Real property tax on government instrumentalities

IN Philippine Fisheries Development Authority (PFDA) vs Central Board of Assessment Appeals, Local Board of Assessment Appeals of Lucena City, City of Lucena, Lucena City Assessor and Lucena City Treasurer, G.R. No. 178030, December 15, 2010, the Supreme Court discussed the real property tax exemption of government instrumentalities.

The Court cited a 2007 case where it already resolved the issue of whether the PFDA is a government-owned or controlled corporation or an instrumentality of the national government. In that case, the City of Iloilo assessed real property taxes on the Iloilo Fishing Port Complex (IFPC), which was managed and operated by PFDA. The Court held that PFDA is an instrumentality of the government and is thus exempt from the payment of real property tax, thus:

“Indeed, the Authority is not a GOCC but an instrumentality of the government. The Authority has a capital stock but it is not divided into shares of stocks. Also, it has no stockholders or voting shares. Hence it is not a stock corporation. Neither is it a nonstock corporation because it has no members.

The Authority is actually a national government instrumentality which is defined as an agency of the national government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation. Unless the government instrumentality is organized as a stock or nonstock corporation, it remains a government instrumentality exercising not only governmental but also corporate powers.”

The exemption from real property tax excludes portions which are leased to private persons or entities.

The exercise of the taxing power of local government units is subject to the limitations enumerated in Section 133 of the Local Government Code. Under Section 133(o) of the Local Government Code, local government units have no power to tax instrumentalities of the national government like the PFDA. Thus, PFDA is not liable to pay real property tax assessed by the Office of the City Treasurer of Lucena City on the Lucena Fishing Port Complex, except those portions which are leased to private persons or entities.

Besides, the Lucena Fishing Port Complex is a property of public dominion intended for public use, and is therefore exempt from real property tax under Section 234 (a) of the Local Government Code. Properties of public dominion are owned by the State or the Republic of the Philippines.

The Lucena Fishing Port Complex, which is one of the major infrastructure projects undertaken by the National government under the Nationwide Fishing Ports Package, is devoted for public use and falls within the term “ports.” The Lucena Fishing Port Complex “serves as PFDA’s commitment to continuously provide post-harvest infrastructure support to the fishing industry, especially in areas where productivity among the various players in the fishing industry need to be enhanced.” As property of public dominion, the Lucena Fishing Port Complex is owned by the Republic of the Philippines and thus exempt from real estate tax.

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