Question & AnswerQ&A (Republic Act No. 10026)
The main purpose of Republic Act No. 10026 is to grant income tax exemption to local water districts by amending Section 27(C) of the National Internal Revenue Code of 1997 and adding Section 289-A to support the expansion and improvement of water services.
Under the amended Section 27(C) of the NIRC, the Government Service and Insurance System (GSIS), Social Security System (SSS), Philippine Health Insurance Corporation (PHIC), local water districts (LWD), and Philippine Charity Sweepstakes Office (PCSO) are exempted from paying income tax.
The amount saved from income tax exemption must be used for capital equipment expenditure to expand water services coverage and improve water quality to provide safe and clean water. Local water districts must also adopt internal control reforms for economic and financial viability and limit annual increases in personal services appropriation and travel, transportation, representation expenses, and vehicle purchases to no more than 20%.
Unpaid taxes from August 13, 1996, until the effectivity of the Act are condoned provided (1) the Bureau of Internal Revenue determines the financial incapacity of the water district after reviewing its financial statements, and (2) the water district submits a program of internal reforms certified by the Local Water Utilities Administration, to Congress for economic and financial viability.
The Secretary of Finance, upon the recommendation of the Commissioner of Internal Revenue and consultation with appropriate government agencies, promulgates the necessary rules and regulations for implementing the Act.
Local water districts, through the Local Water Utilities Administration, are required to annually furnish the Senate and House Committees on Ways and Means with statistical data, financial statements, and other information necessary to monitor compliance and review the rationale of their tax exemption privileges.
If any provision of the Act is declared invalid or unconstitutional, the remaining provisions not affected shall continue in full force and effect.
Any law, presidential decree, executive order, letter of instruction, administrative order, rule or regulation contrary to or inconsistent with any provision of this Act is repealed or modified accordingly.
The Act took effect fifteen (15) days after its publication in the Official Gazette or in at least two newspapers of general circulation, whichever came earlier.
Local water districts are prohibited from increasing their appropriation for personal services, travel, transportation, representation expenses, and purchase of motor vehicles by more than twenty percent (20%) per year.