BIR Ruling No. 196-14

June 17, 2014 BIR RULING NO. 196-14 Camera Club of Davao, Inc. One Stop Video, Ilustre Street Davao City Attention: Anthony R. Serafin President Gentlemen : This refers to your letter dated July 24, 2013 requesting for confirmation of the tax exemption of Camera Club of Davao, Inc. as a nonstock, nonprofit corporation under Section 30 (C) of the National Internal Revenue Code of 1997, as amended (NIRC). It is represented that Camera Club of Davao, Inc. is a nonstock nonprofit corporation duly registered with the Securities and Exchange Commission. Its principal purpose is to promote the art of photography and its different facets for the benefit of the community; to educate and enhance the photographic and other related skills of its members as well as the others who are interested in photography; to undertake worthy civic action projects through the medium of photography; and to undertake fellowship and other activities for the benefit of the members. Section 30 (C) exempts from income tax beneficiary societies operating for the exclusive benefit of its members. Section 27 of Revenue Regulations No. 2-40, otherwise known as Income Tax Regulations provides: SEC. 27. Fraternal beneficiary societies. A fraternal beneficiary society is exempt from tax only if operated under the "lodge system", or for the exclusive benefit of the members of a society so operating. "Operating under the lodge system" means carrying on its activities under a form of organization that comprises local branches, chartered by a parent organization and largely self-governing, called lodges, chapters, or the like. In order to be exempt, it is also necessary that the society should have an established system for payment to its members or their dependents of life, sick, accident, or other benefits. HEacAS Along with police power and eminent domain, taxation is one of the three basic and necessary attributes of sovereignty. Thus, the State cannot be deprived of this most essential power and attribute of sovereignty by vague implications of law. Rather, being derogatory of sovereignty, the governing principle is that tax exemptions are to be construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority; and he who claims an exemption must be able to justify his claim by the clearest grant of statute. The burden of proof rests upon the party claiming exemption to prove that it is in fact covered by the exemption so claimed. In case of doubt, non-exemption must be favored. Taxes being the lifeblood of the government that should be collected without unnecessary hindrance, every precaution must be taken not to unduly suppress it. (BIR Ruling No. 310-2011 dated August 22, 2011) A review of the documents submitted in support of the request shows that Camera Club of Davao, Inc. does not operate under the "lodge" system as required by Revenue Regulations No. 2-40. In addition, it does not have an established system for payment to its members or their dependents of life, sick, or accident benefits. In fact, the primary purpose of Camera Club of Davao, Inc. is merely to promote the art of photography. Moreover, any claim that it is operated for the exclusive benefits of its members has not been established as Camera Club of Davao, Inc. has not been operating since its incorporation in 2011. IN VIEW OF THE FOREGOING, this Office is of the opinion that Camera Club of Davao, Inc. does not qualify for exemption under Section 30 (C) of the NIRC. It is therefore liable for income taxes imposed under Title II of the NIRC. acAIES Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner Bureau of Internal Revenue