Real Property Tax Liability of the National Grid Corporation of the Philippines (NGCP) Pursuant to Its Legislative Franchise, RA No. 9511

June 22, 2012 BLGF MEMORANDUM CIRCULAR NO. 048-12 TO : All Regional Directors for Local Government Finance; Provincial, City and Municipal Assessors and Treasurers; And Others Concerned SUBJECT : Real Property Tax Liability of the National Grid Corporation of the Philippines (NGCP) Pursuant to Its Legislative Franchise, RA No. 9511 WHEREAS, Section 224 of the Local Government Code of 1991, (R.A. No. 7160), in relation to Section 201 thereof provides for the appraisal and assessment of machinery and equipment; WHEREAS, Section 234 of the LGC provides for the exemption from real property tax, and paragraph (c) thereof provides that "all machineries and equipment that are actually, directly, and exclusively used by local water districts and government-owned or controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power; WHEREAS, the last paragraph of Section 234, provides that exemption from payment of real property tax previously granted to, or previously enjoyed by, all persons, whether natural or juridical, including all government-owned or controlled corporation are hereby withdrawn upon the effectivity of the LGC; WHEREAS, the National Grid Corporation of the Philippines (NGCP), is not included in the list of government-owned or controlled corporation and its legislative franchise (Section 9 of R.A. No. 9511) provides, among others, ". . . that the Grantee, its successors or assigns, shall be liable to pay the same taxes on their real estate, buildings and personal property, exclusive of this franchise , as other corporations are now or hereby may be required by law to pay : Provided, further, That payment by Grantee of the concession fees due to PSALM under the concession agreement shall not be subject to income tax and value-added tax (VAT); (Underlining supplied) WHEREAS, the Supreme Court, in the case of Digitel Telecommunications Philippines, Inc. vs. City Government of Batangas (G.R. No. 156040, December 11, 2008) ruled, among others, that the historical usage of the phrase " exclusive of this franchise " in franchise laws enacted by Congress indubitably shows that the phrase is not a grant of tax exemption, but an exclusion of one type of personal property subject to taxes, and the excluded personal property is the franchise; (Underlining supplied) THaAEC WHEREAS, the Supreme Court in the case of the National Power Corporation vs. Province of Quezon and Municipality of Pagbilao (G.R. No. 171586, July 15, 2009), held that "to successfully claim exemption under Section 234 (c) of the LGC, the claimant must prove two (2) elements: "a. The machineries and equipment are actually, directly, and exclusively used by local water districts and government-owned or controlled corporations; "b. The local water districts and government-owned and controlled corporations claiming exemption must be engaged in the supply and distribution of water and/or the generation and transmission of electric power." "xxx xxx xxx." NOW, THEREFORE, and as our immediate response to requests from LGUs for clarification on the status of NGCP's real properties, the following guidelines are hereby issued for information, guidance and compliance of all concerned relative to the real property tax liability of the National Grid Corporation of the Philippines (NGCP): 1. NGCP is subject to real property tax on their real estate, buildings machinery and equipment and personal properties; 2. The Real Properties of NGCP shall be classified, valued and assessed as Industrial; 3. The Assessment Level (AL) for Land, Buildings and other Structures provided under Section 218 (a) (b) or that AL enacted under enabling Ordinance by the local Sanggunian, shall apply; 4. The machinery and equipment of NGCP used actually, directly and exclusively in the generation and transmission of electric power shall have an Assessment Level (AL) of 80% or that AL which was fixed under an enabling Ordinance enacted by the local Sanggunian, pursuant to Section 218 (c) of the LGC; 5. The machinery and equipment of NGCP used actually, directly and exclusively in the generation of electric power which ceased operations shall no longer be assessed, and should be transferred from the taxable roll to exempt roll of real properties. The Provincial Assessors and Treasurers are hereby instructed to disseminate the contents of this Circular to the Municipal Assessors and Treasurers within their respective jurisdiction. cTADCH Be guided accordingly. (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director