WILLIAM C. REAGAN, ETC., petitioner, vs.

COMMISSIONER OF INTERNAL
REVENUE, respondent. [Reagan vs. Commissioner of Internal Revenue, 30 SCRA
968(1969)

Facts: Petitioner William Reagan, a citizen of the United States and an employee of
Bendix Radio, Division of Bendix Aviation Corporation, which provides technical
assistance to the United States Air Force, was assigned at Clark Air Base, Philippines.
Petitioner questioned the payment of income tax assessed on him by respondent
Commissioner of Internal Revenue on a sale of his 1960 Cadillac car to PFC William
Johnson, Jr., US Marine Corps executed at Clark Air Base. It is the contention of the
petitioner, that in legal contemplation the sale was made outside Philippine territory and
hence outside of our jurisdiction. Petitioner seeks to refund the amount P2,979.00 of
income tax he paid.

Issue: Whether or not Clark Air Base is outside of Philippine territory therefore excluded
from the jurisdictional powers of the Philippines to tax.

Held: No.

According to jurisprudence, People v. Acierto ,“By the [Military Bases] Agreement, it

should be noted, the Philippine Government merely consents that the United States
exercise jurisdiction in certain cases. The consent was given purely as a matter of
comity, courtesy, or expediency over the bases as part of the Philippine territory or
divested itself completely of jurisdiction over offenses committed therein."

The Clark Air Force Base is not a foreign soil or territory for purposes of income tax
legislation. There is nothing in the Military Bases Agreement that lends support to such
assertion, It has not become foreign soil or territory. The Philippine's jurisdictional rights
therein, certainly not excluding the power to tax, have been preserved. As to certain tax
matters, an appropriate exemption was provided for.