Bureau of Local Government Finance Opinion

September 12, 2001 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 2nd Indorsement Respectfully returned, thru the Regional Director for Local Government Finance, Department of Finance, Region II, 17th Provincial Road, Caritan Sur, Tuguegarao City (Cagayan),to the Provincial Assessor, same province, the within preceding Indorsement dated April 30, 2001 relative to her within letter dated April 10, 2001 requesting assistance concerning the taxability of the real property (hospital building),located at Macanaya, Aparri, said province, declared in the name of the Lyceum of Aparri under Tax Declaration No. 01-15015-13045. It appears that the abovementioned request was prompted by the letter dated March 19, 2001 of Atty. Pedro R. Perez, Jr.,of Perez Law Office, addressed to the Provincial Assessor of said province claiming that the said hospital building, which was erected on the southern portion of the lot of the school (Lyceum of Aparri),and was established sometime in March, 1998, should be declared exempt from the payment of real property taxes because it is still an integral part of the said school, a non-profit, non-stock institution, and it is also actually, directly and exclusively used for educational purposes. On the other hand, the Provincial Assessor of Cagayan, in her letter dated April 10, 2001 submitted that the subject real properties of the Lyceum of Aparri Hospital (building) was declared by her Office as taxable under Tax Declaration No. 01-0515 for reasons that it is not exclusively devoted to charitable purposes, and it is a big hospital offering a well-rounded medical services for a fee. The Regional Director for Local Government Finance, Department of Finance, Region II, in his abovementioned 1st Indorsement dated April 30, 2001 requested that an ocular inspection/investigation be conducted by the BLGF Central Office in order to facilitate the resolution of said issue. STcHDC In this connection, and this Bureau, thru its representatives, in coordination with the staff of that Regional Office and the Provincial Assessor's Office of Cagayan, conducted an investigation/ocular inspection of the said property in order to ascertain the actual use of the same and, thereby, the requested opinion could be rendered accordingly. In a report dated July 23, 2001, the representatives of this Bureau who conducted the said investigation/ocular inspection submitted, among others, that: 1. The said hospital is erected on the southern portion of the land covering an area of 6.2033 hectares more or less declared as exempt in the name of the Roman Catholic Archbishop of Tuguegarao, Lyceum of Aparri, Under Tax Declaration Nos. 00-05015-15366, 15002 and 13830. 2. Per conversation with Rev. Fr. Joel M. Reyes, Hospital Administrator, it was gathered that the hospital will not start operation until the problem on the taxability of its real properties is not resolved. 3. Other improvements/buildings erected on the said land are as follows: 1. Basketball and Tennis Court 2. Seminary Building 3. Administrative and Registrar Building 4. Computer Building 5. College Building 6. School Canteen 7. School Gymnasium 8. High School Building 9. Dormitory 10. Small Cottages 11. Guard House; and 12. Hospital Building 4. The said hospital is a three (3) storey building consisting an area of 1,088 square meters for both 1st and 2nd floors and 81 square meters for its 3rd floor. It houses the following offices: First Floor 1. Emergency Room 14. Kitchen 2. Lobby 15. Chapel 3. Pharmacy 16. Nursery 4. Administration 17. Recovery Room 5. Rehabilitation 18. Labor Room 6. Medicine Department 19. Clean-up Room 7. Consultation 20. Delivery Room 8. Two (2) Operating Rooms 21. Sterile Supply Room 9. Dressing Room 22. X-Ray Room 10. Cafeteria 23. Ultra Sound Room 11. Laundry Room 24. Radiologist Office 12. Doctor's Lounge 25. Accounting Office 13. Dietician Second Floor 1. Medical Ward two (2) 6. Four (4) Semi- Suite Rooms Private Rooms 2. Doctors' Quarters 7. Pedia Ward 3. OB-Ward 8. Nurses' Quarters 4. Surgical Ward 9. Stock Room 5. Five (5) Private Rooms Third Floor 1. Chaplains' Quarters 5. The Lyceum of Aparri, Incorporated has been registered with the Securities and Exchange Commission (SEC) on April 21, 1983. Its amended Articles of Incorporation has the following purposes/objectives: 1. To give a sound, complete and Catholic education to children and youth of the Philippines and to promote their intellectual and moral development; 2. To establish and maintain a hospital so as to provide for a training ground for the medical and allied course students and, likewise, to provide the required and necessary health care services for students and the community; provided that purely professional medical or surgical services in connection therewith shall be performed by duly qualified physicians and surgeons who may or may not be connected with the corporation and who may be freely and individually contracted by the patients. 3. To perform all and everything necessary and proper for the attainment of the purpose or the furtherance of any of the powers herein above set forth, including the establishment and maintenance of its own security and ground force to take charge of the peace and order and the cleanliness of the school and hospital compound; and 4. To do every other act or acts, incidental or appurtenant to, or connected with the aforesaid business or powers, or any part or parts thereof: Provided, the same is not in conflict with the law under which this corporation is organized. 6. The said school offers the following courses: 1. Ph. D. 8. BSBA 15. BS Crim 2. MAED 9. BSCS 16. BS GE 3. MBA 10. BSOA 17. P. TECH 4. BEED 11. CSC 18. BSN 5. BSED 12. BSCE 19. GMC 6. AB 13. AMT 20. A.A 7. BSA 14. BS CompE 21. BS HRM 7. From the attached Statistical Report, the said school has an enrollment of 1,263 students for the second semester 2000-2001, broken down as follows: Male 535 Female 688 TOTAL 1,223 8. The Philippine Charity Sweepstakes Office (PCSO) under Board Resolution No. 383 series of 1999, allocated the amount of Two Million One Hundred Seventy Four Thousand and Ten Pesos (P2,174,010.00) to Lyceum of Aparri, Cagayan Hospital for the purchase of its medical equipment. 9. The PCSO extends also its assistance in the construction of said hospital in the amount of Four Million One Hundred Four Thousand Eight Hundred Twenty Four Pesos (P4,104,824.00) per Summary of Disbursement submitted by Rev. Fr. Joel M. Reyes, in his attached letter dated December 18, 1998. 10. Likewise, the said school applied for a loan from the Development Bank of the Philippines (DBP) in the amount of Two Million Two Hundred Fifty Thousand Pesos (P2,250,000.00),an additional amount for the construction of said hospital (See attached Application of Loan from DBP). CcSEIH 11. Per Statement of Costs confirmed and submitted by the Project Engineer, the total cost of the said hospital building is Twenty Million Seven Hundred Ninety Two Thousand Six Hundred Eighty Eight Pesos and Five Centavos (P20,792,688.05). 12. The charges and room rates of the old hospital (not operating/closed) are as follows: 1. Suite Rooms P200.00/day 2. Private Rooms P150.00/day 3. Ward P100.00/day 4. Consultation Fee (OPD) P30.00 Towards this end, attention is invited to Section 234(b) of R.A. No. 7160, otherwise known as the Local Government Code of 1991 which reads as follows: "Section 234. Exemptions from Real Property Tax. The following are exempted from payment of the 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 ." (Emphasis supplied) Clearly, it is stated from the abovequoted provision of the said Code that all lands, buildings and improvements which are actually, directly and exclusively used for religious, charitable or educational purposes are exempt from the payment of real property taxes. In view thereof, and considering that the primary purpose for which the subject building was built is to provide a training ground for students taking up medical and allied courses in addition to the required and necessary health care services for the students and the community, and considering further that the same is not yet operational, this Bureau believes that the subject hospital building is exempt from the payment of real property taxes, subject to subsequent investigation/ocular inspection when the subject building will become fully operational. The Provincial Treasurer thereat should be given notice of the action taken by that Office for his appropriate action. Report of action taken hereon within ten (10) days from receipt hereof is requested. (SGD.) BENJAMIN A. GERONIMO Executive Director MEMORANDUM FOR : Exec. Director B. A. GERONIMO THRU : Channel DATE : July 23, 2001 SUBJECT : Report on the investigation/ocular inspection conducted relative to the taxability of the real properties owned by the Lyceum of Aparri Hospital located at Macanaya, Aparri, Cagayan In compliance with BLGF Travel Order No. 15-2001 dated May 22, 2001, hereunder is our report on the investigation/ocular inspection conducted on the real properties owned by Lyceum of Aparri Hospital FACTS The Provincial Assessor of Cagayan in her letter dated April 10, 2001, submitted that the subject real properties of Lyceum of Aparri Hospital (building) was declared as taxable under Tax Declaration No. 01-0515 for reasons that it is not exclusively devoted to charitable purposes, and it is a big hospital offering a well-rounded medical service for a fee. Atty. Pedro R. Perez, Jr.,of Perez Law Office, in his letter dated March 19, 2001 addressed to the Provincial Assessor of said province claims that said hospital which was erected on the southern portion of the lot of the school (Lyceum of Aparri),and was established sometime in March, 1998, should be declared exempt from the payment of real property taxes because it is still an integral part of the said school which' is a non-profit, non-stock institution, and it is also actually, directly and exclusively used for educational purposes. The Regional Director for Local Government Finance, Department of Finance, Region II, in his 1st Indorsement dated April 30, 2001 requested that an ocular inspection/investigation be conducted by the BLGF Central Office in order to facilitate the resolution of said issue. FINDINGS/OBSERVATIONS 1. The said hospital is erected on the southern portion of the land covering an area of 6.2033 hectares more or less declared as exempt in the name of the Roman Catholic Archbishop of Tuguegarao, Lyceum of Aparri, under Tax Declaration Nos. 00-05015-15366, 15002 and 13830. 2. Per conversation with Rev. Fr. Joel M. Reyes, Hospital Administrator, he informed that the hospital will not start operation until the problem on the taxability of its real properties is not resolved. 3. Other improvements/buildings erected on the said land are as follows: 1. Basketball and Tennis Court 2. Seminary Building 3. Administrative and Registrar Building 4. Computer Building 5. College Building 6. School Canteen 7. School Gymnasium 8. High School Building 9. Dormitory 10. Small Cottages 11. Guard House; and 12. Hospital Building 4. The said hospital is a three (3) storey building consisting an area of 1,088 square meters for both 1st and 2nd floors and 81 square meters for its 3rd floor. It houses the following offices: First Floor 1. Emergency Room 14. Kitchen 2. Lobby 15. Chapel 3. Pharmacy 16. Nursery 4. Administration 17. Recovery Room 5. Rehabilitation 18. Labor Room 6. Medicine Department 19. Clean-up Room 7. Consultation 20. Delivery Room 8. Two (2) Operating Rooms 21. Sterile Supply Room 9. Dressing Room 22. X-Ray Room 10. Cafeteria 23. Ultra Sound Room 11. Laundry Room 24. Radiologist Office 12. Doctor's Lounge 25. Accounting Office 13. Dietician Second Floor 1. Medical Ward two (2) 6. Four (4) Semi- Suite Rooms Private Rooms 2. Doctors' Quarters 7. Pedia Ward 3. OB-Ward 8. Nurses' Quarters 4. Surgical Ward 9. Stock Room 5. Five (5) Private Rooms Third Floor 1. Chaplains' Quarters 5. The Lyceum of Aparri, Incorporated has been registered with the Securities and Exchange Commission (SEC) on April 21, 1983. Its amended Articles of Incorporation has the following purposes/objectives: 1. To give a sound, complete and Catholic education to children and youth of the Philippines and to promote their intellectual and moral development; 2. To establish and maintain a hospital so as to provide for a training ground for the medical and allied course students and, likewise, to provide the required and necessary health care services for students and the community; provided that purely professional medical or surgical services in connection therewith shall be performed by duly qualified physicians and surgeons who may or may not be connected with the corporation and who may be freely and individually be contracted by the patients. 3. To perform all and everything necessary and proper for the attainment of the purpose or the furtherance of any of the powers herein above set forth, including the establishment and maintenance of its own security and ground force to take charge of the peace and order and the cleanliness of the school and hospital compound; and 4. To do every other act or acts, incidental or appurtenant to, or connected with the aforesaid business or powers, or any part or parts thereof: Provided, the same is not in conflict with the law under which this corporation is organized. 6. The said school offers the following courses: 1. Ph. D. 8. BSBA 15. BS Crim 2. MAED 9. BSCS 16. BS GE 3. MBA 10. BSOA 17. P. TECH 4. BEED 11. CSC 18. BSN 5. BSED 12. BSCE 19. GMC 6. AB 13. AMT 20. A.A 7. BSA 14. BS CompE 21. BS HRM 7. From the attached Statistical Report, the said school has an enrollment of 1,263 students for the second semester 2000-2001, broke down as follows: Male 535 Female 688 TOTAL 1,223 8. The Philippine Charity Sweepstakes Office (PCSO) under Board Resolution No. 383 series of 1999, allocated the amount of Two Million One Hundred Seventy Four Thousand and Ten Pesos (P2,174,010.00) to Lyceum of Aparri, Cagayan Hospital for the purchase of its medical equipment. 9. The PCSO extends also its assistance in the construction of said hospital in the amount of Four Million One Hundred Four Thousand Eight Hundred Twenty Four Pesos (P4,104,824.00) per Summary of Disbursement submitted by Rev. Fr. Joel M. Reyes, in his attached letter dated December 18, 1998. 10. Likewise, the said school applied for a loan from the development Bank of the Philippines (DBP) in the amount of Two Million Two Hundred Fifty Thousand Pesos (P2,250,000.00),an additional amount for the construction of said hospital (See attached Application of Loan from DBP). 11. Per Statement of Costs confirmed and submitted by the Project Engineer, the total cost of the said hospital building is Twenty Million Seven Hundred Ninety Two Thousand Six Hundred Eighty Eight Pesos and Five Centavos (P20,792,688.05). 12. The charges and room rates of the old hospital (not operating/closed) are as follows: 1. Suite Rooms P200.00/day 2. Private Rooms P150.00/day 3. Ward P100.00/day 4. Consultation Fee (OPD) P30.00 RECOMMENDATION In view of the foregoing, and considering its primary purpose for which it was built is to provide a training ground for students taking medical and allied courses and, also provide the required and necessary health care services for the students and the community, the undersigned hereby recommend that in the meantime the assessment of the subject hospital building be transferred from the list of "Taxable Roll of Real Properties" to the "Exempt Roll of Real Properties" subject to subsequent investigation/ocular inspection when the subject building will be fully operational. Respectfully submitted by: (SGD.) EDWIN C. BALEVA (SGD.) ESTELITO C. SANGALANG FA III LAOO III NOTED BY: (SGD.) EDUARDO L. DEL ROSARIO LAOO V