Following up on my prior post, Divided Tax Court Allows Parsonage Allowance for Minister’s Two Homes: Wall Street Journal, Tax Break for Clergy Questioned, by Laura Saunders:

The U.S. Tax Court ruled that Phil Driscoll, an ordained minister and Grammy Award-winning trumpeter who went to prison for tax evasion, didn’t owe federal income taxes on $408,638 provided to him by his ministry to buy a second home on a lake near Cleveland, Tenn.

Under a provision of the tax code known as the parsonage allowance [§ 107], first passed in 1921, an ordained clergy member may live tax-free in a home owned by his or her religious organization or receive a tax-free annual payment to buy or rent a home if the congregation approves.

The Tax Court ruling, made final in March, extends the parsonage allowance to an unlimited number of homes, which may be owned either by the religious organization or the clergy member.

In a 7-6 ruling, a panel of Tax Court judges sided with Mr. Driscoll’s argument that the word “home” is equivalent to “homes,” just as “child” is interpreted to mean “children” elsewhere in the tax code.

The IRS declined to comment on the decision. In May, the agency appealed it to a federal appeals court in Atlanta.

Experts say the parsonage allowance was originally included as a way to minimize taxes on clergy members, whose compensation was often meager. …

Sen. Charles Grassley (R., Iowa), a member of the Senate Finance Committee, said he wants to ensure that the spirit of the provision isn’t violated. “It’s fair to question why a clergy member needs a tax-free allowance for more than one home, and whether tax-exempt churches should subsidize millionaire ministers,” he says.

Before the Driscoll decision, most tax experts believed the parsonage allowance only applied to one home, says Ellen Aprill, a professor at Loyola Law School in Los Angeles who studies tax issues involving religious institutions. There is no restriction on the value of the home that can be claimed under the exemption. The chief limit is that the annual payment to buy or rent the home may not exceed its rental value, Ms. Aprill says.