Tax-Exempt Status of the Blessed Christ Child Montessori Foundation

May 13, 1999 BIR RULING NO. 065-99 Eduardo S. Martinez Attorney-At-Law 7 Agueda Drive Citihomes Regency Merville, Paraaque S i r : This refers to your letter dated April 26, 1999, in effect, requesting for a ruling confirming the tax-exempt status of the BLESSED CHRIST CHILD MONTESSORI FOUNDATION pursuant to Sec. 4(3), Article 14 of the 1987 Constitution. It is represented that a ruling confirming exemption from taxes of Balayan Children's Center Montessori of Balayan, Batangas was previously issued by this Office; that, however, upon the death of the Chairman of the Board of said institution, the name of the original institution was changed into Blessed Christ Child Montessori Foundation; that the Articles of Incorporation thereof list practically the same members; that although additional courses were added, the purpose of the newly formed institution remained the same, that is, a non-stock, non-profit educational institution; that you are now requesting for the same ruling issued in favor of Balayan Children's Center Montessori. LibLex In reply, please be advised that Article XIV, Sec. 4(3) of the 1987 Constitution states: "SEC. 4(3). All revenues and assets of non-stock, non-profit educational institutions used actually, directly and exclusively for educational purposes shall be exempt from taxes and duties. Upon the dissolution or cessation of the corporate existence of such institutions their assets shall be disposed of in the manner prescribed by law." Pursuant thereto, Department Order No. 137 87 [Rules and Regulations Implementing Section 4(3), Article XIV of the New Constitution (1987 Constitution)] provides, viz: "2.1. Non-stock, non-profit educational institutions are exempt from tax on all revenues derived in pursuance of its purpose as an educational institution and used actually, directly and exclusively for educational purposes . They shall, however, be subject to internal revenue taxes on income from trade, business or other activity the conduct to which is not related to the exercise or performance by such educational institution of its educational purpose or function ." (emphasis supplied) Such being the case, the Blessed Child Montessori Foundation, being a non stock, non-profit educational institution is exempt from taxes and duties on all its revenues and assets used actually, directly and exclusively for educational purposes. However, it shall be subject to internal revenue taxes on its income from trade, business. and other activity the conduct of which is not related to the exercise or performance of its educational purposes or functions. It must be emphasized that your tax exemption does not cover withholding taxes. As an educational institution, you are constituted as withholding agent for the government and required to withhold the tax on compensation income of your employees, or the expanded withholding tax on income payment to persons subject to tax pursuant to Section 50(b) of the Tax Code, as amended. Finally, as a tax-exempt educational institution, you shall file an annual information return on or before the 15th day of the 4th month following the end of your taxable year (Sec. 4, Finance Department Order No. 137-87). Under Section 235 of the Tax Code, any provision of existing general and special law to the contrary notwithstanding, the books of accounts and other pertinent records of tax-exempt organizations or 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 exemptions or tax incentives, and their tax liabilities, if any. This tax exemption shall be valid for a period of three (3) years from the date of issue of this letter. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it shall be disclosed that the facts are different, then this ruling shall be considered revoked. Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group