IPP BOT Real Property Tax Condonation
The Problem
The Local Government Code of 1991 (RA 7160) grants government-owned or -controlled corporations (GOCCs) engaged in electricity generation and transmission a preferential real property tax (RPT) assessment level of 10% on their lands, buildings, machinery and equipment, and a full exemption for machinery and equipment exclusively used in generation and transmission [EO 27, s. 2011, WHEREAS ¶1, 2011-02-28].
Under Build-Operate-Transfer (BOT) contracts — denominated as Power Purchase Agreements (PPAs), Energy Conversion Agreements (ECAs), or similar instruments — National Power Corporation (NPC) and Power Sector Assets and Liabilities Management Corporation (PSALM) contracted Independent Power Producers (IPPs) to build and operate generation facilities. The GOCCs contractually assumed the RPT obligations on those facilities [EO 173, s. 2014, §1, 2014-10-31].
IPPs are private entities, not GOCCs. Local government units (LGUs) have repeatedly taken the position that IPPs are therefore not entitled to the GOCC exemptions and have assessed RPT at the maximum rate of 80% of fair market value under §218 of RA 7160 — eight times the GOCC rate [EO 157, s. 2021, WHEREAS ¶3, 2021-12-16]. Enforcement threats have included levy and public auction of generation assets.
Because NPC/PSALM assumed these liabilities contractually and carry the full faith and credit of the National Government, full collection at 80% would trigger massive direct liabilities on both GOCCs, threaten their financial stability, and risk electricity price increases or rotating brownouts [EO 117, s. 2020, WHEREAS ¶3–4, 2020-07-24].
The Presidential Remedy
Section 277 of RA 7160 grants the President the power to condone or reduce RPT and interest for any year in any province, city, or Metro Manila municipality when public interest requires. Every President since 2011 has exercised this power annually to protect NPC/PSALM from accumulated RPT exposure.
Each condonation EO reduces assessed RPT liabilities to an amount equivalent to the tax computed at 15% of fair market value, depreciated at 2% per annum — the GOCC-equivalent rate — and condones all interests and penalties on the deficiency. Any overpayments are credited to future RPT liabilities [EO 19, s. 2017, §§1–2, 2017-04-27].
Chain of EOs (2011–2025)
| EO | Date | President | CY Covered | Notable change |
|---|---|---|---|---|
| 27 (s. 2011) | 2011-02-28 | Aquino III | up to 2011 | Quezon Province only — origin EO, triggered by specific Quezon LGU enforcement threat |
| 173 (s. 2014) | 2014-10-31 | Aquino III | up to 2014 | Expanded to nationwide; added separability clause and Art. VII §17 constitutional basis; gap covers 2012–2014 |
| 19 (s. 2017) | 2017-04-27 | Duterte | CY 2015–2016 | Two years in one EO; added §2 excess-payment rollover to future liabilities |
| 60 (s. 2018) | 2018-07-25 | Duterte | up to CY 2017 | Standardized form |
| 88 (s. 2019) | 2019-08-13 | Duterte | up to CY 2018 | Identical |
| 117 (s. 2020) | 2020-07-24 | Duterte | up to CY 2019 | Added 3,100 MW grid capacity WHEREAS; explicit penalties condonation |
| 126 (s. 2021) | 2021-03-04 | Duterte | up to CY 2020 | Identical to EO 117 |
| 157 (s. 2021) | 2021-12-16 | Duterte | CY 2021 | Two EOs in 2021; added WHEREAS explicitly citing 80% LGU assessment level |
| 176 (s. 2022) | 2022-06-28 | Duterte | CY 2022 | Signed second-to-last day of Duterte term; not catalogued on LawPhil |
| 36 (s. 2023) | 2023-07-25 | Marcos Jr. | up to CY 2023 | Simplified WHEREAS structure; first Marcos-era condonation |
| 83 (s. 2025) | 2025-02-13 | Marcos Jr. | CY 2024 | First to enumerate full prior EO chain; added DILG compliance monitoring and DOF 6-month progress report; 3,100 MW |
| 106 (s. 2025) | 2025-11-28 | Marcos Jr. | CY 2025 | Grid capacity drops to 1,085 MW — sharply lower than prior EOs; same DILG/DOF reporting requirements |
Key Policy Observations
Assessment rate has never changed. All 12 EOs apply the same formula: 15% of FMV depreciated at 2%/yr. The remedy has been consistent even as the legal ambiguity persists.
No permanent legislative fix. The series spanning 14 years — three presidents, four administrations — reflects that the root ambiguity in RA 7160 has not been resolved by Congress. Each EO is a stopgap exercising presidential condonation authority under §277.
Declining grid capacity at stake. EO 117 (2020) through EO 83 (2025) cited 3,100 MW of affected IPP capacity. EO 106 (2025) cites only 1,085 MW — a 65% drop — likely reflecting BOT contract expirations as old NPC-era plants age out or are decommissioned.
NPC/PSALM as the fiscal backstop. The central justification in every EO is that NPC/PSALM contractually assumed these tax obligations and cannot absorb full 80% assessment without threatening fiscal consolidation and electricity stability. The condonation is, in effect, a protection of the national balance sheet through exercise of presidential tax authority.
Compliance monitoring added in 2025. EO 83 and EO 106 (both Marcos) added new requirements: DILG to monitor LGU compliance, and DOF to report to the President within six months on implementation status [EO 83, s. 2025, §3, 2025-02-13].