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February 9, 2012

Appeals Court: No Housing Allowances for Two Homes

Ruling overturns controversial 2010 Driscoll decision.

by Michael E. Batts


A federal appeals court ruled Wednesday that the ministerial housing exclusion in the Internal Revenue Code is indeed limited to a single home.

The ruling overturns a split Tax Court decision (Driscoll v. Commissioner, 135 T.C. No. 27 (2010)) in which the lower court had ruled that the minister could exclude allowances paid to him for both his primary home and a lake home.

The lower court had based its ruling on its determination that the phrase "a home" can mean more than one home. Not so, said the 11th Circuit Court of Appeals on Wednesday. In an opinion that reads more like a grammar lesson than a court ruling, the appeals court ruled that "a" is, in fact, singular.

The appeals court decision restores the state of the law to what it was widely understood to be before the Driscoll case—one home.

It is possible that Driscoll could further appeal the matter, although we consider it unlikely. We will continue to closely monitor the case for that possibility.

A new update on this development is available atChurchLawAndTax.com. Watch for future updates in Church Law & Tax Report.

This update first appeared in The Nonprofit Watchman, a service of Batts, Morrison, Wales & Lee, P.A. Reprinted with permission.

Michael E. Batts is the founder and managing shareholder of Batts, Morrison, Wales & Lee, P.A., a CPA firm dedicated exclusively to serving nonprofit organizations and their affiliates. He is an Editorial Advisor for Christianity Today's Church Management Team and he also chairs the boards of both the Evangelical Council for Financial Accountability (ECFA) and The Master's Academy of Central Florida.

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Posted by Matt Branaugh on February 9, 2012 9:21 AM

Related Tags: church law, compensation, court, government, housing allowance, IRS, Law, pastors, tax

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