May 13, 2010

Atty. CHRISTIANE B. ALONZO, et. al.

BENEDICTO VERZOSA & BURKLEY
Law Offices
11
th
Floor, BPI Building
Ayala Avenue corner Paseo de Roxas
Makati City

M a d a m :

This pertains to your letter dated 21 April 2010, in behalf of your client, BPI Family
Savings Bank, Inc. (BPI Family), and Bank of the Philippine Islands (BPI), requesting
confirmation of your opinion that the following machinery found in abovementioned Banks are
exempt from real property tax for being machinery of general purpose use; and certain bank
security devices are considered improvement rather than machinery to wit:

A. Machinery of general purpose use:

1. Air-conditioning Units (window type, cabinet type, split type, centralized
type, package type, etc.)
2. Generator Sets
3. Computers (CPU, keyboard, printer, deskset, monitors, scanner/HP
Flatbed, PC Server, modem, etc.)
4. Office devices (bill counter, check writer, passbook printer, etc.)
5. Facsimile Machines
6. Exhaust and Orbit/Ceiling Fans
7. Landline Phones
8. Water Dispensers
9. Refrigerators
10. Water Pumps

B. Machinery considered as improvement:

11. Vaults or vault doors
12. Safety deposit boxes
13. Surveillance cameras
14. Other security devices

It is submitted that the assessors of the different cities in Metro Manila (e.g. Quezon City,
Paraaque City, Cebu City, etc.) are assessing as real property subject to real property tax
machinery owned by BPI, which you consider machinery of general purpose use, despite the
opinion/ruling issued by this Office that these machinery are not subject to real property tax.

Further, it is alleged that safety deposit boxes, surveillance cameras, and other security
devices are allegedly erroneously classified by the assessors as machinery instead of as
improvements, pursuant to Section 199(m) of the Local Government Code (LGC) of 1991 and
Article 290(m) of its Implementing Rules and Regulations (IRR).

Please be informed in this regard that the BLGF, ruled on several occasions that
airconditioning units (window, cabinet, split, package and centralized types) are considered
machinery of general purpose use and therefore exempt from payment of real property tax.
Attached is the letter dated J uly 31, 2006 of this Bureau concerning the airconditioning units
being used by Allied Bank, the penultimate portion of which states:

x x x.

Centralized Airconditioning System have the same functions as
window-type airconditioning units and yet the latter are never considered as real
property for purposes of the real property tax because window-type
airconditioning system could not be.

x x x.

considering that the said machinery (centralized airconditioning
system) is not essential to the needs of banking operations, this Bureau
reiterates its previous ruling that airconditioning units are considered as falling
under the category of machinery of general purpose use and do not fall within the
definition of Machinery subject to real property tax as provided under Section
199(o) of the Local Government Code of 1991.

With respect to the Bank Vaults, safety deposit boxes, surveillance cameras and other
security devices used by the Bank, this Bureau under its 1
st
Indorsement dated November 21,
2002 addressed to the City Assessor of Valenzuela City, copy enclosed, clarified that the Bank
Vault of BPI Family Bank is considered an improvement for reason that it enhances the utility of
the bank for the purpose of storage and safe keeping of cash/check deposits, safety deposit
boxes and other valuables for its clientele, and therefore, subject to real property tax. Being an
improvement, however, the market value of these security devices should have been
included/added to the market value of the building where these devices are installed to come up
with the total market value, and the assessment level to be applied as provided under Section
218(b)(3) of the Code. The BLGF is hereby reiterating the above ruling with respect to the same
properties of BPI and BPI Family Savings Bank, Inc.

Relatedly, please be informed of the provision of Sec. 226 of R.A. No. 7160 which is
quoted hereunder, viz:

Section 226 of R.A. No. 7160:

SEC. 226. Local Board of Assessment Appeals. Any owner or person
having legal interest in the property who is not satisfied with the action of the
provincial, city or municipal assessor in the assessment of his property may,
within sixty (60) days from the date of receipt of the written notice of assessment,
appeal to the Board of Assessment Appeals of the province or city by filing a
petition under oath in the form prescribed for the purpose, together with copies of
the tax declarations and such affidavits or documents submitted in support of the
appeal.

Further, BLGF Memorandum Circular No. 04-2008, dated J anuary 7, 2008, copy
attached, provides in part, as follows:

x x x.

Indeed, the long standing practice adverted to by petitioners does
not justify a continuance of their acts. We cannot sanction such
compromising situations. Henceforth, whenever the local assessor sends
a notice to the owner or lawful possessor of real property of its revised
assessed value, the former shall thereafter no longer have any jurisdiction
to entertain any request for a review or readjustments. The appropriate
forum where the aggrieved party may bring his appeal is the LBAA, as
provided by law. (Underscoring ours)

x x x.

Thus, it is clear in the Callanta Case that once a Notice of Assessment
has already been issued and sent to the property owner,
assessment/reassessment is already beyond the authority of the local assessor
to correct or rectify, the same being within the jurisdiction of the LBAA. As soon
as the notice of assessment is served and received by the taxpayer, an
obligation to pay the amount assessed and demanded arises. (CIR vs. Island
Garment Manufacturing Corp. 153 SCRA 665). What the Supreme Court abhors
and therefore proscribes is the review/readjustment by the assessor after the
latter has already issued a notice of assessment. (Underscoring ours)

x x x.

Evidently, the Callanta Case on the basis of Sec. 226 of the Local Government Code
categorically implies that a taxpayer who is not satisfied with the assessment made by the
Assessor concerned on his real property, has sixty (60) days from receipt of the Notice of
Assessment to file an appeal with the Local Board of Assessment Appeals (LBAA) in the
province, or city where the property is located. Failure to do so would render the assessment
made by the assessor final and executory.

In view hereof, this Bureau is reiterating its previous ruling/opinion issued on the matter.
However, the BLGF is likewise recommending the availment of the appeal process provided
under Sec. 226 of the Local Government Code.

Very truly yours,




MA. PRESENTACION R. MONTESA
Executive Director

SRP/
CCS # 030-10
BPI-BV&Burkely-LawOffices-Makati