PUBLISH 

UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

_________________________________ 

KELLER TANK SERVICES II, INC., 

 Petitioner - Appellant, 

v. 

COMMISSIONER OF INTERNAL 

REVENUE, 

 Respondent - Appellee. 

No. 16-9001 

_________________________________ 

APPEAL FROM THE COMMISSIONER OF INTERNAL REVENUE 

(CIR No. 11611-14 L)

_________________________________ 

A. Lavar Taylor, A. Lavar Taylor Law Offices, Santa Ana, California (Jonathan T. 

Amitrano, A. Lavar Taylor Law Offices, Santa Ana, California; Allen J. White, Allen J. 

White & Associates, Downers Grove, Illinois; and William Wise, Wise & Stracks, 

Chicago, Illinois, with him on the briefs), appearing for Appellant. 

Jennifer M. Rubin, Attorney, Tax Division (Caroline D. Ciraolo, Principal Deputy 

Assistant Attorney General; Diana L. Erbsen, Deputy Assistant Attorney General; Gilbert 

S. Rothenberg, Attorney, Tax Division; and Michael J. Haungs, Attorney, Tax Division, 

with her on the brief), United States Department of Justice, Washington, DC, appearing 

for Appellee. 

_________________________________ 

Before HOLMES, MATHESON, and McHUGH, Circuit Judges. 

_________________________________ 

MATHESON, Circuit Judge. 

_________________________________ 

FILED 

United States Court of Appeals

Tenth Circuit 

February 21, 2017

Elisabeth A. Shumaker 

Clerk of Court
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In this appeal, we address whether a taxpayer may challenge a tax penalty in a 

Collection Due Process hearing (“CDP hearing”) after already having challenged the 

penalty in the Appeals Office of the Internal Revenue Service (“IRS”). 

 Keller Tank Services II, Inc. (“Keller”), the taxpayer, participated in an employee 

benefit plan and took deductions for its contributions to the plan. The IRS notified Keller 

of (1) a tax penalty of $57,782 for failure to report its participation in the plan as a “listed 

transaction” on its 2007 tax return, and (2) an income tax deficiency and related penalties 

for improper deductions of payments to the plan. This case is about the $57,782 penalty 

and Keller’s efforts to challenge it. 

As more fully described below, Keller protested the tax penalty at the IRS Appeals 

Office. It then attempted to do so in a CDP hearing but was rebuffed because it already 

had challenged the penalty at the Appeals Office. Keller appealed the CDP decision to 

the Tax Court, which granted summary judgment to the Commissioner of Internal 

Revenue (“Commissioner”). Keller appeals that decision here. Exercising jurisdiction 

under 26 U.S.C. § 7482(a)(1), we affirm. 

I. BACKGROUND 

To aid the reader, we provide definitions of various terms, set forth the pertinent 

statutes and regulation, and offer a brief overview of the relevant tax enforcement process 

and administrative structure. We then turn to the factual and procedural history of this 

case.

 
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A. Terms, Statutes, and Regulation 

1. Key Terms 

The following terms are used throughout the opinion and first appear in the order 

presented here.1

 Commissioner: the Commissioner of Internal Revenue is nominated by the 

President and confirmed by the Senate, and has the duty to administer, manage, 

conduct, direct, and supervise the execution and application of internal revenue 

laws. Lawsuits by and against the IRS are conducted in the name of the 

Commissioner, and are litigated by counsel of the IRS. 

 Liability: amount owed by a taxpayer under the tax laws. As used in this 

opinion, a liability may be a penalty or deficiency. 

 Deficiency: the amount by which the tax value imposed by the IRS exceeds 

the amount reported by the taxpayer on its return. The IRS’s determination of 

a deficiency is a provisional determination. Accordingly, a notice of 

deficiency affords the taxpayer a right to prepayment judicial review by the 

Tax Court before the IRS assesses and collects the liability. The IRS cannot 

attempt to collect the deficiency until the notice of deficiency has been mailed 

to the taxpayer and the taxpayer has been given 90 days to file a petition in the 

Tax Court. 26 U.S.C. § 6213. 

 Penalty: imposed on taxpayers by the IRS to encourage compliance with tax 

laws. Certain penalties are considered assessable, which means the IRS may 

assess them without providing an opportunity for prepayment judicial review 

by the Tax Court. The penalty provision relevant to this case is § 6707A, 

which imposes a penalty for failing to report transactions classified as 

“reportable,” including “listed” transactions. 26 U.S.C. § 6707A(b)(2). A 

§ 6707A penalty may be imposed for failure to report regardless of whether a 

deficiency results. Internal Revenue Manual 4.32.4.1.1 ¶ 3. 

 Reportable Transaction: a transaction that must be disclosed on a taxpayer’s 

return because the Secretary of Treasury (“Secretary”) has determined that type 

of transaction has potential for tax avoidance or evasion. The maximum 

penalty for failure to report a reportable transaction, other than a listed 

transaction, is $50,000 for a corporation. 26 U.S.C. § 6707A(b)-(c). 

 1

 Unless otherwise specified, all definitions are from Michael I. Saltzman and 

Leslie Book, IRS Prac. & Proc. (2016). 
- 4 - 

 

 Listed Transaction: a type of reportable transaction that is the same as, or 

substantially similar to, a transaction specifically identified by the Secretary as 

a tax avoidance transaction. The Secretary identifies listed transactions in 

notices or other published guidance. The maximum penalty for failing to 

report a listed transaction is $200,000 for a corporation. 26 U.S.C. 

§ 6707A(b)-(c). 

 Assessment: the formal recording and establishment of a taxpayer’s liability, 

fixing the amount owed by the taxpayer. The assessment is effectively a 

judgment and triggers the IRS’s ability to collect on the liability via lien or 

levy. 

 Levy: after a liability has been assessed, certain procedural requirements have 

been met, and the taxpayer has neglected or refused to pay the assessed tax, the 

IRS may attach, or encumber, the taxpayer’s property to seize and sell it as “a 

prompt and convenient method for satisfying delinquent tax claims.” United 

States v. Nat’l Bank of Commerce, 472 U.S. 713, 736 (1985) (quotations 

omitted). This process is called a “levy.” 

 Rescission Request: the taxpayer may request the Commissioner to rescind all 

or part of a penalty imposed under § 6707A for a non-listed reportable 

transaction if doing so would promote compliance with the tax laws and 

effective tax administration. The Commissioner, however, may not rescind a 

penalty for a listed transaction. The IRS Appeals Office hears a taxpayer’s 

request to rescind. No judicial review is available for the decision to grant or 

deny rescission. 26 U.S.C. § 6707A(d)(2). 

 IRS Appeals Office: the administrative dispute resolution body of the IRS that 

resolves tax controversies without litigation. The 1998 IRS Restructuring and 

Reform Act emphasized that the Appeals Office must be an independent 

bureau of the IRS and be impartial to the government and taxpayer. See

Robert v. United States, 364 F.3d 988, 990 (8th Cir. 2004). 

 Collection Due Process (“CDP”) Hearing: the procedure created by the 1998 

IRS Restructuring and Reform Act to control overreaching in the IRS’s 

collection activities. When the IRS decides to collect a liability through a lien 

or levy, taxpayers first receive an opportunity to contest the collection through 

an administrative CDP hearing before a CDP hearing officer (an independent 

employee of the Appeals Office). The CDP hearing officer must have had no 

prior involvement with the taxpayer. Section 6330 outlines the CDP hearing 

procedures required before a levy may be made. 26 U.S.C. § 6330. 
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 Tax Court: a specialized court established by Congress under Article I of the 

Constitution to conduct prepayment judicial review of deficiencies. The Tax 

Court also may review certain other administrative determinations by the IRS. 

See, e.g., 26 U.S.C. § 6330. 

 Refund suit: a lawsuit brought by a taxpayer seeking a refund of a paid 

liability alleged to be unlawfully collected. To challenge the IRS’s assessment 

in a refund suit, the taxpayer must first pay the full amount of the tax liability 

and file a claim for refund with the IRS. If the IRS issues an adverse decision, 

the taxpayer may then institute a tax refund suit in either a federal district court 

or the U.S. Court of Federal Claims. 

2. Key Statutes and Regulation 

The following statutes and regulation are the primary legal materials 

applicable to this appeal. 

a. 26 U.S.C. § 6707A: Penalty for failure to include reportable transaction 

information with return 

(a) Imposition of penalty 

Any person who fails to include on any return or statement any information 

with respect to a reportable transaction which is required under section 6011 to 

be included with such return or statement shall pay a penalty in the amount 

determined under subsection (b). 

(b) Amount of penalty 

(1) In general 

Except as otherwise provided in this subsection, the amount of the 

penalty under subsection (a) with respect to any reportable transaction 

shall be 75 percent of the decrease in tax shown on the return as a result 

of such transaction (or which would have resulted from such transaction 

if such transaction were respected for Federal tax purposes). 

(2) Maximum penalty 

The amount of the penalty under subsection (a) with respect to any 

reportable transaction shall not exceed— 

(A) in the case of a listed transaction, $200,000 ($100,000 in the 

case of a natural person), or 

(B) in the case of any other reportable transaction, $50,000 

($10,000 in the case of a natural person). 
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(3) Minimum penalty 

The amount of the penalty under subsection (a) with respect to any 

transaction shall not be less than $10,000 ($5,000 in the case of a 

natural person). 

(c) Definitions 

For purposes of this section: 

(1) Reportable transaction 

The term “reportable transaction” means any transaction with respect to 

which information is required to be included with a return or statement 

because, as determined under regulations prescribed under section 6011, 

such transaction is of a type which the Secretary determines as having a 

potential for tax avoidance or evasion. 

(2) Listed transaction 

The term “listed transaction” means a reportable transaction which is 

the same as, or substantially similar to, a transaction specifically 

identified by the Secretary as a tax avoidance transaction for purposes 

of section 6011. 

(d) Authority to rescind penalty 

(1) In general 

The Commissioner of Internal Revenue may rescind all or any portion 

of any penalty imposed by this section with respect to any violation if— 

(A) the violation is with respect to a reportable transaction other 

than a listed transaction, and 

(B) rescinding the penalty would promote compliance with the 

requirements of this title and effective tax administration. 

(2) No judicial appeal 

Notwithstanding any other provision of law, any determination under 

this subsection may not be reviewed in any judicial proceeding. 

b. 26 U.S.C. § 6330: Notice and opportunity for [a CDP] hearing before levy 

 26 U.S.C. § 6330(c)(2)(B) (“¶ (c)(2)(B)”): 

(c) Matters considered at hearing 

In the case of any hearing conducted under this section— 

* * * * 

 (2) Issues at hearing 

(A) In general 

The person may raise at the hearing any relevant issue 

relating to the unpaid tax or the proposed levy, including— 

(i) appropriate spousal defenses; 
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(ii) challenges to the appropriateness of collection 

actions; and 

(iii) offers of collection alternatives, which may 

include the posting of a bond, the substitution of other 

assets, an installment agreement, or an offer-incompromise. 

(B) Underlying liability 

The person may also raise at the hearing challenges to the 

existence or amount of the underlying tax liability for any tax 

period if the person did not receive any statutory notice of 

deficiency for such tax liability or did not otherwise have an 

opportunity to dispute such tax liability. 

 26 U.S.C. § 6330(c)(4)(A) (“¶ (c)(4)(A)”): 

(c) Matters considered at hearing 

In the case of any hearing conducted under this section— 

* * * * 

(4) Certain issues precluded 

An issue may not be raised at the hearing if— 

(A)(i) the issue was raised and considered at a previous 

hearing under section 6320 or in any other previous 

administrative or judicial proceeding; and 

(ii) the person seeking to raise the issue participated 

meaningfully in such hearing or proceeding; or 

(B) the issue meets the requirement of clause (i) or (ii) of 

section 6702(b)(2)(A). 

 26 U.S.C. § 6330(d): 

(d) Proceeding after hearing 

(1) Petition for review by Tax Court 

The person may, within 30 days of a determination under this 

section, petition the Tax Court for review of such determination (and 

the Tax Court shall have jurisdiction with respect to such matter). 

* * * * 

(3) Jurisdiction retained at IRS Office of Appeals 

The Internal Revenue Service Office of Appeals shall retain 

jurisdiction with respect to any determination made under this 

section, including subsequent hearings requested by the person who 

requested the original hearing on issues regarding— 
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(A) collection actions taken or proposed with respect to such 

determination; and 

(B) after the person has exhausted all administrative 

remedies, a change in circumstances with respect to such 

person which affects such determination. 

c. 26 C.F.R. § 301.6320-1(“Treas. Reg. § 301.6320-1”): Notice and opportunity 

for [a CDP] hearing upon filing of notice of Federal tax lien 

 Treas. Reg. § 301.6320-1(e)(3): 

(e) Matters considered at CDP hearing—(1) In general. . . . Appeals has the 

authority to determine the validity, sufficiency, and timeliness of any CDP 

Notice given by the IRS and of any request for a CDP hearing that is made 

by a taxpayer. . . . The taxpayer may raise any relevant issue relating to the 

unpaid tax at the hearing, including appropriate spousal defenses, 

challenges to the appropriateness of the [proposed levy], and offers of 

collection alternatives. The taxpayer also may raise challenges to the 

existence or amount of the underlying liability, including a liability 

reported on a self-filed return, for any tax period specified on the CDP 

Notice if the taxpayer did not receive a statutory notice of deficiency for 

that tax liability or did not otherwise have an opportunity to dispute the tax 

liability. Finally, the taxpayer may not raise an issue that was raised and 

considered at a previous CDP hearing under section 6330 or in any other 

previous administrative or judicial proceeding if the taxpayer participated 

meaningfully in such hearing or proceeding. Taxpayers will be expected to 

provide all relevant information requested by Appeals, including financial 

statements, for its consideration of the facts and issues involved in the 

hearing. 

* * * * 

(3) Questions and answers. 

* * * * 

Q–E2. When is a taxpayer entitled to challenge the existence 

or amount of the tax liability specified in the CDP Notice? 

A–E2. A taxpayer is entitled to challenge the existence or 

amount of the underlying liability for any tax period specified 

on the CDP Notice if the taxpayer did not receive a statutory 

notice of deficiency for such liability or did not otherwise 

have an opportunity to dispute such liability. Receipt of a 

statutory notice of deficiency for this purpose means receipt 

in time to petition the Tax Court for a redetermination of the 

deficiency determined in the notice of deficiency. An 
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opportunity to dispute the underlying liability includes a prior 

opportunity for a conference with Appeals that was offered 

either before or after the assessment of the liability. An 

opportunity for a conference with Appeals prior to the 

assessment of a tax subject to deficiency procedures is not a 

prior opportunity for this purpose. 

B. Legal and Administrative Background 

The Internal Revenue Code (“Code” or “IRC”) requires taxpayers to file returns in 

the manner prescribed by the IRS. 26 U.S.C. § 6011(a). The Code directs the 

Secretary—acting through the IRS—to determine, assess, and collect federal taxes. See

id. §§ 6201(a), 6301. Under this authority, the Secretary has established a procedure for 

the IRS to assess and collect penalties and deficiencies, and methods for the taxpayer to 

dispute these liabilities. 

1. Section 6707A Penalty and Administrative Procedure 

Section 6707A of the Code, titled “Penalty for Failure to Include Reportable 

Transaction Information with Return,” authorizes the imposition of a penalty on 

taxpayers who fail to disclose information on their tax returns regarding “reportable” 

transactions, including “listed” transactions. Id. § 6707A. 

Penalties under § 6707A are not subject to the procedures the IRS has afforded for 

deficiencies because they do not depend upon a deficiency; they are imposed solely for 

the failure to disclose, even in cases involving an overpayment of tax. Smith v. Comm’r, 

133 T.C. 424, 428-29 (2009). Because § 6707A penalties are not subject to deficiency 

procedures, the taxpayer may not directly appeal a penalty to the Tax Court. See 

Bartman v. Comm’r, 446 F.3d 785, 787 (8th Cir. 2006) (stating “[a] notice of deficiency 
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issued by the IRS pursuant to § 6212 is the taxpayer's jurisdictional ‘ticket to the Tax 

Court.’” (citations omitted)); Spector v. Comm’r, 790 F.2d 51, 52 (8th Cir. 1986) (citing 

Laing v. United States, 423 U.S. 161, 165 n.4 (1976)) (stating “the determination of a 

deficiency and the issuance of a notice of deficiency is an absolute precondition to tax 

court jurisdiction”). 

Thus, contesting a § 6707A penalty takes a different course. Once an IRS 

examiner proposes and receives approval from the IRS Territory Manager to impose a 

penalty for failing to report a reportable transaction, the examiner issues a “30-day 

Letter” before formally assessing the penalty. Internal Revenue Manual at 4.32.4.4. The 

taxpayer has 30 days to agree to or protest the penalty to the Appeals Office after 

receiving the “30-day Letter.” Id. In response to the taxpayer’s protest, the IRS offers 

the taxpayer a pre-assessment review of the proposed § 6707A penalty by an IRS 

Appeals Officer “[i]f possible.” See id. at 4.32.4.6. If a pre-assessment review is not 

possible, the taxpayer is offered a post-assessment review. Id. The Appeals Officer may 

decide to abate the penalty, rescind a penalty for a reportable transaction that is not a 

listed transaction under § 6707A(d), or approve collection of the penalty. Id. at 4.32.4.8, 

4.32.4.9. 

2. Collection Due Process (“CDP”) Hearings 

Once the IRS decides to levy to collect a penalty, it must notify the taxpayer in 

writing of the right to a hearing under § 6330(a)(1), called a CDP hearing. Congress 

created the CDP process as part of the 1998 IRS Restructuring and Reform Act, a 
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“Taxpayer Bill of Rights” aimed to curb abuse of taxpayers. See Dalton v. Comm’r, 682 

F.3d 149, 154 (1st Cir. 2012); Tucker v. Comm’r, 676 F.3d 1129, 1131 (D.C. Cir. 2012). 

a. The 1998 IRS Restructuring and Reform Act and the CDP Process

Before 1998, the IRS could reach a taxpayer’s assets by lien or levy without 

providing the taxpayer any process before the amount owed by the taxpayer was assessed 

and collected. Dalton, 682 F.3d at 154. Congress created the CDP process to afford 

taxpayers a pre-deprivation opportunity to contest the lien or levy before the IRS 

proceeded with collection. Id. at 154-55. At the CDP hearing, the taxpayer may 

challenge the propriety of a pending lien or levy, verify that collection is appropriate, and 

offer alternatives to collection. Tucker, 676 F.3d at 1131. 

CDP hearings take place in the Appeals Office. Id.; Gyorgy v. Comm’r, 779 F.3d 

466, 472 (7th Cir. 2015). The Appeals Officer presiding over the hearing represents the 

IRS and must have had no prior involvement with the liability at issue. Tucker, 676 F.3d 

at 1131. CDP proceedings “are informal and may be conducted via correspondence, over 

the phone or face to face.” Living Care Alts. of Utica, Inc. v. United States, 411 F.3d 

621, 624 (6th Cir. 2005). No transcript, recording, or other direct documentation of the 

proceeding is required. Id. 

At the hearing, the Appeals Officer must do three things: 

1) conduct a verification that the IRS has met all legal requirements and fulfilled 

its procedural obligations to move forward with the lien or levy, 2) consider 

defenses and collection alternatives proffered by the taxpayer and [] 3) make a 

determination that the “proposed collection action balances the need for the 

efficient collection of taxes with the legitimate concern of the person that any 

collection action be no more intrusive than necessary.” 

 
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Id. at 624-25 (emphasis omitted) (quoting 26 U.S.C. § 6330(c)(3)). 

b. Matters Raised at the CDP Hearing 

The 1998 IRS Restructuring and Reform Act lists the issues the taxpayer may 

raise at the CDP hearing. The taxpayer may challenge its underlying tax “liability” only 

if it “did not receive any statutory notice of deficiency for such tax liability or did not 

otherwise have an opportunity to dispute such tax liability.” 26 U.S.C. § 6330(c)(2)(B) 

(“¶ (c)(2)(B)”). Notably, the taxpayer need only have received an opportunity to dispute 

its tax liability. Whether it took advantage of that opportunity is irrelevant. Thus, a 

taxpayer is precluded from challenging liability at a CDP hearing when the taxpayer was 

afforded, but failed to take advantage of, a prior opportunity to dispute the liability. See, 

e.g., Chandler v. Comm’r, 327 F. App’x 763, 766 (10th Cir. 2009) (unpublished),2 AbuAwad v. United States, 294 F. Supp. 2d 879, 887-88 (S.D. Tex. 2003), Pelliccio v. United 

States, 253 F. Supp. 2d 258, 261-62 (D. Conn. 2003). 

The taxpayer may raise any other relevant “issue” relating to the unpaid tax—

including, but not limited to, challenges to the appropriateness of collection actions, and 

alternative collection options—so long as the issue was not raised and considered in a 

prior administrative or judicial proceeding where the taxpayer meaningfully participated. 

26 U.S.C. § 6330(c)(4)(A) (“¶ (c)(4)(A)”). 

 2

 Although not precedential, we find the reasoning of the unpublished cases 

cited in this opinion instructive. See 10th Cir. R. 32.1 (“Unpublished decisions are 

not precedential, but may be cited for their persuasive value.”); see also Fed. R. App. 

P. 32.1. 
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c. Appealing the CDP Hearing’s Findings and Conclusions 

After the CDP hearing, the Appeals Office decides whether it is reasonable to 

proceed with the intended collection action and issues a notice of determination 

containing its findings and conclusions. Dalton, 682 F.3d at 155; Gyorgy, 779 F.3d at 

472 (citing Treas. Reg. § 301.6330–1(e), Q & A–E8). 

A taxpayer who is dissatisfied with the findings or conclusions of the CDP hearing 

can appeal the determination to the Tax Court. Gyorgy, 779 F.3d at 472 (citing 26 U.S.C. 

§ 6330(d)(1)). The Tax Court may review a § 6707A penalty when it is appealed from a 

CDP proceeding under § 6330(d). Yari v. Comm’r, 143 T.C. 157, 162 (2014). 

When the Tax Court receives an appeal from the CDP hearing, however, its 

review is limited to issues that were properly raised during the CDP hearing. See Goza v. 

Comm’r, 114 T.C. 176, 182-83 (2000); Perkins v. Comm’r, 129 T.C. 58, 67 (2007); 

Konkel v. Comm’r, 2000 WL 1819417, at *3 (M.D. Fla. Nov. 6, 2000); see also Treas. 

Reg. § 301.6330–1(f), Q & A–F3. Because liability challenges precluded by ¶ (c)(2)(B) 

and issues precluded by ¶ (c)(4)(A) cannot be heard at a CDP hearing, the taxpayer may 

not present them to the Tax Court on appeal from the CDP hearing. See Goza, 114 T.C. 

at 182-83. If the taxpayer still wishes to contest those issues, it must instead pay the 

asserted liability and file a refund suit in federal district court. See Gorospe v. Comm’r,

451 F.3d 966, 968 (9th Cir. 2006). 

3. Tax Court 

Congress established the Tax Court, an Article I court within the Executive 

Branch, Samuels, Kramer & Co. v. Comm’r, 930 F.2d 975, 991 (2d Cir. 1991), to give 
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taxpayers a method to challenge IRS liability assessments without first having to pay an 

alleged liability. Without this forum, the taxpayer’s only alternative would be to pay the 

asserted liability and initiate a refund suit in federal district court. Bartman, 446 F.3d at 

787. 

The Tax Court’s jurisdiction is limited and is generally conferred by § 7442, but 

other specific grants are interspersed throughout the Code. Internal Revenue Manual 

35.1.1.1. Specifically, § 6213(a) confers jurisdiction on the Tax Court to redetermine 

deficiencies and § 6330(d) confers jurisdiction to review penalties challenged at a CDP 

hearing. As noted above, the Tax Court may only review issues that were properly 

before the CDP proceeding. 

Because CDP hearings typically produce a “scant record,” the Tax Court generally 

conducts a deferential review of CDP determinations. See Olsen v. United States, 414 

F.3d 144, 150 (1st Cir. 2005). If the underlying tax liability was properly at issue in the 

CDP hearing, the Tax Court reviews that issue de novo. Tucker v. Comm’r, 135 T.C. 

114, 139 (2010). But the Tax Court reviews all other CDP determinations for an abuse of 

discretion. Id. 

The Tax Court’s decision is subject to review in the appropriate circuit court of 

appeals. See 26 U.S.C. § 7482(a)(1). 

C. Factual and Procedural History 

Keller participated in an employee benefit plan called the Sterling Benefit Plan 

(“Plan”), but did not report its participation on its tax return. The IRS alleges Keller’s 

failure to report violated § 6707A. The IRS also claims Keller took improper deductions 
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on its income tax returns related to its participation in the Plan, resulting in a deficiency. 

As a result, Keller has faced two parallel proceedings in which the IRS has sought: (1) a 

penalty under § 6707A for Keller’s failure to report its participation in the Plan,3 which 

the IRS considers a listed transaction (“penalty proceeding”); and (2) the income tax 

deficiency from and resulting penalty for Keller’s alleged improper deduction of 

payments to the Plan (“deficiency proceeding”).4

 This case concerns the first penalty 

proceeding and Keller’s efforts to challenge its liability for the § 6707A penalty. We 

outline the relevant factual and procedural history below. 

1. Section 6707A Penalty and Appeals Office Administrative Proceedings 

The Commissioner proposed a $57,781.50 penalty against Keller under 

§ 6707A for the 2007 tax year for Keller’s failure to disclose its participation in a 

listed transaction. Keller filed a protest with the Appeals Office to seek rescission of 

the penalty under § 6707A(d). On June 20, 2013, the Appeals Officer, Ms. Espinoza, 

held a telephone conference with Keller. Keller sent no materials beyond its protest 

to Ms. Espinoza for consideration before the conference but faxed three forms during 

the conference. At the conference, Ms. Espinoza heard Keller’s liability arguments, 

 3

 As noted above, § 6707A penalties do not depend on an underlying 

deficiency. 

4

 The asserted penalties fall under § 6662(a) (“Imposition of Accuracy-Related 

Penalty on Underpayments”) and § 6662A (“Imposition of Accuracy-Related Penalty 

on Understatements with Respect to Reportable Transactions”). When determining 

penalties for deficiencies stemming from reportable transactions, including listed 

transactions, under § 6662A, the terms “reportable transaction” and “listed 

transaction” have the respective meanings given to such terms by § 6707A(c). 26 

U.S.C. § 6662A(d). 
- 16 - 

concluded Keller’s participation in the Plan was a “listed transaction,” and decided 

the penalty should be sustained. She sent a fax to Keller stating, “If taxpayer 

disagrees with the penalty and/or Appeals doesn’t hear from [Keller] by 7/9/2013, 

Appeals will process the case for closure.” J. App. at 35. Because the Appeals 

Office did not hear from Keller by July 9, 2013, it sustained the penalty and closed 

the case. 

2. CDP Hearing 

 

The IRS sent Keller a final notice of its intent to levy and of Keller’s right to a 

CDP hearing under § 6330. The letter stated that Keller must pay the assessed 

penalty, make payment arrangements, or appeal the levy by requesting a CDP 

hearing. Keller requested a CDP hearing, arguing the penalty was assessed “without 

the opportunity to protest the determination of the underlying transaction . . . [to be] a 

listed transaction.” J. App. at 45. Keller did not seek any collection alternatives or 

propose payment arrangements. 

A CDP Officer, Elizabeth DeAngelis, granted Keller’s request for a hearing 

and sent a letter scheduling a telephone conference. Ms. DeAngelis explained that 

the call would provide an opportunity to discuss the reasons Keller disagreed with the 

collection action or alternatives to the collection action. She explained that she must 

consider any legitimate issues Keller wished to discuss. But, tracking the language 

of ¶ (c)(2)(B), the letter stated: “You are not able to dispute the [underlying tax] 

liability in your CDP hearing because: Our records show you had a prior opportunity 

to dispute the penalty when you had a 6707A Appeals hearing for this tax period.” J. 
- 17 - 

App. at 47. The letter also outlined how Keller could raise the issue of alternative 

collection methods at the CDP hearing and said that if Keller did not agree with the 

CDP’s determination, “[it] may appeal the case to the United States Tax Court.” J. 

App. at 47. 

Keller participated in a phone conference with Ms. DeAngelis on March 18, 

2014. Keller attempted to contest its tax liability, but Ms. DeAngelis informed 

Keller’s counsel that Keller was precluded from challenging its liability because Ms. 

Espinoza had reviewed and sustained liability at the Appeals Office hearing. Keller 

raised no other issues during the hearing. Ms. DeAngelis sustained the penalty. The 

IRS sent Keller a Notice of Determination, which specified that Keller’s only 

arguments at the CDP hearing attempted to dispute its liability for the penalty, 

“however, you are unable to raise the liability within this hearing since you had a 

prior opportunity to dispute the liability when you had the IRC 6707A Appeals 

hearing for this same tax period. You raised no other issues.” J. App. at 52-53, 55. 

3. Tax Court 

Keller filed a petition with the Tax Court to challenge its liability for the 

penalty.5

 The Commissioner filed a motion for summary judgment, arguing that 

Keller was precluded from contesting its liability for the penalty in its CDP hearing 

 5

 In its petition to the Tax Court, Keller also argued that § 6707(d)(2), which 

precludes judicial review of the Commissioner’s determination to rescind a penalty, 

is unconstitutional as a deprivation of due process. Keller raised this argument again 

in its Objection to the Commissioner’s Motion for Summary Judgment. The Tax 

Court noted the argument in its decision, but did not address its merits. Keller has 

not raised this argument on appeal. 
- 18 - 

under ¶ (c)(2)(B) because of its previous opportunity to challenge liability at the 

Appeals Office hearing. After the Tax Court allowed the parties to supplement their 

filings, the Commissioner amended its motion for summary judgment to challenge 

Keller’s ability to challenge its liability under both ¶ (c)(2)(B) and ¶ (c)(4)(A). 

The Tax Court granted summary judgment to the Commissioner on June 16, 

2015. It determined that ¶ (c)(2)(B) precluded Keller from challenging its underlying 

liability because Keller was afforded a prior opportunity to dispute its liability in its 

hearing before the Appeals Office.6

 The Tax Court further held that Treas. Reg. 

§ 301.6320-1(e)(3) is a reasonable interpretation of ¶ (c)(2)(B) and applies to Keller 

based on Lewis v. Commissioner, 128 T.C. 48 (2007). Because Keller did not raise 

any non-liability challenges, the Tax Court sustained the levy.7

 Keller filed two 

motions for reconsideration, which the Tax Court denied. 

Keller timely appealed the Tax Court’s June 16, 2015 order to this court. 

 6

 As noted above, ¶ (c)(2)(B) precludes liability challenges at the CDP hearing 

when the taxpayer had a prior opportunity to dispute liability. See supra, note 4. 

Although the taxpayer need not have taken advantage of that opportunity to be 

precluded from re-litigating its liability before the CDP hearing, we note, as the Tax 

Court did, that Keller availed itself of that opportunity and contested its penalty 

liability before Ms. Espinoza. 

 

7

 The Tax Court also distinguished Keller’s case from Yari v. Comm’r of 

Internal Revenue, 143 T.C. 157 (2014). In Yari, the taxpayer’s previous Appeals 

Office consideration of its liability was not considered a “prior opportunity” to 

challenge its liability under ¶ (c)(2)(B) because an amendment to § 6707A, which 

established the proper method for computing penalties, intervened after the 

administrative hearing and before the Tax Court hearing. Without any intervening 

change to the statute giving rise to Keller’s liability in this case, the Tax Court held 

the Appeals Office had considered Keller’s liability before the CDP hearing, and 

Keller therefore had a prior opportunity to challenge the existence or the amount of 

the underlying liability, as required by ¶ (c)(2)(B). 
- 19 - 

II. DISCUSSION 

The Commissioner argues that Keller’s appeal is moot because Keller is 

collaterally estopped from challenging its liability. Keller argues that Treas. Reg. 

§ 301.6320-1(e)(3) unreasonably interprets ¶ (c)(2)(B) to preclude liability 

challenges at the CDP hearing—and ultimately before the Tax Court—when the 

taxpayer had a prior opportunity to dispute its liability before the Appeals Office. 

We disagree with the Commissioner’s mootness arguments and with Keller’s 

arguments regarding the scope of the CDP hearing and affirm the Tax Court’s grant 

of summary judgment. 

A. Mootness and Collateral Estoppel 

The Commissioner’s mootness argument, as more fully explained below, stems 

from Keller’s stipulation to be bound in its deficiency proceeding by the Tax Court’s 

decision in a related case called Our Country Home Enterprises Inc., et al. v. 

Commissioner, 145 T.C. 1 (2015). In Our Country Home, the Tax Court addressed 

another taxpayer’s participation in the same Sterling Benefit Plan and determined 

that participation in the Plan was a listed transaction. Based on Keller’s stipulation, 

the Commissioner contends that the Tax Court’s decision in Our Country Home that 

participation in the Plan was a listed transaction resolved all of Keller’s issues in this 

appeal and that Keller is thereby collaterally estopped from challenging its liability, 

mooting this case. We disagree for three reasons: (1) The Commissioner’s collateral 

estoppel argument concerns the merits of Keller’s arguments, not our jurisdiction; 

(2) Keller’s stipulation is binding only in Keller’s deficiency proceeding, not the 
- 20 - 

§ 6707A penalty proceeding at issue in this appeal; and (3) even if Keller’s 

participation in the Plan is a listed transaction, Keller contests other issues related to 

this appeal. 

1. Additional Procedural Background 

In the second parallel proceeding mentioned above—the deficiency 

proceeding—the Commissioner issued a notice of deficiency to Keller for its alleged 

improper deductions based on payments to the Plan between 2006-2008 and assessed 

penalties for that deficiency under § 6662(a) and § 6662A. Keller stipulated with the 

IRS that its liability for any deficiency based on improper income deductions for the 

tax years 2006, 2007, and 2008 would be resolved “on the same basis that similar 

issues are resolved by the final decision . . . of Our Country Home.” Supp. App. at 

16. 

On July 13, 2015, the Tax Court published its decision in Our Country Home, 

concluding that participation in the Plan was a listed transaction, any deductions 

taken for payments to the Plan resulted in a deficiency, and this deficiency was 

subject to a penalty under § 6662A. The Tax Court entered its final order on 

February 8, 2016. 

2. Additional Legal Background 

a. Mootness 

The “[c]onstitutional mootness doctrine is grounded in the Article III requirement 

that federal courts may only decide actual ongoing cases or controversies.” Prier v. 

Steed, 456 F.3d 1209, 1212 (10th Cir. 2006) (citations and quotations omitted); see Lewis 
- 21 - 

v. Cont’l Bank Corp., 494 U.S. 472, 477 (1990). This court lacks subject matter 

jurisdiction if a case is moot. Brown v. Buhman, 822 F.3d 1151, 1165 (10th Cir. 2016). 

The parties must continue to have a “personal stake in the outcome” of the lawsuit at all 

stages of the litigation so the question decided affects the rights of the litigants in the case 

before the court. Id. (citations and quotations omitted). The question is whether granting 

relief for the issues before the court “will have some effect in the real world.” Id. at 

1165-66 (citations and quotations omitted). 

A case may become moot while pending, including on appeal. United States v. 

De Vaughn, 694 F.3d 1141, 1157 (10th Cir. 2012) (quoting Church of Scientology v. 

United States, 506 U.S. 9, 12 (1992)). An “actual controversy must be extant at all stages 

of review, not merely at the time the complaint is filed . . . . If an intervening 

circumstance deprives the plaintiff of a personal stake in the outcome of the lawsuit, at 

any point during litigation, the action can no longer proceed and must be dismissed as 

moot.” Brown, 822 F.3d at 1165 (citations and quotations omitted). ‘“Put another way, a 

case becomes moot when a plaintiff no longer suffers actual injury that can be redressed 

by a favorable judicial decision.”’ Id. at 1166 (quoting Ind v. Colo. Dep’t of Corr., 801 

F.3d 1209, 1213 (10th Cir. 2015)). When a case is on appeal, 

[I]t is proper for a party to provide additional facts when that party has an 

objectively reasonable, good faith argument that subsequent events have 

rendered the controversy moot. Indeed, we depend on the parties for such 

information, and it is axiomatic that subsequent events will not be reflected 

in the [lower] court record. 
- 22 - 

See Morganroth & Morganroth v. DeLorean, 213 F.3d 1301, 1309 (10th Cir. 2000), 

overruled on other grounds by TW Telecom Holdings, Inc. v. Carolina Internet Ltd., 661 

F.3d 495 (10th Cir. 2011). 

We review mootness de novo as a legal question. Brown, 822 F.3d at 1168. 

b. Collateral Estoppel 

Collateral estoppel, or issue preclusion, concerns the merits of a case. It is an 

affirmative defense that bars the re-litigation of an issue of law or fact after it is 

determined by a valid, final judgment. Stan Lee Media, Inc. v. Walt Disney Co., 774 F.3d 

1292, 1297 (10th Cir. 2014). 

The party invoking collateral estoppel must prove four elements: (1) the issue 

previously decided is identical to the present one; (2) the prior action was finally 

adjudicated on the merits; (3) the party against whom the doctrine is invoked was a party 

or in privity with a party to the previous adjudication; and (4) the party against whom the 

doctrine is raised had a full and fair opportunity to litigate the issue in the previous 

adjudication. Id. Regarding the third element, the Supreme Court generally holds that 

collateral estoppel does not apply to nonparties in the prior action. Taylor v. Sturgell, 553 

U.S. 880, 893 (2008). But “the [general] rule against nonparty preclusion is subject to 

exceptions,” including that “[a] person who agrees to be bound by the determination of 

issues in an action between others is bound in accordance with the [agreement’s] terms.” 

Id. (quoting 1 Restatement (Second) of Judgments § 40, p. 390 (1980)). The litigated 

issue must also be “essential to the judgment.” Stan Lee Media, 774 F.3d at 1297 

(quoting Arizona v. California, 530 U.S. 392, 414 (2000)). 
- 23 - 

3. Analysis 

This case is not moot for three reasons. 

First, the Commissioner’s attempt to base mootness on collateral estoppel is 

misplaced. Unlike mootness, an Article III jurisdictional bar, collateral estoppel is an 

affirmative defense. See United States v. Simons, 86 F. App’x 377, 380 (10th Cir. Jan. 

22, 2004) (unpublished) (citing Kenmen Eng’g v. City of Union, 314 F.3d 468, 479 (10th 

Cir. 2002)) (“the[] invocation of . . . collateral estoppel to support [a] position on the 

merits does not introduce any jurisdictional element into the case; these are mere 

affirmative defenses.”)); see also Fed. R. Civ. P. 8(c) (listing res judicata and estoppel as 

affirmative defenses). When a collateral estoppel defense defeats a claim, it does so on 

the merits, not by displacing jurisdiction. The Sixth Circuit’s explanation of the 

interaction between the doctrines of mootness and collateral estoppel is instructive:

[T]he possibility that a party is collaterally estopped from pursuing a cause 

of action does not entail that that cause of action is moot. . . . The doctrine 

of mootness . . . in no way depends on the merits of the plaintiff’s 

contention . . . . Stated differently, the court assumes that the plaintiff will 

receive the relief that he requests in this litigation, and then proceeds to 

determine whether there is a substantial likelihood that that relief will 

redress his asserted injury. 

Smith v. SEC, 129 F.3d 356, 363-64 (6th Cir. 1997) (quotations omitted). The 

Commissioner cites no authority to the contrary. 

Second, Keller’s stipulation was limited to its deficiency proceeding and did not 

cover its § 6707A penalty proceeding, which is the only proceeding pertinent to this 

appeal. Applying collateral estoppel to a nonparty on the basis of its agreement to be 

bound by an action between others is limited to “the [agreement’s] terms,” Taylor, 553 
- 24 - 

U.S. at 893. The terms of Keller’s stipulation in the deficiency proceeding do not extend 

to its liability in the penalty proceeding. 

Third, even if the decision in Our Country Home were to collaterally estop Keller 

from challenging that its participation in the Plan constituted a listed transaction, other 

issues remain that the outcome of this appeal could affect. The Commissioner argues that 

if Keller’s participation in the Plan is a listed transaction, this appeal is moot because 

Keller would be “collaterally estopped from challenging its liability for the reporting 

penalty on remand.” Aplee. Br. at 25.8

 But Keller’s appeal contests the scope of the 

CDP hearing, not the merits of its liability challenge. And the Commissioner’s argument 

overlooks that Keller seeks to contest at the CDP hearing not only whether a penalty 

should be imposed but also its proper calculation under § 6707A. Aplt. Br. at 8 (“Among 

the issues considered by the Appeals Officer in this initial administrative appeal was 

whether the IRS erred in computing the amount of the penalty for the year 2007 . . . . 

Keller contended (and still contends) that any penalty assessed under § 6707A for the 

2007 tax year should be [calculated differently.]”). The Our Country Homes stipulation 

does not reach the calculation issue. 

 8

 We question whether this appeal is the proper forum for the Commissioner to 

raise a collateral estoppel argument. At the CDP, Keller would challenge whether it 

should be subject to a penalty under § 6707A and how any such penalty should be 

calculated. These issues are not before us on this appeal, which is limited to determining 

whether Keller should be able to present those challenges at the CDP hearing. The 

Commissioner argues that the Tax Court’s decision in Our Country Home establishes by 

collateral estoppel that Keller’s participation in the Plan is a listed transaction and that the 

penalty therefore cannot ultimately be rescinded. But that issue is not before us. The 

collateral estoppel argument seems more appropriate for the CDP hearing or the Tax 

Court. 
- 25 - 

 For the reasons stated, this case is not moot. 

B. Keller’s Liability Challenges 

Keller argues that ¶ (c)(2)(B) should not preclude liability challenges in a CDP 

hearing or the Tax Court when the taxpayer’s prior opportunity to dispute its liability 

arose, as it did here, in an administrative setting.9

 Keller contends that ¶ (c)(2)(B)’s 

interpretive regulation, Treas. Reg. § 301.6330-1, which specifies that a conference 

with the Appeals Office is a prior opportunity under ¶ (c)(2)(B), is an unreasonable 

interpretation of ¶ (c)(2)(B).10 We disagree. The Tax Court properly held Keller 

was precluded from challenging its liability at the CDP hearing under ¶ (c)(2)(B). 

1. Standard of Review 

“We review tax court decisions ‘in the same manner and to the same extent as 

decisions of the district courts in civil actions tried without a jury.’” Katz v. Comm’r, 

335 F.3d 1121, 1125-26 (10th Cir. 2003) (quoting Kurzet v. Comm’r, 222 F.3d 830, 

833 (10th Cir. 2000); 26 U.S.C. § 7482(a)(1)). Thus, like our review of a district 

court’s grant of summary judgment, we review the Tax Court’s grant of summary 

 9

 Because the Tax Court’s decision was based on ¶ (c)(2)(B) and we conclude 

Keller was precluded from raising its liability challenges at the CDP hearing under 

that paragraph, we need not reach whether Keller was similarly precluded from doing 

so under ¶ (c)(4)(A). 

 

10 Keller also proposes a new interpretation of ¶ (c)(2)(B): unless the taxpayer 

received a notice of deficiency, or a functional equivalent, the taxpayer may 

challenge the merits of the underlying liability in a CDP case. Because we conclude 

Treas. Reg. § 301.6330-1 reasonably interprets ¶ (c)(2)(B), we reject Keller’s 

proposed, alternative interpretation. 
- 26 - 

judgment de novo. Scanlon White, Inc. v. Comm’r, 472 F.3d 1173, 1174 (10th Cir. 

2006).

2. Additional Legal Background 

This section outlines the legal framework for analyzing treasury regulations, 

highlights the relevant portions of ¶ (c)(2)(B) and Treas. Reg. § 301.6330-1, and 

summarizes the Tax Court’s analysis of Treas. Reg. § 301.6330-1 in Lewis v. 

Commissioner. 

a. Chevron deference

We defer to an agency’s regulation that reasonably interprets an ambiguous 

statute. Chevron, U.S.A., Inc. v. Nat’l Res. Def. Council, Inc., 467 U.S. 837, 841-44 

(1984). “[C]onsiderable weight should be accorded to an executive department’s 

construction of a statutory scheme it is entrusted to administer.” Id. at 844; see also 

Hydro Res., Inc. v. EPA, 608 F.3d 1131, 1145-46 (10th Cir. 2010) (en banc) 

(“[C]ourts afford considerable deference to agencies interpreting ambiguities in 

statutes that Congress has delegated to their care, including statutory ambiguities 

affecting the agency’s jurisdiction.” (citations omitted)). 

This deference applies to Treasury regulations. See Mayo Found. for Med. 

Educ. & Research v. United States, 562 U.S. 44, 55 (2011) (clarifying that Chevron

applies “with full force in the tax context”). Here, the Secretary promulgated Treas. 

Reg. § 301.6330-1 pursuant to express general authority under 26 U.S.C. § 7805(a) 

after notice and comment. Id. § 7805(a) (“Secretary shall prescribe all needful rules 

and regulations for the enforcement of this title, including all rules and regulations as 
- 27 - 

may be necessary by reason of any alteration of law in relation to internal revenue.”). 

It follows that Treas. Reg. § 301.6330-1 is entitled to Chevron deference unless it is 

“arbitrary or capricious in substance, or manifestly contrary to the statute.” Mayo 

Found., 562 U.S. at 53 (quotations omitted). 

The Chevron-deference analysis proceeds in two steps. Zen Magnets, LLC v. 

Consumer Prod. Safety Comm’n, 841 F.3d 1141, 1160 (10th Cir. 2016). First, 

“[w]hen Congress has spoken to the precise question at issue, we must give effect to 

the express intent of Congress.” Id. (citations and quotations omitted). Second, “[i]f 

the statute is silent or ambiguous, however, we defer to the agency's interpretation, if 

it is a permissible one.” Id. (quotations omitted); see also Sierra Club, Inc. v. 

Bostick, 787 F.3d 1043, 1056-57 (10th Cir. 2015). 

In the first step, we employ the “traditional tools of statutory construction” to 

determine whether the intent of Congress is clear from the statutory text and 

“whether the [statutory] language . . . has a plain and unambiguous meaning with 

regard to the particular dispute.” INS v. Cardoza-Fonseca, 480 U.S. 421, 446 

(1987); Chevron, 467 U.S. at 842-43; Robinson v. Shell Oil Co., 519 U.S. 337, 340 

(1997). The “plainness or ambiguity of statutory language is determined by reference 

to the language itself, the specific context in which that language is used, and the 

broader context of the statute as a whole.” Robinson, 519 U.S. at 341. If the statute 

is not ambiguous, our inquiry ends there. Id. at 340. But if the statute is “capable of 

being understood by reasonably well-informed persons in two or more different 
- 28 - 

senses,” we proceed to the second step of Chevron. McGraw v. Barnhart, 450 F.3d 

493, 498 (10th Cir. 2006) (quotations omitted). 

In the second step, if the statute is silent or ambiguous on the specific issue, 

we defer to the agency’s interpretation if it is based on a permissible construction of 

the statute. Chevron, 467 U.S. at 842-43; Sierra Club, 787 F.3d at 1057. For a 

construction to be permissible, we need not conclude it was the only one the agency 

could reasonably have adopted or that we would have rendered the same 

interpretation if the question arose initially in a judicial context. Chevron, 467 U.S. 

at 843 n.11. We look only to whether the implementing agency’s construction is 

reasonable. Nat’l Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 

967, 980 (2005). 

b. Paragraph (c)(2)(B) 

The Tax Court relied on ¶ (c)(2)(B) to determine that Keller was precluded 

from challenging its liability at the CDP hearing. As outlined above, ¶ (c)(2)(B) 

precludes a taxpayer from challenging the existence or amount of the underlying tax 

liability at a CDP hearing if the taxpayer had a prior “opportunity to dispute” that 

liability—i.e., the taxpayer received a statutory notice of deficiency or otherwise had 

an “opportunity to dispute” the underlying tax liability. When ¶ (c)(2)(B) precludes a 

taxpayer from challenging its liability at the CDP hearing, the Tax Court accordingly 

lacks authority to review the liability determination because that issue was not 

properly before the CDP hearing. Goza, 114 T.C. at 182-83. 
- 29 - 

c. Treas. Reg. § 301.6330-1 

In Treas. Reg. § 301.6330-1, the IRS explained that ¶ (c)(2)(B)’s reference to 

“opportunity to dispute” “includes a prior opportunity for a conference with Appeals that 

was offered either before or after the assessment of the liability.” This clarification was 

promulgated in response to public comment about the proposed regulation. 

Miscellaneous Changes to Collection Due Process Procedures Relating to Notice and 

Opportunity for Hearing Prior to Levy, 71 Fed. Reg. 60827-02, 60830 (Oct. 17, 2006) (to 

be codified at 26 C.F.R. pt. 301) (“For liabilities not subject to deficiency procedures, the 

offer of an Appeals conference prior to assessment constitutes an opportunity to dispute 

the liability under section 6330(c)(2)(B).”). The IRS rejected the suggestion to limit this 

restriction to prior judicial proceedings: 

According to the comments, the only opportunity to dispute the tax liability 

that is sufficient to prevent the taxpayer from challenging the liability in a 

CDP hearing is the prior opportunity to dispute the liability in a judicial 

forum. The IRS and the Treasury Department believe that the existing 

regulations correctly include an opportunity for an Appeals conference as a 

preclusive prior opportunity. The text of section 6330(c)(2)(B) does not 

contain language limiting prior opportunities to judicial proceedings. 

Moreover, it is consistent for a taxpayer who has had an opportunity to 

obtain a determination of liability by Appeals in one administrative hearing 

to be precluded from obtaining an Appeals determination in a subsequent 

CDP administrative hearing with respect to the same liability. This 

interpretation of section 6330(c)(2)(B) has been upheld by the courts. See, 

e.g., Pelliccio v. United States, 253 F. Supp. 2d 258, 261-62 (D. Conn. 

2003). Accordingly, the final regulations do not adopt this suggestion. 

Id. (emphasis added). 
- 30 - 

d. Tax court interpretation 

The Tax Court applied Chevron deference to Treas. Reg. § 301.6330-1 in Lewis v. 

Commissioner and held the regulation was a reasonable interpretation of ¶ (c)(2)(B). In 

Lewis, like here, the Tax Court affirmed summary judgment for the Commissioner 

because the taxpayer had a prior opportunity to dispute his underlying tax liability in a 

conference with the Appeals Office. 128 T.C. at 62. 

Applying the first step of Chevron, the Tax Court held that ¶ (c)(2)(B)’s 

“otherwise have an opportunity to dispute” language is ambiguous. See id. at 55. It 

noted that neither the 1998 IRS Restructuring and Reform Act nor the Code defined the 

phrase. Id. Moreover, the court said that the phrase could fairly be read to suggest 

different possible meanings, each finding support in the context of the statute: (1) it 

could include only judicial review or (2) it could also include challenges before the 

Appeals Office. Id. at 55-56. 

Moving to Chevron step two, the Tax Court examined the possible meanings of 

the statute outlined above and concluded that Treas. Reg. § 301.6330-1’s interpretation of 

¶ (c)(2)(B) was reasonable. Id. at 61. Addressing the contrary view that ¶ (c)(2)(B) 

could be read to include only judicial review, the Tax Court said: 

As we see it, if Congress had intended to preclude only those taxpayers 

who previously enjoyed the opportunity for judicial review of the 

underlying liability from raising the underlying liability again in a 

collection review proceeding, the statute would have been drafted to clearly 

so provide. The fact that Congress chose not to use such explicit language 

leads us to believe that Congress also intended to preclude taxpayers who 

were previously afforded a conference with the Appeals Office from raising 

the underlying liabilities again in a collection review hearing and before 

this Court. 
- 31 - 

Id. 

The Tax Court also offered several rationales to justify including administrative 

proceedings in the definition of prior “opportunities” that would bar a subsequent 

challenge of the underlying tax liability at a CDP hearing and thus found Treas. Reg. 

§ 301.6330-1 to be a reasonable interpretation of ¶ (c)(2)(B).11 

3. Analysis 

The Tenth Circuit has not addressed whether ¶ (c)(2)(B) precludes a challenge 

to liability at a CDP hearing when the taxpayer’s prior opportunity to dispute liability 

occurred at an administrative, non-judicial proceeding.12

a. Applying Chevron 

Applying the two-step Chevron test, we conclude, as the Tax Court did in 

Lewis, that ¶ (c)(2)(B)’s reference to a prior “opportunity to dispute” is ambiguous 

 11 The Eighth Circuit and Tax Court have similarly precluded liability 

challenges at CDP hearings under ¶ (c)(2)(B) when the taxpayer had a prior 

opportunity to dispute its liability before the Appeals Office. See, e.g., Hassell 

Family Chiropractic, DC, PC v. Comm’r, 368 F. App’x 695, 696 (8th Cir. 2010) 

(unpublished) (barring taxpayer from challenging liability before Tax Court under ¶ 

(c)(2)(B) where it had a prior conference with an IRS Appeals Officer); Bishay v. 

Comm’r, T.C. Memo. 2015-105, at *6 (2015) (holding that a taxpayer had an 

“opportunity” to dispute his liability when he received a Letter 1153 and had a 

subsequent conference with the Office of Appeals, “precluding [the taxpayer] from 

re-raising that argument at his CDP hearing” under ¶ (c)(2)(B)). 

 

12 In Shaffer v. Comm’r, 55 F. App’x 532, 535 (10th Cir. 2003) (unpublished), 

we applied ¶ (c)(2)(B) and barred reconsideration of the taxpayer’s liability when it 

had previously raised the issue of liability in a Tax Court proceeding. We made no 

comment in Shaffer about the statute’s application to a prior administrative 

opportunity to dispute liability. 
- 32 - 

and that Treas. Reg. § 301.6330-1 is a reasonable interpretation of ¶ (c)(2)(B). We 

therefore affirm the Tax Court’s grant of summary judgment. 

i. Step one 

In step one of the Chevron analysis, we determine whether the statute is 

ambiguous. Here, ¶ (c)(2)(B) is ambiguous on its face and when analyzed within the 

context of § 6330. 

Keller and the Commissioner agree that the language of ¶ (c)(2)(B) does not 

define which prior “opportunities” to dispute tax liability Congress intended to 

include. The Tax Court in Lewis found that ¶ (c)(2)(B) was subject to competing 

interpretations. 128 T.C. at 55. Looking at the language of ¶ (c)(2)(B), we agree that 

what constitutes an “opportunity to dispute” is subject to more than one reasonable 

interpretation: it may refer only to judicial review, only to administrative review, or 

both. 

Paragraph (c)(2)(B)’s surrounding text contributes to this ambiguity. 

Paragraph (c)(4)(A) expressly precludes consideration of issues at a CDP hearing that 

were raised and considered at any other “administrative or judicial proceeding” 

(emphasis added). In contrast, ¶ (c)(2)(B) refers to prior “opportunity to dispute” but 

is silent on what type of opportunity the phrase includes. 

Paragraph (c)(2)(B)’s text is thus ambiguous. Neither the surrounding text of 

§ 6330 nor the rest of the Code define what Congress intended by “otherwise have an 

opportunity to dispute.” Accord Lewis, 128 T.C. at 55. 
- 33 - 

ii. Step two 

In step two of the Chevron analysis, we determine whether the agency’s 

interpretation is based on a permissible construction of the statute. Here, we 

conclude that Treas. Reg. § 301.6330-1(e)(3)’s explanation that a prior ¶ (c)(2)(B) 

“opportunity to dispute” includes “a prior opportunity for a conference with Appeals 

that was offered either before or after the assessment of the liability” is a reasonable 

interpretation of ¶ (c)(2)(B). 

First, focusing on the text, ¶ (c)(2)(B) states: 

The person may also raise at the hearing challenges to the existence or amount 

of the underlying tax liability for any tax period if the person did not receive 

any statutory notice of deficiency for such tax liability or did not otherwise 

have an opportunity to dispute such tax liability. 

The word “hearing” refers to the CDP hearing. Because the tax liability in this 

case is a penalty and not a deficiency, the key language is “did not otherwise have an 

opportunity to dispute such tax liability.” Nothing on the face of this text excludes 

an administrative proceeding from an “opportunity to dispute” a tax penalty. And 

nothing suggests that reading “opportunity to dispute” to include an administrative 

proceeding is unreasonable. The text of the statute therefore supports the 

reasonableness of Treas. Reg. § 301.6330-1(e)(3)’s interpretation of ¶ (c)(2)(B). 

Second, considering the key language in the statute’s broader context, 

¶ (c)(4)(A) bars taxpayers from raising an issue at a CDP hearing that was raised and 

considered in a judicial or administrative forum. It is reasonable to conclude that 
- 34 - 

Congress regarded an administrative hearing as adequate to preclude CDP hearing 

consideration under ¶ (c)(2)(B) as well.13

Third, we find the Tax Court’s reasoning in Lewis persuasive. There, the court 

said it would be “possible to interpret ‘otherwise have an opportunity to dispute’ to refer 

to those situations where a taxpayer was afforded one of the other, nondeficiency, 

avenues for prepayment judicial review.” 128 T.C. at 56. But, after pointing out several 

problems with this interpretation, the court concluded it was “unlikely that this was 

Congress’s intent.” Id. at 61. 

For example, the Tax Court observed that if Congress had intended to limit 

¶ (c)(2)(B) to prior judicial review, it could simply have said “opportunity to seek 

judicial review.” Id. at 57. Moreover, the judicial-only interpretation Keller proposes 

would “encourage a taxpayer to wait until a collection action begins before disputing [a 

nondeficiency] liability” to obtain judicial, rather than administrative, review of liability. 

Id. at 58. But this would minimize the role of the Appeals Office and contradict the 

purpose of the 1998 IRS Restructuring and Reform Act. Congress intended to provide 

the taxpayer a means to seek review of a liability through an informal conference with the 

Appeals Office, id. at 59—“a meaningful process, short of litigation, in which [the 

taxpayer] could resolve tax disputes,” id. at 60; see also Giamelli v. Comm’r, 129 T.C. 

107, 114 (2007). 

 13 See Bankers Life and Cas. Co. v. United States, 142 F.3d 973, 983 (7th Cir. 

1998) (“In the second step [of Chevron], the court determines whether the regulation 

harmonizes with the language, origins, and purpose of the statute.”). 
- 35 - 

We agree with these points and the Tax Court’s conclusion that “it is reasonable” 

to read ¶ (c)(2)(B) “to conclude that Congress intended not only to address those 

taxpayers who were previously provided an opportunity to litigate their liability, but also 

those provided an opportunity to dispute the liability short of litigation.” 128 T.C. at 60. 

Thus, under ¶ (c)(2)(B), “[a] conference with the Appeals Office provides a taxpayer a 

meaningful opportunity to dispute an underlying tax liability.” Id. at 61. It follows that 

the regulation interpreting ¶ (c)(2)(B) in this manner is a reasonable construction of the 

statute. 

b. Keller’s arguments 

Keller argues Treas. Reg. § 301.6330-1 is an unreasonable interpretation of 

¶ (c)(2)(B) because it (1) impermissibly limits the jurisdiction of the Tax Court and 

the federal courts; and (2) is internally inconsistent. These arguments do not 

persuade us that the regulation is unreasonable or “arbitrary, capricious, or manifestly 

contrary to the statute,” Chevron, 467 U.S. at 844. 

i. Limiting jurisdiction 

Keller argues that Treas. Reg. § 301.6330-1 impermissibly limits the 

jurisdiction of the Tax Court through a regulation and thus should not receive 

Chevron deference. We disagree. 

Treas. Reg. § 301.6330-1 does not diminish the jurisdiction of any court. 

Section 6330(d) establishes the Tax Court’s jurisdiction to review CDP proceedings. 

Treas. Reg. § 301.6330-1 limits only the scope of what may be heard at the agency’s 
- 36 - 

administrative CDP proceedings.14 Although the Tax Court has jurisdiction only to 

hear matters that were properly before the CDP hearing, see Goza, 114 T.C. at 182-

83, Treas. Reg. § 301.6330-1 does not address the Tax Court. It addresses matters 

that may be raised before an administrative CDP hearing. 

Moreover, Treas. Reg. § 301.6330-1 has no impact on the taxpayer’s ability to 

file a refund suit in federal district court. The jurisdiction of federal courts remains 

available for a taxpayer to contest its liability. 

ii. Inconsistencies 

Keller argues that Treas. Reg. § 301.6330-1 contains internal inconsistencies 

and is thus unreasonable. We disagree. 

First, Keller contends Treas. Reg. § 301.6330-1 is inconsistent because it 

precludes liability challenges at a CDP hearing even when the taxpayer failed to exercise 

its opportunity to dispute liability at the Appeals Office and was therefore not actually 

heard. But this is not an inconsistency. As explained previously, the statute and the 

regulation refer only to an “opportunity,” not to an opportunity that was exercised. See 

Chandler, 327 F. App’x at 766 (holding taxpayer was properly precluded from 

challenging liability at a CDP hearing when it had a prior opportunity to dispute liability 

and did not exercise it). Not only is the regulation internally consistent, it comports with 

the purpose of encouraging taxpayers to use the Appeals Office process. 

 14 We agree with the IRS’s Office of Chief Counsel, who explained: “This 

preclusive effect does not define the scope of the reviewing court’s jurisdiction but 

defines only when a taxpayer can challenge his or her liability.” Collection Due 

Process Cases, Office of Chief Counsel Notice, CC-2003-016, Internal Revenue 

Service at 16 (May 29, 2003). 
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Second, Keller argues Treas. Reg. § 301.6330-1 is inconsistent because it 

precludes liability challenges at a CDP hearing for some, but not all, prior administrative 

opportunities. For example, Keller notes that Treas. Reg. § 301.6330-1’s explanation of a 

prior “opportunity” does not include liability challenges previously heard at a conference 

with the Examination Division of the IRS or by the Appeals Office in a pre-assessment 

hearing for a liability subject to deficiency procedures. But again, Keller fails to show an 

internal inconsistency. Nothing in the regulation mentions conferences with the 

Examination Division or is inconsistent with allowing challenges at the CDP hearing for 

liabilities subject to deficiency procedures. Moreover, Keller fails to show that drawing 

distinctions among different administrative processes is unreasonable or arbitrary or that 

it is inconsistent to treat different administrative proceedings differently. See Mayo 

Found., 562 U.S. at 59 (“Regulation, like legislation, often requires drawing lines.”). In 

particular, Keller has not shown that the prior Appeals Office opportunity addressed in 

Treas. Reg. § 301.6330-1 is similar to or serves similar purposes as the other 

administrative proceedings Keller cites as falling outside the regulation. 

In short, Keller’s internal inconsistency arguments fall short of showing that 

Treas. Reg. § 301.6330-1 is arbitrary, capricious, or manifestly contrary to the statute. 
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III. CONCLUSION 

For the foregoing reasons, we affirm the Tax Court’s grant of summary 

judgment.15

 15 Keller and the Commissioner have each filed an unopposed motion 

requesting judicial notice of certain materials. Keller’s motion tenders a document 

regarding calculation of its penalty. Because we do not, and need not, reach this 

issue, we deny Keller’s motion. The Commissioner’s motion provides a 

supplemental appendix containing documents from Tax Court decisions relevant to 

Keller’s appeal and comporting with Fed. R. Evid. 201(b)(2). See Estate of 

McMorris v. Comm’r, 243 F.3d 1254, 1259 n.8 (10th Cir. 2001). Accordingly, we 

grant the Commissioner’s motion.