High Court questions yeshiva tax-benefits petition after state policy change

The High Court of Justice questioned on Monday whether there was any need to continue hearing a petition challenging tax benefits for donations to yeshivot attended by draft-eligible students who have not regularized their military status, after the state accepted the petitioners’ central legal argument and began implementing it.

Following a hearing lasting approximately one hour, Justices Dafna Barak-Erez, Gila Canfy-Steinitz, and Ruth Ronnen said they would issue a decision at a later date on whether the proceedings should continue.

Israel Hofsheet argues that the benefit amounts to indirect public funding and therefore cannot continue, after the High Court ruled in June 2024 that the state lacked authority to fund yeshivas in respect of students legally required to enlist.

At Monday’s hearing, Barak-Erez pointed to Attorney-General Gali Baharav-Miara’s adoption of the petitioners’ position.

“Why, at this time, has the petition not exhausted itself?” she asked. “The question is not whether we have reached an ideal state, but whether at this time there remains anything to discuss.”

Attorney Hagai Kalai, representing Israel Hofsheet alongside attorney Gal Barir, replied that the petition had effectively been accepted, since the state now agreed that the institutions could not receive such indirect support.

A representative of the attorney-general told the court that, in light of its rulings, the state was not authorized to finance draft-eligible students who had not regularized their status, and was required to take all available steps to prevent such funding.

“You are essentially accepting the principled position presented by the petitioners?” Barak-Erez asked, noting that the answer also affected the procedural question of whether the case should continue.

The state representative said that although the tax benefit was formally granted to donors, it nevertheless constituted indirect support by the state.

“According to our position, there is no authority to provide such support,” she said. “The court ruled that the state is not authorized to continue supporting draft-eligible students who have not regularized their status.”

The information will be checked against military records, after which the Tax Authority will determine each institution’s continued eligibility based on whether draft-eligible students enrolled there have regularized their status.

Smotrich opposed broadly revoking existing approvals because of the military status of students enrolled at the institutions, according to the state’s position submitted ahead of the hearing.

Israel Hofsheet argued that maintaining Section 46 recognition for those institutions would replace prohibited direct funding with an indirect subsidy delivered through the tax system.

The movement further argued that an institution facilitating continued evasion of legally required military service could not be considered a public institution entitled to the benefit and that maintaining its recognition would contradict the rule of law and public policy.

Following the hearing, the movement said the state’s adoption of its legal position and the beginning of its implementation represented a significant public and legal achievement.

“The hearing today illustrated what truly matters: The legal position we presented in the petition was accepted by the state,” Israel Hofsheet said.

It said the remaining question was whether continued judicial proceedings were needed to ensure that the policy was implemented, or whether the court could rely on the state’s assertion that it was already acting in accordance with the principles set out in the petition.

“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,” Israel Hofsheet CEO Uri Keidar said.