Donations in Favor of SHS-G Foundation Exempt from Donor's Gift Tax

October 23, 1985 BIR RULING NO. 187-85 123-a-3 21 (d) 24 (cc) 000-00 187-85 Gentlemen : This refers to your letter dated December 3, 1984 requesting exemption from taxes of donations made in your favor as well as on the interest income of your so-called Project Emergency Fund. It is represented that the SHS-G Foundation, Inc. is, engaged in charitable activities and is registered as a qualified donee institution under Certificate of Registration No. 0916 dated August 5, 1982, that in view of the extremely limited fund of your school, the foundation undertook the establishment of a fund in the amount of one million pesos more or less to be raised from the alumnae donors and friends of the school which fund will be utilized for the continued improvements in the quality of education and to cover such expenses for teachers' salaries and other compensation plus the maintenance of school facilities; that your fund drive as of November 1, 1984 has netted about P500,000.00; and that the one million fund could be called the Project Emergency Fund and should not be diminished but increased gradually from its income or through contributions and donations. In reply thereto, I have the honor to inform you that since the SHS-G Foundation, Inc., is a charitable organization, donations made in its favor are exempt from the donor's gift tax pursuant to Section 123(a)(3) of the Tax Code, as amended, subject to the condition that not more than 30% of the donation shall be used by the donee foundation for administration purposes. Moreover, pursuant to the last paragraph of Section 27 of the Tax Code, as amended by P.D. No. 1457, income of whatever kind and character of all organizations enumerated therein derived from any of their properties, real or personal, or from any of their activities conducted for profit is subject to internal revenue taxes, one of which is income tax, regardless of the disposition made of such income. Consequently, although the Foundation is exempt from tax as a charitable organization pursuant to Section 27(e) of the Tax Code, the interest income and/or yield from its bank deposits, deposit substitute instruments, trust fund and similar arrangements, being income derived from personal property, are subject to income tax. Such being the case, the Foundation is subject to the final withholding tax of 15% on interest and/or yield on deposit substitute instruments and interest on its savings and time deposits paid or accrued beginning October 15, 1984 pursuant to Sections 24(cc) and 53(d)(1) of the Tax Code as amended by P.D. No. 1959. aisadc Very truly yours, (SGD.) TOMAS C. TOLEDO Acting Commissioner