[Senate Hearing 113-388]
[From the U.S. Government Publishing Office]
S. Hrg. 113-388
NOMINATIONS OF MICHAEL B. THORNTON,
JOSEPH W. NEGA, AND F. SCOTT KIEFF
=======================================================================
HEARING
before the
COMMITTEE ON FINANCE
UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
on the
NOMINATIONS OF
MICHAEL B. THORNTON, TO BE A JUDGE OF THE UNITED STATES TAX COURT;
JOSEPH W. NEGA, TO BE A JUDGE OF THE UNITED STATES TAX COURT; AND F.
SCOTT KIEFF, TO BE A MEMBER OF THE UNITED STATES INTERNATIONAL TRADE
COMMISSION
__________
JULY 18, 2013
__________
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COMMITTEE ON FINANCE
MAX BAUCUS, Montana, Chairman
JOHN D. ROCKEFELLER IV, West ORRIN G. HATCH, Utah
Virginia CHUCK GRASSLEY, Iowa
RON WYDEN, Oregon MIKE CRAPO, Idaho
CHARLES E. SCHUMER, New York PAT ROBERTS, Kansas
DEBBIE STABENOW, Michigan MICHAEL B. ENZI, Wyoming
MARIA CANTWELL, Washington JOHN CORNYN, Texas
BILL NELSON, Florida JOHN THUNE, South Dakota
ROBERT MENENDEZ, New Jersey RICHARD BURR, North Carolina
THOMAS R. CARPER, Delaware JOHNNY ISAKSON, Georgia
BENJAMIN L. CARDIN, Maryland ROB PORTMAN, Ohio
SHERROD BROWN, Ohio PATRICK J. TOOMEY, Pennsylvania
MICHAEL F. BENNET, Colorado
ROBERT P. CASEY, Jr., Pennsylvania
Amber Cottle, Staff Director
Chris Campbell, Republican Staff Director
(ii)
C O N T E N T S
__________
OPENING STATEMENTS
Page
Baucus, Hon. Max, a U.S. Senator from Montana, chairman,
Committee on Finance........................................... 1
Hatch, Hon. Orrin G., a U.S. Senator from Utah................... 3
ADMINISTRATION NOMINEES
Thornton, Hon. Michael B., nominated to be a judge of the United
States Tax Court, Washington, DC............................... 5
Nega, Joseph W., nominated to be a judge of the United States Tax
Court, Washington, DC.......................................... 6
Kieff, F. Scott, nominated to be a member of the United States
International Trade Commission, Washington, DC................. 7
ALPHABETICAL LISTING AND APPENDIX MATERIAL
Baucus, Hon. Max:
Opening statement............................................ 1
Prepared statement........................................... 15
Hatch, Hon. Orrin G.:
Opening statement............................................ 3
Prepared statement........................................... 17
Kieff, F. Scott:
Testimony.................................................... 7
Prepared statement........................................... 19
Biographical information..................................... 21
Responses to questions from committee members................ 50
Nega, Joseph W.:
Testimony.................................................... 6
Prepared statement........................................... 61
Biographical information..................................... 62
Thornton, Hon. Michael B.:
Testimony.................................................... 5
Prepared statement........................................... 69
Biographical information..................................... 70
(iii)
NOMINATIONS OF MICHAEL B. THORNTON, TO BE A JUDGE OF THE UNITED STATES
TAX
COURT; JOSEPH W. NEGA, TO BE A JUDGE OF THE UNITED STATES TAX COURT;
AND
F. SCOTT KIEFF, TO BE A MEMBER OF
THE UNITED STATES INTERNATIONAL
TRADE COMMISSION
----------
THURSDAY, JULY 18, 2013
U.S. Senate,
Committee on Finance,
Washington, DC.
The hearing was convened, pursuant to notice, at 2:50 p.m.,
in room SD-215, Dirksen Senate Office Building, Hon. Max Baucus
(chairman of the committee) presiding.
Present: Senators Nelson, Hatch, and Thune.
Also present: Democratic Staff: Mac Campbell, General
Counsel; Lisa Pearlman, International Trade Counsel; Rory
Murphy, International Trade Analyst; and Tiffany Smith, Tax
Counsel. Republican Staff: Everett Eissenstat, Chief
International Trade Counsel; Shane Warren, International Trade
Counsel; Nicholas Wyatt, Tax and Nominations Professional Staff
Member; Rebecca Nasca, Staff Assistant; and Richard Chovanec,
Detailee.
OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR FROM
MONTANA, CHAIRMAN, COMMITTEE ON FINANCE
The Chairman. The committee will come to order.
Winston Churchill once said, ``All the great things are
simple, and many can be expressed in single words: freedom,
justice, honor, duty, mercy, hope.'' These principles guide our
democracy, and, while simple in concept, they require vigilance
to maintain. These principles require experienced citizens
willing to embrace public service. They require a fair and
reasonable legal system. They require public confidence in our
government.
The nominees before us must be vigilant in honoring these
principles. Between them, they have decades of experience and,
if confirmed, they will play an important role in protecting
the interests of millions of Americans.
Mr. Scott Kieff, you have been nominated by the President
to serve as a Commissioner of the U.S. International Trade
Commission, commonly referred to as the ITC. The ITC enforces
our Nation's trade laws, including our trade remedy laws and
section 337.
If confirmed, we will look to you to fairly and objectively
enforce those laws. We will also call upon you and the rest of
the ITC to provide the committee with economic research on
issues affecting global trade. I can tell you, they are very
important and mean a lot to us.
The ITC has provided us thorough reports in the past of the
barriers U.S. exporters and innovators face in foreign markets.
For example, Senator Grassley and I requested a ground-breaking
ITC study on Chinese intellectual property theft. That study
provided us with an independent, authoritative look at the
impact of IP theft on U.S. jobs and our economy.
I can assure you, Mr. Kieff, it will keep you busy. The
Finance Committee will continue to move forward with an
ambitious trade agenda. We will look to you for objective
analysis when shaping our policy.
As a graduate of MIT and the University of Pennsylvania,
Mr. Kieff, you have spent your career working on issues related
to international trade, in both the public and private sector
and in academia. Over the past 15 years, you have been teaching
law at some of the Nation's top universities, including George
Washington, Chicago, Harvard, and my alma mater Stanford, and I
know my colleagues on the committee will not hold that against
you.
Also with us today are Judge Michael Thornton and Joseph
Nega. You have both been nominated by President Obama to serve
as judges on the U.S. Tax Court. Judge Thornton, this is a
return engagement for you. You appeared before this committee
about 15 years ago after being nominated to the U.S. Tax Court
by President Clinton.
You cut your teeth as a tax counsel here on Capitol Hill
for the Ways and Means Committee, then at the Treasury
Department, serving under Secretary Rubin. Welcome back. You
have done a great job at the Tax Court, rising up to become the
chief judge. I am pleased that the President has re-nominated
you.
Finally, we will consider the nomination of Mr. Joseph Nega
to the U.S. Tax Court. Mr. Nega, you have dedicated your entire
life, your entire career, to public service. You began as a
young staffer in the House and served for the past 28 years on
the Joint Committee on Taxation. You now serve as a senior
legislative counsel at JCT. I do not know what this committee
or this Congress would do without a great team at JCT, and that
is very much an understatement. We very much value your work.
You cannot believe how much we value your work.
As you know, Judge Thornton, and as you will soon learn,
Mr. Nega, you are taking on a great responsibility at the
United States Tax Court. The Court provides Americans a forum
to address tax issues. Approximately 30,000 cases are filed in
the Court annually. If confirmed, you will be the arbiter on
these cases, and you must ensure that our tax codes are
administered fairly.
In the wake of the IRS scandal, public confidence in our
tax system is low. You must be thorough; you must give our
citizens a fair day in court. Your work can go a long way
toward restoring the public's confidence.
I thank all three of you for your willingness to serve in
these positions to which you have been nominated. You will have
the complex task of protecting and maintaining freedom,
justice, honor, duty, mercy, and hope, the great things of
which Winston Churchill spoke. Good luck.
[The prepared statement of Chairman Baucus appears in the
appendix.]
The Chairman. Senator Hatch?
OPENING STATEMENT OF HON. ORRIN G. HATCH,
A U.S. SENATOR FROM UTAH
Senator Hatch. Well, thank you, Mr. Chairman. I welcome the
opportunity to hear from our witnesses here today, and I am
pleased to welcome Scott Kieff to the committee today. He is
nominated to be a member of the U.S. International Trade
Commission, and that is very important to me.
His distinguished career includes work as a law professor
at several prestigious universities. He has also served as a
law clerk to the Honorable Giles S. Rich of the U.S. Court of
Appeals for the Federal Circuit and practiced law for 6 years
in Chicago and New York.
Mr. Kieff is currently a senior fellow at Stanford's Hoover
Institution, where he directs a project studying the law,
economics, and the politics of innovation. I have to say to Mr.
Kieff, your background is very impressive to me. I believe you
will be an exceptional addition to the International Trade
Commission, and I am looking forward to working with you and
seeing things work a little bit better than they have.
I am particularly impressed with your extensive background
in intellectual property issues. That is critical to our
country and very much ignored by many in the world today.
Intellectual property is the lifeblood of the U.S. economy, and
providing adequate protection to intellectual property is
fundamental to our continued ability to innovate and compete in
the global economy.
The ITC plays an important role in administering the laws
designed to protect U.S. intellectual property rights. For
example, the ITC's section 337 process is a vital tool for U.S.
companies that face unfair competition from foreign imports
that infringe their intellectual property. I have a
longstanding interest in making sure this process operates as
effectively as possible.
Senator Baucus and I recently requested that the Government
Accountability Office examine the effectiveness of the
enforcement of ITC's section 337 exclusion orders. The ITC also
conducts important analytical work related to intellectual
property. For example, the ITC conducted an important study
requested by this committee on the effects that intellectual
property rights infringement and indigenous innovation policies
in China have on U.S. jobs and, of course, our economy.
The ITC is also preparing a study requested by this
committee examining digital trade in the U.S. and global
economies, including the importance of effective intellectual
property rights protection. So, although the ITC is not a
policy-making agency, I believe Mr. Kieff's background and
expertise on intellectual property issues will bring an
important perspective to the agency's work, and I intend to
support you.
Today we will also hear from two nominees to the U.S. Tax
Court. As we all know, the Tax Court is very important, as it
is the only venue in which a taxpayer may challenge the
government before paying an assessed tax liability. The court
gives taxpayers a chance to be fully heard in a neutral and
public forum.
One of the nominees before us today is Joseph Nega, who
currently serves as Senior Legislative Counsel at the Joint
Committee on Taxation. Here on the Finance Committee, we have
benefitted from Mr. Nega's work for a long time. He will leave
behind very big shoes to fill at the JCT. So we are proud of
you and what you have been able to do.
We will also hear from Judge Michael Thornton, who has
already served very well a term on the Tax Court. Should he be
reconfirmed, taxpayers throughout the country will continue to
benefit from having his knowledge and expertise on the Tax
Court.
As is customary for Tax Court judges who are willing to
continue serving after their terms expire, Chairman Baucus and
I encouraged President Obama to reappoint Judge Thornton, and I
am glad that he followed our advice--one of the few times that
he has, of course. No, he has been pretty good about it.
In the same letter, we also recommended to the President
that he reappoint Judge L. Paige Marvel, whose term has also
expired. I hope that we will be able to consider that
nomination soon. It is the taxpayers who will pay the price if
the Tax Court is not kept staffed with qualified judges.
So, as you can see, we have some important positions to
fill, and, from the looks of it, we have some very qualified
nominees. So I want to thank you, Mr. Chairman, and I look
forward to hearing from these nominees. I look forward to
supporting all three of them.
The Chairman. Well, thank you, Senator, very, very much. I
deeply appreciate working with you.
[The prepared statement of Senator Hatch appears in the
appendix.]
The Chairman. I would now like to introduce the panel, but,
before doing so, I would like to recognize two in the audience
who are very important to the Court and very important to this
committee: Judge John Colvin and Judge Elizabeth Paris from the
U.S. Tax Court.
Would you both stand and be recognized, please? We honor
you both very much for your service. It is good to see good
people going on and continuing to perform good work in other
areas as you have in the Tax Court. Thanks for your service.
The first witness is Judge Michael Thornton, nominated to
his second term as judge on the U.S. Tax Court. The second
witness is Joseph Nega, nominated to be a judge on the U.S. Tax
Court. Finally is Scott Kieff, nominated to be a member of the
U.S. International Trade Commission.
Judge Thornton, why don't you begin? You probably know our
practice here, which is, your statement is automatically
included in the record, and why don't you summarize for about 5
minutes? If you want to speak longer and have great wisdom to
impart, we are ready to learn.
Judge Thornton. I will be very concise. Chairman Baucus,
Ranking Member Hatch----
The Chairman. Actually, before you begin, I would like you
to introduce your family.
Judge Thornton. I will be glad to do that. I have with me
today my wife, Alexandra Deane Thornton----
The Chairman. Hi.
Judge Thornton [continuing]. And my daughter, Kaley
Thornton.
The Chairman. Could you both stand again and be recognized?
[Applause.]
Go ahead.
STATEMENT OF HON. MICHAEL B. THORNTON, NOMINATED TO BE A JUDGE
OF THE UNITED STATES TAX COURT, WASHINGTON, DC
Judge Thornton. So, Chairman Baucus, Ranking Member Hatch,
distinguished members of the committee, thank you for the
privilege of appearing before you today. I last appeared before
this committee a little over 15 years ago, after I was
nominated for my first term as a Tax Court judge. I am grateful
to President Obama for nominating me for a second term on the
Court, and I am grateful to you and the committee's outstanding
staff for processing my nomination so promptly.
When she attended my first confirmation hearing, Kaley
here, who is sitting behind me, was just 3 years old and was
looking forward to entering preschool. It is a vivid reminder
of the passage of time that she is now looking forward to
attending Duke University in the fall. My other daughter,
Camille, unfortunately cannot be here today because she is
attending a summer camp out of town.
I came to the Tax Court after years of tax experience in
private practice, on the Hill, and in the Treasury Department.
That was all good preparation for the past 15 highly rewarding
years on the Tax Court, where I have endeavored to maintain the
Court's long tradition and high standards of resolving tax
controversies fairly, impartially, and expeditiously, in
accordance with congressional intent.
In addition to trying and deciding hundreds of cases, I
have worked actively to better the Court administratively in
ways such as modernizing its rules and bringing the Court more
up to date with the use of technology for e-filing and
providing remote electronic access to the Court's records.
Last year I was honored to have been elected by my
colleagues for a term as Chief Judge. If confirmed for another
term on the Court, I would hope to continue to help maintain
and enhance the public's confidence in the Tax Court as the
forum of choice for litigating Federal tax controversies.
Thank you very much. I would be happy to answer any
questions you might have.
The Chairman. Thank you, Judge.
[The prepared statement of Judge Thornton appears in the
appendix.]
The Chairman. You are next, Mr. Nega. If you could
introduce your family, that would be great, too.
Mr. Nega. My wife Cecily Rock is here, and my sons David
and Philip.
The Chairman. Could you all stand, please? All three?
Great. Thanks. [Applause.]
Why don't you proceed?
STATEMENT OF JOSEPH W. NEGA, NOMINATED TO BE A JUDGE OF THE
UNITED STATES TAX COURT, WASHINGTON, DC
Mr. Nega. Thank you. Chairman Baucus, Ranking Member Hatch,
distinguished members of the Finance Committee, it is a
privilege for me to be here today. Thank you for holding this
hearing to consider my nomination to be a judge on the U.S. Tax
Court. I am very grateful to President Obama for nominating me.
I would also like to thank the Finance Committee staff
members who have been generous with their time while working
with me on my nomination. It is with mixed emotions that I
appear before you here today after 28 years as a member of the
staff of the Joint Committee on Taxation on Capitol Hill. I
have truly enjoyed serving members of the House and Senate on
tax legislative matters, both on tax policy questions and
technical tax issues.
When I came to Capitol Hill in 1985 as a young attorney, it
was at the beginning of the legislative process which
culminated in the passage of the Tax Reform Act of 1986. Since
then, as a Joint Tax Committee staffer, I have provided
assistance to members and their staffs, as well as to committee
staffs, on tax proposals covering a range of subject areas.
During the 1980s, I attended Georgetown Law School at night
and earned a master's degree in tax law. I believe that my
training and my professional experience in the tax field give
me the background I will need to serve as a Tax Court judge and
to fairly and impartially apply the tax law.
I owe a great debt of thanks to all my colleagues on the
staff of the Joint Committee on Taxation, especially our chief
of staff, Tom Barthold. The tax lawyers, accountants, and
economists of the staff of the Joint Committee on Taxation have
shown me over and over the value of teamwork among
knowledgeable professionals with a wide range of expertise.
The clerks and support staff are among the best on the
Hill. When I leave Capitol Hill, I will miss the sense of
shared work and public service with these individuals and all
the many staffers who assist Congress in their attempts to
serve the American people. Sorry about this, Senator. This is
not my usual role. [Laughter.]
I would like to thank my parents, who instilled in me a
strong sense of public service. I suspect my mother will be
tuning in to C-SPAN to watch this hearing in Chicago.
I would also like to thank my wife of 24 years, Cecily
Rock, who is here today, and my sons David and Philip for their
love and support. If confirmed, I will work diligently to
resolve tax controversies fairly and expeditiously. Thank you
for the opportunity to testify.
The Chairman. Thank you, sir, very much.
[The prepared statement of Mr. Nega appears in the
appendix.]
The Chairman. Mr. Kieff, your family?
Mr. Kieff. If I may, since we have a large group and I will
briefly introduce them in the remarks, may I just ask my family
to stand, please, and be recognized?
The Chairman. Sure.
Mr. Kieff. I thank them all for coming, many from great
distances. [Applause.]
The Chairman. I think you have the record. [Laughter.]
Mr. Kieff. They are a supportive bunch.
STATEMENT OF F. SCOTT KIEFF, NOMINATED TO BE A MEMBER OF THE
UNITED STATES INTERNATIONAL TRADE COMMISSION, WASHINGTON, DC
Mr. Kieff. Chairman Baucus, Ranking Member Hatch, and
members of the committee, thank you for inviting me to appear
before you today to consider my nomination. I am grateful to
President Obama for nominating me, to Minority Leader McConnell
for supporting my nomination, and to Chairman Baucus and to
Ranking Member Hatch for bringing us together for this
confirmation hearing.
I also am grateful for the love and support from my family,
several of whom are with me today: my wife Rebecca, my mom
Jacqueline, my sister Elizabeth and brother-in-law Tom, their
children Asher and Estelle, my uncle Nelson, and my parents-in-
law Terrie and Roy. Although he could not be here today, I give
special thanks to my 4-month-old son Evan for being such a
great sounding board during his midnight feedings. [Laughter.]
And recognizing how hard it can be for the doctor to become
the patient, I know how much my father Elliott and brother
David wanted to be here today. I wish my dad a speedy recovery
and appreciate David covering for mom on dad's care so she
could travel to be here.
I am particularly honored and humbled to be here across the
river from Arlington National Cemetery, where two of my
grandparents are buried, as we discuss this opportunity for me
to continue my family's tradition of public service.
The opportunity to engage each area of the Commission's
wide-ranging docket would call upon many favored aspects of the
work I have long enjoyed throughout my career working as a
practitioner, an academic, mediator, arbitrator, and
consultant.
The title 7 antidumping and countervailing duty portion of
the docket would provide a welcome opportunity to continue my
work, applying diverse statutory injury factors to the facts
and circumstances of specific industries and products.
I would take particular pleasure in the section 337 portion
of the Commission's docket, as I have throughout my 2 decades
of devotion to the field of intellectual property. And the
Commission's research activities on industry and economic
analysis relating to section 332 and other statutory duties to
prepare reports and provide trade policy support, offer a
fascinating range of opportunities to continue my academic
commitment to exploring and explaining real-world impacts of
various approaches to trade.
In all of these areas, I would greatly enjoy working with
the other members of the Commission and the Commission staff as
we exchange ideas and learn from each others' diverse wealth of
experiences and perspectives. Having long enjoyed working as a
neutral mediator and arbitrator selected by all sides of a
given dispute, if I were confirmed to this post I would enjoy
faithfully and impartially working within the legal framework
applicable to each matter then before the Commission to enforce
the law based on the particular facts.
Several areas of the Commission's docket have been the
focus of increasing attention and policy debates, and I
understand the many diverse perspectives that have been
offered. But I take seriously the limited role of a
Commissioner and recognize that any legal change would be the
domain of this committee, the Congress, and the President, with
interpretation when appropriate from courts that review the
Commission's work.
Over the past few months, I have enjoyed frank, substantive
discussions with several of you and your staffs, and I look
forward to answering any questions you may have. Thank you.
The Chairman. Thank you, Mr. Kieff.
[The prepared statement of Mr. Kieff appears in the
appendix.]
The Chairman. Judge Thornton, what are your thoughts now
that you have been on the Court 15 years? Do you have some
ideas about the tax laws we pass here, which ones maybe make
sense and which ones do not, which ones are unnecessarily
complicated?
As you know, we are working on passing tax reform
legislation in this Congress. Is there any advice you could
give us as a judge to minimize litigation or to get more
clarity, perhaps? I do not know if that is going to minimize
litigation, but just give us any thoughts that you might have
in proceeding forward. I would ask the same question of you,
Mr. Nega. Although you do not have experience as a Tax Court
judge, you certainly do over at the Joint Committee on
Taxation.
Judge Thornton. With all due respect, I would have to defer
to the Congress and the policies that are enacted into tax law.
I think as a general principle, simpler is better. Probably
simpler tax laws, I imagine, contribute to fewer controversies,
even though there are a lot of factors that would go into
determining the case load at the Court.
The experience of the Tax Reform Act of 1986 is probably
instructional. In the mid-1980s, the Tax Court experienced an
explosion of case filings. After the Tax Reform Act of 1986,
there was a diminishing of the cases filed. I think the Tax
Reform Act of 1986 was partially responsible for that, some of
the simplification matters and the base-broadening matters--not
entirely responsible, but partly. That is probably a good
example.
Another example: in 1993 when Congress enacted section 197,
which provided a way of reducing controversy about the
amortization of intangibles, I think that has been a very
successful provision, and very few cases that I see come into
controversy about that. So, just as a general proposition, I
think measures to simplify the tax code probably result in
benefits to the Court in terms of fewer controversies.
The Chairman. In what area do you find most litigation?
Over what section or area of the code?
Judge Thornton. You know, that is a hard question to
answer. Most of our petitioners are pro se, unrepresented
taxpayers. Most of them have fairly small amounts at issue. So
most of the types of issues that we see from them are the types
of issues you might expect: substantiation issues, unreported
income, that type of thing. So, given the broad base of people,
the 30,000 cases a year that are filed in our court, most of
those people tend to have fairly run-of-the-mill type issues
like that.
The Chairman. All right.
Mr. Nega, from your perspective on the Joint Committee, is
there any advice you have? I mean, you all are going to get
confirmed, so do not worry about that. [Laughter.]
So just be candid, knowing you are going to get confirmed.
Mr. Nega. Well, thank you, Senator. Well, this is my last
opportunity to discuss tax policy because, as a member of the
judiciary, it will be my job to take the tax laws as passed by
Congress and signed by the President and enforce them
expeditiously.
So I will take the opportunity to say that I agree with
Judge Thornton: simpler is better. The experience of the 1986
act taught us that. I do recognize that there are
countervailing factors that members of Congress have to take
into account, whether or not it is social or fiscal policy. As
a general rule, simpler is better in most things, especially in
the tax law.
The Chairman. We all think that. Sometimes it is hard to
know what simple is. I mean, the statute might be simple, but
it can be applied in a near-infinite number of circumstances.
Take the First Amendment of the Constitution, ``Congress shall
pass no law abridging the freedom of speech.'' Well, what in
the heck does that mean? I mean, when you say ``simpler,'' you
mean, what? Base-broadening, fewer provisions? Does that help
or what?
Mr. Nega. What they taught me back in my JD and my LLM
programs was, as a general rule, remember four words: ``base-
broadening'' and ``lower rates.'' In my role as staff person,
that is something that I have always taken to heart in trying
to advise other staff people. I think that there are going to
be exceptions from that rule. It is a very complicated economy,
and Congress has to respond to the complicated world we live
in. But if you will remember broad base, lower rates, you are a
long way towards improving the tax system.
The Chairman. Mr. Kieff, we are going to take up trade
legislation this year, and certainly Trade Promotion Authority.
It might be an opportunity to also address legislation as it
affects the ITC. Your thoughts, ideas, recommendations? Again,
you are going to be confirmed too, so do not worry.
Mr. Kieff. Well, you are very kind, Chairman Baucus. As my
colleagues at the table have expressed, I too would be in a
role that would be, not a policy role, it would be a role in
which I would be constrained to apply the law to the facts.
But I hear what you are saying and agree that there are
important issues, and I really enjoyed writing about and
working on them for many years. I think that the Commission
itself has taken some steps in this area to improve the
efficiency of dispute processing, so electronic dockets, things
like that, e-discovery--and I understand that the committee is
considering a number of approaches as well.
The Chairman. Thank you.
I have four obligatory questions I have to ask each of the
three of you before proceeding with Senator Hatch. If you could
all answer, please. I will ask the same question of all three,
but I will start with you, Judge Thornton. You have been
through this drill before.
Is there anything that you are aware of in your background
that might present a conflict of interest with the duties of
the office to which you have been nominated?
Judge Thornton. No, sir.
Mr. Nega. No, sir.
Mr. Kieff. No, sir.
The Chairman. Thank you. Do you know of any reason,
personal or otherwise, that would in any way prevent you from
fully and honorably discharging the responsibilities of the
office to which you have been nominated?
Judge Thornton. No, sir.
Mr. Nega. No, sir.
Mr. Kieff. No, sir.
The Chairman. Do you agree, without reservation, to respond
to any reasonable summons to appear and testify before any duly
constituted committee of Congress, if confirmed?
Judge Thornton. Yes, sir, I do.
Mr. Nega. Yes, sir.
Mr. Kieff. Yes, sir.
The Chairman. And finally, do you commit to provide a
prompt response in writing to any questions addressed to you by
any Senator of this committee?
Judge Thornton. Yes, sir, I do.
Mr. Nega. Yes, sir.
Mr. Kieff. Yes, sir.
The Chairman. Thank you.
Senator Hatch?
Senator Hatch. Well, thank you.
Mr. Kieff, as you are no doubt aware, intellectual property
is an important part of our U.S. economy. In my State of Utah,
IP is the lifeblood of our industries, from information
technology to the life sciences. As I mentioned in my opening,
the ITC provides a vital tool for U.S. companies that face
unfair competition from foreign imports that infringe their IP.
Would you be kind enough to share your thoughts on the
section 337 process and what you would do to make it as
effective as possible?
Mr. Kieff. Well, thank you, Senator. Those are really
important areas, and I have enjoyed working on these issues for
a long time. Certainly, if confirmed, I would work within the
law at the time, given the particular facts of each case, to
apply that law. I take it what you are asking for is a general
overview, is that right?
Senator Hatch. Well, really how you make it work better,
and how you make that particular section as effective as
possible.
Mr. Kieff. Yes. The Commission, with assistance from many
others including the Federal Circuit, the body that reviews the
Commission's work, has worked to already start the process of
improving procedures, to have them move faster, to look for
ways to make them more efficient. And, as someone who has
really enjoyed working on improving procedural efficiencies in
different government roles in the past as an advisor, if
confirmed I would really enjoy working with my colleagues at
the Commission and with the Commission staff to continue that
process.
Senator Hatch. All right.
In your testimony, you mentioned how important economic
analysis provided by the ITC is to helping to explain the
impacts of international trade on the U.S. economy. Can you
tell us what steps you would take, if confirmed as an
International Trade Commissioner, to ensure that the ITC
provides Congress and the public with the best, most reliable
economic analysis available?
Mr. Kieff. Yes. I think the short answer is that I would
engage, sleeves rolled up, pen in hand, reading glasses on,
working with my colleagues to really dive into the facts of
those matters, because I think the Commission has a great staff
that really has a tradition of engaging the serious economic
issues. It would be fun for me to work with them.
Senator Hatch. Can you share with us some of your thoughts
on how the ITC can assist Congress and the administration to
develop and implement effective trade policy to best benefit
American manufacturers, farmers, and service providers?
Mr. Kieff. Yes. The Commission has their tradition of
working with both the legislative branch and the executive
branch to provide analysis and factual data to support you in
your policy role. So I would continue that tradition, if
confirmed.
Senator Hatch. All right. To both of you Tax Court folks:
you know you are going to be trying cases that are worth
millions of dollars, and some that are worth hundreds; some
that are for very wealthy people, some for people who are not
so wealthy.
As a Tax Court judge, I would like each of you to answer
this question. Like I say, you are going to preside over many
cases that involve unsophisticated taxpayers with few resources
to deploy while making their cases. What lessons do you take
from your prior professional experiences to ensure that you
will treat these taxpayers with respect and understanding while
stopping short of awarding them an advantage that they do not
deserve? Mr. Thornton?
Judge Thornton. Senator Hatch, in the last 15 years I have
been on the Court, I have been particularly impressed with the
number of unrepresented taxpayers who come before our court.
The Tax Court has a long tradition of trying to develop rules
and procedures that are friendly to those taxpayers.
I think our judges collectively have an attitude of trying
to do what we can to assist those taxpayers. The Court is
especially proud of our efforts to make sure that every
taxpayer has an opportunity for access to justice through
taxpayer clinics and pro bono programs.
So I personally am committed to doing everything I can to
assist taxpayers without becoming an advocate for the taxpayer,
but at least trying to make sure they understand the procedure.
Many of the taxpayers who come to the Court are very
intimidated by the entire judicial process. Maybe they have
never been to court before.
I think part of our job is to try to set them at ease, try
to help them understand what they need to do to comply with the
Court's rules and procedures but, as you say, without becoming
their advocate, but making sure they have an opportunity for
access to justice as they might desire it.
Senator Hatch. Well, thank you.
Mr. Nega?
Mr. Nega. I do not think I can say it better than Judge
Thornton, but I will say it slightly differently. I realize
that the Tax Court experience might be the most important
experience that each taxpayer has with the Federal Government,
and I think it is important that you treat them with respect,
but again without crossing over the line and becoming an
advocate for a pro se taxpayer. So I think you just have to
start each day trying to apply the laws fairly on each case.
Senator Hatch. Well, thank you, Mr. Chairman.
The Chairman. Thank you, Senator.
Senator Thune?
Senator Thune. Thank you, Mr. Chairman. Mr. Chairman, I
think we ought to have these nominees think that their
confirmation is still in doubt until they answer these
questions and make sure we get the right answers. [Laughter.]
I want to direct this question to Mr. Thornton and Mr.
Nega. I appreciate the fact that it may not be appropriate to
comment on specific cases before the Tax Court, but I want to
raise a recent Tax Court decision that caught my attention, and
it was Morehouse v. IRS. The Court recently ruled that
Conservation Reserve Program payments are subject to self-
employment taxes, even where the individual receiving the
payments is not actively farming the land. In this particular
case, the individual inherited the land in my State of South
Dakota, but he lived in Minnesota and was not actively engaged
in farming.
Yet, the Tax Court broke with prior decisions in finding
that the taxpayer had to pay self-employment taxes on the CRP
payments, whereas prior court decisions had found that a CRP
participant needed to materially participate in the farming
operation in order to be liable for any self-employment taxes.
This decision causes concerns for a lot of reasons because,
the heavier CRP payments are taxed, the less likely it is that
owners of environmentally sensitive farmland will want to
participate in this important conservation program, which will
increase taxpayer liabilities under crop insurance and disaster
programs by moving land into crop production as opposed to
keeping it in CRP.
So I guess I just would be curious if either of you have
any views on this issue of whether these types or forms of
payments, Conservation Reserve or CRP payments, should be
subject to self-
employment tax in instances where the owner of the farmland is
not actively--or is not considered, I should say--actively
engaged in farming.
Judge Thornton. Senator Thune, I would address the question
more generally, I suppose, by explaining the process of the
Court. All the Court's opinions are reviewed by the entire
Court. We have 19 active judges when we are fully staffed, and
we all review all the decisions.
In making that decision, we try to adhere the best we can
to other judicial precedents. I believe in that particular case
there were other appeals court cases that the Court looked to.
The Tax Court sits in 74 cities throughout the country, and
cases are appealed in 12 different circuits, so we are bound to
apply the law of that circuit wherever the case might arise.
So it is those types of considerations that play into the
Court's decision, trying to make sure we are in the mainstream
of the legal system, trying to be consistent with the
jurisprudence of the appeals circuit in which the case
originates. But I assure you that every case is decided only
after very careful consideration by the entire Court of the
particular facts of the case, the law of the case, and how the
Court believes Congress intended the law to apply.
As to the specifics of the outcome of this case, I am not
in a very good position to comment on that, but that is the
general process by which we try to decide all our cases.
Senator Thune. Anything to add, Mr. Nega?
Mr. Nega. I have to admit that I am not familiar with the
facts of the case, so I am really not in a position to respond
at this point.
Senator Thune. All right. I understand. Like I said, it is
a pending case. But I just think, in terms of tax principle,
tax policy, the payroll tax, self-employment tax, is a Federal
tax and, in the past, has never been applied unless there was
material participation in a farming operation. This is a pretty
important precedent for a lot of reasons, like I said, one of
which is that we are doing everything we can to keep some of
these environmentally sensitive lands in the CRP program.
This is yet another disincentive toward that, if those who
own farmland--perhaps are not materially participating in its
operation but are benefitting from the CRP payments--are
assessed self-
employment taxes. That is obviously a tax consequence that is
going to affect the decision that they make, the economic
decision, about whether or not to keep it in the program. So,
just put it on your radar screen if nothing else.
Mr. Kieff, the ITC has many important functions. The
Commission has recently received a good deal of attention
around these 337 cases which you mentioned, which are cases
where one party is asking the Commission to issue an order
stopping the importation of another company's product.
As you know, these cases often involve high-tech companies
that find themselves at odds over patent disputes. Given your
expertise in this area, I would be curious to know if you
believe the ITC process for considering these cases is
currently working, or if these cases would not be better suited
to district court, where monetary damages could be awarded, as
opposed to these exclusion orders.
Mr. Kieff. Thank you, Senator. I think you are absolutely
right that these are important issues and that they do have
impact. The Commission has a tradition of wrestling with these
issues pretty well, and, like many things in life, it can be
improved, and the Commission has taken steps to find ways to
help resolve disputes quickly that really should not be in the
dispute process.
So, there is a faster way to make earlier decisions in the
matter, when it just seems like there really is no dispute, no
genuine dispute. That is a tool that district courts have. They
have rule 12, they have rule 56. The Commission has developed
its versions of those approaches, and so far those seem to be
meeting with good results. Other techniques can be tried as
well, and I would enjoy working with my colleagues to help do
that, if confirmed. Ultimately though, it is up to this body
and the Congress and the President to decide whether the
Commission has this role.
Senator Thune. Yes. Do you think, though, that these cases
are better suited to district courts, where you can have actual
monetary damages awarded as opposed to the outcomes, the
reliefs, that are allowed for under your jurisdiction?
The Chairman. Let me just break in here. You can continue
as long as you want, Senator. I must leave right now. There is
a vote occurring right now too. But it is up to you. You can
speak as long as you want, but I just----
Senator Thune. Do you want me to just gavel us out, or are
you coming back?
The Chairman. You can gavel us out. Yes. I am not coming
back; I cannot.
Senator Thune. So I should pronounce them confirmed?
[Laughter.]
I am sure they might appreciate that.
The Chairman. You could tell them that we are going to
schedule a vote on their confirmation as quickly as we possibly
can.
Senator Thune. All right. Thank you, Mr. Chairman.
Judge Thornton. Thank you, Mr. Chairman.
Mr. Nega. Thank you, Mr. Chairman.
Mr. Kieff. Thank you, Mr. Chairman.
Senator Thune, please.
Senator Thune. Well, yes. I was just going to ask you again
to give me your thoughts about whether or not these cases are
better suited for district court.
Mr. Kieff. Yes. So I think that there is a lot of
interesting work that has been done to analyze how district
court proceedings, on their own terms, work, how Commission
proceedings at the ITC work. There seems to be a pretty good
consensus that there are a lot of pluses and minuses to both
venues and to both types of remedies. So the district courts,
as you point out, have the remedies available, damages and
injunctions, and the ITC has its remedy available, the
exclusion order. Those really are different things.
My understanding, having really enjoyed working on these
issues for a very long time in each of those settings, is that
there are pluses and minuses to each of them, which then means
trade-offs have to be made. Those are ultimately policy
questions.
Senator Thune. All right.
Do you guys have anything?
[No response.]
Senator Thune. I guess that is a wrap. Thank you all very
much.
This hearing is adjourned. Thanks.
[Whereupon, at 3:30 p.m., the hearing was concluded.]
A P P E N D I X
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