Israel Threatens Legislation to Force JNF to Pay 80 Percent of Income to the State

Dispute between Jewish National Fund and Israeli government intensifies after JNF board reneges on deal to transfer two billion shekels to the state

Land restored by JNF following a forest fire in west Jerusalem.
Hanoch Zurf

Amid continuing tensions over the government’s demand that the Jewish National Fund contribute to the state’s coffers or forfeit its special tax-exempt status, the JNF announced Tuesday that it was rescinding its agreement for joint management of its land with the state-run Israel Land Authority.

The move followed a cabinet vote Tuesday in support of a bill that would require the JNF – the nonprofit also known as Keren Kayemeth LeIsrael – to transfer 80% of the income it receives from the improvement of land to the state.

The legislation was hastily drafted after JNF’s board voted Monday not to proceed with an agreement that had been ironed out two weeks earlier by Finance Ministry Director General Shai Babad and JNF Chairman Danny Atar on the sidelines of a Knesset Finance Committee meeting.

That deal would have seen the JNF transfer 1 billion shekels ($284 million) this year and another 1 billion next year for national infrastructure projects. Instead, the JNF board voted to make just one transfer, next year, of 1 billion shekels.

JNF, which owns 13% of Israeli land, is currently exempt from paying tax on the income it receives from the ILA on improvements to JNF land.

The Knesset finance panel is set to consider the legislation on Wednesday. Habayit Hayehudi, which is part of Prime Minister Benjamin Netanyahu’s governing coalition, opposes the bill and is threatening a filibuster against the proposed legislation, along with opposition MKs on the committee.

Behind the scenes, efforts are underway to reach a compromise with the JNF, which was founded in 1901 to acquire and develop land on behalf of the Jewish people in what was then Ottoman Palestine.

Since the establishment of the State of Israel in 1948, it has continued its work with afforestation, the development of recreation areas and ecology projects, among others. It has independent fundraising affiliates in a number of Western countries, which raise money to support projects in Israel.

One possible compromise under discussion for the bill would involve coming to agreement on a specific annual sum the JNF would pay to the state in the coming years, rather than 80% of its income on land improvement.

Another alternative would be to levy a tax on the income. As it currently stands, the proposed bill gives the organization the option of paying tax on income from the improvements.