13. NATIONAL FEDERATION OF INDEPENDENT BUSINESS (NFIB) VS.

SEBELIUS

567 US 512 (20120

FACTS:

The Patient Protection and Affordable Care Act, also known as the Affordable Care Act (ACA)
or Obamacare, was enacted with the primary aim of expanding health insurance coverage to
more people. To that end, the law required most individuals to acquire and maintain minimum
health coverage or be penalized. It also required states to expand eligibility for their Medicaid
programs to all individuals with incomes up to 138 percent of the federal poverty level. If the
state refused to expand, the law said that the federal government could completely withhold its
portion of Medicaid funding from the state.

Less than two months after enactment, it was challenged by several States as well as individual.

The lawsuit challenged the Affordable Care Act on the grounds that the individual health
insurance mandate exceeded Congress' authority to regulate interstate commerce under the
Commerce Clause of Article I and did not fall within its power to tax. The complaint further
alleged that the act violated the Tenth Amendment by compelling states to follow federal
regulations

ISSUE:

Whether or not the Affordable Care Act is Constitutional?

RULING:

The Court upheld the Affordable Care Act's individual mandate as a legitimate exercise of
Congress' Article I power to lay and collect taxes, concluding that the penalty is a tax. Chief
Justice John Roberts wrote, "The court today holds that our Constitution protects us from federal
regulation under the Commerce Clause so long as we abstain from the regulated activity. But
from its creation, the Constitution has made no such promise with respect to taxes." The court
held, however, that Congress did not have such authority under the Commerce Clause.

The court also concluded that, by cutting off all Medicaid funding to states that refused to
expand the program, the federal government was engaging in coercion. The court stated that the
law transformed the original Medicaid program into "an element of a comprehensive national
plan to provide universal health insurance coverage." However, it upheld the Medicaid
expansion provision otherwise, effectively making the expansion voluntary on the part of the
states.
 19. PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES, INC. vs.
MUNICIPALITY OF TANAUAN, LEYTE, THE MUNICIPAL MAYOR, ET AL.

G.R. No. L-31156 February 27, 1976

FACTS:
The Municipality of Tanauan enacted two ordinances:

1. Municipal Ordinance No. 23, of Tanauan, Leyte, which was approved on September 25,
1962, levies and collects "from soft drinks producers and manufacturers a tai of one-
sixteenth (1/16) of a centavo for every bottle of soft drink corked."

2. On the other hand, Municipal Ordinance No. 27, which was approved on October 28,
1962, levies and collects "on soft drinks produced or manufactured within the territorial
jurisdiction of this municipality a tax of ONE CENTAVO (P0.01) on each gallon (128
fluid ounces, U.S.) of volume capacity.

The tax imposed in both Ordinances Nos. 23 and 27 is denominated as "municipal production
tax.'

On February 14, 1963, the plaintiff-appellant, Pepsi-Cola Bottling Company of the Philippines,
Inc., commenced a complaint with preliminary injunction before the Court of First Instance of
Leyte for that court to declare Section 2 of Republic Act No. 2264 otherwise known as the Local
Autonomy Act, unconstitutional as an undue delegation of taxing authority as well as to declare
Ordinances Nos. 23 and 27, series of 1962, of the municipality of Tanauan, Leyte, null and void.

ISSUE:
Whether or not the ordinances are Constitutionally valid?

RULING:
Yes.
Taxing power is inherently legislative; non-delegated taxing power of the LGU
The power of taxation is an essential and inherent attribute of sovereignty, belonging as a matter
of right to every independent government, without being expressly conferred by the people. It is
a power that is purely legislative and which the central legislative body cannot delegate either to
the executive or judicial department of the government without infringing upon the theory of
separation of powers. The exception, however, lies in the case of municipal corporations, to
which, said theory does not apply. Legislative powers may be delegated to local governments in
respect of matters of local concern. This is sanctioned by immemorial practice. By necessary
implication, the legislative power to create political corporations for purposes of local self-
government carries with it the power to confer on such local governmental agencies the power to
tax.
Under the New Constitution, local governments are granted the autonomous authority to create
their own sources of revenue and to levy taxes. Section 5, Article XI provides: "Each local
government unit shall have the power to create its sources of revenue and to levy taxes, subject
to such limitations as may be provided by law." Withal, it cannot be said that Section 2 of
Republic Act No. 2264 emanated from beyond the sphere of the legislative power to enact and
vest in local governments the power of local taxation.
Validity of the Ordinances
Undoubtedly, the taxing authority conferred on local governments under Section 2, Republic Act
No. 2264, is broad enough as to extend to almost "everything, accepting those which are
mentioned therein." As long as the text levied under the authority of a city or municipal
ordinance is not within the exceptions and limitations in the law.
An increase in the tax alone would not support the claim that the tax is oppressive, unjust and
confiscatory. Municipal corporations are allowed much discretion in determining the rates of
imposable taxes. This is in line with the constitutional policy of according the widest possible
autonomy to local governments in matters of local taxation, an aspect that is given expression in
the Local Tax Code (PD No. 231, July 1, 1973). Unless the amount is so excessive as to be
prohibitive, courts will go slow in writing off an ordinance as unreasonable. Reluctance should
not deter compliance with an ordinance such as Ordinance No. 27 if the purpose of the law to
further strengthen local autonomy were to be realized.
 25. MANILA INTERNATIONAL AIRPORT AUTHORITY vs. CITY OF PASAY

G.R. No. 163072 April 2, 2009

FACTS:

Petitioner MIAA operates and administers the NAIA Complex under EO 903, otherwise known
as the Revised Charter of the Manila International Airport Authority - was issued on 21 July
1983 by then President Ferdinand E. Marcos

Under Sections 31 and 222 of EO 903, approximately 600 hectares of land, including the
runways, the airport tower, and other airport buildings, were transferred to MIAA. The NAIA
Complex is located along the border between Pasay City and Paranaque City.

MIAA received Final Notices of Real Property Tax Delinquency from the City of Pasay for the
taxable years 1992 to 2001. MIAAs real property tax delinquency for its real properties located
in NAIA Complex, Ninoy Aquino Avenue, Pasay City (NAIA Pasay properties)

On 24 August 2001, the City of Pasay, through its City Treasurer, issued notices of levy and
warrants of levy for the NAIA Pasay properties.

ISSUE:
Whether the NAIA Pasay properties of MIAA are exempt from real property tax

RULING:
MIAA is not exempt from paying real property tax.

The Court of Appeals held that as a government-owned corporation, MIAAs tax exemption
under Section 21 of EO 903 has already been withdrawn upon the effectivity of the Local
Government Code in 1992.
In Manila International Airport Authority v. Court of Appeals (2006 MIAA case), this Court
already resolved the issue of whether the airport lands and buildings of MIAA are exempt from
tax under existing laws. The 2006 MIAA case originated from a petition for prohibition and
injunction which MIAA filed with the Court of Appeals, seeking to restrain the City of Paraaque
from imposing real property tax on, levying against, and auctioning for public sale the airport
lands and buildings located in Paraaque City. The only difference between the 2006 MIAA case
and this case is that the 2006 MIAA case involved airport lands and buildings located in
Paranaque City while this case involved airport lands and buildings located in Pasay City. The
2006 MIAA case and this case raised the same threshold issue: whether the local government can
impose real property tax on the airport lands, consisting mostly of the runways, as well as the
airport buildings, of MIAA.
The airport lands and buildings of MIAA are properties of public dominion intended for public
use, and as such are exempt from real property tax under Section 234(a) of the Local
Government Code. However, under the same provision, if MIAA leases its real property to a
taxable person, the specific property leased becomes subject to real property tax. In this case,
only those portions of the NAIA Pasay properties which are leased to taxable persons like private
parties are subject to real property tax by the City of Pasay.
 31. COMMISSIONER OF INTERNAL REVENUE (CIR) VS. THE COURT OF
APPEALS AND FURTUNE TOBACCO
G.R. No. 119761. August 29, 1996
FACTS:

Fortune Tobacco is engaged in the manufacture of different brands of cigarettes. On various

dates, the Philippine Patent Office issued to the corporation separate certificates of trademark
registration over "Champion," "Hope," and "More" cigarettes. In a letter From the CIR was sent
to Fortune Tabacco which states that - "the initial position of the Commission was to classify
'Champion,' 'Hope,' and 'More' as foreign brands since they were listed in the World Tobacco
Directory as belonging to foreign companies. However, Fortune Tobacco changed the names of
'Hope' to 'Hope Luxury' and 'More' to 'Premium More,' thereby removing the said brands from
the foreign brand category.
A 45% Ad Valorem taxes were imposed on these brands

RA No. 7654 was enacted - 55% for locally manufactured foreign brand while 45% for locally
manufactured brands. 2 days after the effectivity the BIR issued RMC 37-93, BIR Deputy
Commissioner sent via telefax a copy of RMC 37-93 to Fortune Tobacco but it was addressed to
no one in particular - since there is no showing who the real owner/s are of Champion, Hope and
More, it follows that the same shall be considered locally manufactured foreign brand for
purposes of determining the ad valorem tax.

Fortune Tobacco received, by ordinary mail, a certified xerox copy of RMC 37-93.

In a letter addressed to the appellate division of the BIR, Fortune Tobacco requested for a
review, reconsideration and recall of RMC 37-93.

ISSUE:
Whether or not the RMC is constitutional?
RULING:
Yes.
In fine, petitioner opines that RMC 37-93 is merely an interpretative ruling of the BIR which can
thus become effective without any prior need for notice and hearing nor publication, and that its
issuance is not discriminatory since it would apply under similar circumstances to all locally
manufactured cigarettes.
A legislative rule is in the nature of subordinate legislation, designed to implement a primary
legislation by providing the details thereof. In the same way that laws must have the benefit of
public hearing, it is generally required that before a legislative rule is adopted there must be
hearing.
It should be understandable that when an administrative rule is merely interpretative in nature, its
applicability needs nothing further than its bare issuance for it gives no real consequence more
than what the law itself has already prescribed. When, upon the other hand, the administrative
rule goes beyond merely providing for the means that can facilitate or render least cumbersome
the implementation of the law but substantially adds to or increases the burden of those
governed, it behooves the agency to accord at least to those directly affected a chance to be
heard, and thereafter to be duly informed, before that new issuance is given the force and effect
of law.
A reading of RMC 37-93, particularly considering the circumstances under which it has been
issued, convinces us that the circular cannot be viewed simply as a corrective measure or merely
as construing Section 142(c)(1) of the NIRC, as amended, but has, in fact and most importantly,
been made in order to place "Hope Luxury," "Premium More" and "Champion" within the
classification of locally manufactured cigarettes bearing foreign brands and to thereby have them
covered by RA 7654.
Specifically, the new law would have its amendatory provisions applied to locally manufactured
cigarettes which at the time of its effectivity were not so classified as bearing foreign brands.
Prior to the issuance of the questioned circular, "Hope Luxury," "Premium More," and
"Champion" cigarettes were in the category of locally manufactured cigarettes not bearing
foreign brand subject to 45% ad valorem tax.
Hence, without RMC 37-93, the enactment of RA 7654, would have had no new tax rate
consequence on private respondent's products. Evidently, in order to place "Hope Luxury,"
"Premium More," and "Champion" cigarettes within the scope of the amendatory law and subject
them to an increased tax rate, the now disputed RMC 37-93 had to be issued. In so doing, the
BIR not simply intrepreted the law; verily, it legislated under its quasi-legislative authority. The
due observance of the requirements of notice, of hearing, and of publication should not have
been then ignored.
Uniformity of taxation

RMC 37-93 would only apply to "Hope Luxury," "Premium More" and "Champion" cigarettes
and, unless petitioner would be willing to concede to the submission of private respondent that
the circular should, as in fact my esteemed colleague Mr. Justice Bellosillo so expresses in his
separate opinion, be considered adjudicatory in nature and thus violative of due process
following the Ang Tibay doctrine, the measure suffers from lack of uniformity of taxation. In its
decision, the CTA has keenly noted that other cigarettes bearing foreign brands have not been
similarly included within the scope of the circular.