Georgia Enacts New Tax Credit for Donations to Rural Hospitals

Georgia’s new Qualified Rural Hospital Organization Expense Tax Credit offers taxpayers a credit for up to 70 percent of their donation to an approved organization.

By Jeff Weinkle, SALT manager

A new, but limited-time, Georgia tax credit is available beginning next year for charity-minded individuals, corporations and fiduciaries. The Qualified Rural Hospital Organization Expense Tax Credit, or “QRH” Credit, provides taxpayers with a Georgia income tax credit of up to 70 percent of their donation to approved rural hospitals for calendar years 2017-2019. [1]

OVERVIEW

Credits are based on donations made to rural hospital organizations qualified by the Georgia Department of Community Health. A list of qualifying hospitals can be found here and will be available as part of an online pre-approval application.

The amount of credit available per donor is based on the type of tax return filed. Single or married-filing-separate individuals may claim a credit of 70 percent of their donation up to $2,500 per year. Married-filing-jointly individuals may claim 70 percent of their donation up to $5,000 per year. Corporate and fiduciary taxpayers can claim the lower amount of 70 percent of their donation or 75 percent of their annual income tax liability, and fiduciaries may not pass credits through to their beneficiaries. If any part of claimed income tax credits are unused for that tax year, they may be carried forward for up to five subsequent years.

Taxpayers who make donations under the credit rules may be able to claim a deduction for the charitable contribution on their federal tax return; however, Georgia requires this deduction to be added back to taxable income to the extent it was used to compute the QRH credit.

PROCEDURES

The QHR credit was modeled closely after Georgia’s Qualified Education Expense Tax Credit (“QEETC”) and therefore follows similar procedures. In order to claim credits, taxpayers must first apply for pre-approval by electronically submitting Form IT-QRHOE-TP1 through the Georgia Tax Center. Applicants will indicate the donation amount and designate the rural hospital organization on the online forms. The Department of Revenue (“DOR”) will notify applicants of their pre-approval within 30 days and will provide pre-approved amount and a tax credit certificate number. [2]

The 2017 application period opens up at 8:00 a.m. on Jan. 3, 2017. [3] As applications are submitted, the DOR will pre-approve credits of up to $4 million for each rural hospital organization on a first-come, first-served basis: up to $2 million for individual taxpayers and $2 million for corporate/fiduciary taxpayers. On July 1, the DOR will begin to pre-approve applications without regard to the 50-50 individual-corporate taxpayer split.

Donors will have 60 days from the date of receiving pre-approval from the DOR (but no later than Dec. 31) to make their planned contribution to their chosen qualifying hospital. The hospital will then provide the donor with a Form IT-QHROE-RHO1 confirmation within 15 days, which, along with the tax credit certificate number and the actual contribution amount, must be submitted electronically by the donor through the Georgia Tax Center within 30 days of the contribution.

Finally, taxpayers will claim their pre-approved and confirmed credits by completing Form IT-QHROE-TP2 when filing their Georgia tax return for the donation year.

Donors and their tax advisors must be mindful of the credit approval procedures since three time-sensitive actions are required on part of the taxpayer: requesting pre-approval before caps are met, making the donation within 60 days of pre-approval and submitting the donation confirmation within 30 days of making the donation. In addition, all submissions must be made electronically through the Georgia Tax Center.

OTHER DETAILS

The total amount of QRH credits available is capped at $50 million for 2017, $60 million for 2018 and $70 million for 2019. Although the QEETC quickly reaches its credit cap each year (the last two years the cap was reached on the first day of the pre-approval period), it remains to be seen whether the QRH credit will match its popularity. Since the QRH credit is based off of 70 percent of a donor’s contribution rather than 100 percent for the QEETC, it may be less beneficial from a tax perspective for certain filers. Nonetheless, the credit provides an opportunity for Georgia taxpayers to make a tax-favored contribution to an area of public need.

If you would like more information about the QRH credit or assistance in obtaining pre-approval, please contact any member of Aprio’s State and Local Tax group.

Contact Jeff Weinkle, SALT manager, at jeff.weinkle@aprio.com or Jeff Glickman, partner-in-charge of Aprio’s SALT practice, at jeff.glickman@aprio.com for more information.

[1] Section 7 of Senate Bill 258 was signed by Governor Deal on April 26, 2016, and it is automatically repealed on Dec. 31, 2019. The law is codified at O.C.G.A. § 48-7-29.20. In addition, on Oct. 11, 2016, the Department of Revenue adopted regulation 560-7-8-.57 to provide additional guidance.

[2] Applicants will be pre-approved on a first-come, first-served basis according to the DATE AND TIME of the submission through the Georgia Tax Center. Unlike the QEETC, there will NOT be any proration of all submissions received on the day that a cap is reached (whether the hospital cap or the aggregate credit cap).

[3] Last year, Georgia adopted regulation 560-7-8-.54, which provides that if a pre-approval period is set to begin on a weekend day, a legal holiday or a day on which the Federal Reserve Bank is closed, then the beginning of such pre-approval day shall be postponed until the first day which is not one of those days. Since Jan. 1 is a legal holiday or a day the Federal Reserve Bank would be closed, a pre-approval period would not begin until Jan. 2 of any year at the earliest. However, since Jan. 1, 2017, is a Sunday, the Federal Reserve Bank is recognizing New Year’s Day on Jan. 2, 2017 (see the Federal Reserve’s list of holidays observed).

This article was featured in the October 2016 SALT Newsletter. To view the newsletter, click here.

Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.

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