Written by Catherine T. Manahan, 6 March 2008
Regulating contributions or gifts as tax deductible items from gross income has indeed come a long way.
Originally, the entity that used to evaluate the qualifications of institutions entitled to tax-deductible contributions or gifts (donees) from donors under the old Tax Code was the former, now defunct Government and Tax-Exempt Corporations (GTEC) Division of the BIR National Office.
It would issue Certificates of Registration to the qualified donee institutions (i.e. domestic corporations or associations organized for religious, charitable, scientific, youth and sports development, cultural or educational purposes or for the rehabilitation of veterans or to social welfare institutions), after evaluating their application, which consisted of a sworn statement showing the character of the organization, the purpose for which it was created, its actual activities, list of proposed projects, sources and disposition of income; its articles of incorporation and financial statements.
With the passage of the 1997 Comprehensive Tax Reform Act, this process of evaluation has been replaced by an "accreditation process" which has proven to be more comprehensive, rigorous, and tight-proof, thus, assuring the BIR of revenue leak-free grant of tax deductions.
The entity that has been deputized under Revenue Regulations 13-98 to develop, implement and institutionalize the rules of accreditation is the Philippine Council for NGO Certification, Inc. (PCNC), a self-regulatory organization that was founded by six of the country’s largest national NGO networks-the Association of Foundations (AF), the League of Corporate Foundations (LCF), the Philippine Business for Social Progress (PBSP), the Bishops-Businessmen’s Conference for Human Development (BBC), the Caucus of Development NGO Networks (CODE-NGO) and the National Council for Social Development Foundations (NCSDF).
For nine years, PCNC has processed 1,049 applications for certificate of accreditation but has certified only 878 applicants. A figure that can be highly reassuring to the BIR that only legitimate and genuine NGO/NSNP domestic corporate applicants get to enjoy the benefits of tax exemption and tax deductions.
So, why then did Malacaņang issue Executive Order No. 671 on Oct. 22 last year, divesting the PCNC of its authority to accredit qualified donee institutions and transferring the same to various government agencies, such as the DWSD, CHED, DOST, etc.?
There should be a logical explanation to this recent move, considering that a significant number of applications for accreditation were still pending and in process upon the effectivity of this EO.
Barring any imputation of political maneuvering, the fate of numerous nongovernment organizations (NGOs) and other non-stock, non-profit (NSNP) domestic corporations whose original applications or renewals for accreditation have long been filed and processed before Nov. 15 last year, the effectivity date of EO 671 (cut-off period), must not be left hanging or prematurely terminated. Fees have been paid, documentary supports have been submitted, occular inspections have been conducted and evaluation reports have already been completed.
To simply ignore and set aside the hard work that all the parties to this whole accreditation process have put in by simply declaring the cut-off period of Nov. 15, 2007 as the last day of PCNC’s authority to accredit does not seem to be just and fair.
An orderly transition, therefore, must be put in place which will honor and uphold all the recommendations made by the PCNC Board even after the cut-off period for applications that have been filed with and processed by them long before EO 671 became effective on Nov. 15 last year.
Besides, the various newly-designated accrediting government agencies may not be prepared yet to assume and discharge the functions of PCNC considering that the current accreditation rules are quite tedious and their present manpower resources may be wanting.
In response to the clamor of the affected NGOs and other domestic NSNP associations, Malacaņang issued during The Multi-Stakeholder Meeting on EO No. 671 S. 2007 last Jan. 29 a Memorandum stating that PCNC "xxx shall continue to process requests for accreditation from prospective donee institutions, without prejudice to the review and approval thereof by the appropriate government agencies, xxx pending issuance by the President of an amendatory executive fiat therefore."
This latest directive suggests a transition process that would give way for an orderly fusion of the PCNC’s functions with the concerned government agencies under the EO. To give it more teeth, the transition process must be clearly incorporated in the implementing rules and regulations of EO 671 which the Secretary of Finance may have to urgently issue to clarify the confusion created by the latest Memorandum.
For its part, the BIR must also issue an amendatory circular revoking its earlier pronouncement designating March 31, 2008 as the last date of validity of all Certificates of Accreditation that were processed by PCNC prior to Nov. 15, 2007.
This latest Malacaņang issuance indeed provides a welcome relief to the embattled NGOs, foundations and NSNP associations who were caught in the crossfire. It must always be borne in mind that in undertaking any government administrative reform or restructuring that will affect third parties, such move should be accompanied by the principles of due process, equity and justice.
Otherwise, the time-tested PCNC accreditation process must be restored and the whole EO 671 must be junked.
