BIR Ruling

September 14, 1976 Educational Research & Development Assistance (ERDA) Foundation, Inc. Rm. 303-304 Guido-Ver Bldg. 1386 Espaa cor. Jhocson St. Sampaloc, Manila Attention: Rev . Fr . Pierre Tritz, S . J . President Gentlemen : This refers to your letter dated August 24, 1976 informing this Office that you are now organized as a Foundation and duly registered as such Foundation with the Securities and Exchange Commission on August 12, 1976; that being formerly the Educational Research & Development Association (ERDA), Inc., you request that the Foundation be granted the same tax privileges as that granted to the Association. cd In reply, I have the honor to inform you that, in our letter of June 10, 1976 the above-named Association was granted exemption from the payment of income tax and the filing of the corresponding income tax return, pursuant to Section 27(e) of the Tax Code. In the same letter, this Office also ruled that all bequests, gifts, and donations to the Association are exempt from donor's and estate taxes and that the donor may claim as deductions in full such gifts and contributions for income tax purposes beginning the calendar year 1974, pursuant to Presidential Decree No. 507. The exemption was granted on the basis of our investigation that the Association is a corporation or association organized and operated exclusively for social welfare and charitable purposes. Since the organization of the Foundation retained the social welfare and charitable purposes for which the association was established, said Foundation, pursuant to Section 27(e) of the Tax Code, is exempt from the payment of income tax on income earned by it as such corporation, and therefore, need not file an income tax return covering such income. However, it is subject to income tax on income derived from any of its properties, real or personal, or any activity conducted for profit regardless of the disposition thereof, which income should be returned for taxation. And even if no taxable income is earned, it should file on or before April 15 of each year, an annual information return stating under oath its gross income and the sources thereof and the expenses incurred during the preceding year, attaching thereto: a) A profit and loss statement; b) A balance sheet; and c) A certificate attesting that there has not been change in its By-Laws, Articles of Incorporation and its activities and manner by operation. As the Foundation is a social welfare and charitable organization, pursuant to Presidential Decree No. 507, all gifts, bequest, donations and/or contributions to that Foundation are exempt from the donor's and estate taxes and shall be deductible in full in computing the taxable net income of the donor, subject to the condition that not more than 30% of the donation or bequest shall be used by that Foundation for administration purposes. However, in order that Foundation may maintain its status as a qualified recipient of tax free donation, it should file within three months from the end of its fiscal or calendar year period an annual information return, with the Chief, Legal Branch of the Regional Office having jurisdiction over the principal address of the organization to which shall be attached the following: a) A list of the donations and bequest received during the year, which should show the name and address of the donors of testators, the amount or market value of each donation or bequest and the disposition thereof. The list should be certified to by the president or treasurer of the organization; b) A list of the activities and/or projects undertaken by the organization and the cost of each undertaking or project, which should also be certified to by the president or treasurer of the organization; c) A certification by the president or treasurer of the organization that not more than thirty per centum (30%) of the total gifts, bequest and donations received during the year was used for administrative purposes; d) A certification by the president or treasurer of the organization that no part of its net income inures to the benefit of any private stockholder or individual. (Sec. 9, Revenue Regulations No. 8-74 dated September 24, 1974). aisa dc Very truly yours, EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-1456-040-3 "TAXPAYERS SHOULD INDICATE THEIR TAN IN ALL COMMUNICATIONS TO THE BIR."