Investing in Rural Hospitals Across Alabama
Rural hospitals are the backbone of many Alabama communities. They care for families around the clock, support thousands of local jobs, and serve as essential partners in economic development. Yet many of these hospitals face significant financial challenges that threaten their ability to keep care close to home.
The Alabama Rural Hospital Investment Program, established by the Legislature in 2025, offers a powerful new way for individuals and businesses to make a lasting impact. Beginning January 5, 2026, taxpayers may contribute to eligible rural hospitals and receive a full, dollar-for-dollar state tax credit. These credits may be applied to income, utility, insurance premiums, and excise taxes—giving donors flexibility while ensuring rural hospitals receive vital support. Contributions can be made directly to a rural hospital or to a third-party entity that will then distribute them to hospitals based on a financial-needs ranking.
To support hospitals across the state, the Alabama Hospital Association has created the Alabama Health Research & Education Foundation to serve as one of these third-party partners. Contributions made through the Foundation will be distributed to the 50 eligible rural hospitals based on a financial need ranking developed by the Rural Hospital Investment Board. Although the law allows a small administrative fee, the Foundation will retain none of it—ensuring every dollar goes directly to hospitals.
Beginning January 2026, donors can contribute in two ways:
- Directly to an eligible rural hospital – ideal for donors who want to strengthen a hospital in their own community.
- Through a Third Party Entity like the Alabama Health Research & Education Foundation – ideal for donors who want their contribution distributed to all 50 eligible rural hospitals based on financial need.
Direct contributions to individual rural hospitals are encouraged whenever possible. But for businesses that do not wish to select a specific hospital, contributing through the Foundation ensures that their gift will be distributed using a rigorous, needs-based methodology developed by the Rural Hospital Investment Board.
Whether you are a business leader looking to strengthen the local workforce, a resident who wants to ensure care remains close to home, or a donor who believes in the importance of rural healthcare, your contribution can make an immediate and meaningful difference.
Together, we can build a stronger, healthier future for Alabama’s rural communities.
Questions about participation, contribution limits, or eligibility? Contact Stephen McCormick or Margaret Whatley.
How to Support Rural Hospitals and Claim Your Tax Credit
The tax credit is available for contributions made between January 1, 2026, and December 31, 2028, unless extended by the Alabama Legislature.
The credit may be applied against:
- Income taxes
- Financial institution excise tax
- Insurance premiums tax
- Utility taxes
Note: To claim the credit against utility taxes, a taxpayer must have a utility tax direct pay permit. This permit is available only to entities receiving multiple utility bills from a single utility company.
Donors may receive a tax credit equal to 100% of their qualified donation, subject to the following limits:
| Donor Type | Annual Limit |
|---|---|
| Individuals (single, head of household, or married filing separately) | $15,000 |
| Individuals (married filing jointly) | $30,000 |
| Pass-through entities | $450,000 |
| Corporations | Lesser of 100% of donation or 75% of income tax liability, up to $500,000 |
| Financial institutions | Lesser of 100% of donation or 75% of state excise tax liability, up to $500,000 |
| Insurance companies | Lesser of 100% of donation or 75% of insurance premium tax liability, up to $500,000 |
| Utility taxpayers | Lesser of 100% of donation or total utility taxes paid |
- The credit is effective in the tax year when the reservation is made.
- Any unused credit may be carried forward for up to three years but cannot be transferred to another taxpayer.
Annual Funding Caps
| Year | Statewide Aggregate Cap | Per Eligible Rural Hospital Cap |
|---|---|---|
| 2026 | $20 million | $750,000 |
| 2027 | $25 million | $1,000,000 |
| 2028 and beyond | $30 million | $1,250,000 |
- Reserve Your Credit
- Open January 5, 2026 for the 2026 tax year.
- Submit your reservation through My Alabama Taxes.
- Reservations are first-come, first-served, subject to statewide and eligible hospital caps.
- Designate the Recipient
- When reserving, specify an eligible rural hospital or an approved third-party organization such as the Alabama Health Research & Education Foundation.
- Make Your Donation
- After securing a reservation, donors have 30 days to make a monetary contribution equal to the reserved amount to the rural hospital or approved third-party.
- The credit cannot exceed the reserved amount, even if the donation is larger.
- Certification
- Within 30 days of receiving the donation—and no later than 60 days from your reservation date—the rural hospital or approved third party must certify the contribution in My Alabama Taxes.