Request for Exemption from Payment of Real Estate Tax by the United Architects of the Philippines

DOJ OPINION NO. 025 , s. 2010 May 28, 2010 Arch. Ana S. Mangalino-Ling President United Architects of the Philippines, Inc. No. 53 Scout Rallos St., Brgy. Laging Handa Diliman, Quezon City Madam : This has reference to your letter requesting for a recommendation to grant the United Architects of the Philippines, Inc. (UAP) a certificate of full exemption from payment of its real estate tax on its National Headquarters Building, which was brought to the attention of this Department by Chairman Emmanuel Y. Angeles of the Commission on Higher Education. You mentioned that the UAP is a non-stock and non-profit corporation and that as an accredited Continuing Professional Education-provider by the Professional Regulatory Commission, the UAP Building serves as an educational and learning center for all its members in pursuit of continuing professional development on higher level of expertise parallel to international standards and instituting training and education programs in several specialized fields within the architecture profession. The instant request, it appears, involves the interpretation of Section 28 (3) of Article VI of the 1987 Constitution, which explicitly states that: (3) Charitable institutions, churches and parsonages or convents appurtenant thereto, mosques, non-profit cemeteries, and all lands, buildings, and improvements actually, directly, and exclusively used for religious, charitable, or educational purposes shall be exempt from taxation. As we see it, you are seeking the opinion of this Department on whether the headquarters building of the UAP should be considered exempt from real property taxation. With regret, this Department is unable to render the desired opinion. Pursuant to law and established precedents, the Secretary of Justice, as Attorney-General, renders opinion and gives legal advice only for and upon the request of national government functionaries, such as heads of departments and chiefs of bureaus and offices of equivalent ranks, and then only on specific legal questions/issues arising in the performance of their respective powers and functions. Accordingly, he has, in practice, consistently declined to render opinion or give legal advice to other government officials and to private individuals and entities, even if coursed through or endorsed by a national government functionary who may, himself, be entitled to seek opinion from this Department. 1 Moreover, the query raised the exemption of the UAP from payment of real property tax falls within the primary jurisdiction of the Bureau of Internal Revenue (BIR). The Secretary of Justice has consistently desisted from expressing his views on matters that fall within the authority of another office over which he possesses no revisory authority, unless his opinion is requested by such office or agency. This rule arises not only from practical considerations, but also out of due respect and deference for the competence and expertise of the office having primary jurisdiction to resolve their matter and for its familiarity with the policy repercussions of the question as well as from a logical recognition of the lawful exercise of an authority conferred by law. 2 Further, the specific issues raised in the instant request necessarily involve the substantive rights of a private party, the UAP, upon whom the opinion of the Secretary of Justice has no binding effect and would, in all probability, contest the same in court if the opinion turns out to be adverse to its interest. As a matter of policy, therefore, the Secretary of Justice has consistently refrained from rendering opinion or giving legal advice on questions which are justiciable in nature or those which may be the subject of judicial controversy. 3 We, therefore, suggest that you directly address your query to the BIR, the office which is in the best position to answer your query. This notwithstanding, for your guidance and information only, we would like to invite your attention to the interpretation of Section 28 (3) of Article VI of the 1987 Constitution made by the Supreme Court in the case of Lung Center of the Philippines vs. Quezon City , 433 SCRA 119, 135-138 (2004), which we deemed applicable to the instant query: The tax exemption under this constitutional provision covers property taxes only. As Chief Justice Hilario, Jr., then a member of the 1986 Constitutional Commission, explained: ". . . what is exempted is not the institution itself . . .; those exempted from real estate taxes are lands, buildings and improvements actually, directly and exclusively used for religious, charitable or educational purposes. Consequently, the constitutional provision is implemented by Section 234(b) of Republic Act No. 7160 (otherwise known as the Local Government Code of 1991) as follows: SECTION 234. Exemptions from Real Property Tax. The following are exempted from payment of the real property tax: xxx xxx xxx (b) Charitable institutions, parsonages or convents appurtenant thereto, mosques, non-profit or religious cemeteries and all lands, buildings, and improvements actually, directly, and exclusively used for religious, charitable or educational purposes. We note that under the 1935 Constitution, ". . . all lands, buildings, and improvements used 'exclusively' for . . . charitable . . . purposes shall be exempt from taxation. However, under the 1973 and the present Constitutions, for "lands, buildings, and improvements" of the charitable institution to be considered exempt, the same should not only be "exclusively" used for charitable purposes; it is required that such property be used "actually" and "directly" for such purposes. In light of the foregoing substantial changes in the Constitution, the petitioner cannot rely on our ruling in Herrera v. Quezon City Board of Assessment Appeals which was promulgated on September 30, 1961 before the 1973 and 1987 Constitutions took effect. As this Court held in Province of Abra v. Hernando : . . . Under the 1935 Constitution: "Cemeteries, churches, and parsonages or convents appurtenant thereto, and all lands, buildings, and improvements used exclusively for religious, charitable, or educational purposes shall be exempt from taxation." The present Constitution added "charitable institutions, mosques, and non-profit cemeteries" and required that for the exemption of "lands, buildings, and improvements," they should not only be "exclusively" but also "actually" and "directly" used for religious or charitable purposes. The Constitution is worded differently. The change should not be ignored. It must be duly taken into consideration. Reliance on past decisions would have sufficed were the words "actually" as well as "directly" not added. There must be proof therefore of the actual and direct use of the lands, buildings, and improvements for religious or charitable purposes to be exempt from taxation. Under the 1973 and 1987 Constitutions and Rep. Act No. 7160 in order to be entitled to the exemption, the petitioner is burdened to prove, by clear and unequivocal proof, that (a) it is a charitable institution; and (b) its real properties are ACTUALLY, DIRECTLY and EXCLUSIVELY used for charitable purposes. "Exclusive" is defined as possessed and enjoyed to the exclusion of others; debarred from participation or enjoyment; and "exclusively" is defined, "in a manner to exclude; as enjoying a privilege exclusively." If real property is used for one or more commercial purposes, it is not exclusively used for the exempted purposes but is subject to taxation. The words "dominant use" or "principal use" cannot be substituted for the words "used exclusively" without doing violence to the Constitutions and the law. Solely is synonymous with exclusively. What is meant by actual, direct and exclusive use of the property for charitable purposes is the direct and immediate and actual application of the property itself to the purposes for which the charitable institution is organized. It is not the use of the income from the real property that is determinative of whether the property is used for tax-exempt purposes. Very truly yours, (SGD.) ALBERTO C. AGRA Acting Secretary Footnotes 1. Secretary of Justice, Opinion No. 45, s. 2009; Op. No. 14, s. 2008 and Nos. 63 & 1, s. 2007. 2. Id. , Op. No. 31, s. 2005. 3. Id. , Op. Nos. 53, 50, 45 & 44, s. 2009; Nos. 76, 74, 69 & 68, s. 2008.