BIR Ruling [DA-610-99]

October 22, 1999 BIR RULING [DA-610-99] Philippine Council For NGO Certification (PCNC) 14/F MSCB Bldg., 4718 Eduque Street, Makati City Attention: Victoria P. Garchitorena Chairwoman This refers to your letter dated September 14, 1999 requesting clarification on the following questions: "1. Is PCNC supposed to certify churches or only church organizations? "2. Is PCNC supposed to certify schools or only school organizations?" You state that you have received a number of applications from churches and schools; that the so-called "corporation soles" do not fit the definition of organizations as stipulated in Revenue Regulations No. 13-98; and that you have already evaluated the application of one school, i.e., Brent International School which caters mostly to affluent families and does not engage in social development-oriented project/activities. In reply, please be informed that a perusal of the definition of non-stock, non-profit organizations/NGO's pursuant to Section 30 (E) and (G) and 34 (H)(2)(C) of the Tax Code of 1997 does not categorically exclude churches and schools. It would seem that churches and schools that meet the requirements for accreditation under Section 2 (c) of Revenue Regulations No. 13-98 and the limitation on (a) the distribution of income to trustees (b) level of administrative expense (c) utilization and (d) distribution of income in case of dissolution are also entitled to accreditation as donee institutions. Conversely, churches and schools that do not meet the criteria and aforestated limitations shall be denied accreditation. In short, it all depends on PCNC which shall, after all, determine whether a church or school is entitled to accreditation after conducting examination and evaluation of the latter. On the matter of application for accreditation of Brent International School Manila (BISM) it is our opinion that the said institution may not qualify for accreditation as a donee institution given the fact that it is an elitist school that caters exclusively to the very wealthy; that the tuition fees are in US dollars and beyond the financial capacity of most sectors of society; that the student are required to contribute an amount also in US dollar as "Capital Development Fee"; that BISM is admittedly engaged in a profit-making venture with Filinvest Realty Corporation, the residential subdivision known as "Brentville" purportedly as additional source of funding for the school; that BISM has disclosed to the Council its intention to charge "bonds" from enrolling students in the near future as an additional source of income effectively placing the school beyond the reach of even the upper middle class. On top of it, BISM does not offer scholarships to underprivileged but deserving students and the only semblance of charitable educational endeavor is free tuition privilege to children of its faculty members many of whom are relatively well-off. These uncontroverted facts show that BISM is engaged in profit-making ventures and also contravenes the requirement that part of its educational activity shall include the granting of scholarships to deserving students. Accordingly, and without necessarily influencing, the course of action to be taken by PCNC vis-a-vis the application for accreditation of BISM as a donee institution, we are inclined to recommend the denial of the same. Please be advised accordingly. Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue