Real Property Tax Disputes: Why Payment Under Protest Is a Mandatory First Step

The Supreme Court's 2016 ruling in National Power Corporation v. Provincial Treasurer of Benguet (G.R. No. 209303) settles a critical procedural question for property owners challenging real property tax assessments: can a taxpayer appeal an assessment without first paying the tax under protest? The answer is a firm no. This decision reinforces that payment under protest, as required by Section 252 of the Local Government Code, is a mandatory condition before any appeal can be entertained—even when the taxpayer claims the property is tax-exempt.

The Facts of the Case

The National Power Corporation (NPC), a government-owned corporation operating the Binga Hydro-Electric Power Plant in Itogon, Benguet, received a real property tax assessment of P62,645,668.80 in May 2000. In 2006, the Provincial Treasurer demanded payment of the delinquency. NPC challenged the assessment before the Local Board of Assessment Appeals (LBAA), arguing that its properties were exempt from real property tax under Sections 234(b) and (c) of the Local Government Code.

The LBAA ordered NPC to pay the assessed amount under protest or post a surety bond before proceedings could continue. NPC refused, claiming that payment under protest was only required when questioning the reasonableness of an assessment, not when challenging the assessor's authority to tax exempt properties. The case eventually reached the Court of Tax Appeals En Banc, which denied NPC's appeal. The Supreme Court affirmed.

The Issue

The central question was whether NPC could appeal the assessment to the LBAA without first paying the real property tax under protest, given its claim that the properties were tax-exempt.

The Ruling: Payment Under Protest Is Mandatory

The Supreme Court ruled against NPC, holding that a claim for tax exemption does not question the assessor's authority but rather the reasonableness or correctness of the assessment—a question of fact that must first be resolved by the LBAA. Under Section 252 of the Local Government Code, no protest shall be entertained unless the taxpayer first pays the tax, with the payment annotated on the tax receipt. The written protest must be filed within 30 days from payment.

The Court cited Section 206 of the Local Government Code, which requires any person claiming tax exemption to file sufficient documentary evidence with the assessor within 30 days from the declaration of the property. If the property is not dropped from the assessment roll, taxes must be paid under protest if exemption is insisted upon. NPC failed to file its exemption requests within the required period and did not submit supporting documents, so its properties remained on the assessment roll.

Timeliness of Appeals: The Fresh Period Rule Does Not Apply

The Court also addressed NPC's late appeal. NPC filed a motion for reconsideration with the LBAA, then appealed to the Central Board of Assessment Appeals (CBAA) beyond the 30-day period. NPC argued that the "fresh period rule" from Neypes v. Court of Appeals should apply, giving it a fresh 30 days from the denial of its motion.

The Supreme Court rejected this argument. The fresh period rule applies only to judicial appeals under the Rules of Court, not to administrative appeals like those from the LBAA to the CBAA. NPC had only the remaining days of the original appeal period after its motion for reconsideration was denied—and it missed that deadline.

Practical Takeaways

• Pay first, protest later. Before appealing a real property tax assessment, pay the tax under protest and ensure the receipt is annotated accordingly. This is a mandatory requirement under Section 252 of the Local Government Code.
• Claiming tax exemption does not excuse payment. A claim of exemption is treated as a question of the assessment's correctness, not a challenge to the assessor's authority. The tax must still be paid under protest.
• File exemption evidence promptly. Under Section 206 of the Local Government Code, documentary proof of exemption must be filed with the assessor within 30 days from the property's declaration. Failure to do so keeps the property on the assessment roll.
• Watch appeal deadlines carefully. The fresh period rule does not apply to administrative appeals. A motion for reconsideration does not suspend the running of the appeal period before the CBAA.
• Consider a surety bond. The LBAA rules allow a taxpayer to post a surety bond covering the assessed taxes as an alternative to payment under protest, subject to conditions.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.