BIR Ruling No. 216-14

June 20, 2014 BIR RULING NO. 216-14 Filinvest Corporate City Foundation, Inc. Vector 1 Bldg., Northgate Cyberzone FCC Alabang, Muntinlupa City Attention: Ana Venus A. Mejia Treasurer Gentlemen: This refers to your letter dated December 23, 2013 requesting for confirmation of Filinvest Corporate City Foundation, Inc. as an exempt organization under Section 30 (E) of the National Internal Revenue Code of 1997, as amended (NIRC). It is represented that Filinvest Corporate City Foundation, Inc. is a nonstock nonprofit organization engaged in social welfare, civic, scientific, educational, character-building, youth and sports development, health, cultural, or charitable purposes. Section 30(E) exempts from income tax organizations organized and operated exclusively for religious, charitable, scientific, athletic, or cultural purposes, or for the rehabilitation of veterans. 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. A perusal of the documents submitted by Filinvest Corporate City Foundation, Inc. shows that it is has given substantial amounts to organizations such as Educational Research and Development Assistance Foundation, Inc. (ERDA) and AGAPP Foundation. Moreover, financial assistance was given to an employee of Filinvest Alabang, Inc., one of the foundation's primary donors. STDEcA To be exempt, an organization must be operated exclusively for one or more of the following purposes religious, charitable, scientific, athletic, cultural, rehabilitation of veterans. If more than an insubstantial part of the organization's activities do not further those purposes, then it is not operated exclusively for those purposes. It must be engaged in activities furthering public purposes rather than private interests. The documents submitted do not show that the various organizations ( e.g. ERDA, AGAPP), which received substantial funds from Filinvest Corporate City Foundation, Inc., qualify for exemption. It should be established that these organizations qualify for exemption, by securing a favorable ruling from the Bureau. Without such ruling, we cannot make a determination whether the funds disbursed by Filinvest Corporate City Foundation, Inc. to these organizations were exclusively utilized for religious, charitable, scientific, athletic, or cultural purposes, or for the rehabilitation of veterans. Lastly, it is necessary for an organization to establish that it is not organized or operated for the benefit of private interests such as designated individuals, the creator or his family, or persons controlled, directly or indirectly, by such private interests. Financial assistance to employees of a donor is not, in and of itself, a charitable activity because employees as a class are not necessarily needy and distressed. Filinvest Corporate City Foundation, Inc. must prove that there was an objective criteria used to grant financial assistance. It must not restrict eligibility for employees of donors or administered in a manner that limits such financial assistance to officers, shareholders, or highly compensated employees of a corporation donating, contributing to or otherwise funding the foundation. IN VIEW OF THE FOREGOING, this Office is of the opinion that Filinvest Corporate City Foundation, Inc. does not qualify for exemption under Section 30 (E) of the NIRC. It is therefore liable for income taxes imposed under Title II of the NIRC. Moreover, donations to it cannot be claimed by donors as charitable deductions for purposes of computing income tax. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner Bureau of Internal Revenue