National Power Corporation

December 23, 2008 BIR RULING [DA-(ET-015) 570-08] 85; 24 (D) (1); 196; E.O. 1035; 001-2008; DA-363-2008; 06-13-2008 National Power Corporation Quezon Avenue corner BIR Road Diliman, Quezon City Attention: Mr. Ricardo V. Samorio Officer-In-Charge South Luzon Projects Gentlemen : This refers to your letter dated September 25, 2008 requesting for estate tax assessment for lots to be acquired by the National Power Corporation (NPC) for the Caliraya-Botocan-Kalayaan-Build-Operate-Transfer (CBK-BROT) Project which is vital in providing electricity to the Luzon grid. It appears that the NPC is in the process of acquiring lots affected by the construction of Caliraya Access Road and Tailrace Canal, Lumot-Caliraya connecting waterway, Botocan underground Tunnel and training dike projects; that the following landowners, to wit: Name Location OCT/TCT No. Fausta Ladiana Brgy. Lewin, Lumban, Laguna Heirs of Igmidio Ladiana Brgy. Lewin, Lumban, 0-140019-NS Laguna Spouses Edilberto Almazan Brgy. Lewin, Lumban, T-87582-NS & Zenaida Lagunda Laguna Emiliano R. Soriano, Jr. Brgy. Lewin, Lumban, T-148772-NS m/to Elizabeth Carillo Laguna Spouses Eleuterio Puhawan Brgy. Lewin, Lumban, 16153-NS Laguna AaHTIE Spouses Eleuterio Puhawah Brgy. Lewin, Lumban, 16155-NS & Fortunata Gaza Laguna Heirs of Antonina Rabie Brgy. Lewin, Lumban, P-9196 RASA-NS Rep. by Abraham Dela Laguna Cruz (RASA Antonino Ranquel & Josefina Macabuhay Heirs of Urbano Espiritu Brgy. Lewin, Lumban, 0-18176(RO-3480)-NS Laguna Spouses Mohammed Brgy. Lewin, Lumban, NS Mohammad & Adeluisa Laguna Ablao Spouses Eleuterio Puhawan Brgy. Lewin, Lumban, T-76998 & Simeona de Luna Laguna Patricio Cesario Brgy. Lewin, Lumban, O-14134-NS Laguna LibLex Milagros Paraiso Brgy. Lewin, Lumban, T-181030-NS Laguna Enrique Paraiso Brgy. Lewin, Lumban, T-18686-NS Laguna Juan Paraiso, Jr. Brgy. Lewin, Lumban, Laguna Norma Weineke Choy m/to Brgy. West Talaongan, T-101583-NS George Q. Choy (Sierra Cavinti, Laguna Lakes) East West Banking East Talaongan, Cavinti, T-100517-NS Corporation Laguna Norma Weineke Choy m/to Bo. West Talaongan, T-100517-NS George Q. Choy (Sierra Cavinti, Laguna Lakes) Del Carmen Invest, Inc. Bo. West Talaongan, T-100600-NS Cavinti, Laguna Orlando C. Bernardo (Sierra Brgy. West Talaongan, T-92830-NS Lakes) Cavinti, Laguna IDSEAH Rizal Motors, Inc. (Sierra Brgy. West Talaongan, T-96583-NS Lakes) Cavinti, Laguna Angela Toque (May also be South Talaongan, Cavinti, NS occupied by Laguna Rancap/Toque/Arroyo) Cipriano G. Arroyo m/to Bo. East Talaongan, P-8376-NS Juana Javier Cavinti, Laguna Felisa Toque present owner Bo. S. Talaongan, Cavinti, NS and possessor is Alberto Laguna Valente Marta I. Gordula (Heirs of Bo. East Talaongan, P-11777-NS Angel R. Gordula) Cavinti, Laguna Leon Toque m/to Adelaida Bo. East Talaongan, P-12144-NS Conde Cavinti, Laguna Aurora V. Villanueva m/to Bo. East Talaongan, P-3168-NS Crispin Oliveros Cavinti, Laguna aDSHIC Mercedes Villanueva m/to Bo. East Talaongan, P-3166-NS Benjamin Oliveros Cavinti, Laguna Santiago R. Maravilla m/to Bo. East Talaongan, P12004-NS Luzviminda de Las Alas Cavinti, Laguna Aurora Villanueva Cavinti, Laguna NS Spouses Rogelio Villanueva Cavinti, Laguna T-185394-NS and Lorenza Custodio Alberto V. Valente m/to Barangay East Talaongan, P-9054-NS Melanie A. Elchico Cavinti, Laguna Romana Rancap Maravilla Bo. East Talaongan, P-11866-NS m/to Alberto Maravilla Cavinti, Laguna Marco G. Villanueva Bo. S. Talaongan, Cavinti, n/a Laguna Evelyn C. Ramos m/to Bo. S. Talaongan, Cavinti, n/a Johans Kooring Laguna HAICET Simeona Flores m/to Pedro Bo. Mahipon, Cavinti, P-12338-NS Esguerra Laguna Mauricia Rangcap m/to Bo. East Talaongan, P-11322-NS Macario Pontiga Cavinti, Laguna Adelaida Toque Bo. Silangan, Talaongan, P-15462-NS Cavinti, Laguna Sotera Rancap Bo. S. Talaongan, Cavinti, n/a Laguna Sps. Ponciano A. Maralit Brgy. East Talaongan, P-11969-NS m/to Crisanta Custodio Cavinti, Laguna Sps. Lilian Cacalda & Brgy. Wawa, Lumban, T-240184-NS Isidro Bacsafra Laguna Alejandro Santos & Brgy. Wawa, Lumban, T-13638-NS Wife/Candida Cruz Laguna Alejandro Santos & Wife Brgy. Wawa, Lumban, T-13639-NS Laguna TDcEaH Sps. Ananias Lawas and Brgy. Wawa, Lumban, T-101963-NS Melania Anonuevo Laguna Heirs of Faustino Arevalo Botocan Tunnel, Majayjay, T-27493 & Florencia Arasa Rep. by Laguna Felipe Arevalo Macario Leobrera Rep. by Majayjay, Laguna n/a Romeo Arasa Alfredo Leobrera, Adelaida T-96454 Circuela Rosende & Milagros Circuela Pedron Sps. Dionisio Rondilla & Majayjay, Laguna Florencia Rondilla and Sps. Angelito Arquiza & Marilyn Vitasa Heirs of Ireneo Leobrera Majayjay, Laguna T-7204 Rep. by Leona Arce CaAIES Heirs of Policarpio Bueno Majayjay, Laguna namely: Gregoria, Delia, Norisa, Edilberto, Elvira, Renato & Alexander Vitasa Heirs of Alejandro Leobrera Majayjay, Laguna Rep. by Enrique Salandanan Heirs of Daniel Ragasa Lumban-Kalayaan Road and Kalayaan Penstock, Brgy. San Juan, Kalayaan, Laguna Belen, Dolores and Normita Lumban, Laguna Leron Heirs & Normita Leron Lumban, Laguna T-95734 Rep. by Remo S. Leron Heirs of Rufino de Ramos Lumban, Laguna T-19794 & Sinforosa Mercado Rep. by Liberty de Ramos HEcTAI Ederlino, Helen, Hazeline, Lumban, Laguna T-103318 Ariel, Artemio Lavin Rep. by Herminia Ramos Lavin Heirs of Felipe Parducho Kalayaan Penstock and Dirt Road, Brgy. Halang, Lumban, Laguna Heirs of Sps. Crispulo Lumban, Laguna Ferrer/Engracia Puhawan Rep. by Romeo F. Gaza Heirs of Valentin Aaliwin Lumban, Laguna Rep. by Enrique A. Javan, Sr. Heirs of Teodorico Arasa Majayjay, Laguna Arganosa Rep. by Ruperto D. Arasa are being required by the BIR Branch No. 55, San Pablo City, Laguna, to settle unpaid real estate taxes for all their other properties including those not involved in this transaction; that the net proceeds for the lot to be acquired by NPC is meager compared to the expenses to be incurred; and that this causes the landowners to be unwilling to sell their property to NPC. In reply, please be informed that the law in effect at the time of death of the decedent was Section 100 of the Tax Code of 1977 (now Section 85 of the Tax Code of 1997, as amended by Republic Act No. 9337) which provided that: "Sec. 100. Gross Estate . The value of the gross estate of the decedent shall be determined by including the value at the time death of all property, real or personal, tangible or intangible, whenever situated: . . ." Presently, Section 85 of the current version of the NIRC is virtually identical to the abovementioned provision. As such, the determination of what constitutes the gross estate of decedents subject to estate tax is the same now as it was at the time of death of the lot owners in the present case (2000). For purposes of determining the estate tax liability of a decedent's estate, the gross estate of the latter must first be ascertained and this includes all real property owned by the decedent, real or personal, tangible or intangible, wherever situated. In the present case, the lots which will be acquired by NPC are included among the mass of the properties that form part of the gross estate of the above-mentioned landowners. However, it appears that the estate tax due on the real properties of the deceased has not yet been paid and that this is now preventing the transfer of the abovementioned lot to NPC for the operation of the San Roque Multi-Purpose Project. EaScHT In this regard, Section 9 (b) of E.O. 1035 states that: Sec. 9. Assessment of Taxes Due . The Bureau of Internal Revenue and the respective Provincial/City Municipal Treasurers shall assess the following taxes, where applicable, on the property being acquired . . . (b) Estate tax due on the portion of the estate of a deceased owner to be acquired by the government and; xxx xxx xxx Such assessment shall be made and transmitted to the government implementing agency/instrumentality concerned within one (1) week from the submission of the complete requirements." The purpose behind E.O. 1035 is to expedite the transfer of private properties to the government for infrastructure and development projects. By expediting the process surrounding such transfers, the government ensures that its public projects will not be hampered by unnecessary delays and obstacles that would prevent the people from benefiting from these projects. The present case is well within the contemplation of the foregoing provision. Section 9 (b) of E.O. 1035 clearly mandates that upon the NPC's submission of the complete requirements, the BIR should submit the estate tax assessment on property to be acquired within one week from such submission. In the present case, the fact that the subject lots are part of the estate of the above-mentioned heirs that have yet to be subjected to estate tax, should not prevent the assessment of said lots in order to facilitate the transfer to NPC. To do otherwise would certainly be violative of the clear intent of E.O. 1035 to prioritize the assessment of estate taxes if such prove a hindrance to the proper implementation of government projects. It must be stressed, however, that the priority given for the assessment of estate taxes on the above-mentioned properties does not exempt the transfer of the same from the imposable taxes under the Tax Code of 1997. Thus, the transfer of the said properties to NPC shall be subject to capital gains tax and the corresponding documentary stamp tax under Sections 24 (D) (1) and 196 of the said Code. TEDaAc Accordingly, this Office holds that subject properties should be assessed for estate tax separately, but the heirs should likewise be assessed on the remainder of the gross estate of the above-mentioned heirs which have not been subjected to estate tax. 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