I. Introduction

In the Philippines, the taxation of real property is primarily governed by the Local Government Code of 1991 (Republic Act No. 7160), which implements the constitutional mandate on local taxation. A key feature of this framework is the exemption from real property tax (RPT) granted to certain properties owned by religious organizations. This exemption reflects the state's recognition of the role of religion in society and aims to prevent undue burden on institutions that serve spiritual and communal needs. Rooted in the 1987 Philippine Constitution, the exemption is not absolute but conditional, requiring that the properties be used exclusively for religious purposes. This article explores the legal foundations, requirements, scope, procedural aspects, judicial interpretations, and limitations of these exemptions, providing a comprehensive analysis within the Philippine legal context.

II. Constitutional Basis

The exemption for religious properties traces its origins to the Philippine Constitution. Article VI, Section 28(3) of the 1987 Constitution explicitly provides: "Charitable institutions, churches and parsonages or convents appurtenant thereto, mosques, non-profit cemeteries, and all lands, buildings, and improvements, actually, directly, and exclusively used for religious, charitable, or educational purposes shall be exempt from taxation." This provision echoes similar exemptions in previous constitutions, such as the 1935 and 1973 Constitutions, underscoring a long-standing policy of non-interference in religious affairs while promoting public welfare.

The constitutional language emphasizes three critical elements: (1) the nature of the institution (e.g., churches, mosques); (2) the type of property (lands, buildings, improvements); and (3) the use of the property (actual, direct, and exclusive for religious purposes). This exemption aligns with the non-establishment clause in Article III, Section 5, which prohibits the state from favoring or inhibiting religion, ensuring that tax relief is granted based on usage rather than affiliation.

III. Statutory Provisions

The constitutional exemption is operationalized through the Local Government Code (LGC). Section 234(b) of the LGC exempts from RPT: "Churches, parsonages or convents appurtenant thereto, mosques, nonprofit or religious cemeteries and all lands, buildings, and improvements actually, directly, and exclusively used for religious, charitable or educational purposes." This mirrors the constitutional text and applies to real properties owned by religious corporations or associations registered under Philippine laws, such as those incorporated under the Corporation Code (Batas Pambansa Blg. 68) or special laws.

Additionally, the National Internal Revenue Code (NIRC), as amended by the Tax Reform for Acceleration and Inclusion (TRAIN) Law (Republic Act No. 10963) and subsequent reforms, intersects with RPT exemptions indirectly. While the NIRC primarily deals with income and value-added taxes, it classifies religious organizations as non-stock, non-profit entities under Section 30(E), exempting them from income tax on donations and religious activities. However, RPT remains under local government jurisdiction, with assessments handled by provincial, city, or municipal assessors.

Other relevant statutes include Republic Act No. 9646 (Real Estate Service Act), which governs property valuations, and various Department of Finance (DOF) and Bureau of Local Government Finance (BLGF) issuances that provide guidelines on exemption claims. For instance, DOF Department Order No. 23-2010 outlines procedures for tax exemptions, emphasizing documentation requirements.

IV. Requirements for Exemption

To qualify for RPT exemption, religious organizations must satisfy stringent criteria centered on ownership and usage:

Ownership: The property must be owned by a religious corporation, association, or institution. This includes denominations registered with the Securities and Exchange Commission (SEC) or recognized under special laws, such as the Roman Catholic Church or Iglesia ni Cristo. Beneficial ownership may suffice if the legal title is held in trust for religious purposes.
Actual, Direct, and Exclusive Use: This is the cornerstone requirement. "Actual" means the property is in current use; "direct" implies no intermediary purposes; and "exclusive" means solely for religious activities, such as worship, prayer, sacraments, or religious education. Incidental uses, like parking lots for congregants or administrative offices integral to religious functions, may qualify if they are appurtenant.
- Examples of qualifying uses: Churches for masses, mosques for prayers, seminaries for priest training, and retreat houses for spiritual retreats.
- Non-qualifying uses: Commercial rentals, profit-generating activities (e.g., leasing space for stores), or mixed uses where non-religious portions predominate.
Non-Profit Nature: The organization must operate without profit motive, with any income reinvested in religious purposes. Audited financial statements may be required to demonstrate this.
Appurtenance: For parsonages or convents, they must be adjacent or necessary to the main religious structure.

Failure to meet these results in full tax liability, including back taxes and penalties under Section 253 of the LGC.

V. Scope of Exemption

The exemption covers real properties, including:

Lands: Vacant lots used exclusively for religious purposes, such as burial grounds or expansion sites for worship facilities.
Buildings: Churches, chapels, mosques, temples, rectories, and ancillary structures like halls for religious gatherings.
Improvements: Fixtures, machinery, or enhancements (e.g., altars, sound systems) integral to religious use.

The exemption does not extend to personal property taxes or other levies like business permits if the property engages in commercial activities. Portions of a property used for non-exempt purposes are taxable pro-rata. For example, if a church building includes a rented cafeteria, only the religious portion is exempt.

In multi-purpose complexes, exemptions apply only to segregated religious areas. Idle properties owned by religious groups but not in use are taxable, as affirmed in various BLGF opinions.

VI. Application Process

While the exemption is constitutional and thus self-executing, practical application requires administrative steps:

Filing a Claim: The religious organization files a sworn declaration with the local assessor’s office, supported by documents such as SEC registration, title deeds, blueprints showing usage, and affidavits attesting to exclusive religious use.
Assessment and Approval: The assessor evaluates the claim, potentially conducting site inspections. Approval leads to annotation on the tax declaration, exempting the property from RPT.
Appeals: Denials can be appealed to the Local Board of Assessment Appeals (LBAA), then the Central Board of Assessment Appeals (CBAA), and ultimately the courts.
Periodic Review: Exemptions are not perpetual; changes in use trigger reassessment. Annual filings may be required in some localities.

BLGF Memorandum Circulars, such as No. 15-2018, standardize these processes to prevent abuse.

VII. Judicial Interpretations and Case Law

Philippine jurisprudence has refined the exemption's application through landmark decisions:

Bishop of Nueva Segovia v. Provincial Board of Ilocos Norte (1928): An early case under the 1935 Constitution analogue, holding that church properties used for religious worship are exempt, even if income-generating activities are minimal and incidental.
Province of Abra v. Hernando (1981): The Supreme Court ruled that exemptions for religious properties are automatic upon meeting constitutional criteria, without needing legislative action. However, proof of usage is essential.
Lung Center of the Philippines v. Quezon City (2004): Though focused on charitable institutions, it established that exemptions apply only to portions actually used for exempt purposes, not the entire property if mixed uses exist. This principle extends to religious contexts.
Commissioner of Internal Revenue v. Court of Appeals (1998): Clarified that religious organizations' non-religious income (e.g., from rentals) is taxable, potentially affecting RPT if usage shifts.
More Recent Cases: In CBAA decisions like those involving evangelical churches, courts have denied exemptions for properties leased to third parties, emphasizing the "exclusive use" test. The Supreme Court in cases like City of Manila v. Chinese Community of Manila (1919, reaffirmed in later rulings) has upheld exemptions for religious cemeteries.

These cases illustrate a strict constructionist approach, balancing fiscal needs with constitutional protections.

VIII. Limitations and Exceptions

Despite the exemptions, several limitations apply:

Taxable Activities: If a religious property generates commercial income (e.g., hosting events for fees), the exempt status may be revoked for that portion.
Special Assessments: Exempt properties may still be liable for special levies under Section 240 of the LGC for public improvements benefiting the property.
Foreclosure Risks: Unpaid taxes on non-exempt portions can lead to auction, though religious properties enjoy procedural safeguards.
Government Oversight: The DOF and BLGF monitor exemptions to curb fraudulent claims, with penalties for misrepresentation under the Revised Penal Code.
Evolving Policies: Amendments to the LGC or tax codes could refine exemptions, though no major changes have altered the core framework post-TRAIN Law.

In times of national emergency, such as under martial law declarations, tax policies may be suspended, but religious exemptions generally persist.

IX. Conclusion

Real property tax exemptions for religious organizations in the Philippines embody a constitutional commitment to religious freedom and societal welfare. By requiring actual, direct, and exclusive use for religious purposes, the law ensures that exemptions serve public interest without becoming avenues for tax evasion. Religious groups must navigate ownership, usage, and procedural hurdles diligently, supported by a body of statutes and jurisprudence that prioritizes evidence-based claims. This framework not only protects sacred spaces but also reinforces the separation of church and state in fiscal matters.