More On the New Tax Directive Threatening Yeshiva Donations as Israeli Authorities Tighten Rules Over Draft Status
Israel’s Tax Authority has begun implementing a new policy that could significantly impact the finances of dozens of yeshivos and Torah institutions by conditioning valuable tax benefits on the military status of their talmidim, as reported earlier tonight here on Matzav.
In letters sent late last week to numerous institutions, the Tax Authority instructed roshei yeshivah, administrators, and authorized signatories to certify that none of their students are eligible for military service without having properly resolved their status with the military. Institutions that decline to make the declaration risk losing eligibility for Section 46 tax benefits, a key incentive for charitable donations.
The directive follows a decision issued at the end of May by Attorney General Gali Baharav-Miara ordering an immediate halt to tax benefits for donations made to chareidi institutions that enroll students who are subject to military service but have not regularized their draft status.
Section 46 of Israel’s Income Tax Ordinance allows donors to approved nonprofit organizations to receive tax credits on their contributions, making it one of the most important tools available to charitable organizations for fundraising.
In its letter, the Tax Authority wrote that, under current Israeli law and in accordance with rulings of the Supreme Court, “as a general rule, it is not permissible to continue granting benefits that directly or indirectly facilitate evasion of military service, including benefits provided to a yeshiva student in that capacity when his attendance at the institution constitutes avoidance of military service. The state has no authority to encourage draft evasion through public funding.”
The letter further stated that, following consultations led by the attorney general and involving legal and professional officials, it was determined that “under the law and applicable court rulings, it is not permissible to provide indirect state funding—including tax credits for charitable donations—to Torah institutions attended by students who have not regularized their status with the military authorities.”
Under the new requirements, every Torah institution—or organization supporting one—that holds Section 46 approval must submit a signed declaration from an authorized board member affirming that, as of the date of the declaration, none of its students are subject to military service without having lawfully resolved their status, and that the institution will not admit such students in the future.
Institutions are also required to submit a complete list of enrolled students for the relevant academic year, including each student’s name and identification number, in an Excel spreadsheet. The Tax Authority warned that institutions failing to submit both the declaration and the student list could lose their Section 46 approval.
At the same time, Keren Olam HaTorah, the organization established to help yeshivos and kollelim offset government funding cuts, has been working to develop alternative methods of supporting institutions affected by the new policy.
As previously reported, the fund recently informed roshei yeshivah that, after consulting with accountants and legal experts specializing in nonprofit and tax law, institutions that—based on individualized legal advice—choose not to include certain students on the lists submitted to the authorities will not automatically lose the fund’s financial support.
In a letter sent to participating institutions, the fund explained that even schools choosing “to continue omitting those students from the reported lists—while recognizing that this should not be done in every case” would remain eligible for assistance, with the fund exploring alternative methods of distributing financial support.
Keren Olam HaTorah emphasized that it is not instructing or recommending any particular course of action. Rather, it said its goal is to provide institutions with practical options for navigating the legal challenges created by the attorney general’s directive.
The new policy comes amid ongoing debate among legal advisers and accountants serving chareidi institutions over how best to respond to the government’s requirements and represents the first organized effort to develop a broad strategy for protecting financial support for the yeshivah world in light of the new restrictions.
{Matzav.com}
