BIR Ruling

October 19, 1967 The Director National Museum Manila S i r : This refers to your letter dated September 8, 1967 requesting information on whether or not donations to support scientific and cultural explorations, expeditions and excavations are deductible from the gross income of the donor within the purview of R.A. No. 4846, the Cultural Properties Preservation and Protection Act. cdtech In reply, I have the honor to inform you as follows: Section 13 of R.A. No. 4846 provides, viz.: "SEC. 13. Any investment by private individuals or institutions for the purchase of cultural properties or for the support of scientific and cultural expeditions, explorations, or excavations, for the purposes of gathering data and of bringing out hidden cultural properties to light, when so certified by the Director of the National Museum, shall be deductible from the income tax returns of the individual or institution: Provided , That when a collector sells any of the cultural properties in his collection, as allowed under this act, the proceeds therefrom shall be considered as income and therefore subject to taxation: Provided , further , That the Government shall be given the first option to buy these cultural properties when placed on sale." The foregoing provisions of the law, to our mind, cover a two-fold aspect, first direct investments by private individuals and institutions for their own personal interests in the acquisition by purchase of cultural properties, and second, investments in exploratory expeditions to search for cultural properties. In either aspect, the investors acquire ownership of the cultural properties which may be disposed of by them for profit. The deduction allowed them from their taxable income of their expenses incurred in the purchase of cultural properties or in the search thereof serves purely as an incentive for them in assisting the State procure and search for such properties which the State intends to preserve and protect and safeguard as a living specimen of Filipino culture. While the cultural properties accumulated by private parties are kept by them in private ownership, nevertheless, the State takes complete control of their disposition, so much so, that the State reserves to itself the first option to purchase them when placed for sale. Besides the deduction of their investments from taxable income is purely sort of tax deferment, they being eventually required to pay the tax on the entire proceeds of the sale of the cultural properties. aisadc In the light of the foregoing, it is the opinion of this Office that the contemplated donation of P250,000 by an airline company to the National Museum is not an investment within the contemplation of Section 13 of R.A. No. 3846 and, therefore, it cannot be allowed as deduction from the taxable income of the company. However, the airline company can be allowed deduction of donations to the Museum under the provisions of Section 30(h) of the Tax Code in an amount not exceeding 3% of the company's taxable net income as computed before the deduction. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue