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Rural Hospital Investment Tax Credit

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Act 2025-404 creates the Rural Hospital Investment Program, designed to help eligible rural hospitals across Alabama receive additional funding by providing a tax credit for qualifying donations.

The Rural Hospital Investment Program Board has been established to administer the Program. The Board, within the Office of the State Treasurer, is responsible for approving eligible rural hospitals for the program. Detailed information on the requirements to become an eligible rural hospital can be found below under “Additional Resources.”

Provisions of the Rural Hospital Investment Tax Credit include:

  • The credit is available for each tax year beginning January 1, 2026, until December 31, 2028, unless extended by legislature.
  • The credit may be applied against:
    • Income taxes;
    • Financial institution excise tax;
    • Insurance premiums tax; or
    • Utility taxes paid.
  • Donors may receive a tax credit equal to 100 percent of qualified donations, subject to the following annual limits:
    • Individuals filing single, head of household, or married filing separately: Up to $15,000.
    • Individuals filing married filing jointly: Up to $30,000.
    • Pass-through Entities: Up to $450,000.
    • Corporations: The lesser of 100 percent of the donation or 75 percent of their income tax liability, up to $500,000.
    • Financial Institutions: The lesser of 100 percent of the donation or 75 percent of their state excise tax liability, up to $500,000.
    • Insurance Companies: The lesser of 100 percent of the donation or 75 percent of their insurance premium tax liability, up to $500,000.
    • Utility Taxpayers: The lesser of 100 percent of the donation or the total utility taxes paid.
      Note! To claim the credit against utility taxes, a taxpayer must have a utility tax direct pay permit.
  • The credit may be distributed to the owners of a pass-through entity on a pro rata basis and can be claimed up to applicable filing limit based on the owner’s tax type.
  • The credit will apply to the tax year in which the reservation is made.
  • Any unused credit may be carried forward for up to three years but cannot be transferred to another taxpayer.

Additional Provisions Include:

  • The tax credit has an annual statewide aggregate cap and an annual cap per eligible rural hospital.
    • Statewide aggregate cap: $20 million for 2026, $25 million for 2027, and $30 million for all subsequent years.
    • Cap per eligible rural hospital: $750,000 for 2026, $1,000,000 for 2027, and $1,250,000 for all subsequent years.
  • The Rural Hospital Investment Program Board has been established to oversee the development and operation of the Rural Hospital Investment Program.
    • The Board is responsible for identifying eligible rural hospitals and ranking such hospitals in order of financial need. A list of eligible hospitals for the upcoming calendar year will be published on this page by December 1 each year. The list can be found under “Additional Resources” below.
    • An Operations Manual detailing the eligibility and ranking process will be published annually. A copy of the manual can be found below under “Additional Resources.”

Credit Award Process

To receive the credit, eligible donors must first secure a credit reservation through My Alabama Taxes. After securing the reservation, a donor must make a qualifying donation and have the donation verified by an eligible rural hospital within 60 days of the reservation date. A tax credit will only be awarded to a donor whose donation has been verified by the receiving rural hospital.

  • For tax year 2026, reservations open January 2026.
  • Donors must reserve a tax credit through My Alabama Taxes. Reservations will be awarded on a first-come, first-served basis, subject to the applicable annual limits.
  • After making a reservation, donors have 30 days to make a monetary donation to an eligible rural hospital. The receiving rural hospital must then verify receipt of the donation through My Alabama Taxes within 60 days of the donor’s reservation date. If the donation is not made and verified within the required timeframe, the reservation will be forfeited.

Timeline Example:

*Any donations not verified by the 60th day of the reservation (August 30) are forfeited.

The procedures for reserving and claiming the credit will be posted here in December 2025.

Additional Resources