ATLANTA – Georgia’s rural hospital tax credit fared better in a new state audit than the critical evaluation the program received from the state Department of Revenue just more than a year ago.
“Hospitals, taxpayers and third parties were largely compliant with statutory provisions,” the Georgia Department of Audits and Accounts concluded in an audit released this week.
The last audit of the tax credit, released in December 2018, found that contributions to the program weren’t necessarily going to the neediest rural hospitals. The report called for bringing greater accountability and transparency to the program.
The General Assembly created the tax credit program in 2016 to help the state’s most financially stressed rural hospitals. A handful of rural hospitals have closed in recent years, unable to generate enough income to keep their doors open.
Under the program, taxpayers who donate to eligible hospitals reduce their state income tax liability by the amounts they contribute.
Donors may choose a specific hospital or, if one is not designated, the hospital receiving the contribution is chosen based on a ranking of financial need. In either case, no individual hospital may receive more than $4 million a year through the program.
Lawmakers capped total annual contributions to the program at $60 million, a level it nearly reached in 2018. However, the donations fell off to $46.5 million in 2019 and likely ended up at a similar level last year, based on data through mid-December, according to the audit.
Advocates for rural hospitals in Georgia blamed the reduction in contributions on a change in federal tax regulations in 2018 that reduced the financial benefit of the donations to individual and corporate taxpayers.
A rule promulgated last August partially restored the federal benefit by allowing some contributions from corporations and pass-through entities to be deducted as a business expense.
As expected, contributions to eligible hospitals vary significantly. In 2019, 12 of the 58 eligible hospitals received more than $1 million in contributions, while 22 received less than $500,000.
Dorminy Medical Center in Fitzgerald, ranked as the neediest rural hospital, received the $4 million limit in 2019, all in undesignated contributions. The hospital receiving the largest amount of designated contributions – Colquitt Regional Medical Center in Moultrie – brought in $3.3 million.
While most 2019 taxpayer contributions to rural hospitals complied with state law, the audit found a limited number of credits that exceeded statutory limits.
The report recommended that the state Department of Revenue strengthen the program’s safeguards by ensuring taxpayers contributing to the program identify the pass-through entities from which they are claiming income and that the agency not allow corporate taxpayer credits to exceed 75% of their actual tax liability.