Bureau of Local Government Finance Opinion

July 24, 2003 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 1st Indorsement Respectfully returned to the ICO-Regional Director for Local Government Finance, Department of Finance, Region VII, Cebu City, her within letter dated February 17, 2003, requesting opinion regarding the taxability of LIHUK PANAGHIUSA, INC., (LPI, for short) on their real properties situated at Cansojong, Talisay City. LIHUK PANAGHIUSA, INC., is allegedly a non-stock, non-governmental organization, duly organized and existing under the laws of the Philippines. It appears that the above-named non-governmental organization acquired its juridical personality on September 26, 1995 with the following purpose(s): "To promote, advance and practice solidarity and brotherhood among peoples, individuals, and groups from diverse backgrounds, without regard to social, economic, political, religious and cultural origins and/or other considerations, and to secure and defend the human rights of individuals in accordance with the local and international law. "xxx xxx xxx." However, on February 16, 2002, the Articles of Incorporation of LPI was amended, will the following primary purpose: "To promote, advance and practice charitable and educational activities and to defend the human rights of individuals. "xxx xxx xxx." It is the contention of that Office that the subject properties of the said Corporation are not the kind which can be granted exemption from taxation as contemplated in Section 234(b), R.A. 7160 otherwise known as the Local Government Code of 1991. aTcIEH That Office also contends that LIHUK PANAGHIUSA, INC., which likewise acquired two (2) lots in Talisay City in 1998 and constructed therein a warehouse in 2000, may not be considered as charitable institution before the amendment of the primary purpose of their Articles of Incorporation as it was only amended on February 16, 2002. Moreover, that Office submitted that during that time, the real properties were idle and not devoted or used for charitable purposes. Attention is invited to Section 234(b) of the Local Government Code of 1991, which reads as follows: "Section 234. Exemptions from Real Property Tax . The following are exempted from payment of real property tax. "xxx xxx xxx. "(b) All charitable institutions, churches, parsonages or convents appurtenant thereto including mosques, nonprofit or religious cemeteries and all lands, buildings and improvements which are actually, directly and exclusively used for religious, charitable or educational purposes." Evidently the abovequoted provision mandates that only real properties actually, directly and exclusively used for religious, charitable or educational purposes are exempt from the payment of real property tax. Attached for your ready reference is it copy of the 2nd Indorsement dated January 10, 2003, of this Bureau, treating on a similar subject matter. In view of the foregoing, and as submitted by that Office that prior to 2002, the properties of LPI had been idle and not devoted nor used actually, directly and exclusively for charitable purposes, not to mention the amendment of its Articles of Incorporation, this Bureau believes and so holds that Lihuk-Panaghiusa, Inc. shall be liable to pay real property tax on subject properties effective 2003, pursuant to Section 221 of the Local Government Code of 1991. SAEHaC (SGD.) MA. PRESENTACION R. MONTESA Executive Director