Department of Revenue Reopens Applications for Georgia HEART Tax Credit

by: Smith and Howard

July 9, 2018

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Updated November 15, 2018.

The Georgia HEART (Helping Enhance Access to Rural Treatment) program awards Georgia income tax credits to taxpayers who contribute to qualified rural hospital organizations located in Georgia. Much like the Georgia income tax credits for School Scholarship Organizations, the amount available for tax credits is limited and has a filing deadline.

The original deadline was June 30, however, the Department of Revenue (DOR) reopened applications on November 15, 2018. The DOR has the authority to reopen applications when it has been determined the aggregate dollar amount donated does not meet the pre-approval cap.

You and/or your business may be able to take advantage of these credits. Here’s what you need to know:

Items to Note Since the DOR has Reopened Applications:

  • Proposed regulations issued in August 2018 state the deduction must be reduced by the benefit received (credit on state tax).
  • C corporations can get the benefit without any reduction in deduction.
  • Flow through entities can deduct the contribution if they establish the donation was made as an ordinary and necessary business expense.

What’s the Advantage for Me?

The HEART credit can help offset your state income tax liability. For instance, if you are a married couple, filing jointly and your state tax liability is $9,000, the credit would allow you to offset your liability by donating $9,000 (or the amount available when all applications are submitted – see below) to a qualified rural hospital organization (RHO).

For high income wage-earners, the benefit is extended to your federal tax return, as you may be able to claim it as a charitable contribution on your federal return. Proposed regulations, effective August 2018, reduce the federal deduction by the state credit received. The regulations were issued to “crack down” on states that seek to find ways around the new limit on state and local tax deductions limits from the Tax Cuts and Jobs Act.

Each year – from 2018 through 2021 – Georgia taxpayers can access $60 million of RHO tax credits, with each qualified RHO having access to $4 million of tax credits (until the total annual $60 million cap is met). During the first six months of each year, a qualified RHO may only accept $2 million of corporate contributions and $2 million of individual contributions.

Who Can Take the Credits and for How Much?

From January 1 through June 30 of each taxable year, the following limits apply with respect to Georgia HEART RHO contributions:

  • In the case of a single individual or a head of household, a 100% Georgia income tax credit for contributions to RHOs, up to a limit of $5,000;
  • In the case of a married couple filing a joint return, a 100% Georgia income tax credit for contributions to RHOs, up to a limit of $10,000; and
  • An individual who is a member of a limited liability company, shareholder of an “S” Corporation, or partner in a partnership (pass-through entities) is allowed a 100% Georgia income tax credit for up to $10,000 of the amount they contribute to a RHO, so long as they would have paid Georgia income tax in that amount on their share of taxable income from the pass-through entity.
  • A “C” Corporation or trust shall be allowed a 100% Georgia income tax credit for contributions to RHOs equal to the amount of the contribution, or 75 percent of the corporation’s or trust’s income tax liability, whichever is less.

After June 30 of each year, for so long as a portion of the $60 million annual cap on RHO tax credits is available to offset their Georgia income tax liability, individual taxpayers may make unlimited contributions to RHOs for a corresponding 100% Georgia income tax credit.

What Happens Next?

Now that applications have been reopened, the DOR will accept applications until the remaining pre-approval cap has been met. All taxpayers seeking pre-approval must submit a new application, as no applications were held from the prior pre-approval period. Applicants who either did not donate up to their prior pre-approved amount or submitted an application after the cap was met in July must submit a new application.

As before, applications are pre-approved on a first-come, first-served basis. All RHO Tax Credit Applications must be submitted and will be pre-approved by the Department through the Department’s Georgia Tax Center (GTC). The date and time the pre-approval form is submitted on GTC is used to determine the first-come, first-served basis.

How Do I Get the Credit?

You will need to complete a short form that includes your filing status, basic personal information (name, address, etc.). You will need to select the RHO (rural hospital organization) you’d like to direct your contribution to (or have the state select for you), and then agree to make the contribution within 60 days of being notified.

Taxpayers who are filing to take various state credits (including the Georgia HEART credit) must file electronically. Smith and Howard already files client tax returns – both federal and state – electronically. If you self-file, you’ll need to be sure to do this.

Note: while the maximum is $10,000 for a married couple filing jointly (for instance), the actual amount of the donation (and therefore, the tax credit available to you) is dependent on how many apply for and receive authorization for the tax credit. If enough taxpayers apply, the required donation (and income tax credit) could be less than $10,000.

Click here to view the Georgia HEART Tax Credit Form.

While taxpayers must file online individually, as questions arise about your particular situation, please reach out to Mark Abrams or anyone on our tax team at 404-874-6244.

How can we help?

If you have any questions and would like to connect with a team member please call 404-874-6244 or contact an advisor below.