Georgia lawmakers are looking to beef up the rural hospital tax credit

Heading into the 2022 General Assembly session, a push is on to raise the annual cap on the state’s rural hospital tax credit from $60 million to $100 million.

In 2021, the program reached that cap by August, giving rural lawmakers and advocates for rural hospitals reason to believe more money will be needed in the coming year. That’s especially true given the pressure the omicron variant of COVID-19 is putting on hospitals as the new year begins.

“2022 is going to be a rather exasperating year to say the least,” said Jimmy Lewis, CEO of Cumming-based HomeTown Health, which represents rural hospitals in Georgia. “We’re going to find ourselves out of money going forward.”

Georgia’s rural hospital tax credit was launched in 2016 and hit the $60 million cap for the first time in 2018 after the General Assembly increased the value of the credit to 100%, giving donors a dollar-for-dollar state income tax benefit.

But contributions fell off in 2019 and again last year after the Internal Revenue Service declared that individual taxpayers could no longer receive an income tax deduction for charitable donations if they received a state tax credit for the same contribution.

At the same time, a state audit found that donations to the rural hospital tax credit program weren’t necessarily going to the neediest hospitals. The report called for greater accountability and transparency.

The program’s fortunes began to change when a follow-up audit released early last year concluded that both hospitals and taxpayers were complying with the law governing the tax credit.

In addition, Lewis said, rural hospital administrators have come to grips with the IRS changes by learning to market the program’s value beyond the tax benefit to contributors. It helps that donors can designate their contributions to benefit a specific rural hospital in their communities.

“This is a 1-for-1 donation to your hospital,” Lewis said. “It doesn’t change the amount of taxes you pay but who benefits.”

That message is hitting home, not just to potential donors but to rural lawmakers. The Georgia House Rural Development Council endorsed raising the cap on the tax credit in its list of recommendations for 2022 released early in December.

“Since its inception, the rural hospital tax credit has infused millions of dollars into the health-care systems in rural Georgia and prevented the closure of essential hospitals in rural communities,” the council’s report stated. “Taxpayers consistently donate funding that helps stabilize these critical health facilities.”

Rural hospitals also have been able to draw down federal COVID-19 relief funds since the coronavirus pandemic struck Georgia nearly two years ago.

But Lewis said that money has been used to offset the impact the additional burden COVID-19 has put on rural hospitals.

“That money went right back out the door, almost dollar for dollar,” he said.

Also, the American Recovery Plan Act President Joe Biden signed into law last March limits hospital funding to capital projects, Lewis said.

“That’s not operational,” he said. “The challenge we’ve got is money for operations.”

Despite the influx of federal dollars, hospitals in Cuthbert and Commerce shut their doors in late 2020, bringing to eight the number of rural hospitals in Georgia that have closed during the last decade. Only Texas and Tennessee have suffered more hospital closures during that period.