Supreme Court Petitions Challenge Tax Benefit Revocation for Ultra-Orthodox Institutions

Two petitions were filed on Thursday with Israel's Supreme Court challenging the legality of the Attorney General Gali Baharav-Miara's directive to revoke tax benefits under Section 46 of the Income Tax Ordinance from ultra-Orthodox Torah institutions, including yeshivas and kollels, whose students are subject to military conscription. This directive is part of a broader government effort to enforce IDF enlistment among yeshiva students, following a petition by the organization "Free Israel" against Finance Minister Bezalel Smotrich, which is currently under Supreme Court review.

In July 2026, the Israel Tax Authority issued detailed guidelines conditioning the recognition of Torah institutions as public bodies eligible for tax benefits on their students' military service. The first petition was submitted by the Association of Yeshiva and Torah Institution Directors, represented by attorney Shmuel Maklev, and the second by a group of Torah donors, represented by attorney David Shuv. Respondents include Finance Minister Bezalel Smotrich, the Tax Authority, Attorney General Gali Baharav-Miara, and the Knesset Finance Committee.

The petitioners argue that the Attorney General's directive and the Tax Authority's subsequent instructions exceed legal authority and constitute an unlawful economic sanction against Torah institutions. They claim the revocation of recognition under Section 46 severely hampers these institutions' ability to raise donations, threatening their closure. Furthermore, they assert the measures violate principles of equality and property rights by discriminating against Torah institutions compared to other educational and cultural bodies. The petitioners contend that the Tax Authority is unlawfully expanding its powers to bypass proper legislative processes and impose political and social objectives through tax policy.

The petitions request the Supreme Court to issue a conditional order, interim injunction, and temporary order to immediately suspend the directive's implementation until a final ruling is made, aiming to prevent irreversible harm to the Torah institutions and their students.