EO 106: Real Property Tax Condonation for Power Plants
Legal question
Why did the President condone real property taxes on privately run power plants?
Applicable laws and rules to discuss
- Executive Order No. 106, condoning IPP real property tax liabilities
- Republic Act No. 7160, the Local Government Code (Sections 218, 234, and 277)
- Build-Operate-Transfer contracts with NAPOCOR/PSALM
Why this matters
Independent Power Producers built and operate roughly 1,085 megawatts of capacity under contracts where NAPOCOR and PSALM effectively absorb real property tax costs. When LGUs assessed these taxes at the maximum 80% rate, it threatened to trigger large government liabilities, cross-defaults, and possible plant shutdowns that could mean rotating power outages.
The legal frame
Section 277 of the Local Government Code lets the President condone or reduce real property tax when public interest requires it. EO 106 reduces CY 2025 RPT liabilities on affected IPP facilities to a rate based on a 15% assessment level (instead of up to 80%), condones related interest and penalties, and directs DILG to monitor LGU compliance.
Who this affects
LGUs hosting IPP power plants, NAPOCOR/PSALM, and IPP operators under BOT or similar power-purchase arrangements should check the DOF's implementing guidance on computing the reduced RPT amount and any refund or credit for amounts already paid above the reduced level.
Practical discussion points
Readers can ask PHLaw.AI what Section 277 of the Local Government Code allows and how RPT condonation differs from RPT exemption.
Ask PHLaw.AI
Try: "What is the difference between real property tax condonation and exemption under the Local Government Code?"