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Jerusalem churches are selling property to developers and making millions. The city wants to collect taxes to support city services.

Jerusalem wants to tax church-owned businesses

In the United States, houses of worship do not pay tax on their facility. But when that institution crosses the line and purchases property like an office building, water park, coffee shop or other enterprise for the purpose of running a business and generating revenue, that enterprise is taxed like every other business. It’s a system that seems to work and religious institutions know when they’re crossing the line between non-profit and for-profit business. It’s pretty straight-forward.

The government of Jerusalem wants to draw similar distinctions and thinks its time for church run business enterprises to pitch in with taxes to run schools, repair roads and help in preserving historical sites.

As Jerusalem’s new light rail expands, churches are finding their property located nearby is valuable and are selling out to developers.

Because the city’s Christian denominations own vast swaths of land in Jerusalem and elsewhere, tax policy has both religious and practical implications, said David Kroyanker, an expert on Jerusalem’s multicultural architecture. With the current building boom in Jerusalem seeing over 36 skyscrapers being built, churches are making millions selling land they once determined as “holy.”

The new policy came to a head last month when church leaders received property tax bills totaling millions of dollars, applicable to all church properties that are not actual houses of worship.

The levying of those bills is spearheaded by Jerusalem Mayor Nir Barkat who wants to shore up the city’s small tax base.

“It is absurd for Jerusalem residents to fund municipal services for the churches … on their own, and for the municipality to be prevented from collecting enormous sums that could significantly improve the city’s development and services,” Barkat said.

Church officials, angered by the recent tax bills and the belief that Israel is trying to change the religious status quo, decided to shutter the Church of the Holy Sepulchre for three days in protest.

“We, the heads of churches in charge of the Holy Sepulchre and the status quo governing the various Christian holy sites in Jerusalem — the Greek Orthodox Patriarchate, the Custody of the Holy Land and the Armenian Patriarchate — are following with great concern the systematic campaign against the churches and the Christian community in the Holy Land,” the church leaders said in a joint statement announcing the closure.

The municipality ultimately hopes to collect taxes from business 887 properties belonging to various churches and the United Nations.

“Mainly since the 19th century, different Christian churches have acquired a huge number of properties,” Kroyanker said. “The Jerusalem municipality is asking to tax only buildings that aren’t churches, and they own much more than the churches.”

Kroyanker questioned why the churches should be exempt from paying taxes on commercial property when comparable Jewish- and Muslim-owned property is not.

“Why shouldn’t a building like the Notre Dame Center,” a Catholic-owned complex that contains a church, a pilgrims’ hotel, a restaurant and a gift shop, “pay tax at least for the areas that are purely commercial?”

American leaders are lining up behind the religious enterprises–something they know would never fly as public tax policy in the United States. American religious leaders co-signed last week a letter to Israeli Prime Minister Benjamin Netanyahu and Mayor Barkat asking them to reconsider a proposed plan to tax church-owned properties in the city.

“If enacted, these measures would have the effect of creating a situation that jeopardizes the very survival of the Christian community in the Holy Land,” they said.

The letter was signed by Cardinal Daniel DiNardo of Galveston-Houston, president of the US Conference of Catholic Bishops; Archbishop Vicken Aykazian of the Armenian Apostolic Church; Elizabeth Eaton, presiding bishop of the Evangelical Lutheran Church in America; and Michael Curry, presiding bishop of the Episcopal Church.

It may not be enough as reality is settling in that the current tax base in Jerusalem is not large enough to make up the lost revenue from church-owned hotels and businesses. And Jerusalem church leaders reluctantly realize that.

Almost half of the city’s residents, including predominantly ultra-Orthodox Jews and Muslim and Christian Arabs, are exempt from property taxes because they live below the poverty line, according to the Israeli Central Bureau of Statistics and National Insurance Institute.

Although the national government helps support Jerusalem’s infrastructure, the mayor says that what the city gets is insufficient, so taxing church properties is necessary to fill the gap. The city also sent bills last month to another tax-exempt landowner, the United Nations.

There has been some flexibility on both sides as government leaders realize that asking for $188 million in back taxes is untenable and church leaders sheepishly admitting they do need to chip in to support the city’s infrastructure which they benefit from.

Farid Jubran, general counsel for the Custody of the Holy Land, the body that oversees the property of the Catholic Church, indicated some of that flexibility.

“We never pretended to ask for an exemption in hotels and halls,” Jubran said, adding that “it is very rare that a church has a hotel. I can think of only five or six (cases). We never said we won’t pay taxes.”

Jubran said that if the municipality wants to tax certain church properties, “it should be done through negotiations and not in a unilateral way. And certainly not retroactively.”