San Beda College

April 20, 1988 San Beda College Mendiola, Manila Attention : Messr . Roberto De Jesus, OSB Sir : This refers to your letter, dated April 8, 1988, requesting confirmation of the Commission that San Beda College is implicitly non-profit. It appears therein that the legal division of the Bureau of Internal Revenue held in abeyance your petition for tax exemption in view of the absence of the term "non-profit" in your articles of incorporation. A perusal of our records show that San Beda College is a pre-war corporation whose corporate records were duly reconstructed with this Commission on October 3, 1947. It was organized as a non-stock corporation, primarily to establish, maintain and operate a college, school or institution of learning. Non-stock corporations are those corporation which are not stock corporations. (Section 3, Corporation Code of the Philippines). As aptly defined in Section 87 of the Corporation Code, "a non-stock corporation is one where no part of its income is distributed as dividends to its members, trustees, or officers, . . . ." Said law amplifies "that any profit which a non-stock corporation may obtain as an incident to its operation shall, whenever necessary or proper, be used for the furtherance of the purpose or purposes for which the corporation was organized, . . .". In other words, it does not necessarily follow that a non-stock corporation can make no profits. Many such corporation obtain profits as an incident to its operations, but unlike in stock corporations, such profits are not distributed among its members but are used for the furtherance of its purposes. (Campos, Campos, The Corporation Code, "Comments, Notes and Selected Cases", 1981 ed, p. 19). Thus, while San Beda College is organized as a non-stock corporation, in the pursuit of its purposes, particularly the primary purpose and paragraphs 1 and 2 of the incidental purposes, it may obtain profits in the course therefore. However, having been organized as a "non-stock" corporation, our law does not empower it to distribute its profits as dividends to its members. As to whether such type of organization is a "profit or non-profit organization," the following authority is cited: "Where corporation was organized to provide educational, civic and cultural radio program and by-laws prohibited use of profits or surplus as dividends, corporation as a 'non-profit' for income tax purposes, notwithstanding broadcast of some commercial programs." (Words & Phrases, Vol. 28A, citing Debs Memorial Radio Fund v. C.I.R.,CCA 2, 148 F2d 948, 951). In the light of the foregoing, we confirm your view that San Beda College is a "non-profit organization." Very truly yours, (SGD.) JULIO A. SULIT, JR. Chairman