Full Breakdown
Israeli Court Weighs End of Tax Benefits for Yeshivas Enrolling Draft-Evasive Students
7/13/2026, 8:28:25 PM
Core Legal Challenge
On a Monday hearing, the High Court of Justice examined a petition filed by the Hofshit BeYisrael (“Free Israel”) movement seeking to revoke the tax-credit benefits granted to donors of yeshiva schools that enroll students required to serve in the Israel Defense Forces but who have not regularized their military status. The petition targets the Section 46 recognition under the Income Tax Ordinance, which currently allows donors to claim credits for contributions to institutions deemed “public.” Petitioners argue that such benefits constitute indirect public funding for schools that facilitate draft evasion. The case is directed against the Finance Ministry and Finance Minister Bezalel Smotrich.
Background & Context
In June 2024 the High Court ruled that the state may not fund yeshivas on behalf of draft-eligible students, establishing that direct financing is prohibited. The current dispute extends that principle to the tax-credit system, asserting that the state’s indirect support through donor incentives must also cease. The Finance Ministry has maintained that a blanket revocation lacks legal basis, while the Attorney General has instructed the Israel Tax Authority to develop a mechanism for identifying affected institutions.
Key Figures & Groups
- Hofshit BeYisrael (Free Israel), an NGO founded in 2009 advocating religious freedom and civil rights, filed the petition.
- Dr. Haggai Kalai and Gal Barir, attorneys representing the petitioners.
- Gali Baharav-Miara, Attorney General, who supports the petition and ordered the Tax Authority to act.
- Bezalel Smotrich, Finance Minister, who opposes a broad revocation of existing approvals.
- Moshe Gafni, Knesset Finance Committee Chairman, advancing legislation to protect nonprofit tax-exempt status.
- Justices Dafna Barak-Erez, Gila Canfy-Steinitz, and Ruth Ronnen, presiding over the hearing.
Data & Statistics
The petition cites that tax credits for donations to just four yeshivas cost the state more than 24 million shekels in 2023.
Official Statements & Responses
Attorney General Baharav-Miara asserted that “tax benefits should no longer be granted for donations to yeshivas attended by draft-eligible students who have not resolved their status with the IDF,” directing the Tax Authority to cross-reference student records with military data. The Finance Ministry’s response emphasized the absence of a legal foundation for a blanket revocation, while Minister Smotrich warned that revoking existing approvals could harm hundreds of nonprofit organizations. The court’s justices questioned whether the petition remains necessary now that the state has adopted the petitioners’ position.
Criticism & Opposition
MK Moshe Gafni introduced a measure aimed at preventing the loss of tax-exempt status for numerous nonprofits, arguing that the Attorney General’s directive could have unintended repercussions. Minister Smotrich similarly cautioned against a sweeping policy change, citing potential damage to the nonprofit sector.
Conflicting Reports & Gaps
All sources agree on the 24 million-shekel figure and the Attorney General’s directive. However, the Finance Ministry and Minister Smotrich dispute whether a blanket revocation is legally justified, leaving the precise scope of future policy unclear.
Verbatim Quotes
- “The petitioners argue that the benefits constitute indirect public funding for institutions that facilitate draft evasion, while the Finance Ministry maintains that there is no basis for a blanket revocation of the benefits.” — Finance Ministry representative
- “Why, at this time, has the petition not exhausted itself?” — Justice Dafna Barak-Erez
- “You are essentially accepting the principled position presented by the petitioners?” — Justice Dafna Barak-Erez
- “According to our position, there is no authority to provide such support,” — State representative to the court
- “We were pleased to see that our position was accepted and that there is no longer any question regarding what should have been clear from the outset,” — Uri Keidar, CEO, Israel Hofsheet
What’s Next
The Israel Tax Authority is now requiring yeshivas seeking Section 46 recognition to submit declarations about the military status of their students. These declarations will be cross-checked with IDF records to determine continued eligibility for donor tax credits. The High Court will later decide whether further proceedings are needed to ensure implementation of the new policy.
