12. NON-IMPAIRMENT OF THE JURISDICTION OF THE SUPREME CORT IN TAX CASES

Non-impairment of the jurisdiction of the Supreme Court

Congress cannot take away from the Supreme Court the power given to it by the Constitution as the final arbiter of tax cases.

The Supreme Court shall have the following powers:

Review, revise, reverse, modify, or affirm on appeal or certiorari, as the law or the Rules of Court may provide, final judgments and orders of lower courts in:

All cases involving the legality of any tax, impost, assessment, or toll, or any penalty imposed in relation thereto. [Section 5 (2) (b), Article VIII, Constitution]

11. POWER OF THE PRESIDENT TO VETO ANY PARTICULAR ITEM OR ITEMS IN A REVENUE OR TARIFF BILL; AND

Veto of appropriation, revenue, or tariff bills by the President

The President shall have the power to veto any particular item or items in an appropriation, revenue, or tariff bill, but the veto shall not affect the item or items to which he does not object. [Section 27 (2) Article VI, Constitution]

An item in a bill refers to particulars, details, the distinct and severable parts of a bill. In budgetary legislation, an item is an individual sum of money dedicated to a stated purpose. [Gonzales v. Macaraig, 191 SCRA 452]

10. CONCURRENCE BY A MAJORITY OF ALL THE MEMBERS OF CONGRESS FOR THE PASSAGE OF A LAW GRANTING TAX EXEMPTION

Revenue bills shall originate exclusively from the House of Representatives

All appropriation, revenue or tariff bills, bills authorizing an increase of the public debt, bills of local application, and private bills shall originate exclusively in the House of Representatives, but the Senate may propose or concur with amendments. [Section 24, Article VI, Constitution]

The Constitution simply means that the initiative for the filing of bills must come from the House of Representatives, on the theory that, elected as they are from the districts, the members of the House can be expected to be more sensitive to the local needs and problems. It is not the law – but the revenue bill – which is required by the Constitution to originate exclusively in the House of Representatives, because a bill originating in the House may undergo such extensive changes in the Senate that the result may be a rewriting of the whole, and a distinct bill may be produced. [Tolentino v. Secretary of Finance]

The Constitution does not also prohibit the filing in the Senate of a substitute bill in anticipation of its receipt of the bill from the House, as long as action by the Senate is withheld until receipt of said bill. [Tolentino v. Secretary of Finance]

9. EXEMPTION OF NON-STOCK, NON-PROFIT EDUCATIONAL INSTITUTIONS FROM TAXATION

Prohibition against taxation of the revenues and assets of non-stock, non-profit educational institutions

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. Upon the dissolution or cessation of the corporate existence of such institutions, their assets shall be disposed of in the manner provided by law. [Section 4, Article XIV, Constitution]

This exemption from corporate income tax is embodied in Section 30 of the NIRC which includes a non-stock, non-profit educational institution.

Note however the last paragraph of Section 30 which states: “Notwithstanding the provisions in the preceding paragraphs, the income of whatever kind and character of the foregoing organizations from any of their property, real or personal, or from any of their activities conducted for profit, regardless of the disposition made of such income, shall be subject to tax imposed under this Code.”

8. EXEMPTION OF RELIGIOUS, CHARITABLE AND EDUCATIONAL ENTITIES, NON-PROFIT CEMETERIES AND CHURCHES FROM PROPERTY TAXATION

Prohibition against taxation of real property actually, directly and exclusively used for religious, charitable and educational purposes
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. [Section 28 (3) , Article VI, Constitution]

This is an exemption from real property tax only.
The exemption in favor of property used exclusively for charitable or educational purposes is not limited to property actually indispensable therefore, but extends to facilities which are incidental to and reasonably necessary for the accomplishment of said purposes. [Abra Valley College v. Aquino, 162 SCRA 106]

7. NO APPROPRIATION FOR RELIGIOUS PURPOSES

Tax exemption of properties for religious, charitable and educational purposes.

Charitable institutions, churches, parsonages, or convents appurtenant thereto, mosques, and 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 (Sec.28 (3), Art. III,1987 Constitution).

Important principles in tax exemption of properties:

a. Exemption of religious, charitable and educational institutions apply to real property tax only. The test is usage, not ownership.

b. The exemption extends to facilities which are incidental to and reasonably necessary for the accomplishment of said purposes, such as school for training nurses, nurses' home, and recreational facilities (Herrera vs. QC Board of Assesment Appeals, 3 SCRA 186).

Prohibition against appropriation of proceeds of taxation for the use, benefit, or support of any church

Section 29, Article VI, Constitution

1. No money shall be paid out of the Treasury except in pursuance of an appropriation made by law.

2. No public money or property shall be appropriated, applied, paid, or employed directly or indirectly, for the use, benefit, or support of any church, denomination, sectarian institution or system of religion, or of any priest, preacher, minister or other religious teacher, or dignitary as such except when such priest, preacher, minister or dignitary is assigned to the armed forces, or to any penal institution, or government orphanage or leprosarium.

3. All money collected on any tax levied for a special purpose shall be treated as a special fund and paid out for such purpose only. If the purpose for which a special fund was created has been fulfilled or abandoned, the balance, if any, shall be transferred to the general funds of the government.

6. NON-INFRINGEMENT OF RELIGIOUS FREEDOM

Non-infringement of religious freedom

The free exercise and enjoyment of religious profession and worship, without discrimination or preference, shall forever be allowed. (Sec.5, Art III, 1987 Constitution).

Application

It has been held that the imposition of license fees of the distribution and sale of bibles and other religious literature not for purposes of profit by a non-stock, non-profit religious corporation violates the above constitutional guarantee of the free exercise and enjoyment of religious profession and worship which carries with it the right to disseminate beliefs and information. It is actually in the nature of a condition or permit for the exercise of a right.


• No law shall be made respecting an establishment of religion, or prohibiting the free exercise thereof.

The free exercise and enjoyment of religious profession and worship, without discrimination or preference, shall forever be allowed. No religious test shall be required for the exercise of civil or political rights. [Section 5, Article III, Constitution]

• The payment of license fees for the distribution and sale of bibles suppresses the constitutional right of free exercise of religion. [American Bible Society v. Manila, 101 Phil. 386]

5. NON-IMPAIRMENT OF THE OBLIGATION OF CONTRACTS

No law impairing the obligation of contracts shall be passed (Sec. 10, Art. III, 1987 Constitution).

The power of taxation cannot be exercised in a manner that would impair the obligation of contracts. What is prohibited is that a taxing statute be passed that would alter the relative rights of the parties with each other.

The mere fact that a tax makes the conduct of a business more expensive or makes an activity more difficult does not result in the impairment of the obligation of contracts. Contract is impaired only if the relative position of the parties to a contract (i.e. equality that is assumed when the contract was entered into) is disturbed by the operation of a taxing statute.

Application

An example of impairment by law is when a tax exemption based on a contract is revoked by a later taxing statute. But exemption from taxation provided for in a franchise, although in a sense is an exemption based on a contract, may be revoked because under the Constitution, a franchise is “subject to amendment, alteration, or repeal” by Congress. (Sec.11, Art. XII.)

The obligation of a contract is impaired when its terms or conditions are changed by law or by a party without the consent of the other, thereby weakening the position or rights of the latter.

An example of impairment by law is when a later taxing statute revokes a tax exemption based on a contract. But this only applies when the tax exemption has been granted for a valid consideration.

A later statute may revoke exemption from taxation provided for in a franchise because the Constitution provides that a franchise is subject to amendment, alteration or repeal.

The parties to the contract cannot exercise the power of taxation.

· > They cannot agree or stipulate that this particular transaction may be exempt from tax- not allowed (except if government)

OPOSA vs. FACTORAN
· > Police power prevails over the non-impairment clause
LA INSULAR vs. MANCHUCA

· > A lawful tax on a new subject or an increased tax on an old one, does not interfere with a contract or impairs its obligation.

· > The constitutional guarantee of the non-impairment clause can only invoked in the grant of tax exemption.

RULES:
1) If the exemption was granted for valuable consideration and it is granted on the basis of a contract.
> cannot be revoked
2) If the exemption is granted by virtue of a contract, wherein the government enters into a contract with a private corporation
> cannot be revoked unilaterally by the government
3) If the basis of the tax exemption is a franchise granted by Congress and under the franchise or the tax exemption is given to a particular holder or person
> can be unilaterally revoked by the government (Congress)
· > The non-impairment clause applies only to contracts and not to a franchise.
· > The non-impairment clause applies to taxation but not to police power and eminent domain.

Furthermore, it applies only where one party is the government and the other, a private individual.
· > As a rule, the obligation to pay tax is based on law. But when, for instance, a taxpayer enters into a compromise with the BIR, the obligation of the taxpayer becomes one based on contract