Phil Driscoll owns two homes. One in Cleveland Tennessee and a lake home outside of Cleveland Tennessee. Phil Driscoll is an ordained gospel minister. Phil Driscoll Ministries paid for both homes and it was excluded from his income under the Pastor’s Housing allowance under Section 107 of the Internal Revenue Code of 1986. The IRS felt that to be a bit greedy and assessed him with additional income and fraud penalties. Rev. Driscoll took the IRS to tax Court. The IRS argued that the use of the word “home” in Section 107 refers only to one home. Rev. Driscoll countered that in Section 7701(m) the Code provides that singular may include plural. Further, the legislative history did not forbid that interpretation. For those reasons the Tax Court ruled inDriscoll, et ux v. Commissioner, 135 TC 27 (2010) that both houses were homes for the purposes of Section 107 and both could be excluded from income. It was a split and narrow decision, but one that shows two things: (1) The IRS Code does by its own design create issues such as this and (2) That statutory language brings in Legislative History when Courts attempt to resolve these types of issues. This case is a big win for Pastors, but more importantly, it makes very clear another point, that when faced with a case where the IRS is taking a narrow reading of the law, one needs to look at the entirety of the Code to see if there is definitional assistance elsewhere and look to the Legislative History to make sure you have either neutral support or positive support from that history.

Driscoll, et ux v. Commissioner

Source: John F. Rodgers