[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

                               __________



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



            Printed for the use of the Committee on Finance

                                 ______

                         U.S. GOVERNMENT PRINTING OFFICE 

89-658-PDF                     WASHINGTON : 2013 
-----------------------------------------------------------------------
  For sale by the Superintendent of Documents, U.S. Government Printing 
  Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800 
         DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, 
                          Washington, DC 20402-0001




                          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

              Additional Material Submitted for the Record

                              ----------                              




[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]





                                   [all]


