BIR Ruling No. 009-06

September 21, 2006 BIR RULING NO. 009-06 34 (H) (2) (a) 000-00 Hon. Angelina Sandoval-Gutierrez Supreme Court of the Philippines Society for Judicial Excellence Padre Faura St. Ermita, Manila M a d a m : This refers to your letter dated August 28, 2006 requesting on behalf of the Society for Judicial Excellence ("Society") exemption from the requirement of securing a certificate from the NEDA that donations to the Society are in accordance with the current National Priority Plan, and to consider such donations to be fully deductible from the gross income of the donors. As represented, this Office ruled in BIR Ruling No. DA-502-06 dated August 16, 2006 that the Society for Judicial Excellence is a non-stock, non-profit corporation organized for charitable purposes as contemplated under Section 30 (E) of the Tax Code of 1997, and that the Society is both a charitable institution and entity of the government. As the Society is organized as an entity of the government, to perform a judicial function for the improvement of the administration of justice, you submit that such requirement to secure a certificate from the NEDA may be dispensed with. As an independent branch of the tri-partite system of the republication government established under the Constitution, the judiciary must be given full discretion to perform its basic function which is the administration of justice. Thus, it cannot be subjected to conform to programs, projects or activities of other branches of the government, without impairing its independent status and violating the Constitution. The Society is tasked as a Committee of the Supreme Court, to carry out the function of selecting awardees for judicial excellence. Hence, donations to the Society may well be embraced under Section 34 (H) (2) (c) of the Tax Code of 1997, and consequently are not covered by the requirement to conform to the current National Priority Plan to be fully deductible from the gross income of the donors. TESICD In reply, please be informed that Section 34 (H) (2) (c) of the Tax Code of 1997 applies only to donations to accredited non-government organizations or those registered with the Philippine Council for NGO Certification (PCNC).Since the Society is not accredited by PCNC, Section 34 (H) (2) (c) will not apply to it. Section 34 (H) (2) (a) of the Tax Code of 1997 which incorporated Section 2 (A) of Batas Pambansa Blg. 45, as implemented by Section 3 (B) of BIR-NEDA Regulations No. 1-81, provides that 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" The requirement of securing a certification from the NEDA, although precisely for purposes of determining whether or not a donee institution is qualified based on the projects listed in the National Priority Plan and being used by the BIR as a basis for allowing the donation as deduction from the taxable net income of the donor, is, however, not provided under the abovementioned law or the regulations implementing the same. To require said certification, would be incorporating matters by executive ruling which is beyond the province of this Office. Accordingly, this Office is of the opinion that the Society need not secure the aforestated certification from the NEDA. 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 as null and void. Very truly yours, (SGD.) JOSE MARIO C. BUAG Commissioner of Internal Revenue