AMENDING CERTAIN SECTIONS OF THE NATIONAL INTERNAL REVENUE CODE GOVERNING EDUCATIONAL INSTITUTIONS

WHEREAS, under existing law, educational institutions are
not placed at par for taxation purposes as some are subject to tax and
others are not subject to tax;

WHEREAS, in line with the provisions of the New
Constitution removing the exemptions of educational institutions from
real estate taxes, their exemption from income tax should likewise be
removed, as provided under existing laws;

WHEREAS, to achieve simplicity in implementation, there
should be imposed a fixed rate of tax on all income of educational
institutions; and

WHEREAS, in order to achieve improvements in educational
facilities and expansion of educational activities, the re-investment of
profits or surplus necessary therefrom should be encouraged;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the
Philippines, by virtue of the powers in me vested by the Constitution as
Commander-in-Chief of all the Armed Forces of the Philippines, and
pursuant to Proclamation No. 1081, dated September 21, 1972, and General
Order No. 1, dated September 22, 1972, as amended, do hereby order and
decree that certain sections of the National Internal Revenue Code, as
amended, be further amended, to read as follows:

“SEC. 24. Rates of tax on corporations.

“(a) Tax on domestic corporations.

“Private educational institutions, whether stock or nonstock,
shall pay a tax of ten percent of their taxable net income from the
operation of the school, related school activities, and on their passive
investment income consisting of interest, dividends, royalties, and the
like: Provided, however, That dividends received by a private
educational institution, whether stock or nonstock, from a domestic or
resident foreign corporation shall be subject to the partial exclusion
of intercorporate dividends provided under Section 29 (c) of this Title,
under the conditions imposed in the said subsection.

x x x

“SEC. 27. Exemption from tax on corporations.

x x x

“(e) Corporation or association organized and operated
exclusively for religious, charitable, scientific, athletic, or cultural
purposes, or for the rehabilitation of veterans, no part of the net
income of which inures to the benefit of any private stockholder or
individual.

“However, the income of any of the foregoing organizations of
whatever kind and character from any of their properties, real or
personal, or from any activity conducted for profit, regardless of the
disposition made of such income, shall be liable to the tax imposed
under this Title.

x x x

“SEC. 30. Deductions from gross income. —

x x x

“(a) Expenses:

x x x

“(4) Expenses allowable to private educational
institutions. — In addition to the expenses allowable as deductions
under paragraph (1) of this subsection, a private educational
institution, whether stock or nonstock, shall also be allowed to deduct
during the taxable year when incurred expenses for the expansion of
school facilities to be determined by rules and regulations issued
jointly by the Departments of Education and Culture and Finance.”

This Decree takes effect beginning the calendar year 1974 and
fiscal year beginning July 1, 1974.

Done in the City of Manila,
this 2nd day of October, in the year of Our Lord, nineteen hundred and
seventy-three.