Taxability and Deductibility of Donations and Contributions

January 31, 1981 BIR RULING NO. 028-81 30-h 000-00 028-81 Knights of Columbus Mary Immaculate Council No. 3937, Inc. Pasig Catholic Rectory Pasig, Metro Manila Attention: Mr . Pablo C . Asuncion President Gentlemen : This refers to your letter dated June 30, 1980 requesting, in effect, a ruling on the taxability and deductibility of donations and contributions made in your favor. Investigation conducted by this Office disclosed that the Knights of Columbus Mary Immaculate Council No. 3937, 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: (1) to provide a center and adequate facilities where the members can meet among themselves; (2) to engage in religious, charitable, educational, fraternal, cultural, and civic activities for the benefits not only of its members but also for the community; (3) to promote mutual understanding and cooperation among the members of the association as well as with the other clubs and organizations of the community; (4) to construct and provide recreational facilities for the members and their families and also for the public; and (5) to acquire, purchase, lease, mortgage, or sell both real and personal properties for the benefit of its members; that the corporation shall be maintained primarily through membership contributions and from donations from civic-minded individuals and private organizations or entities; and that no part of its net income inures to the benefit of any private individual or member. As that corporation is organized for charitable and social welfare purposes, pursuant to Sections 123(a)(3) and 102(d) of the Tax Code, as amended, all gifts, bequests, devises, legacies or transfers in favor of that organization shall be exempt from donor's and estate taxes. Moreover, pursuant to Section 30(h) of the Tax Code, as amended by Batas Pambansa Blg. 45, donations to that organization shall be deductible in full in computing the taxable net income of the donor, subject to the following conditions: 1. Not later than the 15th day of the third month after the close of the corporation's taxable year in which contributions are received, it shall utilize said contributions directly for the active conduct of the activities constituting the purpose or function for which it is organized and operated, unless an extended period is granted by regulations promulgated by the Minister of Finance; 2. The level of administrative expense of which shall on an annual basis conform with the rules and regulations to be prescribed by the Minister of Finance but in no case to exceed to 30 per cent of total expenses; and 3. The assets of the corporation in the event of dissolution shall be distributed to another non-profit domestic corporation organized for similar purposes, or to the State for a public purpose, or will be distributed by a court to another organization to be used in such manner as in the judgment of said court will best accomplish the general purposes for which the dissolved organization was organized. In case the above conditions are not complied with, the donations may be claimed as a deduction from gross income to an amount not in excess of 6% in the case of an individual and 3% in the case of a corporation of the contributor's taxable net income as computed without the benefit of said contributions or donations. Please be informed, in this connection, that under P.D. No. 1457, amending Section 27 of the Tax Code, any income of the organization of whatever kind and character from any of its properties, real or personal, or from any activity conducted for profit, regardless of the disposition made of such income is taxable. cdta Very truly yours, RUBEN B. ANCHETA Acting Commissioner