July 22, 2017

Archives for July 14, 2017

Erin Lynn Sokol Appointed to Fourth Judicial District Court

On Wednesday, July 12, 2017, the Colorado State Judicial Branch announced the appointment of Erin Lynn Sokol to the district court bench in the Fourth Judicial District. Sokol will fill a vacancy created by the retirement of Hon. Gilbert A. Martinez, effective August 1, 2017.

Sokol is currently a trial lawyer at Hogan Lovells in Colorado Springs. She primarily focuses on commercial litigation and employment law. She is a trustee for the Legal Aid Foundation and is a member of the El Paso County and Colorado bar associations. She is also a director of the El Paso County Bar Foundation and the Legal Aid Foundation of Colorado. She received her undergraduate degree from the University of Michigan and her law degree from Georgetown University Law Center.

For more information about the appointment, click here.

Tenth Circuit: Challenge to Tax Penalty Should Have Been Raised in Initial Appeal

The Tenth Circuit Court of Appeals issued its opinion in Keller Tank Services II, Inc. v. Commissioner of Internal Revenue on Tuesday, February 21, 2017.

In this appeal from a ruling of the Tax Court, the Tenth Circuit Court of Appeals had to determine if a taxpayer may challenge a tax penalty in a Collection Due Process (CDP) hearing after previously challenging the penalty to the Appeals Office of the Internal Revenue Service. Keller Tank Services II, Inc. participated in an employee benefit plan called the Sterling Benefit Plan, but did not report its participation in the Plan on its tax return. Keller also deducted from its tax return deductions for its contribution into the Plan. The IRS determined a tax penalty for Keller’s failure to report its participation in the Plan, and assessed a deficiency against Keller for improper deductions of payments into the Plan.

Keller protested the penalty at the IRS Appeals Office, and after the Appeals Office affirmed the penalty, Keller tried to then protest the penalty in a CDP Hearing, where he was told he could not do so as he had already challenged the amount to the Appeals Office. Keller then appealed the CDP determination that he was not allowed to appeal the amount in his CDP hearing to the Tax Court, where the Commissioner of the IRS was granted summary. In defending against Keller’s appeal, the Commissioner argued that Keller’s appeal is moot because it was collaterally estopped from challenging its liability. Keller asserted that Treas. Reg. 301.6320-1(e)(3) unreasonably interprets 26 U.S.C § 6330(c)(2)(B) to preclude liability challenges at a CDP hearing when the taxpayer had the opportunity to dispute liability at the Appeals Office.

To begin, the Tenth Circuit addressed the Commissioner’s contention that Keller’s appeal was moot because it is collaterally estopped from challenging liability in light of Keller’ stipulation to be bound by the holding in Our Country Enterprises Inc., et al. v. Commissioner, that held another taxpayer’ participation in the same Plan was a reportable transaction. The court rejected this argument, and stated that the “constitutional mootness doctrine is grounded in the Article III requirement that federal courts may only decide actual ongoing cases or controversies,” while collateral estoppel concerns the actual merits of the case. The court stated that because mootness is a jurisdictional bar, while collateral estoppel is an affirmative defense, one cannot base mootness on collateral estoppel. Additionally, the court said that Keller’s stipulation was limited to its deficiency hearing and did not cover its penalty hearing, which is the only proceeding relevant to this appeal. Finally, as to the Commissioner’s argument, the court ruled that even if Keller’s stipulation were to collaterally estop Keller from challenging that its participation in the Plan was a listed transaction to report, Keller was alleging other issues that the outcome of the appeal would effect, refuting the mootness claim.

Turning to Keller’s challenge of its liability, Keller argues that Treas. Reg. 301.6320-1(e)(3), which interprets ‘a prior opportunity’ under 26 U.S.C § 6330(c)(2)(B) to include a conference with the Appeals Office, is an unreasonable interpretation of the section because it impermissibly limits the jurisdiction of the Tax Court and the federal courts and is “internally inconsistent.” Because this is an administrative interpretation of an ambiguous statute, the agency’s interpretation is given deference if it meets the standard first applied in Chevron, U.S.A., Inc. v. Nat’l Res. Def. Council, Inc. The Court reviewed the Tax Court’s application of the two-step Chevron deference test de novo. It its own application of the test, the Court determined that as to the first step, the statute itself is ambiguous as the term “opportunity to dispute” could be interpreted in more than one reasonable way.

Turning then to the second step, the Court had to determine if the Treasury Regulation’s interpretation of 26 U.S.C § 6330(c)(2)(B) was a reasonable one. The court held that it was a reasonable interpretation because nothing in the statute precludes the “opportunity to dispute” from being within the context of an administrative hearing. Furthermore, when the court looked to the broader context of the statute, it stated that 26 U.S.C § 6330(c)(4)(A) bars taxpayers from raising an issue at judicial or administrative form and then again raising the same issue at a subsequent CDP hearing. Therefore, the court reasoned that it was the intent of Congress that an administrative hearing could preclude consideration under 26 U.S.C § 6330(c)(2)(B) as well.

The court also rejected Keller’s claim that the Treasury Regulation impermissibly limits the jurisdiction of the Tax Court and federal courts, and therefore it should not receive Chevron deference. The Tenth Circuit stated that § 6330 establishes the Tax Court’s jurisdiction to review CDP proceedings, and the Regulation limits the scope of what may be heard at the CPD hearing, so while it limits the issues that may be raised at the hearing, it does not limit the issues that may be heard at the Tax Court. Finally, the court rejected Keller’s contention that the Regulation was internally inconsistent, stating that Keller failed to show that the Regulation is arbitrary, capricious, or manifestly contrary to the statute.

The Tenth Circuit Court of Appeals affirmed the Tax Court’s grant of summary judgment.

Tenth Circuit: Commerce Clause Authorizes Regulation of Take of Utah Prairie Dog

The Tenth Circuit Court of Appeals published its opinion in People for the Ethical Treatment of Property Owners v. U.S. Fish & Wildlife Service on Wednesday, March 29, 2017.

People for the Ethical Treatment of Property Owners (PETPO), representing over 200 property owners and entities, challenged a regulation promulgated by the Fish and Wildlife Service (FWS) pursuant to the Endangered Species Act (ESA). The challenged regulation restricts, but does not prohibit, the take of Utah prairie dogs, a listed threatened species, on non-federal land. The U.S. District Court of Utah granted PETPO’s request for summary judgment on the basis that neither the Commerce Clause nor the Necessary and Proper Clauses authorizes Congress to regulate the take. The FWS and Friends of Animals (FoA), as intervenors, appealed. Together they argue, that PETPO lacks standing and the challenged regulation is Constitutional. The Tenth Circuit agreed with the district court on the issue of standing, but concluded that the district court erred in its conclusion that the regulation was not authorized by the Commerce Clause. The court did not address whether the regulation was not authorized by Necessary and Proper Clause.

The Tenth Circuit first considered the issue of standing de novo. The parties disagreed whether the PETPO had sufficient standing for the summary judgment stage. The parties agreed that PETPO suffered an injury in fact that was traceable to the actions of defendant, but disagreed about whether PETPO’s injury would be redressable. PETPO claimed that the regulation was unduly burdensome and requested declaratory and injunctive relief, which “pertain to any federal prohibition on the take of Utah prairie dogs on nonfederal land.” The Tenth Circuit found that PETPO had standing, since the Necessary and Proper and Commerce clauses allow Congress to regulate the take.

The Tenth Circuit found that the district court erred in holding that the challenged regulation was not permissible under the Commerce Clause. The court held that “[R]egulation on nonfederal land of take of a purely intrastate species, like the Utah prairie dog, under the ESA is a constitutional exercise of congressional authority under the Commerce Clause.” The court applied the framework established by the Supreme Court in Gonzales v. Raich and found (1) the ESA to be a comprehensive regulatory scheme substantially affecting commerce; and (2) Congress had a rational basis to believe that the regulation at issue is an essential part of that scheme.

Here, the “[R]egulation of take of endangered and threatened species is directly related to—indeed, arguably inversely correlated with—economic development and commercial activity.” This is because Congress intended the ESA to conserve species, restrict commerce, and thereby promote long-term commerce. Further, the Commerce Clause authorizes Congress to regulate commerce, which includes “the power to prohibit commerce.”

Remaining was the question of whether regulation of a purely intrastate species, such as the Utah prairie dog, is authorized within the Raich framework. Here, the court reasoned that the majority of species protected by the ESA are intrastate. If this particular regulation is viewed in isolation as PETPO proposed, the “[p]iecemeal excision of purely intrastate species would severely undercut the ESA’s conservation purposes.” Further, this approach was foreclosed by Raich because it “[w]ould lead to just such a lingering death for the ESA—and likely for other regulatory schemes—insofar as every individual regulation passed within a larger regulatory scheme would be subject to a narrowly applied substantial effects test.” Therefore, “[C]ongress had a rational basis to conclude that providing for the protection of purely intrastate species is essential to the ESA’s comprehensive regulatory scheme.”

The court REVERSED and REMANDED with instructions to enter judgment in favor FWS and FoA.

Tenth Circuit: Unpublished Opinions, 7/13/2017

On Thursday, July 13, 2017, the Tenth Circuit Court of Appeals issued no published opinion and five unpublished opinions.

Watson v. Mylan Pharmaceuticals, Inc.

Jara v. Standard Parking

United States v. Wilfong

Auto-Owners Insurance Co. v. Fleming

Williamson v. Parker

Case summaries are not provided for unpublished opinions. However, some published opinions are summarized and provided by Legal Connection.