Philippine Science High School Class of 1982 & Co. Inc.

November 19, 2007 BIR RULING [DA-597-07] Section 34 (H) 009-2006 Philippine Science High School Class of 1982 & Co. Inc. Unit 411 Cityland 10 Tower 2 6817 H.V. Dela Costa Street Salcedo Village, Makati City Attention: Enrique G. Santos Trustee & Treasurer Gentlemen : This refers to your letter dated September 07, 2007 stating that Philippine Science High School (PSHS), with main campus at Agham Road, Diliman, Quezon City, is a public educational institution created under Republic Act No. 9036 known as "An Act Strengthening The Governance And Defining The Scope Of The Philippine Science High School (PSHS) System, Amending For The Purpose Republic Act No. 8496" and an attached agency of the Department of Science and Technology (DOST). It was formed with the purpose of educating the best of our Country's youth/scholars with an advanced science and mathematics curriculum/program. In connection therewith, you would like to seek confirmation that donations to PSHS whether monetary or in kind made by PSHS Class '82, Inc. and other donors are: 1. Deductible in full from donor's gross income; and 2. Exempt from donor's tax. In reply please be informed as follows: DONOR'S TAX Pursuant to Section 101 (A) (3) of the Tax Code of 1997, as amended, gifts in favor of an educational and/or charitable . . . are exempt from payment of donor's tax subject to the condition that not more than thirty percent (30%) of the gift shall be used for administration purposes (BIR Ruling No. DA-622-99 dated November 3, 1999). On the other hand, Section 101 (A) (2) and (B) (1) of the Tax Code of 1997, as amended, provides that gifts made to or for the use of the National Government or any entity created by any of its agencies which is not conducted for profit, or to any political subdivision of the said Government are exempt from payment of donor's tax (DA-036-03 dated February 6, 2003). Inasmuch as the PSHS is a public educational institution created under Republic Act No. 9036 and an attached agency of the Department of Science and Technology (DOST), donations to it are exempt from donor's tax. DEDUCTIBILITY OF DONATION DACaTI Section 34 (H) (2) (c) of the Tax Code of 1997, as amended, applies only to donations to accredited non-government organization or those registered with the Philippine Council for NGO Certification (PCNC). Since PSHS is not accredited by PCNC considering that it is public educational institution created under Republic Act No. 9036 and an attached agency of the Department of Science and Technology (DOST) the abovecited Section will not apply. Further, Section 34 (H) (2) (a) the Tax Code of 1997, as amended, as implemented by Rev. Regs. No. 13-98, donations to the Government, its agencies or political subdivisions are deductible in full from the gross income of the donor. However, donations not in accordance with the National Priority Plan are subject to limited deductibility or deductions to an amount not exceeding 10% in the case of an individual and 5% in the case of a corporation, of the taxpayer's taxable net income as computed without the benefit of this deduction, viz: "(a) Donations to the Government . Donations to the Government of the Philippines or to any of its agencies or political subdivisions, including fully-owned government corporations, exclusively to finance, to provide for, or to be used in undertaking priority activities in education, health, youth and sports development, human settlements, science and culture, and in economic development according to a National Priority Plan determined by the National Economic and Development Authority (NEDA), in consultation with appropriate government agencies, including its regional development councils and private philanthropic persons and institutions: Provided, That any donation which is made to the Government or to any of its agencies or political subdivisions not in accordance with the said annual priority plan shall be subject to the limitations prescribed in paragraph (1) of this Subsection" For purposes of entitlement to the full deductibility of the contribution/donation from gross income of the donor under Section 34 (H) (2) (a) of the Tax Code of 1997, as amended, a certification must be secured from the NEDA that the contribution/donation to PSHS is in accordance with priority programs, projects and activities included in the current National Priority Plan (BIR Ruling No. 005-03 dated July 2, 2003). With regard to the Adopt-A-School Act, as implemented by Section 3 of Revenue Regulations No. 10-2003, to wit: "SEC. 3. Tax Incentives Accruing to the Adopting Private Entity . A pre-qualified adopting private entity, which enters into an Agreement with a public school, shall be entitled to the following tax incentives: (a) Deduction from the gross income of the amount of contribution/donation that were actually, directly and exclusively incurred for the program subject to limitations, conditions and rules set forth in Section 34 (H) of the Tax Code of 1997, as amended, plus an additional amount equivalent to fifty percent (50%) of such contribution/donation subject to the following conditions: (1) That the deduction shall be availed of in the taxable year in which the expenses have been paid or incurred; (2) That the taxpayer can substantiate the deduction within sufficient evidence such as official receipts or delivery receipt and other adequate records SATDHE (2.1) The amount of expenses being claimed as deduction; (2.2) The direct connection or relation of the expenses to the adopting private entity's participation in the Adopt-A-School Program. The adopting private entity shall also provide a list of projects and/or activities undertaken and the cost of each undertaking, indicating in particular where and how the assistance has been utilized as supported by the Agreement; and (2.3) Proof or acknowledgment of receipt of the contributed/donated property by the recipient public school. (3) That the application, together with the approved Agreement endorsed by the National Secretariat, shall be filed with the Revenue District Office (RDO) having jurisdiction over the place of business of the donor/adopting private entity, copy furnished the RDO having jurisdiction over the property, if the contribution/donation is in the form of real property. (b) Exemption of the Assistance made by the donor from payment of donor's tax pursuant to Sections 101(A)(2) and (B)(1) of the Tax Code of 1997, as amended." Accordingly, this Office confirms your opinion that donors of PSHS are subject to tax deduction in accordance with the national priority plan as determined by the NEDA and likewise exempt from payment of donor's tax pursuant to the abovecited law and Revenue Regulations. 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, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service