Exemption from the Payment of Income Tax and the Filing of the Corresponding Income Tax Return - St. Bede Development Foundation, Inc.

January 12, 1990 BIR RULING NO. 004-90 26 (g) 20 (b) (2) (C) (1) 04 (a) (3) 526-88 004-90 Gentlemen : This refers to your request for exemption from the payment of income tax and the filing of the corresponding income tax return under Section 26 of the National Internal Revenue Code, as amended; the payment of donor's tax on donations, bequests, legacies, gifts and similar contributions made in your favor; and that such donations/contributions be deductible from the gross income of the donor. cd It is represented that the St. Bede Development Foundation, Inc., is a non-stock, non-profit corporation duly registered with the Securities and Exchange Commission; that the purposes for which the corporation is formed are: to engage in, sponsor, assist and/or finance developmental projects which will primarily benefit the urban poor sectors of the country, in general, and the urban poor sectors of Manila, in particular; to serve the urban poor sectors of the country, like the unemployed adults, homeless children/adults, squatters, abandoned, handicapped individuals, underemployed, street vendors/beggars, thru skills training seminars, values-formation sessions, leadership training, placement/reference service, adult education classes, low-cost housing in conjunction with the government and private agencies; to help the urban poor sectors while engaging teachers and other school personnel in developmental projects for their common benefit and growth; to do any and all things which may be reasonably necessary, proper, or convenient for the due carrying on of the objects and purposes of the foundation and to exercise any and all rights, powers and attributes of other foundations of like nature organized under and by virtue of the laws of the Philippines, such as: "1. To accept and receive contributions and donations or gifts of any kind, cash, property or otherwise, and from time to time, without limit as to amount, to draw, make, accept, endorse, guarantee, execute, and issue promissory notes, drafts, bills of exchange, warrants, bonds, debentures, and other negotiable instruments and evidences of indebtedness, and to secure payment thereof and not the interest thereon mortgages on, or pledge, conveyance, of assignment of the whole or any part of the assets of foundation, real, personal or mixed, including contract rights, and to sell, pledge or otherwise encumber or dispose of such securities or their obligations of the foundation for its purpose. "2. To acquire purchase, own, hold, operate, develop, lease, mortgage, pledge, exchange, sell, transfer, or otherwise invest, in any manner permitted by law, real or personal property of every kind and description of any interest thereon. "3. In furtherance of its purposes, to borrow money for human development projects, either without collateral security or on the security of real or personal property, provided that the profits derived therefrom shall not inure to the benefit of any of the officers or members of the foundation ; that the foundation is non-stock and non-profit and organized and operated in the public interest and no portion of its funds shall inure to the benefit of private individuals or juridical entities whether domestic or foreign; that at least sixty (60%) percent of its gross income, as defined in the National Internal Revenue Code, and unrestricted donations, shall be devoted to undertaking, directly financing or assisting development activities for the urban poor of Manila; that not more than thirty (30%) percent of the gross income and not more than ten (10%) percent of the unrestricted donations to the foundation shall be devoted to general and administrative expenses. Based on the foregoing, this Office is of the opinion and so holds that the St. Bede Development Foundation, Inc., falls within the purview of a non-profit organization operated exclusively for the promotion of social welfare as contemplated under Section 26(g) of the National Internal Revenue Code, as amended. Accordingly, it is exempt from the payment of income tax on income received by it as such organization, and therefore, need not file an income tax return concerning such income. However, it is subject to the corresponding internal revenue taxes imposed under the National Internal Revenue Code on its income derived from any of its properties, real or personal or any activity conducted for profit regardless of the disposition thereof, which income should be returned for taxation . Moreover, it is required to file on or before April 15 of each year a profit and loss statement and balance sheet with the annual information return under oath, stating its gross income and expenses incurred during the year and a certificate showing that there has not been any change in its By-laws, Articles of Incorporation, manner of operation and activities as well as sources and disposition of income. Pursuant to Section 94(a)(3) of the Tax Code, as amended, gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, foundation, trust or philanthropic organization or research institution or organization are exempt from the donor's tax provided not more than thirty (30%) per annum of said gifts shall be used by such donee for administration purposes. Such being the case, since the donee is a non-stock, non-profit corporation operated exclusively for the promotion of social welfare, the donations, bequests, legacies, gifts and similar contributions made in its favor are exempt from the payment of donor's tax pursuant to Section 94(a)(3), as amended, provided that not more than thirty per centum (30%) of said gifts shall be used by the donee for administration purposes. As regards the deductibility of the donations or contributions, the same shall be allowed as deductions for income tax purposes to an amount not exceeding 6% in the case of an individual and 3% in the case of a corporation of the taxpayer's taxable income derived from business as computed without the benefit of this deduction (Sec. 29(h)(1), Tax Code). However, said donations or contributions can be deductible in full provided that conditions are complied with as prescribed by Section 29(h)(2)(C) of the Tax Code, as amended by Batas Pambansa Blg. 45, and as implemented by BIR-NEDA Regulations No. 1-81. Very truly yours, (SGD.) JOSE U. ONG Commissioner