February 2, 2012
The Philip Driscoll housing allowance decision was appealed based on a filing by the Department of Justice in US Tax Court on May 24, 2011. Oral arguments were heard by the court today.
Earlier the Tax Court by a 7-6 vote, approved a parsonage allowance exclusion for the pastor’s two homes (Driscoll v. Commissioner, 135 T.C. No. 27 [December 14, 2010]).
Philip Driscoll was an ordained minister working for Phil Driscoll Ministries, Inc., a tax-exempt organization. During the tax years at issue, 1996-1999, Rev. Driscoll and his wife owned a principal resident in Cleveland, TN, and a second residence in Lake Ocoee, TN. Both homes were used solely as personal residences.
During each of the years at issue, the ministry filed a Form 990 claiming an amount described as a parsonage allowance, representing the total amount the ministry paid each year for the acquisition and maintenance of both Rev. Driscoll’s Cleveland and Lake homes, including mortgage payments, utilities, furnishings, improvements, and maintenance. The Driscoll’s did not include the value of these parsonage allowance payments in gross income on their tax returns.
The IRS determined that the Driscoll’s were not entitled to exclude the parsonage allowance paid with respect to their Lake home. The Tax Court concluded that the Driscoll’s were entitled to exclude from income the parsonage allowance with respect to their Lake home, in addition to the home in Cleveland, TN.
The IRS argued that section 107 and its legislative history used the singular term “home,” thereby limited a minister’s excludable parsonage allowance to payments with respect to one home. The majority opinion concluded that the IRS was improperly substituting the phrase “one home” or a “single home” for the phrase “a home” used in the statute, and noted that section 7701(m) provides that singular terms in the Code include the plural.
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