Donation to the Government Shall be Deductible from the Donee's Gross Income

May 14, 1991 BIR RULING NO. 081-91 29 (b) 196-90 081-91 Gentlemen : This refers to your letters dated August 28 and September 18, 1990, in effect, requesting a ruling as to whether the expenses that would be incurred by your company and other private companies to improve a portion of Loakan Road starting from Camp John Hay to EPZA (6 kms.) in Baguio City may be allowed as deduction from your gross income. It appears that you are proposing to improve with your own funds that portion of Loakan Road from Camp John Hay to EPZA in Baguio City covering a distance of six (6) kilometers. It is understood that once completed that stretch of improved road will not be for your exclusive use but that it will remain part of the infrastructure of the government for public use. In reply, please be informed that by proposing to spend your own funds for the improvement of a government infrastructure i.e., a portion of Loakan Road from Camp John Hay to EPZA in Baguio City, you will, in effect, make a donation to the government in an amount equal to what you will spend for the improvement. Pursuant to Section 29 (h) (2) (A) of the Tax Code, said donation shall, for income tax purposes, be deductible in full provided NEDA will certify that the improvement of that stretch of road is included in the National Priority Plan of the government. Otherwise, without such certification, a portion of said donation shall still be deductible from your taxable gross income but only in an amount not in excess of 3% of your taxable income from business as computed without the benefit of this deduction pursuant to Section 29 (h) (1) of the Tax Code. However, the above mentioned donation shall be exempt from donor's gift tax. (Sec. 94 (a) (2), Tax Code). Very truly yours, (SGD.) JOSE U. ONG Commissioner