Administrators of church-run schools must return not only to the grind of educational governance. They must also face the grating music of Kim Henares’ Revenue Memorandum Order No. 20-2013. Some music-makers (I refuse to call them musicians) are known as ‘head-bangers’. In the case of BIR’s music, it is school administrators as well as heads of charitable organizations and corporations that are banging their heads—although they would much prefer banging someone else’s! Section 1 of this sore of a regulation reads in part: “The Bureau of Internal Revenue (Bureau) accords tax-exempt status to these corporations and associations by way of confirmatory BIR rulings or certificates of tax exemption which are issued after due evaluation of documents submitted by said corporations and associations.” “Accord” means “to grant or give especially as appropriate or due”. My, my, the BIR does think it is this great —to grant tax exemptions. Except, of course, that the gang is clearly wrong. Neither Kim, in her graciousness, nor the BIR “accords” tax-exemption or tax-exempt status. The Constitution does, and does so in no uncertain terms. In respect to schools, Art. XIV, Section 4 provides in the third paragraph: “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.” As regards charitable institutions and organizations, Art. VI, Section 28, paragraph 3 is equally unequivocal: “Charitable institutions, churches and parsonages or convents appurtenant thereto, mosques, non-profit cemeteries and all lands, buildings and improvements, actually, directly and exclusively used for religious, charitable or educational purposes shall be exempt from taxation.” But this is no mere mistake in attribution. The BIR cannot deny or withhold what the Constitution concedes or grants. What the despised memorandum requires is oppressive: a caboodle of documents before Madame Kim decides whether you enjoy exemption or not. In fact, the Bureau also wants a written and detailed narration of the association’s “modus operandi”. At the rate it demands information, BIR may very well soon outdo the CIA! Again, it must be stressed, the premise is completely wrong. It is elementary that no administrative agency can broaden or restrict provisions of the Constitution and the privileges the fundamental law gives, an administrative agency has absolutely no right to restrict without doing violence to the fundamental law—against which, much violence has been done anyway in the present scheme of things. In fact the exemption that charitable, religious and school corporations assert against taxation is a right. By Hohfeld’s analysis, a claim of A (tax-exempt associations and institutions) against B (the State) that bars B from doing C (exaction of taxes) against A is a right. And to subject the enjoyment of a right by oppressive requirements is to render it effete.
By contrast, jurisprudence has been far more benign. In a case involving the YMCA, entitled Commissioner of Internal Revenue v. Court of Appeals (1998) the Court exacted modest requirements when it ruled: “Hence, for the YMCA to be granted the exemption it claims under the aforecited provision, it must prove with substantial evidence that (1) it falls under the classification non-stock, non-profit educational institution; and (2) the income it seeks to be exempted from taxation is actually, directly and exclusively for educational purposes.” Only two things need be proved by “substantial evidence”. The St. Luke’s Medical Center case dealt with the characterization of a “charitable institution” and held that “charity is essentially a gift to an indefinite number of persons which lessens the burden of government. In other words, charitable institutions provide for free goods and services to the public which would otherwise fall on the shoulders of government.”
The point to all this is that jurisprudence has laid down standards —and Kim il Henares need not add to them, nor is she entitled to. The BIR Memo is designed, it seems, to discourage entities, associations and corporations otherwise entitled to tax exemption from availing themselves of this privilege. But, dearest Kim, when you discourage corporations and associations from charitable work and providing educational services by imposing on them burdens such as those imposed by your Memorandum Order, you are in fact burdening the government because these religious, charitable and educational corporations and organizations do a lot that government should be doing, but cannot do, or is so inept at doing!
I understand that an RTC Makati Court has declared this memorandum (or at least parts of it) unconstitutional. The Makati RTC was well within its right to do so, because courts, not only the Supreme Court, can declare laws and regulations unconstitutional. However, People v. Vera (1957) urges on inferior courts a becoming reticence and a consciousness of their subordinate position, “that becoming modesty of inferior courts demands conscious realization of the position they occupy in the interrelation and operation of the integrated judicial system of the nation.” It will therefore be more helpful to our religious schools and charitable associations and corporations to challenge the RMO before the Supreme Court to obtain from the High Court a definitive ruling that will, without doubt, form part of the law of the land—and keep Madame Kim from firing wildly!