Bureau of Local Government Finance Opinion

January 11, 2000 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 2nd Indorsement Respectfully returned, thru the Regional Director for Local Government Finance, Department of Finance, Region I, 2nd Floor, Mabanag Justice Hall Building, Governor Luna Street, San Fernando City, to the Provincial Assessor of La Union, the within preceding Indorsement dated September 23, 1999 relative to the letter dated April 30, 1999 of Mr. Ramon C. Posadas, General Manager, La Union Electric Cooperative, Inc. (LUELCO), requesting a ruling/opinion concerning the taxability of the real properties of LUELCO. AcSHCD It appears that Mr. Posadas is claiming exemption from payment of real property taxes on the land and building acquired by LUELCO thru a Deed of Donation dated September 20, 1978 and executed by the municipality of Agoo as represented by the then Mayor of Agoo, Engr. Camilo Tavora and Ambassador Jose D. Aspiras and his wife. Mr. Posadas was also referring to the Decision of the Regional Trial Court of San Carlos City, Pangasinan, regarding the case of the City of San Carlos versus Central Pangasinan Electric Cooperative, Inc. (CENPELCO) on the issue of tax exemption wherein the judgment was rendered in favor of CENPELCO. The dispositive portion of the said Decision on Civil Case No. SCC-1421 states: "The power of local government to 'impose taxes and fees' is always subject to limitations which Congress may provide by law. CENPELCO was organized and exempted by Presidential Decree 269 and also Presidential Decree 231 (Local Tax Code) as amended by Presidential Decree No. 426. Hence, Central Pangasinan Electric Cooperative, Inc. (CENPELCO) is exempt from payment of taxes as provided by various Presidential Decrees, issuances and executive orders or laws." In this connection, attention is invited to the ruling issued by the Department of Finance embodied under its 1st Indorsement dated September 20, 1993, copy enclosed, declaring that: "Clearly, electric cooperatives previously enjoying real property tax exemption privileges under the terms and conditions of P.D. 269 had their abovementioned privileges restored effective July 1, 1987 by virtue of the FIRB Resolution No. 24-87. "Finally, on the basis of the provisions of R.A. 6938, the Cooperative Code of the Philippines, and R.A. 7160, otherwise known as the Local Government Code of 1991, this Department clarified under its letter dated December 29,1992, that: "Evidently, all real property owned by cooperatives are specifically covered by the provisions of Article 122 of R.A. 6938: "xxx xxx xxx "Accordingly, electric cooperatives are exempt from the payment of real property tax when they are duly registered with the Cooperative Development Authority (CDA), pursuant to R.A. 6938 with certain limitations therein specified." It is worth mentioning that in a 2nd Indorsement dated January 4, 1999, this Bureau had manifested concurrence in the argument that: ". . . In the case of Miranda Imperial (77 Phil. 1066), the Supreme Tribunal categorically stated that only decisions of this Honorable Court establish jurisprudence or doctrines in this jurisdiction.' Consequently, decisions of subordinate courts are only persuasive in nature, and can have no mandatory effect . (Paras, Civil Code of the Philippines annotated)." It is also important to note hereon that real property tax exemption previously granted to, or presently enjoyed by, electric cooperatives registered solely under PD 269 has been withdrawn by virtue of Section 234 of R.A. No. 7160, otherwise known as the Local Government Code of 1991, the pertinent portion of which provides: "Section 234. Exemption from Real Property Tax . The following are exempted from payment of the real property tax: "xxx xxx xxx "Except as provided herein, any exemption from payment of real property tax previously granted to, or presently enjoyed by, all persons, whether natural or juridical, including all government-owned or controlled corporations are hereby withdrawn upon the effectivity of thus Code." Moreover, the Department of Justice (DOJ), under its letter dated April 23, 1996, copy attached, supports the stand that in order that a cooperative could enjoy the incentives granted by virtue of the exemption provisions of R.A. No. 6938, the registration with the CDA is required instead of that with the NEA. HEDSCc It is important to note, further, that this Bureau concurs in the observation of the Executive Director of the Cooperative Development Authority, under his Memorandum dated July 24, 1998, (copy attached) that "electric cooperatives which failed to convert into stock cooperatives shall not be entitled to tax exemptions and other privileges (such as exemption from payment of real property taxes) as provided under Republic Act Nos. 6938 and 7160." Accordingly, that Office should first determine whether or not LUELCO is registered with the CDA; and ascertain if its accumulated reserves and undivided net savings do not exceed P10M as required under R.A. No. 6938. In the affirmative, this Bureau finds no reason why the real properties of the said electric cooperative should not be declared exempt from the payment of real property taxes. Be guided accordingly. (SGD.) ANGELINA M. MAGSINO Deputy Executive Director Officer-in-Charge