BIR Ruling [DA-314-96]

August 20, 1996 BIR RULING [DA-314-96] Asian College of Science and Technology Foundation, Inc. 5th Floor, Prudential Bank Bldg. 869 Aurora Blvd., Cubao Quezon City Attention: Mr . Constancio A . Sia President Gentlemen : This refers to your letter dated July 22, 1996 requesting for a ruling to the effect that donations in favor of the Asian College of Science and Technology Foundation, Inc. (ACSAT) 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. cdta Documentary evidence submitted disclosed that ACSAT is a private, non-stock, non-profit domestic corporation, organized and registered with the Securities and Exchange Commission for the following purposes: "1. To organize, conduct and carry on the operation of educational institutions giving collegiate as well as technical and vocational courses in order to help the Filipino youth in acquiring high standards of instruction and technical training in science and technology and in other educational fields, in accordance with state of the art methods and practices of progressive educational institutions here and abroad, to conduct seminars and conferences to advance the frontiers of education, science and technology to secure, to print and publish books, periodicals, magazines and pamphlets for use in connection with courses of study of the institution; and to grant diplomas, awards, titles and degrees as may be authorized by the government; "2. To own, establish, maintain, operate research and/or experimental stations, to act as patron of/and benefactor, to any or all fields of human endeavor including science and technology, the arts and sciences; 3. . . . 4. . . . 5. . . ." that it is governed by a board of trustees who receive 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 educational, research and scientific purposes, donations to ACSAT 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 ACSAT 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 ACSAT by individual donors/contributors shall not be deductible from their gross income/compensation; and that since ACSAT is a private foundation organized and operated for educational, research and scientific purposes, contributions and donations in its favor shall be deductible in full from the gross income of corporate donors/contributors. (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. cdt Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)