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St. Luke's Medical Center, Inc Vs CIR

1) A hospital is exempt from income tax if it is organized and operated exclusively for charitable purposes. Otherwise, it pays a 10% income tax rate. 2) St. Luke's Medical Center was assessed deficiency income tax for 2005-2006 but claimed exemption. The Supreme Court previously ruled SLMC pays the 10% tax rate as it is non-profit but not charitable. 3) The Supreme Court reiterated SLMC must pay the 10% income tax rate as it is not operated exclusively for charity. However, SLMC is not required to pay penalties for non-filing as the previous ruling was made after the tax years in question.

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1K views1 page

St. Luke's Medical Center, Inc Vs CIR

1) A hospital is exempt from income tax if it is organized and operated exclusively for charitable purposes. Otherwise, it pays a 10% income tax rate. 2) St. Luke's Medical Center was assessed deficiency income tax for 2005-2006 but claimed exemption. The Supreme Court previously ruled SLMC pays the 10% tax rate as it is non-profit but not charitable. 3) The Supreme Court reiterated SLMC must pay the 10% income tax rate as it is not operated exclusively for charity. However, SLMC is not required to pay penalties for non-filing as the previous ruling was made after the tax years in question.

Uploaded by

Vel June
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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  • Issues: Identifies the legal questions and challenges under consideration in this case related to tax exemption qualifications.
  • Facts: Details the background information and factual context surrounding the tax deficiencies assessed against the hospital.
  • Doctrine to Remember: This section summarizes the primary legal principles that apply to the case regarding hospital tax exemptions and requirements for non-profit organizations.
  • Ruling: Presents the court's decision, including interpretations of law and implications for tax assessment.

Title: CIR vs St. Luke’s Medical Center, Inc.

(GR 203514 dated 13 February 2017)


Ponente: J. Carpio

Doctrine to Remember
A hospital to be exempt from income tax under Section 30(E) of the Tax Code, it must be both organized
and operated exclusively for charitable purposes. Otherwise, the hospital shall be subject to preferential
tax rate of 10% under Section 27(B) of the Tax Code.

The 10% income tax applies to a hospital that is: (1) proprietary and (2) non-profit. Non-profit does not
necessarily mean charitable. Instead, it connotes that no part of the net income or assets accrues to or
benefits any member or specific person with all income and asset accruing to the institution’s purpose.

Facts

 St. Luke’s Medical Center (SLMC) was assessed for deficiency income tax comprised of deficiency
income tax, for taxable years 2005 and 2006. SLMC protested the assessment and eventually
elevated the case to the CTA.
 The CTA canceled the assessment and ruled that SLMC as a non-stock, non-profit hospital is tax-
exempt under Section 30(E) and (G) of the Tax Code.
 The BIR argued that SLMC is subject to 10% income tax under Section 27(B) of the Tax Code. On
earlier similar cases of SLMC, the SC ruled that SLMC is not tax-exempt but subject to 10% income
tax.
 SLMC paid the basic income tax but not the penalties. Consequently, requested the SC to dismiss the
case based on mootness.
 However, the BIR insisted that SLMC is liable to pay the compromise penalties for not filing its
quarterly income tax returns

Issues Articles/Law Involved


1. Whether or not SLMC is tax-exempt or subject to  Article XIV, Section 4 (3) 1987 Constitution
10% income tax  Section 30(H) and last paragraph thereof NIRC

2. Whether or not SLMC is liable for penalties for


non-filing of income tax returns
Rulings
1. The SC reiterated that for a hospital to be exempt from income tax under Section 30(E) of the Tax
Code, it must be both organized and operated exclusively for charitable purposes. Otherwise, the hospital
shall be subject to preferential tax rate of 10% under Section 27(B) of the Tax Code.

The 10% income tax applies to a hospital that is: (1) proprietary and (2) non-profit. Non-profit does not
necessarily mean charitable. Instead, it connotes that no part of the net income or assets accrues to or
benefits any member or specific person with all income and asset accruing to the institution’s purpose.

The SC found that SLMC is not operating exclusively for charitable purposes. Thus, its revenue from
paying patients is subject to 10% income tax.

2. The SC reiterated its earlier decision that the SLMC is not required to pay penalties for non-filing of
income tax returns and non-payment of income tax. The SC cancelled the assessment for interest,
surcharge and compromise penalties on the basis of good faith and honest belief that on the part of
SLMC that is not subject to tax.
Why? The previous case of CIR vs. SLMC was promulgated only on September 26, 2012 which
therefore covered all possible tax deficiency before the said promulgation date. In the instant case, the tax
deficiency is for years 2005 and 2006

Title: CIR vs St. Luke’s Medical Center, Inc. (GR 203514 dated 13 February 2017) Ponente: J. Carpio Doctrine to Remember A ho

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