BIR Ruling [UN-036-94]

February 28, 1994 BIR RULING [UN-036-94] ERDA-TECH Foundation, Inc. P. O. Box 3600 1099 Manila Attention: Fr . Pierre Tritz, S . J . President Gentlemen : This refers to your request for a ruling to the effect that donations from your generous benefactors, whether in cash or in kind, are not subject to the donor's tax; and that said donations are fully deductible from the donor's gross income, for income tax purposes. Documentary evidence submitted disclosed that ERDA-TECH FOUNDATION, INC. is a private, non-profit, non-stock domestic corporation, organized and registered with the Securities and Exchange Commission for the following purpose and powers: PURPOSE: To maintain and operate a school for vocational, technical and academic training, instruction and education of students. POWERS: In pursuit of the said purpose, the corporation shall have the following powers: 1. to engage the services of workers, employees, teachers and instructors for academic and vocational-technical education as may be necessary in fulfilling its mission to prepare students for active citizenry and productive participation in the country's economy; 2. to solicit grants and donations as may be necessary to sufficiently equip and operate the ERDA-TECH FOUNDATION vocations, technical and academic courses offered; 3. to inculcate positive values towards manual and skilled labor in preparing students for gainful employment and/or entrepreneurship; 4. to purchase, lease, hold, acquire or otherwise accept real or personal property as may be necessary, expedient and appropriate for the purpose herein expressed; 5. to secure loans for purposes of constructing, maintaining and upgrading the school's building facilities, equipments, instruments, tools and implements to address quality education and training; and other purposes necessary for operating said school; and 6. to develop the professional competence of its employees and teachers; that it is governed by trustees who receive no compensation; and that no part of its funds and income shall inure to the benefit of any of its members. In reply, please be informed that as a corporation organized and operated for educational and social welfare purposes, donations to ERDA-TECH FOUNDATION, INC. are exempt from the payment of donor's tax pursuant to Section 94(a)(3) of the Tax Code, as amended, subject to the condition that you will not use more than 30% of the said gifts for administration purposes. On the other hand, Section 29(h)(2)(C) of the Tax Code, as amended by Batas Pambansa Blg. 45, as implemented by BIR-NEDA Regulations No. 1-81, as amended by Revenue Regulations Nos. 1-82 and 10-82, provides that donations to a private foundation, which means a non-profit domestic corporation or association 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 shall be deductible in full from the taxable business income of the donor. Under Section 29 of the Tax Code, as amended by Republic Act No. 7496 (An Act Adopting the Simplified Net Income Taxation scheme (SNITS) for the Self-Employed and Professionals Engaged in the Practice of Their Profession), and as implemented by Revenue Regulations No. 2-93, effective July 28, 1992, only contributions made to the Government and accredited relief organizations for the rehabilitation of calamity-stricken areas declared by the President, among others, shall be allowed as deduction from the gross income of individuals engaged in business or practice of profession. Pure compensation income earners are allowed to deduct from their gross compensation income only their personal and additional exemptions. (Sec. 29, Tax Code) In view thereof, this Office is of the opinion, as it hereby holds, that for income tax purposes, contributions and donations in favor of ERDA-TECH FOUNDATION, INC. by individual donors/contributors shall not be deductible from their gross income; and that since ERDA-TECH FOUNDATION, INC. is a private foundation organized and operated for education and social welfare purposes, CONTRIBUTIONS AND DONATIONS IN ITS FAVOR SHALL BE DEDUCTIBLE IN FULL FROM THE GROSS INCOME OF CORPORATE DONORS/CONTRIBUTORS. (BIR Ruling No. 517-A-93 dated December 23, 1993) 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. aisadc Very truly yours, JAIME M. MAZA Associate Commissioner (Legal Service)