BIR Ruling [DA-032-97]

January 21, 1997 BIR RULING [DA-032-97] J. V. De Ocampo Memorial Foundation, Inc. 1741 Felipe Agoncillo St. Malate, Manila Attention: Ms . Aurora D . Fabros EVP Corporate Secretary Gentlemen : This refers to your request for a ruling to the effect that donations of personalities or realties by the members, friends and benefactors in favor of the J. V. de Ocampo Memorial Foundation, Inc. are not subject to the donor's tax; and that said donations are fully deductible from the donor's gross income, for income tax purposes. cdtech Documentary evidence submitted disclosed that the J. V. de Ocampo Memorial Foundation, Inc., is a private, non-stock, non-profit domestic corporation, organized and registered with the Securities and Exchange Commission for the following purposes: 1. To function and operate as a private science and research foundation for good of mankind and the people of the Philippines in particular; 2. To provide financial support, within the Philippines and abroad, for the studies of selected students and for the attendance at scientific conferences by qualified and competent scholars; 3. To organize, staff and finance research projects which may be established in furtherance of the purposes and objectives of this Foundation; 4. To promote, support and finance publications of reports prepared under the auspices of this Foundation; and 5. To receive and/or give grants, gifts, legacies, donations, contributions, endowments and financial aide or loans from any source whatsoever, and to make use of them in operating enterprises, activities and business as may be necessary to carry out the objectives of this Foundation; that it is governed by trustees who received no compensation; and that no part of its funds and income shall inure to the benefit of any of its members. In reply, please be informed that as a corporation organized and operated for scientific purposes, donations to J. V. de Ocampo Memorial Foundation, Inc. are exempt from the payment of donor's tax pursuant to Section 94 (a) (3) of the Tax Code, as amended, subject to the condition that not more than 30% of the said gifts shall be used by the donee J. V. de Ocampo Memorial Foundation, Inc. for administration purposes. On the other hand, Section 29 (h) (2) (C) of the Tax Code, as amended by Batas Pambansa Blg. 45, as implemented by BIR-NEDA Regulations No. 1-81, as amended by Revenue Regulations Nos. 1-82 and 10-82 provides that donations to a private foundation which means a non-profit domestic corporation or association organized and operated exclusively for scientific, research, educational, character building and youth and sports development, health, social welfare, cultural or charitable purposes or a combination thereof, no part of the net income of which inures to the benefit of any private individual shall be deductible in full from the taxable business income of the donor. Under Section 29 of the Tax Code as amended by Republic Act No. 7496 (An Act Adopting the Simplified Net Income Taxation Scheme [SNITS] for the Self-Employed and Professionals Engaged in the Practice of Their Profession), and as implemented by Revenue Regulations No. 2-93, effective July 28, 1992, individuals engaged in business or practice of profession shall only be allowed as deduction from gross income, among others, contributions made to the Government and accredited relief organizations for the rehabilitation of calamity-stricken areas declared by the President . Pure compensation income earners are allowed to deduct from their gross compensation income only their personal and additional exemptions. (Sec. 29, Tax Code) In view thereof, this Office is of the opinion as it hereby holds that for income tax purposes, contributions and donations in favor of J. V. de Ocampo Memorial Foundation, Inc. by individual donors/contributions shall not be deductible from their gross income; and that since J. V. de Ocampo Memorial Foundation, Inc. is a private foundation organized and operated for scientific purposes, contributions and donations in its favor shall be deductible in full from the gross income of corporate donors/contributors. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. cdll Very truly yours, ALICIA L. TOMACRUZ Head Revenue Executive Assistant (Legal Service)