Getting an Exemption from Arnona for Synagogues
Did you know that synagogues are exempt from paying municipal taxes?
Getting an exemption from Arnona for synagogues saves a lot of money for worshipers and managers. Synagoague management involves expenses that are usually financed by visitors to the synagogue. Many are unaware that it is possible to receive a full exemption from municipal property taxes (called in Hebrew Arnona) for the parts of the property that serve as a synagogue. In addition, it is also possible to obtain an exemption from Arnona rates for the parts of the property that are used by those praying at the synagogue, or that are required for prayers to take place. Our Israeli law firm in Jerusalem and Tel Aviv, specializes in obtaining exemptions and discounts for municipal taxes. This article by Michael Decker explains what are the conditions and requirements of obtaining an exemption from property tax for your synagogue.
What are the conditions for receiving an exemption from Arnona for synagogues?
There are many possibilities for a person looking for a place to pray in Israel. You can go to the neighborhood synagogue, a Beit Midrash, a “Shtiblach” where a new prayer meeting begins every minute, a minyan that convenes in the neighbor’s house and even a weekly minyan on Saturday night. At the same time, it is important to know that with regard to the exemption from Arnona, only some of the places where people gather to pray will be exempt from municipal taxes. According to Amendment No. 17 to the Towns and Government Taxes (Termination) Ordinance, 2017, the property must meet several conditions in order to receive an exemption from Arnona for synagogues:
The property must be mainly used for prayer
The first condition is; that prayer is the main use of the property or part of the property that receives an exemption from municipal taxes. If there is no part of the property the main use of which is for prayer, then of course there is no possibility of receiving any exemption from Arnona for synagogues. For the part that is used mainly for prayer, it is possible to receive a full exemption from municipal taxes. Thus, for example, the prayer hall in a neighborhood synagogue whose only use is to hold a prayer is entitled to a full exemption from Arnona. On the other hand, if someone occasionally performs the evening prayer on Saturday in his yard, the courtyard will not be exempt from municipal taxes.
The accompanying activity must be Torah study or derive from the “character” of the synagogue
The second condition of receiving an exemption from Arnona for synagogues, or part of it, is that any additional use of this part of the property receiving the exemption will only be for the purpose of Torah study, or activities stemming from the nature of the property as a synagogue. If the additional use is not related to the nature of the property as a synagogue, then although the main use of this part of the property is prayer and the secondary use is for other activities, that part of the property will not be entitled to an exemption from municipal taxes.
For example, if the main use of a certain part of the property is the holding of prayers and the secondary use is preparing children for bar mitzvahs or Torah lessons, that part of the property will be exempt from municipal property tax.
On the other hand, if the secondary use in the same case involved Bnei Akiva activities or non-Torah related education, then it is reasonable to assume that this part of the property will not receive full exemption from municipal taxes.
Arnona exemption for parts of the property used by worshipers
In addition to those parts of the property whose primary use is prayer, and any secondary use is for Torah study or activity stemming from the nature of the place as a synagogue, it is possible to receive an exemption from property tax for the other parts of the property that are essential for the observance of the prayer.
For example, prayer cannot exist without a number of basic conditions; such as toilets, stairwells, elevators, passages and corridors, a place to store chairs and holy books and even a kitchen used by the synagogue. We should also note that it is possible to obtain exemptions for other parts of the property used by worshipers such as the Rabbi’s office and the synagogue parking lot.
Lack of business activity is a condition for the exemption from Arnona for synagogues.
Even if the main use of the property is prayer, if the secondary use is business activity, it is not possible to obtain an exemption from Arnona for this property, or any of its parts. Even if business activity takes place only in a part of the property, none of the adjacent parts may receive an exemption. There is no precise definition of business activity, but it should be noted that non-profit activity can be considered as a business activity in terms of limiting the exemption from Arnona for a synagogue.
For example,if a synagogue also functions as the headquarters of a charity Amuta, it is possible that the non-profit associations activity will be considered a “business activity”, provided the financial turnover is large enough. In that case, the synagogue, including those parts of the property essential to the observance of prayer, will not receive an exemption from municipal rates.
In the event that the secondary use is a business activity, is it impossible to receive an exemption?
If there is no possibility of distinguishing between the part where business activity takes place and the part where prayer takes place, it is not possible to receive an exemption for the portion of the prayer.
However, if it is possible to separate them, it is possible to obtain a full exemption for the part used primarily for prayer and for the parts essential to the existence of prayer and study.
Is a Beit Midrash considered a synagogue?
There is one exception to the conditions mentioned above, which is a Beit Midrash. Assuming the main use of the Beit Midrash is Torah study and the only other use is for regular prayer services and the property even has a Torah Ark, the Beit Midrash can be considered a synagogue for the purpose of receiving an exemption from Arnona for a synagogue. For example, it is possible that the main hall of the yeshiva where the students pray three prayers a day or the room in the kollel where they mainly study but also regularly use for prayer will be exempt from municipal taxes.
Is raising money for a synagogue considered a business activity?
As we mentioned earlier, there is no precise definition of business activity, but it is reasonable to assume that when it comes to limited or occasional fundraising the activity may be seen as essential for prayer and not as a business activity.
For example, it is reasonable to assume that selling prayer activity space and Mitzvahs in the synagogue or the packing activity of mishloach manot (Purim Gifts) to raise funds for the synagogue will not be considered business activity.
On the other hand, it is possible that a synagogue that rents its own kitchen and the banquet hall for weddings, Sabbaths or Bar / Bat Mitzvahs will be considered to conduct business activities in that part property, and therefore this part will not be exempt from Arnona.
Have you submitted an application for an exemption from Arnona for a synagogue and were rejected?
There may be a variety of reasons for rejecting the request of a synaguge for an exemption from payment of Arnona and each case must be examined on its merits. It is important to note that this decision is not the end of the matter and can be appealed. In our experience, it is often possible to change a decision made by yhe Municipality, especially if the judgment was made without considering all the relevant information.
If you have any questions regarding exemption from Arnona for synagogues, tax exemptions / discounts, or any other legal issues, please contact our offices in Tel Aviv or Jerusalem.