Bureau of Local Government Finance Opinion

May 11, 2015 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Wendell V. Ballesteros General Manager Philippine Rural Electric Cooperative Association, Inc. (PHILRECA) 4th Floor CASMAN Bldg. 1198 Quezon Avenue Quezon City Sir : This refers to the copy of your letter dated February 18, 2015, addressed to the Office of the President copy furnished the Department of Finance (DOF), which was forwarded to this Bureau for appropriate action. Said letter pertains to issues relative to Republic Act No. 10531, "An Act Strengthening the National Electrification Administration, Further Amending for the Purpose Presidential Decree No. 269, as Amended, Otherwise Known as the "National Electrification Administration Decree", Otherwise Known as the "National Electrification Administration Reform Act of 2013." HTcADC In connection thereof, PHILRECA requests, among others, the following: a) Enjoin the Department of Energy (DOE) and Department of Public Works and Highways (DPWH) to cooperate with each other and come up with the necessary guidelines for the implementation of Section 13, Chapter III of R.A. 10531; and b) To enjoin DOE and Department of Finance (DOF) through the Bureau of Local Government Finance (BLGF) to cooperate with each other and come up with the necessary guidelines for the implementation of Section 13, Chapter III, R.A. 10531 inserting a new section to P.D. 269, designated as Section 32-A, more particularly, paragraph (c) thereof. As aptly stated in your letter, the NEA initiated the drafting of a propose Guidelines for Electric Cooperative Privileges which was endorsed to the DOE and consequently referred to the DOF through the BLGF for comment. In reply, under a letter dated June 17, 2014, this Bureau stated that only EC's registered with the cooperative Development Authority (CDA) are entitled to tax exemption. The BLGF "comments" prompted the DOE to sought for a legal opinion from the Department of Justice (DOJ) on the appropriate interpretation of the provisions of Section 13 of R.A. 10531 wherein DOJ issued legal opinion favorable to the BLGF. However, it is PHILRECA's position that the incentives granted to ECs under Section 13 of R.A. 10531 are meant to apply to all ECs whether registered with and supervised NEA or registered with the CDA. While we understand the sentiments of ECs registered with and supervised by NEA and their desire for entitlement to exemptions, incentives and privileges granted under the pertinent provisions of R.A. No. 7160, also known as the Local Government Code (LGC) of 1991, this Bureau has no authority to declare so. There has to be a legislative initiative from Congress amending the pertinent provision of the LGC to conform to the tenets of Section 13-A (c) of R.A. No. 10531, which states: "SEC. 32-A. Incentives of Electric Cooperatives. Consistent with the declared policy of this Act, electric cooperatives which comply with the financial and operational standards set by the NEA shall enjoy the following incentives: . . .; and (c) To avail of the preferential rights granted to cooperatives under Republic Act No. 7160, otherwise known as the 'Local Government Code of 1991', and other related laws." aScITE The immediate preceding provisions of law compel us to validate with the relevant provisions of the LGC the claim of PHILRECA that incentives granted to ECs under Section 13-A of R.A. No. 10531 include those supervised by NEA, thus: "SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: xxx xxx xxx." (n) Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and cooperatives duly registered under R.A. No. 6810 and Republic Act Numbered Sixty-nine hundred thirty-eight (R.A. No. 6938) otherwise known as the "Cooperative Code of the Philippines" respectively; and. . . . ." "SEC. 234. Exemptions from Real Property Tax. The following are exempted from payment of the real property tax: xxx xxx xxx." (d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938 ; and. . . . ." (Underscoring for emphasis) The foregoing discussion and the immediate preceding provision of law considered, this Bureau hereby reiterates its previous stand on the incentives of ECs embodied in the letter dated June 17, 2014 addressed to Director MYLENE C. CAPONGCOL of Electric Power Industry Management Bureau (EPIMB) of the DOE and therefore, regrets that it cannot agree to, or support the position of PHILRECA for lack of legal basis in the LGC and its IRR. We hope that this will help clarify matters. Very truly yours, (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director