President Ferdinand R. Marcos Jr. has issued Executive Order (EO) No. 106, ordering the reduction of real property taxes (RPT) imposed on Independent Power Producers (IPPs) for Calendar Year (CY) 2025. This decisive action aims to prevent widespread financial defaults, significant economic losses, and potential disruptions to the nation’s electricity supply.
The President’s order specifically targets RPT liabilities, including special levies for the Special Education Fund, on power generation facilities of IPPs operating under a Build-Operate-Transfer (BOT) scheme or similar contracts with government-owned or -controlled corporations (GOCCs).
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RPT Reduction: All RPT liabilities for CY 2025 and all prior years through CY 2025 are reduced to an amount based on an assessment level of 15% of the fair market value of the property, machinery, and equipment. The fair market value will be further depreciated at a rate of $2\%$ per annum.
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Condonation of Penalties: All interests and penalties on the deficiency RPT liabilities of the concerned IPPs are condoned (forgiven).
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Excess Payments: Any RPT payments already made by IPPs over and above the reduced amount will be applied to their RPT liabilities for succeeding years.
The order addresses a critical conflict arising from varying interpretations of the Local Government Code (RA 7160). While GOCCs engaged in power generation enjoy preferential RPT assessment levels (10%) and exemptions on generation-related machinery, various Local Government Units (LGUs) have argued that IPPs are not entitled to the same privileges.
The concerned LGUs have assessed the IPPs at the maximum assessment level of 80% and have threatened enforcement actions, including the levy and sale of properties.
President Marcos highlighted the severe national risks of inaction:
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Fiscal Threat: A substantial portion of the RPT charged has been contractually assumed by the National Power Corporation (NAPOCOR) and the Power Sector Assets and Liabilities Management Corporation (PSALM). The Department of Finance (DOF) warned that collecting RPT at the high LGU-assessed rate would “trigger massive direct liabilities on the part of NAPOCOR/PSALM,” thereby threatening the financial stability of the government and its fiscal consolidation efforts.
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Energy Security: The affected IPPs provide an estimated grid capacity of $\mathbf{1,085}$ megawatts. The EO warns that their closure or non-operation would force the public to rely on more costly power alternatives or face rotating power outages, leading to significant economic losses across all sectors.
The President exercised his power under Section 277 of the Local Government Code, which allows the Chief Executive to condone or reduce RPT when public interest so requires.
The President has directed the Department of Interior and Local Government (DILG), in coordination with the DOF, to monitor the compliance of concerned LGUs. Furthermore, the DOF has been ordered to submit a progress report on the implementation of EO No. 106 within six months of its effectivity.
