Close Menu
Berlin, Ocean Pines News Worcester County Bayside Gazette Logo Berlin, Ocean Pines News Worcester County Bayside Gazette


OPA may fight on in IRS suit

OCEAN PINES —  By unanimous decision this week the Ocean Pines Association Board of Directors elected to continue their fight against the IRS over the OPA’s tax liability for Beach Club parking revenue, as long as the proposition is fiscally reasonable. 
The decision comes on the heals of the US Court of Appeals most recent ruling against the home owners association.
Board President Tom Terry said a significant part of the decision was the fact that only one of the judges who ruled against the OPA last month would be among the nine judges who would hear the appeal.
Because of increased caseloads at the Fourth Circuit Court of Appeals, only one judge from the court sat on the OPA’s case. 
The other judges were members of a lower court.
“We want to get in front of a broader audience down there,” Terry said of the decision, with qualifiers, to continue to pursue the case.
Terry said that, to a one, the Directors believe they have a strong case and that it is worth pursuing an additional hearing. 
The catch is whether or not it makes financial sense to pursue the case. After rendering their decision the Board directed General Manager Bob Thompson to set the OPA’s legal team to work figuring out precisely the cost of victory.
Although in general terms, the amount owed has been reported at around $1 million, the fact is that the OPA has been more focussed on prosecuting the case than calculating to the penny what the cost of losing the fight would be.
Now that they’ve exhausted all but their last option, they want to make sure that to cost of this final round won’t be an unnecessary expense. Should it turn out that the additional fees to both apply for an appeal and then prosecute it puts the OPA over a tipping point, the Directors may decide that the fight isn’t worth the additional cost.
Terry clarified that it is possible the Court may decide not to hear the case but said if it was prudent financially it was an option worth exercising nonetheless.
“What we’re still trying to determine is the money issue,” Terry said. “We’re not going to take a blind step without knowing the cost.”
After last month’s ruling Terry said that the OPA legal team was working on negotiation possibilities that might be acceptable to the IRS. 
Should the case go unheard it might be possible to negotiate a payment plan with the IRS to limit the bite of the payment due.
So far, the OPA has paid $119,171 in combined taxes from 2003 and 2004 as a condition of continuing to defend itself in the IRS suit. The payments were necessary to get a hearing in the Fourth Circuit.
Courts and mediation have both found in favor of the IRS before the OPA brought the case to the United States Court of Appeals, Fourth Circuit, which sided with all the lower courts against the Association.
The IRS suit stems from a law that makes revenues earned from exclusive, private clubs taxable if they do not have a direct affect on a non-profit’s purpose. While the other OPA amenities — the Yacht and Country Club and the Indoor Pool, for example — are open to the public, Beach Club parking is not.
This opinion supports the Tax Courts determination that the net income from the two parking lots and beach club is not “substantially related” to the association’s tax-exempt purpose.
The central part of the OPA’s argument had been that the revenue the company derived from the sale of parking spaces was substantially related to their purpose of promoting social welfare. 
Providing access to the Beach Club parking for members only was a way of looking out for the interests of the OPA membership, which owns the property.