BIR Ruling [DA-371-03]

October 15, 2003 BIR RULING [DA-371-03] 34 (H) (3), 88 (B), 102 DA-148-01, DA-123-01 Cadiz Carag & De Mesa Law Offices Suite 2602, 26th Floor, The Atlanta Centre No. 31 Annapolis Street, Greenhills 1500 San Juan, Metro Manila Attention: Attys. Othelo C. Carag and Anna Liza M. Ang-Co Gentlemen : This refers to your letter dated September 5, 2003 requesting for a confirmation of your opinion on behalf of your client, Harris Memorial College, Inc. (formerly Harris Memorial College Development Center for Women, Inc.), hereinafter referred to as "Harris", on the full deductibility of the donation of properties to Harris and the valuation of the donated properties. It is represented that Harris is a non-stock, non-profit educational institution duly recognized by the Department of Education and Commission on Higher Learning to conduct and operate kindergarten, elementary and high school classes; that it is also authorized to conduct and operate a Bachelor of Arts Course, Bachelor in Kindergarten Education, Bachelor of Elementary Education Course and Bachelor of Secondary Education Course, covered by Government Recognition Nos. 67 and 68, Series of 1971, and 161 and 162, Series of 1998, respectively; that it is duly registered with the Securities and Exchange Commission under SEC Registration No. PW-767; that the purposes for which Harris is incorporated are to prepare persons especially women, for active participation in church and national development particularly in the field of Christian education, and mission work and to grant undergraduate and graduate degrees in Christian education and other fields or studies related to the total human development in accordance with the approval of the appropriate government agency; and that the following donations were received or will be received by Harris. "a. Donation by Lingap Kabataan Incorporated to Harris of the former's co-ownership rights in the real property located at Malolos, Bulacan, covered by Transfer Certificate of Title ("TCT") No. T-52010. "b. Proposed donation by RHL Properties & Development Corporation (RHL) to Harris over 50 square meters in a non-prime section of the commercial center building known as Times Plaza, located at corner United Nations and Taft Avenue, Ermita, Manila covered by TCT Nos. 118180 and 118181. "c. Proposed donation by RHL to Harris over the leasehold rights over a contiguous area of the office tower building known as Times Plaza equivalent to eight and one-half (8 1/2) percent of the total area of the office tower building located at United Nations Avenue, Manila covered by TCT Nos. 118180 and 118181. "d. Proposed transfer by RHL to Harris of the entire commercial center and office tower buildings located at United Nations Avenue, Manila covered, by TCT Nos. 118180 and 118181 on November 2, 2045." Based on foregoing, you now request for a confirmation of your opinion that: "1. Upon accreditation of Harris as a nongovernment organization by Philippine Council for NGO Certification, donations actually made within the taxable year to Harris are deductible from the taxable income of the donors. Since the Deed of Donation between Lingap Kabataan and Harris was executed on May 23, 2000, the same may be recorded or booked by the donor as of May 23, 2000 notwithstanding the possibility that the Tax Clearance Certificate authorizing the registration of the donated property in the name of the donee is issued at a later date. "2. The donated properties shall be valued at its fair market value as of the date in which the donation was made." In reply, please be informed that: 1. Subject to the condition that Harris is a donee institution duly accredited by PCNC and registered with the BIR, donations, contributions or gifts actually made within the taxable year to Harris shall be deductible from the taxable income of the donor, subject to the conditions imposed under Section 3(2) of Revenue Regulations No. 13-98 implementing Sec. 34(H) of the Tax Code of 1997 relative to the Deductibility of Contributions or Gifts Actually Paid or Made to Accredited Donee Institutions in Computing Taxable Income (BIR Ruling Nos. [DA-271-00] dated June 28, 2000, [DA-123-01] dated July 18, 2001, [DA-301-00] dated August 11, 2001, [DA-148-01] dated September 3, 2001) . THAECc The donation by Lingap Kabataan to Harris may be recorded or booked by Lingap Kabataan as of May 23, 2000, although the Tax Clearance Certificate authorizing the registration of the donated property in the name of Harris is issued at a later date (BIR Ruling [DA-123-01] dated July 18, 2001) . 2. On your question regarding the valuation of donations made in property, the value of the said donations shall be the fair market value thereof at the time of the donation. In case, however, of real property, the value shall be the zonal value determined by the Commissioner of Internal Revenue or the fair market value as shown in the schedule of values fixed by the Provincial or City Assessors, whichever is higher, pursuant to Section 102, in relation to Section 88(B), both of the Tax Code of 1997. 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, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service