Myline Cordial

Angeles University Foundation vs. City of Angeles
G.R. No. 189999, June 27, 2012
675 SCRA 359
689 Phil. 623

FACTS:
Angeles University Foundation is a non-stock non-profit educational institution. It applied for a building permit for the construction of an 11 -storey building of the Angeles University Foundation Medical Center in the main campus and renovation of a school building located at Mirasol Village which will be used as a school dormitory. The Local Government assessed petitioner and required it to pay building permit and other fees such as locational clearance fees and real property tax on its real property occupied by informal settlers.

ISSUE:
Whether or not petitioner is exempt from payment of building permit fee and real property taxes.

RULING:
No. Petitioner is not exempted in the payment of building permit fee and real property tax because:
1. Building fee is not a tax but an imposition pursuant to the regulatory powers of the LGUs to which petitioner is not exempted from; and
2. It is not exempted from property tax because it was being occupied by informal settler, it is not actually, directly and exclusively used for educational purposes.

Background

R.A. No. 6055 granted tax exemptions to educational institutions like petitioner which converted to non-stock, non-profit educational foundations. Section 8 of said law provides:
SECTION 8. The Foundation shall be exempt from the payment of all taxes, import duties, assessments, and other charges imposed by the Government on all income derived from or property, real or personal, used exclusively for the educational activities of the Foundation.

On February 19, 1977, Presidential Decree (P.D.) No. 1096 was issued adopting the National Building Code of the Philippines. The said Code requires every person, firm or corporation, including any agency or instrumentality of the government to obtain a building permit for any construction, alteration or repair of any building or structure. Building permit refers to “a document issued by the Building Official x x x to an owner/applicant to proceed with the construction, installation, addition, alteration, renovation, conversion, repair, moving, demolition or other work activity of a specific project/building/structure or portions thereof after the accompanying principal plans, specifications and other pertinent documents with the duly notarized application are found satisfactory and substantially conforming with the National Building Code of the Philippines x x x and its Implementing Rules and Regulations (IRR).” Building permit fees refers to the basic permit fee and other charges imposed under the National Building Code.

Exempted from the payment of building permit fees are: (1) public buildings and (2) traditional indigenous family dwellings. Not being expressly included in the enumeration of structures to which the building permit fees do not apply, petitioner’s claim for exemption rests solely on its interpretation of the term “other charges imposed by the National Government” in the tax exemption clause of R.A. No. 6055.

That a building permit fee is a regulatory imposition is highlighted by the fact that in processing an application for a building permit, the Building Official shall see to it that the applicant satisfies and conforms with approved standard requirements on zoning and land use, lines and grades, structural design, sanitary and sewerage, environmental health, electrical and mechanical safety as well as with other rules and regulations implementing the National Building Code. Thus, ancillary permits such as electrical permit, sanitary permit and zoning clearance must also be secured and the corresponding fees paid before a building permit may be issued. And as can be gleaned from the implementing rules and regulations of the National Building Code, clearances from various government authorities exercising and enforcing regulatory functions affecting buildings/structures, like local government units, may be further required before a building permit may be issued.

A charge of a fixed sum which bears no relation at all to the cost of inspection and regulation may be held to be a tax rather than an exercise of the police power. In this case, the Secretary of Public Works and Highways who is mandated to prescribe and fix the amount of fees and other charges that the Building Official shall collect in connection with the performance of regulatory functions, has promulgated and issued the Implementing Rules and Regulations which provide for the bases of assessment of such fees, as follows:

1. Character of occupancy or use of building
2. Cost of construction “ 10,000/sq.m (A,B,C,D,E,G,H,I), 8,000 (F), 6,000 (J)
3. Floor area
4. Height

Related jurisprudence:

In Lung Center of the Philippines v. Quezon City, this Court held that only portions of the hospital actually, directly and exclusively used for charitable purposes are exempt from real property taxes, while those portions leased to private entities and individuals are not exempt from such taxes. We explained the condition for the tax exemption privilege of charitable and educational institutions, as follows:

Under the 1973 and 1987 Constitutions and Rep. Act No. 7160 in order to be entitled to the exemption, the petitioner is burdened to prove, by clear and unequivocal proof, that (a) it is a charitable institution; and (b) its real properties are ACTUALLY, DIRECTLY and EXCLUSIVELY used for charitable purposes. “Exclusive” is defined as possessed and enjoyed to the exclusion of others; debarred from participation or enjoyment; and “exclusively” is defined, “in a manner to exclude; as enjoying a privilege exclusively.” If real property is used for one or more commercial purposes, it is not exclusively used for the exempted purposes but is subject to taxation. The words “dominant use” or “principal use” cannot be substituted for the words “used exclusively” without doing violence to the Constitutions and the law. Solely is synonymous with exclusively.

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.