Exemption from the Donor's Tax and Estate Tax

December 12, 1989 BIR RULING NO. 253-89 94 (a) (3) 80 (d) 001-89 253-89 Gentlemen : This refers to your letter dated August 30, 1989 requesting a ruling whether contributions, gifts, donations, and bequests, by members of parents associations in favor of duly-approved projects that are part of the school plans shall be exempted from the donor's tax and estate tax pursuant to Section 94(a)(3) and Section 80(d) respectively, of the National Internal Revenue Code (NIRC). cdta Section 94(a)(3) exempts the following gifts from the donor's tax: "Gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, foundation, trust or philanthropic organization or research institution or organization: Provided, however , that not more than 30% of said gifts shall be used by such donee for administration purposes." On the other hand, Section 80(d) exempts the following from the estate tax: "All bequests, devises, legacies or transfers to social welfare, cultural and charitable institutions, no part of the net income of which inures to the benefit of any individual: Provided, however , that not more than 30% of said bequests, devises, legacies or transfers shall be used by such institutions for administrative purposes." In reply, please be informed that the gifts in favor of duly-approved projects that are part of the school plans shall be understood to mean gifts made by members of parents associations in favor of an educational institution, which is incorporated as a non-stock entity, paying no dividends, governed by trustees who receive no compensation, and devoting all its income, whether student's fees or gifts donations, subsidies or other forms of philanthropy, to its accomplishment and promotion of that purposes enumerated in its articles of incorporation. (See last paragraph of Section 94(a), Tax Code). Said gifts are exempt from donor's tax . Provided, however , that not more than 30% thereof shall be used for administration purposes. However, bequests by members of parents associations in favor of duly-approved projects that are part of the school plans are not exempt from the estate tax under the provisions of Section 80(d), Tax Code, which only mentions "social welfare, cultural, and charitable institutions." In other words, said provision does not mention educational institutions as one of its recipient institutions. It is a settled rule in taxation that tax exemption cannot be created by implication because it is highly disfavored in law; and one who claims exemption from tax must be able to justify his claim by clearest grant of organic or statutory law. Very truly yours, (SGD.) JOSE U. ONG Commissioner