Qualified Rural Hospital Organization Tax Credit Program
Please Note: On August 23, 2018, Treasury released Proposed Regulations outlining the income tax treatment of contributions in exchange for state or local tax credits. We are currently reviewing these proposed regulations and will provide additional commentary soon. Based upon an initial review, these proposed regulations appear to disallow the federal deductibility of charitable contributions under the Rural Hospital Tax Credit Program.
On May 2, 2018, Governor Nathan Deal House Bill 769 (the “Bill”) into law. Among other measures, the Bill amplifies the Qualified Rural Hospital Organization Tax Credit Program (the “RHO Program”). Previously, the RHO Program allowed donors to receive a state income tax credit of up to 90 percent of the amount contributed to certain rural hospitals, not to exceed $5,000 for single filers and $10,000 for joint filers.
The Bill enhances the RHO Program by increasing the credit ratio from 90 percent to 100 percent and by eliminating the contribution limits after July 1st of each year. Both enhancements are effective July 1, 2018.
These changes to the RHO Program, coupled with federal tax law changes from the Tax Cuts and Jobs Act (the “TCJA”), may make this program very attractive to you – both in supporting rural hospitals and in planning for your personal Georgia income tax bill.
Specifically, the TCJA limits the amount of state and local taxes (“SALT”) that individuals may deduct to $10,000. This limitation applies to the total of state and local income taxes and ad valorem taxes (including real estate taxes). For many individuals, this represents a limitation on a significant deduction. However, the RHO Program converts the dollars expended from state income taxes paid (subject to the SALT limitation) to a charitable contribution (not subject to the SALT limitation). Thus, for taxpayers whose SALT deduction is limited, this may represent an opportunity to convert an otherwise nondeductible expense to a deductible expense. A word of caution for taxpayers whose SALT deduction is below the $10,000 threshold – while the RHO contribution is deductible for federal income tax purposes, it is not allowed for Georgia income tax purposes.
A listing of the participating hospitals can be found at the Department of Community Health website by clicking here.
For more information on the background of the original legislation (Senate Bill ), please read “Georgia Senate Bill 258: The General Assembly’s Attempt to Sustain Georgia’s Tax-Exempt, Rural Hospitals with a State Income Tax Credit” by clicking here.
If you would like to discuss how participation in the RHO Program might impact your personal income tax situation, please reach out to Draffin & Tucker.
Steps to applying for the RHO Program:
- Each donor must be registered with the Georgia Department of Revenue (DOR) to facilitate the web based pre-approval process. To begin the registration process, please click here. You may click here to view a tutorial video published by the DOR.
- Donor must electronically submit Form IT-QRHOE-TP1 with the DOR. For detailed instructions on how to apply, please click here to view a tutorial video published by the DOR. A printed version of the instructions from the DOR can be found by clicking here.
- The DOR will notify the donor and the RHO within thirty (30) days.
- The donor must make the contribution to the Rural Hospital Organization within the earlier of sixty (60) days after the date of the preapproval notice and the end of the calendar year.
- The donor must electronically notify (through the donor’s DOR account) the DOR of the contribution amount, the tax credit certificate number, and provide a copy of Form IT-QRHOE-RH01 within thirty (30) days of the contribution to the Rural Hospital Organization.
- The donor will receive Form IT-QRHOE-TP2 from the DOR after the contribution is made and after the electronic notification is complete. This form is required to be submitted with the donor’s Georgia Income Tax Return to claim the credit.