Taxability of Donations, Contributions or Gifts

April 17, 1990 BIR RULING NO. 061-90 94 (a) (3) 29 (h) (2) (c) 015-90 061-90 M a d a m : This refers to your letter dated March 1, 1990 in effect, requesting a ruling on the taxability of donations, contributions, or gifts made to the Music Competitions For Young Artists Foundation, Inc. (NAMCYA). It is represented that NAMCYA is a non-stock and non-profit foundation, as expressly provided for in its Articles of Incorporation; that the purposes for which it was formed are, among others: 1. To discover outstanding musical talents through nationwide competitions and festival designed for young Filipino musicians in all possible forms, modes, styles and traditions of musical performance in the Philippines; 2. To assist in the cultivation, development and advancement of outstanding young Filipino musicians through continued training, public performance, media exposure, and other forms of artistic incentives; 3. To help strengthen the multi-cultural fiber of the country through the cultivation and promotion of exceptionally gifted young musicians and musical ensembles from Philippine cultural communities, and the preservation and dissemination of their distinct musical expressions and traditions; 4. To promote the creation of works by Filipino composers, relative to the competitions, and making possible their publication and dissemination, as a means of further enriching contemporary Philippine music literature. That by virtue of Proclamation No. 1173 the period from November 26 to December 2 has been declared as "National Music Week For Young Artists"; that the National Music Competitions for Young Artists Foundation, Inc. has effectively undertaken the discovery and development of young talents in music by holding annual competitions and festivals in celebration of National Music Week; and that donations or contributions to the NAMCYA are sought to be exempt from the donor's tax and the value of such donations be made deductible from the income tax liability of the donor/s. In reply, please be informed that gifts made in favor of a non-stock and non-profit cultural foundation within the contemplation of Section 94(a)(3) and (b)(2) of the Tax Code as amended, are exempt from the donor's tax provided that not more than thirty per centum (30%) of said gifts shall be used by the donee for administration purposes. Considering that the donee, Music Competitions For Young Artists Foundation, Inc., is a non-stock and non-profit cultural foundation, then the donations, contributions, or gifts made in its favor are exempt from the payment of the donor's tax. Regarding the deductibility of the donations for income tax purposes, pursuant to Section 29(h)(2)(C)(i) of the Tax Code as amended, donations shall be deductible in full from the donor's income when made in favor of a private foundation organized and operated exclusively for scientific, research, educational, character-building, youth and sports development, health, social-welfare, cultural or charitable purposes, or a combination thereof, no part of the net income of which inures to the benefit of any private individual. Music Competitions For Young Artists Foundation, Inc. is a non-stock and non-profit private foundation within the contemplation of Section 29(h)(2)(C)(i) of the Tax Code as amended, thus, the donations made in its favor are deductible in full from the income of the donor for purposes of computing his income tax liability: Provided, that not later than the 15th day of the third month after the close of the foundation's taxable year in which contributions are received, it makes utilization directly for the active conduct of the activities, constituting the purposes or function for which it is organized and operated, unless an extended period is granted; and that the level of administrative expense shall in no case exceed thirty percent (30%) of the total expenses. Provided, further that the assets of the foundation shall, in case of dissolution, be distributed to another non-profit domestic corporation organized for similar purpose or purposes as to the state for public purpose [Section 29(h)(2)(C)(ii) and (iii)]. casia Very truly yours, (SGD.) JOSE U. ONG Commissioner