The Ministry of Justice published this evening (Sunday) the summary of the third hearing, which was held under the chairmanship of Attorney Gali Baharav of Yara, on the implementation of High Court rulings on enforcing the recruitment of yeshiva students into the IDF.
The document indicates that Rabbi Meara is going to revoke tax benefits from institutions where conscripts who have not settled their status with the IDF study, and to create an extensive oversight mechanism for yeshivahs and kollels.
In the case of the IRS, Meara gave the Tax Authority only one week to begin preventing the Section 46 tax benefit.
According to the decision, the Tax Authority will publish an official public notice in the coming days regarding the change in policy regarding Section 46 of the Income Tax Ordinance, which grants a tax credit to donors to recognized non-profit organizations.
Under the new policy, Torah institutions seeking to receive or renew approval will be required to submit a signed affidavit from the head of the institution, confirming that all students have settled their status with the military authorities.
In addition, the institutions will be required to transfer student information, including ID card numbers, to the Tax Authority for cross-checking with IDF data.
The document reveals that the state is launching an integrated digital database that will centralize information from the Corporations Authority, the Ministry of Education, and the Tax Authority, with the aim of locating institutions where conscripts are studying.
Nonprofit organizations that already hold approval under Section 46 will also be required to submit the new documents and declarations as a condition for their continued eligibility for the tax benefit.
It was also determined that an inter-ministerial committee will be established, headed by the Deputy Legal Advisor to the Prime Minister, whose role is to prevent attempts to circumvent the new restrictions through alternative funding channels.
The document also cites the High Court's ruling that "creating bypass financing channels is contrary to the provisions of the ruling," and accordingly, supervision and control procedures will be formulated that will include ongoing cross-checking of information between state authorities.
Section 46 of the Income Tax Ordinance is one of the most significant tools for encouraging philanthropy in Israel, and it constitutes an economic oxygen pipeline for non-profit organizations and public institutions. The mechanism works through a tax credit method: when an individual or corporation donates money to an institution that has received official approval from the state, they are entitled to receive back from the state 35% of the total donation as a credit from the income tax they owe, while for companies the credit is equal to the amount of corporate tax.
Without Article 46, large donors may avoid transferring funds, as the donation becomes much more expensive for them.
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