The Supreme Court has affirmed that taxpayers must first pay their assessed real property taxes under protest before their challenges to the assessment can be entertained. This ruling reinforces the principle that tax collection is vital for government operations and cannot be easily halted by disputes. It clarifies that even those claiming tax exemptions must follow this procedure to properly contest assessments, ensuring that local government units receive the necessary funds while disputes are resolved.

Tax Exemption vs. Assessment: The Battle Over Camp John Hay’s Property Taxes

This case revolves around Camp John Hay Development Corporation (CJHDC) and its challenge to real property tax assessments issued by the City Assessor of Baguio City. CJHDC claimed it was exempt from paying these taxes based on Republic Act No. 7227, also known as the Bases Conversion and Development Act of 1992. The central question was whether CJHDC could bypass the requirement of paying the tax under protest while asserting its tax-exempt status. The Supreme Court, in its decision, addressed the interplay between tax exemptions, assessment challenges, and the procedural requirements for contesting local tax impositions.

The legal framework underpinning this decision is rooted in the Local Government Code of 1991 (LGC), particularly Section 252, which mandates payment under protest. This section states:

SEC. 252. Payment Under Protest. – (a) No protest shall be entertained unless the taxpayer first pays the tax. There shall be annotated on the tax receipts the words “paid under protest.” The protest in writing must be filed within thirty (30) days from payment of the tax to the provincial, city treasurer or municipal treasurer, in the case of a municipality within Metropolitan Manila Area, who shall decide the protest within sixty (60) days from receipt.

Building on this provision, the Court emphasized that administrative remedies must be exhausted before judicial intervention can be sought. The LGC provides a tiered system for appealing tax assessments, beginning with the Local Board of Assessment Appeals (LBAA) and potentially moving to the Central Board of Assessment Appeals (CBAA). These remedies are detailed in Sections 226 to 231 of the LGC, which outline the process for property owners to contest assessments they deem incorrect.

The Supreme Court cited its prior ruling in Dr. Olivares v. Mayor Marquez to underscore the importance of exhausting administrative remedies. In that case, the Court stated:

x x x A perusal of the petition before the RTC plainly shows that what is actually being assailed is the correctness of the assessments made by the local assessor of Parañaque on petitioners’ properties. Under the doctrine of primacy of administrative remedies, an error in the assessment must be administratively pursued to the exclusion of ordinary courts whose decisions would be void for lack of jurisdiction. But an appeal shall not suspend the collection of the tax assessed without prejudice to a later adjustment pending the outcome of the appeal.

This principle highlights that disputes over tax assessments should first be addressed within the administrative framework established by law. Only after these avenues have been exhausted can a party seek judicial relief.

The Court also addressed CJHDC’s claim of tax exemption, noting that such a claim does not negate the assessor’s authority to assess the property. Instead, it challenges the correctness of the assessment, which must be substantiated with sufficient evidence. Section 206 of the LGC provides the mechanism for claiming tax exemptions, requiring claimants to file documentary evidence supporting their claim with the local assessor.

The decision underscores the principle that taxation is the rule and exemption is the exception. As the Court stated, “The law does not look with favor on tax exemptions and the entity that would seek to be thus privileged must justify it by words too plain to be mistaken and too categorical to be misinterpreted.” This strict interpretation of tax exemptions reinforces the government’s ability to collect revenue and fulfill its functions.

In summary, the Supreme Court upheld the CTA’s decision, emphasizing the mandatory nature of Section 252 of the LGC. The Court reasoned that even those claiming tax exemption must comply with the payment under protest requirement to properly contest real property tax assessments. By requiring payment under protest, the Court balanced the rights of taxpayers to challenge assessments with the government’s need to collect taxes efficiently.

FAQs

What was the key issue in this case?	The central issue was whether Camp John Hay Development Corporation (CJHDC) could challenge its real property tax assessments without first paying the taxes under protest, given its claim of tax exemption. The Supreme Court ruled that payment under protest is mandatory, even for entities claiming tax exemption, to properly contest the assessment.
What does “payment under protest” mean?	“Payment under protest” requires a taxpayer to first pay the assessed tax before formally contesting it. This payment is annotated on the tax receipt, and the funds are held in trust while the protest is being resolved.
What is the legal basis for requiring payment under protest?	Section 252 of the Local Government Code of 1991 mandates payment under protest as a prerequisite for entertaining a challenge to a tax assessment. This requirement ensures that tax collection is not unduly delayed by disputes.
What is the role of the Local Board of Assessment Appeals (LBAA)?	The LBAA is the first administrative body to which a taxpayer can appeal a tax assessment. It reviews the assessor’s decision and makes a determination based on the evidence presented.
What if the taxpayer disagrees with the LBAA’s decision?	If the taxpayer disagrees with the LBAA’s decision, they can further appeal to the Central Board of Assessment Appeals (CBAA) within 30 days of receiving the LBAA’s decision. The CBAA has exclusive jurisdiction to hear and decide appeals from decisions of Local Boards.
How does this ruling affect taxpayers claiming tax exemptions?	Even taxpayers claiming tax exemptions must first pay the assessed taxes under protest to challenge the assessment. They must also present sufficient documentary evidence supporting the claim for exemption to the local assessor.
What kind of evidence is needed to prove a tax exemption?	Sufficient evidence includes corporate charters, titles of ownership, articles of incorporation, bylaws, contracts, affidavits, certifications, and mortgage deeds. These documents must demonstrate that the property qualifies for the claimed tax exemption.
What happens if the protest is decided in favor of the taxpayer?	If the protest is decided in favor of the taxpayer, the amount or portion of the tax paid under protest will be refunded or applied as a tax credit against future tax liabilities.
Can a taxpayer go directly to court to challenge a tax assessment?	No, taxpayers must first exhaust all available administrative remedies, including payment under protest and appealing to the LBAA and CBAA. Only after exhausting these remedies can a taxpayer seek judicial intervention.

This Supreme Court decision underscores the importance of adhering to procedural requirements when contesting tax assessments. By requiring payment under protest, the Court ensures that local government units receive the necessary funds to operate while disputes are resolved through the proper administrative channels.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: CAMP JOHN HAY DEVELOPMENT CORPORATION vs. CENTRAL BOARD OF ASSESSMENT APPEALS, G.R. No. 169234, October 02, 2013