A federal appeals court says the Ocean Pines Association owes back taxes…on money it got from running an oceanfront club and parking lot at which only Ocean Pines residents could buy memberships.
The Salisbury Daily Times reports that the Association argued that the revenue from the Beach Club was not taxable because it was part of a nonprofit organization.
But the three judge panel said that because the club was not fully open to the general public it was not substantially related to the association’s tax-exempt goal to promote social welfare.
The Internal Revenue Service found the 2003 and 2004 returns were unrelated taxable revenue.
The Association then appealed to the US Tax Court in 2010 which in August of that year sided with the IRS.