In 2016, the Georgia General Assembly passed legislation that awards Georgia income tax credits to taxpayers who make contributions to qualified rural hospital organizations (“RHOs”) located in Georgia. This program became effective January 1, 2017 and extends through 2021 and includes 58 approved rural hospitals. The program allows taxpayers to make donations to RHO’s in return for Georgia tax credits. Originally, the credit was limited to 70% of funds donated but later increased to 90%. The program was expanded in May 2018 to allow a credit of 100% of the amount donated. Georgia has an overall limitation of $60 million in credits awarded annually with a maximum of $4 million per rural hospital. The credits must be applied for in advance and approved by the Georgia Department of Revenue. Once approved, the taxpayer has 60 days to make their donation. The credit for the amount donated is claimed when the taxpayer files their Georgia income tax return.
From January 1 through June 30, contributions are subject to the following rules:
- Individuals can apply for credits with the following limitations: $5,000 for Single and Head of Household taxpayers and $10,000 for Married Filing Joint
- Individuals who are owners of a pass-through entity (partnership, LLC, S Corporation) can apply for $10,000 (limited to the owner’s Georgia tax liability from the pass-through entity’s taxable income if less)
After June 30, for so long as a portion of the $60 million annual cap on RHO tax credits is still available, individual taxpayers may make UNLIMITED contributions to RHO’s for a corresponding Georgia income tax credit. These can be submitted for pre-approval beginning in May of that year.
Contributions made by C Corporations and Trusts are limited to a Georgia tax credit of 100% of the amount contributed or 75% of their Georgia tax liability – whichever is less.
The amount of credits claimed on a taxpayer’s Georgia income tax return is non-refundable and cannot exceed the Georgia income tax liability. An excess credit can be carried forward for the next five years. The excess cannot be carried back to a prior year.
Taxpayers who itemize their deductions may deduct the amount donated as a charitable contribution (subject to applicable Federal limitations). For Georgia tax purposes, the amount deducted must be added back in calculating Georgia taxable income.
Planning Opportunity: Effective January 1, 2018, the Tax Cuts and Jobs Act (TCJA) limits deductions for state and local taxes (SALT) to $10,000. This includes income, real estate and any other deductible state and local taxes. Thus, the ability to make a deductible donation with a corresponding Georgia tax credit can generate significant tax savings for some taxpayers.
It is worth noting that the IRS issued Notice 2018-54 announcing their intention to propose regulations addressing the Federal tax treatment of certain payments made by taxpayers for which taxpayers may receive a credit against their state and local taxes. This Notice is in response to states that are considering legislation that allows taxpayers to circumvent the SALT limitation mentioned above. CoNexus is monitoring this development closely, but we are hopeful that programs such as the Rural Hospital Tax credit and Private School Tuition credit that were in effect prior to TCJA should not be adversely affected.
It is widely expected that the RHO credit will reach its maximum allocation on or soon after July 1. Unlike the Private school tuition credit, it is expected the state will approve applications on a first-come-first-serve basis rather than prorate amongst those requesting approval. Therefore, time is of the essence if this is a donation you are considering for 2018.
If you wish to contribute more than the $5,000/$10,000 limits for 2018 as permitted after July 1, given the expected high demand for RHO credits starting July 1, we recommend submitting a Georgia HEART pre-application online here https://www.georgiaheart.org/donate/pre/tax_contribution as soon as possible before July 1 in order to increase odds of application approval under Georgia DOR’s approval process. This allows Georgia HEART to submit the application form to Georgia DOR on your behalf.
Please contact CoNexus CPA Group, LLC if you have questions on RHO credits or would like planning assistance.