Tuesday, October 30, 2012

Commissioner of Internal Revenue vs. St. Luke's Medical Center, Inc., G.R. No. 195909, September 26, 2012


Commissioner of Internal Revenue vs. St. Luke's Medical Center, Inc.

G.R. No. 195909 September 26, 2012

In a nutshell:

St. Luke’s Medical Center, Inc. (St. Luke’s) is a hospital organized as a non-stock and non-profit corporation. St. Luke’s accepts both paying and non-paying patients. With respect to its non-paying patients, St. Luke’s is exempted from income tax pursuant to Sec. 30 (E) and (G) of the NIRC for being a non-stock corporation or organization operated exclusively for charitable or social welfare purposes. Accepting paying patients does not destroy the exemption of St. Luke’s under Sec. 30 of the NIRC. Instead, the last paragraph of Sec. 30 of the NIRC provides that St. Luke’s activities conducted for profit, regardless of the disposition of such income, shall be subject to tax imposed under this Code.

What is the income tax rate to be applied to St. Luke’s activities conducted for profit? With respect to its paying patients, St. Luke’s is subject to the 10% preferential tax rate of proprietary non-profit hospitals under Section 27(B).