Bureau of Local Government Finance Opinion

August 27, 2003 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 2nd Indorsement Respectfully returned to the City Assessor of Paraaque City, her within preceding indorsement relative to the request of Atty. Myrna Cruz-Feliciano, representative of the Comboni Missionaries of the Heart of Jesus, Inc. (CMHJI), for exemption from the payment of real property tax on the real property (land) located at lot 22-A, Blk-2, Mendoza St., Villa Mendoza Subd., Brgy. San Isidro, same city. It appears that the abovementioned request of Atty. Cruz-Feliciano is being made in view of the issuance of Tax Declaration No. E-011-15996 by that Office covering the subject property as "Taxable," which she contends is "actually, directly and exclusively being used for religious purposes" by the said congregation. At the same time, she submitted a copy of the floor plan of the building erected on the subject land which is seemingly not yet assessed for taxation purposes. In this regard, that Office conducted an ocular inspection of the building, with the findings that it "has numerous uses and if not for the small chapel in the second floor, the building is not actually, directly and exclusively used for religious purposes." However, this Bureau deemed it necessary to conduct further verification on the said premises. Hence, its authorized representatives conducted a separate ocular inspection for additional information necessary in determining the exemption or taxability of the subject real properties of CMHJI. In this connection, attention is invited to the pertinent portion of the Ocular Inspection Report submitted by the said representatives of this Bureau, to wit: "O B S E R V A T I O N S "1. Although a part of the building is functioning as an office, still, the undersigned deem that the subject real properties (land and building) of CMHJI are being used actually, directly and exclusively for its religious purposes. We find the operations of the Circulation Office as only " incidental " for the accomplishment of their religious existence and purpose. Also, we cannot assume that the same is income-generating considering the minimal rates being charged, as observed. We deem that the same is only necessary to continuously run the said Circulation Office in spreading the Word of God . "2. Likewise, the Living Quarters serve as residence of the local and foreign missionaries of the said congregation who are indeed distinguishable personages that constitute religious institutions." In this connection, attention is invited to Section 234 of R.A. No. 7160, otherwise known as the Local Government Code of 1991 which reads in part, as follows: "SEC. 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 or educational purposes ;" Moreover, attention is also invited to the clarificatory portion in Supreme Court (SC) Decisions, as embodied under CBAA Decision Case No. L-08: Classification/Actual Use in clarifying the term " actually, directly and exclusively used ," to wit: 1. Abra Valley College, Inc. vs. Aquino (G.R. No. L-39086, June 15, 1988, 162 SCRA 106), citing Herrera vs. Quezon CityBoard of Assessment Appeals (G.R. No. L-1570, September 30, 1961, 3 SCRA 1860) and Commissioner of Internal Revenue vs. Bishop of the Missionary District (14 SCRA 991) : ". . . Moreover, the exemption in favor of property used exclusively for charitable or educational purposes is not limited to property actually indispensable therefore (Cooley on Taxation, Vol. 2, p. 1430), but extends to facilities which are incidental to and reasonably necessary for the accomplishment of said purposes, such as in the case of hospitals, a school for training nurses, a nurses home, a property used to provide housing facilities, and other members of the hospital staff, and recreational facilities for student nurses, interns, and residents (18 C. Juris Secundum 621) such as athletics fields, including a farm used for inmates of the institutions. (Cooley on Taxation, Vol. 2, p. 1430) 2. Herrera vs. Quezon City Board of Assessment Appeals (3 SCRA 186 [1961]) and Commissioner of Internal Revenue vs. Bishop of Missionary District (14 SCRA 191 [1965]) : "It must be stressed however, that while this Court allows a more liberal and nonrestrictive interpretation of the phrase "exclusively used for educational purposes" as provided for in Article VI, Section 22 paragraph 3 of the 1935 Philippine Constitution, reasonable emphasis has always been made that exemption extends to facilities which are incidental to and reasonably necessary for the accomplishment of the mean purpose . . . (Emphasis supplied) It is clear, therefore, that the term "actually, directly and exclusively used" under Section 234(b) of the Code is not limited to and does not preclude such other " incidental uses " attached to the primary use of a property. In the instant case, the Circulation Office of CMHJI, which is a part of the subject building, is considered as incidental to and reasonably necessary in achieving the main purpose of the said congregation in spreading the Word of God . The Living Quarters which house the local and foreign missionaries of CMHJI who are indeed distinguished personages that constitute religious institutions, are likewise incidental to and necessary in the accomplishment of its existence and purpose. IADaSE In view of the foregoing, this Bureau opines that the subject land and building of the said congregation are exempt from the payment of real property tax. In view hereof, that Office is hereby instructed to: 1. Drop from the Roll of "Taxable" Real Properties the subject land of CMHJI, and transfer the same to the "Exempt" Roll; and 2. Issue the corresponding tax declaration for its building marked as "Exempt." Be guided accordingly. (SGD.) MA. PRESENTACION R. MONTESA Executive Director