G.R. No. 232199 - National Transmission Corp. vs. Commission on Audit

Republic Act No. 7227 (1992) created the Bases Conversion and Development Authority (BCDA) and authorized special economic zones (SEZs), including Camp John Hay in Baguio City. Executive Order No. 103 (1993) formed John Hay Development Corporation (later John Hay Management Corporation, JHMC) as BCDA’s subsidiary to manage and develop the area.
Proclamation No. 420 (1994) designated the John Hay Special Economic Zone (JHSEZ), extended Subic SEZ incentives, and provided remittance shares: 3% national, 1% local, 1% contiguous-area development. Baguio City Ordinance (Resolution No. 362, 1994) set income‐sharing at 3% national, 3% city, and 1% joint community fund; plus 25% of BCDA’s lease rentals (or 30% of JHMC net income) for city projects.

Republic Act No. 7916 (1995) exempted ecozone businesses from national and local taxes, in lieu of 5% gross-income remittance (3% national; 1% LGU; 1% contiguous fund). Amended by RA 8748 (1999) and limited by Section 50 to zones under RA 7227. RA 9399 (2007) granted one‐time tax amnesty for pre‐existing SEZ enterprises. RA 9400 (2007) expressly included JHSEZ under RA 7916 incentives but limited BCDA/JHMC to real‐property activities; PEZA to register, regulate, supervise SEZ enterprises.
In 2004 BCDA created a One Stop Action Center for SEZ business accreditation. Baguio City issued Administrative Order No. 102 (2009) extending City Tax Ordinance No. 2000-001 to JHSEZ, requiring mayor’s permits and payment of business taxes, fees, and charges. BCDA and JHMC sought a legal opinion; the City Legal Officer confirmed permit fees are regulatory charges, not exempt taxes. Notices to stop operations were issued to unpermitted locators in February 2010.

BCDA and JHMC filed a petition for declaratory relief and preliminary injunction (RTC Baguio City, March 2010), secured agreement on notice procedure, but ultimately lost on May 13, 2010: the RTC held that business permit fees are regulatory, not taxes, and SEZ businesses must secure city permits. The motion for reconsideration was denied (June 24, 2010).
BCDA and JHMC filed a Petition for Review on Certiorari under Rule 45 before the Supreme Court, challenging the decision and City’s authority to impose fees on JHSEZ enterprises.

Whether the Rule 45 Petition for Review on Certiorari was proper, considering questions of fact and the hierarchy of courts.
Whether direct recourse to the Supreme Court was permissible, or if BCDA/JHMC should have first appealed to the Court of Appeals.

Whether statutory tax exemptions under RA 7916 (as extended by RA 9400) cover the payment of business permit and license fees imposed by a local government unit.
Whether City Tax Ordinance No. 2000-001 and Administrative Order No. 102 impose a tax (exempt) or a regulatory fee (non-exempt) on JHSEZ enterprises.
Whether Baguio City waived the right to collect business permit fees by virtue of Resolution No. 362 (1994) or the income-sharing Memorandum of Agreement for the Baguio Convention Center purchase.