Article 23p. 23

NATIONAL INTERNAL REVENUE CODE TAXATION, TARIFF and CUSTOMS LAWS

agencies

or

political

subdivisions

not

in

accordance with the said annual priority plan

shall be subject to the limitations prescribed in

paragraph (1) of this Subsection;

(b) Donations to Certain Foreign Institutions

or International Organizations. - donations to

foreign

institutions

or

international

organizations

which

are

fully deductible in

pursuance

of

or

in

compliance

with

agreements, treaties, or commitments entered

into by the Government of the Philippines and

the

foreign

institutions

or

international

organizations or in pursuance of special laws;

(c) Donations to Accredited Nongovernment

Organizations.

-The

term

' nongovernment

organization '

means a non-profit domestic

corporation:

(1) Organized and operated exclusively for

scientific,

research,

educational,

character-building and youth and sports

development,

health,

social

welfare,

cultural

or

charitable

purposes,

or

a

combination thereof, no part of the net [31]

income of which inures to the benefit of

any private individual;

(2) Which, not later than the 15 th day of the

third

month

after

the

close

of

the

accredited nongovernment organizations

taxable year in which contributions are

received, makes utilization directly for the

active

conduct

of

the

activities

constituting the purpose or function for

which it is organized and operated, unless

an extended period is granted by the

Secretary of Finance in accordance with

the

rules

and

regulations

to

be

promulgated, upon recommendation of

the Commissioner;

(3) The level of administrative expense of

which shall, on an annual basis, conform

with

the

rules

and

regulations

to

be

prescribed by the Secretary of Finance,

upon

recommendation

of

the

Commissioner, but in no case to exceed

thirty percent (30%) of the total expenses;

and

(4) The assets of which, in the event of

dissolution,

would

be

distributed

to

another non-profit domestic corporation

organized for similar purpose or purposes,

or to the state for public purpose, or would

be

distributed

by

a

court

to

another

organization to be used in such manner as

in the judgment of said court shall best

accomplish the general purpose for which

the dissolved organization was organized.

Subject to such terms and conditions as

may be prescribed by the Secretary of

Finance, the term ' utilization ' means:

(i)

Any amount in cash or in kind

(including

administrative

expenses)

paid or utilized to accomplish one or

more

purposes

for

which

the

accredited

nongovernment

organization

was

created

or

organized.

(ii)

Any amount paid to acquire an

asset used (or held for use) directly in

carrying out one or more purposes

for

which

the

accredited

nongovernment

organization

was

created or organized.

An amount set aside for a specific project

which comes within one or more purposes

of

the

accredited

nongovernment

organization

may

be

treated

as

a

utilization, but only if at the time such

amount

is

set

aside,

the

accredited

nongovernment

organization

has

established

to

the

satisfaction

of

the

Commissioner that the amount will be

paid

for

the

specific

project

within a

period

to

be

prescribed

in

rules

and

regulations

to be promulgated by the

Secretary

of

Finance,

upon

recommendation

of

the Commissioner,

but not to exceed five (5) years, and the

project

is

one

which

can

be

better

accomplished

by

setting

aside

such

amount than by immediate payment of

funds.

(3)

Valuation.

-

The

amount

of any charitable

contribution of property other than money shall be

based on the acquisition cost of said property.

(4) Proof of Deductions. - Contributions or gifts

shall be allowable as deductions only if verified

under the rules and regulations prescribed by the

Secretary of Finance, upon recommendation of the

Commissioner.

(I) Research and Development. -

(1) In General. - A taxpayer may treat research or

development

expenditures

which

are

paid

or

incurred

by

him

during

the

taxable

year

in

connection with his trade, business or profession as

ordinary and necessary expenses which are not

chargeable to capital account. The expenditures so

treated shall be allowed as deduction during the

taxable year when paid or incurred.

(2)

Amortization

of

Certain

Research

and

Development Expenditures. - At the election of the

taxpayer and in accordance with the rules and

regulations to be prescribed by the Secretary of

Finance,

upon

recommendation

of

the

Commissioner,

the

following

research

and

development

expenditures

may

be

treated

as

deferred expenses:

(a)

Paid

or

incurred

by

the

taxpayer

in

connection

with

his

trade,

business

or

profession;

(b) Not treated as expenses under paragraph (1)

hereof; and

(c)

Chargeable

to

capital

account

but

not

chargeable to property of a character which is

subject to depreciation or depletion.

In

computing

taxable

income,

such

deferred

expenses shall be allowed as deduction ratably

distributed over a period of not less than sixty (60)

months

as

may

be

elected

by

the

taxpayer

(beginning with the month in which the taxpayer

first realizes benefits from such expenditures).

The election provided by paragraph (2) hereof may

be made for any taxable year beginning after the

effectivity of this Code, but only if made not later

than the time prescribed by law for filing the return

for such taxable year. The method so elected, and

the

period

selected

by

the

taxpayer,

shall

be

adhered to in computing taxable income for the

taxable year for which the election is made and for

all

subsequent

taxable

years

unless

with

the

approval

of

the

Commissioner,

a

change

to

a

different method is authorized with respect to a part

or all of such expenditures. The election shall not

apply to any expenditure paid or incurred during

any taxable year for which the taxpayer makes the

election.

(3) Limitations on Deduction. - This Subsection

shall not apply to:

(a)

Any

expenditure

for

the

acquisition

or

improvement of land, or for the improvement

of property to be used in connection with

© Compiled by RGL

23 of 201