Timothy Habilitation Center, Inc.

November 5, 2009 BIR RULING [NSNP-(S30E-139) 694-09] Sec. 30 (E);S-30-041-2005 Timothy Habilitation Center, Inc. #5 Francisco Court, Gilmore, New Manila, Quezon City Attention: Ms. Mary Jane Tan President Gentlemen : This refers to your letter dated August 17, 2009 requesting tax exemption of Timothy Habilitation Center, Inc. under Section 30 of the Tax Code of 1997, as amended. DIETcH It is represented that Timothy Habilitation Center, Inc., with Taxpayer Identification No. 007-087-779-000, is a non-stock, non-profit corporation registered with the Securities and Exchange Commission (SEC) with SEC Registration No. CN200811753 dated July 28, 2008; that the purposes for which the foundation was formed are the following: 1. To help provide multidisciplinary care such as but not limited to physical therapy, occupational therapy, speech pathology services, counseling as well as special education for the habilitation and rehabilitation of the visually, physically, and mentally impaired and multi-handicapped pediatric patients. Not to operate as a clinic or hospital; 2. To continuously update the center's knowledge, techniques, and technology and resources for the advancement and improvements of habilitation and rehabilitation services rendered by the center. that Timothy Habilitation Center, Inc. was already issued BIR Ruling No. DA-(S30E-016) 143-2009 dated February 25, 2009; that the said Ruling was issued upon condition that the Articles of Incorporation is to be amended to state that "no part or portion of the income or assets of the corporation shall belong or inure to the benefit of any of its members and that in case of dissolution, assets of the corporation shall be transferred to similar institution or to the government"; and that said requirement has been complied with, the Amended Articles of Incorporation is being submitted in support of this request. In reply, please be informed as follows: Income Tax Based on the foregoing, this Office cannot as yet issue the requested certificate of tax exemption because Timothy Habilitation Center, Inc. has yet to prove by actual operation for at least three (3) years that it is really an organization/association exempt from income tax under Section 30 of the Tax Code of 1997, as amended. Timothy Habilitation Center, Inc. can file the necessary annual information return instead of an income tax return on or before the 15th day of the fourth month of the preceding accounting period following the start of its operation as an exempt organization as required under Section 24 of Revenue Regulations (Rev. Regs.) No. 2 (Collector vs. Sinco, G.R. No. L-9276 dated October 23, 1956) .Based on such information return, we shall conduct the necessary investigation on the activities undertaken during the period. The letter of exemption shall thereafter be issued depending upon the result of our investigation. SDHITE However, Timothy Habilitation Center, Inc. is subject to the corresponding internal revenue taxes imposed under the National Internal Revenue Code on its income derived from any of its properties, real or personal, or any activity conducted for profit regardless of the disposition thereof, which income should be returned for taxation. Likewise, interest income from currency bank deposits and yield or any other monetary benefits from deposit substitute instruments and from trust funds and similar arrangements, and royalties derived from sources within the Philippines are subject to the 20% final withholding tax: provided, however, that interest income derived by it from a depository bank under the expanded foreign currency deposit system shall be subject to 7-1/2% final withholding tax pursuant to Section 27 (D) (1),in relation to Section 57 (A),both of the Tax Code of 1997. Moreover, it is required to file on or before the 15th day of the fourth month following the end of the accounting period a Profit and Loss Statement and Balance Sheet with the Annual Information Return under oath, stating its gross income and expenses incurred during the preceding period and a certificate showing that there has not been any change in its By-laws, Articles of Incorporation, manner of operation and activities as well as sources and disposition of income. It should be understood that the Timothy Habilitation Center, Inc. shall be constituted as withholding agent of the government if it acts as an employer and its employees receive compensation income subject to the withholding tax under Section 79 (A), Chapter XIII, Title II of the Tax Code of 1997, as implemented by Revenue Regulations (Rev. Regs.) No. 2-98, as amended, or if it makes income payments to individuals or corporations subject to the expanded withholding tax provided for in Section 57 (B) of the Tax Code of 1997, also as implemented by Rev. Regs. No. 2-98, as amended (BIR Ruling No. S30-047-01 dated June 5, 2001) . Under Section 235 of the Tax Code of 1997, any provision of existing general and special law to the contrary notwithstanding, the books of accounts and other pertinent records of tax-exempt organization or grantees of tax incentives shall be subject to examination by the BIR for purposes of ascertaining compliance with the conditions under which it has been granted tax exemptions or tax incentives, and payment of its tax liabilities, if any. Finally, for purposes of securing a permanent exemption after the three (3)-year period, Timothy Habilitation Center, Inc. is required to submit the following documents pursuant to Revenue Memorandum Circular No. 14-2001: TIDaCE 1) SEC Registration 2) Articles of Incorporation which must include the following provisions: a. That the corporation is non-stock, non-profit; b. That the primary purpose for which it was created is one of those enumerated under Section 30 of the Tax Code of 1997; c. That no part of the net income shall inure to the benefit of any of its members; d. That the trustees do not receive any compensation; e. In case of dissolution, assets of the corporation shall be transferred to similar institution or to the government; 3) By-laws; 4) Annual Information Returns for the past three (3) years; and 5) Financial Statements for the past three (3) years. This ruling modifies BIR Ruling No. DA-(S30E-016) 143-2009 dated February 25, 2009 earlier issued to Timothy Habilitation Center, Inc. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered null and void. SCEHaD Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service