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.