Tax Exemption for Local Water Districts

A new Section 289-A is added to the NIRC granting income tax exemption to LWDs.
Income tax savings must be used for capital equipment expenditure to expand water service coverage and improve water quality.
Emphasizes provision of safe and clean water throughout provinces, cities, and municipalities.
Requires adoption of internal control reforms to enhance economic and financial viability.
Prohibits increasing appropriations for personal services, travel, transportation, representation expenses, and motor vehicle purchases by more than 20% annually.

All unpaid taxes due from LWDs from August 13, 1996, until the act’s effectivity date are condoned.
Condonation is subject to:
1. BIR validation of the LWD’s financial incapacity to pay, after covering maintenance, operations, debt servicing, and reserve funds.
2. Submission of an internal reforms program certified by the Local Water Utilities Administration to Congress, aimed at economic and financial viability.

LWDs, through the Local Water Utilities Administration, must submit annual statistical data and financial statements to the Senate and House Committees on Ways and Means.
This reporting facilitates monitoring of compliance and rationalization of tax exemption privileges.

The Secretary of Finance shall issue implementing rules and regulations upon recommendation of the Commissioner of Internal Revenue and consultation with relevant agencies.

Invalidity or unconstitutionality of any provision does not affect the remaining provisions, which shall remain effective.

Conflicting laws, decrees, orders, or regulations are repealed or modified as necessary to conform with this Act.

The Act takes effect 15 days after publication in the Official Gazette or in two newspapers of general circulation, whichever is earlier.