April 2, 2012
Authored by: Keith Kehrer
The United States Court of appeals for the Eleventh Circuit Court recently ruled that the parsonage allowance exclusion from gross income contained in section 107 of the Code is limited to the rental value of providing a single home. Commissioner v. Driscoll, 2012 U.S. App. LEXIS 2403 (11th Cir. 2012). The case involved a minister who claimed the parsonage allowance for both his principle residence and his lake house. In addition to turning back a minister’s expansive use of the parsonage allowance, the Eleventh Circuit’s decision addressed important issues related to the interpretation of ambiguous provisions of the Code.The text of section 107(b) limits the parsonage allowance exclusion to the rental allowance paid to a minister to the extent used to rent or provide “a home.” The controversy turned on the question of whether the phrase “a home” should be given a singular or a plural application. In a closely divided opinion, the Tax Court had rejected the argument by the IRS that the exemption should be limited to a single home, holding that nothing in the legislative history or regulations under section 107 required the court to rewrite the phrase “a home” to mean a “single home” or “one home.” Driscoll v. Commissioner, 135 T.C. 557 (2010)
In its decision reversing the Tax Court, the Eleventh Circuit advanced three arguments in support of its conclusion that that phrase “a home” should be limited to a single home. First, the court rejected the Tax Court’s reliance upon the Dictionary Act, 1 U.S.C. § 1, for the proposition that singular terms in the Code also include their plural forms. Although section 7701(p)(1)(1) of the Code contains a list of cross references to the Dictionary Act, including one for the definition of “[s]ingular as including plural,” the Eleventh Circuit relied on section 7806(a) of the Code, which states that cross references “are made only for convenience, and shall be given no legal effect.” In addition, the court noted that the Supreme Court has held that the Dictionary Act does not apply if “the context indicates otherwise.” United States v. Hayes, 555 U.S. 415, 422 n.5 (2009). Therefore, the Dictionary Act would apply only if the context of section 107(2) reasonably supported such an application. After consulting Webster’s Dictionary, the court concluded that the word “home” has singular connotations.
Second, the court noted that the legislative history associated with the Internal Revenue Code of 1954 contains references to “a dwelling house,” “a home,” and “the home,” and concluded that Congress intended for the parsonage allowance exclusion to apply only to one home. While acknowledging that the phrase “a home” may be used to refer to “no particular home,” the court again consulted Webster’s Dictionary and concluded that the word “a” maintains a singular connotation when the context indicates a singular meaning, as it does in section 107.
Finally, the court relied on the principle articulated by the Supreme Court that income exclusions should be “narrowly construed.” Commissioner v. Schleier, 515 U.S. 323, 328 (1995). The Tax Court had rejected a similar argument, finding that, without unequivocal evidence of legislative purpose, a general rule of statutory construction should not be used to change the phrase “a home” to read “a single home” or “one home.” The Eleventh Circuit disagreed and declined to construe any ambiguity in section 107(2) to favor a more expansive reading of the parsonage allowance income exclusion.