Update on Driscoll
On February 8, 2012, the U.S. Court of Appeals for the Eleventh Circuit reversed the Tax Court's controversial 2011 ruling on the Driscoll case.
Philip Driscoll is an ordained minister, serving Phil Driscoll Ministries, Inc., which is tax-exempt under Sec. 501(c)(3) of the Internal Revenue Code. He and his wife, Lynne, owned a primary residence and a lake home.
When calculating the amount of Mr. Driscoll's income to be excluded from income taxation under the Sec. 107 housing allowance provisions, the Driscolls' calculations included the expenses from both homes. The IRS disallowed some of the income exclusion, maintaining that only the expenses from the Driscolls' primary residence would qualify for the calculation of the Sec. 107 housing allowance income exclusion.
The Tax Court disagreed with the IRS, holding in large part that the word "home," used in the singular in Sec. 107, also implied the plural version "homes." The Tax Court relied on the Dictionary Act to maintain that a singular word used in the Internal Revenue Code would also include the plural version of the term.
The U.S. Court of Appeals disagreed, stating that "the Dictionary Act's singular-to-plural provision should only apply if the context of I.R.C. Section 107(2) reasonably supports such an application. We hold that it does not." Many experts in the field of clergy taxation had long maintained that the legislative intent of Sec. 107 was not to allow an income exclusion for expenses related to second or vacation homes. The U.S. Court of Appeals defines home, as used in Sec. 107, in the singular and as a "principal place of residence." It also references the Supreme Court's directive that "income exclusions should be 'narrowly construed,'" and determined that the Tax Court's ruling applied an overly ambiguous interpretation to the housing allowance income exclusion of Sec. 107.
A link to the full text of the ruling:
Susan McInnis, CPA | 02/28/2012