The Bureau of Internal Revenue (BIR) clarified that donations or gifts being claimed as deductions from the gross income of a taxpayer are subject to the bureau’s confirmation.
BIR Commissioner Kim Jacinto-Henares said in a recent circular that charitable contributions may be subject to examination to determine their compliance with the conditions for which they have been granted tax exemptions or incentives.
Henares issued Revenue Memorandum Circular 86-2014 to clarify the substantiation requirements needed to justify claims of charitable contributions as deductions to the gross income of a taxpayer.
The circular said donors claiming charitable contributions as deductions must submit a Certificate of Donation (BIR Form 2322), which contains a donee certification and a donor’s statement of values.
The donee certification indicates that the donee has received on the date indicated the subject donation, whether cash or property, and provides a description of the properties donated. It must be signed by an authorized representative of the donee organization.
The donor’s statement of values requires the donor to execute a statement, which provides descriptions, acquisition costs, and net book values of the properties donated, as
reflected in the financial statements of the donor. It must also be accompanied by a deed of sale to prove the acquisition cost of the properties, which will be subject to confirmation by the BIR as to its correctness and accuracy.
Henares also said donee organizations, such as accredited nonstock and nonprofit organizations, charitable contributions which can be claimed as deductions to the gross income of the donor are still subject to examination by the BIR.
“Under Section 235 of the National Internal Revenue Code of 1997 [Tax Code], the books of accounts and other pertinent records of tax-exempt organizations or grantees of tax incentives shall be subject to the examination by the bureau for purposes of ascertaining compliance with the conditions under which they have been granted exemptions or tax incentives, and their tax liability, if any,” the Circular said.
Under the Tax Code, charitable contributions to nonstock, nonprofit organizations, which are accredited by official accrediting entities as donee-institutions, are subject to limited or full deductibility from the gross income of the donor-taxpayer to determine his taxable income, subject to certain conditions. Such contributions may also be exempt from the donor’s tax, which is also subject to certain conditions laid down by the Tax Code and pertinent BIR regulations.