Alabama Acts to Save Rural Hospitals

Governor Kay Ivey has signed the Rural Hospital Investment Act of 2025 (HB86), a bipartisan measure aimed at strengthening Alabama's rural healthcare system through targeted tax incentives. The legislation, sponsored by State Representative Terri Collins (R-Decatur), establishes the Rural Hospital Investment Program, offering state tax credits to individuals and businesses that donate to qualifying rural hospitals. 

Governor Ivey signed HB86 on May 14, after the bill received unanimous support in both chambers. HB86 passed the Alabama House with a 103-0 vote and the Senate with a 34-0 vote.

Under the new law, donors can receive tax credits for contributions to eligible rural hospitals. The credit limits are as follows:

• Individual taxpayers: up to $15,000
• Married couples filing jointly: up to $30,000
• Pass-through entities: up to $450,000
• Corporations: up to $500,000

To qualify for the program, hospitals must be located in federally designated rural areas, serve Medicare and Medicaid patients, provide services to indigent patients, and submit a five-year financial plan. These funds can be used for direct care and operational expenses, including expenditures to maintain or upgrade facilities.

Alabama’s rural hospitals have been struggling for years, with at least seven closing since 2011 because of financial issues. Alabama has an estimated 52 rural hospitals that meet federal criteria for funds under HB86–a third of which are at risk of closing.

The program will be overseen by the Rural Hospital Investment Program Board, established within the Office of the State Treasurer. The Board will be responsible for determining hospital eligibility and coordinating with the Alabama Department of Revenue for program implementation.

The Rural Hospital Investment Act, modeled on a successful program in Georgia, hopes to provide a sustainable funding mechanism to support these vital institutions. By incentivizing private donations through tax credits, Alabama is working to ensure that rural residents have access to essential healthcare services.

The full text of HB86 is HERE.