BIR Ruling No. 264-14

July 1, 2014 BIR RULING NO. 264-14 B C U Sons Foundation, Inc. 3A Montepino Bldg. Gamboa cor. Amorsolo Streets Legaspi Village, Makati City Attention: Concepcion E. Gabriel In-Charge Gentlemen : This refers to your letter dated November 20, 2012 requesting for confirmation of B C U Sons Foundation, Inc. as an exempt organization under Section 30 (G) of the National Internal Revenue Code of 1997, as amended (NIRC). It is represented that B C U Sons Foundation, Inc. is a nonstock nonprofit organization engaged in social welfare by granting scholarships and endowments. Section 30 (G) exempts from income tax civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare. An organization is operated exclusively for the promotion of social welfare if it is primarily engaged in promoting in some way the common good and general welfare of the people of the community. An organization embraced within this Section is one which is operated primarily for the purpose of bringing about civic betterments and social improvements. 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 considered 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) aICcHA To be exempt, an organization must have no net earnings or assets inuring to the benefit of any member, organizer, officer or any specific person and the organization must be organized and operated for the promotion of social welfare; A perusal of the documents submitted by B C U Sons Foundation, Inc. shows that it is has given substantial amounts to another organization Assumption Development Foundation. However, documents submitted do not show that Assumption Development Foundation, which is the main beneficiary of B C U Sons Foundation, Inc., qualifies for exemption. It should be established that Assumption Development Foundation qualifies for exemption, by securing a favorable ruling from the Bureau. Without such ruling, we cannot make a determination whether the funds disbursed by B C U Sons Foundation, Inc. to the former were exclusively utilized for social welfare purposes. IN VIEW OF THE FOREGOING, this Office is of the opinion that B C U Sons Foundation, Inc. does not qualify for exemption under Section 30 (G) 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