Conference on Technology and Innovation for Disaster Risk Reduction and Management and Climate Change Adaptation

January 6, 2006 BLGF LOCAL ASSESSMENT OPINION NO. 003-06 3rd Indorsement Respectfully returned to the ICO-Regional Director for Local Government Finance, Department of Finance, Cordillera Administrative Region (CAR), 2nd Floor LBP Building, Harrison Road, Baguio City, the within preceding 2nd Indorsement dated October 17, 2005, relative to the letter dated September 21, 2005 of Ms. Cynthia Venezuela, President, CNS International Language School (CNS, for brevity), 45 Leonard Wood Road, Barangay St. Joseph, that city, requesting that the building (formerly Baguio Vacation Hotel) presently being leased by the school from its owner, A.L. Yabut Management & Development Corporation, covered by ARP No. 01-07007-86744, be reclassified from commercial to institutional. The LAOO IV of Assessment and Appraisal Division, Office of the City Assessor, same city, conducted and ocular inspection on September 29, 2005 and submitted a report thereon, stating the following findings: 1. The building is subject to a contract of lease between A. L. Yabut Management & Development Corporation represented by Mr. Ernesto A. Yabut, Chairman of the Board, as LESSOR, and Mr. Kwang Hyu Choi, a.k.a. Jimmy Choi, a Korean citizen, as LESSEE, for a period of five (5) years starting May 1, 2005 until April 30, 2010, renewable for the same period subject to the terms and conditions of the said lease contract; 2. CNS was registered at the Securities and Exchange Commission (SEC) on May 18, 2005 as a non-stock, non-profit association that aims, among others, to effectively assist students in acquiring and enhancing their fundamental knowledge and skill in languages, particularly that of the English language; facilitate the learning of languages through the utilization of contemporary educational techniques, advanced learning strategies, enhanced curriculum, innovative teaching methodologies and facilities, in an environment conducive to the undertaking of such activity; to enable students to become proficient in the use of English language thereby empowering them to foster better understanding and communication with others, especially those of other nationalities who belong to English-speaking communities (A. 1, 2, and 3 of the Articles of Incorporation) (copy enclosed); 3. Tutorial Institution Occupancy Permit No. 2005-000190 was issued by Engr. Oscar Flores on May 17, 2005; 4. Sanitary Permit No. CHO 5-8423 was issued by the Baguio Health Department on June 07, 2005; 5. A business permit to engage and operate in tutorial services (Permit No. 9652-05) was issued by the Mayor's Office on July 22, 2005; 6. TESDA CAR Regional Director issued a Certificate of TVET Program Registration, (NTR 0514031251) on August 8, 2005 to CNS International Language School as a school offering English Enhancement Program; and 7. The 3-storey main building is used as a tutorial school for Korean students with Filipinos and foreigners as mentors/teachers. There are 50 rooms, of which 24 rooms were converted and designed for one on one tutorials, 14 rooms for group studies, 2 rooms for school staff, and the rest of the rooms for the library, canteen, gym, faculty & administrative offices. (Assessment of this building as a hotel is covered by ARP No. 01-07007-86744 however, it does not reflect the third floor). The hotel building was assessed under ARP No. 01-07007-86744. The assessment however did not include the third floor. In this regard, attached, for your information, is a copy of our 4th Indorsement dated July 17, 1995, treating on a similar subject matter, the pertinent portions of which read as follows: "This Department, in a series of opinions/rulings rendered on the same subject matter, maintains that educational institutions actually, directly and exclusively used for religious, charitable or educational purposes should be granted exemption from the payment of real property taxes, pursuant to the abovecited provision of the Constitution and Section 234(b) of the Local Government Code of 1991, quoted hereunder: '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, charitable or educational purposes .' (Emphasis ours) "It is evident from the foregoing provisions that for lands, buildings, and improvements to be exempt from the payment of real property tax, they should not only be exclusively, but also actually and directly used for educational purposes. The Supreme Court Decision in the case of the Province of Abra vs. Hon. Harold M. Hernando, G.R. No. L-49336, dated August 31, 1981, embodied a clarificatory statement regarding the required exclusive, actual and direct use of lands, buildings and improvements in order to qualify for exemption. The pertinent portion of said Decision is quoted hereunder: 'Respondent Judge would not have erred so grievously had he merely compared the provisions of the present Constitution with that appearing on the 1935 Charter on tax exemption of 'lands, buildings, and improvements.' There is a marked difference. 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 changes 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 and improvements for religious or charitable purposes to be exempt from taxation . . . . (Emphasis Supplied)'" Evidently, the said building is exempt from payment of the real property tax provided the same is actually, directly, and exclusively used for educational purposes. Accordingly, the 1st and 2nd floors of the building regardless of whether or not the ownership thereof remains with A. L. Yabut Management & Development Corporation, being leased and used by CNS for educational purposes, are exempt from real property tax. "The sole determinative factor for exemption from realty taxes is the 'use' to which the property is devoted, and where 'use' is the test, the ownership is immaterial." (Martin on the Rev. Adm. Code, 1961, Vol. II, p. 487, citing Apostolic Prefect of the Mt. Province vs. Treasurer of Baguio City, 71 Phil. 547). In view of the foregoing, and considering the abovecited ruling and findings in the ocular inspection conducted, this Bureau believes and so holds that: 1. the subject leased portions of the CNS building which are actually, directly and exclusively used for educational purposes should be declared exempt from the payment of real property tax; and 2. the radio station which does not form part of the lease contract, and is not actually, directly and exclusively used for educational purposes shall continue to be maintained under the name of ALY Management and Development Corporation and should be declared taxable. Consequently, a separate tax declaration should be issued to cover the said radio station. Be guided accordingly. (SGD.) MA. PRESENTACION R. MONTESA Executive Director