Bureau of Local Government Finance Opinion

January 10, 2005 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Engr. Orlando A. Tibang Irrigation Superintendent II National Irrigation Administration (NIA) Marbel-Banga River Irrigation System Koronadal City South Cotabato S i r : This refers to your request for real property tax exemption of the real properties (Irrigation Structures and facilities including the Soil Erosion Control Structures) owned by National Irrigation Administration (NIA) pursuant to Section 234 (a) and (e) of R.A. No. 7160, also known as the Local Government Code (LGC) of 1991. Attached herewith for your information and ready reference is the 2nd Indorsement dated April 19, 2004 of the Provincial Assessor of South Cotabato, submitting his reply and/or comment to our 1st Indorsement dated March 17, 2004, wherein his Office assessed and approved as "taxable" the real properties of NIA in accordance with the ruling embodied under the 2nd Indorsement dated May 13, 2002 of this Bureau, which are quoted, in part, hereunder: "xxx xxx xxx. "It is represented that NIA is a government owned or controlled corporation (GOCC), created under Republic Act No. 3601 on June 22, 1963 and amended by Presidential Decree No. 552. IaESCH "xxx xxx xxx. "The applicable provision of law on the matter is Section 234 of the Local Government Code of 1991 (R.A. No 7160), which provides as follows: "xxx xxx xxx. "Sec. 234. Exemption 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 the local water districts and government-owned or controlled corporation engaged in the supply and distribution of water and/or generation and transmission of electric power. (Emphasis supplied) "xxx xxx xxx." However, Sec. 234(e) of the Code likewise provides the following: "(e) Machinery and equipment exclusively used for pollution control and environmental protection. "xxx xxx xxx." Evidently, the exemption from payment of real property tax of GOCC's (such as NIA), has already been effectively withdrawn since 1992, and therefore the exemption has been limited to machineries and equipment only, which the Administration actually, directly and exclusively uses in the distribution of water. However, other real properties owned by NIA, which do not fall under the abovequoted provision of the Code, shall be considered taxable. EaTCSA At any rate, any machinery and equipment used exclusively by NIA for pollution control and environmental protection, would not be subject to the payment of real property tax. We trust that the foregoing clarifies matters. Very truly yours, (SGD.) MA. PRESENTACION R. MONTESA Executive Director