Professional Documents
Culture Documents
MARCOS • October 11, 1994: Cesa, OIC of the Office of the Treasurer of the City of Cebu,
G.R. No. 120082 / September 11, 1996 / DAVIDE, JR., J. / Real Property Taxation / EFHDy demanded payment for realty taxes on several parcels of land belonging to the
NATURE PETITION for review on certiorari of decision of CA petitioner
PETITIONERS Mactan Cebu International Airport Authority • Petitioner objected to such demand for payment as baseless and unjustified,
RESPONDENTS Hon. Ferdinand J. Marcos (Cebu City RTC Judge); Tomas claiming in its favor the aforecited Section 14 of RA 6958 which exempts it from
Osmena; Eustaquio Cesa payment of realty taxes. It was also asserted that it is an instrumentality of the
government performing governmental functions, citing section 133 of the LGC.
• Respondent City refused to cancel and set aside petitioner's realty tax account,
SUMMARY. Mactan Cebu International Airport Authority (MCIAA), which was
insisting that the MCIAA is a government-controlled corporation whose tax
created by virtue of R.A. 6958, was mandated to principally undertake the
exemption privilege has been withdrawn by virtue of Sections 193 and 234 of the
economical, efficient, and effective control, management, and supervision of the
LGC.
Mactan International Airport and Lahug Airport, and such other airports as may be
• As the City of Cebu was about to issue a warrant of levy against the properties of
established in Cebu. Since the time of its creation, petitioner MCIAA enjoyed the
petitioner, the latter was compelled to pay its tax account "under protest" and
privilege of exemption from payment of realty taxes in accordance with Section 14
thereafter filed a Petition for Declaratory Relief with the RTC of Cebu.
of its charter. However, on October 11, 1994, the OIC of the Office of the Treasurer
• MCIAA: the taxing powers of local government units do not extend to the
of the City of Cebu demanded payment from realty taxes in the total amount.
levy of taxes or fees of any kind on an instrumentality of the national
Petitioner objected to such demand for payment as baseless and unjustified
government. While it is indeed a government-owned corporation, it
claiming in its favor the aforecited Sec. 14 of R.A. 6958. It was also asserted that it
nonetheless stands on the same footing as an agency or instrumentality of
is an instrumentality of the government performing governmental functions, citing
the national government by the very nature of its powers and functions.
Section 133 of the LGC. The Court ruled that MCIAA’s exemption from payment of
• Cebu City: MCIAA is not an instrumentality of the government but merely a
taxes is withdrawn by virtue of Sections 193 and 234 of LGC. The petitioner cannot
government-owned corporation performing proprietary functions As such, all
also claim that it was never a “taxable person” under its Charter. It was only
exemptions previously granted to it were deemed withdrawn by operation of law,
exempted from the payment of realty taxes. The grant of the privilege only in
as provided under Sections 193 and 234 of the LGC.
respect of this tax is conclusive proof of the legislative intent to make it a taxable
• The RTC dismissed the petition and ruled: a close reading of the LGC provides the
person subject to all taxes, except real property tax.
express cancellation and withdrawal of exemption of taxes by government owned
DOCTRINE. Since the last paragraph of Section 234 of the LGC unequivocally
and controlled corporation per Sections after the effectivity of said Code.
withdrew, upon the effectivity of the LGC, exemptions from payment of real
property taxes granted to natural or juridical persons, including government-
ISSUES & RATIO.
owned or controlled corporations, except as provided in the said section, and
1. WON MCIAA is liable to pay the tax. – YES.
Mactan Cebu International Airport Authority is a government-owned corporation,
• Section 1331 of the LGC prescribes the common limitations on the taxing
it necessarily follows that its exemption from such tax granted it in Section 14 of its
powers of local government units.
Charter, R.A 6958, has been withdrawn.
• The "taxes, fees or charges" referred to are "of any kind", hence they
include all of these, unless otherwise provided by the LGC. The term
FACTS. "taxes" is well understood so as to need no further elaboration, especially
• Mactan Cebu International Airport Authority (MCIAA) was created by virtue of RA in the light of the above enumeration. The term "fees" means charges fixed
No. 6958, mandated to "principally undertake the economical, efficient and by law or Ordinance for the regulation or inspection of business activity,
effective control, management and supervision of the Mactan International Airport while "charges" are pecuniary liabilities such as rents or fees against person
in the Province of Cebu and the Lahug Airport in Cebu City, and such other or property.
Airports as may be established in the Province of Cebu. • Among the "taxes" enumerated in the LGC is real property tax, which is
• Since the time of its creation, petitioner MCIAA enjoyed the privilege of governed by Section 232. It reads as follows: Sec. 232. Power to Levy Real
exemption from payment of realty taxes in accordance with Sec. 14 of its Charter.
1 Section 133. Common Limitations on the Taxing Powers of Local Government Units.—Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall
Except
as
provided
herein,
any
exemption
from
payment
of
real
property
tax
previously
granted
to,
or
presently
enjoyed
by
all
persons,
whether
natural
or
juridical,
including
government-owned
or
controlled
corporations
are
hereby
withdrawn
upon
the
effectivity
of
this
Code.
3 Section 193. Withdrawal of Tax Exemption Privilege.—Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons whether natural or juridical,
including
government-owned
or
controlled
corporations,
except
local
water
districts,
cooperatives
duly
registered
under
RA
No.
6938,
nonstick
and
nonproRit
hospitals
and
educational
institutions,
are
hereby
withdrawn
upon
the
effectivity
of
this
Code.
Philippines or any of its political subdivision "in Section 234(a)4. The terms their intimate conversation during a judiciary fun jog at the Cebu City Sports Center
"Republic of the Philippines" and "National Government" are not as one of the bases of the decision.
interchangeable. If Section 234(a) intended to extend the exception therein
to the withdrawal of the exemption from payment of real property taxes
under the last sentence of the said section to the agencies and
instrumentalities of the National Government mentioned in Section 133(o),
then it should have restated the wording of the latter. Yet, it did not.
[MINOR ISSUES]
2. WON the parcels of land in question belong to the Republic of the Philippines
whose beneficial use has been granted to the petitioner. – YES.
• Section 15 of the petitioner's Charter involves a "transfer" of the "lands"
among other things, to the petitioner and not just the transfer of the
beneficial use thereof, with the ownership being retained by the Republic of
the Philippines. This "transfer" is actually an absolute conveyance of the
ownership thereof because the petitioner's authorized capital stock consists
of, inter alia "the value of such real estate owned and/or administered by
the airports." Hence, the petitioner is now the owner of the land in
question and the exception in Section 234(c) of the LGC is inapplicable.
DECISION.
Petition DENIED.
NOTES/CHISMIS HEHEHEHEHEHEHEHE.
Judge Ferdinand J. Marcos is not THE dictator. However upon curiosity, a quick
google search revealed that on 2001, he was dismissed by the Supreme Court from
the service for immorality, and was also reportedly abandoned by his alleged
paramour (a law student). Chief Justice Hilario Davide (who is the ponente here) used
4
(a)
Real
property
owned
by
the
Republic
of
the
Philippines
or
any
of
its
political
subdivisions
except
when
the
beneRicial
use
thereof
has
been
granted,
for
consideration
or
otherwise,
to
a
taxable
person;
MIAA v. PASAY at public auction the NAIA Pasay properties if the delinquent real property taxes remain
GR 163072 / Apr 2 2009 / CARPIO, J. / LocGov – Real Property Taxation / BUNYI unpaid.
• Oct 2001, MIAA filed petition for prohibition and injunction and prayer for PI/TRO with CA
PETITIONERS Manila International Airport Authority (MIAA) against Pasay. CA dismissed and ruled that since MIAA is a GOCC, its tax exemption under
RESPONDENTS Pasay City + SP, Mayor, Treasurer, and Assessor of Pasay City EO 903 Sec. 21 has been withdrawn and it is now liable for real property tax pursuant to
NATURE Petition for review on certiorari LGC Sec. 1935 (withdrew tax exemptions granted to GOCCs) and LGC Sec. 2346 (taxed real
property owned by the Republic when beneficial use thereof has been granted to a taxable
SUMMARY. Pasay City is demanding real property tax from MIAA for its NAIA Complex person).MR denied.
properties located in Pasay. CA ruled that MIAA is a GOCC who is liable for real property tax.
SC held that MIAA is not liable for real property tax because (1) it is not a GOCC but is a ISSUES & RATIO.
government instrumentality which is exempt from any kind of tax from LGUs pursuant to LGC WON MIAA’s NAIA Pasay properties are exempt from real property tax – YES
Sec. 133 and (2) MIAA’s properties are public dominion and are thus exempt from real • MIAA v. CA (2006) already resolved the issue of whether MIAA’s airport land and buildings
property tax pursuant to LGC Sec. 234(a).
are exempt from tax under existing laws. The only difference between the 2006 MIAA case
DOCTRINE. LGC Sec. 133 which provides that LGUs have no power to tax instrumentalities and this 2009 MIAA case is that the former involved airport lands and buildings located in
of the national government like the MIAA. Hence, MIAA is not liable to pay real property tax Paraaque City while this case involved airport lands and buildings located in Pasay City. In
for the NAIA Pasay properties. Furthermore, the airport lands and buildings of MIAA are 2006 MIAA, SC held:
properties of public dominion intended for public use, and as such are exempt from real o MIAA is not a GOCC under Admin Code, Introductory Provs, Sec. 2(13) because it is not
property tax under LGC Sec. 234(a). However, if MIAA leases its real property to a taxable organized as a stock or non-stock corporation and it is not a GOCC under 1987
person, the specific property leased becomes subject to real property tax. In this case, only Constitution, Art. XII, Sec. 16 because it is not required to meet the test of economic
those portions of the NAIA Pasay properties which are leased to taxable persons like private viability. MIAA is a government instrumentality vested with corporate powers and
parties are subject to real property tax by Pasay City. performing essential public services pursuant to Admin Code, Introductory Provs, Sec.
2(10). As a government instrumentality, MIAA is not subject to any kind of tax by local
governments under LGC Sec. 133(o). The exception to the exemption in LGC Sec. 234(a)
FACTS. does not apply to MIAA because such exception applies only if the beneficial use of real
• PET Manila International Airport Authority (MIAA) operates and administers the NAIA
property owned by the Republic is given to a taxable entity, and MIAAis not a taxable
Complex under its Revised Charter, EO 903 (1983). Under EO 903, approximately 600h of entity under the LGC.
land, including the runways, the airport tower, and other airport buildings, were transferred o MIAA’s airport land and buildings are properties of public dominion under CC Art. 4207
to MIAA. The NAIA Complex is located along the border between Pasay City and Paraaque because they are properties intended for public use (at the very least intended for public
City. service) and the terms “ports constructed by the State” includes airports and seaports. As
• Aug 28 2001, MIAA received Final Notices of Real Property Tax Delinquency from the City
properties of public dominion, MIAA’s properties are owned by the Republic and thus
of Pasay for the taxable years 1992 to 2001, totaling P 1B. Pasay issued notices of levy and exempt from real estate tax under LGC Sec. 234(a).
warrants of levy for the NAIA Pasay properties. Thereafter, Pasay’s Mayor threatened to sell
5
SECTION 193. Withdrawal of Tax Exemption Privileges. Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-
owned or controlled corporations, except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this
Code.
6
SECTION 234. Exemptions from Real Property Tax. The following are exempted from payment of the real property tax: (a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the
beneficial use thereof has been granted, for consideration or otherwise to a taxable person;
7
Art. 420. The following things are property of public dominion: (1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of
similar character; (2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth.
• The definition of instrumentality under Admin Code Introductory Provs Sec. 2(10)8 uses the NAIA Pasay properties which are leased to taxable persons like private parties are
phrase “includes government-owned or controlled corporations” which means that a subject to real property tax by Pasay City.
government instrumentality may or may not be a GOCC because it is a broader term. The
term GOCC, meanwhile, has a separate definition under Admin Code Introductory Provs. DECISION.
Sec. 2(13)9 . Thus, MIAA is a government instrumentality that does not qualify as a GOCC. Petition GRANTED. CA reversed. MIAA’s NAIA Pasay properties declared EXEMPT from real
As explained in 2006 MIAA: property tax and all real property tax assessments by Pasay, except for the portions MIAA has
o A GOCC must be organized as a stock or non-stock corporation, and MIAA is neither. leased to private parties, declared VOID.
Corpo Code Sec. 3 defines a stock corporation as one whose capital stock is divided into
shares and authorized to distribute to the holders of such shares dividends. MIAA is not a DISSENT – J. YNARES-SANTIAGO
stock corporation because it has no capital stock divided into shares. MIAA has capital • The power to impose ad valorem tax on real property is given to LGUs under LGC Sec. 232.
but it is not divided into shares of stock. It has no stockholders of voting shares. Corpo The law also provides exemptions under Sec. 234 which includes properties owned by the
Code Sec. 87 defines a non-stock corporation as one where no part of its income is Republic. Since the airport and all its installations are intended for public use, these are of
distributable as dividends to its members, trustees or officers, thus, a non-stock public dominion. Lands were transferred to MIAA but such is not absolute as the beneficial
corporation must have members. MIAA is not a non-stock corporation because it has no ownership is with the government. It is holding these properties only as an agent for the
members. Even if we assume that the Government is considered as the sole member of state. MIAA cannot dispose of the lands without specific approval from the President.
MIAA, this will not make MIAA a non-stock corporation. Non-stock corporations cannot Therefore since all its properties are of public dominion, it must be exempt from real
distribute any part of their income to their members but MIAA Charter Sec. 11 mandates property tax except if the beneficial use of these properties have been granted to a taxable
MIAA to remit 20% of its annual gross operating income to the National Treasury. MIAA is person (i.e. lease).
not organized for any of the purposes mentioned in Corpo Code Sec. 88 10. MIAA, a
public utility, is organized to operate an international and domestic airport for public use. DISSENT – J. TINGA
o Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a • Reiterated his dissent in the previous MIAA cases. That the black and white categorization
GOCC. MIAA is a government instrumentality, vested with corporate powers to perform of stock and non-stock corporations disregards the power of Congress to create GOCC in
efficiently its governmental functions. When the law vests in a government instrumentality whatever structure it deems necessary. The court also failed to consider that an
corporate powers, the instrumentality does not become a corporation. MIAA exercises instrumentality refers to regulatory agencies, chartered institutions and GOCCs. The
the governmental powers of eminent domain, police authority and the levying of fees majority wrongly defined an instrumentality that the Executive issued an EO clarifying its
and charges, at the same time, MIAA exercises all the powers of a corporation under definition. All persons, natural or juridical, including GOCCs are liable for real property
the Corpo Law, insofar as these powers are not inconsistent with the provisions of this taxes. The only exempt properties are those owned by the Republic. Since GOCCs have a
EO. separate personality from the gov’t it is liable for taxes. Any tax exemptions granted to it
• MIAA is not a GOCC but a government instrumentality which is exempt from any kind prior LGC is deemed repealed under LGC. The properties owned by MIAA are properties of
of tax from the local governments. The exercise of the taxing power of LGUs is public dominion but the provision allowing its alienation subject to President’s approval
subject to the limitations in LGC Sec. 133 which provides that LGUs have no power to should be voided to avoid the inconsistency that public properties devoted for public use
tax instrumentalities of the national government like the MIAA. Hence, MIAA is not cannot be alienated. MIAA is liable for real property taxes but its property is not subject to
liable to pay real property tax for the NAIA Pasay properties. Furthermore, the foreclosure proceedings as it is owned by the state.
airport lands and buildings of MIAA are properties of public dominion intended for
public use, and as such are exempt from real property tax under LGC Sec. 234(a). SEPARATE OPINION – J. NACHURA:
However, if MIAA leases its real property to a taxable person, the specific property • The properties comprising the NAIA being of public dominion which pertain to the State,
leased becomes subject to real property tax. In this case, only those portions of the the same should be exempt from real property tax following Section 234(a) of the LGC.
8
SEC. 2. General Terms Defined. (10) Instrumentality refers to any agency of the national Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not
all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. This term includes regulatory agencies, chartered institutions and government-owned or controlled corporations.
9
SEC. 2. General Terms Defined. (13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or
proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital
stock: Provided, That government-owned or controlled corporations may further be categorized by the department of Budget, the Civil Service Commission, and the Commission on Audit for the purpose of the exercise and
discharge of their respective powers, functions and responsibilities with respect to such corporations.
10
Section 88 of the Corporation Code provides that non-stock corporations are organized for charitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or similar purposes,
like trade, industry, agriculture and like chambers.
PHIL. FISHERIES DEVT AUTHORITY v. CA 4. Upon its completion, the MPWH turned over IFPC to PFDA, pursuant to Sec. 11,
G.R. No. 169836 / JUL 31, 2007 / YNARES-SANTIAGO, J. / PD 977, which places fishing port complexes and related facilities under the
LOCGOV - / JCFMAGSINO governance of the PFDA.
5. Notwithstanding such turnover, title to the land and buildings remained with the
Republic.
NATURE Petition for Review on Certiorari – CA Decision
6. PFDA thereafter eased portions of IFPC to private firms and individuals engaged
PETITIONERS Philippine Fisheries Development Authority in fishing related businesses.
7. Sometime in May 1988, City of Iloilo assessed the entire IFPC for real property
RESPONDENTS Court of Appeals, Office of the President, Dept. of Finance, and taxes. The assessment remained unpaid until the total delinquency for the years
City of Iloilo 1988 and 89 reached P5,057,349,67.
8. To satisfy this deficiency, City of Iloilo scheduled a sale at public auction of the
IFPC.
SUMMARY: PFDA was assessed with tax deficiency by the City of Iloilo for the 9. PFDA filed an injunction case at the RTC. During pre-trial, parties agreed to avail
operation of the IFPC and eventually wanted to sell IFPC to satisfy its claim. DOF of administrative proceedings – PFDA will file a claim for tax exemption with the
ruled that PFDA is liable, but should not sell IFPC at public auction since it belongs Iloilo City Assessor’s Office. The latter, however, denied the claim for exemption,
to the Republic. PFDA claims that it is not liable to pay for real property taxes. SC hence PFDA elevated the case to the DOF.
held that PFDA is an instrumentality of the national government, hence, it is liable 10. DOF ruled that PFDA is liable to pay real property taxes to Iloilo because it
to pay real property taxes assessed by the City of Iloilo on the IFPC only with enjoys the beneficial use of the IFPC. However, in satisfying the amount of
respect to those portions which are leased to private entities. Notwithstanding said unpaid taxes, property owned by PFDA shall be auctioned, and not the IFPC,
tax delinquency on the leased portions of the IFPC, the latter or any part thereof, which is the property of the Republic.
being a property of public domain, cannot be sold at public auction. This means 11. PFDA filed a petition before the OP which was eventually dismissed. MR denied.
that the City of Iloilo has to satisfy the tax delinquency through means other than 12. During appeal to the CA, the OP decision was affirmed. CA opined that IFPC
the sale at public auction of the IFPC. may be sold at public auction to satisfy the delinquency.
DOCTRINE: As a general rule, unlike GOCCs, instrumentalities of the national
government, are exempt from local taxes. An exception to this exemption is with ISSUES & RATIO.
regard to real property taxes – when an instrumentality of the national government WON PFDA is liable to pay real property tax to the City of Iloilo. If yes, may the
grants to a taxable person the beneficial use of a real property owned by the IFPC be sold at public auction to satisfy tax delinquency? - IN PART YES & NO.
Republic, said instrumentality becomes liable to pay real property tax. (ie. leasing NO.
such properties to private parties) o To resolve this issue, SC first has to determine (1) whether PFDA is a GOCC or
an instrumentality of the national government; and (2) whether IFPC is a
FACTS. property of public dominion.
1. On August 11, 1976, Marcos issued PD 977 creating the PFDA and placing it o PFDA is not a GOCC, but an instrumentality of the national government
under the direct control and supervision of the Sec of Natural Resources. which is generally exempt from the payment of real property tax.
Thereafter, EO 772 was issued amending PD 977, and renaming the Authority to Exemption, however, does not apply to portions of IFPC which PFDA leased
its now present name, PFDA, and attaching such to the Ministry of Natural to private entities.
o IFPC is a property of public dominion and cannot be sold at public auction to
Resources.
2. Upon effectivity of the Administrative Code (EO 292), the PFDA became an satisfy tax delinquency.
o In Manila Intl Airport Auth v. CA, a distinction between an instrumentality and
attached agency of the Dept. of Agriculture.
3. Beginning October 31, 1981, then Ministry of Public Works and Highways a GOCC was made:
o Definition of a GOCC:
reclaimed from the sea a 21-ha. parcel of land in Brgy. Tanza, Iloilo City, and
constructed thereon the Iloilo Fishing Port Complex (IFPC) – consisting of Sec. 2(13) of the Introductory Provisions of the Administrative Code of
breakwater, a landing quay, a refrigeration building, a market hall, a municipal 1987: GOCC refers to any agency organized as a stock or nonstock
shed, an administration building, a water and fuel oil supply system and other corporation, vested with functions relating to public needs whether
port related facilities and machineries. governmental or proprietary in nature, and owned by the Government
directly or through its instrumentalities either wholly, or, where applicable as
in the case of stock corporations, to the extent of at least fiftyone (51) Indeed, PFDA is not a GOCC but an instrumentality of the government. The
percent of its capital stock. Authority has a capital stock but it is not divided into shares of stocks. Also, it
☞ MIAA v. CA: MIAA was not organized as a stock or non-stock has no stockholders or voting shares. Hence, it is not a stock corporation.
corporation; not a stock corporation since it has no capital stock divided Neither it is a nonstock corporation because it has no members.
into shares; no stockholders or voting shares. o PFDA is actually a national government instrumentality - an agency of the
o Definition of a Stock Corporation: national government, not integrated within the department framework, vested
Sec. 3, Corpo Code: A stock corporation is one whose “capital stock is with special functions or jurisdiction by law, endowed with some if not all
divided into shares and x x x authorized to distribute to the holders of such corporate powers, administering special funds, and enjoying operational
shares dividends x x x autonomy, usually through a charter. When the law vests in a government
☞ MIAA v. CA: has capital but it is not divided into shares of stock. MIAA instrumentality corporate powers, the instrumentality does not become a
has no stockholders or voting shares. Hence, MIAA is not a stock corporation. Unless the government instrumentality is organized as a stock or
corporation. MIAA is also not a nonstock corporation because it has no nonstock corporation, it remains a government instrumentality exercising not
members. Sec. 87, Corpo Code defines a nonstock corporation as “one only governmental but also corporate powers.
where no part of its income is distributable as dividends to its members, o Hence, PFDA, who is tasked to promote development of the country and
trustees or officers.” fisihing industry and improve efficiency handling, preserving, marketing, and
☞ Even if we assume that the Government is considered as the sole distribution of fish and other aquatic products, exercises the governmental
member of MIAA, this will not make MIAA a nonstock corporation. Non powers of eminent domain (Sec. 4(k), PD 977, a. by EO 772), and the power to
stock corporations cannot distribute any part of their income to their levy fees and charges (Sec. 4(e), PD 977, a. by EO 772). At the same time, PFDA
members. Sec. 11 of the MIAA Charter mandates MIAA to remit 20% of exercises the general corporate powers conferred by laws upon private and
its annual gross operating income to the National Treasury. This prevents government-owned or controlled corporations (Sec. 4(j), PD 977, a. by EO 772).
MIAA from qualifying as a nonstock corporation.
o Sec. 88, Corpo Code: nonstock corporations are “organized for charitable, o GR: Unlike GOCCs, instrumentalities of the national government, are exempt
religious, educational, professional, cultural, recreational, fraternal, literary, from local taxes pursuant to Sec. 133(o), LGC.
scientific, social, civil service, or similar purposes, like trade, industry, XPN: Real Property Taxes under Sec. 234, LGC – when an instrumentality of the
agriculture and like chambers.” national government grants to a taxable person the beneficial use of a real
☞ MIAA v. CA: MIAA is not organized for any of these purposes. MIAA, a property owned by the Republic, said instrumentality becomes liable to pay real
public utility, is organized to operate an international and domestic property tax. (ie. leasing such properties to private parties)
airport for public use. o Thus in MIAA v. CA:
☞ Since MIAA is neither a stock nor a nonstock corporation, MIAA does not o Sec. 193, LGC. expressly withdrew the tax exemption of all juridical
qualify as a governmentowned or controlled corporation. persons “[u]nless otherwise provided in this Code.”
o Thus, for an entity to be considered as a GOCC, it must either be organized as a o Now, Sec. 133(o) of the Local Government Code expressly provides
stock or nonstock corporation. otherwise, specifically prohibiting local governments from imposing any
o Two requisites must concur before one may be classified as a stock kind of tax on national government instrumentalities. Sec. 133, LGC.
corporation, namely: (1) that it has capital stock divided into shares, and (2) Common Limitations on the Taxing Powers of Local Government Units.
that it is authorized to distribute dividends and allotments of surplus and —Unless otherwise provided herein, the exercise of the taxing powers
profits to its stockholders. of provinces, cities, municipalities, and barangays shall not extend to
o If only one requisite is present, it cannot be properly classified as a stock the levy of the following: x x x
corporation. As for nonstock corporations, they must have members and (o) Taxes, fees or charges of any kinds on the National
must not distribute any part of their income to said members. Government, its agencies and instrumentalities, and local
o On the basis of the parameters set in the MIAA case, PFDA should be classified government units.
as an instrumentality of the national government. As such, it is generally exempt o By express mandate of the LGC, local governments cannot impose any
from payment of real property tax, except those portions which have been kind of tax on national government instrumentalities like the MIAA.
leased to private entities. Local governments are devoid of power to tax the national
o In the MIAA case, petitioner Philippine Fisheries Development Authority government, its agencies and instrumentalities.
was cited as among the instrumentalities of the national government.
o The taxing powers of local governments do not extend to the national levied upon to satisfy the tax delinquency should be resolved against the City of
government, its agencies and instrumentalities, “[u]nless otherwise Iloilo.
provided in this Code” as stated in the saving clause of Sec. 133.
o The saving clause in Sec. 133 refers to the exception to the exemption CONCLUSION
in Sec. 234(a), LGC, which makes the national government subject to In sum, the Court finds that PFDA is an instrumentality of the national government,
real estate tax when it gives the beneficial use of its real properties to a hence, it is liable to pay real property taxes assessed by the City of Iloilo on the IFPC
taxable entity. Section 234(a) of the Local Government Code provides: only with respect to those portions which are leased to private entities.
Sec. 234, LGC. Exemptions from Real Property Tax—The following are Notwithstanding said tax delinquency on the leased portions of the IFPC, the latter
exempted from payment of the real property tax: or any part thereof, being a property of public domain, cannot be sold at public
(a) Real property owned by the Republic of the Philippines or any of its auction. This means that the City of Iloilo has to satisfy the tax delinquency through
political subdivisions except when the beneficial use thereof has been means other than the sale at public auction of the IFPC.
granted, for consideration or otherwise, to a taxable person.
DECISION.
PFDA should be classified as an instrumentality of the national government which is Petition AFFIRMED.
liable to pay taxes only with respect to the portions of the property, the beneficial
use of which were vested in private entities. When local governments invoke the
power to tax on national government instrumentalities, such power is construed
strictly against local governments.
The rule is that a tax is never presumed and there must be clear language in the law
imposing the tax. Any doubt whether a person, article or activity is taxable is
resolved against taxation. This rule applies with greater force when local
governments seek to tax national government instrumentalities.
Thus, the real property tax assessments issued by the City of Iloilo should be upheld
only with respect to the portions leased to private persons. In case the Authority fails
to pay the real property taxes due thereon, said portions cannot be sold at public
auction to satisfy the tax delinquency.
In Chavez v. PEA, reclaimed lands are lands of the public domain and cannot, without
Congressional fiat, be subject of a sale, public or private. In the same vein, the port
built by the State in the IFPC is a property of the public dominion and cannot be sold
at public auction, citing Art. 420, CC as basis.
IFPC was constructed by the State for public use and/or public service falls within the
term “port” which is listed under Art. 420, CC. Being a property of public dominion
the same cannot be subject to execution or foreclosure sale. In like manner, the
reclaimed land on which the IFPC is built cannot be the object of a private or public
sale without Congressional authorization.
Whether there are improvements in the fishing port complex that should not be
construed to be embraced within the term “port,” involves evidentiary matters that
cannot be addressed in the present case. As for now, considering that the PFDA is a
national government instrumentality, any doubt on whether the entire IFPC may be
GOVERNMENT SERVICE INSURANCE SYSTEM v. CITY TREASURER AND CITY • Both the GSIS Building and the MTC stands on the Concepcion property.
ASSESSOR OF THE CITY OF MANILA • The Katigbak property is leased by GSIS to Manila Hotel Corporation (MHC), a taxable
G.R. No. 186242 / 23 December 2009/ Velasco, J. / entity.
Loc Gov / Silva
• The City Treasurer of Manila assessed GSIS delinquent realty taxes on the two
properties for the period of 1992 to 2002, with the usual warning of distraint and/or
NATURE Petition for Review on Certiorari
levy.
PETITIONERS GSIS • GSIS denied tax liability, asserting that it is exempt under its OLD Charter (PD 1146)
RESPONDENTS CITY TREASURER and CITY ASSESSOR of the CITY OF MANILA and NEW charter (RA 8291 or the GSIS Act of 1997).
• LGU claims that GSIS has a tax liability under the LGC
• GSIS then filed a petition for certiorari and prohibition with the RTC to nullify the
SUMMARY: assessments made and to proceed with the possible attachment.
The City of Manila assessed GSIS for payment of real estate taxes covering the period of
• RTC ruled against GSIS and held that the property is subject to real property tax.
1992. GSIS refused to pay the tax because it argues that under RA 8291, it is exempt from
paying ANY tax. ISSUES & RATIO.
1. WON GSIS is exempt from Real Property Tax (RPT)?
The Court held:
• Yes, GSIS is exempt. GSIS was established in 1936 thru Commonwealth Act 186,
1. GSIS is exempt from paying the real property tax. While the LGC revoked the GSIS’ establishing it as a non-stock corp. In 1977, GSIS’ charter was amended via PD 1146.
prior tax-exempt status, it was restored by provision of law when Congress enacted RA This PD maintained GSIS’ non-stock nature, and also granted its assets immunity from
8291. Also, as an instrumentality of the national government and following the ruling of all taxes (PD 1146, Sec. 33:…the System, its assets, revenues including all accruals
MIAA v. CA, it is outside the purview of local taxation. thereto, and benefits paid, shall be exempt from all taxes, assessments, fees, charges
2. Since GSIS allowed the Katigbak property to be used by MHC, the property is subject to or duties of all kinds…”)
real property tax and MHC pays by virtue of the beneficial use doctrine. As to who pays,
• This tax exemption, however, was WITHDRAWN by the LGC in 1992. LGC Sec. 193
the Court cited a case and the contract to point that MHC is liable to pay taxes. and 234 removed GSIS’ exemption from RPT. (SEC. 234. Exemption from Real
Property Tax. x x x Except as provided herein, any exemption from payment of real
The property is not subject to attachment. This is provided for by RA 8291. On the first part, property tax previously granted to, or presently enjoyed by, all persons, whether
since no tax liability attaches to GSIS, its property cannot be subject to attachment. As to the natural or juridical, including all government-owned or controlled corporation are
Katigbak property, regardless whether MHC is liable to pay taxes, by express provision of RA hereby withdrawn upon the effectivity of this Code)
8291, GSIS’ property may not be subject to attachment.
• Nevertheless, this FULL TAX EXEMPTION was REENACTED through RA 8291. Under
it, the full tax exemption privilege of GSIS was restored, the operative provision being
DOCTRINE: Sec. 39 thereof. Sec 39 of RA 8291: …GSIS, its assets, revenues including all accruals
• GSIS, as a government instrumentality, is not a taxable juridical person under Sec. 133(o) thereto, and benefits paid, shall be exempt from all taxes, assessments, fees, charges
of the Local Government Code. or duties of all kinds. These exemptions shall continue unless expressly and specifically
• The unpaid tax attaches to the property and is chargeable against the taxable person who revoked….these exemptions shall not be affected by subsequent laws to the contrary
had actual or beneficial use and possession of it regardless of whether or not he is the unless this section is expressly, specifically and categorically revoked or repealed by
owner (MHC as the lease). law and a provision is enacted to substitute or replace the exemption referred to
• A valid tax levy presupposes a corresponding tax liability; Even granting arguendo that herein as an essential factor to maintain or protect the solvency of the fund…
Government Service Insurance System’s (GSIS’s) liability for realty taxes attached from
• The foregoing exempting proviso, couched as it were in an encompassing manner,
1992, when Republic Act No. 7160 effectively lifted its tax exemption under Presidential brooks no other construction but that GSIS is exempt from all forms of taxes. While
Decree Nos. 1146 to 1996, when Republic Act No. 8291 restored the tax incentive, the not determinative of this case, it is to be noted that prominently added in GSIS
levy on the subject properties to answer for the assessed realty tax delinquencies cannot present charter is a paragraph precluding any implied repeal of the tax-exempt clause
still be sustained for the simple reason that the governing law, Republic Act No. 8291, in so as to protect the solvency of GSIS funds. Moreover, an express repeal by a
force at the time of the levy prohibits it. subsequent law would not suffice to affect the full exemption benefits granted the
GSIS, unless the following conditionalities are met: (1) The repealing clause must
expressly, specifically, and categorically revoke or repeal Sec. 39; and (2) a provision is
FACTS. enacted to substitute or replace the exemption referred to herein as an essential
• GSIS owns two properties in Manila: factor to maintain or protect the solvency of the fund. These restrictions for a future
o the Katigbak Property and the Concepcion-Arroceros Property. express repeal, notwithstanding, do not make the proviso an irrepealable law, for such
• Title to the Concepcion property was transferred to the SC in 2005 pursuant to restrictions do not impinge or limit the carte blanche legislative authority of the
Proclamation 835 and was used as the site to erect MeTC of Manila.
legislature to so amend it. The restrictions merely enhance other provisos in the law • The foregoing is not all. As it were, MHC has obligated itself under the GSIS-MHC
ensuring the solvency of the GSIS fund. Contract of Lease to shoulder such assessment. Stipulation l8 of the contract
• Moreover, GSIS is NOT strictly a GOCC UNDER LGC 193, but an instrumentality of pertinently reads: [Should there be any change in the law or interpretation of the GSIS
the State. GSIS manages the funds for the life insurance, retirement, survivorship, and law or any other circumstance which would subject the leased property to any kind of
disability benefits of all government employees and their beneficiaries. This tax, assessment, or levy…the Lessee agrees and obligates itself to shoulder and
undertaking, to be sure, constitutes an essential and vital function which the pay such tax, assessment or levy as it becomes due…
government, through one of its agencies or instrumentalities, ought to perform if • Considering, however, that MHC has not been impleaded in the instant case, the
social security services to civil service employees are to be delivered with reasonable remedy of the City of Manila is to serve the realty tax assessment covering the subject
dispatch. Katigbak property to MHC and to pursue other available remedies in case of
• [As an instrumentality of the State,] the subject properties under GSISs name are nonpayment, for said property cannot be levied upon as shall be explained below.
owned by the Republic. The GSIS is but a mere trustee of the subject properties
which have either been ceded to it by the Government or acquired for the 5. WON the GSIS properties are exempt from Levy
enhancement of the system. This particular property arrangement is clearly shown by • Yes. Although this issue has been rendered moot and academic, considering that it is
the fact that the disposal or conveyance of said subject properties are either done by MHC and not GSIS that is liable for RPT, the SC still held that it is without doubt that
or through the authority of the President of the Philippines. In fact, the Concepcion the subject GSIS properties are exempt from any attachment, garnishment, execution,
property was already transferred to the SC through Proclamation 835 by the President. levy, or other legal processes. This is the clear import of the third paragraph of Sec.
• If any real estate tax is due to the City of Manila, it is, following City of Davao, only for 39, RA 8291: The funds and/or the properties referred to herein as well as the
the interim period, or from 1992 to 1996 (during the period when the LGC withdrew benefits, sums or monies corresponding to the benefits under this Act shall be exempt
the tax exemption enjoyed by the GSIS), to be precise. from attachment, garnishment, execution, levy or other processes issued by the
courts, quasi-judicial agencies or administrative bodies…
2. WON GSIS is liable for RPT for the Conception Property during the period when • Thus, even granting arguendo that GSIS liability for realty taxes attached from 1992,
the LGC withdrew GSIS’ tax exemption when RA 7160 effectively lifted its tax exemption under PD 1146, to 1996, when RA
• No. Sec. 39 of RA 8291 is clear:…. any assessment against the GSIS as of the approval 8291 restored the tax incentive, the levy on the subject properties to answer for the
of this Act are hereby considered paid…” assessed realty tax delinquencies cannot still be sustained. The simple reason: The
governing law, RA 8291, in force at the time of the levy prohibits it. And in the final
3. WON RPT may be assessed against the Katigbak property analysis, the proscription against the levy extends to the leased Katigbak property, the
• Yes. LGC 234 provides: The ff. are exempted from payment of RPT: (a) Real property beneficial use doctrine, notwithstanding.
owned by the Republic of the Philippines or any of its political subdivisions except
when the beneficial use thereof has been granted, for consideration or otherwise, to a DECISION.
taxable person… (SC referred to this as the BENEFICIAL USE DOCTRINE) Petition is hereby GRANTED. The November 15, 2007 Decision and January 7, 2009 Order
• This exemption, however, must be read in relation with Sec. 133(o) of the LGC, which of the Regional Trial Court, Branch 49, Manila are REVERSED and SET ASIDE. Accordingly,
prohibits LGUs from imposing taxes or fees of any kind on the national government, the real property tax assessments issued by the City of Manila to the Government Service
its agencies, and instrumentalities: LGC SEC. 133. Common Limitations on the Taxing Insurance System on the subject properties are declared VOID, except that the real
Powers of Local Government Units. Unless otherwise provided herein, the exercise of property tax assessment pertaining to the leased Katigbak property shall be valid if served
the taxing powers of provinces, cities, municipalities, and barangays shall not extend on the Manila Hotel Corporation, as lessee which has actual and beneficial use thereof. The
to the levy of the following: xxx (o) Taxes, fees or charges of any kinds on the National City of Manila is permanently restrained from levying on or selling at public auction the
Government, its agencies and instrumentalities, and local government units. subject properties to satisfy the payment of the real property tax delinquency.
• Following LGC 234 in LGC 133, GSIS, lost in a sense its NON-TAXABLE STATUS with
respect to the Katigbak property when it contracted its beneficial use to MHC,
doubtless a taxable person. Thus, the real estate tax assessment of PhP 54,826,599.37
covering 1992 to 2002 over the subject Katigbak property is valid insofar as said tax
delinquency is concerned as assessed over said property.
4. Who is liable for the RPT assessed against the Katigbak Property, MHC or GSIS?
• MHC is liable. The unpaid tax attaches to the property and is chargeable against the
taxable person who had actual or beneficial use and possession of it regardless of
whether or not he is the owner. Being in possession and having actual use of the
Katigbak property since November 1991, MHC is liable for the realty taxes assessed
over the Katigbak property from 1992 to 2002.
LUNG CENTER OF THE PH v. QUEZON CITY charity patients). QC-LBAA dismissed the petition, which was later affirmed by
G.R. No. 144104 /June 29, 2004 / J. Callejo, Sr../LOCGOV/Miggy the Central Board of Assessment Appeals of QC (CBAA).
PETITIONER Lung Center of the Philippines ● CBAA said that Lung Center ain’t a charitable institution and that it’s property’s
RESPONDENTS Quezon City, QC City Assessor Rosas not actually, directly and exclusively used for charitable purposes. CA affirmed
CBAA.
SUMMARY. City Assessor Rosas assessed real property taxes over Lung Center’s
● Lung Center: I’m a charitable institution within the context of the 1987
land and building used for its hospital. Lung Center argues that it’s a charitable
Constitution. In 1995-99, 100% of my out-patients were charity patients and 60%
institution who is tax exempt. Ct held that while it is a charitable institution, the tax
of the hospital’s beds is allotted to charity patients. I’m obviously a charitable
exemption granted by law covers only property that’s actually, directly, and
institution since I receive govt subsidies, plus “exclusively” under the
exclusively used for charitable purposes. Here, Lung Center leased out a portion of
Constitution doesn’t necessarily mean solely so I don’t lose my charitable
its property to private individuals who used the same as clinics, a canteen, and a
character just cos I derive income from my leases. Also, even if PD 1823 doesn’t
business establishment. The Ct said that the exemption doesn’t cover these
exempt me from payment of real property taxes, I am not precluded from
particular areas.
seeking tax exemption under the 1987 Consti.
DOCTRINE. Laws granting exemption from tax are construed strictissimi juris
●
against the taxpayer. An intention to grant such exemption must be expressed in
● QC: Lung Center is not a charitable institution. It does not use the property
clear and unmistakable terms.
actually, directly and exclusively for charitable purposes. In a newspaper report,
In order to be entitled to the exemption, Lung Center is burdened to prove, by
graft charges were filed against Lung Center before the SB for undercharging
clear and unequivocal proof, that (a) it’s a charitable institution; AND (b) its real
rentals (detrimental to the govt) and for not following the CoA directive to
properties are ACTUALLY, DIRECTLY, and EXCLUSIVELY used for charitable
terminate the lease. It only uses the govt subsidies for charitable patients but
purposes. Exclusive is defined as possessed and enjoyed to the exclusion of others
the income derived is used for the benefit of paying patients. Lastly, hospital
(it is not equal to dominant use of principal use!). If real property’s used for 1 or
charges everyone (even charity patients) before being treated and refuse to let
more commercial purposes, it’s not exclusively used for the exempted purposes
them go if they don’t pay
but is subject to taxation.
11 Lung Center accepts both paying and non-paying patients. It renders medical services to out-patients, both paying and non-paying. It also receives annual govt subsidies.
As applied: the whereas clauses of PD 182312 and the purposes13 for which Lung BUT those portions of its real property that are leased to private entities aren’t
Center was created under its AoI show the medical services of the petitioner are to exempt from real property taxes as these aren’t actually, directly and
be rendered to the public in general in any and all walks of life including those who exclusively used for charitable purposes.
are poor and the needy without discrimination. After all, any person, the rich as well Laws granting exemption from tax are construed strictissimi juris against the taxpayer.
as the poor, may fall sick or be injured or wounded and become a subject of An intention to grant such exemption must be expressed in clear and unmistakable
charity14 . terms.
There’s also substantial evidence that it spent its income + govt subsidies for its PD 1823 Sec. 2 provides that: xxx the Lung Center shall be exempt from income
patients and operation of the hospital (and even incurred a net loss in 1991 and and gift taxes, the same further deductible in full for the purpose of determining the
1992). maximum deductible amount under NIRC 30 (h). It shall be exempt from the
payment of taxes, charges and fees imposed by the govt or any political
As a general principle, a charitable institution doesn’t lose it character as such subdivision or instrumentality thereof with respect to equipment purchases
and its exemption under taxes simply because it derives income from paying made by, or for the Lung Center.
patients, whether out-patient, or confined in the hospital, or receives subsidies
from the govt, so long as the money received is devoted or used altogether to It’s clear that Lung Center DOES NOT enjoy any property tax exemption
the charitable object which it’s intended to achieve; and no money inures to the privileges for its real properties as well as the building constructed thereon. If
private benefit of the persons managing or operating the institution. Congress intended for it to be exempted, it would’ve included it in the enumeration
-->The money received by the petitioner becomes a part of the trust fund and of the tax exempt privileges. Expressio unius est exclusio alterius.
must be devoted to public trust purposes and cannot be diverted to private
profit or benefit. Under P.D. No. 1823, the petitioner is entitled to receive The exemption mustn’t be so enlarged by construction since the reasonable
donations. The petitioner does not lose its character as a charitable institution presumption is that the State had granted in express terms all it intended to grant at
simply because the gift or donation is in the form of subsidies granted by the all, and that unless the privilege is limited to the very terms of the statute, the favor
government would be extended beyond what was meant. The tax exemption under Sec. 23(3)
(This is supported by the US Ct’s rulings in Congregational Sunday School v Board of Art VI 1987 Consti15 covers property taxes only, as explained by C.J.
Review, Lutheran Hospital Assocn of South Dakota v Baker, and Yorgason v County Davide16 (ConCom mem). This exemption is implemented by RA 7160 234 (b)17. Note
Board of Equalization of Salt Lake County) that in the 1935, it just says “exclusively” unlike in the 1973 and 1987 Constitutions.
This change in language is significant as held in Province of Abra v Hernando.
(2) WoN the real properties of Lung Center are exempt from real
Under the 1973 and 1987 Constitutions and Rep. Act No. 7160 in order to be
property taxes – PARTIAL ONLY
entitled to the exemption, the petitioner is burdened to prove, by clear and
12Lung Center is a non-profit and non-stock corporation which, subject to the provisions of the decree, is to be administered by the Office of the President of the Philippines with the Ministry of Health and the Ministry of Human
Settlements
13 essence: organized for the welfare and benefit of the Filipino people principally to help combat the high incidence of lung and pulmonary diseases in the Philippines.
14a charity may be fully defined as a gift, to be applied consistently with existing laws, for the benefit of an indefinite number of persons, either by bringing their minds and hearts under the influence of education or religion, by
assisting them to establish themselves in life or otherwise lessening the burden of government.[12] It may be applied to almost anything that tend to promote the well-doing and well-being of social man. It embraces the
improvement and promotion of the happiness of man.[13] The word charitable is not restricted to relief of the poor or sick.
15 Sec 28 (3) Art VI Consti: Charitable institutions…and all lands, buildings, and improvements, ACTUALLY, DIRECTLY, and EXCLUSIVELY used for…charitable purposes shall be exempt from taxation.
16 “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”
17 LGC 234(b): Exemptions from property tax – (b) charitable institutions…. And all lands, buildings, and improvements actually, directly, and exclusively used for religious, charitable or educational purposes.
unequivocal proof, that (a) it is a charitable institution; and (b) its real properties present Constitution added charitable institutions, mosques, and non-profit
are ACTUALLY, DIRECTLY and EXCLUSIVELY used for charitable purposes. cemeteries and required that for the exemption of lands, buildings, and
improvements, they should not only be exclusively but also actually and directly used
Exclusive is defined as possessed and enjoyed to the exclusion of others; debarred for religious or charitable purposes. The Constitution is worded differently. The
from participation or enjoyment; and exclusively is defined, in a manner to exclude; change should not be ignored. It must be duly taken into consideration. Reliance on
as enjoying a privilege exclusively.[40] If real property is used for one or more past decisions would have sufficed were the words actually as well as directly not
commercial purposes, it is not exclusively used for the exempted purposes but is added. There must be proof therefore of the actual and direct use of the lands,
subject to taxation.[41] The words dominant use or principal use cannot be buildings, and improvements for religious or charitable purposes to be exempt from
substituted for the words used exclusively without doing violence to the taxation.
Constitutions and the law.[42] Solely is synonymous with exclusively.[43]
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.
As applied; The petitioner failed to discharge its burden to prove that the entirety of
its real property is actually, directly and exclusively used for charitable purposes.
While portions of the hospital are used for the treatment of patients and the
dispensation of medical services to them, whether paying or non-paying, other
portions thereof are being leased to private individuals for their clinics and a canteen.
Further, a portion of the land is being leased to a private individual for her business
enterprise under the business name Elliptical Orchids and Garden Center. Indeed,
the petitioners evidence shows that it collected P1,136,483.45 as rentals in 1991 and
P1,679,999.28 for 1992 from the said lessees.
Accordingly, we hold that the portions of the land leased to private entities as well as
those parts of the hospital leased to private individuals are not exempt from such
taxes.[45] On the other hand, the portions of the land occupied by the hospital and
portions of the hospital used for its patients, whether paying or non-paying, are
exempt from real property taxes.
DECISION.
Petition PARTIALLY GRANTED
NOTES.
Doctrine in Province of Abra:
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
LRTA v. CENTRAL BOARD • CA affirmed Local Board. Reiterated that properties did not fall under any of the
G.R. No. 127316 / October 12, 2000 / PANGANIBAN, J./ LOCGOV – LOCAL GOVERNMENT exemptions listed in Sec. 40 of Real Property Tax Code because they were not
TAXATION – REAL PROPERTY TAXATION – RA10149 / REDMAINES owned by the Gov’t or any GOCC (which are exempt). True, the gov’t owned the
NATURE Petition for review on certiorari of a CA decision real property upon which the properties were built. However, they were still
PETITIONERS Light Rail Transit Authority taxable because beneficial use had been transferred to LRTA, a taxable entity.
RESPONDENTS Central Board of Assessment Appeals, Board of Assessment Since LRTA was not engaged in PURELY governmental or public service, its
Appeals of Manila, City Assessor of Manila operations were proprietary and profit-oriented.
2. What is the basis of the imposition of real property tax – ACTUAL USE OF
THE PROPERTY.
LRTA: it merely operates and maintains the LRT system and that the actual users of
the carriageways and terminal stations are the commuting public. The public-use
character of the LRT is not negated by the fact that revenue is obtained from the
latter's operations.
SC: No. Under the Sec. 40 of the Real Property Tax Code, real property is classified
for assessment purposes on the basis of actual use, which is defined as "the purpose
for which the property is principally or predominantly utilized by the person in
possession of the property.”
Unlike public roads, which are open for use by everyone, the LRT is accessible
only to those who pay the required fare. It is thus apparent that petitioner does
not exist solely for public service, and that the LRT carriageways and terminal
stations are not exclusively for public use. Although petitioner is a public utility,
it is nonetheless profit-earning. It actually uses those carriageways and terminal
stations in its public utility business and earns money therefrom.
Under the Real Property Tax Code, real property "owned by the Republic of the
Philippines or any of its political subdivisions and any GOCC so exempt by its
charter, provided, however, that this exemption shall not apply to real property of the
abovenamed entities the beneficial use of which has been granted, for consideration
or otherwise, to a taxable person." (footnote says that this is also found under Sec.
234(a) of LGC)
AS APPLIED: Under EO 603, the charter of LRTA, there is no provision that provides
for any real estate tax exemption. Under Art. 4, Sec. 8 of charter, its exemption is
limited to direct and indirect taxes, duties or fees in connection with the importation
of equipment.
Even granting that the national government owns the carriageways and stations, the
exemption would still not apply because their beneficial use has been granted to
LRTA, a taxable entity.
CONCLUSION: Taxation is the rule and exemption is the exception. Any claim for
tax exemption is strictly construed against the claimant. LRTA has not shown its
eligibility for exemption and is thus subject to tax.
PHILRECO v. SECRETARY The Tax Exemption:
G.R. No 143076 / June 10 2003 / Puno, J./Pambid Following Sec. 3918 of PD 269, electric cooperatives are permanently exempt from
PETITIONERS Philippine Rural Electric Cooperatives Association, Inc. (Philreca); paying income taxes and all National Government, local government and municipal
Agusan Del Norte Electric Cooperative, Inc. (Aneco); Iloilo I Electric Cooperative, Inc. (Ileco I); taxes and fees, including franchise, filing, recordation, license or permit fees or taxes
And Isabela I Electric Cooperative, Inc. (Iselco I) and any fees, charges, or costs involved in any court or administrative proceeding in
RESPONDENTS Secretary of the DILG, Secretary of the DOFinance which it may be a party, and all duties or imposts on foreign goods acquired for its
operations.
SUMMARY. Petitioners assail the constitutionality of Secs. 193 and 234 of the LGC
for violating the EPC. They claim that electric cooperatives are singled out because The Loan Agreements:
the said provisions withdraw tax exemptions previously granted to them. On the To finance the electrification projects envisioned by PD 269, the PHL entered into 6
other hand, cooperatives under RA 6938 continue to enjoy tax exemptions. loan agreements with the USA for the benefit of the electric cooperatives, amounting
The SC upheld the Constitutionality of the LGC provisions. There was no violation to $86M. Sec. 6.519 of the loan agreement provides that “the loan agreement and
of the EPC, because there was a substantial distinction between electric the loan provided for herein shall be free from… any taxation or fees imposed under
cooperatives and cooperatives under RA 6938. any laws or decrees in effect within the Republic of the Philippines”.
DOCTRINE. . Sec. 6.5 of the Loan Agreement does not grant any tax exemption
in favor of the borrower or the beneficiary either on the proceeds of the loan itself Enter the LGC:
or the properties acquired through the said loan. It simply states that the loan With the passage of the LGC, the petitioners argue that their tax exemptions have
proceeds and the principal and interest of the loan, upon repayment by the been invalidly withdrawn. Thus, they assail the constitutionality of Secs. 193 and 234
borrower, shall be without deduction of any tax or fee that may be payable of the LGC on the ground that the said provisions discriminate against them, in
under Philippine law as such tax or fee will be absorbed by the borrower with violation of the equal protection clause. Furthermore, they argue that these
funds other than the loan proceeds. provisions are unconstitutional because they impair the obligation of contracts
between the PHL and the US.
FACTS.
ISSUES & RATIO.
The Petitioners:
WON the provisions are unconstitutional? NO.
Electric cooperatives organized and existing under P.D. 269 (The National
Procedural – Petitioners disregarded the hierarchy of courts, going directly to the SC,
Electrification Administration Decree). Some of them are members of the PHL Rural
but the latter ruled upon it anyway.
Electric Cooperatives Association, Inc. (PHILRECA), an association of 119 electric
cooperatives in the Philippines. Others non-stock, non-profit electric cooperatives
■ No violation of the EPC.
registered with the National Electrification Administration.
Petitioners Argument – Secs. 193 and 234 withdraw tax exemptions previously
granted to all persons except, among others, cooperatives registered under RA
18 SECTION 39. Assistance to Cooperatives; Exemption from Taxes, Imposts, Duties, Fees; Assistance from the National Power Corporation. — Pursuant to the national policy declared in Section 2, the Congress hereby finds and
19 Section 6.5. Taxes and Duties. The Borrower covenants and agrees that this Loan Agreement and the Loan provided for herein shall be free from, and the Principal and interest shall be paid to A.I.D. without deduction for and free
from, any taxation or fees imposed under any laws or decrees in effect within the Republic of the Philippines or any such taxes or fees so imposed or payable shall be reimbursed by the Borrower with funds other than those
provided under the Loan. To the extent that (a) any contractor, including any consulting firm, any personnel of such contractor financed hereunder, and any property or transactions relating to such contracts and (b) any commodity
procurement transactions financed hereunder, are not exempt from identifiable taxes, tariffs, duties and other levies imposed under laws in effect in the country of the Borrower, the Borrower and/or Beneficiary shall pay or
reimburse the same with funds other than those provided under the Loan.
6938. Thus, the provisions20 unduly discriminate against the petitioners, who are duly A principle adhered to by RA 6938 is the principle of subsidiarity. Pursuant to
registered cooperatives under PD 269 but NOT under RA 6938 because the tax this principle, the government may only engage in development activities where
exemption for them has been withdrawn. cooperatives do not possess the capability or the resources to do so and only
Electric cooperatives registered under PD 269 and electric cooperatives registered upon the request of such cooperatives. This principle is found in Art. 221 of RA
with the Cooperative Development Authority (CDA) under RA 6938 are similarly 6938.
situated for the following reasons: a) petitioners are registered with the NEA which is On the other hand, PD 269 is full of provisions which grant the NEA, upon the
a government agency like the CDA; b) petitioners, like CDA-registered cooperatives, happening of certain events, the power to control and take over the
operate for service to their member-consumers; and c) prior to the enactment of the management and operations of cooperatives registered under it. This include
Local Government Code, petitioners, like CDA-registered cooperatives, were already the following (no need to copy I guess):
tax-exempt. a) the NEA Administrator has the power to designate, subject to the
confirmation of the Board of Administrators, an Acting General Manager and/or
SC – The EPC means that “no person or class of persons shall be deprived of the Project Supervisor for a cooperative where vacancies in the said positions occur
same protection of laws which is enjoyed by other persons or other classes in the and/or when the interest of the cooperative or the program so requires, and to
same place and in like circumstances.” The guaranty of equal protection is not prescribe the functions of the said Acting General Manager and/or Project
violated by a law based on reasonable classification. Classification, to be reasonable, Supervisor, which powers shall not be nullified, altered or diminished by any
must (1) rest on substantial distinctions; (2) be germane to the purposes of the law; policy or resolution of the Board of Directors of the cooperative concerned;
(3) not be limited to existing conditions only; and (4) apply equally to all members of b) the NEA is given the power of supervision and control over electric
the same class. cooperatives and pursuant to such powers, NEA may issue orders, rules and
regulations motu propio or upon petition of third parties to conduct referenda
As applied: and other similar actions in all matters affecting electric cooperatives;
1) There is a substantial distinction between coops under PD 269 and RA 6938. c) No cooperative shall borrow money from any source without the approval
Such distinction is manifest in two material respects – capital contributions, and of the Board of Administrators of the NEA; and
extent of government control. d) The management of a cooperative shall be vested in its Board, subject to the
a. Capital Contributions supervision and control of NEA which shall have the right to be represented
The elements of a cooperative under RA 6938 are a) association of persons; b) and to participate in all Board meetings and deliberations and to approve all
common bond of interest; c) voluntary association; d) lawful common social or policies and resolutions.
economic end; e) capital contributions; f) fair share of risks and benefits; g) Why does NEA control the electric coops? – Remember, NEA was given the
adherence to cooperative values; and g) registration with the appropriate power to incur loans to finance the electric coops. In effect, NEA serves as the
government authority. primary source of funds for these electric coops. On the other hand, coops
On the other hand, PD 269 makes no mention of capital contributions. under RA 6938 are envisioned to be self-sufficient organizations with minimal
Why the difference? – Coops under RA 6938 are created under the principle that need for government regulation.
the members “bind themselves to help themselves”. Through their collectivity, In any case, transitory provisions of RA 6938 indicate the intent of Congress to
they are able to attain economic benefits. Electric coops under PD 269 do not distinguish between electric coops and those under RA 6938. For coops already
require capital contributions because it is the government that funds them. existing under previous laws, they are deemed registered with the CDA
b. Extent of Government Control (governing body of coops under 6938) upon submission of documents within
20 Section 193. Withdrawal of Tax Exemption Privileges.—Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-
owned and controlled corporations, except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of
this Code
Section 234. Exemptions from real property tax.—The following are exempted from payment of the real property tax:
(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and
3 + 4) Secs 193 and 234 of the LGC permit reasonable classification as these
exemptions are not limited to existing conditions and apply equally to all members
of the same class. Exemptions from local taxation, including real property tax, are
granted to all cooperatives covered by R.A. No. 6938 and such exemptions exist for
as long as the LGC and the provisions therein on local taxation remain good law.
Sec. 6.5 of the Loan Agreement does not grant any tax exemption in favor of the
borrower or the beneficiary either on the proceeds of the loan itself or the properties
acquired through the said loan. It simply states that the loan proceeds and the
principal and interest of the loan, upon repayment by the borrower, shall be without
deduction of any tax or fee that may be payable under Philippine law as such
tax or fee will be absorbed by the borrower with funds other than the loan
proceeds.
PROVINCIAL ASSESSOR OF MARINDUQUE v. CA
G.R. No.170532 / April 30, 2009/ Austria-Martinez, J./ ELEEscober CBAA - MARCOPPER not exempt
- a dam is not machinery but an improvement. To be considered a “machinery,” the
PETITIONERS Provincial Assessor of Marinduque
property must either be a physical facility for production; or a service facility; or one that
RESPONDENTS CA, MARCOPPER
is actually, directly and exclusively used to meet the needs of the particular industry,
business, or activity; and which by its very nature and purpose is designed for, or
SUMMARY. Provincial Assessor wanted to levy real property taxes on necessary to a manufacturing, mining, logging, commercial, industrial or agricultural
MARCOPPER's siltation dam. MARCOPPER claimed an exemption because the purpose.
dam was a "machine" used for pollution control and environmental protection. - The property here does not produce anything nor operate as auxiliary to a production
process; thus, it is neither a physical facility for production nor a service facility. It is not
even necessary to the mining activity of respondent, because its purpose is merely to
SC held that the dam was not a machine because the DENR certification described
contain silt and sediments.
the property as a structure. Based on this finding, the SC held that it was an
- Also, the ocular inspection revealed that the dam has not been operation for 2 years.
improvement adhered to the soil and therefore not a machine as defined in the
LGC for real property tax exemption. CA - REVERSED.
- Dam is considered machinery because the definition is broad enough to include a
DOCTRINE. A claim for exemption under Sec. 234(e), as well as Sec. 206, should “machinery, instrument, apparatus or device consisting of parts which, functioning
be supported by evidence that the property is actually, directly and exclusively together, allows a person to perform a task more efficiently,” such as the subject
used for pollution control and environmental protection. The burden is upon the property.
taxpayer to prove, by clear and convincing evidence, that his claim for exemption - Under the Philippine Mining Act (RA 7942)22 pollution control devices are tax exempt
has legal and factual basis - Its non-operational state of the property does not remove it from the clear provisions of
LGC and (RA 7942), in the absence of clear and convincing evidence that the dam and
decant system was inutile to achieve its purpose.
FACTS.
The Provincial Assessor sent an assessment notice to MARCOPPER for real property taxes Assessor:
(RPT) due on its properties, including its Siltation Dam and Decant System (these are the - CA was wrong in finding that the properties were tax exempt under the LGC and in
properties in question) at Barangay Lamese, Sta. Cruz, Marinduque. The subject property disregarding the findings of both the LBAA and the CBAA that the properties were
has a market value of Php36,360,996.19. not for pollution control, having been non-operational for years after a typhoon
damaged it (Marcopper had even admitted to this and had wanted to repair the
MARCOPPER paid, but appealed before the Local Board of Assessment Appeals (LBAA) on dam).
the ground that the subject property is exempt from real property taxation under Section - CBAA also found that Marcopper did not even obtain a tax exemption certificate
234(e) of the LGC. It attached an Affidavit issued by its Chief Mining Engineer Ricardo from the DENR, nor did Marcopper dispute this finding.
Esquieres, Jr., stating that the subject property were constructed to comply with the DENR
condition that Marcopper prevent run-offs and silt materials from contaminating the Mogpog Marcopper:
and Boac Rivers. Therefore it is exempt because these are "machinery and equipment used - Wrong mode of appeal! Assessor should have filed a Petition for Review on Rule 45
for pollution control and environmental protection". certiorari within 15 days, but filed a Rule 65 Certiorari 60 days after receiving the
decision
Marcopper also submitted a Certification issued by DENR Regional Technical Director Carlos -
J. Mag(si)no that the subject property is a “Siltation Dam structure intended primarily for ISSUES & RATIO.
pollution control of silted materials." 1. WON Assessor filed the proper mode of appeal. NO
Appeal from a CA decision (re: CBAA decisions) to the SC should have been under a Rule 45
LBAA dismissed the appeal, citing the earlier ruling in Benguet Corp. v. Central Board saying certiorari. [CBAA – Petition for Review to CA23 -- appeal to SC o questions of law should be
that a tailings dam is a permanent improvement not exempt from real property tax.
22 Sec. 91. Incentives for Pollution Control Devices. Pollution control devices acquired, constructed or installed by contractors shall not be considered as improvements on the land or building where they are placed, and shall not be subject
to real property and other taxes or assessments: Provided, however, That payment of mine wastes and tailings fees is not exempted.
24 Sec. 234. Exemptions from Real Property Tax. -‐ The following are exempted from payment of the real property tax:
(e) Machinery and equipment used for pollution control and environmental protection.
25 (c) Usage exemptions. Exempted from real property taxes on the basis of the actual, direct and exclusive use to which they are devoted are: (i) all lands, buildings and improvements which are actually directly and exclusively used for
religious,
charitable
or
educational
purposes;
(ii)
all
machineries
and
equipment
actually,
directly
and
exclusively
used
by
local
water
districts
or
by
government-‐owned
or
controlled
corporations
engaged
in
the
supply
and
distribution
of
water
and/
or
generation
and
transmission
of
electric
power;
and
(iii)
all
machinery
and
equipment
used
for
pollution
control
and
environmental
protection.
26 Sec. 206. Proof of Exemption of Real Property from Taxation. -‐ Every person by or for whom real property is declared, who shall claim tax exemption for such property under this Title shall file with the provincial, city or municipal
assessor
within
thirty
(30)
days
from
the
date
of
the
declaration
of
real
property
sufficient
documentary
evidence
in
support
of
such
claim
including
corporate
charters,
title
of
ownership,
articles
of
incorporation,
bylaws,
contracts,
affidavits,
certifications
and
mortgage
deeds,
and
similar
documents.
If
the
required
evidence
is
not
submitted
within
the
period
herein
prescribed,
the
property
shall
be
listed
as
taxable
in
the
assessment
roll.
However,
if
the
property
shall
be
proven
to
be
tax
exempt,
the
same
shall
be
dropped
from
the
assessment
roll.
27 (o) Machinery embraces machines, equipment, mechanical contrivances, instruments, appliances or apparatus which may or may not be attached, permanently or temporarily, to the real property. It includes the physical facilities for production,
the
installations
and
appurtenant
service
facilities,
those
which
are
mobile,
self-‐powered
or
self-‐propelled
and
those
not
permanently
attached
to
the
real
property
which
are
actually,
directly,
and
exclusively
used
to
meet
the
needs
of
the
particular
industry,
business
or
activity
and
which
by
their
very
nature
and
purpose
are
designed
for,
or
necessary
to
its
manufacturing,
mining,
logging,
commercial,
industrial
or
agricultural
purposes.
NHA v. ILOILO
G.R. No. 172267/ August 20, 2008 / Tinga, J./Real Property Taxation/GRACEgar Rosalina Francisco: NHA’s failure to make a deposit rendered its action jurisdictionally infirm.
NATURE PETITION for review on certiorari of a decision of the CA.
PETITIONERS NATIONAL HOUSING AUTHORITY SC: Under Sec. 267, LGC, a deposit equivalent to the amount of the sale at public auction
RESPONDENTS ILOILO CITY, as represented by its Mayor, HON. JERRY TREÑAS, plus two percent (2%) interest per month from the date of the sale to the time the court
ILOILO CITY TREASURER CATHERINE TINGSON, and ROSALINA FRANCISCO, action is instituted is a condition—a “prerequisite,” to borrow the term used by the
acknowledged father of the Local Government Code7— which must be satisfied before the
court can entertain any action assailing the validity of the public auction sale. The law, in
SUMMARY. City auctioned off NHA’s lot. The latter filed a complaint in the RTC but City plain and unequivocal language, prevents the court from entertaining a suit unless a deposit is
said the lower court did not acquire jurisdiction because of failure to comply with Sec. 267. made. This is evident from the use of the word “shall” in the first sentence of Section 267.
LGC. NHA said it’s tax-exempt so provision not applicable to it. Court sided with NHA.
DOCTRINE. A deposit equivalent to the amount of the sale at public auction plus two What’s with the deposit?
percent (2%) interest per month from the date of the sale to the time the court action is 1. a jurisdictional requirement the nonpayment of which warrants the failure of the
instituted is a condition—a “prerequisite,” to borrow the term used by the acknowledged action
father of the Local Government Code—which must be satisfied before the court can 2. not a tax measure
entertain any action assailing the validity of the public auction sale 3. meant to reimburse the purchaser of the amount he had paid at the auction sale
FACTS. should the court declare the sale invalid.
• The City officials auctioned off NHA’s lot for nonpayment of taxes. There was no private The requirement is not applicable if the plaintiff is the government or any of its agencies as
individual who offered to buy the lot so City bought it and after the expiration of the it is presumed to be solvent ,and more so where the tax exempt status of such plaintiff as
redemption period, Rosalina Francisco purchased the land. basis of the suit is acknowledged.
• NHA filed a complaint to annul the auction sale since it was allegedly done without notice
to NHA as the registered owner thereof, in addition to the fact that the latter is a tax-exempt Case at bar: NHA is indisputably a tax-exempt entity whose exemption covers real property
agency of the government. taxes and so its property should not even be subjected to any delinquency sale. Perforce,
o City and Francisco separately filed MTDs based on the same grounds: lack of the bond mandated in Section 267, whose purpose it is to ensure the collection of the tax
jurisdiction and forum shopping 28. According to them, the lower court did not delinquency should not be required of NHA before it can bring suit assailing the validity of the
acquire jurisdiction for failure of plaintiff to comply with the deposit
auction sale. Any public auction sale involving property owned by NHA would be null and
mandated under Section 267, R.A. 716029. void and any suit filed by the latter questioning such sale should not be dismissed for
• RTC dismissed. CA affirmed. Hence, this petition. failure to pay the bond. NHA cannot be declared delinquent in the payment of real
property tax obligations which, by reason of its tax-exempt status, cannot even accrue in
ISSUES & RATIO. the first place.
WON NHA’s tax-exempt status vests it with immunity as well from the deposit
requirement under Section 267 of R.A. No. 7160 – YES DECISION.
NHA: 1. Under several statutes—namely Presidential Decree (P.D.) No. 1922, P.D. No. 2013 and Petition granted, judgment reversed and set aside. Case remanded to Regional Trial Court of
Republic Act (R.A.) No. 7279—it is exempt from the payment of any and all fees and taxes of Iloilo City.
any kind, whether local or general. Hence, Sec. 267 not applicable to it.
2. Assuming that it is indeed required to make a deposit, NHA avers that a deposit is not NOTES.
necessary in view of the fact that the government is always presumed to be solvent. Nonetheless, because respondent Iloilo City filed a motion to dismiss NHA’s Complaint dated 5
3. There are irregularities in the conduct of the delinquency sale, such as the fact that it was not June 2002 based on Section 267 and not an answer, it is both proper and prudent to remand
served a copy of the warrant of levy, which allegedly necessitate a review of the case. the case to the trial court in order to afford respondent Iloilo City full opportunity to be heard
on the matters raised in the complaint. Also re forum shopping: the civil case had already been
City of Iloilo: NHA cannot take refuge in its theory that it is exempt from making a deposit previously dismissed for failure to comply with the deposit requirement deemed by the court to
because it is not a taxpayer and is, within the contemplation of the 2nd paragraph of Article 267 be a condition precedent for the filing of that suit. This previous case, however, hardly counts
of R.A. No. 7160, merely a juridical person having legal interest in the subject property. for forum shopping precisely because it is no longer pending.
28 Civil Case No. 22090 before Branch 34 of Iloilo RTC. In fact, said case has been dismissed on the ground of noncompliance with the deposit requirement under Sec. 267, R.A. 7160
29 Sec. 267. Acting Assailing Validity of Tax Sale.—No court shall entertain any action assailing the validity of any sale at public auction of real property or rights therein under this Title until the taxpayer shall have deposited with the court the amount for which the real property was sold,
together
with
interest
of
two
(2%)
per
month
from
the
date
of
sale
to
the
time
of
the
institution
of
the
action.
The
amount
so
deposited
shall
be
paid
to
the
purchaser
at
the
auction
sale
if
the
deed
is
declared
invalid
but
it
shall
be
returned
to
the
depositor
if
the
action
fails.
Neither
shall
any
court
declare
a
sale
at
public
auction
invalid
by
reason
of
irregularities
or
informalities
in
the
proceedings
unless
the
substantive
rights
o
the
delinquent
owner
of
the
real
property
or
the
person
having
legal
interest
therein
have
been
impaired.
REPUBLIC v. PARAÑAQUE No. 654 had already been expressly repealed by the LGC and that PRA failed to
G.R. No. 191109/ Jul 18, 2012/ Mendoza, J./LOCGOV-Real Property Taxation/ comply with the procedural requirements in Sec. 206.
MMBDELACRUZ
NATURE Petition for Review on Certiorari ISSUES & RATIO.
PETITIONERS Republic of the PH, rep. by the Phil. Reclamation Authority (PRA) 1. WON the PRA is an incorporated instrumentality of the national
RESPONDENTS City of Parañaque government and is, therefore, exempt from payment of real property tax
under Sections 234(a) and 133(o) LGC vis-à-vis MIAA v. CA? YES.
SUMMARY. The areas reclaimed by PRA were levied upon by Parañaque City after PRA was
assessed of delinquent real property taxes. SC declared the auction sale and assessment PRA is not a GOCC either under Section 2(3) IPAC or under Section 16, Article XII of
notice void because PRA was a government instrumentality and the reclaimed lands were the 1987 Constitution. The facts, the evidence on record and jurisprudence on the
part of the public domain. issue support the position that PRA was not organized either as a stock or a non-
DOCTRINE. An incorporated government instrumentality that operates for public service stock corporation. Neither was it created by Congress to operate commercially and
and is not economically viable can’t be taxed as a GOCC. Lands of the public domain are compete in the private market. Instead, PRA is a government instrumentality vested
exempt from real estate tax. with corporate powers and performing an essential public service pursuant to
Section 2(10) of the Introductory Provisions of the Administrative Code. Being an
FACTS. incorporated government instrumentality, it is exempt from payment of real property
• The Public Estates Authority (PEA) is a government corporation created by tax.
P.D. 1084 to provide a coordinated, economical and efficient reclamation of
lands, and the administration and operation of lands belonging to, managed 1. PRA is not a GOCC because it is neither a stock nor a non-stock
and/or operated by, the government with the object of maximizing their corporation.
utilization and hastening their development consistent with public interest. E.O.
380 transformed PEA into PRA. GOCC v Instrumentality under the Admin Code
• PRA reclaimed several portions of the foreshore and offshore areas of Manila GOCC Government instrumentality/ government corporate
Bay, including those located in Parañaque City, and was issued OCsT and TCsT entities
over the reclaimed lands. Section 2(13) IPAC defines a GOCC as follows: Section 2(10) IPAC defines a government
• The City Treasurer issued Warrants of Levy on PRA’s reclaimed properties 30 (13) Government-owned or controlled corporation "instrumentality" as follows:
located in Parañaque City based on the assessment for delinquent real refers to any agency organized as a stock or non- (10) Instrumentality refers to any agency of the
property taxes made by the City Assessor. stock corporation, vested with functions relating to National Government, not integrated within the
public needs whether governmental or proprietary department framework, vested with special
• PRA filed a petition for prohibition with prayer for TRO and/or WPI against
in nature, and owned by the Government directly functions or jurisdiction by law, endowed with some
Carabeo before the RTC; denied. or through its instrumentalities either wholly, or, if not all corporate powers, administering special
• The auction sale of the subject properties was consummated. where applicable as in the case of stock funds, and enjoying operational autonomy, usually
• PRA sought to declare as null and void the assessment for real property taxes, corporations, to the extent of at least fifty-one (51) through a charter.
the levy based on the said assessment, the public auction sale, and the percent of its capital stock:
31 P.D. No. 1084: Section 2. Declaration of policy. It is the declared policy of the State to provide for a coordinated, economical and efficient reclamation of lands, and the administration and operation of lands belonging to,
managed and/or operated by the government, with the object of maximizing their utilization and hastening their development consistent with the public interest.
Section 4. Purposes. The Authority is hereby created for the following purposes:
(a) To reclaim land, including foreshore and submerged areas, by dredging, filling or other means, or to acquire reclaimed land;
(b) To develop, improve, acquire, administer, deal in, subdivide, dispose, lease and sell any and all kinds of lands, buildings, estates and other forms of real property, owned, managed, controlled and/or operated by the
government.
(c) To provide for, operate or administer such services as may be necessary for the efficient, economical and beneficial utilization of the above properties.
SEC. 234. Exemptions from Real Property Tax – The following are exempted from payment of the • There is no point in national and local governments taxing each other,
real property tax:
unless a sound and compelling policy requires such transfer of public funds
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions
except when the beneficial use thereof has been granted, for consideration or otherwise, to a
from one government pocket to another.
taxable person. • There is also no reason for local governments to tax national government
instrumentalities for rendering essential public services to inhabitants of
SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. – Unless local governments.
otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities,
and barangays shall not extend to the levy of the following:
(o) Taxes, fees or charges of any kinds on the National Government, its agencies and
2. The subject reclaimed lands are still part of the public domain, owned
instrumentalities, and local government units. by the State and, therefore, exempt from payment of real estate taxes.
It is clear from Section 234 that real property owned by the Republic is exempt Here, the subject lands are reclaimed lands, specifically portions of the
from real property tax unless the beneficial use thereof has been granted to a foreshore and offshore areas of Manila Bay. As such, these lands remain public
taxable person. lands and form part of the public domain. SC cited Section 2, Article XII of the
• There is no proof that PRA granted the beneficial use of the subject 1987 Constitution32 and Art. 420 CC33.
reclaimed lands to a taxable entity. There is no showing on record either
that PRA leased the subject reclaimed properties to a private taxable entity. Chavez v. PEA and AMARI Coastal Development Corporation:
• Foreshore and submerged areas irrefutably belonged to the public domain and were inalienable
unless reclaimed, classified as alienable lands open to disposition and further declared no longer
This exemption should be read in relation to Section 133(o) of the same Code, which needed for public service.
prohibits local governments from imposing "taxes, fees or charges of any kind on the • The fact that alienable lands of the public domain were transferred to the PEA (now PRA) and
National Government, its agencies and instrumentalities x x x." The Administrative issued land patents or certificates of title in PEA’s name did not automatically make such lands
Code allows real property owned by the Republic to be titled in the name of private. Reclaimed lands retained their inherent potential as areas for public use or public service.
• Only when qualified private parties acquire these lands will the lands become private lands. In the
agencies or instrumentalities of the national government. Such real properties
hands of the government agency tasked and authorized to dispose of alienable of disposable
remain owned by the Republic and continue to be exempt from real estate tax. lands of the public domain, these lands are still public, not private lands.
• PEA's charter expressly states that PEA "shall hold lands of the public domain" as well as "any
The Republic grants the beneficial use of its real property to an agency or and all kinds of lands."
instrumentality of the national government when the title of the real property is
transferred to an agency or instrumentality even as the Republic remains the Sec. 14, Chap. 4, Title I, Book III, Admin Code:
owner of the real property. Such arrangement does not result in the loss of the tax SEC 14. Power to Reserve Lands of the Public and Private Dominion of the Government.-
(1)The President shall have the power to reserve for settlement or public use, and for specific
exemption, unless "the beneficial use thereof has been granted, for consideration or
public purposes, any of the lands of the public domain, the use of which is not otherwise directed
otherwise, to a taxable person." by law. The reserved land shall thereafter remain subject to the specific public purpose indicated
until otherwise provided by law or proclamation.
Rationale of Sec. 133 (o):
• LGUs cannot tax the national government, which historically merely Reclaimed lands such as the subject lands in issue are reserved lands for public
delegated to LGUs the power to tax. use. They are properties of public dominion. The ownership of such lands
33 Article 420 of the Civil Code enumerates properties belonging to the State:
Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth.
remains with the State unless they are withdrawn by law or presidential
proclamation from public use.
DECISION.
Petition is GRANTED. RTC Order is REVERSED and SET ASIDE. All reclaimed
properties owned by the Philippine Reclamation Authority are hereby declared
EXEMPT from real estate taxes. All real estate tax assessments, including the final
notices of real estate tax delinquencies, issued by the City of Parañaque on the
subject reclaimed properties; the assailed auction sale, dated April 7, 2003; and the
Certificates of Sale subsequently issued by the Parañaque City Treasurer in favor of
the City of Parañaque, are all declared VOID.
ALVAREZ v. GUINGONA, JR. • HB No. 8817 “An Act Converting the Municipality of Santiago into an Independent
G.R. No. 118303 / JAN 31, 1996 / HERMOSISISMA JR., J. / LOC GOV – General Powers and Component City to be known as the City of Santiago”was filed in the House of
Attributes; Income / LTLimbaring Representatives (HR) with Antonio Abaya as principal author.
• It was then referred to the House Committee (HC) on Local Governments and HC on
NATURE Special Civil Action in the SC
Committee Appropriations.
PETITIONERS Sen. Heherson Alvarez, Sen. Jose Lina, Nicasio Bautista, Jesus
o The Committee submitted to the house a favorable report with amendments.
Gonzaga, et. Al. • Meanwhile, a counterpart of HB 8817, SB 1243 “An Act Converting the Municipality of
RESPONDENTS Hon. Teofisto Guingona Jr. as Exec. Secretary; Hon. Rafael Santiago into an Independent Component City to be Known as the City of Santiago,” was
Alunan as Secretary of Local Government, Hon. Salvador filed in the Senate with Sen. Tito Sotto as principal sponsor just right after the HR had
Enriquezas Secretary of Budget, et al. conducted its first public hearing.
• HB 8817 was passed on 2nd reading and approved on 3rd reading and was thereafter
submitted to the Senate.
SUMMARY. Petitioners challenge the validity of RA 7720 which sought to convert o The Senate Committee on Local Government recommended that HB 8817 be approved
the Municipality of Santiago into an independent component city. They argued without amendment since it was on all fours with SB 1243.
that Santiago can’t qualify as a component city because it doesn’t satisfy o The Committee Report passed the 2nd reading and was approved on the 3rd reading.
P20Million income requirement and because it did not originate in the House of • The enrolled bill as submitted to the President and signed by him on May 5, 1994 as RA
Representatives. As to the income requirement, petitioners stress that the internal 7720.
revenue allotment (IRAs) must not be included in the computation for income. SC • When a plebiscite on the Act was held, a great majority of registered voters of Santiago
ruled against the petitioners. voted in favor of its conversion into a city.
• However, the petitioners assail the validity of RA 7720 arguing that
a. Santiago could not qualify into a component city because its average annual income for
DOCTRINE. A local government unit is autonomous in the sense that it is given
the last 2 consecutive years falls below the required annual income of P20Million34
more powers and increased responsibility. As such, they are provided with
b. The bill did not originate from the House of Representatives.
adequate resources to meet such responsibilities. They may avail of such resources
through (1) local taxes (2) IRAs and (3) national wealth utilization proceeds. ISSUES & RATIO.
1. [MAIN] WON the Internal Revenue Allotments (IRAs) are to be included in the
LGC defines income as all revenues and receipts collected or received forming the computation of the average annual income of a municipality for the purposes of its
gross accretions of funds of the local government unit. The IRAs are items of conversion into an independent component city. – YES! IRAs form part of income of
income because they form part of the gross accretion of the funds of the local LGUs
government unit. The IRAs regularly and automatically accrue to the They thus • PETITIONERS: the IRAs should not be included in the computation to determine the average
constitute income which the local government can invariably rely upon as the annual income of the municipality (see notes). The IRAs are not actually income but transfers
and/or budgetary aid from the national government and that they fluctuate depending on
source of much needed funds
factors like population, land and equal sharing
o Following the proposed computation the average annual income is only about
Dept of Finance Order No 35-93also defines Annual Income to be revenues and
P13Million which is far below the P20 Million average income requirement.
receipts realized by provinces, cities and municipalities from regular sources of the
Local General Fund including the internal revenue allotment and other shares SC: argument is untenable! Internal Revenue Allotments form part of the income of LGUs.
provided for in Sections 284, 290 and 291 of the Code, but exclusive of • A Local Government Unit is a political subdivision of the State which is constituted by law
nonrecurring receipts, such as other national aids, grants, financial assistance, loan and possessed of substantial control over its own affairs. It is autonomous in the sense that it
proceeds, sales of fixed assets and similar others is given more powers, authority, responsibilities and resources.
o Power which used to be highly centralized in Manila, is thereby deconcentrated,
enabling especially the peripheral local government units to develop not only at their
FACTS. own pace and discretion but also with their own resources and assets.
34For a municipality to be converted into a component city, it must (1) have an average annual income of at least Twenty Million Pesos for the last two (2) consecutive years based on 1991 constant prices and
(2)Such
income
must
be
duly
certiRied
by
the
Department
of
Finance
• The practical side to development through a decentralized local government system certainly • Furthermore, petitioners themselves acknowledge that HB No. 8817 was already approved
concerns the matter of financial resources. With its broadened powers and increased on Third Reading and duly transmitted to the Senate when the Senate Committee on Local
responsibilities, an LGU must now operate on a much wider scale. More extensive Government conducted its public hearing on HB No. 8817.
operations, in turn, entail more expenses. Understandably, the vesting of duty, • The filing in the Senate of a substitute bill in anticipation of its receipt of the bill from
responsibility and accountability in every LGU is accompanied with a provision for the House, does not contravene the constitutional requirement that a bill of local
reasonably adequate resources to discharge its powers and effectively carry out its application should originate in the House of Representatives, for as long as the Senate
functions. does not act thereupon until it receives the House bill
o Availment of such resources is effectuated through the vesting in every LGU of:
1. the right to create and broaden its own source of revenue; • SC Final Words: On the side of every law, there is a presumption of constitutionality. Hence,
2. the right to be allocated a just share in national taxes, such share being in the form for RA 7720 to be nullified it must be shown that there is a clear and unequivocal breach of
of internal revenue allotments (IRAs); and the Constitution, not merely a doubtful and equivocal one; the grounds for nullity must be
3. the right to be given its equitable share in the proceeds of the utilization and clear and beyond reasonable doubt.
development of the national wealth, if any, within its territorial boundaries.
• The funds generated from local taxes, IRAs and national wealth utilization proceeds accrue to DECISION.
the general fund of the local government and are used to finance its operations subject to Petition DISMISSED.
specified modes of spending the same as provided in the Local Government Code and its
IRR (i.e. not less than 20% of the IRAs must be set aside for local development projects) NOTES.
• Hence, for purposes of budget preparation, the IRAs and the share in the national wealth Proposed computation by the Petitioners
utilization proceeds are considered items of income. This is also because the Local
Total income (at 1991 constant prices)
Government Code defines income as all revenues and receipts collected or received forming Php 20, 379, 057.07
for
the gross accretions of funds of the local government unit.
o The IRAs are items of income because they form part of the gross accretion of the funds 1991
of the local government unit. The IRAs regularly and automatically accrue to the They
Total income (at 1991 constant prices)
thus constitute income which the local government can invariably rely upon as the
source of much needed funds for Php 21, 570, 106.87
• While Section 450 (c) of the Local Government Code provides that the average annual 1992
income shall include the income accruing to the general fund, exclusive of special funds,
Total income for 1991and 1992 Php 41,949, 163.94
transfers, and nonrecurring income, it must be noted that IRAs are a regular recurring item of
income and can’t be classified as a special fund or transfer.
LESS: IRAs for 1991 and 1992 (Php 15, 730, 043.00)
• Dept of Finance Order No 35-93also defines Annual Income to be revenues and receipts
realized by provinces, cities and municipalities from regular sources of the Local General Total income for 1991 and 1992 Php 26, 219, 120.94
Fund including the internal revenue allotment and other shares provided for in Sections 284,
290 and 291 of the Code, but exclusive of nonrecurring receipts, such as other national aids, Average Annual Income Php 13, 109, 560.47
grants, financial assistance, loan proceeds, sales of fixed assets and similar others
o Such order, constituting executive or contemporaneous construction of a statute by an
administrative agency charged with the task of interpreting and applying the same, is
entitled to full respect and should be accorded great weight by the courts, unless such
construction is clearly shown to be in conflict with the Constitution, the governing
statute, or other laws.
2. WON RA 7720 can be said to have originated from the House of Representatives
considering that Senate passed SB No. 1243, its own version of HB 8817. – YES!
• It cannot be denied that HB No. 8817 was filed in the House of Representatives first before
SB No. 1243 was filed in the Senate.
o Petitioners themselves cannot disvow their own admission that HB No. 8817 was filed
on April 18, 1993 while SB No. 1243 was filed on May 19, 1993.The filing of HB No.
8817 was thus precursive not only of the said Act in question but also of SB No. 1243.
PIMENTEL v. AGUIRRE o It doesn’t violate local autonomy because it merely directs local governments to
G.R. No. 132988 / July 19 2000 / Panganiban, J. / LOCGOV – Local Taxation and Fiscal Matters: identify measures that can reduce total expenditures.
Internal Revenue Allotment / ECSCALA o It doesn’t violate the prohibition against imposition of holdbacks because the
NATURE Special Civil Action of Certiorari withholding is only temporary in nature.
PETITIONERS Aquilino Pimentel Jr
RESPONDENTS Alexander Aguirre (capacity as Corporate Secretary), Emilia ISSUES & RATIO.
Boncodin (Sec of DBM), Roberto Pagdanganan (intervenor) 1. WON Sec 1 of AO 372, insofar as it “directs” LGUs to reduce their expenditures
by 25 percent is unconstitutional as it violates the principle of local autonomy.–
NO.
SUMMARY. In 1997, President Ramos issued AO 372 which: (1) required all
[CT began with a discussion on the president’s power of supervision over LGUs & extent
government departments and agencies, including SUCs, GOCCs and LGUs to
of local autonomY –see notes]
identify and implement measures in FY 1998 that will reduce total expenditures for
the year by at least 25% of authorized regular appropriations for non-personal
Fiscal Autonomy of LGUs
services items (Sec 1) and (2) ordered the withholding of 10% of the IRA to
a. LGUs enjoy fiscal autonomy in addition to administrative autonomy. Fiscal autonomy
LGUs (Sec 4). Pimentel assailed these provisions as unconstitutional.SC held that
means that LGUs have the power to create their own sources of revenue in addition
Sec 1 was valid while Sec 4 was unconstitutional.
to their equitable share in the national taxes released by the national government as
DOCTRINE. A basic feature of local fiscal autonomy is the automatic release of the
well as the power to allocate their resources in accordance with their own priorities.
shares of LGUs in the national internal revenue. This is mandated by no less than
the Constitution. The LGC specifies further that the release shall be made directly
b. Local autonomy however, does not rule out any manner of national government
to the LGU concerned within 5 days after every quarter of the year and “shall not
intervention by way of supervision.
be subject to any lien or holdback that may be imposed by the national
c. For one, the President, according to the Constitution, is still the head of the NEDA,
government for whatever purpose.” As a rule, the term “shall” is a word of
the economic and planning agency of the government, primarily responsible for
command that must be given a compulsory
formulating and implementing integrated social and economic policies plans for the
entire country. The formulation and implementation of the policies and programs
FACTS. however are subject to consultations with the appropriate public agencies, private
• Pimentel was assailing two provisions of AO 37235 (issued by Pres. Ramos in Dec 27 sectors and LGUs.
1997) d. This Constitutional directive was followed in the LGC Sec 284 which provides that:
o Sec 1: All government departments and agencies, including state universities “In the event that the national government incurs an unmanaged public
and colleges, GOCCs, and LGUs will identify and implement measures in Fiscal sector deficit, the President of the PH is hereby authorized, upon the
Year 1998 that will reduce total expenditures for the year by at least 25% of recommendation of the Secretary of Finance, Secretary of the Interior and
authorized regular appropriations for non-personal service items Local Government and Secretary of Budget and Management, and subject
o Sec 4: Pending the assessment and evaluation by the Development Budget to consultation with the presiding officers of both houses of Congress and
Coordinating Committee of the emerging fiscal situation, the amount equivalent the presidents of the liga, to make the necessary adjustments in the
to 10% of the IRA to LGUs shall be withheld (this was later amended by AO 43 internal revenue allotment of LGUs but in no case shall the allotment be
of ERAP which reduced the amount of IRA to be withheld to 5%) less than 30% of the collection of national internal revenue taxes of the third
• Pimentel: AO was in effect an exercise of control of the President over the LGUs in fiscal year preceding the current fiscal year”
violation of principle of local autonomy. e. Before the President may therefore interfere in local fiscal matters: [IN THE
o Sec 4 is in contravention of Sec 286 of the LGC and of Sec 6 Article X of the BOOK!]
1987 Constitution providing for the automatic release to each of the units its 1. There must be an unmanaged public sector deficit in the national government
share in the national internal revenue 2. Consultations must be had with the presiding officers of Senate and the House
• OSG: AO 372 was issued to alleviate the economic difficulties brought about by the and the presidents of the various local leagues
peso devaluation. 3. Recommendation must be obtained from Secretaries of the DILG, DoF and DBM
(a) LGUs
must
identify
the
projects
eligible
for
funding,
based
on
the
criteria
laid
down
by
the
OC;
(b) LGUs
must
submit
their
project
proposals
to
the
DILG
fo
appraisal;
and
(c) The
project
proposals
that
pass
DILG
appraisal
are
submitted
to
the
OC
for
review,
evaluation,
and
approval.
Just
for
background,
some
of
the
projects
eligible
for
funding
are
the
following:
(a) Delivery
of
local
health
and
sanitation
services,
hospital
services
and
other
tertiary
services;
(b) Delivery
of
social
welfare
services;
(c) Provision
of
socio-‐cultural
services
and
facilities
for
youth
and
community
development;
(d) Provision
of
agricultural
and
on-‐site
related
research;
(e) Improvement
of
community-‐based
forestry
projects
and
other
local
projects
on
environment
and
natural
resources
protection
and
conservation;
(f) Improvement
of
tourism
facilities
and
promotion
of
tourism;
(g) Peace
and
order
and
public
safety;
(h) Construction,
repair
and
maintenance
of
public
works
and
infrastructure,
including
public
buildings
and
facilities
for
public
use,
especially
those
destroyed
or
damaged
by
man-‐made
or
natural
calamities
and
disaster
as
well
as
facilities
for
water
supply,
Rlood
control
and
river
dikes;
(i) Provision
of
local
electriRication
facilities;
(j) Livelihood
and
food
production
services,
facilities
and
equipment;
and
(k) Other
projects
that
may
be
authorized
by
the
OC
consistent
with
the
aforementioned
objectives
and
guidelines.
(b) Remaining P1.5B: Earmarked again to support LAAP, to be endorsed and constitute an illegal amendment by the executive branch of a substantive law.
approved by the OC, in accordance with its guidelines, procedures, and (Further, petitioner mentions that in a Dec. 2001 letter, Exec. Sec. Romulo
documentary requirements endorsed to DBM Sec. Boncodin the release of the LGSEF to certain LGUs in
Pres. Estrada then authorized the Executive Secretary and the DBM to release the first accordance with PGMA’s handwritten instructions. Hence, the LGUs are at a loss
P2.5B of the 2000 LGSEF. Later, the OC, under the new administration of Pres. Macapagal- as to how a portion of the LGSEF was actually allocated.) Finally, portions of the
Arroyo, promulgated OCD-2001-29 for the allocation, implementation, and release of the LGSEF are yet to be released, resulting in damage and injury to the petitioner.
remaining P2.5B of the 2000 LGSEF.
The respondents’ arguments
2001 GAA: The LGSEF reappears The respondents contend that:
In 2001, Congress failed to enact a GAA, so the 2000 GAA was deemed re-enacted, (1) Congress is the arbiter of what should be the “just share” of the LGUs in the
together with the IRA of the LGUs therein. The proviso earmarking P5B for the LGSEF was national taxes. Art. X, §6 does not specify that the just share of the LGUs shall be
therefore also re-enacted, and allocated as follows: P111.778B was the LGUs’ internal determined solely by the LGC. Moreover, the phrase “as determined by law” in that
revenue allotment in RA 8760, or the 2000 GAA. The 2000 GAA, like in 1999, also contained a provision means that there exists no limitation on the power of Congress to
proviso earmarking P5B of the IRA as the LGSEF. The allocation is as follows: determine what is the just share of the LGU’s in the national taxes.
(a) P3B: Modified codal formula: (2) §285, LGC was not intended to be a fixed determination of their share in the
- Provinces: 25% (P750M) national taxes. Congress may enact other laws, including appropriations laws,
- Cities: 25% (P750M) providing for a different sharing formula. The provision was merely intended to be the
- Municipalities: 35% (P1.050B) default share of the LGUs, but they have no vested right in a permanent or fixed
- Barangays: 15% (P450M) percentage, because Congress may increase or decrease the LGUs’ share in
(b) P1.9B: LAAP accordance with what it believes is appropriate for their operation.
(c) Remaining P100M: LGSEF “capability building fund” (3) The petition is procedurally infirm because:
(a) It raises factual issues that should be threshed out in the lower courts.
The petitioner’s arguments (Specifically, they refer to petitioner’s allegation that because portions of the
Gov. Mandanas of Batangas then wrote to the members of the OC seeking LGSEF have not been released, injury and damage has been incurred.
reconsideration, and also to PGMA, urging her to disapprove the allocation for violating the Respondents argue that such allegation is subject to proof in the proper venue.)
Constitution and the LGC. However, PGMA approved the OC Resolution embodying the above (b) It is moot and academic. The IRAs for the years 1999, 2000, and 2001 have been
allocation. released, and the government is now operating under the 2003 budget.
The Province, represented by Gov. Mandanas, thus come before the Court to assail the (c) Petitioner has no legal standing, because it has not suffered any injury.
constitutionality of the LGSEF provisos in the 1999, 2000, and 2001 GAAs, and the OC
resolutions,37 on the following grounds: ISSUES & RATIO.
(1) The LGSEF violates the Constitution and LGC insofar as the mandate that Procedural
the just share of LGUs in the national taxes shall be “automatically released” 1. Whether the petitioner has legal standing.—YES.
to them. Subjecting the distribution and release of the P5B LGSEF, which is part Petitioner has legal standing. As a local government unit, it seeks relief in order to protect or
of the IRA, to compliance by the LGUs to the rules, regulations, mechanisms, and vindicate its own interest, as well as that of the other LGUs. This interest pertains to the LGUs’
guidelines prescribed by the OC contravenes the explicit directive of the share in the national taxes, or the IRA.
Constitution (Art. X, §6) and the LGC (§18 and §286) that their share in the
national taxes be automatically released to them. This is repugnant to the 2. Whether the petition involves factual questions properly cognizable by the lower
principle of local autonomy: as an example, in 2001, the release of the LGSEF courts.—NO.
was long delayed, because the OC was unable to convene and issue guidelines. The instant controversy is predicated upon a substantial issue (see above). Further, the
(2) The LGSEF improperly amends §285, LGC, which prescribes the percentage following facts are necessary to resolve the issue before the Court, and being undisputed, they
sharing 38 of the IRA among LGUs. The modifications with respect to the LGSEF no longer need to be determined by a trial court:
(a) The
LGUs
shall
have
a
just
share
in
the
national
taxes;
(b) That
just
share
shall
be
determined
by
law;
and
(c) That
just
share
shall
be
automatically
released
to
the
LGUs.
41 If the national internal revenue collections for the current Riscal year is less than 40% of the collections of the preceding 3rd Riscal year, what should be automatically released shall be a proportionate amount of the collections for the current
Riscal
year.
ACORD v. ZAMORA
G.R. No. 144256 / JUNE 8, 2000 / CARPIO-MORALES, J./LOCGOV/AMOR ISSUES & RATIO.
1. WON the petition contains proper verifications and certifications against forum-
shopping. – YES. Petitioners substantially complied with the RoC.
NATURE Petition for Certiorari, etc.
PETITIONERS Lots of NGOs and POs, 3 brgy officials, and the Provinces of
Despite merely stating that the allegations are ‘true of our knowledge and belief’ instead of
Batangas and Nueva Ecija as petitioner-intervenors
‘ture and correct of our personal knowledge or based on authentic records’, the statement
RESPONDENTS Hon. Ronaldo Zamora, in his capacity as Exec Sec, Hon. constitutes substantial compliance especially when the question at issue is one purely of law
Benjamin Diokno, in his capacity as SoBM, Hon. Leonor Magtolis-Briones, in her and the veracity of the allegations are not disputed. Even if the verifications for the
capacity as National Treasurer, and the Commission on Audit organizations were not signed by those authorized, there would remain the indivs who validly
executed their verifications.
SUMMARY. GAA for 2000 had a provision allotting P10B as part of IRA subject to
2. WON Petitioners have standing. – Moot and academic since the provinces of Batangas
the condition that the revenue targets submitted by the Pres are met. The SC held
and NE, both LGUs, have adopted the arguments of the Petitioners.
that the provision is void for being in contravention to the constitutional mandate
of the automatic release of the IRA, pursuant to Art. X, Sec. 6. It is the LGUs, each having a separate juridical entity, which stand to be injured—Adoption of
DOCTRINE. As the Consti lays upon the executive the duty to automatically the provinces of petitioners’ arguments made the question of standing academic.
release the just share of LGUs in the natl taxes, so it enjoins the legislature not to
pass laws that might prevent the executive from performing this duty. If indeed the No cause of action against Respondents as they have no responsibility with respect to the
framers intended to allow the enactment of statutes making the release of IRA mandate of the GAA provisions, and that the committees mentioned in the GAA should
conditional instead of automatic, then Art. X, Sec. 6 would have been worded instead have been impleaded – The GAA provisions were not to be implemented solely by
differently. The last part of the sentence, ‘which shall be automatically released to the committees named therein, but also by the executive branch, particularly the DBM and
the Natl Treasurer. The committees were tasked merely to conduct quarterly assessments,
them,’ would have been qualified by the phrase ‘as provided by law’, or something
and not in the actual release of the IRA, which is the duty of the executive. Since the present
to that effect. And since under the provision, only the just share is qualified by the
controversy centers on the proper manner of releasing the IRA, respondents are the proper
words ‘as determined by law,’ and not the release thereof, the plain implication is
parties to the suit.
that Congress is not authorized by the Consti to hinder or impede the automatic
release of the IRA. 3. WON the provision violates the constitutional injunction that the just share of local
govts in the natl taxes or the IRA shall be automatically released. — YES.
FACTS.
(SUB-ISSUE NO. 1)
● Pursuant to Sec. 22, Art. VII Consti, President Estrada submitted the Natl Expenditures
Program for Fiscal Yr 2000.
Petitioners: the GAA violated Art. X, Sec. 6 Consti42 when it made the release of IRA
● The program proposed an IRA in the amt of P121.778B ff the formula in Sec. 284 LGC
contingent on whether revenue collections could meet the revenue targets originally
(IRA=40% of natl internal revenue taxes).
submitted by the Pres, rather than making the release automatic.
● Eventually, the GAA for the Yr 2000 was enacted.
● It provided that the IRA for LGUs shall amount to P111.778B.
Respondents: the consti provision is addressed to the executive, not to the legislature,
● In another part of the GAA, under the heading “UNPROGRAMMED FUND”, it is provided
hence, it does not prevent the legislature from imposing conditions upon the release of the
that an amount of P10B, apart from the P111.778B, shall be used to fund the IRA, which
IRA, based on the delibs43 of the ConComm. Davide and Nolledo shared a common
amount shall be released only when the original revenue targets submitted by the Pres to
assumption that the entity which would execute the automatic release of internal revenue
Congress can be realized based on a quarterly assessment to be conducted by certain
was the executive dept. The Pres or any member of the Exec Dept cannot unilaterally,
committees, namely, the Devt Budget Coordinating Committee, Senate’s Committee on
without the backing statute, withhold the release of the IRA.
Finance, and the HoR’s Committee on Appropriations.
● Hence, this petition questioning the constitutionality of this provision.One to two sentences
per bullet only.
42 Section 6. Local government units shall have a just share, as determined by law, in the national taxes which shall be automatically released to them.
43 Basta nag-aaway lang sila kung dapat may word na “periodically” sa phrase na ‘which shall be automatically (periodically) released to them.’
SC: As the Consti lays upon the executive the duty to automatically release the just share of Applied: The consti provision mandates: (1) The LGUs shall have a just share in the natl taxes;
LGUs in the natl taxes, so it enjoins the legislature not to pass laws that might prevent the (2) the just share shall be determined by law; and (3) the just share shall be automatically
executive from performing this duty. If indeed the framers intended to allow the enactment released to the LGUs. Being “automatic” connotes something mechanical, spontaneous, and
of statutes making the release of IRA conditional instead of automatic, then Art. X, Sec. 6 perfunctory. The GAA provisions withhold the releasing of the IRA pending an event which is
would have been worded differently. The last part of the sentence, ‘which shall be not even certain of occurring. To rule that the term “automatic release” contemplates such
automatically released to them,’ would have been qualified by the phrase ‘as provided by conditional release would be to strip the term “automatic” of all meaning.
law’, or something to that effect. And since under the provision, only the just share is
qualified by the words ‘as determined by law,’ and not the release thereof, the plain Additionally, to interpret “automatic release” in such a broad manner would be inconsistent
implication is that Congress is not authorized by the Consti to hinder or impede the with the ruling in Pimentel v Aguirre. In that case, the withholding by the executive was ruled
automatic release of the IRA. to have contravened the constitutional mandate of an automatic release. There is no
substantial difference between the withholding of the IRA there and in this case, except that
(SUB-ISSUE NO. 2) here it is the legislature, not the executive, which has authorized such. Despite this
distinction, the Pimentel ruling remains applicable, since Art. X, Sec. 6 Consti enjoins both
Respondents: But these statutory provisions show the legislature authorizing the executive the legislative and executive branches of govt.
branch to withhold the IRA in certain circumstances: Sec. 70 of the PNP Reform and
Reorganization Act of 199844, Sec. 531 LGC 45, Sec. 10, RA 792446 , and Rule XXXII, Art. 383(c) Only exception to the bar from withholding the IRA: Sec. 284 LGC48 . If the natl internal
of the Rules and Reglns Implementing the LGC47. revenue collections for the current fiscal yr is less than 40% of the collections of the
preceding 3rd fiscal yr, what should be automatically released shall be a proportionate
SC: Where the meaning of a consti provision is clear, contemporaneous or practical, amount of the collections for the current fiscal yr. Such adjustment may even be made on a
executive interpretation is entitled to no weight. This is because the application of the quarterly basis depending on the actual collections of natl internal revenue taxes for the qtr
doctrine of contemporaneous construction is more restricted as applied to the interpretation of the current fiscal year.
of consti provisions than when applied to statutory provisions, and that except as to matters
committed by the consti itself to the discretion of some other dept, contemporaneous or DECISION.
practical construction is not necessarily binding upon the courts, even in a doubtful case. Petition GRANTED.
44 SECTION 70. Budget Allocation. – x x x The Secretary shall submit a report to Congress and the President within fifteen (15) days from the effectivity of this Act on the number of PLEBs already organized as well as the LGUs
still without PLEBs. Municipalities or cities without a PLEB or with an insufficient number of organized PLEBs shall have thirty (30) days to organize their respective PLEBs. After such period, the DILG and the Department of
Budget and Management shall withhold the release of the LGUs share in the national taxes in cities and municipalities still without PLEB(s).
45This provision is among the Transitory Provisions of the Code, and is quoted by respondents as follows:
“SECTION 531. Debt Relief for Local Government Units.— x x x “The national government is hereby authorized to deduct from the quarterly share of each local government unit in the internal revenue collections an
amount to be determined on the basis of the amortization schedule of the local unit concerned: Provided, That such amount shall not exceed five percent (5%) of the monthly internal revenue allotment of the local
government unit concerned.
47ARTICLE 383. Automatic Release of IRA Shares of LGUs. – x x x (c) The IRA share of LGUs shall not be subject to any lien or holdback that may be imposed by the National Government for whatever purpose unless
otherwise provided in the Code or other applicable laws and loan contract or project agreements arising from foreign loans and international commitments, such as premium contributions of LGUs to the Government Service
Insurance System and loans contracted by LGUs under foreign-assisted projects.
48 Provided, That in the event that the national government incurs an unmanageable public sector deficit, the President of the Philippines is hereby authorized, upon the recommendation of Secretary of Finance, Secretary of
Interior and Local Government and Secretary of Budget and Management, and subject to consultation with the presiding officers of both Houses of Congress and the presidents of the "liga," to make the necessary adjustments in
the internal revenue allotment of local government units but in no case shall the allotment be less than thirty percent (30%) of the collection of national internal revenue taxes of the third fiscal year preceding the current fiscal year:
Provided, further, That in the first year of the effectivity of this Code, the local government units shall, in addition to the thirty percent (30%) internal revenue allotment which shall include the cost of devolved functions for essential
public services, be entitled to receive the amount equivalent to the cost of devolved personal services.