Section 3Sec./Art. 3

Definition of Terms. - As used in this Act:

(a) Actual Growth Rate refers to the percentage increase in the aggregate annual regular income for provinces, cities, and municipalities from the last income reclassification;

(b) Annual Regular Income refers to revenues, including fees and receipts actually realized which are reported yearly on cash basis by provinces, cities and municipalities from regular sources, including the National Tax Allotment (NTA) and other shares in national wealth, but exclusive of non-recurring receipts, such as national aids, grants, financial assistance, loan proceeds, sales of assets, miscellaneous income/receipts and similar others.

For the purpose of this Act, shares from national wealth, excise tax on tobacco, incremental collection from value-added tax (VAT) under Republic Act No. 7643, and the gross income tax paid by business and enterprises in Special Economic Zones under Republic Act No. 7916, otherwise known as The Special Economic Zone Act of 1995, as amended, and such other shares as may be granted by law to the province, city, or municipality, shall be considered as part of the annual regular income. The annual regular income shall be computed from the Statement of Receipts pursuant to the guidelines issued by the Department of Finance (DOF);

(c) Average Annual Regular Income refers to the sum of the annual regular income, as herein defined, actually obtained by a province, city, or municipality during the required number of fiscal years preceding the year of general information reclassification of local government units, divided by such number of fiscal years as provided in Section 4 hereof;

(d) Local Government Units (LGUs) refer to the political subdivisions of the State, namely province, city or municipality;

(e) LGU Leagues refer to the Union of Local Authorities of the Philippines (ULAP), League of Provinces of the Philippines (LPP), League of Municipalities of the Philippines (LMP), and the League of Cities of the Philippines (LCP); and

(f) Schedule of Income Classification refers to the updated income classification of LGUs periodically issued by the Secretary of Finance pursuant to Section 6 of this Act.