Bureau of Local Government Finance Opinion

August 28, 2012 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 2nd Indorsement Respectfully returned to the ICO-Regional Director for Local Government Finance, Department of Finance, Region IX, F.S. Fajares Avenue, Oval Complex, Pagadian City, his within preceding Indorsement dated June 14, 2012, seeking legal opinion on the claim of Mr. Jose Raul A. Saniel, General Manager of ZAMBOANGA del Sur 1 Electric Cooperative , (ZAMSURECO 1), located in the municipality of Ramon Magsaysay, Province of Zamboanga del Sur, that the electric poles of ZAMSURECO 1 are not subject to the payment of real property tax. HADTEC Mr. Saniel, in his letter dated March 5, 2012 addressed to the Municipal Mayor of R. Magsaysay, said province, is objecting on the assessment made by the said Local Government Unit (LGU) against the electric poles of said electric cooperative invoking the Supreme Court Decision in the case of " Board of Assessment Appeals, et al. vs. MERALCO ," (G.R. No. 15334) (10 SCRA 64) wherein the Court held that " . . . . steel towers of an electric company do not constitute real property for purposes of real property tax ." In this regard, please be informed that the subject SC Decision was promulgated in 1964 (prior to the Real Property Tax Code, PD 464 as amended). With the enactment of the Local Government Code (LGC) of 1991 (R.A. No. 7160), it was deemed repealed and/or modified specifically the definition of machinery under Section 199 (o) of the said Code. Hence, the prevailing and applicable law now is provided under Section 234 (c) of the LGC of 1991, which provides, to wit: HADTEC "SEC. 234. Exemptions from Real Property Tax. The following are exempted from payment of real property tax. 'xxx xxx xxx '(c) 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; 'xxx xxx xxx.' In view hereof, and pursuant to the aforequoted provision of the Code, this Bureau is of the opinion that ZAMSURECO 1, the real properties thereof (electric poles) are subject to the payment of real property tax. HADTEC Attached are copies of this Bureau's ruling rendered under its 3rd Indorsement dated March 30, 2012 and letter to the Honorable Secretary, Department of Energy (DOE), which similarly treat on the same subject matter, for your information and proper guidance. Be guided accordingly. (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director