Congress has enacted several major tax laws since 2001, each of which contains provisions that will affect tax reporting by both churches and ministers for 2012 and future years. In addition, a number of court decisions and IRS rulings provided clarification on several important tax issues. Several of the most important changes and clarifications are summarized in this feature article. The information in this article will assist ministers and churches in correctly preparing tax forms and returns for calendar year 2012 and beyond, and provide helpful guidance on several issues.
Part 1—Clergy and Lay Church Employees
A. Miscellaneous Tax Law Changes
1. Federal appeals court addresses housing allowances for clergy with two homes
In 2010, the United States Tax Court ruled in the Driscoll case that a minister could apply a housing allowance to expenses incurred in owning two homes. The court acknowledged that section 107 of the tax code, which contains the housing allowance exclusion, refers to a minister's "home" in the singular, but it concluded that this did not limit the application of a housing allowance to only one home.