Bureau of Local Government Finance Opinion

January 26, 1999 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 1st Indorsement Respectfully referred, thru the City Assessor, to the City Treasurer, both of Pasay City, the within letter dated October 5, 1998 of Ms. Clara R. Pastor, one of the Heirs of the late Florencio Reyes, Sr., requesting assistance for the review of the assessments and real property tax computations covering their real property (land) declared in the name of the late Florencio Reyes, Sr. It appears that the abovementioned request was prompted by the purported auction sale of the Subject real property in view of the accumulated real property tax delinquencies thereon amounting to P2,478,425.18, as of September, 1998, of which the amount of P1,000,000.00 has allegedly been paid under protest. Ms. Pastor further submits the following manifestations, to wit: 1. That the subject real property should not have been appraised/assessed like similar properties in the locality considering that the same is fully occupied by squatters "In fact, the same has been declared as an Area for Priority Development (APD) under P.D. No. 2016 as evidenced by the attached copy of House Resolution No. 726 introduced during the First Regular Session of the Tenth Congress" by no less than Hon. Jovito O. Claudio who was then a Congressman; and 2. That the Heirs of the late Florencio Reyes, Sr., are willing to settle the remaining real property tax delinquency under a lighter "Compromise Agreement". A careful reading of the abovementioned House Resolution No. 726 reveals that the subject real property of the late Florencio Reyes, Sr., has, indeed, been declared as an APD in consonance with P.D. No. 2016 which was promulgated on January 23, 1986, "and included in the Urban Land Reform Zone (ULRZ) under the Urban Land Reform Program," and that the same has been the subject of an inquiry "for possible expropriation or for distribution to the bonafide residents therein under the Community Mortgage Program of the Government." In this connection, quoted hereunder is Section 5 of P.D. No. 2016 (Prohibiting the Eviction of Occupants from Land Identified and Proclaimed as Area for Priority Development (APD) or as Urban Land Reform Zones), to wit: "xxx xxx xxx. "SEC. 5. The National Housing Authority, as lead agency of the national government in the implementation of housing developments for marginal and low income families, shall upon the identification and proclamation of a depressed community as an Area for Priority Development or an Urban Land Reform Zone, include the same in its list of pipeline projects for development under the Zonal Improvement Program for Metro Manila or the Slum Improvement and Resettlement Program for regional cities. . . . " Clearly, once a depressed community, like the one located in the subject land of the late Florencio Reyes, Sr., which is fully occupied by squatters, has been identified and proclaimed as an APD, the same shall be included in the list of the National Housing Authority in its pipeline projects for development under the Zonal Improvement Program for Metro Manila. Hence, the situation tends to place the subject property in a situation different from those that are not covered by the proclamation as the same could no longer be a subject of free negotiations in case the owner would want to offer his property in the open market. During the Second Regular Session of the Tenth Congress, the Minutes of the Meeting of the Committee on Housing and Urban Development held on the 5th of November, 1996 at the VIP Room, House of Representatives, copy attached, reveals that even Congress has taken cognizance that among the effects of the declaration of the area as an APD would be "that tenants may not be ejected therefrom and that the tenants must be given priority to purchase the property". In this regard, this Bureau finds the contention of Ms. Pastor, that the subject real property should not have been appraised/assessed like similar properties in the locality, tenable, considering that P.D. No. 2016 virtually "froze" the valuation on these properties. Moreover, attention is also invited to the 2nd Indorsement dated November 16, 1998, copy enclosed, of this Bureau, treating on a relatively similar subject matter, particularly with regard to Section 3 of said P.D. No. 2016, the resolving portion thereof states: "Obviously, not only exemptions from payment of real property tax previously granted to persons whether natural or juridical nor GOCC's have been withdrawn upon the effectivity of the Local Government Code of 1991, but also exemptions granted under the general and special laws, acts, charters, decrees like P.D. No. 2016, have also been deemed withdrawn and/or repealed upon the effectivity of the Code on January 1, 1992. "Accordingly, the subject real properties are indeed exempt from real property taxes commencing in January 1988 in view of the . . . exemption provisions of P . D . No . 2016 and the NHA Board Resolution No. 1245, and in line with Article III(B)(2) of the Manual on Real Property Tax Administration in the Philippines; but the same shall become taxable beginning January 1992, the year the Local Government Code of 1991 took effect." (Emphasis supplied) The abovementioned Section 3 of P.D. No. 2016 is quoted hereunder for ready reference. "Section 3. Privately-owned land which has been identified and proclaimed as an Area for Priority Development or Urban Land Reform Zone or is a project for development under the ZIP in Metro Manila and SIR Program for the regional cities shall be exempt from the payment of real estate taxes ." (emphasis supplied) Similarly, therefore, the subject real property should have been declared exempt from real property taxes effective the year following its declaration as an APD but not earlier than 1987 (the year following the effectivity of P.D. No. 2016) up to 1991, considering the withdrawal of exemption provisions of Section 234 of R.A. No. 7160, which took effect on January 1, 1992. Apparently, the amount of real property tax assessed against the subject real property of the late Florencio Reyes, Sr., by the Offices of the City Assessor and the City Treasurer of Pasay City is wanting rectifications in view of the foregoing circumstances. Accordingly, the purported auction sale of the subject land is deemed inappropriate at this juncture as such remedy could only become binding if the real property tax assessed thereon does not suffer any infirmity. In the same vein, the imposition of penalties against the subject property is also hereby deemed inappropriate as the correct amount of tax has yet to be established and the corresponding notice to the Heirs of the late Florencio Reyes, Sr., properly issued in order that the same could be considered valid and binding commencing its receipt by the said Heirs. In view thereof, the City Assessor is hereby instructed to ascertain the year when the subject real property was initially declared as an APD and immediately rectify the assessment records of the subject real property taking into consideration the following: CHDTEA 1. That in the valuation of the subject land for real property tax purposes, the prevailing condition of the subject property should be taken into account with comparison to the adjacent parcels of land for possible application of adjustment factors for being a squatter infested area, and its declaration as an APD; and 2. The exemption of the subject real property effective the year following its declaration as an APD, as provided under Section 3 of P.D. No. 2016, and in line with the abovecited related ruling dated November 16, 1998. The City Treasurer, for her part, should immediately make the necessary corrections pertaining to the real property tax collection records of the subject property based on the rectified assessments made in accordance herewith by the City Assessor. That Office is also hereby advised to favorably consider the request of the Heirs of the late Florencio Reyes, Sr. to pay the resulting delinquent real property tax under a lighter "Compromise Agreement", in line with Section 2 of Local Assessment Regulations No. 2-83 dated January 19, 1983, copy also enclosed, which in part provides as follows: "SEC. 2. If the delinquency as of December 31, 1982 aggregates to substantial amount which shall make it burdensome for the taxpayer to pay in one lump sum, the provincial or city treasurer may allow the liquidation of the total delinquent taxes and penalties, including expenses involved, in installments pursuant to the schedule indicated below, provided that 25% of the aggregate amount shall be remitted to the treasurer concerned, on the date the compromise agreement is signed by the delinquent taxpayer and the provincial or city treasurer or his authorized representative: Total Delinquency Balance Payable in installments "xxx xxx xxx. "c. P200,000- or over 25-36 months" Report of action taken hereon soonest is requested. (SGD.) ANGELINA M. MAGSINO Deputy Executive Director Officer-in-Charge