Angeles University Foundation vs. City of Angeles

Non-stock, non-profit educational institutions are not exempt from building permit fees under Section 8 of Republic Act No. 6055 because such fees are regulatory impositions on the activity of construction under the state's police power, not "charges imposed... on property" for revenue purposes; furthermore, to qualify for real property tax exemption, the property must be actually, directly, and exclusively used for educational purposes, a burden the claimant failed to discharge.

The case addresses the scope of tax exemption privileges granted to educational institutions converted into non-stock, non-profit foundations under Republic Act No. 6055, particularly in relation to the National Building Code of the Philippines (Presidential Decree No. 1096) and the Local Government Code of 1991. It clarifies the distinction between regulatory fees imposed under police power and taxes imposed for revenue generation, and interprets the constitutional and statutory requirements for real property tax exemptions applicable to religious, charitable, and educational institutions.

• Angeles University Foundation (AUF) is a non-stock, non-profit educational institution established on May 25, 1962, and converted into a non-stock, non-profit educational foundation under Republic Act No. 6055 on December 4, 1975.
• In August 2005, AUF filed an application with the Office of the City Building Official for a building permit to construct an 11-storey building for the Angeles University Foundation Medical Center in its main campus, which resulted in a Building Permit Fee Assessment of P126,839.20 and a Locational Clearance Fee requirement of P238,741.64.
• AUF claimed exemption from these fees in letters addressed to the City Treasurer and the Acting City Building Official, citing previous Department of Justice opinions and prior instances where the City had issued building permits for other university buildings without requiring payment of such fees.
• Despite endorsements from the Bureau of Local Government Finance and confirming legal opinions from the Department of Justice Secretary affirming the exemption, respondents refused to issue the building permits for the medical center and for the renovation of a school building located at Marisol Village.
• AUF paid under protest a total of P826,662.99, which included building permit and electrical fees, locational clearance fees, fire code fees, and real property taxes (basic and SEF) for the subject properties.
• After the payment, the corresponding permits were issued, but AUF's subsequent formal request for a refund was denied by the City Treasurer, prompting the filing of a complaint for refund before the Regional Trial Court.

• Petitioner argued that Section 8 of Republic Act No. 6055 grants exemption from "all taxes, import duties, assessments, and other charges imposed by the Government on all income derived from or property, real or personal, used exclusively for the educational activities of the Foundation," asserting that the phrase "other charges" encompasses building permit fees, locational clearance fees, and related impositions to give effect to the legislative intent of providing meaningful incentives for the conversion of educational institutions into non-profit foundations.
• Petitioner contended that the disputed fees are actually taxes disguised as regulatory fees because the amounts assessed (totaling P645,906.84 for the medical center alone) are exorbitant and bear no reasonable relation to the actual cost of inspection, surveillance, and regulation, thereby indicating that the primary purpose is revenue generation rather than regulation.
• Petitioner relied on Section 193 of the Local Government Code of 1991 to argue that non-stock, non-profit educational institutions retained their tax exemption privileges despite the general withdrawal of exemptions for other entities.
• Regarding the real property tax assessment for the Marisol Village property, petitioner alleged that the land was intended to be used actually, directly, and exclusively for educational purposes as a school dormitory and sports facility, despite being temporarily occupied by informal settlers.

• Respondents maintained that building permit fees are regulatory in nature imposed under the police power of the state pursuant to the National Building Code (Presidential Decree No. 1096), not taxes, and therefore fall outside the scope of the tax exemption privilege granted by Republic Act No. 6055.
• Respondents argued that under the principle of ejusdem generis, the term "other charges" in Section 8 of R.A. No. 6055 must be interpreted in light of the specific preceding words "taxes, import duties, and assessments," limiting the exemption to revenue-raising impositions and excluding regulatory fees.
• Respondents asserted that the National Building Code expressly limits exemptions from building permit fees to public buildings and traditional indigenous family dwellings under Section 209, and by the principle of inclusio unius est exclusio alterius, private educational institutions are not exempt.
• Respondents contended that the fees were computed based on reasonable criteria provided in the National Building Code (such as character of occupancy, cost of construction, floor area, and height) and were commensurate with the cost of regulation, and that the presumption of regularity in the performance of official duties applied to the assessments.
• Regarding the real property tax, respondents argued that the Marisol Village property was not actually, directly, and exclusively used for educational purposes because it was occupied by informal settlers and petitioner admitted it could not yet utilize the area for its intended educational use.

• Procedural Issues: N/A.
• Substantive Issues: Whether petitioner is exempt from the payment of building permit fees and related regulatory fees imposed under the National Building Code by virtue of its status as a non-stock, non-profit educational foundation under Republic Act No. 6055; and whether the parcel of land owned by petitioner in Marisol Village is exempt from real property tax under the constitutional and statutory provisions governing exemptions for educational institutions.

• Procedural: N/A.
• Substantive: The Supreme Court denied the petition and affirmed the Court of Appeals' decision. The Court ruled that building permit fees are not "charges imposed... on property" but are regulatory impositions on the activity of constructing, altering, or repairing buildings, derived from the state's police power to safeguard life, health, property, and public welfare under the National Building Code. Applying the principle that the primary purpose determines the character of an imposition, the Court held that since the purpose of building permits is regulation and any revenue generated is merely incidental, these fees are not taxes from which petitioner is exempt under Section 8 of R.A. No. 6055. Furthermore, the Court applied the ejusdem generis rule to limit the phrase "other charges" to pecuniary liabilities of the same class as taxes, duties, and assessments (i.e., revenue-raising measures). Regarding the real property tax claim, the Court held that petitioner failed to discharge its burden of proving by clear and unequivocal evidence that the Marisol Village property was actually, directly, and exclusively used for educational purposes, as required by Article VI, Section 28(3) of the 1987 Constitution and Section 234(b) of the Local Government Code, noting that "exclusive" means possessed and enjoyed to the exclusion of others and cannot be substituted with "dominant" or "principal" use.

• Ejusdem Generis Rule — Where general words follow the enumeration of specific particular classes of things, the general words will be construed as applying only to things of the same general class as those enumerated. The Court applied this rule to interpret the phrase "other charges" in Section 8 of R.A. No. 6055 as limited to revenue-raising impositions similar to taxes, import duties, and assessments, thereby excluding regulatory fees like building permit fees.
• Distinction Between Taxation and Police Power (Regulatory Fees) — The primary purpose of an imposition determines whether it is a tax or a regulatory fee. If the generation of revenue is the primary purpose, it is a tax; if regulation is the primary purpose, it is an exercise of police power, and the fact that revenue is incidentally raised does not make it a tax. The Court applied this doctrine to classify building permit fees as regulatory measures under the National Building Code.
• Strict Construction of Tax Exemptions — Tax exemptions are strictly construed against the taxpayer and liberally in favor of the taxing authority; he who claims an exemption must be able to justify his claim by the clearest grant of organic or statutory law. The Court applied this principle in narrowly interpreting the exemption provisions of R.A. No. 6055 and requiring strict proof for the real property tax exemption.
• Actual, Direct, and Exclusive Use Rule — For real property tax exemptions granted to charitable or educational institutions under the Constitution and the Local Government Code, the property must be actually, directly, and exclusively used for the exempt purpose. "Exclusive" is defined as possessed and enjoyed to the exclusion of others; it is not sufficient that the use is merely dominant or principal, nor is the use of income derived from the property determinative of the exemption.

• "The conservative and pivotal distinction between these two (2) powers rests in the purpose for which the charge is made. If generation of revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that revenue is incidentally raised does not make the imposition a tax."
• "What is meant by actual, direct and exclusive use of the property for charitable purposes is the direct and immediate and actual application of the property itself to the purposes for which the charitable institution is organized."
• "'Exclusive' is defined as possessed and enjoyed to the exclusion of others; debarred from participation or enjoyment; and 'exclusively' is defined, 'in a manner to exclude; as enjoying a privilege exclusively.' If real property is used for one or more commercial purposes, it is not exclusively used for the exempted purposes but is subject to taxation."

• Philippine Airlines, Inc. v. Edu — Cited for the principle that the primary purpose of an exaction determines its nature as either a tax or a regulatory fee.
• Chevron Philippines, Inc. v. Bases Conversion Development Authority — Cited for the doctrinal distinction between tax and regulation based on primary purpose.
• Gerochi v. Department of Energy — Cited for the rule that if regulation is the primary purpose, the incidental generation of revenue does not convert the imposition into a tax.
• Progressive Development Corporation v. Quezon City — Cited for the principle that a charge of a fixed sum bearing no relation to the cost of inspection and regulation may be held to be a tax.
• Lung Center of the Philippines v. Quezon City — Cited as the controlling precedent establishing the requirement that property must be actually, directly, and exclusively used for charitable or educational purposes to qualify for tax exemption.

• Section 8, Republic Act No. 6055 — The provision granting non-stock, non-profit educational foundations exemption from taxes, import duties, assessments, and other charges on income and property used exclusively for educational activities; interpreted by the Court to exclude regulatory fees.
• Presidential Decree No. 1096 (National Building Code of the Philippines), Sections 102, 103, 203(4), 208, 209, and 301 — Sections 102 and 103 establish the regulatory purpose (police power) of the Code; Section 301 mandates building permits for construction, alteration, or repair of structures; Section 209 enumerates specific exemptions limited to public buildings and traditional indigenous family dwellings; Sections 203(4) and 208 govern the fixing and disposition of building permit fees.
• Article VI, Section 28(3), 1987 Constitution — The constitutional provision granting exemption from taxation for charitable institutions, churches, and lands, buildings, and improvements actually, directly, and exclusively used for religious, charitable, or educational purposes.
• Section 234(b), Republic Act No. 7160 (Local Government Code of 1991) — The statutory provision implementing the constitutional exemption from real property tax for properties actually, directly, and exclusively used for educational purposes.
• Section 193, Republic Act No. 7160 — The provision withdrawing tax exemptions upon the effectivity of the Code, except for local water districts, cooperatives, and non-stock and non-profit hospitals and educational institutions; held by the Court not to preserve exemptions for regulatory fees not granted by R.A. No. 6055.