatment.
The responses to these Frequently Asked Questions provide potential donors with a better understanding of the RHO expense tax credit program and Georgia HEART.
1. Which hospitals qualify to participate in the Georgia HEART Hospital Program?
Participation in the Georgia HEART program is limited to Georgia rural hospitals that meet qualification criteria established in the law, including county population size (50,000 or less, excluding military personnel); tax-exempt status or public hospital authority management; acceptance of Medicare and Medicaid; and minimum annual provision of indigent or uncompensated care. In order to qualify, rural hospitals have to file a five-year plan with the Georgia Department of Community Health (“DCH”). Presently, the DCH has qualified 58 RHOs, 58 of which are participating in Georgia HEART. Each year, a list of the Georgia HEART RHOs, listed by financial need as determined by DCH, is available here.
2. What are the limits on the tax credits available under the Georgia HEART program?
From 2018 through 2021, Georgia taxpayers can access $60 million of RHO tax credits each year, with each qualified RHO having access to $4 million of tax credits (until the total annual $60 million cap is met). During the first six months of each year, a qualified RHO may only accept $2 million of corporate contributions and $2 million of individual contributions.
From January 1 through June 30 of each taxable year, the following limits apply with respect to Georgia HEART RHO contributions:
- In the case of a single individual or a head of household, a 100% Georgia income tax credit for contributions to RHOs, up to a limit of $5,000;
- In the case of a married couple filing a joint return, a 100% Georgia income tax credit for contributions to RHOs, up to a limit of $10,000; and
- An individual who is a member of a limited liability company, shareholder of an “S” Corporation, or partner in a partnership (pass-through entities) is allowed a 100% Georgia income tax credit for up to $10,000 of the amount they contribute to a RHO, so long as they would have paid Georgia income tax in that amount on their share of taxable income from the pass-through entity (See Q&A items 14. through 18. for more information for owners of pass-through entities.)
Georgia HEART began accepting 2019 tax credit applications on its website on October 1, 2018.
After June 30 of each year, for so long as a portion of the $60 million annual cap on RHO tax credits is available, to offset their Georgia income tax liability, individual taxpayers may make unlimited contributions to RHOs for a corresponding 100% Georgia income tax credit.
- In mid May of each year through June 30, individual taxpayers will be able to make a “HEART Appointment” to authorize Georgia HEART to submit their post-June 30 tax credit pre-approval forms with the DOR.
A “C” Corporation or trust shall be allowed a 100% Georgia income tax credit for contributions to RHOs equal to the amount of the contribution, or 75 percent of the corporation or trust’s income tax liability, whichever is less.
3. What happens if the hospital the taxpayer wants to support has already reached their maximum $4 million annual contribution limit?
In the event that you desire to contribute to a RHO that has already received the maximum amount of contributions for that taxable year, you may choose another qualified RHO, or request Georgia HEART to designate one for you.
4. What if taxpayers do not have a particular RHO to which they want contribute?
On the Georgia HEART Tax Credit Form, taxpayers may request Georgia HEART to designate a RHO to receive their contributions.
5. Where can taxpayers learn more about the participating Georgia HEART hospitals?
On the Georgia HEART website, there is a list of participating hospitals, many of which have provided case statements describing their hospital mission, needs, and proposed use of contributed funds.
6. Can taxpayers who contribute to student scholarship organizations (“SSOs”) for a Georgia Education Expense Credit also contribute to qualified RHOs for a tax credit?
Yes, and Georgia HEART encourages those taxpayers who have been contributing to SSOs to continue to do so.
7. What if the amount of tax credit for which a taxpayer is eligible exceeds the taxpayer’s income tax liability?
The total amount of the RHO expense tax credit for a taxable year cannot exceed the taxpayer’s Georgia income tax liability. Any unused tax credit may be used against the taxpayer’s succeeding five years’ tax liability. This tax credit cannot be applied against prior years’ tax liability.
8. Are there any limits placed on how the RHO to which donors contribute be used?
Yes, RHOs must use contributions for the provision of health care-related purposes, which, in additional to the provision of health care services, includes the use of contributions for capital expenditures that facilitate the provision of health care-related services. Each year, RHOs must report to the DCH how they used the contributions and the DCH reports to lawmakers accordingly.
9. What is the process for contributing to a RHO for a tax credit?
Because the law limits total tax credits available each year to $60 million, taxpayers who wish to participate in the Georgia HEART hospital tax credit program must be pre-approved by the Georgia Department of Revenue (“DOR”). This simply means that the DOR sets aside a certain amount of the available tax credits specifically for the respective taxpayer. Once the taxpayer submits to Georgia HEART their request for pre-approval, the Georgia HEART team provides the taxpayer with step-by-step instructions for completing the remainder of the process. Details of each step are described below:
- Taxpayer completes Georgia HEART 2019 tax credit application
- Georgia HEART electronically submits taxpayer application to DOR
- DOR informs taxpayer and Georgia HEART of approval within 30 days, indicating the amount for which approval was granted
- Georgia HEART emails taxpayer with detailed instructions regarding how and where to make their payment
- Taxpayer sends a check to the Georgia HEART office (made payable to the hospital) by posted deadline, which is 60 days from date of DOR approval
- Georgia HEART emails taxpayer a Letter of Confirmation, (Form IT-QEE-RHO1) and instructions on reporting the tax credit contribution to the DOR
- Taxpayer has 30 days to electronically report the hospital contribution to the DOR through the Georgia Tax Center (“GTC”) website
- Taxpayer claims the Georgia income tax credit when they file their state income tax return for the year in which the contribution is made
10. Is there a deadline to qualify for the tax credit?
In order to contribute to a RHO for a tax credit, an individual or corporation must satisfy all the required steps by the posted deadlines or prior to December 31st of the applicable tax year, whichever comes first. Georgia HEART recommends that all applications for pre-approval be submitted no later than mid-November to allow adequate time to fulfil the required steps.
11. How do I obtain pre-approval for the Georgia HEART RHO tax credit contributions?
Georgia HEART has simplified the process for the taxpayer. Simply complete the online pre-approval application request and Georgia HEART will submit your request directly to the DOR for pre-approval. Georgia HEART will communicate with you during each step of the process, from pre-approval to the required reporting your contribution to the DOR.
12. In determining the amount to contribute to a Georgia HEART RHO, how does a taxpayer determine their potential Georgia income tax liability?
Typically, taxpayers’ Georgia income tax liability is 6% of Georgia taxable income. If taxpayer income and deductions will not change much from the prior year, the taxpayer can look at Line 16 of the Georgia income tax return (Form 500) for their income tax liability for the prior tax year and estimate their tax liability accordingly. Of course, taxpayers should consult with their tax professionals to secure the best estimate of their upcoming Georgia income tax liability.
13. Whom may taxpayers contact at Georgia HEART to answer any remaining questions?
A member of the Georgia HEART team will be happy to assist you with any question you may have. Please call the Georgia HEART office at 770-250-5971 or email firstname.lastname@example.org.
Frequently Asked Question for Owners of Pass-Through Entities
Individuals with ownership in S-Corps, LLCs or Partnerships (pass-through entities) may contribute up to $10,000 to a qualified rural hospital for a tax credit.
Members of limited liability companies, shareholders of “S” Corporations, and partners in partnerships are allowed a Georgia income tax credit for up to $10,000 of the amount they contribute to a qualified rural hospital, so long as they would have paid Georgia income tax in that amount on their share of taxable income.
If husband and wife both earn income from pass-through entities, each can contribute up to the $10,000 limit for a total of $20,000.
14. How does this work if I own more than one pass-through entity?
If the individual has ownership in more than one pass-through entity, the total credit allowed cannot exceed $10,000. The individual decides which pass-through entities to include when computing Georgia income for purposes of this tax credit and may combine all Georgia income, loss and expense regardless of ownership in multiple pass-through entities.
15. How do I determine whether I can take the full $10,000 tax credit?
All Georgia income, loss and expense from the taxpayer-selected pass-through entities will be combined to determine Georgia income for purposes of this credit. Note: even W2 income from the entity may be included as well as K-1 income (i.e., salaries and profits may be counted). Such combined Georgia income shall be multiplied by 5.75% (Georgia’s 2019 income tax rate) to determine that tax that was actually paid.
Helpful example: the taxpayer’s Georgia income from pass through entities in 2019 must be at least $173,913 to take advantage of the full $10,000 tax credit ($173,913 * 5.75% = $10,000).
16. May I also claim a credit as an individual tax filer?
If the taxpayer chooses to be preapproved under this option, they are not allowed the additional amounts normally allowed an individual.
17. Can this tax credit be carried forward?
No. 5.75% of the Georgia income from pass through entity (or entities) is the maximum amount that may be claimed as a tax credit, and any excess amounts may not be claimed in the current year and may not be carried forward.
18. Can my payment to a qualified rural hospital be made from my business (my pass-through entity)?
No. The Department of Revenue requires that payment to the qualified rural hospital must come from the individual who will be claiming the tax credit.