Interpretation of Section 9 (b) of Republic Act No. 8980

July 28, 2005 BIR RULING NO. 006-05 R.A. 8980 000-00 Department of Labor and Employment Intramuros, Manila Attention: Mr. Benedicto Ernesto R. Bitonio, Jr. Assistant Secretary for Policy and Program Support Gentlemen : This refers to your letter dated May 25, 2004 requesting for a ruling on the interpretation of Section 9 (b) of Republic Act (R.A.) No. 8980 otherwise known as " An Act Promulgating a Comprehensive Policy and a National System for Early Childhood Care and Development ("ECCD"), Providing Funds Therefor and For Other Purposes .", also known as the "ECCD" Act. In reply, please be informed that in accordance with Section 9 (b) of R.A. 8980 which provides, to wit: "(b) Support for ECCD Programs. Support for ECCD programs can be solicited from local and international civic organizations, private philanthropic foundations to supplement available resources. Workplace-based or related ECCD programs should be supported by corporations and employers in the form of physical facilities and recurrent operating costs. The operating cost incurred for employer or corporate-sponsored ECCD programs can be deducted from taxable income: Provided, That the employer or corporation will not charge user fees ." (Emphasis supplied) and in relation to Section 63 of the Rules and Regulations Implementing R.A. 8980 which provides, to wit: "Sec. 63. Workplace-based or related ECCD Programs . Corporations and employers shall support workplace-based or related ECCD programs in the form of physical facilities and recurrent operating costs. Such operating costs can be deducted from the taxable income of the corporation or employer, provided they do not charge user fees." the operating costs incurred by any employer or corporation who supported the workplace-based or related ECCD programs can be deducted from their taxable income. However, R.A. 8980 provides a condition precedent that before deducting the operating costs, the employer or corporation must not charge user fees or those payments whether monetary or non-monetary for the participation of a child in a private ECCD program. ScTaEA In view of the foregoing and in cooperation with the declared policy of the State to promote the rights of children to survival, development and special protection with full recognition of the nature of childhood and its special needs, this Office finds that operating costs incurred by employers or corporations in supporting the workplace-based or related ECCD programs are deductible from their taxable income. It should be understood however that employers or corporations participating in the workplace-based or related ECCD programs under R.A. 8980 are required to file under oath stating its gross income and expenses incurred during the year and a certificate showing the manner of operation and activities as well as sources and disposition of income in order to determine whether they actually incurred operating costs in support of the workplace-based or related ECCD programs. Furthermore, pursuant to Section 27 (g) of the IRR of R.A. 8980, the DOLE has the primary responsibility to strictly monitor the implementation of the ECCD-related policies in private establishments. As such, it should see to it that there are no user fees being charged as required under Section 9 (b) of R.A. 8980 Lastly, under Section 235 of the Tax Code of 1997, any provision of existing general and special law to the contrary notwithstanding, the books of accounts and other pertinent records of grantees of tax incentives shall be subject to examination by the BIR for purposes of ascertaining compliance with the conditions under which they have been granted tax incentives, and their tax liabilities, if any. Very truly yours, (SGD.) JOSE MARIO C. BUAG OIC-Commissioner of Internal Revenue