BIR Ruling [DA-229-97]

June 24, 1997 BIR RULING [DA-229-97] M.C. Tolentino Foundation, Inc. Janka Transit Compound Kilometer 21, Quirino Highway, Lagro Novaliches, Quezon City Attention: Mr . Manuel C . Tolentino President Gentlemen : This refers to your request for 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 submitted disclosed that the M.C. TOLENTINO FOUNDATION, INC. (Foundation) is a non-stock, non-profit domestic corporation, organized and duly registered with the Securities and Exchange Commission on June 10, 1996 with the following purpose, to wit: "To undertake projects and programs particularly, though not exclusively, in the areas of educational, economics, social, political, cultural, spiritual and sports development of the individual. The full scope of the activities of the corporation shall be geared towards the improvement of the quality of the life of every Filipino, so that they could take better control of every aspect of their lives, livelihood, cultural and spiritual heritage in line with the governments Philippines 2000 vision. xxx xxx xxx In reply, please be informed that as a corporation organized and operated for cultural purposes, donations in favor of the Foundation 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, M.C. TOLENTINO FOUNDATION, INC., for administration purposes. prLL 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 M.C. TOLENTINO FOUNDATION, INC. by individual donors/contributors shall not be deductible from their gross income; and that since M.C. TOLENTINO FOUNDATION, INC. is a non-stock, non-profit domestic corporation organized and operated primarily for cultural 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. (BIR Ruling No. 517-A-93 dated December 23, 1993) 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. LLpr Very truly yours, SIXTO S. ESQUIVIAS IV OIC, Assistant Commissioner (Legal Service)