Saturday, March 10, 2012

IRS suit is a bad deal but now it’s time to move on


Earlier this week, the United States Court of Appeals, Fourth Circuit, upheld previous rulings and mediations in favor of the IRS’ lawsuit against the Ocean Pines Association. The IRS sued for more than $1 million in fees and back taxes it claimed the OPA owed on Beach Club parking revenue.
Each time the OPA went to mediation and then to court over the matter, they assured themselves as well as the membership that they believed they had a strong case. With each unfavorable decision, the assurances became stronger and the arguments more complex, but it may be time to admit defeat.
The Ocean Pines Board of Directors has fought the good fight, standing up both for the membership and for what they believed was an honest and legal practice. Reading through the Court’s decision, though, makes it pretty clear it would take more than belief to overcome the significant case law citations the court referenced in its decisions.
Learning tax lessons the hard way is always uncomfortable and a little embarrassing, not to mention expensive. No one likes admitting that their premises were flawed and that those flaws created an untenable position from which to argue.
To its credit, the board took the necessary financial steps in preparation for a potential loss and has been discussing new operational policies to soften the financial blow of a loss. They would best serve both the membership and the board itself to chalk this unfortunate ruling up to a lesson learned and move on.

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