Real Property Tax
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2008
Unfortunately, there are no questions that fall in the category of real property taxation.
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2009
Republic Power Corporation (RPC) is a government-owned and controlled corporation engaged in the supply, generation and transmission of electric power. In 2005, in order to provide electricity to Southern Tagalog provinces, RPC entered into an agreement with Jethro Energy Corporation (JEC), for the lease of JEC's power barges which shall be berthed at the port of Batangas City. The contract provides that JEC shall own the power barges and the fixtures, fittings, machinery, and equipment therein, all of which JEC shall supply at its own cost, and that JEC shall operate, manage and maintain the power barges for the purpose of converting the fuel of RPC into electricity. The contract also stipulates that all real estate taxes and assessments, rates and other charges, in respect of the power barges, shall be for the account of RPC.
In 2007, JEC received an assessment of real property taxes on the power barges from the Assessor of Batangas City. JEC sought reconsideration of the assessment on the ground that the power barges are exempt from real estate taxes under Section 234 [c] of R.A. 7160 as they are actually, directly and exclusively used by RPC, a government-owned and controlled corporation. Furthermore, even assuming that the power barges are subject to real property tax, RPC should be held liable therefor, in accordance with the terms of the lease agreement. Is the contention of JEC correct?Explain your answer.
SUGGESTED ANSWER:
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No, the contention of JEC is not correct. The owner of the power barges is JEC which is required to operate, manage and maintain the power barges for the purpose of converting the fuel of RPC into electricity. This belies the claim that RPC, a government-owned and controlled corporation engaged in the supply, generation and transmission of electric power, is the actual, direct and exclusive user of the barge, hence, does not fall within the purview of the exempting provision of Sec 234(c) of RA 7160. Likewise, the argument that RPC should be liable to the real property taxes consonant with the contract is devoid of merit. The liability for the payment of the real estate taxes is determined by law and not by the agreement of the parties .
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2010
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A inherited a two-storey building in Makati from his father, a real estate broker in the ‘60s. A group of Tibetan monks approached A and offered to lease the building in order to use it as a venue for their Buddhist rituals and ceremonies. A accepted the rental of P1 million for the whole year.
The following year, the City Assessor issued an assessment against A for non-payment of real property taxes.
Is the assessor justified in assessing A’s deficiency real property taxes? Explain. (3%)
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SUGGESTED ANSWER:
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NO. According to Section 234 of the Local Government Code,
SECTION 234. Exemptions from Real Property Tax. - The following are exempted from payment of the real property tax: (b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, nonprofit or religious cemeteries and all lands, buildings, and improvements actually, directly, and exclusively used for religious, charitable or educational purposes;
In this case, the two-storey building was leased to Tibetan monks actually, directly, and exclusively for religious purposes. Hence, the assessor is not. justified in assessing A’s deficiency real property taxes
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2011
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A municipality may levy an annual ad valorem tax on real property such as land, building, machinery, and other improvement only if
A. the real property is within the Metropolitan Manila Area.
B. the real property is located in the municipality.
C. the DILG authorizes it to do so.
D. the power is delegated to it by the province.
SUGGESTED ANSWER:
A. the real property is within the Metropolitan Manila Area.
Section 232 of the Local Government Code provides that a province or city or municipality within the Metro Manila Area an anal ad valorem tax on real property such as land, building, machinery, and other improvement not hereinafter specifically exempted.
Real property owned by the national government is exempt from real property taxation unless the national government
A. transfers it for the use of a local government unit.
B. leases the real property to a business establishment.
C. gratuitously allows its use for educational purposes by a school established for profit.
D. sells the property to a government-owned non-profit corporation.
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SUGGESTED ANSWER:
B. leases the real property to a business establishment.
Local governments are devoid of power to tax the national government, its agencies and instrumentalities. The taxing powers of local governments do not extend to the national government, its agencies and instrumentalities, "[u]nless otherwise provided in this Code" as stated in the saving clause of Section 133 of the Local Government Code. The saving clause in Section 133 refers to the exception to the exemption in Section 234(a) of the Code, which makes the national government subject to real estate tax when it gives the beneficial use of its real properties to a taxable entity. (Philippine Fisheries Development Authority v. Court of Appeals, G.R. No. 169836, [July 31, 2007], 555 PHIL 661-675)
After the province has constructed a barangay road, the San may impose a special levy upon the lands specifically benefitted by the road up to an amount not to exceed
A. 60% of the actual cost of the road without giving any portion to the barangay.
B. 100% of the actual project cost without giving any portion to the barangay.
C. 100% of the actual project cost, keeping 60% for the province and giving 40%
to the barangay.
D. 60% of the actual cost, dividing the same between the province and the barangay.
SUGGESTED ANSWER:
A. 60% of the actual cost of the road without giving any portion to the barangay.
Section 240. Special Levy by Local Government Units. - A province, city or municipality may impose a special levy on the lands comprised within its territorial jurisdiction specially benefited by public works projects or improvements funded by the local government unit concerned: Provided, however, That the special levy shall not exceed sixty percent (60%) of the actual cost of such projects and improvements, including the costs of acquiring land and such other real property in connection therewith: Provided, further, That the special levy shall not apply to lands exempt from basic real property tax and the remainder of the land portions of which have been donated to the local government unit concerned for the construction of such projects or improvements (Sec 240 of the Local Government Code).
What is the tax base for the imposition by the province of professional taxes?
A. That which Congress determined.
B. The pertinent provision of the local Government Code.
C. The reasonable classification made by the provincial sanggunian.
D. That which the Dept. of Interior and Local Government determined.
Prior to the enactment of the Local Government Code, consumer's cooperatives registered under the Cooperative Development Act enjoyed exemption from all taxes imposed by a local government. With the Local Government Code’s withdrawal of exemptions, could these cooperatives continue to enjoy such exemption?
A. Yes, because the Local Government Code, a general law, could not amend a special law such as the Cooperative Development Act.
B. No, Congress has not by the majority vote of all its members granted exemption to consumers' cooperatives.
C. No, the exemption has been withdrawn to level the playing field for all taxpayers and preserve the LGUs' financial position.
D. Yes, their exemption is specifically mentioned among those not withdrawn by the Local Government Code.
SUGGESTED ANSWER:
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D. Yes, their exemption is specifically mentioned among those not withdrawn by the Local Government Code.
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 nonprofit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code. (Sec 193 of the Local Government Code)
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2012
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The appraisal, assessment, levy and collection of real property tax shall be guided by the following principles. Which statement does NOT belong here?
a) Real property shall be appraised at its current and fair market value;
b) Real property shall be classified for assessment purposes on the basis of its actual use;
c) Real property shall be assessed on the basis of a uniform classification within each local political subdivision;
d) The appraisal and assessment of real property shall be based on audited financial statements of the owner.
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SUGGESTED ANSWER:
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d) The appraisal and assessment of real property shall be based on audited financial statements of the owner.
According to Section 198 of the Local Government Code, the appraisal, assessment, levy and collection of real property tax shall be guided by the following fundamental principles:
(a) Real property shall be appraised at its current and fair market value;
(b) Real property shall be classified for assessment purposes on the basis of its actual use;
(c) Real property shall be assessed on the basis of a uniform classification within each local government unit;
(d) The appraisal, assessment, levy and collection of real property tax shall not be let to any private person; and
(e) The appraisal and assessment of real property shall be equitable.
The Manila International Airport Authority (MIAA) is exempt from real property tax. Which statement below is NOT correct?
a) MIAA is not a government-owned or controlled corporation because it is not organized as a stock or non-stock corporation;
b) MIAA is a government instrumentality vested with corporate powers and performing essential public services;
c) MIAA is not a taxable entity because the real property is owned by the Republic of the Philippines and the beneficial use of such property has not been granted to a private entity;
d) MIAA is a government-owned or controlled corporation because it is required to meet the test of economic viability.
SUGGESTED ANSWER:
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d) MIAA is a government-owned or controlled corporation because it is required to meet the test of economic viability.
MIAA v. City of Pasay reiterated that MIAA is not a government-owned or controlled corporation under Section 2 (13) of the Introductory Provisions of the Administrative Code because it is not organized as a stock or non-stock corporation. Neither is MIAA a government owned or controlled corporation under Section 16, Article XII of the 1987 Constitution because MIAA is not required to meet the test of economic viability. MIAA is a government instrumentality vested with corporate powers and performing essential public services pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code. As a government instrumentality, MIAA is not subject to any kind of tax by local governments under Section 133(o) of the Local Government Code. The exception to the exemption in Section 234(a) does not apply to MIAA because MIAA is not a taxable entity under the Local Government Code. Such exception applies only if the beneficial use of real property owned by the Republic is given to a taxable entity.
Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and thus are properties of public dominion. Properties of public dominion are owned by the State or the Republic. (G.R. No. 163072, [April 2, 2009], 602 PHIL 160-225)
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For purposes of real property taxes, the tax rates are applied on:
a) Zonal values;
b) Fair market value;
c) Assessed values;
d) Reproduction values.
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SUGGESTED ANSWER:
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c) Assessed values;
SECTION 233. Rates of Levy. - A province or city or a municipality within the Metropolitan Manila Area shall fix a uniform rate of basic real property tax applicable to their respective localities as follows:
(a) In the case of a province, at the rate not exceeding one percent (1%) of the assessed value of real property; and (b) In the case of a city or a municipality within the Metropolitan Manila Area, at the rate not exceeding two percent (2%) of the assessed value of real property.
One of the local government units below does NOT have the power to impose real property tax:
a) Bacoor, Cavite;
b) Davao City;
c) Tarlac Province;
d) Malabon, Metro Manila.
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SUGGESTED ANSWER:
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There is no correct answer in the choices. The closest possible answer is Bacoor, Cavite provided that is a municipality outside Metro Manila. However, Bacoor is now a city.
Legal basis: Under SECTION 200 of the Local Government code, the provinces and cities, including the municipalities within the Metropolitan Manila Area, shall be primarily responsible for the proper, efficient and effective administration of the real property tax.
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Where the real property tax assessment is erroneous, the remedy of the property owner is:
a) To file a claim for refund in the Court of Tax Appeals if he has paid the tax, within thirty (30) days from date of payment;
b) To file an appeal with the Provincial Board of Assessment Appeals within thirty (30) days from receipt of the assessment;
c) To file an appeal with the Provincial Board of Assessment Appeals within sixty (60) days from receipt of the assessment;
d) To file an appeal with the Provincial Board of Assessment Appeals within sixty (60) days from receipt of the assessment and paying the assessed tax under protest.
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SUGGESTED ANSWER:
c) To file an appeal with the Provincial Board of Assessment Appeals within sixty (60) days from receipt of the assessment;
Section 226 of the Local Government Code provides that:
SECTION 226. Local Board of Assessment Appeals. - Any owner or person having legal interest in the property who is not satisfied with the action of the provincial, city or municipal assessor in the assessment of his property may, within sixty (60) days from the date of receipt of the written notice of assessment, appeal to the Board of Assessment appeals of the province or city by filing a petition under oath in the form prescribed for the purpose, together with copies of the tax declarations and such affidavits or documents submitted in support of the appeal.
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The City Government of Manila may NOT impose:
a) Basic real property tax at 2% of the assessed value of real property;
b) Additional levy on real property for the special education fund at 1% of the assessed value of real property;
c) Additional ad valorem tax on idle lands at a rate not exceeding 5% of the assessed value;
d) Special levy on lands within its territory especially benefited by public works projects or improvements funded by it at 80% of the actual cost of the projects or improvements.
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SUGGESTED ANSWER:
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d) Special levy on lands within its territory especially benefited by public works projects or improvements funded by it at 80% of the actual cost of the projects or improvements.
Section 240 of the Local Government Code provides that:
SECTION 240. Special Levy by Local Government Units. - A province, city or municipality may a special levy on the lands
comprised within its territorial jurisdiction specially benefited by public works projects or improvements funded by the
local government unit concerned: Provided, however, That the special levy shall not exceed sixty percent (60%) of the
actual cost of such projects and improvements, including the costs of acquiring land and such other real property in connection therewith: Provided, further, That the special levy shall not apply to lands exempt from basic real property tax and
the remainder of the land portions of which have been donated to the local government unit concerned for the construction of projects or improvements
2013
Mr. Amado leased a piece of land owned by the Municipality of Pinagsabitan and built a warehouse on the property for his business operations. The Municipal Assessor assessed Mr. Amado for real property taxes on the land and the warehouse. Mr. Amado objected to the assessment, contending that he should not be asked to pay realty taxes on the land since it is municipal property. Was the assessment proper?
SUGGESTED ANSWER:
The assessment was proper. Under Section 217 of the LGC, real property shall be classified, valued and assessed on the basis of its actual use regardless of where located, whoever owns it, and whoever uses it. A related and complementary provision is Section 234(a) of the LGC which provides that a real property owned by the Republic of the Philippines or any of its political subdivisions is exempt from realty taxes, except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person.
In the given problem, Mr. Arnado, as lessee of the land owned by the Municipality, is the actual user of the land and is liable for the realty taxes. Therefore, the assessment was proper.
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2014
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Madam X owns real property in Caloocan City. On July 1, 2014, she received a notice of assessment from the City Assessor, informing her of a deficiency tax on her property. She wants to contest the assessment. (4%)
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(A) What are the administrative remedies available to Madam X in order to contest the assessment and their respective prescriptive periods?
(B) May Madam X refuse to pay the deficiency tax assessment during the pendency of her appeal?
SUGGESTED ANSWER:
(A) The administrative remedies available to Madam X to contest the assessment and their respective prescriptive periods are as follows:
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Pay the deficiency real property tax under protest (Section 252, LGC);
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File the protest with the local treasurer – The protest in writing muse be filed within thirty (30) days from payment of the tax to the provincial, city, or municipal treasurer, in the case of a municipality within Metropolitan Manila Area, who shall decide the protest within sixty (60) days from receipt (Section 252, LGC);
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Appeal to the LBAA – If protest is denied or upon the lapse of the 60-day period for the treasurer to decide, the taxpayer may appeal to the LBAA within 60 days and the case decided within 120 days (Section 226 & 229, LGC);
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Appeal to the CBAA – If not satisfied with the decision of the LBAA, appeal to the CBAA within 30 days from receipt of a copy of the decision (Section 229 (c), LGC).
(B) No. The payment of the deficiency tax is a condition before she can protest the deficiency assessment. It is the decision on the protest or inaction thereon that gives her the right to appeal. This means that she cannot refuse to pay the deficiency assessment during the pendency of the appeal because it is the payment itself which gives rise to the remedy. Section 252 of the Local Government Code provides that no protest shall be entertained unless the taxpayer first pays the tax.
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2015
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LLL is a government instrumentality created by Executive Order to be primarily responsible for integrating and directing all reclamation projects for the National Government. It was not organized as a stock or a non-stock corporation, nor was it intended to operate commercially and compete in the private market.
By virtue of its mandate, LLL reclaimed several portions of the foreshore and offshore areas of the Manila Bay, some of which were within the territorial jurisdiction of Q City. Certificates of title to the reclaimed properties in Q City were issued in the name of LLL in 2008. In 2014, Q City issued Warrants of Levy on said reclaimed properties of LLL based on the assessment for delinquent property taxes for the years 2010 to 2013.
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(A) Are the reclaimed properties registered in the name of LLL subject to real property tax? (4 % )
(B) Will your answer be the same in (a) if from 2010 to the present time, LLL is leasing portions of the reclaimed properties for the establishment and use of popular fastfood restaurants J Burgers, G Pizza, and K Chicken? (2%)
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SUGGESTED ANSWERS:
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(A) No. Under Sec. 234 (a) of the Local Government Code, ‘ 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.’
Since LLL is a government instrumentality created for the purpose of integrating and directing all reclamation projects for the National Government and not intended to operate commercially and compete with the private market, it must be held that the lands that it reclaims by virtue of its mandate belongs to the Republic of the Philippines. Therefore, said lands shall be exempted from taxation and Q City had no authority to issue Warrants of Levy against LLL.
Therefore, LLL is under no obligation to pay the taxes claimed by Q City because it is a government instrumentality created for a public purpose and the land that it reclaims are properties belonging to the Republic of the Philippines. By virtue of the exemption granted under law, LLL shall not be liable to pay property taxes.
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(B) No. Under the above-stated provision of the Local Government Code, real property belong to the Republic of the Philippines shall be exempted from property tax, except when the beneficial use therefore is granted, for a consideration or otherwise, to a taxable person.
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Here, LLL has a lease agreement with popular fastfood restaurants dating from 2010 up until the present. Thus, the exemption granted under law no longer applies because the beneficial use of the lands has been granted to private commercial establishments which are taxable under the law. Thus, LLL can no longer claim the benefit of the exemption because the lands in question are being leased out to taxable persons.
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2016
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Philippine National Railways (PNR) operates the rail transport of passengers and goods by providing train stations and freight customer facilities from Tutuban, Manila to the Bicol Province. As the operator of the railroad transit, PNR administers the land, improvements and equipment within its main station in Tutuban, Manila.
Invoking Section 193 of the Local Government Code (LGC) expressly withdrawing the tax exemption privileges of government-owned and controlled corporations upon the effectivity of the Code in 1992, the City Government of Manila issued Final Notices of Real Estate Tax Deficiency in the amount of P624,000,000.00 for the taxable years 2006 to 2010. On the other hand, PNR, seeking refuge under the principle that the government cannot tax itself, insisted that the PNR lands and buildings are owned by the Republic.
Is the PNR exempt from real property tax? Explain your answer.
SUGGESTED ANSWER
Yes, PNR is exempt from real property tax.
The Local Government Code Section 234 provides that real property owned by the Republic of the Philippines or any of its political subdivisions are exempt from the payment of real property taxation, except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person. Further, Section 133 of the same law provides that the taxing power of a local government unit shall not extend to the levy of the following:
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x x x (o)Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities, and local government units.
The law creating PNR, Republic Act 4156, provides that PNR is a corporation to serve as the instrumentality of the Government of the Philippines in providing a nation-wide railroad and transportation system.
From the foregoing, it is clear that PNR is an instrumentality of the Government. Applying the provisions of the Local Government Code exempting government instrumentality from taxation, the City Government of Manila cannot validly impose real estate tax in question upon PNR.
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The Philippine-British Association, Inc. (Association) is a non-stock, non-profit organization which owns the St. Michael's Hospital (Hospital). Sec. 216 in relation to Sec. 215 of the LGC classifies all lands, buildings and other improvements thereon actually, directly, and exclusively used for hospitals as "special." A special classification prescribes a lower assessment than a commercial classification.
Within the premises of the Hospital, the Association constructed the St. Michael's Medical Arts Center (Center) which will house medical practitioners who will lease the spaces therein for their clinics at prescribed rental rates. The doctors who treat the patients confined in the Hospital are accredited by the Association.
The City Assessor classified the Center as "commercial" instead of "special" on the ground that the Hospital owner gets income from the lease of its spaces to doctors who also entertain out-patients. Is the City Assessor correct in classifying the Center as "commercial?" Explain.
SUGGESTED ANSWER
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No, the City Assessor is incorrect in classifying the Center as commercial instead of special.
Section 216 of the Local Government Code provides that all lands, buildings, and other improvements thereon actually, directly and exclusively used for hospitals, cultural, or scientific purposes, and those owned and used by local water districts, and government-owned or controlled corporations rendering essential public services in the supply and distribution of water and/or generation and transmission of electric power shall be classified as special.
Section 217 of the same law provides that Real property shall be classified, valued and assessed on the basis of its actual use regardless of where located, whoever owns it, and whoever uses it.
The Supreme Court ruled in the case of City Assessor of Cebu vs. Association of Benevola de Cebu, G.R. No. 152904, that charging the doctors rental for the spaces does not mean commercial use because the doctors and the services they provide are integral to the operation of the hospital and the benefits to the hospital's patients. Further, the court declared that the doctors and their spaces definitely incidental to and reasonably necessary for the operations of the hospital.
Here, the Center rented the spaces at a prescribed rates, and said doctors were accredited by the Association. Clearly, the doctors and their offices are integral, incidental, and reasonably necessary to the operation of the Center. Thus these must also be classified as "special property" being a part of the property of a non-stock non-profit organization.
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2017
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San Juan University is a non-stock, non-profit educational institution. It owns a piece of land in Caloocan City on which its three 2-storey school buildings stood. Two of the buildings are devoted to classrooms, laboratories, a canteen, a bookstore, and administrative offices. The third building is reserved as dormitory for student athletes who are granted scholarships for a given academic year.
In 2017, San Juan University earned income from tuition fees and from leasing a portion of its premises to various concessionaires of food, books, and school supplies.
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(A) Can the City Treasurer of Caloocan City collect real property taxes on the land and building of San Juan University? Explain your answer.
(B) Is the income earned by San Juan University for the year 2017 subject to income tax? Explain your answer.
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SUGGESTED ANSWER:
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(A) Yes, the City Treasure of Caloocan City can collect real property taxes but only on the leased portion.
Section 4(3), Article XIV of the 1987 Constitution provides that the assets of a non-stock, non-profit educational institution shall be exempt from taxes and duties only if the same are used actually, directly, and exclusively for educational purposes. The test of exemption from taxation is the use of the property for purposes mentioned in the Constitution. The leased portion of the building may be subject to real property tax since such lease is for commercial purposes, thereby, it removes the asset from the property tax exemption granted under the Constitution.
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(B) No, the income earned by San Juan University is not subject to income tax provided that the revenues are used actually, directly, and exclusively for educational purposes as provided under Article XIV, Section 4(3) of the 1987 Constitution. The requisites for availing the tax exemption under Section 4(3) Article XIV are as follows: (1) the taxpayer falls under the classification non-stock, non-profit educational institution; and (2) the income it seeks to be exempted from taxation is used actually, directly and exclusively for educational purposes. Thus, so long as the requisites are met, the revenues may be exempt from tax.
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2018
In an action for ejectment filed by Kurt, the lessor owner, against Kaka, the lessee, the trial court ruled in favor of Kurt. However, the trial court first required Kurt to pay the realty taxes due on the property for 2016 before he may recover possession thereof.
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Kurt objected, arguing that the delinquent realty taxes were never raised as an issue in the ejectment case. At any rate, Kurt claimed that it should be Kaka who should be made liable for the realty taxes since it was Kaka who possessed the property throughout
2016.
Is Kurt correct in resisting the trial court's requirement to pay the taxes first? (2.5%)
SUGGESTED ANSWER:
Yes, the trial court does not have jurisdiction to require Kurt to pay the RPT. The local treasurer must first file a civil action for collection before the competent court. (Sec. 266, LGC)
However, assuming the trial court has jurisdiction, Kurt shall be liable to pay. Unpaid realty taxes attach to the property and is chargeable against the person who had actual or beneficial use and possession of it regardless of whether or not he is the owner (Estate of Lim v. City of Manila, G.R. No. 90639, February 21, 1990) Thus, the owner or the lessor is in-charge of payment. The lessee is free from this obligation. However, the lessor may factor the RPT in the rent along with the other dues although this is not usually discussed.
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Kilusang Krus, Inc. (KKI) is a non-stock, non-profit religious organization which owns a vast tract of land in Kalinga.
KKI has devoted 1 /2 of the land for various uses: a church with a cemetery exclusive for deceased priests and nuns, a school providing K to 12 education, and a hospital which admits both paying and charity patients. The remaining 1/2 portion has remained idle.
The KKI Board of Trustees decided to lease the remaining 1 /2 portion to a real estate developer which constructed a community mall over the property.
Since the rental income from the lease of the property was substantial, the KKI decided to use the amount to finance (1) the medical expenses of the charity patients in the KKI Hospital and (2) the purchase of books and other educational materials for the students of KKI School.
(a) Is KKI liable for real property taxes on the land? (2.5%)
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SUGGESTED ANSWER:
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Yes, KKI’s property may be subject to real property tax.
Under the case of DLSU vs CIR and (LAW), taxes imposed are based on the actual, direct and exclusive use of the said property. Since ½ of the land is leased to the real estate developer, it does not fall under the tax exemption for property used for religious, educational or charitable purposes hence that portion is taxable.
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The City of Kabankalan issued a notice of assessment against KKK, Inc. for deficiency real property taxes for the taxable years 2013 to 2017 in the amount of PhP 20 million. KKK paid the taxes under protest and instituted a complaint entitled "Recovery of Illegally and/or Erroneously-Collected Local Business Tax, Prohibition with Prayer to Issue TRO and Writ of Preliminary Injunction" with the RTC of Negros Occidental.
The RTC denied the application for TRO. Its motion for reconsideration having been denied as well, KKK filed a petition for certiorari with the Court of Appeals (CA) assailing the denial of the TRO.
Will the petition prosper? (5%)
SUGGESTED ANSWER:
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No, petition will not prosper.
Petitions for certiorari challenging an interlocutory order involving local taxes is within the jurisdiction of the Court of Tax Appeal not the Regional Trial Court. (City of Manila v. Grecia-Cuerdo, 715 SCRA 182 [2014])
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In 2015, Kerwin bought a threestory house and lot in Kidapawan, North Cotabato. The property has a floor area of 600 sq.m. and is located inside a gated subdivision. Kerwin initially declared the property as residential for real property tax purposes.
In 2016, Kerwin started using the property in his business of manufacturing garments for export. The entire ground floor is now occupied by state-of-the-art sewing machines and other equipment, while the second floor is used as offices. The third floor is retained by Kerwin as his family's residence. Kerwin's neighbors became suspicious of the activities going on inside the house, and they decided to report it to the Kidapawan City Hall. Upon inspection, the local government discovered that the property was being utilized for commercial use. Immediately, the Kidapawan Assessor reclassified the property as commercial with an assessment level of 50% effective January 2017, and assessed Kerwin back taxes and interest. Kerwin claims that only 2/3 of the building was used for commercial purposes since the third floor remained as family residence. He argues that the property should have been classified as partly commercial and partly residential.
(a) Is the Kidapawan assessor correct in assessing back taxes and interest? (2.5%)
(b) Is Kerwin correct that only 2/3 of the property should be considered commercial? (2.5%)
(c) If Kerwin wants to file an administrative protest against the assessment, is he required to pay the assessment taxes first? With whom shall the protest be filed and within what period? (2.5%)
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SUGGESTED ANSWER:
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A. Yes. As as general rule, all assessments and reassessments made after the first day of January of any year shall take effect on the first of January of the succeeding year. However, since the change of actual use in this case is attended by fraud, it is only proper to assess Kerwin’s property of back taxes and interest on the year 2016 where the use of the property ceased be solely devoted for residential use.
B. No. Real property shall be classified, valued and assessed on the basis of its actual use regardless of where located, whoevr owns it, and whoever uses it. In cases where there are mixed land uses, the predominance rule is applied. (Sec. 217, in relation to Sec. 199 (b), LGC)
C. Yes. Payment under protest is required within 30 days to provincial, city or municipal treasurer. No protest shall be entertained unless the tax is first paid. (Sec. 252, LGC)