Verification of Annual Information Returns Filed under Revenue Regulations No. 8-74 dated September 24, 1974 implementing Presidential Decree No. 507

May 19, 1976 REVENUE MEMORANDUM ORDER NO. 26-76 SUBJECT : Verification of Annual Information Returns Filed under Revenue Regulations No. 8- 74 dated September 24, 1974 implementing Presidential Decree No. 5 07 TO : All Internal Revenue Officers and Others Concerned 1. Section 9 of Revenue Regulations No. 8-74 dated September 24, 1974 provides: "SECTION 9. Returns and verification of operations . A qualified recipient, in order to maintain its status as such, should file within three months from the end of its calendar or fiscal year period an annual information return (BIR Form No. ___), to which shall be attached the following: '(a) A list of the donations and bequests received during the year, which should show the name and address of the donor or testator, the amount or market value of each donation or bequest and the disposition thereof. This list should be certified to by the president or treasurer of the organization; '(b) A list of the activities and/or projects undertaken by the organization and the cost of each undertaking or project, which should also be certified to by the president or treasurer of the organization; '(c) A certification by the president or treasurer of the organization that not more than thirty per centum (30%) of the total gifts, bequests, and donations received during the year was used for administrative purposes; '(d) A certification by the president or treasurer of the organization that no part of its net income inured to the benefit of any private stockholder or individual.' "The operations of the donees and legatees shall be verified annually for the purpose of ascertaining whether or not they are actually undertaking the activities of any organization exempt under P.D. No. 507 and complying with the terms and conditions prescribed by said Decree and implementing regulations." The annual information return required under the above-quoted provisions of the regulations shall be filed by the organization duly qualified to receive tax-free donations with the Chief, Legal Branch of the Regional Office having jurisdiction over the principal address of the organization. Upon receipt of the information return, the Regional Office shall cause necessary verification to ascertain the following: a. The correctness of the list of donations and bequests received by the organization as well as the list of activities and/or projects undertaken by it; b. Whether not more than 30% of the gifts, bequests, and donations received during the year was used for administration purposes; and c. Whether no part of the net income of the organization inured to the benefit of any private stockholder or individual. Even if the organization failed to file an annual information return, within the three-month period provided in the regulations, its operations shall be verified annually after the expiration of said period, by the Regional Office concerned for the purpose of ascertaining whether or not it is actually undertaking the activities exempt under Presidential Decree No. 507 and complying with the terms and conditions prescribed by said Decree and its implementing regulations. 2. The National Office shall furnish the Regional Office concerned for its information and guidance a copy of the statement of qualification issued to the organization. 3. If verification shows that the organization is not actively performing the activities for which it was organized; or it is spending more than 30% of the total donations and/or legacies received by it during the year; or it has violated any of the provisions of Presidential Decree No. 507 and its implementing regulations, the verification should also show whether the donor participated or consented to said violation of the donee. In case of affirmative findings, the donor shall be deprived of the tax exemption benefits under the decree and, therefore, the corresponding gift tax due on the donations should be ascertained and reported to this Office. If the donation was deducted in full from the donor's gross income, the deduction shall be disallowed, and, therefore, the corresponding deficiency income tax should, likewise, be ascertained and reported to this Office. (See Section 10, Revenue Regulations No. 8-74) 4. After every verification, the Regional Office concerned shall submit its report to the Commissioner of Internal Revenue, Attn.: Chief, Law Division. Strict compliance herewith is enjoined. aisa dc EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-1456-040-3