BIR Ruling [DA-143-97]

April 3, 1997 BIR RULING [DA-143-97] Angara, Abello, Concepcion, Regala & Cruz ACCRA Bldg., 122 Gamboa Street Legaspi Village, Makati City Attention: Attys . Teodoro D . Regala Ruby Rose J . Yusi and Miguel Baron Gentlemen : This refers to your request in behalf of your client, UNION CHURCH OF MANILA PHILS. FOUNDATION, INC., for its registration as donee institution under Section 29(h)(2)(C) of the Tax Code, as amended by Batas Pambansa Blg. 45, and implemented by BIR-NEDA Regulations No. 1-81, as amended by BIR-NEDA Regulations No. 1-82. cdt Documentary evidence subjected disclosed that the UNION CHURCH OF MANILA PHILS. FOUNDATION INC. (Foundation) is a non-stock, non-profit domestic corporation, organized and duly registered with the Securities and Exchange Commission on march 19, 1997 with the following purposes, among others, to wit: "To create, maintain and act as a non-profit institution/foundation for educational, cultural and social development pursuits ad purposes; to elevate and maintain a high standard of training, upgraded curricula, improved teaching and learning materials and more conducive schooling conditions in the Philippines; to provide a method of instruction based on experience, parental guidance, peer learning, observations, to provide a systematic educational activity carried on outside the framework of the formal system; to provide settled types of learning to particular sub-groups of the population, particularly out-of-school youths and adults for the purposes of communicating ideas, developing skills, changing attitudes or modifying behavior related to the realization of development goals and the achievement of higher standard of living and welfare for the people; to initiate, undertake, maintain, support, develop, finance, or assist in training programs and in various other related fields, as well, to include the promotion of Christian values, and to this end: (a) to conduct educational programs, including those which utilize the fields of arts and culture as a vehicle or medium, and to disseminate information and technology through public fora, exhibitions and publications; xxx xxx xxx" and that as represented," . . . the Foundation will set up a Sunday school which will provide Christian education following a published curriculum which has been successfully adopted in the United States. The Sunday school will be geared towards the moral and character development of the individual in accordance with established Christian values. The Foundation will also undertake youth programs for the out-of-school youth. This program, which will be done on a weekly basis, will seek to provide "parental" advice and learning through experience in order to achieve the purpose of developing the youth as Christian members of society. Moreover, the Foundation will undertake charitable activities through local churches and non-government organizations. . . ." In reply, please be informed that as a corporation organized and operated for educational purposes, donations in favor of the Foundation are exempt from the payment of donors 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, UNION CHURCH OF MANILA PHILS. 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) Such being the case, this Office is of the opinion as it hereby holds that for income tax purposes, charitable and other contributions in favor of the UNION CHURCH OF MANILA FOUNDATION, INC. by individual donors' contributors shall not be deductible from their gross income; and that since UNION CHURCH OF MANILA FOUNDATION, IC. is a non-stock, non-profit domestic corporation organized and operated primarily for educational purposes contributions and donations to it by corporate donors shall be deductible in full from the gross income of the corporate donors/contributors. It should be understood that the said exempt organization/foundation shall be constituted as withholding agent for the government if it acts as an employer and its employees received compensation income subject to the withholding tax under Section 72(a), Chapter 10, Title II of the NIRC as implemented by Revenue Regulations No. 6-82, as amended, or if it makes income payments to individuals or corporations subject to the expanded withholding tax pursuant to Section 50(b) of the NIRC, as amended, and as implemented by Revenue regulations No. 6-85, as amended. It is requested that a copy of this letter of exemption be attached to the annual information return which you will file on or before April 15 of each year. 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. (BIR Ruling No. 517-A-93 dated December 23, 1993) cdtech Very truly yours, ALICIA L. TOMACRUZ Head Revenue Executive Assistant (Legal Service)