Appeals Committee Rules on Levying Interest on Betterment Levy
An appeals committee has ruled that "legal interest" on a betterment levy is the same as regular default interest and can be reduced, potentially to zero. The decision came after Delta Construction, Renovation, and Entrepreneurship disputed a charge from the Bat Yam Local Planning and Building Committee regarding a property.
The core issue was whether the appeals committee's authority to reduce default payments extended to a component the local committee termed "legal interest." The appeals committee, led by Adv. Helel Galcop, determined that there is no distinction between the two and both can be reduced. The original betterment levy was assessed at approximately NIS 1.01 million as of June 11, 2019. Delta paid about NIS 1.1 million, including linkage differentials, by May 2023, with no outstanding balance acknowledged.
However, a subsequent determination by an appointed appraiser, Evelyn Davidson, raised the levy to approximately NIS 1.08 million, a difference of about NIS 69,000. This decision was issued on September 16, 2024. For over a year and nine months, the local committee failed to issue an updated payment demand. When a new calculation finally arrived on July 7 of this year, the outstanding balance had ballooned to over NIS 140,000, primarily due to accrued interest.
Delta requested the cancellation of interest charges. The local committee removed the default interest component but retained the "legal interest" portion, reducing the balance to about NIS 90,148. The committee argued that the authority to reduce payments under Section 16 of the law applied only to "punitive" default interest, not this other component.
The appeals committee rejected this argument, stating that the legal basis for interest on betterment levies stems from Section 15 of the Third Addendum to the Planning and Building Law, which applies linkage differentials without distinguishing between interest types. The committee emphasized that the name given to the interest component does not change its nature as part of default payments subject to reduction under Section 16. The committee also dismissed a claim that full reduction was not permissible, citing the law's intent to ease burdens on taxpayers affected by lengthy proceedings.
Considering the circumstances, including Delta's full payment of the initially assessed amount and the local committee's significant delay in issuing an updated demand, the appeals committee fully granted Delta's request. All interest components were canceled as of May 4, 2023, with the balance now only subject to linkage differentials. The local committee must issue a revised demand, and Delta will have 30 days to pay without any interest. If payment is not made within that period, regular, non-punitive interest will apply until the final resolution of the appeal.
