Bureau of Local Government Finance Opinion

February 23, 2001 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 3rd Indorsement Respectfully returned to the Municipal Treasurer and the Municipal Assessor, both of the Municipality of Taguig, Metro Manila, the 2nd Indorsement dated September 29, 1998 of that Office, relative to the letter dated February 16, 1998 of the then Undersecretary Ben Hur C. Salcedo of the Department of Energy (DOE), requesting a definitive ruling on the liability of the DOE for real property taxes over a parcel of land, and the buildings and other improvements thereon owned by DOE, located at Energy Center, Merritt Road, Fort Bonifacio, Taguig, Metro Manila. In this connection, enclosed is a copy of our letter of even date, which resolved that "the subject real properties are exempt from the payment of real property taxes from 1987 up to the present pursuant to the exemption provisions of Section 40(a) of P.D. No. 464, otherwise known as the Real Property Tax Code, and Section 234(a) of R.A. No. 7160, otherwise known as the Local Government Code of 1991." The said Municipal Treasurer and the Municipal Assessor of Taguig are, therefore, instructed to rectify all real property tax assessment and collection records pertaining to the subject real property in accordance with such 2nd Indorsement. DSETcC Report of action taken hereon within ten (10) days from receipt hereof is requested. (SGD.) BENJAMIN A. GERONIMO Executive Director February 23, 2001 Honorable Cyril C. Del Callar Undersecretary, Department of Energy (DOE) Energy Center, Merritt Road Fort Bonifacio, Taguig, Metro Manila S i r : This refers to the letter dated February 16, 1998 of that Department, requesting a definitive ruling on the liability of DOE for real property taxes over a parcel of land, and the buildings and other improvements thereon, owned and used by DOE, its Bureaus and Offices, located in Fort Bonifacio, Taguig, Metro Manila. The request was prompted by the "Statement of Delinquent Amount Due on Real Property Taxes" dated November 24, 1997 of the Municipal Treasurer of Taguig, amounting to P2,151,407.00 representing the real property taxes including the penalties due on said properties. In its abovementioned letter dated February 16, 1998 DOE alleged that: 1. The subject parcel of land was allocated to the then Ministry of Energy and its Bureaus and Offices for its occupancy through Letter of Instructions No. 693 signed by former President Ferdinand E. Marcos. 2. On May 31, 1993 the said land covering an area of 23,878 square meters was sold by the Bases Conversion Development Authority (BCDA) to DOE as stated in the Deed of Sale of Portion of Unregistered Land executed by both parties. ISEHTa On the other hand, the Municipal Assessor of Taguig in his 2nd Indorsement dated September 29, 1998 submitted that DOE is still liable to pay real estate tax from 1987 to 1997 in view of the following arguments: a. Tax Declaration No. C-019-00667 was first issued in the name of Energy Development Corporation, a government corporation and not DOE which was abolished during then President Aquino's administration. That, under P.D. No. 464 and R.A. No. 7160, the same, allegedly, is not among those that are exempt from payment of real property taxes, hence, it was assessed for the first time on October 7, 1993 and, being undeclared properties should be assessed for ten (10) years back taxes; b. On July 2, 1997 the then Officer-in-Charge of the Assessor's Office of Taguig, Metro Manila, Atty. Primitivo C. Cruz, cancelled T. D. No. D-019-00332 in the name of Energy Development Corporation and changed the name of the owner (Energy Development Corporation) to Department of Energy under Tax Declaration No. D-019-00948, retroactive to 1994 without mentioning about the exemption from taxation; and c. Prior to the acquisition of jurisdiction of Taguig, DOE was allegedly paying real property taxes on all its land and buildings in Makati. The DOE contends that the Republic of the Philippines owns the land through DOE, hence, the same is exempt from real property taxes under Section 234(a) of R.A. No. 7160. The said Section 234(a) reads, as follows: "Section 234. Exemptions from Real Property Tax . The following are exempted from payment of real property tax: "(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person . . ." "xxx xxx xxx. Moreover, under Section 40(a) of P.D. No. 464, enacted on May 20, 1974, the real properties of government agencies or its political subdivisions are likewise exempt from real property taxes. Section 40(a) of the Real Property Tax Code reads, as follows: "Section 40. Exemptions from Real Property Tax . The exemption shall be as follows: "(a) Real property owned by the Republic of the Philippines or its political subdivisions and any government owned or controlled corporation so exempt by its charter: Provided, however, That this exemption shall not apply to real property, of the abovenamed entities the beneficial use of which has been granted, for consideration or otherwise, to a taxable person." aDSTIC "xxx xxx xxx. It is clear from R.A. No. 7160 and P.D. No. 464 that real properties of government agencies are exempt from real property taxes, provided, that the beneficial use of such properties have not been granted, for consideration or otherwise, to a taxable person. To resolve the issue, this Department, thru the Bureau of Local Government Finance, conducted an investigation/ocular inspection of the properties, to determine whether they are exempt from real property tax under P.D. No. 464 and R.A. No. 7160. In a report dated October 27, 1998, the representatives of the Bureau of Local Government Finance who conducted the investigation/ocular inspection stated: "xxx xxx xxx. "3. Per attached Deed of Sale of a Portion of Unregistered Land executed by and between the Bases Conversion Development Authority (BCDA) and the Department of Energy (DOE), the said land was sold to DOE in the amount of P47,756,000.00 which then President Fidel V. Ramos concurred in per his Memorandum dated April 30, 1993. "4. DOE was first created on October 6, 1977 under P.D. No. 1206, then it became the Office of Energy Affairs under Executive Order No. 193 enacted on June 10, 1987 and became DOE again on December 9, 1992 under R.A. No. 7638. "5. The land is exclusively used by DOE where its buildings and improvements are erected or constructed, viz: 1. Energy Research Laboratory 14. Energy Data Center of the Phil. 2. Gym 15. Lagoon I 3. Covered Tennis Court 16. Databank 4. Tennis Court 17. Annex Bldg. 5. Basketball Court 18. Solar Laboratory 6. Parking Lot 19. Non-Conventional Energy Dev't. 7. Motorpool Office 20. Lagoon II 8. Motorpool 21. DOE Main Bldg. 9. Garage 22. National Petroleum Testing Lab. 10. Canteen 23. Parking Lot 11. Energy Research Lab. Bldg. IV 12. Energy Research Lab. Bldg. III 13. Energy Research Lab. Bldg. II "6. That under Section 4 of R.A. No. 7638, approved on December 9, 1992, the said Department (DOE) was created to prepare, integrate, coordinate, supervise, and control all plans, programs, projects, and activities of the Government relative to energy exploration, development, utilization, distribution, and conservation. EScIAa "xxx xxx xxx. Apparently, it is safe to conclude from the foregoing information that the then Office of Energy Affairs, until its transformation to DOE under R.A. No. 7638, is a regular agency of the National Government. In view thereof, this Bureau finds that the subject real properties are exempt from the payment of real property taxes from 1987 up to the present pursuant to Section 40(a) of P.D. No. 464, otherwise known as the Real Property Tax Code, and Section 234(a) of R.A. No. 7160, otherwise known as the Local Government Code of 1991.Emphasis, however, is hereby made that this exemption shall only be enjoyed for so long as the beneficial use of the subject real properties are not transferred, for consideration or otherwise, to a taxable person or entity. The Municipal Assessor and the Municipal Treasurer of Taguig have been given notice of this ruling for their immediate appropriate action concerning the real property tax assessments and collection records pertaining to the subject real properties of the DOE. We trust that this will clarify matters. Very truly yours, (SGD.) BENJAMIN A. GERONIMO Executive Director