BIR Ruling No. 079-12

February 15, 2012 BIR RULING NO. 079-12 Section 101 NIRC; Revenue Regulations No. 13-98 Philippine Council for NGO Certification 6/F SCC Bldg., CFA-MA Compound 4427 Interior Old Sta. Mesa, Manila Attention: Luis P. Morales Executive Director Gentlemen : This refers to your letter dated January 3, 2011 requesting that The Philippine Children's Mission, Inc. be granted a Certificate of Donee Institution Status pursuant to Revenue Regulations (RR) No. 13-98. In reply, please be informed that Section 3 of Revenue Regulations No. 13-98, dated December 8, 1998, implementing the provisions of Section 101 (A) and (B) of the 1997 Tax Code, as amended, laid down the conditions under which a donation to accredited non-stock, non-profit corporations/NGOs may be deductible from the donor's income from trade, business or profession, to wit: "Section 3. Donations to Accredited Non-stock, Non-profit Corporations/NGOs. Donations to accredited non-stock, non-profit corporations/NGOs shall be entitled to the following benefits: (1) Limited Deductibility. Donations, contributions or gifts actually paid or made within the taxable year to accredited non-stock, non-profit corporations shall be allowed limited deductibility in an amount not in excess of ten percent (10%) for an individual donor, and five percent (5%) for a corporate donor, of the donor's income derived from trade, business or profession as computed without the benefit of this deduction. (2) Full Deductibility. Donations, contributions or gifts actually paid or made within the taxable year to accredited NGOs shall be allowed full deductibility, subject to the following conditions: aCcHEI (i) The accredited NGO shall make utilization directly for the active conduct of the activities constituting the purpose or function for which it is organized and operated, not later than the fifteenth (15th) day of the third month after the close of the accredited NGOs taxable year in which contributions are received, unless an extended period is granted by the Secretary of Finance, upon recommendation of the Commissioner. For this purpose, the term "utilization" shall have the meaning as defined under Sec. 1 (c) of these Regulations. (ii) The level of administrative expenses of the accredited NGO, shall, on an annual basis, not exceed thirty percent (30%) of the total expenses for the taxable year; (iii) In the event of dissolution, the assets of the accredited NGO, would be distributed to another accredited NGO organized for similar purpose or purposes, or to the State for public purpose, or purposes, or to the state for public purpose, or would be distributed by a competent court of justice to another accredited NGO to be used in such manner as in the judgment of said court shall best accomplish the general purpose for which the dissolved organization was organized. (iv) The amount of any charitable contribution of property other than money shall be based on the acquisition cost of said property. (v) All the members of the Board of Trustees of the non-stock, non-profit corporation, organization or NGO do not receive compensation or remuneration for their service to the aforementioned organization." (emphasis supplied) ScHAIT However, a perusal of Article XI of the By-Laws of The Philippine Children's Mission, Inc. shows that, in the event of the dissolution of the Corporation, after satisfaction of all the claims of the creditors, any endowment fund and unexpended designated funds of the Corporation shall be returned to the donors upon the latter's written demand, if still living at the time of the Corporation's dissolution. The aforementioned provision in the By-Laws clearly violates the conditions for the deductibility of donations under RR 13-98. Based on the foregoing, this Office hereby denies the request of The Philippine Children's Mission, Inc. to be accredited as a Donee Institution Status. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue