87712rmc 51-2014.pdf

REVENUE MEMORANDUM CIRCULAR NO. 51-2014 issued on June 11, 2014 clarifies the inurement prohibition under Section 30 of the National Internal Revenue Code (NIRC) of 1997. In order for an entity to qualify as a non-stock and/or non-profit corporation/association/organization exempt from Income Tax under Section 30 of the NIRC, as amended, its earnings or assets shall not inure to the benefit of any of its trustees, organizers, officers, members or any specific person. The following are considered “inurements” of such nature: a. Payment of compensation, salaries, or honorarium to its trustees or organizers; b. Payment of exorbitant or unreasonable compensations to its employees; c. Provision of welfare aid and financial assistance to its members; d. Donation to any person or entity (except donations made to other entities formed for the purpose/s similar to its own); e. Purchase of goods or services for amounts in excess of the fair market value of such goods or value of such services from an entity in which one or more of its trustees, officers or fiduciaries has an interest; and f. Distribution of entity’s remaining assets to its trustees, organizers, officers or members upon dissolution and satisfaction of all liabilities.