Taxation of Donations Made by Domestic Corporations to the Fund of Assistance to Private Education

June 8, 1994 BIR RULING NO. 114-94 29 (h) (2) (A) 000-00 114-94 Santos, Bacobo, Verceles and Lopez Law Firm Cristina Condominium, Unit 501 Herrera corner Legaspi Street Legaspi Village, Makati MM Attention: Atty . Gonzalo T . Santos, Jr . Gentlemen : This refers to your letter dated August 23, 1993 requesting confirmation of your opinion that for income tax purposes, donations made by domestic corporations to the Fund of Assistance to Private Education (FAPE) are deductible in full from the gross income of such donors. It is represented that FAPE was created by virtue of Executive Order No. 156 dated November 5, 1968; that it is the result of the implementation of a "Project Agreement" entered into on June 11, 1968, by and between the Government of the Republic of the Philippines and the Government of the United States of America, the sole purpose of which is to finance the various programs of assistance to private education; that it is administered/trusteed as a permanent irrevocable trust fund by the Private Education Assistance Committee which is headed by the Secretary of Education as Chairman; that this Office ruled on February 21, 1969 to the effect that the grants, donations and contributions received by it from public or private sectors, as well as the grants extended by it to private education are likewise exempt from the payment of gift taxes (Sec. 94 (a) (3), formerly Sec. 112 (a) (3), Tax Code). In reply, please be informed that Section 29(h)(2)(A) of the Tax Code, as amended, provides that donations to the Government of the Philippines or to any of its agencies or political subdivisions including fully-owned government corporations exclusively to finance, to provide for, or to be used in undertaking priority activities in education, health, youth and sports development, human settlements, science and culture, and in economic development, according to a national priority plan to be determined by the NEDA, in consultation with appropriate government agencies including its regional development councils and private philanthropic persons and institutions are deductible in full from the gross income of the donor. Accordingly, if the donation made by domestic corporations to FAPE are in accordance with the said national priority plan, the same shall be deductible in full from the gross income of such donors; otherwise, they shall be subject to the limitation of 8% of the corporate taxpayer's taxable income derived from business as computed without the said deduction (donation or contribution). Very truly yours, VICTOR A. DEOFERIO, JR. Acting Commissioner of Internal Revenue