Taxation

Real Property Tax Exemption

The following are cases which illustrate the Real Property Tax Exemption

LUNG CENTER vs. QUEZON CITY

G.R. No. 144104. June 29, 2004

 

Under P.D. No. 1823, the petitioner 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. It was 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.

Hence, the medical services of the petitioner are to be rendered to the public in general in any and all walks of life including those who are poor and the needy without discrimination. After all, any person, the rich as well as the poor, may fall sick or be injured or wounded and become a subject of charity.

As a general principle, a charitable institution does not lose its character as such and its exemption from taxes simply because it derives income from paying patients, whether out-patient, or confined in the hospital, or receives subsidies from the government, so long as the money received is devoted or used altogether to the charitable object which it is intended to achieve; and no money inures to the private benefit of the persons managing or operating the institution.

In this case, the petitioner adduced substantial evidence that it spent its income, including the subsidies from the government for 1991 and 1992 for its patients and for the operation of the hospital. It even incurred a net loss in 1991 and 1992 from its operations.

Even as we find that the petitioner is a charitable institution, we hold, anent the second issue, that those portions of its real property that are leased to private entities are not exempt from real property taxes as these are not actually, directly and exclusively used for charitable purposes.

The settled rule in this jurisdiction is that laws granting exemption from tax are construed strictissimi juris against the taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption is the exception. The effect of an exemption is equivalent to an appropriation. Hence, a claim for exemption from tax payments must be clearly shown and based on language in the law too plain to be mistaken.

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. 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.

 

ABRA VALLEY COLLEGE, INC. vs. AQUINO

G.R. No. L-39086 June 15, 1988

The phrase “exclusively used for educational purposes” was further clarified by this Court in the cases of Herrera vs. Quezon City Board of assessment Appeals, 3 SCRA 186 [1961] and Commissioner of Internal Revenue vs. Bishop of the Missionary District, 14 SCRA 991 [1965], thus —

 

Moreover, the exemption in favor of property used exclusively for charitable or educational purposes is ‘not limited to property actually indispensable’ therefor (Cooley on Taxation, Vol. 2, p. 1430), but extends to facilities which are incidental to and reasonably necessary for the accomplishment of said purposes, such as in the case of hospitals, “a school for training nurses, a nurses’ home, property use to provide housing facilities for interns, resident doctors, superintendents, and other members of the hospital staff, and recreational facilities for student nurses, interns, and residents’ (84 CJS 6621), such as “Athletic fields” including “a firm used for the inmates of the institution. (Cooley on Taxation, Vol. 2, p. 1430).

 

The test of exemption from taxation is the use of the property for purposes mentioned in the Constitution (Apostolic Prefect v. City Treasurer of Baguio, 71 Phil, 547 [1941]).

It must be stressed however, that while this Court allows a more liberal and non-restrictive interpretation of the phrase “exclusively used for educational purposes” as provided for in Article VI, Section 22, paragraph 3 of the 1935 Philippine Constitution, reasonable emphasis has always been made that exemption extends to facilities which are incidental to and reasonably necessary for the accomplishment of the main purposes.

YMCA vs. CIR

G.R. No. L-7988  January 19, 1916

Speaking generally, the association claims exemption from taxation on the ground that it is a religious, charitable and educational institution combined. That it has an educational department is not denied. It is undisputed that the aim of this department is to furnish, at much less than cost, instruction in subjects that will greatly increase the mental efficiency and wage-earning capacity of young men, prepare them in special lines of business and offer them special lines of study.

There is no doubt about the correctness of the contention that an institution must devote itself exclusively to one or the other of the purpose mentioned in the statute before it can be exempt from taxation; but the statute does not say that it must be devoted exclusively to any one of the purposes therein mentioned. It may be a combination of two or three or more of those purposes and still be entitled to exempt. The Young Men’s Christian Association of Manila cannot be said to be an institution used exclusively for religious purposes, or an institution used exclusively for charitable purposes, or an institution devoted exclusively to educational purposes; but we believe it can be truthfully said that it is an institution used exclusively for all three purposes, and that, as such, it is entitled to be exempted from taxation.

 

 

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