Keller Tank Services II, Inc. v. Commissioner
854 F.3d 1178
| 10th Cir. | 2017Background
- Keller Tank Services failed to report participation in the Sterling Benefit Plan on its 2007 return; the IRS proposed a $57,781.50 penalty under 26 U.S.C. § 6707A as the Plan was treated as a "listed transaction."
- Keller protested to the IRS Office of Appeals; an Appeals Officer (pre-assessment conference) sustained the penalty and closed the case when Keller did not provide further materials.
- The IRS assessed the penalty and issued a final notice of intent to levy; Keller requested a Collection Due Process (CDP) hearing and again attempted to challenge the penalty liability.
- The CDP officer refused to consider the liability challenge, stating Keller had a prior opportunity to dispute the liability before Appeals; Keller raised no other collection-alternative issues at the CDP hearing.
- Keller petitioned the Tax Court; the Tax Court granted summary judgment for the Commissioner, holding 26 U.S.C. § 6330(c)(2)(B) precluded re-litigation of liability at CDP where the taxpayer had a prior Appeals opportunity, and Treas. Reg. § 301.6330-1 is a reasonable interpretation of that statutory language.
- On appeal to the Tenth Circuit, the court affirmed: the case is not moot (collateral estoppel does not defeat jurisdiction here) and Chevron deference supports the Treasury regulation precluding CDP re-litigation after an Appeals conference.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the appeal is moot via collateral estoppel from a related Tax Court decision/stipulation | Keller: stipulation in deficiency case does not bind the § 6707A penalty CDP appeal; live controversy remains. | Commissioner: Keller stipulated to be bound by Our Country Home decision, so issue resolved and appeal moot. | Not moot — collateral estoppel is an affirmative defense on the merits, Keller’s stipulation limited to the deficiency proceeding, and other live issues (e.g., penalty calculation/scope of CDP) remain. |
| Whether § 6330(c)(2)(B) permits a taxpayer to challenge underlying liability at a CDP hearing after a prior administrative Appeals conference | Keller: § 6330(c)(2)(B) should not bar CDP challenges when prior opportunity was only administrative (not judicial); regulation is unreasonable. | Commissioner: statute allows preclusion based on prior opportunity and regulation reasonably interprets that to include Appeals conferences. | Held for Commissioner — prior administrative Appeals conference is an "opportunity to dispute" under ¶(c)(2)(B), barring liability challenges at CDP. |
| Whether Treas. Reg. § 301.6330-1 is a permissible Chevron construction of ¶(c)(2)(B) | Keller: regulation unreasonably limits Tax Court/federal jurisdiction and is internally inconsistent. | Commissioner: regulation legitimately defines "opportunity to dispute" to include Appeals conferences; is consistent with statutory purpose. | Held: regulation is reasonable and entitled to Chevron deference; it harmonizes with § 6330 and Congress’s intent to empower Appeals as an administrative forum. |
| Whether the regulation improperly forecloses other judicial remedies or creates internal inconsistencies | Keller: regulation denies access to judicial review and treats similar administrative processes inconsistently. | Commissioner: regulation limits only what issues can be raised at CDP; taxpayers retain ability to bring refund suits in federal court; distinctions among administrative processes are reasonable. | Held: regulation does not strip courts of jurisdiction nor is it arbitrary; it governs administrative CDP scope while leaving judicial remedies intact. |
Key Cases Cited
- Chevron, U.S.A., Inc. v. Nat’l Res. Def. Council, 467 U.S. 837 (agency deference framework)
- Mayo Foundation for Medical Education & Research v. United States, 562 U.S. 44 (Chevron applies in tax context)
- Dalton v. Commissioner, 682 F.3d 149 (1st Cir. 2012) (purpose and scope of CDP hearings)
- Tucker v. Commissioner, 676 F.3d 1129 (D.C. Cir. 2012) (CDP proceedings in Appeals Office requirement)
- Lewis v. Commissioner, 128 T.C. 48 (Tax Ct. 2007) (Treas. Reg. § 301.6330-1 upheld as reasonable interpretation of § 6330(c)(2)(B))
- Goza v. Commissioner, 114 T.C. 176 (Tax Ct.) (Tax Court limited to issues properly raised at CDP hearing)
- Yari v. Commissioner, 143 T.C. 157 (Tax Ct. 2014) (Tax Court may review § 6707A penalty when properly before it)