Arnona Exemption for a House of Prayer in Israel
An exemption from municipal taxes for places of prayer – Synagogues, churches etc.
How do you receive an an Arnona exemption for a house of prayer? If there is something more frustrating than paying taxes it’s paying taxes when you are not obliged to do so. Arnona is a type of municipal property tax imposed on residents of an Israeli local authority. It is intended to finance various services provided by the authority. But not everyone are obliged to pay Arnona rates. Our law firm has branches in Jerusalem and Tel Aviv, specializes in corporate and non-profit legal issues. Decker, Pex, Levi‘s expertise includes applying for a discount on property tax for non-profit organizations, as well as appeals and exemptions on municipal tax payment. This article by Israeli advocate Michael Decker will explain how to obtain an arnona exemption for a house of prayer (ie, an exemption from municipal taxes).
What is the basis for receiving an Arnona exemption for a house of prayer?
Sometimes, the property of a private person or community body (Non for profit organization) will be exempt from municipal tax when the property houses a type of public activity that the public wants to finance. For example, an asset or part of an asset that serves as a house of prayer is entitled to a full exemption from municipal taxes. In addition, an exemption may be granted for other parts of the property, in which there are activities that accompany the observance of the prayer, as detailed below. For these reasons, Amendment No. 17 to the Municipal and Government Taxes (Termination) Ordinance, 2017 was enacted. In order to examine whether an asset or part of the property will be exempt from municipal taxes, we must examine the nature of the use of the property.
What are the conditions for receiving an Arnona exemption for a house of prayer?
A. The main use of the property must be for prayer
The basic condition for receiving an exemption from property tax for an asset or part of an asset is that its main use is to hold prayers. If there is no part of the property whose main purpose is that of a place of prayer, it will not be possible to receive an exemption from property tax for the property or for part of the property.
B. The accompanying activity is religious studies
If there is a part of the property that is used solely for the purpose of holding prayers, that part will be totally exempt from municipal taxes. If other activities take place in the same area, we must examine whether the nature of these activities prevents the application for the exemption.
The only additional uses permitted in the place of prayer are religious studies or activities of a religious nature, which are connected to the use of the location as a prayer house. For example, when the main use of the prayer hall is prayer and the secondary use is connected to prayer, such as religious studies, the prayer hall will be entitled to an exemption from Arnona.
On the other hand, when the additional use of the prayer hall is an activity that is not that of religious study, or even of a religious nature, although the main use in the prayer hall is the observance of prayer, it will not be exempted from municipal taxes. For example, when the main use of this part of the property is prayer and the secondary use is a children’s playing area, the property will not be exempt from municipal taxes.
C. Parts of the property that are essential for the observance of prayer
In addition to the section whose main use is the existence of prayer, it is possible to receive an exemption from municipal taxes for the parts that fulfill the needs that are essential for the existence of prayer and study there. For example, the bathrooms, the foyer, the stairwells, the nursing room, and the storeroom that are used for prayer or study, which are used by the local residents, will be exempt from municipal taxes. We should also note that it is possible to obtain an exemption for a kitchen used by worshipers, the office of the spiritual leader of the house of prayer, and even a parking lot intended solely for worshipers.
D. The property containing the house of prayer should not conduct business activity
Even if the main use of the property is that of prayer, but in addition there is business activity in the property, the property will not be exempt from municipal taxes. It is difficult to define exactly what business activity is, but in any case it is important to emphasize that even non-profit activity can be considered a type of business activity. For example, a large-scale activity of a non-profit organization in a prayer house can be considered as a business activity and thus prevent the house of prayer from receiving an exemption from municipal taxes.
Is there no way to receive an exemption from municipal taxes for a house of prayer adjacent to business activity?
If it is not possible to separate the place of prayer from the part of the property used for religious study or a part in which business activity is conducted, the house of prayer will not receive an exemption from municipal taxes. However, if these parts of the house of prayer can be separated from each other, the place of prayer will be exempt from municipal taxes.
Is raising money for the house of prayer considered as a business activity in the property?
As noted above, there is no clear and uniform definition of business activity. However, as far as occasional activity or minimal fundraising is concerned, it is reasonable to assume that this will not be defined as a business activity, provided that the fundraising does not extend beyond the scope of donations to maintain the house of worship. Thus, for example, the existence of a charity box in the chapel does not appear to be a business activity, because it is a small donation to the house of prayer. It is also possible that the existence of a community event in the chapel intended to raise money for the chapel will not be considered a business activity because it is a temporary activity essential to the continued existence of the place of worship. At the same time, we reiterate that if the funds raised exceed the needs of the chapel, this fundraising may count as business activities.
I asked for an Arnona exemption for a house of prayer, and my request was rejected. What should I do?
It is important to know that this decision can be appealed. In many cases where we dealt with such decisions, they were based on a superficial and non-exhaustive review by the city inspectors who examined the property. In other cases, the decision to reject the request for an exemption from Arnona stemmed from the reluctance of the members of the appeals committee to exempt the house of worship from Arnona due to various excuses that could not withstand legal scrutiny.
If you have any questions regarding an arnona exemption for a house of prayer, please contact our law office in Tel Aviv and Jerusalem.
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