BIR Ruling [DA-146-97]

April 7, 1997 BIR RULING [DA-146-97] Eugenio Lopez Foundation, Inc. Ground Floor, Chronicle Bldg. Meralco Avenue, Pasig City Attention: Mr . Rommel S . Duran Trustee Gentlemen : This refers to your letter dated March 20, 1997 requesting for a ruling to the effect that the donation of two (2) parcels of land by Mr. Roberto M. Lopez in favor of the Eugenio Lopez Foundation, Inc. (Foundation) is not subject to donor's tax; and that said donation is fully deductible from the donor's gross income, for income tax purposes. Documentary evidence submitted disclosed that the Foundation is a non-stock, non-profit domestic corporation duly organized and registered with the Securities and Exchange Commission (SEC) for the following purposes: "To promote and encourage the advancement of anthropology, archeology, ethnology, Philippine culture and history, both ancient and modern, natural and literary, the applied arts and other sciences, and scientific researches directed toward benefitting the general public, with particular emphasis on and reference to those dealing in and about the Philippines, through the organization, establishment and maintenance of museums, libraries and galleries, and to that end and purpose, to foster and promote the collection, preservation and protection, the restoration and reconstruction of historical objects, manuscripts, paintings, books, artifacts, relics, antiques, sculptures, sketches, drawings, collections, pottery, ceramics, metals, coins, medals, flags, badges, and other articles which are the cultural, historical, anthropological, ethnological, archeopological and scientific value and significance to the Philippines and other countries of the world, including but not limited to the life and works of Filipino heroes, martyrs, artists and other persons of world-renown; to foster, promote and encourage the study, development and advancement of Philippine culture and history, anthropology, archeology, ethnology and the arts, and other related sciences by means of researches and cultural and scientific expeditions or trips within and without the Philippines for the purpose of achieving the purposes mentioned and to cause the publication of the results of such researches and expeditions through the means of books, pamphlets, journals, brochures, leaflets and others which may be distributed or circulated to or availed of by students, researches, scholars, etc. and to the public in general; to achieve the promotion of these sciences through financial support, grants donations, bequests, contributions and other forms of financial aid and assistance exclusively from the members and out of the funds of the Foundation as well as from corporations, partnerships, entities or other institutions of which the members are stockholders, partners, directors officers and/or members; and to do any and all acts and things which are necessary and proper to accomplish the primary purposes mentioned." (As amended on April 20, 1975) 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 thereto, please be informed that as a corporation organized and operated for education's and cultural purposes, the donation by Mr. Roberto M. Lopez of two (2) parcels of land located at 963 Stanford St., Wack-Wack, Mandaluyong City covered by TCT Nos. 63963 and 63964 of the Register of Deeds for Mandaluyong City in favor of the Foundation shall be 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, Foundation 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 No. 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 then 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, the donation of the aforementioned two (2) parcels of land in favor of the Foundation by Mr. Roberto M. Lopez shall not be deductible from his gross income. (BIR Ruling No. 517-A-93 dated December 23, 1993) Moreover, the Deed of donation is subject only to the documentary stamp tax of fifteen pesos (P15.00) imposed under Section 188 of the Tax Code, as amended. (BIR Ruling No. 178-91 dated September 10, 1991) 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. Very truly yours, ALICIA L. TOMACRUZ Head Revenue Executive Assistant (Legal Service)