By Marti Webb Slay
The Alabama Rural Hospital Investment Tax Credit program became effective in January, and in just a month, the $20 million cap was reached, closing the tax credit for the rest of 2026.
Experts say it is not too early for investors or hospitals to begin planning to take advantage of the program for 2027, however, as the cap will likely be reached just as quickly next year.
The program, patterned after the Georgia HEART (Helping Enhance Access to Rural Treatment) program, offered an opportunity for donors to receive a dollar-for-dollar tax credit on state taxes while helping rural Alabama hospitals.
“It’s a great opportunity for supporting rural hospitals without getting help from the government,” said Danne Howard, president and CEO of the Alabama Hospital Association. “It’s not a complete fix, and it won’t remedy everything, but it’s a tool to use while working on a plethora of other things. It’s a piece of the puzzle.”
David Compher, CPA with Carr, Riggs & Ingram, explained the difference between a deduction and a tax credit. “A tax credit is better than a deduction,” he said. “With a deduction, if your tax rate is 10 percent and you make a $1000 donation, your savings will be your 10 percent tax rate, so $100. If you get a tax credit for $1000, then you get to reduce your taxes by $1000.
“Corporations can reduce their tax liability by up to 75 percent. For example, if a corporation has a $100,000 tax liability, they can give the hospital $75,000. So you are diverting funds that would normally go to Montgomery to your local hospital. And now you will only owe Alabama 25,000. On top of that, you’re taking control of how your tax dollars are spent.”
Georgia’s cap is now $100 million per year, having started at $60 million with $20 million increases each year. The Alabama bill originally had a goal of $60 million as well, but eventually $20 million was approved, increasing to $25 million in 2027 and $30 million in 2028. The bill will sunset at that point, unless the legislature renews it.
“We worked with budget leaders and had to be sensitive to any negative impacts this might have on budgets,” Howard said. “The political reality was to demonstrate this wouldn’t negatively impact the budget. We found a goal that was small enough to test the waters and show it’s worth it. That’s been accomplished.”
Howard is hopeful the bill will be renewed when it’s time, and she is optimistic that the caps will continue to grow. “The response to this initial roll-out indicates a strong response from both individuals and businesses,” she said. “It speaks to the role rural hospitals play in our state and is affirming how critical rural hospitals are to the healthcare delivery system.”
In order to qualify for donations under the program, hospitals must be designated rural hospitals by the federal government, and they have to submit information proving they weren’t about to close. In addition to the overall $20 million cap, each hospital has an individual cap as well. Donations can be made to specific hospitals, but there are also foundations, including one set up by the Alabama Hospital Association, which accepted donations and allocated them to hospitals based on need. The donations made to their foundation were allocated the next day.
“Only a little over $2 million in donations were sent to foundations,” Howard said. “Most were sending them directly to their local hospital.”
While the $20 million cap did not allow for every eligible hospital to reach its own cap, Howard said seven or eight hospitals did reach their cap, and every eligible rural hospital received meaningful donations. One hospital reached its goal within 13 minutes.
There are restrictions to how the money may be used. It cannot, for example, be used for executive compensation, although it can be used to offset costs of recruiting medical professionals. Some hospitals under the Georgia plan have used the funds to develop new cancer programs and seed capital expenses for an oncology wing or infusion center. Other hospitals are expanding wellness programs for their community. Alabama rural hospitals will soon be able to develop similar programs as needed with the funds they’ve received.
Given how quickly the cap was reached this year, Howard suggests that businesses begin preparing for next year. The Hospital Association is making plans to tell the stories of the hospitals which have benefited from the new program, and she promises that more information will flow to make the public more aware of the benefits for donors and rural hospitals alike.
More information about the program can be found on the Alabama Department of Revenue website, https://www.revenue.alabama.gov/tax-incentives/rural-hospital-investment-tax-credit
