BIR Ruling

June 19, 1969 Mr. Lauro D. Abrahan President, BIR Savings & Loan Association, Inc. Room 106, Finance Building Manila S i r : This refers to your letter dated June 2, 1969 requesting information as to the liability to tax, income and/or business taxes, of the BIR Savings and Loan Association, Inc. casia In reply, I have the honor to inform you as follows: According to its Articles the BIR Savings and Loan Association, Inc. (hereinafter referred to as the Association) is a non-stock corporation organized for the following purposes, viz: to receive savings and time deposits from its members and pay interest on said deposits at such rates as may be allowed by the Central Bank rules and regulations; to extend loans to members and/or make investments in the securities of productive enterprises or in securities of the Government or any of its political subdivisions, instrumentalities or corporations; and generally to exercise and execute all the powers, prerogatives and privileges inherent in and granted to corporations; and to such savings and loan associations, primarily for the benefit of its members. According to its By-Laws, the members of the Association shall consist of (1) regular and permanent employees of the Bureau of Internal Revenue, (2) employee appointed under Section 24(c) of Republic Act No. 2260, and (3) retired employees who became members of the Association prior to their retirement; and that special membership status shall be extended to the Bureau of Internal Revenue Employees Association (BIREA) and associations which may be organized in the future by revenue employees or any group of employees of the Bureau for legitimate purposes, provided, that the said associations are registered with the Securities and Exchange Commission; that the Association shall derive its income from the capital contributions of the members, interest on loans, miscellaneous fees and service charges to be collected from the loan-applicant; that such income less only the ordinary operational expenses will be divided and distributed wholly among the member-depositors in proportion to their capital contributions; and that finally, the Association will transact business only with its members. Based on the foregoing facts, this Office believes and so holds that the BIR Savings and Loan Association, Inc., qualifies as an association within the purview of Section 27(b) of the Tax Code, as amplified by Section 26 of the Income Tax Regulations. Accordingly, it is exempt from the payment of income tax and filing of the corresponding income tax return. It is, however, required to file on or before April 15 of each year, a balance sheet, profit and loss statement together with an annual information return under oath, stating its gross income and expenses incurred during the preceding year, and a certificate showing that there has not been any substantial change in its By-Laws, Articles of Incorporation, manner of operation and activities as well as sources and disposition of income. Attention is, however, invited to the fact that the exempt character of the Association may be lost should it invest its funds in securities as provided for in the purpose-clause of its Articles of Incorporation for an exempt savings and loan association within the purview of Section 27(b) of the Tax Code must limit its operations to the receipt of deposits from and to the granting of loans to its members. However, the interest earned from the deposit of its funds with any banking institution will not give rise to any income tax consequence, the deposit of its funds in banks being essentially done for safekeeping and the interest accruing thereon being purely an incident thereof. aisadc In any event, the Association shall not be subject to any tax on business. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue