Principal Address of Churches

The Securities and Exchange Commission (SEC) issued on August 13, 2014 Memorandum Order No. 16, Series of 2014 entitled "PRINCIPAL OFFICE ADDRESS OF CORPORATIONS AND PARTNERSHIPS."

Prior to the issuance of Memorandum Circular No. 3, Series of 2006, SEC allowed registrant corporations and partnerships to indicate in their principal office address only the name of the city, town or municipality where they conduct business, and considered "Metro Manila" as a principal office address. The term corporation, as used in this blog, includes non-stock, non-profit corporation such as religious organizations including churches.

However, on February 16, 2006, SEC issued Memorandum Circular No. 3, Series of 2006 directing registrant corporations and partnerships  to state in their Articles of Incorporation or Articles of Partnership, the specific address of their principal office, which shall, include, if feasible, the street number, street name, barangay, city or municipality; and that "Metro Manila" shall no longer be allowed as address of the principal office.

On February 20, 2014, SEC issued Memorandum Circular No. 6, Series of 2014, directing existing corporations and partnerships whose articles of incorporation or articles of partnership still indicate a general address as their principal office address, such as a city, town or municipality, or "Metro Manila," to file, on or before December 31, 2014, an amended articles of incorporation or amended articles of partnership, as the case maybe, in order to specify their complete addresses, such that it has a street number, street name, barangay, city or municipality, and if applicable, the name of the building, the number of the building, and name or number of the room or unit.

In the event that a corporation whose principal office address as indicated in its articles is already specific and complete or fully compliant with the aforementioned Circulars, has moved or moves to another location within the same city of municipality, the corporation is not required to file an amended articles of incorporation, however, it must declare its new or current specific address in its General Information Sheet (GIS) within fifteen (15) days from transfer to its new location. For this purpose, the term "Metro Manila" shall not be considered a city or municipality.

A corporation is not precluded from filing an amended articles of incorporation to indicate its new location within the same city or municipality of its former address. On other hand, the corporation must file an amended articles of incorporation to indicate its new location in another city or municipality.

In the case of partnership, considering that it has no obligation to file the GIS, it is required to file an amended articles of partnership every time it transfers to a new location within the same or another city or municipality.

To download a copy of this Memorandum Circular, click here.

The Principle of Compliance in the Bible

When they came to Capernaum, those who collected the two-drachma {tax} came to Peter and said, "Does your teacher not pay the two-drachma {tax}?" He said, "Yes." And when he came into the house, Jesus spoke to him first, saying, "What do you think, Simon? From whom do the kings of the earth collect customs and poll-tax, from the sons or from stranger?" When Peter said, "From strangers," Jesus said to him, "Then the sons are exempt. However, so that we do not offend them, go to the sea and throw in a hook, and take the first fish that comes up; and when you open its mouth, you will find a shekel. Take that and give it to them for you and Me" (Matthew 17:24-27, NASB).

The narrative found in the above passage is nowhere to be found in the other Gospels except in the Gospel of Matthew. I believe that Matthew, who was a former tax collector, understands the law of taxation imposed by the Roman government and the consequences of not complying with it.

Jesus Teaches Compliance
We can also in chapter 22 of the Gospel of Matthew that in order to trap Jesus, the Pharisees questioned Him about compliance with the law of taxation. Though they have different motive in questioning, Jesus replied using the principles of "separation of Church and State," that is, "render to Caesar the things that are Caesar's; and to God the things that are God's" (cf. 22:21). Our LORD only implies that His followers - the "Church" - are not free from the obligation of complying with the civil laws; and also to give their hearts, lives, properties, and influence all to God for He is the rightful Owner of these.

Consequences for Non-Compliance
Proverbs 10:9 says, "Whoever walks in integrity walks securely, but he who makes his ways crooked will be found out" (ESV). In the past, there was a gangster named "Al Capone" who was involved in illegitimate occupation but was highly visible as public figure for he made donations to various endeavors using the money he made from his activities. Capone tried to walk in integrity though his ways of earning was crooked. History tells us the Capone was not imprisoned due to his illegal activities but because of tax evasion; proving that he tried to become a man of integrity, he didn't get the security he wanted from God.

Sometime in the years 2012 and 2013, we heard of two Filipino personalities namely, former Chief Justice Renato Corona and Janet Lim-Napoles. Both tried to walk in integrity: Corona was the Chief Justice of the land; while Napoles donated money to the church. They are now both facing tax evasion case filed by the Commissioner of the Bureau of Internal Revenue (BIR).

My point is that churches and believers must walk in integrity by complying with the civil laws, especially laws, rules and regulations on taxation, so that "so that we do not offend them (the BIR)," and face tax related problems in the future.

Churches and the Corporation Code of the Philippines

All churches that I know are registered with the Securities and Exchange Commission as a non-stock corporation.

Being a corporation, it is separate legal entity, an artificial being created by operation of law, having the right of succession and the power, attributes and properties expressly authorized by law or incident to its existence (Section 2, Corporation Code of the Philippines).

The Corporation Code of the Philippines defined non-stock corporation as one where no part of its income is distributable as dividends to its members, trustees, or officers; that any profit which a non-stock corporation may obtain as an incident to its operations shall, whenever necessary or proper, be used for the furtherance of the purpose or purposes for which the corporation was organized (Section 87, Corporation Code of the Philippines).

We should also take note that the pertinent provisions governing stock corporation shall be applicable to non-stock corporations, except as may be covered by specific provisions of Title XI of the Corporation Code of the Philippines.

Non-stock corporations may be formed or organized for charitable, religious, educational, professional, cultural, fraternal, literary, scientific, social, civic service, or similar purposes, like trade, industry, agricultrual and like chambers, or any combination thereof (see Title XI Section 88 of the Corporation Code of the Philippines).

Chapter II of the Corporation Code of the Philippines deals with religious corporations, to wit:

• Sec. 109 - Classes of religious corporations
• Sec. 110 - Corporation sole
• Sec. 111 - Articles of incorporation
• Sec. 112 - Submission of the articles of incorporation
• Sec. 113 - Acquisition and alienation of property
• Sec. 114 - Filing of vacancies
• Sec. 115 - Dissolution
• Sec. 116 - Religious societies

As a registered corporation with the Securities and Exchange Commission (SEC), churches are required to submit (a) 4 copies of General Information Sheet to be filed within 30 days from date of the annual members meeting; and (b) 4 copies of Audited Financial Statements (AFS) stamped "RECEIVED" by the Bureau of Internal Revenue (BIR) within 120 calendar days after the end of the fiscal year, as indicated in the Financial Statements.

The AFS of churches with annual gross receipts of PHP100,000.00 or more, or total assets of PHP50,000,000.00 or more shall be audited by an independent certified public accountant (CPA) registered with the Board of Accountancy (BOA). However, if the annual gross receipts or total assets is less than these amounts, the financial statements (FS), at the minimum, be certified under oath by the treasurer of the church.

Rule 68 of the Securities Regulations Code (SRC), as amended, states the requirements applicable to the form and content of financial statements required to be filed with the SEC by all corporations - whether stock or non-stock (including churches) - that the AFS are prepared and presented in conformity with the generally accepted accounting principles (GAAP), except those whose paid-up capital is less than PHP50,000.00.

The Need for Church Accounting Training in the Philippines

A church is one of many organizations that make up the nonstock nonprofit sector. The National Internal Revenue Code (NIRC) under Chapter IV Section 30(E) states that religious organizations, among others, are exempt from paying income tax, except those whose income was earned from activities conducted for profit.

The tax exemption granted under the law is not automatic since they are required to secure confirmatory rulings or certificates of tax exemption from the Bureau of Internal Revenue (BIR). The tax exemption privileges are not absolute since it does not cover all types of income and activities.

Because of these these laws, rules and regulations, churches organized and existing under the laws of the Republic of the Philippines are required to file an annual return with the BIR and with the Securities and Exchange Commission (SEC), attaching therein their financial reports that are prepared in accordance with the Generally Accepted Accounting Principles (GAAP).

Church accounting can be daunting task and many small churches struggle with it. More often than not, a member of the church with little or no accounting knowledge is drafted into the church treasurer or church financial secretary position. They may have some business accounting experience, but may not have any specific training in church accounting. The membership expects them to "handle" or "take care" of the church finances appropriately even though they have made very little provision for educating or training on the issues specific to church accounting.

May I remind you of what the LORD Jesus Christ said on Matthew 17:24-27 when the collectors of the two-drachma temple tax came and asked Peter, "Doesn't your teacher pay the temple tax?" And Jesus said to Peter, "But so that we may not cause offense, go to the lake and throw out your line. Take the first fish you catch; open its mouth and you will find a four-drachma coin. Take it and give it to them for my tax and yours."

Almost all churches that I visited are focused in providing training in the aspect of spirituality to their members but had not provided training about the issue of accounting, compliance, and taxation to the church leaders. So that we may not cause offense to the government agencies, I suggest that church leaders in the Philippines must take this issue into their considerations.