Performance Audit 20-18

Rural Hospital Tax Credit

Credit administration largely consistent with statutory requirements

December 2020




DOR should:
  • Require taxpayers to identify pass-through entities from which they are claiming income

  • Develop processes to identify excess approved amounts and adjust those amounts

Georgia HEART should:
  • Directly report undesignated contributions to DOR



O.C.G.A. § 48-7-29.20 requires the Department of Audits and Accounts to conduct an annual audit of the Rural Hospital Tax Credit (RHTC) program that includes the following:

  1. All contributions received by rural hospital organizations;

  2. All tax credits received by individual and corporate donors; and

  3. All amounts received by third parties that solicited, administered, or managed donations pertaining to O.C.G.A. § 48-7-29.20.

The program was established in 2017 and allows taxpayers to donate to eligible rural hospitals and reduce their state income tax liability by the amounts they donate. Taxpayers may choose a specific hospital or, if one is not designated, a hospital will be selected based on a ranking of need.

The Department of Revenue (DOR) administers portions of the RHTC related to taxpayer eligibility criteria, and the Department of Community Health (DCH) administers portions related to hospital eligibility criteria. A third-party vendor (Georgia HEART) provides services to hospitals and contributors but is under contract with hospitals, not the state, for these services.



Rural hospital tax credit contributions were $46.5 million in 2019, well under the $60 million program limit. Hospitals, taxpayers, and third parties were largely compliant with statutory provisions, though DOR controls should be strengthened to ensure proper limits are enforced for corporation and individuals claiming credits at pass-through limits.

Contributions to rural hospitals totaled $46.5 million in 2019.

  • After receiving $59.5 million in 2018, hospitals received contributions of $46.5 million in 2019 and are on a similar pace for 2020.

  • In 2019, 12 of the 58 eligible hospitals received more than $1 million, with the highest at $3.3 million. The average annual amount received by a hospital was $800,000.

  • As required by state law, contributions not designated to a hospital by the donor were distributed to the neediest hospital on the Department of Community Health ranking.

Contributions Per Year 2017 - 2020

All RHTC hospitals met eligibility requirements and received annual contributions within the statutory limit of $4 million.

  • DCH reviewed hospital eligiblity and updated the list in 2020. The number of hospitals dropped to 56, from 58 the two previous years.

  • All hospitals provided required program reports to DCH.

Taxpayer credits earned in 2019 were largely in compliance with state law, but we identified weakness in controls related to pass-throughs and corporate credits.

  • Individual taxpayers have credit limits in place between January 1 and June 30. While some taxpayers were approved at higher limits available to those associated with a pass-through entity, DOR lacks controls to ensure that taxpayers are members of those entities or that the entities have sufficient income to allow the credit amount.

  • We found nine instances (less than $100,000) in which a corporation’s credit exceeded the statutory limit of 75% of its income tax liability. DOR does not have controls to compare actual income tax liability but instead relies on the estimated liability provided when the credit is requested.

Hospitals paid Georgia HEART the allowed 3% of contributions.

  • All eligible hospitals contracted with Georgia HEART Hospital Program, LLC in 2019. All paid a fee equal to 3% of contributions, totaling $1.4 million.

You may also be interested in:

Rural Hospital Tax Credit (2019) - Full Report