Constitutional Law, Taxation

Henares/BIR v. ST. PAUL COLLEGE OF MAKATI G.R. No. 215383, March 08, 2017 Tax Exemption of Non-Stock, Non-Profit Educational Institutions


Petitioner Kim Jacinto-Henares, acting in her capacity as then Commissioner of Internal Revenue (CIR), issued RMO No. 20-2013, “Prescribing the Policies and Guidelines in the Issuance of Tax Exemption Rulings to Qualified Non-Stock, Non-Profit Corporations and Associations under Sec. 30 of the NIRC, as Amended”

Respondent St. Paul College of Makati (SPCM), a non-stock, non-profit educational institution, filed a Civil Action to Declare Unconstitutional RMO No. 20-2013 with Prayer for Issuance of TRO and Writ of Preliminary Injunction before the RTC, alleging that “RMO No. 20-2013 imposes additional prerequisite to the enjoyment by non-stock, non-profit educational institutions of the privilege of tax exemption under Sec. 4(3) of Article XIV of the Constitution, and under Department of Finance Order No. 137-87. Essentially, the said RMO requires NSNPEIs to submit an application for tax exemption to the BIR subject to approval by CIR in the form of a Tax Exemption Ruling (TER) which is valid for a period of three years and subject to renewal”; and makes failure to file an annual information return a ground for a non-stock, non­ profit educational institution to “automatically lose its income tax-exempt status.”

The RTC issued a TRO and a WPI against the implementation of RMO No. 20-2013. 

The trial court ruled in favor of SPCM and declared RMO No. 20-2013 unconstitutional. 

Hence, this present petition.


Whether the trial court correctly concluded that RMO [No.] 20-2013 imposes a prerequisite before a non-stock, non-profit educational institution may avail of the tax exemption under section 4(3), Article XIV of the Constitution.


We DENY the petition on the ground of mootness.

On 25 July 2016, CIR Caesar R. Dulay issued RMO No. 44-2016, which provides that:

In line with the Bureau’s commitment to put in proper context the nature and tax status of non-profit, non-stock educational institutions, this Order is being issued to exclude non-stock, non-profit educational institutions from the coverage of RMO No. 20-2013, as amended.

SECTION 1. Nature of Tax Exemption. — The tax exemption of non-stock, non-profit educational institutions is directly conferred by paragraph 3, Section 4, Article XIV of the 1987 Constitution, the pertinent portion of which reads:

“All revenues and assets of non-stock, non-profit educational institutions used actually, directly and exclusively for educational purposes shall be exempt from taxes and duties.”

This constitutional exemption is reiterated in Section 30 (H) of the 1997 Tax Code, as amended, which provides as follows:

“Sec. 30. Exempt from Tax on Corporations. – The following organizations shall not be taxed under this Title in respect to income received by them as such:

x x x            x x x x x x

(H) A non-stock and non-profit educational institution; x x x.”

It is clear and unmistakable from the aforequoted constitutional provision that non-stock, non-profit educational institutions are constitutionally exempt from tax on all revenues derived in pursuance of its purpose as an educational institution and used actually, directly and exclusively for educational purposes. 

This constitutional exemption gives the non-stock, non-profit educational institutions a distinct character. 

And for the constitutional exemption to be enjoyed, jurisprudence and tax rulings affirm the doctrinal rule that there are only two requisites: 

(1) The school must be non-stock and non-profit; and 

(2) The income is actually, directly and exclusively used for educational purposes. 

There are no other conditions and limitations.

In this light, the constitutional conferral of tax exemption upon non-stock and non-profit educational institutions should not be implemented or interpreted in such a manner that will defeat or diminish the intent and language of the Constitution.

With the issuance of RMO No. 44-2016, a supervening event has transpired that rendered this petition moot and academic, and subject to denial. 

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