Power of a Province or City to Impose Local Franchise Tax Against National Power Corporation (NPC)

December 7, 1998 BLGF MEMORANDUM CIRCULAR NO. 020-98 TO : All Regional Directors for Local Government Finance; District Treasurers of Metropolitan Manila; Provincial and City Treasurers and Others Concerned SUBJECT : Power of a Province or City to Impose Local Franchise Tax Against National Power Corporation (NPC) For the information and guidance of all concerned, attached herewith is a copy of Memorandum Order No. 1-98 dated November 19, 1998 of the Department of Finance, embodying the latest ruling on the power of a province or city to impose local franchise tax against the National Power Corporation, the dispositive portion of which reads as follows: "In view of the foregoing, the Department hereby abandons the ruling contained in the latter dated June 19, 1998 sent by Undersecretary Ms. Cecilia G. Soriano to Mr. Guido Alfredo A. Delgado. The Department now reverts to its ruling dated July 28, 1992. The Bureau of Local Government Finance is therefore instructed to recall BLGF Memorandum Circular No. 14-98 dated July 22, 1998." It may be recalled that, in the abovementioned July 28, 1992 ruling, the Department of Finance categorically resolved, thus: "Now, if we may notice, the language used in Republic Act No. 7160, as in P.D. No. 1931 and E.O. 93 is too plain and free from ambiguity and it expresses its definite intention to cut or diminish the broad tax exemption privileges of NPC by making it subject to the franchise and real property taxes. "xxx xxx xxx. ". . . In the case of the franchise tax, PNC shall become liable to it only upon the effectivity of the ordinance imposing the said tax to be passed by the municipality or province pursuant to Section 137 of Republic Act No. 7160." From the ruling embodied in Memorandum Order No. 1-98 as mentioned above, it would appear that NPC is no longer exempt from the payment of franchise tax but liable to pay the same as imposed under a duly-enacted tax ordinance of LGUs concerned. Thus, any payment made by NPC on the basis of the ruling dated July 28, 1992 whether under protest or not shall no longer be refunded and LGUs concerned are hereby instructed to exert effort for the collection of the subject franchise tax from the said company. For further clarification, provinces and cities and municipalities within Metropolitan Manila are authorized to impose franchise tax pursuant to Section 137 in relation with Section 151 and 144 of the code. LLpr Accordingly, BLGF Memorandum Circular No. 14-98 dated July 22, 1998 of this Bureau, implementing the ruling of the Department of Finance (that NPC is exempt from the payment of franchise tax) is hereby recalled and considered superseded by this Memorandum Circular. The Regional Directors for Local Government Finance and the District Treasurers of Metropolitan Manila are hereby instructed to disseminate the contents of this Circular to all Provincial and City Treasurers within their respective jurisdictions. (SGD.) ANGELINA M. MAGSINO Deputy Executive Director Officer-In-Charge November 19, 1998 MEMORANDUM TO : Deputy Executive Director Angelina M. Magsino Officer-in-Charge Bureau of Local Government Finance FROM : Secretary Edgardo B. Espiritu SUBJECT : Memorandum Order No. 1-98 Re: Power of a Province or City to Impose Local Franchise Tax Against National Power Corporation (NPC) This refers to the issue of whether a province or city may impose franchise tax against NPC under Sec. 137 of the Local Government Code (LGC). I have received several request for reconsideration of a letter dated June 19, 1998, where this Department ruled that NPC is exempt from Sec. 137 tax. After a study of these request, I find that the ruling does not accord with existing jurisprudence. The Department should revert to the ruling contained in its letter dated July 28, 1992, addressed to Mr. Pablo Malixi, then President of NPC. I therefore instruct the Bureau to issue the appropriate circular in accordance with the attached Memorandum Order, for the information and guidance of BLGF Regional Directors, provincial and city treasurers and others concerned. cdll For immediate compliance. (SGD.) EDGARDO B. ESPIRITU Secretary