BIR Ruling No. 530-12

August 29, 2012 BIR RULING NO. 530-12 Sec. 101 (A) (3);00-000 Dulay Pagunsan & Ty Strata 100 Building Suite 1300, F. Ortigas Jr. Road Ortigas Center, Pasig City Attention: Atty. Sinforoso R. Pagunsan Gentlemen : This refers to your letter dated February 17, 2012 stating that the De La Salle University, Inc. (DLSU) is a non-stock, non-profit education institution duly registered with the Securities and Exchange Commission (SEC) under SEC Registration No. 65138; that DLSU is duly accredited by the Philippine Council for NGO Certification (PCNC);that its Certificate of Registration as a qualified donee institution status was issued by the BIR on November 24, 2008; that DLSU is the registered owner of six (6) parcels of land located at Malate, Manila, covered by TCT Nos. 193304, 193305, 193306, 189073, 189074 and 189075 issued by the Registry of Deeds for the City of Manila with an aggregate area of 2,582.70 square meters; that on the other hand, La Sallian Educational Innovators Foundation (De La Salle-College of Saint Benilde),Inc. (DLS-CSB) is also a non-stock, non-profit educational institution under SEC Registration No. 144920; that DLS-CSB is duly accredited by the PCNC and was issued a Certificate of Registration as a qualified donee institution by the BIR on December 22, 2010; and that on January 18, 2012, a Deed of Donation was executed by DLSU, as Donor, and DLS-CSB, as Donee, whereby the former transferred to the latter the above-mentioned properties to be used actually, directly and exclusively for educational purposes which the latter has accepted. Based on the foregoing representations, you now request for ruling that the above-mentioned donation is exempt from the payment of donor's tax under Section 101 (A) (3) of the Tax Code of 1997, as amended; and that the said donation is deductible from DLSU's gross income under Section 34 (H), supra . In support of your request, you have submitted the following documents, to wit: 1. Certified true copy of the SEC, Articles of Incorporation and By-Laws of DLS-CSB; 2. Certified true copy of the SEC, Articles of Incorporation and By-Laws of DLSU; 3. Certificate of Registration as a qualified donee institution issued by the BIR; 4. Deed of Donation; 5. Transfer Certificates of Title Nos. 199304, 193305, 193306, 189073, 189074 and 189075 all of the Registry of Deeds for the City of Manila; 6. Tax Declarations issued for the Land and Improvements thereon; 7. Secretary's Certificate; and 8. Certification of the Zonal Value of the property. In reply thereto, please be informed that Section 101 (A) (3) of the Tax Code of 1997, as amended, reads: "SEC. 101. Exemption of Certain Gifts. The following gifts or donations shall be exempt from the tax provided for in this Chapter: (A) In the Case of Gifts Made by a Resident. xxx xxx xxx (3) Gifts in favour of an educational and/or charitable, religious, cultural or social welfare corporation, institution, accredited non-government organization, trust or philanthropic (sic) organization or research institution or organization; Provided, however, That not more than thirty percent (30%) of said gifts shall be used by such donee for administration purposes. For the purpose of this exemption, a non-profit educational and/or charitable corporation, institution, accredited non-government organization, trust or philanthropic organization, and/or research institution or organization is a school, college or university and/or charitable corporation, accredited non-government organization, trust or philanthropic organization and/or research institution or organization, incorporated as a non-stock entity, paying no dividends, governed by trustees who receive no compensation, and devoting all its income, whether students' fees or gifts, donations, subsidies or other forms of philanthropy, to the accomplishment and promotion of the purposes enumerated in its Articles of Incorporation." Corollarily, Section 34, supra ,provides "SEC. 34. Deductions from Gross Income . Except for taxpayers earning compensation income arising from personal services rendered under an employer-employee relationship where no deductions shall be allowed under this Section other than under Subsection (M) hereof, in computing taxable income subject to income tax under Sections 24 (A);25 (A);26; 27 (A),(B) and (C),and 28 (A) (1),there shall be allowed the following deductions from gross income: xxx xxx xxx (H) Charitable and Other Contributions. xxx xxx xxx (2) Contributions Deductible in Full. Notwithstanding the provisions of the preceding subparagraph, donations to the following institutions or entities shall be deductible in full: xxx xxx xxx (c) Donations to Accredited Non-Government Organizations . The term 'non-government organization' means a non-profit domestic corporation: (1) Organized and operated exclusively for scientific, research, educational, character-building and youth and sports development, health, social welfare, cultural or charitable purposes, or a combination thereof, no part of the net income of which inures to the benefit of any private individual; xxx xxx xxx" The above-cited provisions are so worded in an unequivocal manner that donations made to a non-stock, non-profit educational institution no part of its net income inures to the benefit of any of its trustees or of any private individual, like DLS-CSB a qualified donee institution, is exempt from donor's tax and the said donation is deductible from the gross income of the Donor, DLSU as in this case. Accordingly, this Office holds that the donation of the above-mentioned properties by DLSU to DLS-CSB to be used actually, directly and exclusively for the latter's educational purposes shall be EXEMPT from donor's tax pursuant to Section 101 (A) (3) of the Tax Code of 1997, as amended. In the same manner, the said donation shall be deductible from the gross income of DLSU, as the donor, pursuant to Section 34 (H) (2) (c), ibid. It is to be emphasized however, that donation received by the DLS-CSB, as the donee, should be reported in DLSU's income tax return in the year the donation was made and not in the year the donation was actually or constructively received. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue