LLL is a government instrumentality created by Executive Order to be primarily responsible for integrating and directing all reclamation projects for the National Government. It was not organized as a stock or a non-stock corporation, nor was it intended to operate commercially and compete in the private market.
By virtue of its mandate, LLL reclaimed several portions of the foreshore and offshore areas of the Manila Bay, some of which were within the territorial jurisdiction of Q City. Certificates of title to the reclaimed properties in Q City were issued in the name of LLL in 2008. In 2014, Q City issued Warrants of Levy on said reclaimed properties of LLL based on the assessment for delinquent property taxes for the years 2010 to 2013.
a. Are the reclaimed properties registered in the name of LLL subject to real property tax? (4 % )
b. Will your answer be the same in (a) if from 2010 to the present time, LLL is leasing portions of the reclaimed properties for the establishment and use of popular fastfood restaurants J Burgers, G Pizza, and K Chicken? (2%)
Suggested answer only. Not an official answer and not legal advice.
(a) No, the reclaimed properties registered under LLL are not subject to real property tax. (b) No, the answer differs for the leased portions. Under Sec. 234(a), LGC and jurisprudence (PRA v. City
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Quick check
Are reclaimed lands registered under a non-stock government reclamation instrumentality subject to real property tax?
Reclaimed public domain lands owned by a government instrumentality are exempt from real property tax under Section 234(a) of the LGC.
What principle determines the taxability of government-owned real property leased to private commercial entities?
Under the beneficial use doctrine, government property leased to taxable private entities loses its real property tax exemption.
Which landmark Supreme Court decision affirmed that the Philippine Reclamation Authority is a tax-exempt government instrumentality?
PRA versus City of Paranaque held that the PRA is a tax-exempt government instrumentality holding public domain land.
What is the legal status of warrants of levy issued by a city on tax-exempt reclaimed lands of the public domain?
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Who is liable for real property tax when a government instrumentality leases its land to a private fast-food restaurant?
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Learn more about these topics
1. Government Instrumentality Exemption
Under Section 234(a) of the Local Government Code, real property owned by the Republic of the Philippines or any of its political subdivisions is exempt from real property tax. In Philippine Reclamation Authority versus City of Paranaque, the Supreme Court ruled that a government instrumentality vested with corporate powers holding reclaimed lands of the public domain is exempt from local real property taxation. Because reclaimed foreshore lands form part of the public domain, certificates of title issued in the name of a non-stock, non-profit reclamation authority remain public property immune from local tax levies.
2. Beneficial Use Doctrine
Section 234(a) of the Local Government Code establishes the beneficial use doctrine, providing that real property owned by the Republic or a government instrumentality loses its tax exemption when beneficial use thereof has been granted, for consideration or otherwise, to a taxable person. When a government reclamation agency leases portions of its reclaimed real estate to private commercial entities such as fast-food restaurants, beneficial use passes to private taxable lessees. Consequently, the leased portions become subject to local real property tax assessed against the private occupants.
3. Public Domain Lands
Reclaimed foreshore and offshore areas form part of the inalienable public domain of the State intended for public use or public service. Under constitutional and statutory provisions, property of public dominion cannot be alienated, attached, or subjected to execution sales or tax warrants of levy by local government units. Unless explicitly reclassified as alienable and disposable land of the public domain by executive proclamation or statutory enactment, reclaimed lands held by a government instrumentality retain their public character and remain immune from administrative summary tax collection remedies.