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The Supreme Court has declined to review a decision of the Eleventh Circuit that a minister could not exclude under former Code Sec. 107 the parsonage allowance he received for a second residence as well as his principal residence. The Eleventh Circuit, reversing the Tax Court, found that the legislative history supported IRS’s contention that the exclusion was meant to cover only one residence.

Background. For the years at issue in the case (’96 through ’99), the version of Code Sec. 107 then in effect provided that the gross income of a minister of the gospel doesn’t include: (1) the rental value of a home furnished to him as part of his compensation; or (2) the rental allowance paid to him as part of his compensation, to the extent used by him to rent or provide a home.

Facts. Philip A. Driscoll was an ordained minister who worked for Mighty Horn Ministries, Inc., later known as Phil Driscoll Ministries, Inc. Mr. Driscoll’s employer was a Code Sec. 501(c)(3) organization exempt from tax under Code Sec. 501(a). From ’96 through ’99, Driscoll and his wife owned a principal residence as well as a lakeside home. Both properties were used as a residence by the Driscolls (i.e., neither was ever used for commercial purposes, such as rentals). Driscoll’s employer paid him a parsonage allowance for both of his residences, and the Driscolls excluded the allowance from their income.

IRS said the Driscolls could not exclude under former Code Sec. 107 the portion of the parsonage allowance that they received for their lakeside home. It argued that, because the Code and regs referred to “a home” (rather than “homes”), the parsonage exclusion was limited to a single home only. The Driscolls argued that the only limitation in the Code was that a property be used as a residence by a minister, a condition that Mr. Driscoll met for both properties. As a result, they concluded that the parsonage allowance for both homes should be excluded.

Tax Court decision. Siding with the Driscolls, a divided Tax Court concluded that what IRS sought to do was substitute the phrase “a single home” or “one home” for the phrase “a home” that appears in the Code and other authorities on which IRS relied. The Tax Court found no basis for IRS’s position. To the contrary, it pointed out that the Code at pre-amended Code Sec. 7701(m)(1) (i.e., current Code Sec. 7701(p)(1)) cross-references the Dictionary Act (1 USC § 1) for the proposition that “words importing the singular include and apply to several persons, parties, or other things,” and thus rejected IRS’s position that the phrase “a home” in former Code Sec. 107 meant a “single home” or “one home.” The Tax Court concluded that, as pertinent to the case, that section required only that amounts paid as part of a minister’s compensation be used to rent or provide a home, i.e., a dwelling house of the minister, in order to be excluded from the minister’s gross income.

Eleventh Circuit reversed. Rejecting the Tax Court’s reliance on Code Sec. 7701, and the cross-reference to the Dictionary Act, the Eleventh Circuit pointed out that under Code Sec. 7806(a), cross-references are made only for convenience and are to be given no legal effect. The appellate court also pointed out that the Supreme Court has held that the Dictionary Act, by its own terms, does not apply if “the context indicates otherwise.” (Hayes, 555 U.S. 41 (2009)) Thus, the Dictionary Act’s singular-to-plural provision should only apply if the context of the parsonage exclusion reasonably supports such an application, which the Eleventh Circuit held it does not. It also pointed out that the legislative history of Code Sec. 107 consistently used the singular (a dwelling house, a home, and the home) and thus demonstrated that Congress intended for the parsonage exclusion to apply to only one home.