Bureau of Local Government Finance Opinion

June 16, 2000 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION The City Assessor Pagadian City S i r : This refers to your letter dated February 29, 2000, requesting opinion as to whether or not Zamsureco I is exempt from the payment of real property taxes. Zamsureco claims that they are still exempt considering that "NEA and CDA agreed to register the electric coops provisionally to be able to enjoy the benefits of tax exemption as provided for under Republic Act 6938." It is submitted that Zamsureco I is an electric cooperative solely registered with the National Electrification Administration (NEA). The same (Zamsureco I) apparently failed to convert as stock cooperative until the transition period of three (3) years (within which it may convert into stock cooperative and, thereupon, be registered with the CDA, in pursuance of R.A. No. 6938), which expired on May 4, 1997. DaIACS The said electric cooperative has been declared as "Taxable" in view of the Memorandum dated July 24, 1998 of the Executive Director of the Cooperative Development Authority (CDA),which reads, in part, as follows: "The Certificate of Provisional Registration of electric cooperatives which failed to convert as stock cooperatives automatically expired on May 4, 1997. . . ." "Consequently, electric cooperatives which failed to convert into stock cooperatives shall not be entitled to tax exemptions and other privileges as provided under Republic Act Numbers 6938 and 7160, otherwise known as the Cooperative Code of the Philippines and Local Government Code (of 1991) respectively." In this connection, attention is invited to our letter dated March 1, 2000, copy enclosed, treating on a similar subject matter, which clarified on the basis of the ruling issued by the Department of Finance embodied under its 1st Indorsement dated September 20, 1993, that: 1. Electric cooperatives previously enjoying real property tax exemption privileges under the terms and conditions of P.D. No. 269 had their abovementioned privileges restored effective July 1, 1987 by virtue of the FIRB Resolution No. 24-87. 2. On the basis of the provisions of R.A. 6938, Cooperative Code of the Philippines, and R.A. No. 7160, otherwise known as the Local Government Code of 1991, " electric cooperatives are exempt from the payment of real property tax when they are duly registered with the Cooperative Development Authority (CDA), pursuant to R . A . 6938 with certain limitations therein specified ." (Emphasis supplied) CSTHca 3. That the real property tax exemption previously granted to, or presently enjoyed by, electric cooperatives registered solely under P.D. No. 269 has been withdrawn by virtue of Section 234 of R.A. No. 7160, otherwise known as the Local Government Code of 1991; and 4. In Opinion No. 101, series of 1996, the Department of Justice (DOJ) supports the stand that in order that a cooperative could enjoy incentives granted by virtue of the exemption provisions of R.A. No. 6938, the registration with CDA is required instead of that with the NEA. In view thereof, and considering that ZAMSURECO I is a solely NEA-registered electric cooperative (not CDA-registered under R.A. No. 6938), its exemption privileges under Section 39 of P.D. No. 269 were similarly withdrawn pursuant to Section 234 of R.A. No. 7160. And considering further that the Certificates of Provisional Resignation of Zamsureco I automatically expired on May 4, 1997, the same, therefore, is liable to real property taxes beginning January 1, 1998 in view of the withdrawal of exemption provisions of R.A. No. 7160, and Article III(B)(2) of the Manual on Real Property Tax Administration, which provides: "(2) Day as of which exemption determined "If property is not exempt on the tax day, its is liable to taxation for the (fiscal) year although it afterwards becomes exempt. For instance, it has been decided that where land has become liable for taxes, it remains so for that year although subsequently acquired for purposes rendering it exempt." Please be guided accordingly. Very truly yours, (SGD.) ANGELINA M. MAGSINO Deputy Executive Director Officer-in-Charge