[Senate Hearing 116-509]
[From the U.S. Government Publishing Office]
S. Hrg. 116-509
NOMINATIONS OF MICHAEL N. NEMELKA, CHRISTIAN N. WEILER, AND ALINA I.
MARSHALL
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON FINANCE
UNITED STATES SENATE
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
ON THE
NOMINATIONS OF
MICHAEL N. NEMELKA, TO BE DEPUTY UNITED STATES TRADE REPRESENTATIVE FOR
INVESTMENT SERVICES, LABOR, ENVIRONMENT, AFRICA, CHINA, AND THE WESTERN
HEMISPHERE, WITH THE RANK OF AMBASSADOR, EXECUTIVE OFFICE OF THE
PRESIDENT; CHRISTIAN N. WEILER, TO BE A JUDGE OF THE UNITED STATES TAX
COURT; AND ALINA I. MARSHALL, TO BE A JUDGE OF THE UNITED STATES TAX
COURT
__________
JULY 21, 2020
__________
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Finance
__________
U.S. GOVERNMENT PUBLISHING OFFICE
46-156-PDF WASHINGTON : 2021
COMMITTEE ON FINANCE
CHUCK GRASSLEY, Iowa, Chairman
MIKE CRAPO, Idaho RON WYDEN, Oregon
PAT ROBERTS, Kansas DEBBIE STABENOW, Michigan
MICHAEL B. ENZI, Wyoming MARIA CANTWELL, Washington
JOHN CORNYN, Texas ROBERT MENENDEZ, New Jersey
JOHN THUNE, South Dakota THOMAS R. CARPER, Delaware
RICHARD BURR, North Carolina BENJAMIN L. CARDIN, Maryland
ROB PORTMAN, Ohio SHERROD BROWN, Ohio
PATRICK J. TOOMEY, Pennsylvania MICHAEL F. BENNET, Colorado
TIM SCOTT, South Carolina ROBERT P. CASEY, Jr., Pennsylvania
BILL CASSIDY, Louisiana MARK R. WARNER, Virginia
STEVE DAINES, Montana SHELDON WHITEHOUSE, Rhode Island
TODD YOUNG, Indiana MAGGIE HASSAN, New Hampshire
BEN SASSE, Nebraska CATHERINE CORTEZ MASTO, Nevada
Kolan Davis, Staff Director and Chief Counsel
Joshua Sheinkman, Democratic Staff Director
(ii)
C O N T E N T S
----------
OPENING STATEMENTS
Page
Grassley, Hon. Chuck, a U.S. Senator from Iowa, chairman,
Committee on Finance........................................... 1
Wyden, Hon. Ron, a U.S. Senator from Oregon...................... 2
Cassidy, Hon. Bill, a U.S. Senator from Louisiana................ 5
ADMINISTRATION NOMINEES
Nemelka, Michael N., nominated to be Deputy United States Trade
Representative for Investment Services, Labor, Environment,
Africa, China, and the Western Hemisphere, with the rank of
Ambassador, Executive Office of the President, Washington, DC.. 6
Weiler, Christian N., nominated to be a judge of the United
States Tax Court, Washington, DC............................... 8
Marshall, Alina I., nominated to be a judge of the United States
Tax Court, Washington, DC...................................... 9
ALPHABETICAL LISTING AND APPENDIX MATERIAL
Cassidy, Hon. Bill:
Opening statement............................................ 5
Grassley, Hon. Chuck:
Opening statement............................................ 1
Prepared statement........................................... 31
Marshall, Alina I.:
Testimony.................................................... 9
Prepared statement........................................... 31
Biographical information..................................... 32
Responses to questions from committee members................ 38
Nemelka, Michael N.:
Testimony.................................................... 6
Prepared statement........................................... 41
Biographical information..................................... 42
Responses to questions from committee members................ 46
Weiler, Christian N.:
Testimony.................................................... 8
Prepared statement........................................... 55
Biographical information..................................... 56
Responses to questions from committee members................ 86
Wyden, Hon. Ron:
Opening statement............................................ 2
Prepared statement........................................... 87
(iii)
NOMINATIONS OF MICHAEL N. NEMELKA,
TO BE DEPUTY UNITED STATES TRADE
REPRESENTATIVE FOR INVESTMENT
SERVICES, LABOR, ENVIRONMENT,
AFRICA, CHINA, AND THE WESTERN
HEMISPHERE, WITH THE RANK OF
AMBASSADOR, EXECUTIVE OFFICE OF
THE PRESIDENT; CHRISTIAN N. WEILER,
TO BE A JUDGE OF THE UNITED STATES
TAX COURT; AND ALINA I. MARSHALL,
TO BE A JUDGE OF THE
UNITED STATES TAX COURT
----------
TUESDAY, JULY 21, 2020
U.S. Senate,
Committee on Finance,
Washington, DC.
The WebEx hearing was convened, pursuant to notice, at
10:14 a.m., in Room SD-215, Dirksen Senate Office Building,
Hon. Chuck Grassley (chairman of the committee) presiding.
Present: Senators Enzi, Toomey, Cassidy, Lankford, Wyden,
Cantwell, Carper, Cardin, Hassan, and Cortez Masto.
Also present: Republican staff: Mayur Patel, International
Trade Counsel; Jeffrey Wrase, Deputy Staff Director and Chief
Economist; and Nicholas Wyatt, Tax, Infrastructure, and
Nominations Policy Advisor. Democratic staff: Michael Evans,
Chief Counsel; Ian Nicholson, Investigator; Joshua Sheinkman,
Staff Director; and Jayme White, Chief Advisor for
International Competitiveness.
OPENING STATEMENT OF HON. CHUCK GRASSLEY, A U.S. SENATOR FROM
IOWA, CHAIRMAN, COMMITTEE ON FINANCE
The Chairman. Welcome, everyone, to today's hearing on
pending nominations. Today, we will have an opportunity to hear
testimony from the President's nominees for positions with the
U.S. Trade Representative, and of course also with the U.S. Tax
Court.
We will hear from Michael Nemelka, who has been nominated
to serve as a Deputy U.S. Trade Representative. We will also
hear from Christian Weiler and Alina Marshall, both of whom
have been nominated to be judges of the U.S. Tax Court for a
15-year term.
We congratulate the nominees and show our appreciation for
their willingness to serve their country. The background of
each of these individuals is impressive. They are all very
accomplished professionals, and of course we applaud the
President for selecting people who are so well-qualified to be
nominees for these positions.
I would also add that there is a clear need to fill these
positions very quickly. The pandemic has taken a terrible
economic toll on the country. Recovery requires an ambitious
trade agenda to open markets and create new jobs for our
citizens. The current U.S. Trade Representative, Ambassador
Lighthizer, is trying to do exactly that, including by
negotiating a trade agreement with Kenya. Mr. Nemelka would
assist him with this important goal. That is why we need to get
this nominee over to the U.S. Trade Representative to help
Ambassador Lighthizer.
Today, we will also have nominees to the U.S. Tax Court.
The Tax Court is especially important in that it gives ordinary
taxpayers a place to challenge the IRS before they need to pay
the disputed liability. In a disagreement that any citizen has
with the IRS, these people can feel like they have no way to
voice a disagreement with such a large and powerful government
agency. The Tax Court then gives those taxpayers a place for
their dispute with the IRS to be considered fairly. Like many
other institutions, the Tax Court has been required to adapt to
the COVID-19 situation and is conducting their proceedings
remotely, as we are today. Even in this new environment, a
delayed tax day finally came last week, and taxpayers will
still need a forum for dispute resolution.
If the two nominees before us today are confirmed, we will
have 18 of 19 positions for judges of the Tax Court being
filled.
So I say ``thank you'' to everyone who is participating in
today's hearing, whether you are personally present or
remotely. I hope that we will be able to take some steps today
that will help economic recovery by advancing these nominees
and letting the government serve the people according to their
guidance.
I look forward to hearing the nominees' statements and,
hopefully, to working with them very soon.
[The prepared statement of Chairman Grassley appears in the
appendix.]
The Chairman. Now we will hear from Senator Wyden.
[Pause.]
The Chairman. Senator Wyden?
OPENING STATEMENT OF HON. RON WYDEN,
A U.S. SENATOR FROM OREGON
Senator Wyden. Mr. Chairman? Can you hear me, Mr. Chairman?
The Chairman. Yes; thank you very much.
Senator Wyden. And, Mr. Chairman, you should have the staff
work on your system there because a lot of what you said at the
end was pretty much garbled. So if they can correct it, I think
that will help you and the committee.
The committee of course comes together today to discuss two
nominations to the Tax Court and one for a position at the
trade office. The Tax Court of course is all about fundamental
fairness to taxpayers, giving taxpayers a venue to dispute
potentially mistaken charges before they would have to pay.
The trade office of course faces big challenges: the Phase
One China trade deal, the one the President says was the
biggest and best anywhere, is already failing. The new NAFTA
certainly is at risk of becoming only so many words on paper if
the administration does not step up on implementing the labor
obligations which Senator Brown and I and so many on our side
of the committee fought for to dramatically change trade
policy. In the fight against trade cheats, American workers and
businesses need USTR to do better.
So these are both important roles. The nominees before the
committee, in my view, are qualified to fill them.
With that said, this is the committee's first meeting after
a recess that the Senate should not have taken. In the
pandemic, virtually every new day is the worst day yet, with
tens of millions of jobless Americans headed over an income
cliff, literally losing a lifeline of supercharged unemployment
benefits that were developed in the Finance Committee room.
So, while the nominations before this committee are
important--and I very much look forward to discussing important
issues with our witnesses--the committee quickly needs to move
beyond business as usual. There are COVID hot spots all over
the country. Just like in March and April, the testing cannot
keep up with the spread of the virus. Health-care workers do
not have adequate protective equipment.
You can count on one hand the States that literally have
the pandemic under control. Parents, we're hearing--and I heard
this in Oregon just over the past week--are afraid to send
their kids back to school. And too many school districts do not
know when or how they will be able to bring children back
safely. It is a disaster for teachers and staff, for kids, and
for parents--many of whom may have to drop out of the workforce
in order to make sure their youngsters are taken care of.
And here are the facts with respect to the economic
challenge. And of course our committee is front and center on
those economic challenges. Consumer spending is dropping.
Short-term furloughs are turning now into permanent furloughs.
The number of new weekly unemployment claims, which before this
year had never crossed 700,000, has been a million or more for
17 weeks straight. Everybody understands that the country is at
the beginning of a once-in-a-century unemployment crisis.
But if not for the supercharged unemployment benefits--
which I am going to mention were developed in the Finance
Committee room--keeping families afloat, this country would
also be in the middle of its second Great Depression. Those
benefits, however, are going to expire in a matter of days.
They are going to lapse if Senate Republicans refuse to act
by July 25th. That, in my view, will be a moral and economic
disaster that is just going to hit the country like a wrecking
ball. Folks are not going to have the money they need to make
rent and buy groceries. We ought to make sure everybody
understands those super-charged benefits did so much to keep
our economy afloat over the last months.
Now, the Trump administration does not have a plan for any
of this. The administration now is hiding COVID data from the
public, going by media reports. The big idea is to cut jobless
workers' lifeline to pay for tax handouts to corporations and
Wall Street.
So I am just going to close with a little bit of history so
everybody understands what we are dealing with over the next
few weeks.
In the Finance Committee room, Finance Committee leadership
developed the original unemployment package. As Secretary
Scalia said, you could not do the first choice, which was basic
wage replacement, so we had to go with an averaging technique,
which was $600 per week each week. And that has allowed
millions--even with all the hassles at the State level in
trying to get the IT systems up and running--it has allowed
millions to pay rent and to buy groceries, and to be able to
survive as we deal with this pandemic.
And this was put together by Finance leadership and signed
off on by Secretary Mnuchin in the Finance Committee room. So
now, renewing those supercharged unemployment benefits at a
time when the unemployment rate is so high cannot wait any
longer.
The Senate should have done that weeks and weeks ago,
instead of leaving town for a recess. Now the Democratic
leader, Senator Schumer, and I have a proposal called the
American Workforce Rescue Act that in effect would tie future
unemployment benefits to economic conditions on the ground.
I have heard Republican Senators say, for example, they
understand the need for a benefit when unemployment is high and
folks cannot pay rent and buy groceries, but the benefit really
should taper off when the unemployment rate goes down. That is
exactly what Senator Schumer and I have talked about, and
members of the Republican leadership have in effect said
virtually what I just described.
By delaying unemployment benefits, in my view, the
Republican leader is exploiting for political leverage all
those Americans who are walking on an economic tightrope. It is
wrong. It ought to end this week. And I hope people are
following the Senate this week, because we are going to do
everything we can to make it possible to get supercharged
benefits renewed this week. Because, come July 25th, millions
of Americans are going to see their lifeline--what they need to
make rent, buy groceries--they are going to see that lifeline
cut massively. And it is being cut over the opposition of
Senate Democrats.
So today's hearing is going to examine important
nominations. Mr. Chairman, I am going to close by saying I
appreciate you calling the hearing. I look forward to the
questions and answers. And in the days ahead, I hope this
committee turns again to address the income cliff and the
pandemic that has killed 140,000 Americans and threatens to do
extraordinary, long-lasting damage to our economy.
These are challenges that the Senate Finance Committee can
address, and it ought to be done this week. Thank you, Mr.
Chairman.
The Chairman. Thank you, Senator Wyden.
[The prepared statement of Senator Wyden appears in the
appendix.]
The Chairman. I will introduce the three nominees, and then
we will hear from the three nominees. And then we will have
questions for the nominees first by me, then by Senator Wyden,
and then any other members who want to participate.
So I will start out with Mr. Nemelka. He currently is
working as a special advisor to Ambassador Lighthizer. He has
had an opportunity to become directly familiar with the U.S.
Trade Representative's work and office, the trade priorities of
this administration, and what we in the Congress think about
various trade issues. Accordingly, he is in a position to hit
the ground running once he is confirmed.
Before joining USTR, Mr. Nemelka was a partner at Kellogg,
Hansen, Todd, Figel, and Frederick, where his practice focused
on complex commercial litigation. Kellogg Hansen is a highly
regarded law firm whose alumni include Justice Neil Gorsuch of
the Supreme Court and two Circuit Court judges, and hopefully
they can claim this new Ambassador as well after he is
confirmed.
The nominee holds a B.A. in history from Brigham Young
University and a juris doctorate from the University of
Virginia School of Law, where he was on the managing board of
the Virginia Law Review. Following law school, the nominee
clerked for Judge Paul Niemeyer of the Fourth Circuit.
And now I am going to go to Christian Weiler, who has been
nominated to be a judge of the Tax Court. And I am going to
turn to Senator Cassidy, if he is available virtually, to speak
about this nominee.
OPENING STATEMENT OF HON. BILL CASSIDY,
A U.S. SENATOR FROM LOUISIANA
Senator Cassidy. Thank you, Mr. Chairman. I assume you can
hear me.
The Chairman. Yes, I can.
Senator Cassidy. It is my pleasure to voice strong support
for Christian Weiler to be a judge in the United States Tax
Court. Mr. Weiler is very qualified and prepared for the
position. And we are honored that he is able to join us
remotely.
Now, he would not be here, as is so true for many of us,
without the love and support of his spouse. Leslie is a CPA. He
also has four children: Amelia, 13; Jack, 12; Michael, 8; and
their youngest is 3. Amelia plays volleyball; Jack and Michael,
soccer and football. Nathan is still a little young, but I am
told he has his fourth birthday Sunday, so happy birthday,
Nathan.
And I have it on good authority they are in the next room.
And so again, you spoke of how we do things differently. It is
so great to have family in the room with us--well, they are now
in the room with us virtually. Not quite the same, but it is
still great that they are here. And I am sure that they are
incredibly proud.
Thank you all for the sacrifice you will make as a family.
Mr. Weiler has been a board-certified tax specialist since
2012, certified by the Louisiana State Board of Legal
Specialization. He was born and raised in New Orleans and went
to LSU for undergrad, where he earned his degree in accounting.
He earned his juris doctorate from Loyola University Law School
in New Orleans and his L.L.M. in Taxation from SMU's Dedman
School of Law.
He has been admitted to practice in all Louisiana State
courts, the Federal District Courts for the Eastern and Middle
Districts of Louisiana and the Eastern District of Texas,
United States Tax Court, United States Court of Federal Claims,
and the United States Fifth Circuit Court of Appeals.
He has been recognized as a top-rated tax attorney in New
Orleans by Super Lawyers, as well as by New Orleans Magazine.
Besides being an outstanding attorney, he gives back to our
community in a remarkable fashion. He is a volunteer with the
Southeast Louisiana Legal Services Pro Bono Tax Clinic. He was
a recipient of their 2015 Outstanding Pro Bono Service Award,
in recognition of his dedication to low-income tax clients in
Louisiana. He was the recipient of the 2016 Pro Bono Public
Award from the Louisiana State Bar Association, again for
outstanding pro bono service to Louisiana's indigent.
Beyond leveraging his legal expertise, Mr. Weiler also
volunteers with Boys Hope Girls Hope of New Orleans. He is a
board member. He serves on the Children's Neuromuscular
Foundation of Louisiana, and the Louise T. Fine Memorial
Foundation.
He and his family attend St. Pius X Catholic Church, where
he actively serves. He has worked at the New Orleans law firm
Weiler and Reeves since 2006 alongside his father John, making
partner in 2012. I read that, and I thought, man, your dad must
be pretty tough. Took him 6 years to make you a partner in a
firm that he heads. Anyway, his firm primarily handles small
business clients and individual tax-related matters.
As you can see, Mr. Weiler is an exceptional tax attorney
and an exceptional person. He is very qualified to serve the
Tax Court. I look forward to his confirmation hearing and the
eventual vote in the full Senate.
Thank you, Mr. Chairman.
The Chairman. Thank you for that very thorough
introduction, Senator Cassidy.
So I will introduce our last nominee, Alina Marshall. She
is very familiar with the Tax Court. She has worked as counsel
to the Chief Judge since 2013. Also, she has been adjunct
professor of law at Georgetown University Law Center. And she
has experience in private practice.
Ms. Marshall has a bachelor's degree from Yale University
and completed her juris doctorate at the University of
Pennsylvania Law School. Also, she served as a law clerk at the
Tax Court. So she is very closely connected to the Tax Court
through her entire legal career.
So I thank you all for participating in today's hearing,
and we will start with Mr. Nemelka.
STATEMENT OF MICHAEL N. NEMELKA, NOMINATED TO BE DEPUTY UNITED
STATES TRADE REPRESENTATIVE FOR
INVESTMENT SERVICES, LABOR, ENVIRONMENT, AFRICA, CHINA, AND THE
WESTERN HEMISPHERE, WITH THE RANK OF AMBASSADOR, EXECUTIVE
OFFICE OF THE PRESIDENT, WASHINGTON, DC
Mr. Nemelka. Chairman Grassley, Ranking Member Wyden, and
members of the committee, let me start by thanking you for
holding this hearing today. I would also like to thank your
staffs for their professionalism, expertise, and courtesy
throughout this nomination process.
Thank you, Chairman Grassley, for that introduction and for
your support. It is a special honor to appear before you today.
As you mentioned, I clerked for Judge Niemeyer on the Fourth
Circuit, and he gave each of his young law clerks a word of
advice at the start of our clerkship. He said, ``I want you to
treat taxpayer dollars as if you had to show every receipt to
Senator Grassley.''
I have always remembered that, and I never imagined I would
have the privilege of testifying before you some day. But you
should know that your spirit of responsibility has filtered
down into the Federal judiciary, and I know I will certainly
continue to follow that advice if I have the honor of being
confirmed.
I would like to recognize the members of my family who are
here with me today, and those who are watching from home. I am
grateful to my wife Melanie for supporting my desire to serve
in government, and for her love and friendship. We have been
blessed with four wonderful children: two daughters, Emma and
Ava, who are behind me; and two teenaged sons, Benjamin and
William, who are either sleeping or watching from home.
I have also been blessed with the best of parents,
siblings, and in-laws, and would like to thank them for their
love and support. And I would be remiss if I did not mention my
gratitude for my second family at Kellogg Hansen, a firm that
epitomizes excellence and integrity.
I am deeply honored to have been recommended by Ambassador
Lighthizer and nominated by President Trump to serve as the
Deputy United States Trade Representative for Africa, China,
and the Western Hemisphere, and for Investment Services,
Textiles, Labor, and Environment.
I have had the privilege of serving at USTR for the past 5
months as an advisor and counselor to Ambassador Lighthizer.
Based on my experience, I know firsthand how tirelessly he
works day in and day out advocating for the interests of the
United States. The dignity of the American worker is at the
forefront of everything he does. We are all very fortunate to
have him as our United States Trade Representative.
As I have seen, one of the main reasons Ambassador
Lighthizer has had so much success is because of his close
partnership with you. One of my primary goals, if I am
confirmed, will be to ensure that I contribute to that
constructive relationship with this committee and others in
Congress.
If confirmed, I would have the opportunity to help build on
the successes that USTR has already achieved. In the Western
Hemisphere, we have the new United States-Mexico-Canada
Agreement that just entered into force on July 1st. As
Ambassador Lighthizer has said, that landmark agreement is the
gold standard against which all other trade agreements will be
judged.
It earned 89 votes in the Senate, a remarkable feat, and
was supported by labor unions, businesses, farmers, and
ranchers alike. The job now is to enforce it, including through
the Brown-Wyden rapid response mechanism, the groundbreaking
enforcement tool for resolving certain labor violations. You
have my commitment, if I am confirmed, to ensure that we
receive every benefit of the bargain through smart and
effective enforcement.
For China, we have the Phase One agreement, which also just
entered into force a few months ago. In that remarkable
agreement, USTR achieved many long-held goals, including a
commitment from China to fully respect intellectual property
rights, end forced technology transfer, and increase purchases
of U.S. goods and farm products, among many other things.
We must ensure that China lives up to its commitment, and
we have an agreement that is in writing and is fully
enforceable to make sure they do.
In Africa, USTR just launched negotiations on a free trade
agreement with Kenya, which would be the first such agreement
between the United States and a Sub-Saharan African country. As
Ambassador Lighthizer has said, the goal is to conclude an
agreement that is comprehensive and high standard, while also
being one that works for Kenya and can serve as a model for
additional agreements across Africa.
I also look forward to seizing the opportunities we have in
investment, services, and textiles, and building on the USMCA's
model labor and environment chapters. In short, it is a very
exciting time to be at USTR, and I would be very grateful for
the opportunity to serve my country in this position, should I
be confirmed.
Members of the committee, I thank you again for this
opportunity, and I look forward to your questions.
[The prepared statement of Mr. Nemelka appears in the
appendix.]
The Chairman. Thank you. We will now go to Mr. Weiler,
remotely.
STATEMENT OF CHRISTIAN N. WEILER, NOMINATED TO BE A JUDGE OF
THE UNITED STATES TAX COURT, WASHINGTON, DC
Mr. Weiler. Good morning, Chairman Grassley, Ranking Member
Wyden, and the other members of the Finance Committee. Thank
you for scheduling my confirmation hearing this morning.
I would also like to specifically thank Senator Cassidy for
his kind introduction, and for his support throughout my
nomination process.
I am honored to be nominated to serve as a judge on the
United States Tax Court. I would also like to acknowledge this
morning my beautiful wife Leslie and my four children who are
here with me this morning: Amelia, Jack, Michael, and Nathan.
And I want to thank them for all of their love and
encouragement throughout my nomination process. I know that I
would not be appearing before this committee today without the
support of my family.
Senators, the Tax Court provides a critical independent
forum for the resolution of civil tax disputes with IRS. If
confirmed, I pledge to decide all matters in an impartial
manner by applying the facts before me to the relevant
provisions of the tax code as written, and by also looking to
controlling precedent.
In my home town of New Orleans, I have had the pleasure of
working for my father and my law partner, John Weiler, for
nearly 15 years. In working with my father, I have not only had
the privilege of being mentored by a truly outstanding tax
attorney with unparalleled knowledge and skill, I have also had
the privilege of learning from a great human being. Through my
father's example, he has shown me how to treat others with
respect and kindness in all matters. Formed by my strong
Christian faith, I believe we are all children of God, and
therefore not only do I pledge to serve as an impartial judge,
I also pledge to treat all parties who may appear before me
with respect and kindness.
I am also proud of my volunteer work with Southeast
Louisiana Legal Services Pro Bono Tax Clinic. I believe my
volunteer experience with the Tax Clinic will serve me well as
a judge.
Finally, if confirmed, I look forward to serving my
country.
Senators, thank you for your time and consideration this
morning, and I look forward to answering any questions that you
might have. Thank you.
[The prepared statement of Mr. Weiler appears in the
appendix.]
The Chairman. Thank you, Mr. Weiler. Now we go to Ms.
Marshall.
STATEMENT OF ALINA I. MARSHALL, NOMINATED TO BE A JUDGE OF THE
UNITED STATES TAX COURT, WASHINGTON DC
Ms. Marshall. Chairman Grassley, Ranking Member Wyden, and
members of the Finance Committee, thank you for holding this
hearing to consider my nomination to serve as a judge on the
United States Tax Court. I am grateful to you and your staffs
for the opportunity to be here today.
My husband Sean, my daughter Elizabeth, and my son Luke are
here with me this morning. Stand up, guys. Their love and
support brighten my days and renew my enthusiasm. My parents,
Jackie and Florin Ionescu, my in-laws Michele and George Hall
and Barbara and David Marshall, are all supporting me remotely,
and I remain thankful for their patience and encouragement.
I am grateful to Chief Judge Foley, the judges of the Tax
Court, and the Tax Court family who have allowed me to work
with them on so many challenging and exciting opinions and
projects.
I also want to thank my generous and supportive friends,
especially the Walshes. I am thankful to President Trump for
nominating me to serve on the Court. This chance to chase my
dream is truly humbling and a reminder of the opportunities
that are uniquely available in the United States. I remain
amazed that an immigrant who learned to speak English in the
public school system and from ``Sesame Street'' would have the
chance to meet with you today and, if confirmed, serve as a
judge.
My family's journey of coming from Romania and building a
new life is a tale of the American Dream, and the chances and
resources given to us inspire me to give back, promote
opportunity, and serve others.
For much of the last decade, I have had the privilege of
serving at the Tax Court. I have been a member of the Tax Court
family since 2010 and have served as counsel to the Chief Judge
since 2013. I have the honor of advising the Chief Judge in the
exercise of his statutory duties to review opinions before
release.
I also have the privilege of helping with, and advising on,
administrative and policy matters, including as the Court has
continued to serve its mission during this pandemic. The Court
quickly changed its ways of conducting business, and it has
been exhilarating to participate in the Court's adoption of new
opinion review, case management, and trial procedures.
Given my time at the Tax Court and my experience at both
large and small law firms, I believe I would be well-equipped
to try cases and dispose of pending motions carefully,
accurately, and efficiently, if I am confirmed.
The Tax Court is a special place, both because of its
feeling of family and because of everyone's commitment to the
Court's mission: the crucial role in supporting the United
States' system of voluntary self-assessment.
Everyone works hard to meet the Court's mission of being a
national forum for the expeditious resolution of disputes
between taxpayers and the Internal Revenue Service, the careful
consideration of the merits of each case, and a uniform
interpretation of the Internal Revenue Code.
I already seek to serve the Court's mission by reviewing
opinions and advising the Chief Judge, and I believe I could
further support the Court's mission by carefully hearing cases
and fairly applying the law to the facts of each case.
Thank you again for your consideration. I look forward to
the committee's questions.
[The prepared statement of Ms. Marshall appears in the
appendix.]
The Chairman. Okay. Before I go to my questions and Senator
Wyden's questions, there are four questions that we always ask
every nominee who comes before the committee. And generally
there is a one-word answer.
First, 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? I will
start with Mr. Nemelka.
Mr. Nemelka. No.
The Chairman. I will go to Mr. Weiler.
Mr. Weiler. No, Mr. Chairman.
The Chairman. And now to Ms. Marshall.
Ms. Marshall. No, Mr. Chairman.
The Chairman. Did you say ``no,'' Ms. Marshall?
Ms. Marshall. I said ``no,'' Mr. Chairman. Sorry.
The Chairman. Okay; thank you.
Now the next question is, do you know of any reason,
personal or otherwise, that would in any way prevent you from
fully or honorably discharging the responsibilities of the
office to which you have been nominated? Mr. Nemelka?
Mr. Nemelka. No.
The Chairman. Okay. And then, Mr. Weiler?
Mr. Weiler. No, Mr. Chairman.
The Chairman. And now, Ms. Marshall.
Ms. Marshall. No, Mr. Chairman.
The Chairman. Thank you.
The next question: do you agree, without reservation, to
respond to any reasonable summons to appear and testify before
any duly constituted committee of Congress if you are
confirmed? Now let me ask my staff, is that question for all
three, or just for the nominee to the USTR?
Okay, we have always asked that even of judges. So, if you
haven't forgotten what I asked, would you answer that question,
Mr. Nemelka?
Mr. Nemelka. Yes, Mr. Chairman.
The Chairman. Mr. Weiler?
Mr. Weiler. Yes, Mr. Chairman.
The Chairman. Okay. And Ms. Marshall?
Ms. Marshall. Yes, Mr. Chairman.
The Chairman. Okay. The last question: do you commit to
provide a prompt response in writing to any questions addressed
to you by any Senator of this committee? Mr. Nemelka?
Mr. Nemelka. Yes, Mr. Chairman.
Mr. Weiler. Yes, Mr. Chairman, I do.
The Chairman. And, Ms. Marshall?
Ms. Marshall. Yes, Mr. Chairman.
The Chairman. Okay. Now we will go to the questions that I
will ask, and then we will go to Senator Wyden, and then we
have a long list of people who might ask questions.
And let me say, there are going to be a lot of them. Only
two of them, I think, intend to be here in person, so for those
who are remote, if there is anyone who has said they are coming
to the committee meeting and will not in the end do that, I
would like to have you tell me so I know how much time to
devote to questioning.
Mr. Nemelka, I have been traveling through Iowa the last
couple of weeks because the Senate has been in recess. I hold
Q&As with my constituents. My fellow farmers have repeatedly
raised the importance of the China Phase One deal. They have
faced a lot of hardships because of trade negotiations and
trade disputes we have had, so I feel that we are trying to do
right with them. But there are still questions out there.
As we enter the fall, it will be critical to ensure that
China follows through on purchase commitments. If confirmed,
you will be the Deputy USTR with responsibility for China. Tell
me what you will do to ensure that China follows through on the
obligation. That is my first question.
Mr. Nemelka. Thank you for that question, Mr. Chairman. I
know that, at USTR, we work every day to ensure that China
lives up to its commitments under the China Phase One deal. And
if I have the honor of being confirmed, I will put all of my
energies behind that as well.
Specifically on the agricultural purchases, we have our
ambassador, Greg Doud, who is on the phone almost every day
with the Chinese ensuring that they fulfill their commitments.
And in the fall, in particular with the seasonal products, and
soybeans in particular that are currently in the ground, we
expect to see those purchases rapidly increase.
The Chairman. Now my next question deals with Brazil and
ethanol. The administration is trying to improve our trade
relations with Brazil. Brazil is one of the top markets for
American ethanol. In 2017 however, Brazil imposed a restrictive
trade rate quota on ethanol that has limited our trade.
I would like to have you discuss with me--or if you can
make a commitment to make ethanol market access a top priority
as part of any effort to improve trade relations with Brazil.
Mr. Nemelka. Thank you for that question. And yes, you do
have my commitment. And I know we are currently discussing, or
those at the office are currently discussing ethanol, in
particular with Brazil. As you mentioned, they have imposed a
TRQ. Brazil should either raise that TRQ or they should lower
their tariff. They have a higher tariff on ethanol than we
have, which shows an imbalance where they have tilted the table
in a way for their products and adversely against ours. And so
we should work closely with them to either raise the TRQ or
reduce their tariffs.
The Chairman. If confirmed, you will be overseeing our
negotiations with Kenya. With respect to the USMCA, we have had
folks express concern that the approach to protecting American
investment is insufficient. In particular, they are worried
that Mexico may be moving in the wrong direction in giving a
fair shake to Americans, since the investor-state dispute
settlement has been scaled back.
This effects more than just investments that could have
been done in America or any other country. It involves issues
like licensing intellectual property or investments in geologic
resources.
We want Americans to be able to safely make those types of
investments overseas, because they benefit us here at home. If
confirmed, will you commit that, for Kenya you will seek
comprehensive protections for American investors that are more
robust than the approach taken in the USMCA?
Mr. Nemelka. The investment chapter with Kenya--I agree, it
is going to be a very important chapter for that agreement. And
we have a goal of making it a high-standard, a comprehensive
chapter with respect to ISDS. I know that that is still under
consideration, and you have my commitment to work with
Ambassador Lighthizer to carefully consider that issue and
consult with you on it.
The Chairman. Okay. I have kind of a softball question for
our tax nominees that I would like to have you respond to. As a
Tax Court judge, you will preside over many cases that involve
unsophisticated taxpayers with few resources to deploy while
making their case.
What lessons do you take from your prior professional
experience to ensure that you will treat these taxpayers with
respect and an understanding, while stopping short of awarding
them an advantage? And I know that you each took care to make
sure that you were going to be very equitable in this area, but
I would still like to have you express it more fully. Or as
short as you can, for whatever answer you want to give me in
regard to that. Mr. Weiler?
Mr. Weiler. Yes, Mr. Chairman. Thank you.
I believe my background and experience will serve me well
to handle such matters. I am in a small firm presently, and as
Senator Cassidy mentioned, principally my practice is small
business owners and individuals.
Also, I have volunteered for some 10 years at Southeast
Louisiana Tax Clinic and handled pro bono matters that are
often before the court, including collection matters, innocent
spouse relief, Earned Income Tax Credit matters. In fact, some
70 percent of the Tax Court docket is small claims and pro se
matters. So I think that experience will serve me well.
I have also volunteered as an attorney at the calendar call
here in New Orleans for the Tax Court. And as a judge, although
my role would be different, obviously, and I would be an
impartial arbitrator, I think there are opportunities as a
judge to make these taxpayers aware of the pro se--actually,
the pro bono outreach activities, including the calendar call
volunteer attorneys.
So I would commit to making taxpayers aware of this
service. And finally, I would also pledge to keep an open mind
and of course to apply the law as written by Congress.
Thank you, Mr. Chairman.
The Chairman. Ms. Marshall?
Ms. Marshall. Before coming back to the Court as counsel to
the Chief Judge, I had the privilege of working at a smaller
firm where I worked with human being clients who were sometimes
less knowledgeable about the tax laws but very passionate about
their jobs and their families.
In my work at the Court, I have seen a lot of trial
testimony and briefs. I have seen the challenges that taxpayers
face in trying to make complex arguments in an unfamiliar
forum.
Also, as an immigrant, I understand how language barriers
can hinder communication and how sometimes a little bit of time
and patience can resolve these challenges. Because of my
background, I am familiar with the Tax Court's resources to
help smaller taxpayers. I am familiar with the small tax case
designation, with the LITCs, the Low-Income Tax Clinics, the
pro bono programs, and with the Court's website that has a lot
of resources that can be helpful to taxpayers.
The Chairman. I thank you very much.
Now we will go to Senator Wyden.
Senator Wyden. Thank you very much, Mr. Chairman. I was
glad, Mr. Chairman, you asked that question of the Tax Court
nominees as your wrap-up question, because that really is the
litmus test: can they relate to people who are not up on the
ins and outs of tax law? So I appreciate you asking it.
Let me go to the trade issue, Mr. Nemelka. One out of four
jobs in my State revolves around international trade. The trade
jobs often pay better than do the non-trade jobs. And the ball
game with respect to----
The Chairman. [Inaudible.]
Senator Wyden. Mr. Chairman, may I continue?
The Chairman. I was rude. I was talking to a colleague, and
my microphone was on, so I am sorry, Senator Wyden. Proceed.
Senator Wyden. Not to worry. In the sweep of western
civilization, not a problem. [Laughter.]
Now, Mr. Nemelka, with respect to trade, the ball game is
really enforcement. And that is what Senator Brown and I sought
to do with colleagues, on the Democratic side in particular, to
make sure that trade efforts going forward actually were
supported with laws that had teeth in them. And because you
have worked in these trade areas for some time, you understand
what the issues are. There are questions of Mexico's commitment
to labor obligations, dairy markets--that access--Customs, food
safety.
And so I think the first question I would like to ask you
is, if confirmed, can you give us some kind of target date when
we could expect to start seeing enforcement actions brought by
the Trump administration, by the U.S. Trade Representative? Can
you give us a target date when we could begin to see those kind
of enforcement actions?
We all understand first impressions are key, and I think
knowing that there are going to be enforcement actions coming
up is an extraordinarily important message to send right now.
Mr. Nemelka. Thank you, Senator Wyden, for that question.
And I agree completely that enforcement is key. And you have my
commitment, if I am confirmed, to make that a priority.
Your question with respect to a target date--I know that,
in my job as an advisor there currently, we have hit the ground
running. All the committees are stood up. We have the panelists
appointed. For the labor issues, we have the hotline set up. We
have a petition process established. And we are working with
stakeholders and others to identify the best cases, because I
think your point is a very important one, which is the first
impression--not only to do it quickly, but also to pick the
right cases and work and consult with you and this committee to
identify the best cases. And to win them. That is what I would
bring from my background: to ensure that we have smart and
effective enforcement and actually win the cases we bring.
In terms of a target date, I know that Ambassador
Lighthizer has said that we have this month to review the
process and then consult with you, and quickly thereafter bring
the best cases.
Of course before we bring a case, we need to consult with
Canada and Mexico and try to resolve the case before actually
litigating. But if those consultations fail, I agree with you
we need to be fully prepared to use the tools that you have
given us, including the Brown-Wyden rapid response mechanism.
Senator Wyden. But you could see, for example, an
enforcement action in the next several months?
Mr. Nemelka. If the consultation processes fail, I could
see sometime this fall. There are time periods where we need to
consult with Canada and Mexico, so we are limited by that time
period we need to consult. But if those consultations fail, I
could see, if I am confirmed, actually doing something this
fall.
Senator Wyden. Okay. Second question: the UK has adopted a
unilateral digital services tax that unfairly targets American
technology companies and is certainly a burden on digital
trade.
Will you commit to ensuring that repealing this
discriminatory tax is a top priority in the negotiations
between the U.S. and the UK?
Mr. Nemelka. I do agree with that, Senator Wyden.
Senator Wyden. I appreciate that, because the stakes there
are enormous. And I am glad you have made it clear, because I
know those negotiations between the United States and the UK
are going to be the place where we are going to be watching,
and to know that that is a top priority is very important to
me.
The last trade question I want to talk about is China's
unfair trade practices. They range from IP theft to censorship.
They are obviously a special priority for the Finance
Committee, and China is in your portfolio and that of the
Ambassador.
Now, how are you going to spearhead the China portfolio,
and particularly prosecuting the cause of going after China's
unfair trade practices? With Mr. Gerrish's departure, we want
to see progress on Phase Two. We want to see the issues
addressed in the Trade Rep's report in 301. How are you going
to use the China portfolio to go after China's trade practices
that rip off our jobs and our workers and companies?
Mr. Nemelka. Thank you for that question, Senator Wyden. I
think the primary way we will do that is that the China Phase
One deal has an enforcement mechanism that actually sets out a
process to do just that. And it is a process that escalates as
we do not get the response that we expect, or that China has
committed to. And so I think we use the enforcement mechanism
that we have in writing in the China Phase One deal.
And with respect to the other abuses that you have alluded
to, I think that is something that we always need to be mindful
of and continue to work with China on to see what we can do in
a Phase Two deal.
The Chairman. Senator Enzi?
Senator Enzi. Thank you, Mr. Chairman. And I want to thank
the nominees for their willingness to serve. We need competent
people in all of these important positions, and as an
accountant, I particularly appreciate the nominees for the Tax
Court and know what kind of efforts and decisions that they
will have to make.
I am going to aim my questions for Mr. Nemelka. My State of
Wyoming is home to some of the highest-grade rare earth
deposits in North America. Rare earth elements are an important
part of many electronic products we use every day, like
computers and cameras.
Right now the problem for the United States is that China
has a stranglehold on the supply chain that makes it difficult
to utilize the deposits we have here. I have made it my goal to
see that the supply chain for rare earths, from the mining to
the refining, is done right here in this country--and better
yet, the State of Wyoming. And locating the supply chain closer
to where the minerals are found is good for our national
security, and it makes economic sense.
Do you share my concern over China's control over the rare
earth elements? And do you think there is a way to reduce our
dependence on China for rare earth elements? And are there ways
to use trade to foster a domestic industry?
I have seen how they have traded a lot of countries out of
their rare earths by building a soccer stadium or a new
parliamentary building. And they are locking those up around
the world, as we speak. What can we be doing?
Mr. Nemelka. Thank you, Senator, for that question. I do
share your concern with respect to rare earth minerals and
having them primarily coming from overseas. And I am from Utah,
which is next door to Wyoming, and I am aware of the rare earth
deposits that are in Wyoming and other western States, and how
important it is to develop those industries. And you do have my
commitment to make that a priority.
And I think it is going to take a government-wide
interagency effort on this, not just trade but across the
government. And I know that this administration has had some
initiatives that it has announced on that front, and you have
my commitment to contribute constructively to those.
Senator Enzi. Thank you. I want to ask an agricultural
question too. I appreciated the chairman's questions and know
that he will be involved in negotiations with China, and others
of course.
Are there ways to ensure that the domestic agriculture is
safeguarded and not used as a pawn during the negotiations? You
have seen the times when it has been a pawn, and I want to make
sure that that is not the fact.
Mr. Nemelka. I think that is critical. One of the primary--
you know, what America does best, as the chairman and others
have said, is to grow food products and export them to the
world.
You know we have a Chief Agricultural Negotiator whose sole
job is to make sure that it does not become a pawn, and I have
never seen any evidence that that would happen. And I certainly
would not allow that to happen in any negotiation I am involved
in.
Senator Enzi. Thank you. My final question on trade:
American entrepreneurs depend on protection of their
intellectual property in ongoing negotiations that you do with
China. Do you commit to holding China accountable to their
intellectual property practices, and ensuring that American
intellectual property is protected?
Mr. Nemelka. Yes, you do have my commitment. And that is
one of the commitments that we have in writing in the China
Phase One deal, that China will respect intellectual property
rights. And my understanding is they have actually made a lot
of progress on that, on their commitments that they have made
in the China Phase One deal.
And if I am confirmed, I will certainly make that a
priority to ensure that they continue to live up to those
commitments.
Senator Enzi. Thank you for your answers, and your
willingness to serve. I yield back.
The Chairman. Senator Cantwell?
Senator Cantwell. Thank you, Mr. Chairman.
Mr. Nemelka, congratulations on your nomination. Trade is a
very important issue to the State of Washington, and so I have
a lot of trade-related questions for you.
One, starting with wheat--and 90 percent of our wheat is
exported--Kenya is a very specific market opportunity that has
10-percent tariffs. What are we doing currently to reduce those
10-
percent tariffs in Kenya?
Mr. Nemelka. Thank you, Senator Cantwell, and I am aware of
your expertise on trade and how important it is to the State of
Washington. That is going to be a priority in our negotiations
with Kenya, if I am confirmed, and those negotiations just
kicked off and----
Senator Cantwell. You mean if you are not confirmed, it
will not be a priority? [Laughter.]
Mr. Nemelka. Well, if I am not confirmed, I will not be
there. So, if I am there, and I am confirmed, then that will be
a priority. And I know that reducing those tariffs will be a
key part of our ask with Kenya.
Senator Cantwell. Thank you. On what I call the twin side
of the coin with the Mexico agreement, Senator Wyden talked
about enforcement. I want to ask you specifically about
capacity building.
We were able to get $240 million in there for capacity
building. What do you think the priorities are in capacity
building in Mexico?
Mr. Nemelka. Thank you for that question. You did provide
those resources to the Department of Labor particularly for the
capacity building, and some to USTR. I think that a priority is
labor, to ensure that the workers in Mexico know their labor
rights, know about the reforms, and to ensure that
protectionist unions that are currently there, that there is a
process to challenge those--and that the labor workers
understand their rights. And so I think capacity building
around labor is a priority in Mexico.
Senator Cantwell. And so, does USTR undertake that? How do
you make sure that happens?
Mr. Nemelka. We work very closely with the Department of
Labor. We actually have attaches. Labor has three attaches in
Mexico. USTR is having a permanent person who will be placed in
Mexico to help oversee those efforts. We have the Interagency
Labor Committee, which we co-chair with the Department of
Labor, which will help coordinate those efforts.
There is a structure----
Senator Cantwell. And they have annual meetings and things?
I mean, since the COVID problem is so pervasive there as well,
I just wonder how this is going.
Mr. Nemelka. They have many more than just annual meetings.
They have already met. They are meeting again this week, I
believe. They have regular meetings. It is an up and
functioning committee that is--as you mentioned, they have to
do it remotely, but it is ongoing.
Senator Cantwell. Right. And can we get updates on that
periodically?
Mr. Nemelka. Absolutely.
Senator Cantwell. Great. That would be so helpful.
Aluminum: what is USTR doing to stop the oversupply with
China on aluminum?
Mr. Nemelka. The oversupply issue on aluminum and other
products, I know is a big issue, and I know it is something
that Ambassador Lighthizer considers frequently. And I
actually, in particular, do not know of any specific efforts. I
have not been involved in those discussions, but I know that it
is a priority. And it would be, if I were confirmed.
Senator Cantwell. Well, I think overcapacity--and my
colleague before me, Senator Enzi, was talking about rare earth
minerals. I could say the same. A lot of our aluminum is going
to building essential materials in the U.S., and I think that
we need to understand where the United States needs to be as it
relates to aluminum, and the criticality of that supply.
So I look forward to working with you on that issue. Thank
you, Mr. Chairman.
Mr. Nemelka. I do too. Thank you.
The Chairman. Is Senator Toomey available? You are next if
you----
Senator Toomey. I am here. Can you hear me, Mr. Chairman?
The Chairman. Yes. Please proceed.
Senator Toomey. Thank you very much, Mr. Chairman. My
question is for Mr. Nemelka, and it is follow-up on a question
Senator Cantwell raised. We keep hearing that the
administration is considering reimposing section 232 tariffs,
specifically upon Canadian aluminum, despite the fact that
Canada is a country with whom we have a free trade agreement.
Now of course as you know, section 232 authorizes tariffs
in response to the importation of a product or an article that
impairs national security. In the United States, as I am sure
you know, U.S. aluminum manufacturers are not seeking these
tariffs. The U.S. aluminum manufacturers alone cannot meet
domestic demand for aluminum, even at full capacity. I am told
that U.S. primary aluminum smelters can only meet about one-
third of demand for input aluminum if they are working all-out.
And maybe more importantly than any of this, there are far more
Pennsylvania and American jobs that come from aluminum users
than aluminum producers.
About 97 percent of the U.S. aluminum jobs are not in the
production of aluminum, they are in the use of that aluminum to
make products. Those workers, that 97 percent of all workers in
the aluminum space, their jobs are at risk if the input that
they need becomes uncompetitive because we decide to
arbitrarily put a tax on it when it comes from Canada.
So my question is, given this dynamic that we have,
wouldn't raising tariffs on aluminum cost more jobs than it
saves?
Mr. Nemelka. Thank you for that question, Senator Toomey. I
have read the press reports about the surges of aluminum
imports from Canada and the concern that that raises. I am also
aware of the August agreement between Mexico, Canada, and the
United States with respect to certain 232 tariffs. And I know
that--I know that the office is carefully considering those
issues.
I have not been involved in those discussions, but I think
that there is a framework in place, based on the August
agreement between Mexico, Canada, and the United States, to
address any aluminum surges.
Senator Toomey. But you did not answer the question. Does
it not stand to reason that, with the vast majority of people
in the aluminum space working for companies that use aluminum
in order to make some other product, does it not stand to
reason that if the cost of that input is uniquely higher for
American manufacturers, they would be at a competitive
disadvantage? Is not the risk that raising taxes on Canadian
aluminum for American consumption--in other words, raising
taxes on Americans--that it would diminish jobs and not create
jobs?
Mr. Nemelka. I am not--I am not sure about the analysis. I
know that there was an issue that was addressed by Mexico,
Canada, and the United States, and we were able to--the office
was able to resolve that in August. And Canada and Mexico
agreed to certain conditions----
Senator Toomey. I understand what they agreed to, and I
understand the circumstances under which they agreed to it. I
am asking a different question, which is, is it a good idea to
put the jobs of people who use aluminum to make products in
jeopardy by raising the cost of their input? And I would
certainly hope that you could commit to doing a thorough
analysis of the negative impact on the people employed in
aluminum-using industries before recommending that we make them
less competitive by raising their costs.
Mr. Nemelka. Senator Toomey, you do have my commitment, if
I am confirmed, that any such action that I would actually work
on would definitely include a full analysis of those types of
considerations.
Senator Toomey. Thank you. One other question, also for Mr.
Nemelka, and that is about the 301 tariffs on medical products.
My understanding is that right now there are a number of goods
that we use that we consider to be personal protective
equipment--garments, diagnostic test instruments, hand
sanitizers, and others--some of which are subject to tariffs
now. And given the tremendous need for these products, and
given that American manufacturers are, I am pretty sure,
working all-out to provide all that they can, would it not be a
good idea to consider immediately suspending the tariffs on all
COVID-related protection products?
Mr. Nemelka. Thank you for that question, Senator Toomey,
and it is a critical issue at this time in the middle of the
pandemic. I do know that there is a--you mentioned a 301
tariff. There is an exclusion process that has been put in
place that is very thorough, and for a lot of the equipment you
referred to, those exclusions have been granted.
In terms of, if your question goes to elimination of all
the preexisting tariffs, I think that Ambassador Lighthizer has
said, and I agree, that we need to encourage domestic
manufacturers for those, and that certainly plays into the
considerations.
Senator Toomey. Yes; now that kind of effort to manage the
economy and decide which things must be made in America and
which ones are not, is very misguided in the first place, in my
view. But it is only even conceivable in the very long term,
right, because it takes awhile to invest in a manufacturing
facility, to build a plant. And so the idea that now in the
midst of a crisis we would knowingly impose this higher cost on
Americans who are trying to protect themselves, with the idea
that well, maybe sometime in years down the road we will
increase domestic manufacturing, it just strikes me as
profoundly misguided. I hope the U.S. Trade Rep will reconsider
that.
The Chairman. Senator Carper? Senator Carper, if you are
available.
Senator Carper. Senator Carper is available. Can you hear
me?
The Chairman. Yes; go ahead.
Senator Carper. That is great. I just want to say to Mr.
Weiler and Ms. Marshall, thank you for your willingness to
serve in these positions.
Ms. Marshall, it looks like you have had some pretty good
experience for the last 7 years as the counsel for the Chief
Judge at the Tax Court? Is that right?
Ms. Marshall. Yes, Senator.
Senator Carper. If Mr. Weiler needs some advice as the new
kid on the block, would you be willing to give him some counsel
and help him get ready for his new job, if he is confirmed?
Ms. Marshall. It would be an honor, sir.
Senator Carper. And, Mr. Weiler, how would you feel about
accepting that offer?
Mr. Weiler. Oh, I would very much welcome it, Senator. So
thank you. Yes.
Senator Carper. I think in every job I have ever held or
been elected to, I have asked people who had served in the role
before for their advice and counsel. As the Governor of
Delaware, I used to, as they say, ``Sit on the shoulders of
those who came before me,'' people like Mike Castle and Pete du
Pont and others. So I would urge you to do the same thing here.
Mr. Nemelka, I have just a personal question, if I could.
Have you had a chance to meet with most of the members of this
committee prior to your confirmation hearing?
Mr. Nemelka. I have had the opportunity to speak with many.
I do not know if it is ``most,'' but many I have, including
you, and I very much enjoyed our conversation.
Senator Carper. I was going to ask, which interview did you
most enjoy?
Mr. Nemelka. I would have to say yours. I think ours went
on for close to an hour, and it was a very enjoyable
conversation.
Senator Carper. It is not supposed to be that much fun, and
I have great expectations for your upcoming service as a key
member of the Trade Rep's team.
I do have a serious question. I understand from our
conversation a couple of weeks ago that the Trade Rep has set
up something called the Interagency Environment Committee and
has hired a number of new staff dedicated to USMCA
environmental enforcement.
I was pleased to learn of this progress, and I commend you
and your team for moving quickly on implementation in this
area. As we discussed, I am particularly interested in making
sure that the Trade Rep uses the new environmental monitoring
and environmental mechanism that several of us pushed to
include in USMCA.
This mechanism, as you may know, would require the
Interagency Environment Committee to review all allegations of
environmental violations that result in a factual record at the
Commission for Environmental Cooperation.
You mentioned on a call that the U.S. Trade Rep and EPA now
have an agreement that the Interagency Environment Committee
will not only review cases that result in a factual record, but
all submissions to the Commission for Environmental
Cooperation, a move that I wholeheartedly applaud.
Here is my question: now that USMCA is officially in
effect--and we are glad it is--does the Interagency Environment
Committee have a process in place for reviewing submissions to
the Commission for Environmental Cooperation? And has the new
committee begun reviewing any submissions?
Mr. Nemelka. Thank you for that question, and I appreciate
your leadership on the environmental issues and the
environmental chapter in USMCA. And the answer is, yes. The
committee is up and running and does have a process for
considering those--those petitions. And as you mentioned, we do
have that agreement with the EPA that it is not just the
petitions to the Commission that result in a factual record,
but any--any complaint that is submitted, or any other
complaint outside of that process. Somebody can submit a
complaint directly to the committee or otherwise.
Senator Carper. Well, you may have just answered my next
question, but I am going to ask it anyway. Would that committee
be open to accepting direct submissions from the public for
issues outside of the Customs verification agreement, rather
than going through the Commission for Environmental
Cooperation?
Mr. Nemelka. The answer is, yes, Senator.
Senator Carper. Thank you. One last question. How has the
COVID-19 pandemic impacted the ability of the U.S. Trade Rep
and the Interagency Environment Committee to conduct on-the-
ground monitoring of Mexico's environmental obligations?
Mr. Nemelka. It is a very good question. We have three
attaches, environmental attaches, who have been assigned to
USTR from NOAA, EPA, and Fish and Wildlife Service who will be
based in Mexico City. And I would say that the primary--we have
those attaches--the primary obstacle that COVID has given us is
actually getting them established in Mexico. But otherwise, our
environmental office is in constant contact with their Mexican
and Canadian counterparts, and USMCA, the environmental
chapter, is up and running.
But the primary obstacle with COVID has been getting those
attaches and our permanent USTR person actually established in
Mexico City.
Senator Carper. Mr. Nemelka, thank you very much. My
congratulations to each nominee. We look forward to voting and
hopefully confirming you into your service.
Mr. Chairman, thank you.
The Chairman. Thank you. Senator Cassidy, remotely.
Senator Cassidy. Yes. First, Mr. Weiler and Ms. Marshall--
again thank you all, all three of you, for your willingness to
do this.
You know, I have worked for 25 years as a physician in a
public hospital for the uninsured. I am always struck that when
you work with people closely, you actually have more of their
perspective. And sometimes I hear folks say something about
health care for those who are less well-off, and I am thinking
that is not my patients. Those were not the folks I treated for
25 years.
You have both done this pro bono work for those who are
less well-off when they come to the Tax Court. What is--very
quickly, because I have questions for our other nominee--what
is the one insight you have that you think is unique that folks
might not understand for those who came to your pro bono tax
courts?
Mr. Weiler, let us start with you.
Mr. Weiler. Thank you. Thank you, Senator Cassidy, for that
question. I would say the one insight that I have gained is
being able to listen first, being able to hear what the
client's needs are, and being able to direct that to solving
their issue and problem. And as a judge, I feel that I can do
the same.
I am pledged to be fair, pledged to be impartial, but I
think it is important to listen to the pro se taxpayer. They
are not necessarily an attorney. They do not have the legal
acumen maybe to express their position articulately. So I
think, as a judge, that is important, particularly for the Tax
Court to listen to the taxpayer and to try to resolve the issue
if at all possible.
Senator Cassidy. And, Ms. Marshall, would you add to that,
or do you have the same impression?
Ms. Marshall. I would agree with everything Mr. Weiler
said, and I would echo and suggest that my insight would be how
hard the Tax Court tries to get it right. The judges really
work hard to hear the cases, to make sure every case is heard
fairly and carefully, and that every person who comes to the
Court, every individual, every corporation, the IRS, everyone
has a moment to make their best case and to be heard.
Senator Cassidy. Got you.
Listen, Mr. Nemelka, in our agreement with China--I believe
I know the answer to this--are there any environmental
protections? Or are there any worker rights protections in that
agreement with China?
Mr. Nemelka. Specifically directed to those two subjects, I
cannot--I do not recall any.
Senator Cassidy. So if we demand those of Mexico, of
Central American countries, et cetera--which, by the way, I
think we should--and China is willing to ignore them, using
slave labor, allegedly, befouling the air with greenhouse gases
which float over to Oregon, Washington State, and California,
is that not effectively regulation imposed upon a country like
Guatemala or Mexico, which by ignoring is effectively a subsidy
to lowering the production costs in China?
Mr. Nemelka. I agree with you, Senator Cassidy, that labor
and environmental standards are incredibly important and are
trade-related for the very reason that you say, and that we
should have the minimum standard that all countries should
abide by.
Senator Cassidy. So we do not have them with China, and
China just blatantly ignores them. And so I am concerned that
we are effectively incentivizing companies to move production
from a Central American country which needs that worker base to
keep folks there, keep them prosperous, incenting them to move
to China which does not have enforcement of those regulations.
Again, any comment on that? Do you disagree that we might be
incentivizing by these regulations?
Mr. Nemelka. Thank you for that comment. I mean, I agree
with the basic premise, which is, if countries do not abide by
labor or environmental standards, that it then is a trade-
distorting issue, because----
Senator Cassidy. Now let me ask you something else. During
the negotiations with Mexico on the USMCA, I was concerned
about the actions of investor-state dispute settlements. And I
understood kind of philosophically that for some it served as a
subsidy. There was an uncertainty of doing business in Mexico.
Why should we alleviate that uncertainty? I was upset because
it was not for energy companies.
You are required to develop their energy resources in
Mexico--they are in Mexico--but nonetheless if they nationalize
it, you have no recourse. Cabotage laws make both building
companies locate in Mexico--they have cabotage laws like we
have cabotage laws--but otherwise there is no ISDS.
But I get that. Now let us flip over to intellectual
property rights. By the same principle, why should we be
protecting intellectual property rights? Should that not be the
price of doing business, that somebody may steal your IP? Why
do we defend intellectual property rights when we do not defend
a boat company which has to build in Mexico because of cabotage
laws?
Mr. Nemelka. Thank you for that question, Senator Cassidy.
I know that the ISDS issue was heavily negotiated with Mexico
and Canada. In terms of the actual reasons why some are covered
and some not, I actually do not know the archeology of that.
But I am happy to work with you and discuss that with you.
The Chairman. Senator Cardin?
Senator Cardin. Thank you, Mr. Chairman. And let me thank
all of our nominees for their willingness to serve.
Mr. Nemelka, I want to ask you a couple questions. Our
committee, the Congress, was very strong in the Trade Promotion
Authority when we gave the executive power to negotiate. Some
of our principle trade objectives are good governance, anti-
corruption, and human rights.
In the USMCA agreement, that was carried out by a separate
chapter on good governance. And my question really refers to--
if we go forward with a free trade agreement with Kenya, this
would be a real challenge on governance. Kenya has a reputation
that is less than stellar on fighting corruption. They have
significant human rights challenges in that country. It would
be a country that would present challenges under any scenario
on governance issues, but if it is our first free trade
agreement with a challenged country, it is going to be looked
upon as a model to move forward.
So what commitment can you give this committee, if we move
forward with this agreement and submit one to Congress for
approval, about how you would protect the trade objectives that
Congress overwhelmingly supported on good governance in such a
trade agreement?
Mr. Nemelka. Thank you for that question, Senator. And I
completely agree with you that those elements are important.
They are in the Trade Promotion Authority that Congress has
directed for USTR with respect to trade objectives. And as
Ambassador Lighthizer said, the intention is to negotiate a
high-standard, comprehensive agreement with Kenya that can
serve as a model. And I think you identify an important
consideration there, that if we do not have strong good
governance and anti-corruption provisions, it will not be as
useful as a model.
And so you have my commitment to seek, if I am confirmed,
an agreement with Kenya that would have those strong
protections.
Senator Cardin. Well, I have some concerns about proceeding
with Kenya with a free trade agreement. But putting that aside
for one moment, if that goes forward I would just ask your
commitment to work with us from the beginning on this chapter
dealing with good governance so that we have the input of those
of us in Congress who have pushed very hard for this objective
in trade to make sure that any agreement that is submitted to
Congress contains adequate protections on good governance.
Do I have your assurance that you will work with us from
the beginning on these issues?
Mr. Nemelka. Senator Cardin, you do. And I welcome that.
Senator Cardin. Thank you.
The USMCA contains a provision in regard to small
businesses. I am the ranking Democrat on the Small Business
Committee. I had a chance to talk to Ambassador Lighthizer
about these issues.
Can you just update us as to how the implementation of the
small business provisions of the USMCA is moving forward,
particularly knowing that COVID-19 has changed the time
schedule on a lot of the implementations of the USMCA?
Mr. Nemelka. Happy to. My understanding is that a lot of
progress is being made on the small business provisions of
USMCA, and that largely--you know the agreement is in force. I
know that our office talks to Mexico almost every day on
various USMCA provisions. And one of them, a very important
one, is the small business chapter.
And my understanding is that that is largely stood up.
Senator Cardin. Thank you. And to our two nominees in
regards to the Tax Court, I just really want to underscore the
point that was raised by other colleagues. The Court plays a
critically important function, and not everyone who appears
before it has the same degree of sophistication.
So I appreciate your response that you will be listening to
the litigants, particularly those who are not represented by
counsel, and understand it is a complex area for even those of
us who have a knowledge of the field and have adequate
representation. But for those who do not, it does require a
sensitivity, and I just urge you to be an advocate for that
type of sensitivity in the Court.
With that, Mr. Chairman, I would yield back my time.
The Chairman. Thank you, Senator Cardin. Now, Senator
Lankford.
Senator Lankford. Mr. Chairman, thank you very much.
Mr. Nemelka, let me ask you several questions. Thanks to
all of you, by the way, before I get started, for the work that
you continue to do, and for stepping up to be able to take this
responsibility. All have impressive backgrounds, so thanks for
stepping into this kind of public service.
Mr. Nemelka, I want to be able to talk specifically with
you. And you and I have talked before about rare earth minerals
and our dependence in connection with China and rare earth
minerals.
What is your philosophy at this point on how to be able to
diversify our trade portfolio and our opportunities to be able
to pursue rare earth minerals, in particular from locations
other than China, and developing those?
Mr. Nemelka. Thank you, Senator Lankford. And I did enjoy
our conversation, and I appreciate that question. It is a
similar concern that Senator Enzi expressed. And my philosophy
is that it has got to be a priority; that it has got to be not
just a trade issue, but an intergovernmental effort. We need to
work across the board to not just diversify our supply of rare
earth minerals, as you say from other countries, but also to
develop our own supplies here domestically.
Senator Lankford. I would agree. So the Indo-Pacific--
obviously there are other countries that have some of these
same rare earth minerals. Are we targeting relationships with
specific countries in the Pacific Rim to develop some of those
relationships in trade, as well as trying to get domestic
manufacturing? Specifically, what would your responsibility be
on the trade side? Any specific countries we are trying to
target right now?
Mr. Nemelka. Southeast Asia would not be in my portfolio,
but we do have a specific office that is dedicated to such
matters, and not just geographically, but also competitively.
And I know that that is--you know, rare earth minerals, and
sourcing, and diversifying where our companies get those
materials, are a priority across the administration.
Senator Lankford. Okay. We will continue to talk about
that. I know you have China in your portfolio. That is the
reason I raised that for the whole region, and just the
connections that we continue to have in our dependence there.
Let us talk a little bit about the Northern Triangle and
the Western Hemisphere. The Northern Triangle has been a vital
trade partner for us. It is also vital not only for trade and
what is coming in, but also geopolitically, and creating a
stable set of economies in the Northern Triangle is
exceptionally important.
Do you have plans? Do you have key partners that are there?
Do you have expansions? Do you have technical expertise that
you are providing to Guatemala, El Salvador, and Honduras at
this point, especially that you are trying to target for
increased trade relationships and stability, or trade among
each other in the ongoing trade agreements already there?
Mr. Nemelka. Thank you for that question, and I agree with
its importance. And I agree that those are critical trade
relationships. And I do know that we are in frequent contact
with those countries on trade-related matters, trying to not
only increase trade and facilitate it, but address the
irritants. And I am aware that the office has people directly--
that their job is to work with those countries on those trade-
related matters. And I look forward to working with you and
others on it.
Senator Lankford. Yes; we cannot lean in enough there.
Obviously those are all--all three of those countries are vital
trade partners for us, and it is important that their economies
continue to remain strong long-term as well, and continue to be
able to grow.
Several of my Oklahoma companies have been very, very
concerned about the 301 tariffs and the tariff lists and the
exemptions. The exemption process has been arduous, to say the
least, as they have gone through this the last couple of years.
And there has been a great deal of instability to say whether
they are going to be extended, not extended, what happens next
with our 301 tariffs, where they do the design engineering in
Oklahoma, and then they do manufacturing, let us say in China.
What is your plan on the exemption process? Are there any
thoughts that you have on the 301 tariffs for the future?
Mr. Nemelka. Thank you for that question. On the exemption
process, I know that that is run by our Office of General
Counsel and by professional staff. I know that they work
tirelessly on that and take each request sincerely and work
hard on that.
And so I am not particularly involved, in my current
position, nor would I be if I am confirmed. But I do know that
it is a process that the office handles with the utmost
conscientiousness.
Senator Lankford. The challenge that I have is obviously
the China connection that you have in your portfolio, that if
those resources are produced there in China, this becomes a
very, very difficult process to be able to get clarification on
how long the exemption--when they will get information on the
exemption, if it is going to expire at some point. Just
providing as much clarity as we could possibly give in the days
ahead will help our trade relationships.
And if the push is going to be that you just need to go
somewhere else, people just need to know that and not be led
along to think that there will be some exemption in the days
ahead when there is not one coming.
So we just need to be able to make sure that we provide
long-term clarity to companies.
Mr. Chairman, thank you. Thanks to all of the folks who are
here testifying today.
The Chairman. Thank you, Senator Lankford. Now, is Senator
Hassan available?
Senator Hassan. I am, Mr. Chairman. Thank you.
The Chairman. You bet. Go ahead.
Senator Hassan. Well, thank you, Chairman Grassley and
Ranking Member Wyden, for holding this hearing. And to all
three of our nominees today, thank you for your public service,
and thank your families for supporting you in that service.
Nobody does this by themselves, and we are very grateful for
everything that you and your families are willing to do to
serve.
Mr. Nemelka, I want to just touch on the same issue that
Senator Lankford was just asking about, because companies all
across New Hampshire are trying to weather this economic
crisis, but are also having to pay substantial tariffs that the
administration has imposed on imports from China. And since
China is part of your portfolio, I hope that you will get as up
to speed as possible on the exclusion issue. Because the
tariffs were already a major burden prior to COVID-19, and I am
really concerned that they continue to affect businesses,
especially small businesses, during this crisis.
One example is a business in New Hampshire, Extreme
Networks, which has 400 employees in Salem, NH. It was denied
tariff exclusions and continues to pay tariffs on networking
hardware.
So please get up to speed on this issue, and I hope that
the office will revisit not only the way it is communicating to
small businesses about these exclusions, but consider the
impact that these exclusions are having during the economic
crisis.
Can you commit to doing that?
Mr. Nemelka. I can, Senator. I thank you for that guidance.
Senator Hassan. I also wanted to follow up on a question
that Senator Toomey asked. I want to drill down a little bit
more on the issue of the supply of personal protective
equipment.
It is not just a matter of public and individual health,
but it is also obviously a matter of economic recovery for our
country. Let me be clear about what is happening on the ground.
Medical facilities, nursing homes, schools, businesses, do
not have enough personal protective equipment. And the
administration does not have a plan to secure the supply of PPE
needed for the long term. During Ambassador Lighthizer's June
appearance before this committee, I asked him if the
administration would lower tariff barriers that reduce U.S.
access to personal protective equipment and medical supplies.
And I take it from your answer now that you think USTR
should address tariff barriers in order to strengthen
international PPE supply chains. Is that correct?
Mr. Nemelka. Could you repeat the question?
Senator Hassan. Do you think USTR should address tariff
barriers, specifically lower some of these tariffs, to
strengthen our international personal protective equipment
supply chain?
Mr. Nemelka. I do not know if I said that. If I did, I
misspoke. I think what I was saying is that during this
pandemic, I think the office has granted the exclusions, the
301 exclusions, on those products. And with respect to the
standard tariffs that apply in any event, not just the 301, I
think what I said is, it is important to strike a balance, that
we want to move supply chains here. It is important to have our
own domestic supply.
But I agree with you. It is important to make sure that our
front-line workers have enough--have that equipment at hand.
And so it is a balance.
Senator Hassan. It is a balance. It is also about
predictability as we try to give people confidence that they
will be able to go back to school and go back to work. We need
to know how and where we are getting these supplies, and how to
produce them at home as well.
Let me follow up a little bit more on this. In the same
hearing with Ambassador Lighthizer, he told me that USTR and
the FEMA-led PPE task force were not coordinating. I urged USTR
to coordinate with FEMA to build out our domestic supply of
PPE.
Mr. Nemelka, has USTR begun to coordinate with FEMA's PPE
task force since Ambassador Lighthizer appeared here last
month?
Mr. Nemelka. Thank you for that question. I do not know the
answer, but I will definitely find out and am happy to follow
up with you.
Senator Hassan. I would really appreciate it. This is
absolutely critical for our capacity to protect health, but
also our economic recovery. And I would really urge you and the
entire task force team to work together and really develop a
strategy that we have not yet seen from the administration.
Thank you, Mr. Chairman. I yield the rest of my time.
The Chairman. Thank you very much. And now we call on
Senator Cortez Masto, and it looks like that Senator will be
the last one unless somebody else lets me know that they have
questions. Otherwise, I will adjourn, and we are getting close
to the vote anyway. So I hope that this might be the last
Senator to participate.
Senator from Nevada, go ahead.
Senator Cortez Masto. Thank you, Mr. Chairman.
To the panelists, congratulations on your nominations.
Welcome to your family members as well.
Let me start with the two potential tax judges. I know you
have been sitting there and watching as your panelist, the
Deputy USTR nominee, is getting a lot of questions. So let me
talk to you a little bit about the Tax Court.
Both of you either have, as attorneys, been before the Tax
Court, or want to be working there now. What are the
technological challenges at the Tax Court right now? My
understanding is that there are challenges in filing petitions
online. There are challenges in accessing documents online as
well. Is that true? And what would you do as Tax Court judges?
Or what would you like to see change, if that is the case?
Let me start with Mr. Weiler, and then I will ask Ms.
Marshall to go next.
Mr. Weiler. Thank you, Senator. Yes, the Tax Court is, as
are most of the courts around the country, facing some
unprecedented times. The Tax Court has been proactive. I have
been--obviously I am not at the Court today, so I cannot get
very specific--but my understanding in my discussions with Ms.
Marshall, the other nominee, as well as with the Chief Judge,
is that the Tax Court has implemented a Zoom or a virtual
platform. And it is really to promote that the docket continues
to move.
Petitions are being filed and now being accepted by the
Court. So they are accepting mail. And there is an online
platform for pro se taxpayers and practitioners alike to file.
So from a high level, I can address and say the good news is
that the Tax Court is moving forward with having virtual
dockets, which I think most importantly will allow settlement,
hopefully a resolution of the matters.
Most of the matters before the Tax Court ultimately are
resolved. So I think this promotes discussion and dialogue
between a taxpayer and IRS counsel. And if and when the need
arises, then a hearing or a virtual trial can proceed.
Senator Cortez Masto. Thank you. Ms. Marshall?
Ms. Marshall. Thank you for that question, Senator. This is
a time of change at the Tax Court. It is a really exciting time
to work there.
This past Friday the Court set up its new website. I think
it is a little more taxpayer-friendly, a little easier to
access from your smart device. The Court is working towards a
new case management system. That is expected to come out before
the end of 2020. The new case management system is also
designed to be more user-friendly, more taxpayer-friendly. And
unlike the current system, it will allow for petitions to be
electronically filed with the Court.
The Court has set up a program with ZoomGov for hearings
and trials, which will be conducted remotely for the next
while. And the Court does currently allow a lot of access to
documents. Right now, the public can access on the Tax Court
website all Court opinions, all Court orders, Court decisions,
and docket record sheets. In addition to that, taxpayers and
practitioners can access their cases, any document in their
cases. Taxpayers who would like further access to the Court can
call in a request and, for a fee of, I believe it is 50 cents a
page, $3 maximum per document, they can get Court records that
are not sealed emailed to them.
Senator Cortez Masto. Okay; and so has COVID-19 added an
additional burden on accessing this information because of the
technological challenges? Or is that something the Court has
worked through to address right now so that there are no
backlogs?
Ms. Marshall. I do not believe the current system--I
believe that the Court has done a good job of keeping up with
changes in technology and trying to adapt to the pandemic. The
Court did not receive mail for over 3 months, and currently
petitions cannot be electronically filed. So there will be a
backlog in the Court catching up on that.
Traditionally, documents could be accessed by the public at
the Court for free, but the Court is not currently open for
visitors. And traditionally the documents were mailed or picked
up by courier, but now since the pandemic, the Court is
allowing emailed documents.
Senator Cortez Masto. Okay. Thank you very much.
Congratulations, everyone. I notice my time is up. Thank you
for your willingness to serve.
The Chairman. Okay, we are about done here. So I will
finish by thanking all the Senators who participated, and
particularly the nominees for answering their questions. Also,
we wish--we congratulate you once again on your willingness to
serve. And then for people who have asked questions, or people
who were not asking any questions who want to submit questions
for answers in writing, we would ask that that deadline be 5
o'clock this Friday, July 24th. And then in turn, I tell the
nominees to answer the questions as quickly as they can in
writing.
And so with that----
Mr. Nemelka. Senator Grassley?
The Chairman. Yes?
Mr. Nemelka. Do you mind if I quickly call my daughters?
The other kids got on the screen, and I was not able to bring
them on. I know I am going to hear about it if I do not.
The Chairman. Please do that.
Mr. Nemelka. This is Emma, and Ava is right here.
The Chairman. Okay. You bet.
Mr. Nemelka. Thank you.
The Chairman. Well, God bless them and thank you very much.
Meeting adjourned.
[Whereupon, at 11:50 a.m., the hearing was concluded.]
A P P E N D I X
Additional Material Submitted for the Record
----------
Prepared Statement of Hon. Chuck Grassley,
a U.S. Senator From Iowa
Welcome, everyone, to today's hearing on pending nominations.
Today, we will have an opportunity to hear testimony from the
President's nominees for positions with the U.S. Trade Representative
and the U.S. Tax Court.
We'll hear from Michael Nemelka, who has been nominated to serve as
a Deputy U.S. Trade Representative.
We'll also hear from Christian Weiler and Alina Marshall, both of
whom have been nominated to be judges of the U.S. Tax Court for 15-year
terms.
I want to congratulate the nominees and say that I appreciate their
willingness to serve their country. The background of each of these
individuals is impressive. They are all very accomplished
professionals. I applaud the President for providing us such well-
qualified nominees.
I would also add there is a clear need to fill these positions
quickly. The pandemic has taken a terrible economic toll on our
citizens. Recovery requires an ambitious trade agenda to open markets
and create new jobs for our citizens. The current USTR, Ambassador
Lighthizer, is trying to do exactly that, including by negotiating a
trade agreement with Kenya. Mr. Nemelka would assist him with this
important goal. That's why we need to get him over to USTR to help
Ambassador Lighthizer.
Today, we will also hear from two nominees to the U.S. Tax Court.
The Tax Court is especially important in that it gives ordinary
taxpayers a place to challenge the IRS before they need to pay the
disputed liability. In a disagreement with the IRS, many people can
feel like they have no way to voice a disagreement with such a large
and powerful government agency. The Tax Court gives those taxpayers a
place for their disputes with the IRS to be considered fairly. Like
many other institutions, the Tax Court has been required to adapt to
the COVID-19 situation and is conducting proceedings remotely. Even in
this new environment, a delayed tax day finally came last week, and
taxpayers will still need a forum for dispute resolution that is as
operational as we can make it.
If the two nominees before us today are confirmed, 18 of 19
positions for judges at the Tax Court will be filled.
Thank you to everyone who is participating in today's hearing,
whether in person or remotely. I hope we'll be able to take some steps
toward economic recovery with the advancement of these nominees.
I look forward to hearing the nominees' statements and, hopefully,
to working with them very soon.
______
Prepared Statement of Alina I. Marshall, Nominated to be a
Judge of the United States Tax Court
Chairman Grassley, Ranking Member Wyden, and members of the Finance
Committee, thank you for holding this hearing to consider my nomination
to serve as a judge on the United States Tax Court. I am grateful to
you and your staff for the opportunity to be here today.
My husband Sean, my daughter Elizabeth, and my son Luke are here
with me this morning. Their love and support brighten my days and renew
my enthusiasm. My parents Jackie and Florin Ionescu, and my in-laws
Michele and George Hall and Barbara and David Marshall, are all
supporting me remotely, and I remain thankful for their patience and
encouragement. I am grateful to Chief Judge Foley, the judges of the
Tax Court and the Tax Court family, who have allowed me to work with
them on so many challenging and exciting opinions and projects. I also
want to thank my generous and supportive friends and neighbors,
especially the Walshes.
I am thankful to President Trump for nominating me to serve on the
Tax Court. This chance to chase my dream is truly humbling and a
reminder of the opportunities that are uniquely available in the United
States. I remain amazed that an immigrant who learned to speak English
in the public school system and from ``Sesame Street'' would have the
chance to meet with you today and, if confirmed, to serve as a judge.
My family's journey of coming from Romania and building a new life is a
tale of the American dream, and the chances and resources given to us
inspire me to give back, promote opportunity, and serve others. For
much of the last decade, I have had the privilege of serving at the Tax
Court.
I have been a member of the Tax Court family since 2010 and have
served as counsel to the Chief Judge since 2013. I have the honor of
advising the Chief Judge in the exercise of his statutory duty to
review opinions before public release. I also have the privilege of
helping with and advising on administrative and policy matters,
including as the Court has continued to serve its mission during this
pandemic. The Court quickly changed its ways of conducting business,
and it has been exhilarating to participate the Court's adoption of new
opinion review, case management, and trial procedures. Given my time at
the Tax Court and my experience at both large and small law firms, I
believe I would be well-equipped to try cases and dispose of pending
motions carefully, accurately, and efficiently if I am confirmed.
The Tax Court is a special place, both because of its feeling of
family and because of everyone's commitment to the Court's crucial role
in supporting the United States' system of voluntary self-assessment.
Everyone works hard to meet the Court's mission of being ``a national
forum for the expeditious resolution of disputes between taxpayers and
the Internal Revenue Service; for careful consideration of the merits
of each case; and to ensure a uniform interpretation of the Internal
Revenue Code.'' I already seek to serve the Court's mission by
reviewing opinions and advising the Chief Judge, and I believe I could
further support the Court's goals by carefully hearing cases and fairly
applying the law to the facts of each case.
Thank you again for your consideration. I look forward to answering
the committee's questions.
______
SENATE FINANCE COMMITTEE
STATEMENT OF INFORMATION REQUESTED
OF NOMINEE
A. BIOGRAPHICAL INFORMATION
1. Name (include any former names used): Alina Ionescu Marshall;
former: Alina Ionescu.
2. Position to which nominated: Judge, United States Tax Court.
3. Date of nomination: November 19, 2019.
4. Address (list current residence, office, and mailing addresses):
5. Date and place of birth: October 1, 1977; Bucharest, Romania.
6. Marital status (include maiden name of wife or husband's name):
7. Names and ages of children:
8. Education (list all secondary and higher education institutions,
dates attended, degree received, and date degree granted):
Greenwich High School, Greenwich, CT; August 1991-June 1995,
high school diploma; class salutatorian, June 1995.
Yale University; August 1995-May 1999, bachelor's degree,
ethics, politics, and economic and international studies, cum
laude, May 1999.
University of Pennsylvania Law School; August 1999-May 2002,
juris doctor, cum laude, May 2002.
9. Employment record (list all jobs held since college, including the
title or description of job, name of employer, location of work, and
dates of employment for each job):
June 2013-present: Counsel to the Chief Judge, United States
Tax Court, Washington, DC. Provide substantive comments on
draft opinions prepared by the judges; recommend to the Chief
Judge whether draft opinions should be reviewed by the Court
Conference, published as precedential opinions, or released as
nonprecedential memorandum opinions; consult with the Chief
Judge.
January 2011-December 2013: Adjunct professor of law,
Georgetown University Law Center, Washington, DC. Taught ``Tax
Penalties and Tax Crimes'' (later ``Tax Penalties and Tax
Opinions'').
April 2012-June 2013: Associate, West and Feinberg, P.C.,
Bethesda: MD. Advised closely held businesses on corporate and
tax planning matters; researched Federal and State tax law;
drafted documents including asset and stock purchase
agreements, promissory notes, stock appreciation rights, and
employment agreements.
July 2010-April 2012: Law clerk, United States Tax Court,
Washington, DC. Drafted opinions on topics including economic
substance, section 183 hobby losses, accounting method change,
sale of mixed-use property, fraudulent failure to file a tax
return, and awards of attorney's fees. Drafted orders on
motions.
August 2004-August 2009: Associate, Freshfields Bruckhaus
Deringer US LLP, Washington, DC. Drafted and negotiated
transaction documents, including for securitizations, debt
offerings, derivatives, financings, and tax-advantaged
structures. Drafted tax opinion letters.
September 2002-August 2004: Associate, Milbank, Tweed, Hadley,
and McCloy, LLP (now Milbank LLP), Washington, DC. Drafted
project finance transaction documents and performed due
diligence.
January 2002-May 2002: Student telemarketer, University of
Pennsylvania Law School Alumni Development Office,
Philadelphia, PA. Solicited donations from alumni over the
telephone.
August 2001-December 2001: Legal writing fellow, University of
Pennsylvania Law School, Philadelphia, PA. Taught legal writing
to LL.M. students.
May 2001-August 2001: Summer associate, Milbank, Tweed, Hadley,
and McCloy, LLP (now Milbank LLP), New York, NY. Rotated
through departments, including tax.
June 2000-December 2000: Insurance clerk, Stradley, Ronon,
Stevens, and Young, LLP, Philadelphia, PA. Assisted attorneys
in insurance defense litigation group.
December 1999-January 2000: Temporary assistant, Cliggott
Publishing (via Judlind Temps), Darien, CT. Temporary office
assistant.
October 1998-May 1999: Office assistant, Yale University, New
Haven, CT. Office assistant to Professor Csaba Horvath,
professor of chemical engineering.
June 1998-September 1998: Research analyst, International
Marketing Strategies, Marine Money International, Stamford, CT.
Drafted research summaries about shipping companies.
October 1997-May 1998: Dining hall student worker, Yale
University, New Haven, CT. Assisted with preparing, serving,
and cleaning after meals.
May 1997-August 1997: Office assistant, American Institute of
Foreign Study, Au Pair Division, Stamford, CT. Worked as an
office assistant.
June 1995-January 1997: Part-time recruiting assistant,
Staffing Partners, Shelton, CT. Data entry and office
assistance.
10. Government experience (list any current and former advisory)
consultative, honorary, or other part-time service or positions with
Federal, State, or local governments held since college, including
dates, other than those listed above):
None.
11. Business relationships (list all current and former positions held
as an officer, director, trustee, partner (e.g., limited partner, non-
voting, etc.), proprietor, agent, representative, or consultant of any
corporation, company, firm, partnership, other business enterprise, or
educational or other institution):
In my law firm positions as an associate, I acted as an agent,
representative, or consultant for the firms' clients. I have
volunteered as an alumni interviewer for Yale University and
the University of Pennsylvania.
12. Memberships (list all current and former memberships, as well as
any current and former offices held in professional, fraternal,
scholarly, civic, business, charitable, and other organizations dating
back to college, including dates for these memberships and offices):
Bar memberships: New York State, 3rd Judicial Department, since
January 2003; District of Columbia, since April 2004; Maryland
State, since April 2012; and the U.S. Tax Court Bar, since July
2011.
Professional organizations: American Bar Association (and Tax
Section), member since May 2003; New York State Bar
Association, member from March 2004 (and Tax Section member
from March 2005-December 2010; District of Columbia Bar tax
community, member since June 2006; Maryland State Bar
Association (and Tax Section), member from March 2012-February
2014; Federal Bar Association, member since September 2019; J.
Edgar Murdock American Inn of Court, member since 2012; and
International Fiscal Association, member from June 2006 to
December 2009.
Others: St. Charles Catholic Church--parishioner since 2004;
Columbus Club Pool--member since February 2017; Jhoon Rhee Tae
Kwon Do, member since June 2016; Orangetheory Fitness, member
since January 2019; Kennedy Center, associate level member
February 2013-February 2014; Dean Clinton Society for
consecutive donors to Penn Law, joined 2012; Penn Law Kilgore
Society, joined 2013; University of Pennsylvania Law Review,
editor 2000-2002; Penn Law student newspaper participant in
2001-2002; Yale University Women's Organization, member and/or
volunteer for part of college; and Yale Alpine Ski Team, racer
for part of college.
13. Political affiliations and activities:
a. List all public offices for which you have been a candidate
dating back to the age of 18.
None.
b. List all memberships and offices held in and services
rendered to all political parties or election committees,
currently and during the last 10 years prior to the date of
your nomination.
None.
c. Itemize all political contributions to any individual,
campaign organization, political party, political action
committee, or similar entity of $50 or more for the past 10
years prior to the date of your nomination.
None.
I have worked for the Tax Court for many of the last 10 years
and, as a Tax Court employee, I am obligated to follow the Code of
Conduct for Judicial Employees. As such, I am not permitted to
contribute to a candidate, political organization, or political event.
14. Honors and awards (list all scholarships, fellowships, honorary
degrees, honorary society memberships, military medals, and any other
special recognitions for outstanding service or achievement received
since the age of 18):
President's Education Awards Program Outstanding Academic
Achievement award, 1995; graduated Yale University in 1999 cum
laude; graduated University of Pennsylvania Law School in 2002
cum laude; University of Pennsylvania Law Review; University of
Pennsylvania legal writing fellow; Order of the Coif; U.S. Tax
Court performance awards in 2015, 2016, 2018, and 2019; and
U.S. Tax Court certificate of appreciation in 2017.
15. Published writings (list the titles, publishers, dates, and
hyperlinks (as applicable) of all books, articles, reports, blog posts,
or other published materials you have written):
``Is the Limited Scope Marketed Opinion Preparing for a
Comeback?'', Tax Talk, Fall 2012 at pg. 3, https://cdn.laruta.io/app/
uploads/sites/7/legacy
Files/uploadedFiles/MSBA/Member_Groups/Sections/Taxation/taxtalkfall
12.pdf.
``The Rescission Decision,'' Tax Talk, Spring 2013 at pg. 3,
7, https://cdn.
laruta.io/app/uploads/sites/7/legacyFiles/uploadedFiles/MSBA/Member_
Groups/Sections/Taxation/taxtalkspring13.pdf.
I worked on at least two client updates at Freshfields,
Bruckhaus, Deringer but, after searching my files, I was unable
to confirm whether any client updates went out with my name on
them. I reached out to the firm, and they were unable to
confirm as well.
In the summer of 1998, I drafted research summaries about
shipping companies that were included in an annual review of
shipping companies published by Marine Money International. It
also seems likely that one of the summaries was expanded and
published as an article called ``Hyide Marine: At a Glance'' in
July 1998. I do not have a copy of this article. See https://
www.marinemoney.
com/search/node?keys=alina%20ionescu.
I have not written any articles while at the Tax Court because
of limitations on employees and the nature of my current
position.
16. Speeches (list all formal speeches and presentations (e.g.,
PowerPoint) you have delivered during the past 5 years which are on
topics relevant to the position for which you have been nominated,
including dates):
I have not given any formal speeches or presentations while at
the Tax Court because of limitations on employees and the
nature of my current position.
I have participated in group presentations for the J. Edgar
Murdock American Inn of Court. Members are assigned to groups,
and groups are assigned dates and topics for presentations. Our
group presentations were not formal speeches and did not have
PowerPoint presentations. The topics were: October 2014:
Statute of limitations for assessments (IRC sec. 6501);
November 2015: Preparing the lay witness for trial/knowing your
witness has testified incorrectly (misinterpreting the
question, facts, etc.) or falsely; November 2016: Protection of
taxpayer information on electronic devices used by private
sector and Government lawyers; November 2017: Branerton v.
Commissioner--parties are expected to engage in an informal
exchange of information before utilizing the Tax Court's rules
for formal discovery; and November 2018: Transferee liability,
nominee liens, and alter ego.
The next group presentation will be in January 2020 on the
topic of source and selection of criminal tax cases.
I have also participated in internal presentations for law
clerks at the Tax Court. Every fall, the counsel to the Chief
Judge gives a presentation at law clerk orientation to explain
the reviewer function and offer suggestions for successful
opinion writing. Also, near the end of 2017 and 2018, I
participated in internal presentations about collection due
process cases and procedures.
17. Qualifications (state what, in your opinion, qualifies you to
serve in the position to which you have been nominated):
I am qualified to serve as a judge on the United States Tax
Court because of my background in private practice, teaching
experience, work at the Tax Court in various capacities, and
commitment to the mission of the Tax Court.
My private practice experience offered exposure to a variety of
clients, ranging from large multinationals to individuals. The
years spent at large law firms afforded me the luxury of
exhaustive research and experience preparing a work product
suited to the needs of a sophisticated client. I learned about
structuring transactions, tax efficiency, negotiation, and
advocacy. My time at a small firm, on the other hand, allowed
me to understand the needs of individuals, families, and small
businesses. These clients needed timely and affordable answers
that could be adapted to their changing circumstances. Because
of my background in private practice, I can see cases from
different points of view and am prepared to hear and decide
cases of a range of taxpayers, including individuals and
multinational businesses. I understand that the Tax Court must
serve both large taxpayers with sophisticated transactions and
individual taxpayers with straightforward tax returns, and that
it must do so in a timely, careful, and consistent manor.
At Georgetown University Law Center, I co-taught a class
focused on tax penalties, tax opinion letters, and tax crimes.
Because tax penalties are often at issue in Tax Court cases and
because taxpayers often raise reliance on a professional as a
penalty defense, my background in this area has proven and will
continue to prove useful.
I currently serve as counsel to the Chief Judge of the Tax
Court. Along with three colleagues, I advise the Chief Judge in
the exercise of his statutory duty to review opinions before
public release. I provide substantive comments on draft
opinions prepared by the judges, focusing on accuracy,
persuasiveness, thoroughness in considering relevant
authorities, and consistency with the case law of the Tax Court
and the relevant Court of Appeals. I recommend to the Chief
Judge whether draft opinions should be reviewed by the Court
Conference, published as precedential opinions, or released as
nonprecedential memorandum opinions, and consult with him
regarding substantive topics or particular draft opinions.
Previously, as a law clerk at the Tax Court, I drafted opinions
addressing a variety of fact-finding and legal issues and
drafted orders on motions. I am familiar with the Tax Court's
jurisprudence rules and internal procedures and would be well-
equipped to try cases and dispose of pending motions
immediately, should I be confirmed.
The Tax Court has described its mission as providing ``a
national forum for the expeditious resolution of disputes
between taxpayers and the Internal Revenue Service that allows
for careful consideration of the merits of each case and
ensures a uniform interpretation the Internal Revenue Code.''
By offering taxpayers the opportunity to be heard timely by an
impartial judge without having to pay the disputed liability
first, I believe the Tax Court plays a crucial role in
supporting the United States' system of voluntary self-
assessment. I already seek to serve the Court's mission by
reviewing opinions and advising the Chief Judge, and I believe
I could further support the Court's goals by carefully hearing
cases and fairly applying the law to the facts of each case.
B. FUTURE EMPLOYMENT RELATIONSHIPS
1. Will you sever all connections (including participation in future
benefit arrangements) with your present employers, business firms,
associations, or organizations if you are confirmed by the Senate? If
not, provide details.
If confirmed by the Senate; I will continue to work at the Tax
Court in my new capacity.
2. Do you have any plans, commitments, or agreements to pursue
outside employment, with or without compensation, during your service
with the government? If so, provide details.
No.
3. Has any person or entity made a commitment or agreement to employ
your services in any capacity after you leave government service? If
so, provide details.
No.
4. If you are confirmed by the Senate, do you expect to serve out
your full term or until the next presidential election, whichever is
applicable? If not, explain.
Yes.
C. POTENTIAL CONFLICTS OF INTEREST
1. Indicate any current and former investments, obligations,
liabilities, or other personal relationships, including spousal or
family employment, which could involve potential conflicts of interest
in the position to which you have been nominated.
In connection with the nomination process, I have consulted
with the Administrative Office of the U.S. Courts (AOUSC) to
prepare and file a financial disclosure report. Because of my
position at the Tax Court, I have been preparing and filing
financial disclosure reports since 2013.
I am not aware of any potential conflicts of interest; however,
I have worked on tax matters in private practice that could
potentially be brought to the Tax Court. Should any matter
arise that involves an actual or potential conflict of
interest, I would take whatever steps were necessary and
appropriate after carefully and diligently applying 28 U.S.C.
section 455, Canon 3 of the Code of Conduct for United States
Judges, and other relevant canons and provisions, including
recusal.
2. Describe any business relationship, dealing, or financial
transaction which you have had during the last 10 years (prior to the
date of your nomination), whether for yourself, on behalf of a client,
or acting as an agent, that could in any way constitute or result in a
possible conflict of interest in the position to which you have been
nominated.
In connection with the nomination process, I have consulted
with the AOUSC to prepare and file a financial discloser
report. Because of my position at the Tax Court, I have been
preparing and filing financial disclosure reports since 2013.
I am not aware of any potential conflicts of interest; however,
I have worked on tax matters in private practice that could
potentially be brought to the Tax Court. Should any matter
arise that involves an actual or potential conflict of
interest, I would take whatever steps were necessary and
appropriate after carefully and diligently applying 28 U.S.C.
section 455, Canon 3 of the Code of Conduct for United States
Judges, and other relevant canons and provisions, including
recusal.
3. Describe any activity during the past 10 years (prior to the date
of your nomination) in which you have engaged for the purpose of
directly or indirectly influencing the passage, defeat, or modification
of any legislation or affecting the administration and execution of law
or public policy. Activities performed as an employee of the Federal
Government need not be listed.
None.
4. Explain how you will resolve any potential conflict of interest,
including any that are disclosed by your responses to the above items.
If confirmed, I would take whatever steps were necessary and
appropriate after carefully and diligently applying 28 U.S.C.
section 455, Canon 3 of the Code of Conduct for United States
Judges, and other relevant canons, provisions and guidance,
including recusal.
5. Two copies of written opinions should be provided directly to the
committee by the designated agency ethics officer of the agency to
which you have been nominated and by the Office of Government Ethics
concerning potential conflicts of interest any legal impediments to
your serving in this position.
6. The following information is to be provided only by nominees to
the positions of United States Trade Representative and Deputy United
States Trade Representative: have you ever represented, advised, or
otherwise aided a foreign government or a foreign political
organization with respect to any international trade matter at any time
in any capacity? If so, provide the name of the foreign entity, a
description of the work performed (including any work you supervised),
the time frame of the work (e.g., March to December 1995), and the
number of hours spent on the representation.
Not applicable.
D. LEGAL AND OTHER MATTERS
1. Have you ever been the subject of a complaint or been
investigated, disciplined, or otherwise cited for a breach of ethics
for unprofessional conduct before any court, administrative agency
(e.g., an Inspector General's office), professional association,
disciplinary committee, or other ethics enforcement entity at any time?
Have you ever been interviewed regarding your own conduct as part of
any such inquiry or investigation? If so, provide details, regardless
of the outcome.
No.
2. Have you ever been investigated, arrested, charged, or held by any
Federal, State, or other law enforcement authority for violation of any
Federal, State, county, or municipal law, regulation, or ordinance,
other than a minor traffic offense? Have you ever been interviewed
regarding your own conduct as part of any such inquiry or
investigation? If so, provide details.
No, with one exception: In July 2016, my husband and I received
a violation notice from the Arlington County Department of
Community Planning, Housing and Development (Department) for
our residence. The notice identified a violation of Virginia
Maintenance Code Section 304.2 described a ``Chipped and
peeling paint on the exterior of the attached side carport.''
The correction action was described as follows: ``Remove all
deficient paint. Repaint all unprotected surfaces to protect
from the elements and prevent deterioration and maintain in
good condition.'' We corrected the violation by the identified
compliance date (August 11, 2016) and did not hear back from
the Department.
3. Have you ever been involved as a party in interest in any
administrative agency proceeding or civil litigation? If so, provide
details.
No.
4. Have you ever been convicted (including pleas of guilty or nolo
contendere) of any criminal violation other than a minor traffic
offense? If so, provide details.
No.
5. Please advise the committee of any additional information,
favorable or unfavorable, which you feel should be considered in
connection with your nomination.
None.
E. TESTIFYING BEFORE CONGRESS
1. If you are confirmed by the Senate, are you willing to appear and
testify before any duly constituted committee of the Congress on such
occasions as you may be reasonably requested to do so?
Yes.
2. If you are confirmed by the Senate, are you willing to provide
such information as is requested by such committees?
Yes.
______
Questions Submitted for the Record to Alina I. Marshall
Question Submitted by Hon. Chuck Grassley
Question. Generally, a best practice in protecting and promoting
healthy whistleblowing is to secure whistleblowers' access to
independent judicial reviews of their claims. This is no less true for
those who blow the whistle on tax fraud to the Internal Revenue
Service. In 2006, I authored an amendment that established a mandatory
IRS whistleblower award program and transferred review of whistleblower
cases away from the U.S. Court of Claims to the U.S. Tax Court. The Tax
Court has, in the past, decided whistleblower cases using a de novo
standard of review, but hadn't made a decision on the standard of
review for over 12 years. However, the Tax Court, in Kasper v.
Commissioner of Internal Revenue (2018), applied an arbitrary and
capricious standard of review. I am concerned that the Kasper case may
negatively affect whistleblowers coming forward in the future, though I
am pleased to know that the Tax Court has decided to revisit the
standard of review for whistleblowers in Tax Court case 11099-13W. To
that end, my question to you is this: will you commit to having an open
mind when considering the appropriate standard of review for
whistleblower cases--looking to the plain language of the statute and
the meaning of the words when the statute was adopted in 2006?
Answer. Yes, if confirmed and if I were to consider a challenge to
Kasper, either in a case before me or with respect to a case referred
to the Court Conference, I would have an open mind in considering the
appropriate standard of review for whistleblower cases. I would look to
the plain language of the statute, the meaning of the words when the
statute was adopted, and stare decisis considerations.
______
Questions Submitted by Hon. Todd Young
Question. Transparency is a widely accepted judicial norm--
increasing the accountability of courts and thereby increasing the
confidence and trust from the general public. However, the limited
access afforded to Tax Court documents has been a longstanding issue.
Most of the documents are public, but never see the light of day due to
the burdensome process for nonparties and those outside Washington, DC.
The current Tax Court practice essentially limits on-demand e-access to
documents to main parties, and those who have the resources to go to
the Tax Court personally. While I'm sympathetic to the need for privacy
for personal/confidential information, it is still important for the
public to have access to the IRS's position and aids pro se litigants
in preparing briefings based on prior petitioners with similar cases.
Should the Tax Court be subject to the same systemic oversight and
transparency that our system demands of Article III courts with respect
to e-access to documents? If so, how do you plan on addressing the
Court's electronic transparency?
Answer. Oversight and transparency are important to every court's
accountability to the public, and therefore to the public's perception
of justice. I agree that it is important for the public to have access
to the IRS's positions and that pro se taxpayers benefit from accessing
records of petitioners with similar cases. Because of the Tax Court's
position as an Article I court that is not under the Administrative
Office of the U.S. Courts, the Tax Court's policies and procedures do
not always align with those of Article III courts.
The Court has recently changed the document retrieval policy for
non-parties. To ensure public access during the pandemic, the Court now
receives copy requests from non-parties by telephone and fulfills the
requests electronically by email for a fee of $0.50 per page, with a
per-document cap of $3.00. This is a move in the right direction. If I
am confirmed, I would look for other ways to increase public access to
Court documents while also protecting the sensitive taxpayer data.
Question. Amid the COVID-19 pandemic, the Tax Court faces a large
mail backlog with a large percentage constituting unopened petitions
(as these must be filed in paper form). There are reports that the Tax
Court received 2\1/2\ truckloads of mail to be processed. Amidst the
current backlog what is the court doing to ensure that these petitions
are processed in an efficient manner? How do you plan to ensure
petitioners receive a fair and timely trial?
What other challenges do you foresee the Tax Court encountering as
a result of the coronavirus, and how do you plan to address these
challenges to return to the pre-pandemic status quo?
Answer. The Court is working hard to address the current backlog of
mail, with records and petitions clerks working staggered shifts to
ensure compliance with social distancing and virus protection
protocols.
If confirmed, I will immediately be available to take trial
sessions and resolve cases. My Court experiences will assist me in
handling my caseload in a manner that will ensure petitioners receive a
fair and timely trial. For example, I plan to contact the parties early
in the process to promote cooperation and will address motions and
evidentiary issues promptly.
One significant challenge the Court faces is the implementation of
remote trial proceedings. I fully anticipate that the Court's process
will have to evolve and, if confirmed, I will help to make the
necessary adjustments to ensure that taxpayers receive an opportunity
to appear before the Court safely and with minimal inconvenience and
expense.
As a result of the pandemic and related medical or personal
challenges, the Court may be asked to address innumerable taxpayers who
experience difficulty meeting petition and notice of appeal filing
deadlines. The Tax Court will have to address such issues as they arise
in each case.
The Tax Court has benefitted from new technology and adapted
quickly to the challenges of the pandemic. By capitalizing on these
opportunities, I believe that the Tax Court will be well-suited to
address any post-pandemic challenges.
Question. The Tax Court's decision to conduct remote proceedings
reflects the new ``normal'' that we are all experiencing during these
unprecedented times. As a result, parties must take steps to ensure
that they and their witnesses have adequate technology and Internet
resources to participate in a remote proceeding. Today, the vast
majority of Americans have, or can use, a telephone. But proceedings
that require a personal computer with Internet service may not be
accessible to many litigants. With that said, I have concerns with how
remote proceedings will work for vulnerable, low-income taxpayers.
How do you plan to address the socioeconomic ``digital divide''
with respect to remote proceedings and ensure there's an easily
accessible platform so low-income taxpayers can fairly participate?
How do you anticipate the general use of remote proceedings will
impact the current lengthy delay in issuing a judgment in the Tax
Court, while still ensuring a just process?
Answer. Most Tax Court cases are resolved without trial and
taxpayers may, over the telephone, participate in and resolve all pre-
trial matters. In addition, the Court's remote proceedings will be
conducted via Zoomgov, a secure platform selected because it is user-
friendly. While video features are accessible over computer, tablet, or
smartphone, taxpayers can also dial in to Zoomgov by telephone.
The Court has a long history of encouraging and working with Low-
Income Taxpayer Clinics (LITCs) and pro bono assistance programs, which
will be available to help these taxpayers with Zoomgov and other
technological concerns. LITCs and pro bono assistance programs
participated in the development of the Court's remote trial procedures.
Upon notification of their case being calendared, taxpayers are
notified of the availability of the LITCs and programs. In addition,
immediately after the case is calendared, the LITCs, pro bono
assistance programs, and other attorneys will be able to assist parties
by entering a limited entry of appearance. If confirmed, I will ensure
that litigants are aware of these resources, treated with kindness,
patience and respect, and not disadvantaged because of challenges in
using technology.
I believe that the general use of remote proceedings could help the
Tax Court to decide cases more quickly and efficiently. Tax Court
judges using remote proceedings will save time traveling. It is also
possible that the Court may receive fewer requests for a continuance,
as taxpayers will not be required to travel to a city of trial and may
be able to avoid taking time off work or finding childcare in order to
attend a trial.
Question. Like any other court proceeding, there is a waiting
period that may be required. There is no fixed time in which a judge
must make a decision, but in most cases, it can be at least 6 months
between when the petition is filed to when the case is called for
trial, and then another 6 months or year before an opinion is issued--
especially given the current backlog.
With the possibility of interest continuing to accrue on an
individual's unpaid tax balance throughout the course of the
proceeding, do you plan to address the waiting period and the time it
takes to render a decision? If so, what are your plans?
Will you commit to issuing opinions within a year of the trial
date?
Answer. If confirmed, I would help the Tax Court to investigate and
consider options to shorten the period of time between when a petition
is filed and when an opinion is issued. For example, a taxpayer may
wait longer for a trial if the taxpayer chooses a place of trial where
the Court has fewer cases and therefore only holds one trial session
per year. It may be possible to reduce this period of time for a
taxpayer willing to have a remote trial.
I believe in the maxim that justice delayed is justice denied. I
will aspire to issue opinions in the vast majority of cases within a
year of the trial date. I cannot guarantee, however, that every opinion
will be issued within a year because there are valid and necessary
reasons that a case might require additional time. For example,
issuance of a court opinion may be delayed if a taxpayer files a
bankruptcy petition that temporarily bars continuation of a pending Tax
Court case, a case is designated for review by the Court Conference, or
the parties request a longer briefing schedule or extensions to filing
deadlines after a complex trial.
Question. The Tax Court is responsible for overseeing a diverse
array of tax-
related legal challenges, and because of its power and
responsibilities, it is vital that it continue to improve.
Based on your career, what proactive steps can Congress take to
improve the experience of taxpayers?
In your knowledge, what current outstanding issues should this
committee be aware of as it pertains to the interaction between
taxpayers and the Tax Court?
Answer. I believe that Congress's best method for continuing to
improve the experience of taxpayers is to continue providing clear
statutes that can be readily interpreted by taxpayers, attorneys, the
Internal Revenue Service, and the courts.
In addition, I believe that taxpayers would be well-served if
Congress were to accept the Tax Court's proposal regarding subpoenas.
The Court has sought to modernize its subpoena authority, including by
removing the requirement that the production of documents or other
evidence be at a ``designated place of hearing'' (26 U.S.C. sec.
7456(a)(1)). This change would allow for the production of documents
and other evidence before a hearing date and at a place other than the
place of the trial or hearing. By allowing the parties earlier access
to documents and other evidence, the parties may be able to settle
issues more quickly or narrow issues before trial.
As it pertains to the interaction between taxpayers and the Tax
Court, the committee should be aware that the Court is capitalizing on
new technology to increase communications with and access by taxpayers.
The Court has updated its website, offering a more user-friendly,
mobile-friendly Internet resource. The Court has implemented remote
trial procedures using Zoomgov so that it can keep cases moving during
this pandemic, when travel is difficult and large gatherings in
courtrooms are unadvisable. By year-end, the Court will complete and
switch to its new case management system. The new case management
system will be mobile-friendly and permit taxpayers to file petitions
electronically. To ensure excellent communication and clarity, the
Court has done usability testing with stakeholders, including low
income taxpayer clinics and the general public, to ensure that the new
case management system is user-friendly.
Question. How will you seek to ensure the access of clinics to the
Tax Court to ensure proper representation of all taxpayers, regardless
of their financial situations?
Answer. While the Tax Court cannot endorse or recommend any
particular low-income taxpayer clinic or pro bono assistance program,
the Court mails information about these resources to pro se taxpayers.
To facilitate taxpayer access to representation, the Court allows
limited entries of appearance to be entered as soon as a case is
calendared.
If I am confirmed, I would, on conference calls and at calendar
call, remind taxpayers of these resources. I would also direct
taxpayers to the Court's website, which includes an example of a remote
trial proceeding (i.e., pre-calendar call, the process of clinics
arranging assistance for a self-represented taxpayer, calendar call,
and trial).
______
Prepared Statement of Michael N. Nemelka, Nominated to be Deputy United
States Trade Representative for Investment Services, Labor,
Environment, Africa, China, and the Western Hemisphere, With the Rank
of Ambassador, Executive Office of the President
Chairman Grassley, Ranking Member Wyden, and members of the
committee, let me start by thanking you for holding this hearing today.
I'd also like to thank your staff for their professionalism, expertise,
and courtesy throughout this nomination process.
Thank you, Chairman Grassley, for that introduction and for your
support. It is an especial honor to appear before you today. I clerked
for Judge Paul V. Niemeyer on the United States Court of Appeals for
the Fourth Circuit in 2006, which is when you were chairman of this
committee the first time around. Judge Niemeyer gave each of his young
law clerks a word of advice at the start of our clerkship. He said, ``I
want you to treat taxpayer dollars as if you had to show every receipt
to Senator Grassley.'' I've always remembered that, and I never
imagined I would have the privilege of testifying before you some day--
although, if you ask, I don't have those receipts anymore from all
those years ago. But you should know that your spirit of responsibility
has filtered down into the Federal judiciary, and I think Judge
Niemeyer still gives that same advice today. I know I will certainly
continue to follow it, if I have the honor of being confirmed to this
position.
I would like to recognize the members of my family who are here
with me today, and those who are watching from home. I'm grateful to my
wife Melanie for supporting my desire to serve in government, and for
her love and friendship. We've been blessed with four wonderful
children--two daughters, Emma and Ava, who are with us today; and two
teenaged sons, Benjamin and William, who are either sleeping or
watching from home. I've also been blessed with the best of parents,
siblings, and in-laws, and I would like to thank them for their love
and support.
I am deeply honored to have been recommended by Ambassador
Lighthizer and nominated by President Trump to serve as the Deputy
United States Trade Representative for Africa, China, and the Western
Hemisphere, and for Investment, Services, Textiles, Labor, and
Environment. I have had the privilege of serving at USTR for the past 5
months as an advisor and counselor to Ambassador Lighthizer. Based on
my experience, I know firsthand how tirelessly he works day in and day
out advocating for the interests of the United States. The dignity of
the American worker is at the forefront of everything he does. We are
all very fortunate to have him as our United States Trade
Representative.
As I've seen, one of the main reasons Ambassador Lighthizer has had
so much success is because of his close partnership with you. One of my
primary goals, if I am confirmed, is to ensure that I contribute to
that constructive relationship with this committee and others in
Congress.
If confirmed, I would have the opportunity to help build on the
successes that USTR has already achieved. In the Western Hemisphere, we
have the new United States-Mexico-Canada Agreement that just entered
into force on July 1st. As Ambassador Lighthizer has said, that
landmark agreement is the gold standard against which all other trade
agreements will be judged. It earned 89 votes in the Senate, a
remarkable feat, and was supported by labor unions, businesses,
farmers, and ranchers alike. The job now is to enforce it, including
through the Brown-Wyden rapid response mechanism, the groundbreaking
enforcement tool for resolving certain labor violations. You have my
commitment, if I am confirmed, to ensure that we receive every benefit
of the bargain through smart and effective enforcement.
For China, we have the Phase One agreement, which also just entered
into force a few months ago. In that remarkable agreement, USTR
achieved many long-held goals, including a commitment from China to
fully respect intellectual property rights, end forced technology
transfer, and increase purchases of US goods and products, among many
other things. We must ensure that China lives up to its commitments.
And we have an agreement that is in writing, and is fully enforceable,
to make sure they do.
In Africa, USTR just launched negotiations on a free trade
agreement with Kenya, which would be the first such agreement between
the United States and a Sub-
Saharan African country. As Ambassador Lighthizer has said, the goal is
to conclude an agreement that is comprehensive and high-standard, while
also being one that works for Kenya and can serve as a model for
additional agreements across Africa.
If confirmed, I also look forward to seizing the opportunities we
have on investment, services, and textiles, and building on the USMCA's
model labor and environmental chapters.
In short, it is a very exciting time to be at USTR, and I would be
very grateful for the opportunity to serve my country in this position
should I be confirmed.
Members of the committee, I thank you again for this opportunity,
and I look forward to your questions.
______
SENATE FINANCE COMMITTEE
STATEMENT OF INFORMATION REQUESTED
OF NOMINEE
A. BIOGRAPHICAL INFORMATION
1. Name (include any former names used): Michael Nephi Nemelka.
2. Position to which nominated: Deputy United States Trade
Representative.
3. Date of nomination: March 20, 2020--White House announcement of
intent to nominate; May 4, 2020 (expected)--Nomination delivered to the
Senate.
4. Address (list current residence, office, and mailing addresses):
5. Date and place of birth: August 6, 1978; Salt Lake City, UT.
6. Marital status (include maiden name of wife or husband's name):
7. Names and ages of children:
8. Education (list all secondary and higher education institutions,
dates attended, degree received and date degree granted):
Brigham Young University, B.A. in history teaching.
Dates attended: June-December 1997 and then 2000-2003 (from
January 1998 to February 2000 I lived in the Czech Republic as
a representative for my church, hence the gap in dates
attended); date degree granted: May 2003.
University of Virginia School of Law, J.D.
Dates attended: 2003-2006; date degree granted: May 2006.
9. Employment record (list all jobs held since college, including the
title or description of job, name of employer, location of work, and
dates of employment for each job):
Wilmer Hale LLP, summer associate, worked on various legal
research issues, Washington, DC office, summer 2005.
Covington and Burling LLP, summer associate, worked on various
legal research issues, Washington, DC office, summer 2006.
The Honorable Judge Paul V. Niemeyer, law clerk to judge on
U.S. Court of Appeals for the Fourth Circuit, drafted case
memos, judicial opinions, and helped judge prepare for oral
argument, August 2006-August 2007.
Kellogg, Hansen, Todd, Figel, and Frederick, P.L.L.C.,
associate (2007-2014) and then partner (2015-2020), areas of
focus included antitrust, intellectual property, contractual
disputes, and appellate litigation. Tried numerous cases to
verdict, including in both Federal and State courts, as well as
in arbitration.
The Office of the United States Trade Representative, special
advisor to Ambassador Lighthizer, work on assigned projects,
January 23, 2020 to the present.
10. Government experience (list any current and former advisory,
consultative, honorary, or other part-time service or positions with
Federal, State, or local governments held since college, including
dates, other than those listed above):
None other than those listed above.
11. Business relationships (list all current and former positions held
as an officer, director, trustee, partner (e.g., limited partner, non-
voting, etc.), proprietor, agent, representative, or consultant of any
corporation, company, firm, partnership, other business enterprise, or
educational or other institution):
Partner at Kellogg, Hansen, Todd, Figel, and Frederick,
P.L.L.C.
12. Memberships (list all current and former memberships, as well as
any current and former offices held in professional, fraternal,
scholarly, civic, business, charitable, and other organizations dating
back to college, including dates for these memberships and offices):
Virginia State Bar, member June 8, 2007 to the present;
District of Columbia Bar, member October 6, 2008 to the
present; Federalist Society, member 2003 to the present;
Virginia Law Review, managing board (2005-2006), editor (2004-
2005); Rex E. Lee Law Society, member 2003-2006; the Church of
Jesus Christ of Latter-day Saints, lifelong member.
13. Political affiliations and activities:
a. List all public offices for which you have been a candidate
dating back to the age of 18.
None.
b. List all memberships and offices held in and services
rendered to all political parties or election committees,
currently and during the last 10 years prior to the date of
your nomination.
None.
c. Itemize all political contributions to any individual,
campaign organization, political party, political action
committee, or similar entity of $50 or more for the past 10
years prior to the date of your nomination.
None.
14. Honors and awards (list all scholarships, fellowships, honorary
degrees, honorary society memberships, military medals, and any other
special recognitions for outstanding service or achievement received
since the age of 18):
Heritage Scholarship (full-tuition 4-year scholarship) at
B.Y.U.; Raven Society Award at University of Virginia; Phi
Kappa Phi; and Phi Alpha Theta.
15. Published writings (list the titles, publishers, dates, and
hyperlinks (as applicable) of all books, articles, reports, blog posts,
or other published materials you have written):
None.
16. Speeches (list all formal speeches and presentations (e.g.,
PowerPoint) you have delivered during the past 5 years which are on
topics relevant to the position for which you have been nominated,
including dates):
None.
17. Qualifications (state what, in your opinion, qualifies you to
serve in the position to which you have been nominated):
The position of Deputy United States Trade Representative
requires skills on dispute resolution, negotiation, and leading
teams toward a common goal. My experience as a commercial
litigation partner at Kellogg Hansen has prepared me to perform
these aspects of the position. Thinking tactically, advocating
a position, developing relationships with counterparts, leading
large teams, and putting the interests of my clients first have
formed the basis for my practice in dispute resolution and
settlement of large, complex cases. As Deputy USTR, my job will
be to apply those same skills in representing the interests of
the United States as an effective advocate. I also understand
that in order to achieve the best results and respect
Congress's Article I power over trade, it is essential to work
closely with members of Congress and their staffs in that
effort.
B. FUTURE EMPLOYMENT RELATIONSHIPS
1. Will you sever all connections (including participation in future
benefit arrangements) with your present employers, business firms,
associations, or organizations if you are confirmed by the Senate? If
not, provide details.
Pursuant to the policy of Kellogg Hansen, I will receive the
remainder of my share of 2019 profits after my departure from
the firm.
Amount: $2,815,482.
Dates of Payment: The remaining share of 2019 firm profits
will be paid in 10 units in 2020 at intervals yet to be determined.
Source: Share of firm profits for work performed January 1,
2019-December 31, 2019.
Pursuant to the policy of Kellogg Hansen, I retain an interest
in any recovery obtained in a contingency fee case for which I
was the originating partner. The only case to which this
pertains is a domestic antitrust case against CDK Global, LLC
(``CPK'') and The Reynolds and Reynolds Company (``Reynolds''),
two enterprise software providers. The firm represents other
software vendors that need to access data on the databases
within the enterprise software systems controlled by CDK and
Reynolds. The plaintiffs represented by the firm are: (1) Motor
Vehicle Software Corporation; (2) Cox Automotive; (3) AutoLoop
LLC; and (4) Authenticom, Inc. The terms of my remaining
interest are limited to my actual time investment and
originating interest to the cases while employed at the firm,
plus a partial share of any amount in excess of the firm's
investment at the time of any future recovery.
2. Do you have any plans, commitments, or agreements to pursue
outside employment, with or without compensation, during your service
with the government? If so, provide details.
No.
3. Has any person or entity made a commitment or agreement to employ
your services in any capacity after you leave government service? If
so, provide details.
No.
4. If you are confirmed by the Senate, do you expect to serve out
your full term or until the next presidential election, whichever is
applicable? If not, explain.
Yes.
C. POTENTIAL CONFLICTS OF INTEREST
1. Indicate any current and former investments, obligations,
liabilities, or other personal relationships, including spousal or
family employment, which could involve potential conflicts of interest
in the position to which you have been nominated.
None.
2. Describe any business relationship, dealing, or financial
transaction which you have had during the last 10 years (prior to the
date of your nomination), whether for yourself, on behalf of a client,
or acting as an agent, that could in any way constitute or result in a
possible conflict of interest in the position to which you have been
nominated.
None.
3. Describe any activity during the past 10 years (prior to the date
of your nomination) in which you have engaged for the purpose of
directly or indirectly influencing the passage, defeat, or modification
of my legislation or affecting the administration and execution of law
or public policy. Activities performed as an employee of the Federal
Government need not be listed.
None.
4. Explain how you will resolve any potential conflict of interest,
including any that are disclosed by your responses to the above items.
I am entering into an ethics agreement with USTR, which will be
forthcoming after the nomination is officially sent to the
Senate on May 4, 2020.
5. Two copies of written opinions should be provided directly to the
committee by the designated agency ethics officer of the agency to
which you have been nominated and by the Office of Government Ethics
concerning potential conflicts of interest or any legal impediments to
your serving in this position.
These will be forthcoming from the relevant officials.
6. The following information is to be provided only by nominees to
the position of United States Trade Representative and Deputy United
States Trade Representative: have you ever represented, advised, or
otherwise aided a foreign government or a foreign political
organization with respect to any international trade matter at any time
in any capacity? If so, provide the name of the foreign entity, a
description of the work performed (including any work you supervised),
the time frame of the work (e.g., March to December 1995), and the
number of hours spent on the representation.
No.
D. LEGAL AND OTHER MATTERS
1. Have you ever been the subject of a complaint or been
investigated, disciplined, or otherwise cited for a breach of ethics
for unprofessional conduct before any court, administrative agency
(e.g., an Inspector General's office), professional association,
disciplinary committee, or other ethics enforcement entity at any time?
Have you ever been interviewed regarding your own conduct as part of
any such inquiry or investigation? If so, provide details, regardless
of the outcome.
No.
2. Have you ever been investigated, arrested, charged, or held by any
Federal, State, or other law enforcement authority for a violation of
any Federal, State, county, or municipal law, regulation, or ordinance,
other than a minor traffic offense? Have you ever been interviewed
regarding your own conduct as part of any such inquiry or
investigation? If so, provide details.
No.
3. Have you ever been involved as a party in interest in any
administrative agency proceeding or civil litigation? If so, provided
details.
No.
4. Have you ever been convicted (including pleas of guilty or nolo
contendere) of any criminal violation other than a minor traffic
offense? If so, provide details.
No.
5. Please advise the committee of any additional information,
favorable or unfavorable, which you feel should be considered in
connection with your nomination.
None.
E. TESTIFYING BEFORE CONGRESS
1. If you are confirmed by the Senate, are you willing to appear and
testify before any duly constituted committee of the Congress on such
occasions as you may be reasonably requested to do so?
Yes.
2. If you are confirmed by the Senate, are you willing to provide
such information as is requested by such committees?
Yes.
______
Questions Submitted for the Record to Michael N. Nemelka
Questions Submitted by Hon. Chuck Grassley
Question. I've been traveling through Iowa the last couple of
weeks. My fellow farmers have repeatedly raised the importance of the
China Phase One deal. They've faced a lot of hardship under the trade
war, and we need to do right by them. As we enter the fall, it will be
critical to ensure that China follows through on its purchase
commitments. If confirmed, you will be the Deputy USTR with
responsibility for the China portfolio. Tell me what you will do to
ensure that China follows through on its obligations.
Answer. USTR has been following China's progress in purchasing U.S.
food and agricultural products very closely. If confirmed, I will be
prepared to handle whatever China issues Ambassador Lighthizer asks me
to take on, including holding China to its commitments to purchase U.S.
food and agricultural products.
Question. The administration is trying to improve our trade
relations with Brazil. Brazil is one of the top markets for American
ethanol. In 2017 though, Brazil imposed a restrictive tariff rate quota
(TRQ) scheme on ethanol that has limited our trade.
Will you commit to making ethanol market access a top priority as
part of any efforts to improve trade relations with Brazil?
Answer. Yes. Presidents Trump and Bolsonaro have repeatedly called
for closer trade and economic ties between the United States and
Brazil. If confirmed, I will continue efforts to support this charge,
including by working with U.S. Chief Agricultural Negotiator Gregg Doud
to advocate at every opportunity for fair trade in ethanol.
Question. If confirmed, you will be overseeing both the
negotiations for a free trade agreement with Kenya and our trade policy
concerning investment. With respect to USMCA, we've had folks express
concern that the approach to protecting American investment is
insufficient. In particular, they're worried that Mexico may be moving
in the wrong direction in giving a fair shake to Americans since the
investor-state dispute settlement (ISDS) has been scaled back. This
affects more than just investment that could have been done in America
or another country. It involves issues like licensing of intellectual
property or investments in geologic resources. We want Americans to be
able safely make those type of investments overseas because they
benefit us here at home.
If confirmed, will you commit that for the Kenya negotiations that
you will seek comprehensive protections for American investors that are
more robust than the approach taken with USMCA?
Answer. If confirmed, I will push for a high-standard and
comprehensive U.S.-Kenya FTA, including a high-standard investment
chapter. To this end, the administration will seek to secure for U.S.
investors in Kenya important rights consistent with U.S. legal
principles and practice and the highest international standards, as
well as seeking to reduce or eliminate investment barriers in Kenya,
such as equity caps, land ownership limitations, and local content
requirements. The administration will also seek mechanisms to ensure
that Kenya lives up to its commitments; the administration is still
considering the appropriateness of investor-state dispute settlement,
however.
Question. Eliminating foreign barriers to trade in services could,
by some estimates, increase U.S. services exports by as much as $1.4
trillion, creating millions of new American jobs. How do you plan to
use your position to continue to break barriers and expand markets for
U.S. services providers?
Answer. Services is a key element of this position's portfolio, and
if confirmed, I will work to ensure that the United States remains the
global leader in services trade. The United States is the world's
largest services trading country, accounting for 15 percent of global
exports. In 2019, U.S. services exports were $845 billion, one-third of
all U.S. exports, and exceeding services imports by $250 billion.
Growth in U.S. services sectors powers growth across the whole economy.
I will therefore look forward to pursuing high standard services and
digital trade commitments in U.S. FTA negotiations with the United
Kingdom and Kenya and continuing to advocate high standard services and
digital trade rules in the WTO and other forums. I will also continue
to advocate for U.S. interests and consider the range of trade tools
available whenever a trading partner seeks to introduce new barriers,
such as digital tax regimes that target world-class U.S. service
suppliers.
Questions Submitted by Hon. Ben Sasse
Question. Given the extensive conversations we are having with our
allies and partners about the national security concerns surrounding
Chinese inputs into the supply chains of telecommunications and general
technological goods, these will continue to be areas negotiated and
discussed in phase deals like with Japan and full TPA negotiated trade
agreements with the U.K. and Kenya.
You are currently working at USTR as a special advisor to
Ambassador Lighthizer; what experience have you had in representing the
interest of the United States in national security concerns?
Answer. In my role as advisor and counselor to Ambassador
Lighthizer, I see firsthand how important national security concerns
can be in the context of trade. I will not have the necessary security
clearance until after confirmation to work on all issues in this area,
but if I'm confirmed, one area in particular that will be important
will be the CFIUS review process. I also understand that USTR
coordinates closely with inter-government agencies--including national
security agencies--in clearing chapter texts for specific trade
agreements. USTR also negotiates for national security exemptions, as
necessary, from specific trade agreements so that the U.S. government
has the necessary flexibility on national security issues that come up
in the context of trade.
Question. What has been your coordination with the intelligence
community and other national security agencies when negotiating trade
agreements?
Answer. I have not personally coordinated with the intelligence
community and other national security agencies given that I will only
have the necessary security clearance if I am confirmed. But I know
that USTR, in clearing chapter texts as part of negotiations of free
trade agreements, generally coordinates with national security agencies
as part of that process. I also understand that USTR regularly
coordinates with the National Security Agency on various aspects of our
trading relationships.
Question. China seems to have unfettered access to our markets,
while they impose restrictions on American companies to relinquish
sensitive technology to gain access to their market. I understand USTR
has been working on these matters, including the 2018 report on the
investigation into China's actions under section 301. When confirmed,
to what extent will you continue to apply pressure to China on these
forced technology transfers and what would be the ideal outcome of a
Phase Two agreement with China? How is USTR evaluating the risks to
U.S. national security that could come through increased economic
transactions?
Answer. Following the administration's imposition of substantial
additional tariffs on Chinese goods pursuant to section 301, China
entered into negotiations with the United States, which resulted in a
historic Phase One economic and trade agreement, signed in January 15,
2020. In this agreement, the administration was able to address a wide
range of unfair trade practices, including in the area of technology
transfer, where China committed not to force or pressure U.S. companies
to transfer technology to Chinese companies, among other things. USTR
is closely monitoring China's implementation of its Phase One
commitments. In Phase Two, we remain fully committed to addressing
additional unfair trade practices, including further disciplines in the
area of technology transfer and new disciplines in critical areas such
as state-sponsored cyber-theft for commercial gain as well as excess
capacity, subsidies, and state-owned enterprises, among others.
The administration utilizes a range of tools to address the
national security risks that may arise from economic transactions
involving forced technology transfer. For example, the Foreign
Investment Risk Review Modernization Act (FIRRMA), signed into law in
August 2018, provides significantly expanded jurisdiction for the
United States to review and, if needed, to mitigate or to prohibit
controlling and non-
controlling foreign investments in the area of critical technologies.
Question. When the entire U.S. Government (State, Commerce,
intelligence community, Treasury) is laser-focused on encouraging our
allies and partners to reduce their reliance on Huawei technology
because of the security implications, how does USTR take those larger
foreign policy efforts into account when negotiating specific trade
agreements with allies and partners?
Answer. I understand that USTR coordinates closely with inter-
government agencies--including national security agencies--in clearing
chapter texts for specific trade agreements. USTR also negotiates for
national security exemptions, as necessary, from specific trade
agreements. It is important that the U.S. Government has the necessary
flexibility on national security issues that come up in the context of
trade. Coordinating with the relevant national security agencies--and
relying on the experience and expertise of the professionals at USTR--
is critical to the process.
Question. Will you share USTR's strategy and commitment to
developing a plan for strengthening ties to Southeast Asia, including
expanding market access and eliminating non-tariff barriers, so that
Nebraska agriculture and U.S. businesses are not at a disadvantage for
access to trade in these markets?
Answer. Under the Trump administration's Indo-Pacific Strategy, the
United States works with countries across Southeast Asia and the
Pacific to strengthen regional trade and security. USTR's activities in
the region are focused on expanding market access and eliminating non-
tariff barriers, including by confronting structural barriers,
expanding market access for U.S. farmers and exporters, and targeting
unfair trade practices that underpin trade deficits. In support of
these objectives, the United States regularly engages Southeast Asia
and Pacific countries both in our Trade and Investment Framework
Agreements (with Brunei, Burma, Cambodia, Indonesia, Laos, Malaysia,
New Zealand, the Philippines, Thailand, Vietnam, and the ten ASEAN
countries collectively) and under our two FTAs (with Australia and
Singapore). Throughout the Trump administration, we have made and will
continue to make the expansion of U.S. agricultural exports and the
elimination of agricultural trade barriers including non-tariff
barriers high priorities in these engagements.
Question. Can you comment on timing for a Phase Two agreement with
Japan?
Answer. I understand that negotiations with Japan have been delayed
due to the coronavirus pandemic and that Ambassador Lighthizer expects
Phase Two negotiations to begin within the next few months. If
confirmed, I will support the administration's plan to negotiate a
comprehensive trade agreement, as outlined in the U.S.-Japan Trade
Agreement Negotiation Objectives published in December 2018.
______
Questions Submitted by Hon. Ron Wyden
Question. Both USMCA and labor are in your portfolio. I have real
concerns that the already monumental task of spurring real labor reform
in Mexico has been made even more difficult under the COVID-19
pandemic. In the USMCA Implementation Act, Congress provided
significant funds to, among other things, enable grants to support
worker-focused capacity building efforts in Mexico. As co-chair of the
Interagency Labor Committee, USTR has a lead role in distributing the
funds made available by the Act.
Do you pledge to ensure adequate funding of programs on a timely
basis to maximize the ability of workers in Mexico to benefit from the
obligations around collective bargaining and freedom of association and
other critical labor issues addressed in the agreement?
What else besides funding is needed to ensure Mexican workers'
rights are enforced?
Answer. I am committed to ensuring USCMA capacity-building funds
are allocated as soon practicable, in order to support the
implementation of USMCA labor obligations and Mexico's landmark reform
process. USTR is working closely with the Department of Labor and the
Interagency Labor Committee to make this happen. To date, the
Department of Labor has awarded $32 million in technical assistance
funding to assist Mexico in complying with the labor commitments in the
USMCA, improve working conditions, and strengthen the rule of law. An
additional project will build worker capacity in Mexico to identify
violations of labor law and also will provide legal support and improve
advocacy and administrative functions. The Interagency Labor Committee
also is working to monitor Mexico's implementation of USMCA's labor
obligations. USTR and the Department of Labor have ongoing
consultations with Mexico and labor stakeholders to identify challenges
and address concerns, particularly those related to Mexico's
implementation of the labor reform process. I look forward to working
with you on this critical issue.
Question. Stakeholders have already raised a number of concerns
about the implementation of the USMCA by Mexico. Among these are
changes to Mexico's new General Rules of Foreign Trade (GRFT) which
raises the ``Tasa Global'' charged on all shipments in the simplified
clearance mode, including those from the United States. This and other
aspects of the GRFT make it more expensive and more burdensome for
certain U.S. shipments to enter Mexico than before the agreement was
signed and came into force.
In your view, are Mexico's actions consistent with the agreement?
If so, how can it be that we negotiated an agreement that makes it
harder for U.S. exports to get into Mexico? If not, how do you plan to
remedy this issue?
Answer. Mexico's regulations to implement certain elements of the
USMCA certainly raise questions which USTR will continue to address
with our Mexican counterparts. On the ``Tasa Global'' increase, which
was made with almost no notice or opportunity to comment, we have
lodged questions formally with Mexico's Enquiry Point, requesting a
delay and an opportunity to comment. In addition, we continue to engage
the government of Mexico using an all-of-government approach.
Question. In June, Canada issued regulations implementing the USCMA
tariff rate quota provisions for dairy products. These regulations,
which allocate import licenses to Canadian producers of competing
products, raise serious concerns regarding whether Canada will provide
the market access for U.S. dairy products promised in the USCMA.
In your view, are Canada's TRQ regulations consistent with the
agreement?
If not, what action will USTR take to ensure that the dairy market
provisions are implemented as drafted?
Answer. A critical component of the market access the United States
secured in the USMCA is the ability to export U.S. products duty-free,
under tariff-rate quotas (TRQs) directly to retailers and distributors.
Such exports maximize profit for U.S. producers and build consumer
demand for U.S. products in Canada. I am committed to ensuring that
Canada does not undermine the value of the market access for the United
States under the USMCA.
USTR will be closely monitoring Canada's implementation of all its
dairy commitments, including its administration of dairy TRQs, and will
be ready to take enforcement action under the agreement, including
through its dispute settlement mechanism, if necessary.
Question. As you are no doubt aware, China and China's unfair trade
practices--ranging from IP theft to censorship--are a significant issue
for this committee. China appears in both your portfolio and that of
Ambassador Gerrish.
Can you explain what issues you will spearhead now and after Mr.
Gerrish's departure?
Can you indicate when we will see significant progress on a Phase
Two agreement addressing the structural reform identified by USTR's
section 301 report?
Answer. Ambassador Gerrish has been handling the China portfolio
since his confirmation in March 2018. Once he leaves USTR at the end of
July 2020, Ambassador Lighthizer will reassign his portfolio, including
with regard to China. I will be prepared to handle whatever China
issues Ambassador Lighthizer asks me to handle. I can assure you that
Ambassador Lighthizer places the highest priority on ensuring that
China fully implements its commitments under the Phase One agreement.
As I am called upon to help with that effort, I will do everything
within my power to help ensure that China fully implements its Phase
One agreement commitments.
USTR is fully committed to moving ahead with Phase Two negotiations
as soon as we can. But both the United States and China have made clear
that we first need to focus on making sure that the Phase One agreement
is being properly implemented. Proper implementation of the Phase One
agreement will be essential to establish the groundwork for tackling
the other important issues that remain outstanding in Phase Two.
Question. What metrics do you think are relevant to judging the
success of U.S. trade policy?
Are we to solely look to trade deficits and agriculture purchases?
What other criteria do you think should be considered when
evaluating the success of trade policy?
Answer. There are many metrics that are relevant to judging the
success of U.S. trade policy. Trade has a significant impact on
employment, and the types of jobs that our economy supports, and so one
of the most important metrics is the number of jobs--and the quality of
jobs--that our trading relationships support. That includes jobs in
manufacturing, services, technology, farming, ranching, and so forth. A
primary purpose of trade policy, in my view, should be to create and
support as many high-paying middle-class jobs as possible. Other
relevant metrics include increasing exports, encouraging domestic
manufacturing, particularly in critical supply chains, and supporting
our farmers and ranchers. Another important indicator of success is
having labor and environmental standards in our trading relationships
that are consistent with those outlined in TPA. I also believe a
successful trading policy requires strong and effective enforcement,
and a close partnership with Congress. Thus, as is clear, I don't think
we should look solely at trade deficits and agricultural purchases for
judging the success of U.S. trade policy.
Question. Digital trade will be a critical part of your portfolio
as the digital economy has a large and increasing impact on all sectors
of the United States. Examples ranging from the deployment of precision
agriculture technology to the incorporation of smart components in
manufactured goods demonstrate how integrated digital trade has become
in every facet of our economy.
Do you agree with me that every facet of our trade policy should be
deployed to address barriers to digital trade, which is an area where
the United States has a comparative advantage and which supports other
exporting sectors?
What initiatives will you pursue for a digital trade agenda?
Answer. I recognize the importance of the digital economy to
American jobs, prosperity, and security, and U.S. companies' unique
competitive advantages in this area. If confirmed, I look forward to
maximizing U.S. engagements and advancing U.S. goals in this area in
all relevant multilateral, plurilateral, and bilateral venues, as well
as, as necessary, using enforcement actions and other trade tools.
Question. Your portfolio includes Africa, and you will be leading
the ongoing negotiations with Kenya. This is the first bilateral trade
deal being negotiated with a Sub-Saharan African country, so it is
important that any agreement we reach be ambitious and enforceable,
with high standards on issues like the environment, labor, and digital
trade.
First, on the environment: how will you seek to address illegal
trafficking of wildlife, which can have ties to money laundering and
terrorist financing?
Answer. The USMCA Environment Chapter will serve as the model for
the Kenya environment negotiations. The USMCA contains the highest
standard commitments to combat wildlife trafficking of any free trade
agreement, including to treat intentional transnational trafficking of
wildlife as a serious crime, as defined in the United Nations
Convention on Transnational Organized Crime. We will continue to pursue
strong, robust, and enforceable provisions regarding illegally traded
wildlife in the U.S.-Kenya Environment Chapter. If confirmed, as the
negotiations proceed, I look forward to discussions with Congress and
other stakeholders on how to most effectively address this critical
issue with Kenya and with other countries on the continent.
Question. Second, given Kenya's sizable informal labor market, how
will you ensure that we can achieve high-standard and enforceable labor
obligations?
Answer. On labor, I agree that Kenya's informal labor market
presents certain challenges. The negotiating objectives Congress set
out in TPA emphasize the importance of addressing labor rights issues
regardless of economic sector. I am committed to ensuring that Kenya,
like other FTA partners, adopts and maintains laws for the effective
protection of labor rights and has the means to enforce those laws. I
will work with you and other members of Congress on ways to address
this challenge during the negotiations.
Question. Finally, like several other nations, Kenya has proposed a
unilateral digital services tax (DST) that unfairly targets American
tech companies and acts as a burden on digital trade. Will you commit
to ensuring that Kenya abandons its unilateral DST as part of these
negotiations?
Answer. We are pursuing high-standard services and digital trade
commitments in our FTA negotiations with Kenya, and by necessity, that
will include negotiations with Kenya to abandon its unilateral DST. I
commit to continue to advocate for U.S. interests and consider the
range of trade tools available whenever a trading partner seeks to
introduce new barriers, such as digital tax regimes that target world-
class U.S. service suppliers.
Question. The environmental obligations in our trade agreements
help to ensure that our agreements do not encourage the flight of
capital to locations with lower-standard environmental protections;
that our trading partners effectively manage scarce resources, such as
fisheries and timber; and that we incentivize good stewardship of the
environment across those partners.
Do you commit to making high-standard commitments on fisheries
subsidies in the UK, Kenya, and WTO negotiations a high priority?
Answer. Yes. The USMCA contains high standard commitments on
fisheries subsidies and will serve as the model for the Kenya and UK
environment negotiations. If confirmed, I will also consider additional
proposals, including by the other trading partners, consistent with the
negotiating objectives set out in TPA. In the WTO negotiations, the
United States has played a very active role in seeking a meaningful
outcome and real constraints on the world's largest subsidizers such as
China, building on the kinds of prohibitions negotiated in the USMCA.
If confirmed, I will continue to press for strong, clear prohibitions
on subsidies for illegal fishing, overfished stocks, and fishing in
areas beyond a country's own national jurisdiction and control, as well
as real constraints on the world's largest subsidizers.
Question. What are your priorities in the implementation of USMCA
with respect to the environment and what specific initiatives would you
pursue with respect to the USMCA environmental issues?
Answer. The USMCA advances environmental protection with new and
enforceable tools to protect and conserve ecologically and economically
significant terrestrial and marine environments in North America and
beyond. The administration has achieved timely implementation of USMCA
environment obligations, consistent with the July 1, 2020 entry into
force timeline. If confirmed, I will continue to advance implementation
(and enforcement) of all aspects of the environment chapter. I will
work closely with the members of the Interagency Environment Committee
on Monitoring and Enforcement (IECME). I will use the IECME's
assessment report, as well as input from other stakeholders, to develop
priorities for our efforts. I will ensure the most effective and
efficient use of the tools and resources made available to us through
the USMCA and our relevant domestic statutes, including to identify
priorities and specific initiatives for USMCA environment
implementation.
______
Questions Submitted by Hon. Mark R. Warner
Question. The U.S. has entered into preliminary negotiations with
the Republic of Kenya to establish a comprehensive free trade
agreement. While I am optimistic regarding the possibility of an
agreement and a strengthened relationship with our Kenyan allies, I am
concerned that USTR may use these negotiations as an opportunity to
again export policy similar to the ``safe harbor'' provisions found in
section 230 of the Communications Decency Act. As you know, there are
multiple bipartisan efforts in Congress aimed at reforming the
underlying statute on which the safe harbor provision is based. By
including these provisions in trade agreements, as was done in the
USMCA, USTR limits Congresses ability to legislate.
Further, in many countries (including Kenya) with recent histories
of violence against ethnic and religious minorities, the use of social
media platforms to incite and amplify calls to violence have been a
major problem. In Myanmar, for instance, UN investigators concluded
that Facebook was a ``determining cause'' of the genocide against the
Rohingya. Countries across the world are exploring legal regimes to
address the ways in which social media platforms can directly
contribute to such harmful activity, including by holding platforms
legally responsible. Yet as drafted, the platform safe harbor that USTR
has pushed would prevent trading partners from maintaining civil or
common law rules that hold platforms liable in instances in which they
knowingly or recklessly leave up, or amplify, harmful content.
Given our understanding regarding the role of social media
platforms in contributing, and in some cases catalyzing, ethnic
cleansing campaigns, is this an appropriate provision to force on
trading partners--particularly those, like Kenya, with fraught
histories of religious and ethnic violence?
Answer. I believe that a provision addressing the non-IP civil
liability of interactive computer service suppliers can play an
important role as one element of a broader set of comprehensive, high
standard digital trade rules to facilitate the continued growth of the
U.S. economy and to support innovative Internet-based business models.
At the same time, I recognize that any such provision in a trade
agreement must provide flexibility for the Congress, the
administration, and our negotiating partners to evolve policy and law
in response to new challenges, including addressing the types of harms
you identified.
Question. Like others, I am concerned about the inclusion of food
and beverage-related products on lists of targeted products related to
USTR's Airbus actions. They have an outsized impact on consumers and
small and medium-sized businesses. The presence of candy and chocolate
products is especially concerning considering that the U.S. domestic
industry their trade association have argued against the tariffs and
feel they could lead to EU retaliation against them. How does USTR
weigh comments arguing against tariffs on imported products from the
U.S. domestic industry?
Answer. The European Union as a whole, and France, Germany, Spain,
and the United Kingdom, are each party to the underlying dispute and
are collectively responsible for the unfair subsidization of Airbus.
Because of this, USTR's action in October 2019, and the action taken in
February 2020, focused on the EU member states that subsidize Airbus
and also covered products of other EU member states. USTR established a
process for interested persons to submit comments on the updated action
through July 26th. Among other matters, USTR specifically invited
comments regarding potential disproportionate economic harm to U.S.
interests, including small or medium size businesses and consumers.
USTR will continue to consider public comments concerning potential
effects on the U.S. economy, and any other comments, when considering
any possible further modifications to this trade action.
Question. The candy and confection industry is disproportionately
targeted by this tariff list, with almost a third of the import value
from tariffs that were newly added to this list. Why is such a small
industry bearing the brunt of these tariffs?
Answer. Determining an appropriate action under section 301
involves a balance between the most effective action to obtain the
elimination of the unfair act, policy, or practice, and minimizing any
adverse effects on the U.S. economy. To assist in achieving the
appropriate balance, USTR conducts a notice and comment process on
possible trade actions and carefully considers all public input.
______
Questions Submitted by Hon. Robert Menendez
Question. When this committee was debating Trade Promotion
Authority, it passed my amendment that barred ``fast track'' procedures
for any trade agreement with a country on Tier 3 of the State
Department's Trafficking in Persons (TIP) Report--a group of countries
whose governments fail to combat human trafficking. Following that
amendment, we saw unprecedented politicization of the TIP Report where
countries were upgraded based on unrelated factors, one of those being
trade. If confirmed, you will oversee our trading relationships with
several countries that have poor records on combatting human
trafficking.
Will you commit that, if confirmed, you will not take any action to
attempt to influence the TIP Report?
Answer. Yes. I agree that it is of critical importance to take
action to combat human trafficking. I would welcome the State
Department's report on this issue and would not in any way attempt to
influence the conclusions that the State Department includes in its
report based on their independent analysis and assessment.
Question. If confirmed, you will oversee our trade relationships
with the entire hemisphere. And given the administration's focus on
trade deficits, it surprises me that the Western Hemisphere hasn't
gotten more attention, given the fact that we have trade surpluses with
several of our trading partners in the region.
If confirmed, what will be your priorities for expanding our trade
relationships with the other countries in the region? Will your primary
focus be to explore new agreements or renegotiate the ones we already
have?
Answer. Free, fair, and reciprocal trade with the countries of the
Western Hemisphere will be one of my priorities, if I am confirmed. In
the near term, our focus in the Western Hemisphere will be on deepening
our trade relations with countries that share our trade priorities and
are willing to meet high standards. We are already working with Brazil
on regulatory and other issues under our Agreement on Trade and
Economic Cooperation and with Ecuador on a range of issues, including
import licensing reform, under our bilateral Trade and Investment
Council. Any decisions on future FTA negotiations will be made in
consultation with the Congress.
Question. Shortly after Congress approved USMCA, Mexico's
television regulator issued a new regulatory interpretation that
severely limits the amount of advertising U.S. media firms can show on
their paid TV channels in the country. U.S. industry argues that this
action discriminates against U.S. TV providers in violation of USMCA
and will undercut U.S. jobs that support their programming in Mexico.
In last month's hearing on the President's 2020 trade policy agenda,
Ambassador Lighthizer suggested that this action is indeed a likely
violation of Mexico's obligations under USMCA. Additionally, it is my
understanding is that USTR viewed a similar move 6 years ago to be a
violation of NAFTA and successfully resolved it until this latest
change.
Do you believe this action by Mexico's television regulator is a
violation of USMCA? Now that USMCA has entered into force, if
confirmed, what will you do to ensure Mexico lives up to its commitment
not to discriminate against U.S. companies?
Answer. I agree that the regulatory interpretation issued in
February by Mexico's television regulator, made without prior notice or
public consultation, is troubling and challenges longstanding industry
practices that U.S. channels have used to make investment decisions.
The administration has raised this issue with the Mexican government
and will continue to fight for fair treatment for U.S. TV providers,
including by bringing enforcement actions under the USMCA, as
necessary.
______
Questions Submitted by Hon. Sherrod Brown
Question. This administration, including USTR Lighthizer, has said
that USMCA should be a model for all future trade agreements. One of
the key provisions in USMCA that allowed the agreement to garner broad,
bipartisan support, is the Brown-Wyden rapid response mechanism that
creates an entirely new, worker-
driven enforcement process for key labor obligations.
Do you believe the Brown-Wyden rapid response mechanism should be
included in a trade agreement reached with the UK? Do you believe it
should be included in a trade agreement reached with Kenya?
Answer. USTR is currently developing draft text for the labor
chapters of the UK and Kenya negotiations, in preparation for
interagency discussions as well as consultations with the Congress and
stakeholders. I look forward to working with you and other interested
members of Congress on all of the labor aspects of these negotiations,
including the appropriateness of the inclusion of a rapid response
labor mechanism.
Question. In your opinion, how successful do you believe U.S. trade
agreements have been in combating forced labor in our trading partners
and in U.S.-based companies' global supply chains? Do you believe there
are improvements that should be made to U.S. trade agreements with
respect to forced labor? If so, please detail those improvements.
Answer. I am strongly committed to addressing forced labor under
U.S. trade agreements and related U.S. laws. USTR officials engage with
trade partner countries and U.S. businesses regarding forced labor
around the world, including discussions on global supply chains. USTR
also participates in a number of intra-
governmental initiatives that work to address forced labor and is part
of the U.S. government's whole-of-government enforcement work in this
area. USTR is a member of both the Forced Labor Enforcement Task Force
and the DHS Forced Labor Interagency Working Group, and collaborates
with Customs and Border Protection (CBP) on its enforcement of the
forced labor import prohibition in section 307 of the Tariff Act of
1930. Since passage of the Trade Facilitation and Trade Enforcement Act
of 2015, CBP has issued seventeen Withhold Release Orders to detain at
the U.S. border shipments that they reasonably believe have been
produced by forced labor. If confirmed, I look forward to working with
you on this important issue.
Question. In your opinion, how important are unions to equitable
growth in the U.S.? Do you believe expanding the presence of
independent unions in our trading partners should be a primary
objective in U.S. trade policy? Please explain.
Answer. The rights of workers to form and join unions of their
choice and to bargain collectively are fundamental aspects of ensuring
that the benefits of trade and economic growth are shared broadly. I
believe this is true for all economies around the world, including
those of our trading partners and that of the United States. I strongly
support the inclusion of labor rights provisions in Trade Promotion
Authority and in our trade agreements, and I admire and respect your
leadership on this critical issue.
Question. In your opinion, should government purchases of U.S.
agricultural goods be a primary negotiating objective of U.S. trade
negotiations? Please explain.
Answer. USTR's ambitious trade agenda promotes fair, balanced trade
to grow the U.S. economy and support high-paying American jobs. This
agenda includes the negotiation of comprehensive trade agreements that
address a broad range of important agricultural equities. This includes
lowering of other countries' tariff and nontariff barriers to achieve
fairer, more balanced trade to benefit U.S. agriculture. Under some
circumstances, I believe that the inclusion of agriculture purchase
commitments may complement these efforts by offering immediate tangible
benefits to U.S. agricultural producers.
Question. In your opinion, what improvements have been made in
addressing global steel overcapacity in the last 2 years? Are you aware
of any examples of overcapacity perpetrators reducing net steel
production capacity in the last 2 years?
Answer. The problem of massive and persistent overcapacity in the
global steel sector will only be addressed when countries that created
the problem take meaningful steps to remove the distortive policies and
practices that impede functioning markets and cause severe global
imbalances. China is the prime offender in this regard. Capacity
developments in China's steel sector are notoriously opaque, but
information that is available suggests that net steel production
capacity in China began to increase again in 2019, after modest
reductions in the 2016-2018 period. At the same time, China has been
actively pushing its steelmakers to build new capacity in overseas
markets, particularly in Southeast Asia. The administration is working
with like-minded partners in the OECD and G20 to bring greater
international attention to these developments.
Question. USTR's published negotiating objectives for the Kenya FTA
do not include sustainable or equitable economic development in Kenya
as a stated objective of the negotiations.
In your opinion, do you believe sustainable, equitable economic
development in Kenya should be a USTR objective for the talks? If so,
what U.S. FTA, in your view, has best achieved equitable growth in a
developing country? On what metrics is that assessment based? Will that
FTA serve as model for the Kenya FTA negotiations?
Answer. In pursuing an FTA with Kenya, I would seek an outcome that
makes workers, farmers, and business people in both the United States
and Kenya more prosperous. In that context, our vision is to conclude
an agreement with Kenya that can serve as a model for additional
agreements in Africa that will serve as an enduring foundation to
expand U.S.-Africa trade and investment across the continent.
Question. In your opinion, what provisions of AGOA should be
included in a Kenya FTA? Are there any AGOA provisions that should not
be included in a bilateral FTA with Kenya?
Answer. Given that AGOA is set to expire in 2025, we are preparing
for a future that reflects the economic and commercial opportunities
our modern comprehensive trade agreements can help support--
opportunities that unilateral trade preferences like AGOA simply
cannot. Our negotiating objectives for the agreement are consistent
with those Congress outlined in Trade Promotion Authority.
Question. In your opinion, should addressing the market-distorting
impacts of state-owned enterprises be a priority of USTR in any Phase
Two negotiations with China?
Answer. Yes. There are many critical issues that need to be
addressed in the Phase Two negotiations, and addressing China's
problematic state-owned enterprises will certainly be a priority. Under
China's non-market economic system, state-owned enterprises receive
substantial preferences not available to other competitors, especially
foreign competitors, and as a result the playing field is by no means
level.
______
Prepared Statement of Christian N. Weiler,
Nominated to be a Judge of the United States Tax Court
Chairman Grassley, Ranking Member Wyden, and other Senators on the
Finance Committee, thank you for holding this hearing.
I am honored to be nominated to serve as a judge of the United
States Tax Court. I would like to also thank my beautiful wife and four
children for their love and encouragement throughout my nomination
process. I know that I would not be appearing before you without their
support.
The role of the Tax Court, albeit limited in scope, is very
important. The Tax Court provides a critical independent forum for the
resolution of civil tax disputes with the IRS. The Court hears all
types of tax cases, which can vary substantially in size and complexity
depending on the taxpayer. If confirmed, I pledge to decide all matters
in an impartial manner, by applying the facts before me to the relevant
provisions of the tax code and by also looking to controlling
precedent. I genuinely believe the Tax Court serves an important
function in safeguarding the fairness of our Nation's tax system.
In my hometown of New Orleans, LA, I have had the pleasure of
working with my father and law partner, John Weiler, for some 15 years
at the law firm of Weiler and Rees. In working with my father, I have
not only had the privilege of being mentored by a truly outstanding tax
attorney with unparalleled knowledge and skills, I have also had the
privilege of learning from a great human being. By my father's example,
he has shown me how to treat others with respect and kindness in all
matters. My father has also shown me the importance of listening to my
clients' problems and how to work alongside them to help guide them to
a resolution of their legal issue. In short, I believe the advocacy and
personal skills I have acquired while working with my father will serve
me well as a judge.
Formed by my strong Christian faith, I believe we are all children
of God, and therefore not only do I pledge to serve as an impartial
judge, I also pledge to treat all parties and attorneys who may appear
before me with respect and kindness.
Also, while the Tax Court hears large and complex tax issues, it
most often hears small tax matters filed by self-represented litigants.
I am proud of my volunteer work as an attorney with the Southeast
Louisiana Legal Services Pro Bono Tax Clinic, where I have gained
valuable experience in matters commonly before the Tax Court, such as
audits of the Earned Income Tax Credit, innocent spouse claims for
relief, and collection due process appeals. I believe my experience
with these specific tax matters will serve me well as a judge.
Finally, if confirmed, I look forward to serving my country.
Thank you for your time and consideration, and I look forward to
answering any questions that the committee might have.
______
SENATE FINANCE COMMITTEE
STATEMENT OF INFORMATION REQUESTED
OF NOMINEE
A. BIOGRAPHICAL INFORMATION
1. Name (include any former names used): Christian Neumann Weiler.
2. Position to which nominated: Judge, United States Tax Court.
3. Date of nomination: November 19, 2019.
4. Address (list current residence, office, and mailing addresses):
5. Date and place of birth: May 1, 1979; New Orleans, LA.
6. Marital status (include maiden name of wife or husband's name):
7. Names and ages of children:
8. Education (list all secondary and higher education institutions,
dates attended, degree received, and date degree granted):
Masters of law (LL.M.) in taxation, Southern Methodist
University Dedman School of Law, Dallas, TX, May 2006.
Juris Doctor (J.D.), Loyola University School of Law, New
Orleans, LA, May 2005.
Bachelor of science (accounting), Louisiana State University,
Baton Rouge, LA, December 2001.
9. Employment record (list all jobs held since college, including the
title or description of job, name of employer, location of work, and
dates of employment for each job):
Weiler and Rees, LLC, law firm, New Orleans and Covington, LA,
partner, January 2012 to present; associate attorney, June 2000
to December 2011.
Winn, Beaudry, and Winn, LLP, 1601 Elm Street, #4200, Dallas,
TX 75201, part-time law clerk while attending SMU Law School,
September 2005 to May 2006 (estimate).
Courtenay, Hunter, and Fontana, 400 Poydras Street, New
Orleans, LA, part-time law clerk while attending Loyola Law
School, January 2004 to May 2005 (estimate).
KPMG, LLP, 909 Poydras Street, Suite 2900, New Orleans, LA
70112, staff accountant, January 2002 to May 2002.
10. Government experience (list any current and former advisory,
consultative, honorary, or other part-time service or positions with
Federal, State, or local governments held since college, including
dates, other than those listed above):
None.
11. Business relationships (list all current and former positions held
as an officer, director, trustee, partner (e.g., limited partner, non-
voting, etc.), proprietor, agent, representative, or consultant of any
corporation, company, firm, partnership, other business enterprise, or
educational or other institution):
Weiler and Rees, LLC, law firm, New Orleans and Covington, LA,
member, January 2012 to present.
12. Memberships (list all current and former memberships, as well as
any current and former offices held in professional, fraternal,
scholarly, civic, business, charitable, and other organizations dating
back to college, including dates for these memberships and offices):
Member of the Louisiana Bar Association, 2005 to present.
Board-certified tax law specialist, Louisiana State Board of
Legal Specialization, January 2012 to present.
Member and officer for the Louisiana State Bar Tax Section;
member from 2006 to present, officer from 2018 to present.
Active member of the American Bar Association Tax Section, 2005
to present.
Former officer and member of the National Association of
Planned Givers, Greater New Orleans Chapter, 2007 to 2018
(approximate).
Former volunteer board member of Boys Hope Girls Hope of
Greater New Orleans, 2008 to 2010 (estimate).
Volunteer board member of Children's Neuromuscular Foundation
of Louisiana, June 2008 to present.
Volunteer board member of Louise T. Fein Memorial Foundation,
April 2010 to present.
Former member of Krewe of Thoth, a New Orleans Mardi Gras club,
2013 until 2017 (estimate).
13. Political affiliations and activities:
a. List all public offices for which you have been a candidate
dating back to the age of 18.
None.
b. List all memberships and offices held in and services
rendered to all political parties or election committees,
currently and during the last 10 years prior to the date of
your nomination.
None.
c. Itemize all memberships and contributions to any
individual, campaign organization, political party, political
action committee, or similar entity of $50 or more for the past
10 years prior to the date of your nomination.
I have not made any personal political contributions that I can
recall. My law firm, Weiler and Rees, LLC has made prior political
contributions to local candidates running for public office. Attached
as Exhibit A is a detailed listing of all prior contributions made by
my law firm from the Louisiana Ethics Administration Program.
14. Honors and awards (list all scholarships, fellowships, honorary
degrees, honorary society memberships, military medals, and any other
special recognitions for outstanding service or achievement received
since the age of 18):
Recognized as a top-rated tax attorney in New Orleans by Super
Lawyers and New Orleans Magazine.
Officer for the Louisiana State Bar Tax Section and active
member of the American Bar Association Tax Section.
Recipient of the 2016 Pro Bono Publico Award from the Louisiana
State Bar Association for ``Outstanding Pro Bono Service to
Louisiana's indigent. ''
Recipient of the southeast Louisiana Legal Services Outstanding
Pro Bono Service Award, in ``Recognition of his extraordinary
pro bono services, and dedication to our low-income tax clients
of Louisiana,'' November 2016.
15. Published writings (list the titles, publishers, dates, and
hyperlinks (as applicable) of all books, articles, reports, blog posts,
or other published materials you have written):
``Overview: How the Tax Cuts and Jobs Act Affects You and Your
Law Practice''; Louisiana Bar Journal, April-May 2019, 66 La.
B.J. 336 (a copy of this article is attached as Exhibit B-1),
http://files.lsba.org/documents/publications/BarJournal/
Feature2-Weiler-Journal-Feb-March-2019.pdf.
``Louisiana Pet Trusts and How to Avoid Some Hairy
Situations''; Louisiana Bar Journal, February-March 2017, 64
La. B.J. 344 (a copy of this article is attached as Exhibit B-
2), https://www.lsba.org/documents/publications/BarJournal/
Journal-Feature1-Feb-Mar-2017.pdf.
``IRS Makes Important Changes to Offshore Voluntary Disclosure
Program''; Louisiana Bar Journal, April-May 2014, 62 La. B.J.
228 (a copy of this article is attached as Exhibit B-3).
``The Low-Profit Limited Liability Company Has Arrived in
Louisiana''; Louisiana Bar Journal, April-May 2011, 59 La. B.J.
98 (a copy of this article is attached as Exhibit B-4), https:/
/www.lsba.org/documents/publications/BarJournal/Journal-
Feature2-August2011.pdf.
``Compliance With the Patient Protection and Affordable Care
Act,'' November 12, 2012, Weiler and Rees, News and Highlight
(a copy of this article is attached as Exhibit B-5), http://
www.wrtaxlaw.com/compliance-with-the-patient-protection-and-
affordable-care-act-ppaca/.
``The Angel Investor Tax Credit, A Unique Way to Invest Capital
in a Louisiana Business,'' April 10, 2013, Weiler and Rees,
News and Highlight (a copy of this article is attached as
Exhibit B-6), http://wrtaxlaw.com/the-angel-investor-tax-
credit/.
``Current Federal Taxation Update 2017,'' March 24, 2018,
Weiler and Rees, News and Highlight (a copy of this article is
attached as Exhibit B-7), http://wrtaxlaw.com/current-federal-
taxation-update-2017/.
``Understanding U.S. Taxation of Virtual or Crypto-Currency
Transactions,'' August 22, 2018, Weiler and Rees, News and
Highlight (a copy of this article is attached as Exhibit B-8),
https://wrtaxlaw.com/understanding-u-s-taxation-of-virtual-or-
crypto-currency-transactions/.
Co-author of the Louisiana LLC Forms and Practice Manual, 3rd
Edition, Data Trace Publishing Company; provided annual updates
for the manual in years 2011, 2012, 2013, 2014 and 2015,
https://www.datatrace.com/louisiana-limited-liability.html.
16. Speeches (list all formal speeches and presentations (e.g.,
PowerPoint) you have delivered during the past 5 years which are on
topics relevant to the position for which you have been nominated,
including dates):
``Rent-to-Own Personal Property, Is it Taxable or Exempt?'',
2019 IAAO Conference on September 9, 2019. Attached as Exhibit
C.
``Valuation problems and complexity in valuing and assessing
Low-Income Housing Tax Credit Developments, including
Scattered-Site Developments in Louisiana,'' 2018 IAAO Legal
Conference in December 2018. Attached as Exhibit C.
``Overview of the 2017 Federal Tax Cuts and Jobs Act,'' three
presentations for customers of Gulf Coast Bank and Trust, made
in March and April 2018. Attached as Exhibit C.
17. Qualifications (state what, in your opinion, qualifies you to
serve in the position to which you have been nominated):
I believe I am a strong candidate for the position of Tax Court
judge based on my experience and personal commitment to
service. I believe the role of the Tax Court is vital to ensure
taxpayers of the United States have an opportunity to be heard
separate and apart from IRS.
I am an experienced tax attorney, a board-certified tax law
specialist, and I hold an LL.M. in taxation from SMU Dedman
School of Law. I am also an active member of the ABA Tax
Section and Louisiana State Bar Association Tax Section.
Over my approximately 14 years of experience as an attorney, I
have gained valuable trial and litigation experience before the
United States Tax Court, Federal District Courts, and Louisiana
State Courts. This litigation experience would serve me well as
a judge for the United States Tax Court.
I have also volunteered for some 10 years with Southeast
Louisiana Legal Services--a pro bono tax clinic in south
Louisiana. Through my volunteering, I have handled many issues
often faced by Tax Court judges, including ``S'' cases (``small
claims''), collection due process appeals, Earned Income Tax
Credit (``EITC'') eligibility issues, and dependency claims. My
experience as a volunteer attorney with the tax clinic, working
with pro se litigations, would serve me well since a large
majority of Tax Court cases are brought by pro se taxpayers/
litigants.
Finally, I believe I have the personal aptitude sought in a
judge. In other words, in my practice I routinely listen to the
concerns of my clients, who are individuals and small business
owners, and seek a reasonable resolution for them.
B. FUTURE EMPLOYMENT RELATIONSHIPS
1. Will you sever all connections (including participation in future
benefit arrangements) with your present employers, business firms,
associations, or organizations if you are confirmed by the Senate? It
not, provide details.
Yes, I plan to sever all connections with my present law firm.
2. Do you have any plans, commitments, or agreements to pursue
outside employment, with or without compensation, during your service
with the government? If so, provide details.
No, I do not have any plans or agreements to pursue outside
employment.
3. Has any person or entity made a commitment or agreement to employ
your services in any capacity after you leave government service? If
so, provide details.
No.
4. If you are confirmed by the Senate, do you expect to serve out
your full term or until the next presidential election, whichever is
applicable? If not, explain.
Yes.
C. POTENTIAL CONFLICTS OF INTEREST
1. Indicate any current and former investments, obligations,
liabilities, or other personal relationships, including spousal or
family employment, which could involve potential conflicts of interest
in the position to which you have been nominated.
None.
2. Describe any business relationship, dealing, or financial
transaction which you have had during the last 10 years (prior to the
date of your nomination), whether for yourself, on behalf of a client,
or acting as an agent, that could in any way constitute or result in a
possible conflict of interest in the position to which you have been
nominated.
None; should any former client appear before me as a judge of
the U.S. Tax Court, I would recuse myself from handling the
case.
3. Describe any activity during the past 10 years (prior to the date
of your nomination) in which you have engaged for the purpose of
directly or indirectly influencing the passage, defeat, or modification
of any legislation or affecting the administration and execution of law
or public policy. Activities performed as an employee of the Federal
Government need not be listed.
None.
4. Explain how you will resolve any potential conflict of interest,
including any that are disclosed by your responses to the above items.
N/A.
5. Two copies of written opinions should be provided directly to the
committee by the designated agency ethics officer of the agency to
which you have been nominated and by the Office of Government Ethics
concerning potential conflicts of interest or any legal impediments to
your serving in this position.
N/A.
6. The following information is to be provided only by nominees to
the positons of United States Trade Representative and Deputy United
States Trade Representative:
Have you ever represented, advised, or otherwise aided a foreign
government or a foreign political organization with respect to any
international trade matter at any time in any capacity? If so, provide
the name of the foreign entity, a description of the work performed
(including any work you supervised), the time frame of the work (e.g.,
March to December 1995), and the number of hours spent on the
representation.
N/A.
D. LEGAL AND OTHER MATTERS
1. Have you ever been the subject of a complaint or been
investigated, disciplined, or otherwise cited for a breach of ethics
for unprofessional conduct before any court, administrative agency
(e.g., an Inspector General's office), professional association,
disciplinary committee, or other ethics enforcement entity at any time?
Have you ever been interviewed regarding your own conduct as part of
any such inquiry or investigation? If so, provide details, regardless
of the outcome.
No.
2. Have you ever been investigated, arrested, charged, or held by any
Federal, State, or other law enforcement authority for a violation of
any Federal, State, county, or municipal law, regulation, or ordinance,
other than a minor traffic offense? Have you ever been interviewed
regarding your own conduct as part of any such inquiry or
investigation? If so, provide details.
No.
3. Have you ever been involved as a party in interest in any
administrative agency proceeding or civil litigation? If so, provide
details.
No.
4. Have you ever been convicted (including please of guilty or nolo
contendere) of any criminal violation other than a minor traffic
offense? If so, provide details.
No.
5. Please advise the committee of any additional information,
favorable or unfavorable, which you feel should be considered in
connection with your nomination.
None.
E. TESTIFYING BEFORE CONGRESS
1. If you are confirmed by the Senate, are you willing to appear and
testify before any duly constitute committee of the Congress on such
occasions as you may be reasonably requested to do so?
Yes.
2. If you are confirmed by the Senate, are you willing to provide
such information as is requested by such committees?
Yes.
______
Exhibit A
Campaign Finance Contributions
----------------------------------------------------------------------------------------------------------------
Filer Name Report Type Source Description Date Amount
----------------------------------------------------------------------------------------------------------------
Core, Patricia................... F102: ANN-- Contribut Weiler and Golf 10/8/2007 $600.00
LA-28858 ion Rees LLC Tournament
650
Poydras
St., New
Orleans,
LA 70130
----------------------------------------------------------------------------------------------------------------
Fitzmorris, Louis................ F102: ANN-- Contribut Weiler and 5/5/2016 $500.00
LA-63054 ion Rees, LLC
7039 Hwy
190 East
Service
Rd., Ste
A,
Covington,
LA 70433
----------------------------------------------------------------------------------------------------------------
Fitzmorris, Louis................ F102: ANN-- Contribut Weiler and 11/15/2016 $500.00
LA-63054 ion Rees, LLC
7039 Hwy
190 East
Service
Rd., Ste
A,
Covington,
LA 70433
----------------------------------------------------------------------------------------------------------------
Fitzmorris, Louis................ F102: ANN-- Contribut Weiler and 11/22/2017 $500.00
LA-69221 ion Rees, LLC
7039 Hwy
190 East
Service
Rd., Ste
A,
Covington,
LA 70433
----------------------------------------------------------------------------------------------------------------
Fitzmorris, Louis................ F102: 30P-- Contribut Weiler and 2/20/2019 $500.00
LA-78855 ion Rees, LLC
7039 Hwy
190 East
Service
Rd., Ste
A,
Covington,
LA 70433
----------------------------------------------------------------------------------------------------------------
Fitzmorris, Louis................ F102: 30P-- Contribut Weiler and 4/16/2015 $300. 00
LA-50455 ion Rees, LLC
7039 Hwy
190 East
Service
Rd., Ste
A,
Covington,
LA 70433
----------------------------------------------------------------------------------------------------------------
Fitzmorris, Louis................ F102: ANN-- Contribut Weiler and 3/17/2017 $250.00
LA-69221 ion Rees, LLC
7039 Hwy
190 East
Service
Rd., Ste
A,
Covington,
LA 70433
----------------------------------------------------------------------------------------------------------------
Fitzmorris, Louis................ F102: ANN-- Contribut Weiler and 3/19/2018 $125.00
LA-75676 ion Rees, LLC
7039 Hwy
190 East
Service
Rd., Ste
A,
Covington,
LA 70433
----------------------------------------------------------------------------------------------------------------
Fitzmorris, Louis................ F102: 30P-- Contribut Weiler and 8/13/2019 $125.00
LA-78855 ion Rees, LLC
7039 Hwy
190 East
Service
Rd., Ste
A,
Covington,
LA 70433
----------------------------------------------------------------------------------------------------------------
Henry, Charles A................. F102: 30P-- Contribut Weiler and 8/27/2019 $500.00
LA-78608 ion Rees, LLC
7039 Hwy
190 East
Service
Rd., Ste
A,
Covington,
LA 70433
----------------------------------------------------------------------------------------------------------------
Lopinto, Joseph P., III.......... F102: 90P-- Contribut Weiler and 10/19/2017 $500.00
LA-68724 ion Rees, LLC
7039 Hwy
190 East
Service
Rd. Ste A,
Covington,
LA 70433
----------------------------------------------------------------------------------------------------------------
Lopinto, Joseph P., III.......... F102: 10G-- Contribut Weiler and 3/9/2018 $250.00
LA-70374 ion Rees, LLC
7039 Hwy
190 East
Service
Rd. Ste A,
Covington,
LA 70433
----------------------------------------------------------------------------------------------------------------
Lopinto, Joseph P., III.......... F102: 30P-- Contribut Weiler and 1/29/2018 $200.00
LA-69515 ion Rees, LLC
7039 Hwy
190 East
Service
Rd. Ste A,
Covington,
LA 70433
----------------------------------------------------------------------------------------------------------------
Williams, Erroll G............... F102: ANN-- Contribut Weiler and 7/2/2015 $500.00
LA-58186 ion Rees, LLC
7039 Hwy
190 East
Service
Rd. Ste A,
Covington,
LA 70433
----------------------------------------------------------------------------------------------------------------
Williams, Erroll G............... F102: ANN- Contribut Weiler and 6/30/2015 $500.00
LA-58186 ion Rees, LLC
7039 Hwy
190 East
Service
Rd. Ste A,
Covington,
LA 70433
----------------------------------------------------------------------------------------------------------------
Williams, Erroll G............... F102: 180P-- Contribut Weiler and 2/23/2017 $500.00
LA-65622 ion Rees, LLC
7039 Hwy
190 East
Service
Rd. Ste A,
Covington,
LA 70433
----------------------------------------------------------------------------------------------------------------
Williams, Erroll G............... F102: ANN-- Contribut Weiler and 10/17/2018 $500.00
LA-76340 ion Rees, LLC
7039 Hwy
190 East
Service
Rd. Ste A,
Covington,
LA 70433
----------------------------------------------------------------------------------------------------------------
Exhibit B-1
From Louisiana Bar Journal, Vol. 66, No. 5, February/March 2019
Overview: How the Tax Cuts and Jobs Act Affects
You and Your Law Practice
By Christian N. Weiler
The Tax Cuts and Jobs Act (TCJA or Tax Act) is a sweeping tax
package that certainly impacts your federal personal income tax
obligation beginning in 2018. Here is a look at some of the more
important elements of the new law that will have an impact on you as an
individual and as a Louisiana attorney.\1\
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\1\ Unless otherwise noted, the changes are effective for tax years
beginning in 2018 through 2025.
Important Changes to Your Individual Federal Income Tax Return
Beginning after December 31, 2017, seven tax rates now apply for
individuals--10 percent, 12 percent, 22 percent, 24 percent, 32
percent, 35 percent and 37 percent. The standard deduction is also
increased to $24,000 for married individuals filing a joint return,
$18,000 for head-of-household filers, and $12,000 for all other
taxpayers, adjusted for inflation in tax years beginning after 2018. No
changes are made to the additional standard deductions for the elderly
and blind. The deduction for personal exemptions is effectively
suspended by reducing the exemption amount to zero.
Here are some highlights to relevant changes which will impact your
personal income tax return.
Casualty Losses
The new Tax Act suspends the personal casualty and theft loss
deduction, except for personal casualty losses incurred in federally
declared disaster areas.
Gambling Activities
Under the new Tax Act, the limitation of wagering losses is
modified to provide that all deductions for expenses incurred in
carrying out wagering transactions, and not just gambling losses, are
limited to the extent of gambling winnings.
Child and Family Tax Credit
The child tax credit is increased to $2,000, and the phaseout
limits are increased to $400,000 for married taxpayers filing jointly
and $200,000 for all other taxpayers. The amount of the tax credit that
is refundable is increased to $1,400 per qualifying child, and this
amount is indexed for inflation.
State and Local Taxes
Under the new Tax Act, a taxpayer may claim an itemized deduction
up to $10,000, $5,000 for married taxpayers filing separately, for the
aggregate of (i) state and local property taxes not paid or accrued in
carrying a trade or business or an activity undertaken for profit, and
(ii) state and local income taxes, or sales taxes in lieu of income,
paid or accrued in the year. Foreign real property taxes may not be
deducted.
Mortgage Interest
The deduction for interest on home equity indebtedness is
suspended, and the deduction for mortgage interest is limited to
underlying indebtedness of up to $750,000 ($375,000 for married
taxpayers filing separately). After December 31, 2025, the former rules
are reinstated.
Medical Expenses
For taxable years beginning after December 31, 2016, and before
January 1, 2019, the threshold on personal medical expense deduction is
reduced to 7.5 percent.
College Sporting Event Tickets
Under prior law, special rules applied to certain payments to
institutions of higher education, in exchange for which the payor
received the right to purchase tickets or seating at an athletic event.
For contributions made in tax years beginning after December 31, 2017,
no charitable deduction is allowed for these types of payments.
Alimony
Per any divorce or separation agreement executed after December 31,
2018, or executed before that date, but modified after, alimony and
separate maintenance payments are not deductible by the payor spouse
and are not included in the income of the payee spouse. Note: This
provision is effective after December 31, 2018, and not December 31,
2017.
Overall Limitation on Itemized Deductions
The deduction for miscellaneous itemized deductions that are
subject to the 2 percent floor is suspended, meaning the deduction may
no longer be claimed. This includes deductions for tax preparation and
out-of-pocket employee expenses.
Moving Expenses
The deduction for moving expenses is suspended. There is an
exception for members of the armed forces.
Health Care ``Individual Mandate''
The new Tax Act repeals the individual mandates of Obamacare by
reducing the amount of the individual shared responsibility (penalty)
to zero. The new Tax Act leaves intact the 3.8 percent Net Investment
Income Tax, and the 0.9 percent additional Medicare Tax, both enacted
by Obamacare.
ABLE Accounts
Under the new Tax Act, changes have been made to Internal Revenue
Code Section 529A, which provides for ``ABLE Accounts.'' This is a
provision that allows individuals with disabilities, and their
families, to fund a tax-preferred savings account to pay for
``qualified'' disability-related expenses. Under prior law, annual
limitation on contributions is the amount of the annual gift tax
exemption ($15,000 for 2018). Effective for tax years after the
enactment date, and before January 1, 2026, the contribution amount is
increased, the lesser of (i) the federal poverty line for a oneperson
household or (ii) the individual's compensation for the year.
College Savings Plans
Under prior law, funds in a Code Section 529 College Savings
Account could only be used for qualified higher education expenses. For
distributions after December 31, 2017, ``qualified higher education
expenses'' include tuition at an elementary or secondary public,
private or religious school, up to a $10,000 limit per tax year.
Estate and Gift Tax Exemption
Effective for testamentary and inter vivos gifts in 2018, the
estate and gift tax exemption has been increased to roughly $11.2
million ($22.4 million for married couples).
Alternative Minimum Tax (AMT) Exemption
The AMT has been retained for individuals by the new law but the
exemption has been increased to $109,400 for joint filers ($54,700 for
married taxpayers filing separately) and $70,300 for unmarried
taxpayers. The exemption is phased out for taxpayers with alternative
minimum taxable income over $1 million for joint filers and over
$500,000 for all others.
Bottom Line
While these changes will lower rates at many income levels,
determining the overall impact on any particular individual or family
will depend on a variety of other changes made by the Tax Cuts and Jobs
Act, including increases in the standard deduction, loss of personal
and dependency exemptions, a dollar limit on itemized deductions for
state and local taxes, and changes to the child tax credit.
Important Changes to Your Law Practice
New Corporate Income Tax Rate
C corporations were historically subject to graduated tax rates of
15 percent for taxable income up to $50,000, 25 percent (over $50,000
to $75,000), 34 percent (over $75,000 to $10,000,000), and 35 percent
(over $10,000,000). Personal service corporations pay tax on their
entire taxable income at the rate of 35 percent. Beginning with the
2018 tax year, the new Tax Act makes the corporate tax rate a flat 21
percent, and it also eliminates the corporate alternative minimum tax.
Meal, Entertainment and Fringe Benefit Changes
There are changes to note in this area, all effective for amounts
incurred or paid after December 31, 2017:
Deductions for business-related entertainment expenses
are disallowed.
The 50 percent limit on the deductibility of business
meals is retained and expanded to meals provided through an in-house
cafeteria or otherwise on the premises of the employer.
Deductions for employee transportation fringe benefits
(e.g., parking and mass transit) are denied, but the exclusion from
income for such benefits received by an employee is retained (except in
the case of qualified bicycle commuting reimbursements).
No deduction is allowed for transportation expenses
that are the equivalent of commuting for employees (e.g., between the
employee's home and the workplace), except as provided for the safety
of the employee. However, this bar on deducting transportation expenses
does not apply to any qualified bicycle commuting reimbursement, for
amounts paid or incurred after December 31, 2017, and before January 1,
2026.
Expensing Rules Liberalized
For property placed in service in tax years beginning after
December 31, 2017, the maximum amount a taxpayer may expense is
increased to $1 million, and the phaseout threshold amount is increased
to $2.5 million.
Net Operating Losses (NOLs)
Under pre-TCJA rules, a net operating loss (NOL) for any tax year
was generally carried back 2 years, and then carried forward 20 years.
The new Tax Act repeals the general 2-year NOL carryback and also
provides that NOLs may be carried forward indefinitely.
New Business Income Deduction
Under the new Tax Act, a new 20 percent income tax deduction for
so-called ``passthrough business income'' is afforded. With the
corporate tax rate being reduced under the new tax law to a flat 21
percent, a deduction for ``pass through'' forms of business was
designed by Congress to give a reduction to those businesses
approximating the lower corporate tax rate. If applicable, the 20
percent deduction can be claimed by the owners of S corporations,
partnerships, sole proprietorships, and even beneficiaries of trusts.
These are generally referred to as ``pass-through tax entities'' that
pay no income tax at the entity level. This business income is ``passed
through'' to the owners (or trust beneficiaries) who must report the
income on his or her individual income tax return.
It is an understatement to say this 20 percent deduction found in
new IRC Sec. 199A is saddled with exclusions, phase-outs, technical
issues and uncertainties. Commentators are still attempting to analyze
and figure out how this new deduction actually works.
For most pass-through business owners, the deduction is the lesser
of (i) the ``combined qualified business income'' of the taxpayer, or
(ii) 20 percent of the excess of taxable income over the sum of any net
capital gain. The term ``combined qualified business income'' is then
defined as the lesser of (i) 20 percent of the business owner's
qualified business income, called QBI or (ii) the greater of (a) 50
percent of the W-2 wages of business allocable to the owner; or (b) 25
percent of the W-2 wages of the business plus 2.5 percent of the
unadjusted tax basis in property of the business allocable to the
business owner.\2\ Qualified business income is generally profit from
the active income and expenses from the operation of the pass-through
business and does not include passive income, such as interest,
dividends or even capital gains.
---------------------------------------------------------------------------
\2\ Exemptions exist for meeting the requirements of the wage
limitation, where taxable income for a single filer is $157,500 or
less; or for married filing jointly, $315,000 of income or less. Then
there is a phase-out amount, and then the wage test becomes applicable.
The starting point for determining ``QBI'' is difficult, since the
starting point is ``profit of the business,'' which is not really
defined under the Internal Revenue Code. Profit might be defined as
gross revenue less expenses. The 20 percent deduction of this profit
amount, subject to a number of limitations, passes through to the owner
as a deduction, which can be claimed on his or her individual income
tax return to offset other taxable income, such as wages, dividends,
---------------------------------------------------------------------------
interest and other forms of income.
The deduction is 20 percent of your ``qualified business income''
(QBI) from a partnership, S corporation or sole proprietorship, defined
as the net amount of items of income, gain, deduction and loss with
respect to your trade or business. The business must be conducted
within the United States to qualify, and specified investment-related
items are not included, e.g., capital gains or losses, dividends and
interest income (unless the interest is properly allocable to the
business). The trade or business of being an employee does not qualify.
Also, QBI does not include reasonable compensation received from an S
corporation or a guaranteed payment received from a partnership for
services provided to a partnership's business.
The deduction is taken ``below the line,'' i.e., it reduces your
taxable income but not your adjusted gross income, but is available
regardless of whether you itemize deductions or take the standard
deduction. In general, the deduction cannot exceed 20 percent of the
excess of your taxable income over net capital gain. If QBI is less
than zero, it is treated as a loss from qualified business income the
following year.
There is also a different phase-out for service businesses, which
is applicable to those trades or businesses involving the performance
of services in the fields of health, law, consulting, athletics,
financial or brokerage services, or where the principal asset is the
reputation or skill of one or more employees or owners. The exemption
amounts and phase-in amounts are different. It is interesting to note
that certain personal service providers have been excluded from the
personal service rules.
Conclusion
This article only briefly covers some of the most significant
changes to you and your law practice. There are additional rules and
limitations which may apply and, as with any piece of large
legislation, there will be many lingering questions regarding
implementation. Should you have any questions regarding the Tax Act, it
is recommended that you consult your paid tax professional,
particularly since the new Tax Act could result in material changes to
your law practice.
______
Exhibit B-2
From Louisiana Bar Journal, Vol. 64, No. 5, February/March 2017
Louisiana Pet Trusts and How to Avoid Some Hairy Situations
By Christian N. Weiler
Many people consider their pets as more than companion animals.
Many consider their pets as family members. In August 2015, the
Louisiana Legislature enacted La. R.S. 9:2263 titled ``Trust for the
Care of an Animal'' or, more commonly referred to as, a ``Pet Trust.''
Louisiana was one of the last remaining states to enact a Pet Trust law
(currently 49 states plus the District of Columbia have enacted Pet
Trust laws).
According to the American Pet Products Association (APPA), it is
estimated that this year the pet industry will reach $62 billion in the
United States. Also according to the APPA, 65 percent of U.S.
households own at least one pet.
This author has had personal experience with several estate-
planning clients who were concerned about the well-being and care of
their pets upon death. Now, the Louisiana Legislature has offered a
solution. While some may think considering a pet in estate planning
unnecessary, for some clients, a legal estate planning document
ensuring care for their pet after death provides peace of mind and a
defined mandate for future caregivers.
Background: Louisiana Pet Trust
The controlling provisions of a Pet Trust are found in La. R.S.
9:2263. A Louisiana inter vivos or testamentary trust may be created to
provide for the care of one or more animals in existence on the date of
the creation of the trust. The trust instrument should designate a
caregiver for each animal. An animal's caregiver will have physical
custody of the animal after the death of the owner(s) and will bear
responsibility for the animal's care. If a caregiver is not designated
or if the designated or appointed caregiver is unable or unwilling to
serve, the trustee is free to appoint a caregiver or he/she may act as
the caregiver. The trust instrument also may designate a person to
enforce the provisions of the trust. If a person is not designated to
enforce the provisions of the trust or if the designated person is
unable or unwilling to do so, the caregiver, the trust settlor or any
of the settlor's successors may enforce the trust terms.
Under the Pet Trust provisions, trust assets may be used only for
the care of each animal and for compensation and expenses of the
trustee and the caregiver. Louisiana law indicates ``reasonable
compensation'' may be afforded to the trustee and the caregiver. A
Louisiana court may determine that the value of the trust
``substantially exceeds the amount required to care for each animal and
for reasonable compensation and expenses of the trustee and the
caregiver.'' Upon such a determination, the court may partially
terminate the trust, but only as to the excess assets held in trust.
A Pet Trust terminates upon the death of the last surviving animal
provided for in the trust. The trust instrument may designate a person
to receive the trust's principal upon a partial or complete
termination. In the absence of a designation, the trust assets are
distributed to the settlor, if living, or to the settlor's successors
upon termination.
Unless otherwise provided for, a Pet Trust shall be governed by the
provisions of the Louisiana Trust Code. Consequently, a trustee's
fiduciary duty and obligation to render an accounting remains.
According to the Comments found in La. R.S. 9:2263, the Pet Trust
provisions are modeled after similar provisions in the Uniform Trust
Code, the Uniform Probate Code and laws from a variety of other
states.\1\ The Comments also state that a Pet Trust ``creates a unique
exception to a foundational principle of Louisiana law and allows an
animal to serve as the beneficiary of a trust, through a mechanism
sometimes referred to as a `statutory pet trust.' '' The Comments to
the Pet Trust provision also state: ``This Section contemplates the
existence of a tetra partite, rather than tripartite relationship,
under which there exists a settlor, trustee, caregiver, and
beneficiary.''
---------------------------------------------------------------------------
\1\ See, Comment (a) citing to: Unif. Trust Code Sec. 408; Unif.
Prob. Code Sec. 2-907; 12 Del. C. Sec. 3555; Cal. Prob. Code
Sec. 15212; N.C. Stat. Sec. 36C-4-408; Tex. Prop. Code Ann.
Sec. 112.037; Fla. Stat. Ann. Sec. 736.0408.
However, this author questions some of these Comments and found
material differences between the various state laws. In some states,
there is no mention of a caregiver in the applicable law and it is
permissible for the trustee to retain one or more persons to assist
with animal care and well-being. If a Pet Trust names a caregiver, is
that caregiver not also a beneficiary of the Pet Trust since he/she
receives funding needed for the day-to-day maintenance and care of the
pet? The pet is presumed to be a beneficiary under the Comments;
however, this animal has no other rights under Louisiana law.
Additionally, this provision now found in the Trust Code seems to
conflict with the law of persons.\2\ Furthermore, as discussed below,
while the Louisiana Trust Code now provides for an animal to be a
beneficiary, there is no federal law to the equivalent, resulting in
some uncertain tax consequences.
---------------------------------------------------------------------------
\2\ La. Civ.C. art. 24 et seq.; see Comment (b).
A Pet Trust can be funded with anything from cash and investment
assets, to retirement benefits and life insurance. The only limitation
on funding a Pet Trust is that an excessive amount of funds may be
prohibited from being transferred to the Pet Trust. As stated above, if
a court finds that the value of the trust ``substantially exceeds'' the
amount required to care for each pet and for realistic compensation and
expenses of the trustee and caregiver, the court may terminate the
trust as to the excess portion. However, what exactly is meant by
``substantially exceeds''? Guidance for developing an answer to
excessive funding would likely require knowledge on the life expectancy
of the pet and the average cost of maintenance for that type of animal.
Furthermore, drafting a Pet Trust with an explanation of the settlor's
maintenance and care desires, including a description of the pet's
current lifestyle, will presumably help to establish the amount of
appropriate funding of the Pet Trust. How a trust is to work for
distribution purposes is as varied as the funding mechanism. A Pet
Trust is really only limited by a client's imagination or the
attorney's creativity.
What Are the Tax Implications of a Pet Trust?
Pet Trusts are funded with assets transferred into the trust to
provide for the care and well-being of the animal. While this transfer
or funding does not trigger income tax, the earnings of this trust are
taxable. If the trust is a revocable inter vivos trust, it would be
considered a grantor trust for federal income tax purposes, resulting
in taxation to the trust's settlor. If the trust is irrevocable, the
trust would be considered a ``complex trust'' under federal income tax
laws and distributions from the trust would be taxable, presumably to
the named caregiver. Consequently, a Pet Trust could result in
unintended consequences to the pet's caregiver.
Alternatively, if the animal is deemed as the trust beneficiary,
all trust income, whether distributed or not, is taxed to the trust
itself; however, trusts usually pay income taxes at a higher rate of
tax. This approach was recognized by the IRS in Revenue Ruling 76-
486.\3\ The future income tax obligations of the trust or caretaker
should be taken into consideration when establishing and funding the
trust.
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\3\ Rev. Rul. 76-486, 1976-2 CB 192.
Based on the Internal Revenue Code, the IRS ruled in Revenue Ruling
78-105 \4\ that charitable remainder trusts which name animals as
income beneficiaries or pay income for the benefit of animals will not
qualify for a charitable federal estate tax deduction. The IRS ruled on
several scenarios, with the primary thrust limiting a trust beneficiary
as a ``person'' which includes an individual, trust or other company
and excludes animals.
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\4\ Rev. Rul. 78-105, 1978-1CB 295.
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Conclusion
The overall goal of this revision to the Louisiana Trust Code by
the Legislature is intended to honor the legality of a settlor's
bequest at his/her death, or in life. Louisiana-domiciled clients
concerned about the well-being of their pets after their deaths can now
consider a Pet Trust in their estate plans. The Pet Trust provision
provides for personalization or customization and merely acts as a
basic framework for the attorney drafting such a trust, whether it is
an inter vivos or a testamentary trust. When advising clients, however,
attorneys should make them aware of the potential ramifications of such
a trust, particularly the unique and complex federal tax implications.
______
Exhibit B-3
From Louisiana Bar Journal, Vol. 62, No. 3, October/November 2014
IRS Makes Important Changes to Offshore Voluntary Disclosure Program
By Christian N. Weiler
On June 18th, the Internal Revenue Service announced major changes to
its offshore voluntary compliance programs, providing new options to
taxpayers living overseas and taxpayers residing in the United States.
The changes include an expansion of the streamlined filing-compliance
procedures and modifications to the offshore-voluntary-disclosure
program, often referred to as the ``OVDP.'' The expanded program is
intended to help those U.S. taxpayers whose failure to disclose their
offshore assets was non-willful.
The changes to the streamlined filing-compliance procedures are now
available to certain U.S. taxpayers residing in the United States. The
changes eliminate both the requirement that the tax liability be $1,500
or less and the requirement of a risk questionnaire from the taxpayer.
The changes now require the taxpayer to certify that his or her
previous failures to comply with the law were non-willful.
When a taxpayer intends to take advantage of the new streamlined
disclosure, he must amend the most recent 3 years of personal income
tax returns, complete a certification form and submit full payment of
the tax liability, including interest and the miscellaneous offshore
penalty. This miscellaneous offshore penalty is now equal to 5 percent
of the highest aggregate balance/value of the taxpayer's total foreign
financial assets. The taxpayer is also required to electronically file
the most recent 6 years of overdue FBAR reports.
______
Exhibit B-4
From Louisiana Bar Journal, Vol. 59, No. 2, August/September 2011
The Low-Profit Limited Liability Company Has Arrived in Louisiana
By Christian N. Weiler
During the 2010 general session, the Louisiana Legislature enacted
legislation to allow the creation of a new type of limited liability
company called the ``Low-Profit Limited Liability Company'' or
``L3C.''\1\ An L3C is a new form or ``subset'' of a limited liability
company and is intended to be a mixture of for-profit and tax-exempt
investors. The L3C is being touted as a wonderful new opportunity for
private foundations to expand investment in program-related
investments.
---------------------------------------------------------------------------
\1\ 2010 La. Acts, No. 417, amending Revised Statutes Title 12,
Chapter 22, Parts I and II.
L3C legislation was first enacted in Vermont in April 2008. In
2009, L3C legislation was enacted in Michigan, Wyoming, Utah and
Illinois. As of now, L3C legislation has been adopted in approximately
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nine states.
The L3C concept differs from a traditional LLC in that the primary
or significant purpose of the L3C cannot be to make a profit, but
rather to achieve a social benefit, with profit as a secondary or
ancillary purpose. The name itself, Low-Profit Limited Liability
Company, is a bit of a misnomer since the business is not restricted in
how much profit it can make.
Requirements of an L3C
Under Louisiana law, an L3C is required to set forth in its
articles of organization, and at all times satisfy a business purpose
in conformity with, each of the following requirements:
(a) The entity significantly furthers the accomplishment of one or
more charitable or educational purposes within the meaning of Section
170(c)(2)(B) of the Internal Revenue Code (IRC) and would not have been
formed but for the entity's relationship to the accomplishment of
charitable or educational purposes.
(b) No significant purpose of the entity is the production of
income or the appreciation of property provided; however, the fact that
an entity produces significant income or capital appreciation shall
not, in the absence of other factors, be conclusive evidence of a
significant purpose involving the production of income or the
appreciation of property.
(c) No purpose of the entity is to accomplish one or more political
or legislative purposes within the meaning of IRC Sec. 170(c)(2)(D).\2\
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\2\ La. R.S. 12:1302 C(1).
Within the articles of organization, an L3C must indicate whether
the company is a low-profit limited liability company and is required
to use the words ``low-profit limited liability company'' or the
abbreviations ``L3C'' or ``l3c.''\3\
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\3\ La. R.S. 12:1306 A(1)(b).
If a company organized to meet the requirements of an L3C at its
formation or at any time ceases to satisfy any one of the foregoing
requirements, it shall immediately cease to be a Low-Profit Limited
Liability Company, but by continuing to meet all the other requirements
of Louisiana law, it shall continue to exist as a limited liability
company. In such event, the articles of organization shall be amended
and the name of the company shall be changed to be in conformance with
La. R.S. 12:1306, which requires the use of the words ``limited
liability company'' or the abbreviations LLC or LC.\4\
---------------------------------------------------------------------------
\4\ La. R.S. 12:1302 C(2).
---------------------------------------------------------------------------
Potential Purposes of an L3C
According to the IRS, an L3C is not a nonprofit organization and it
does not qualify as a tax-exempt organization unless all its members
(i.e., investors) are tax-
exempt entities.\5\
---------------------------------------------------------------------------
\5\ See Instructions for IRS Form 1023, Part II.
In theory, the L3C bridges a gap between for-profit entities and
certain nonprofit entities, namely entities categorized by federal law
as private foundations. Under the Internal Revenue Code, a private
foundation is any domestic or foreign religious, scientific or
charitable organization described in IRC Sec. 501(c)(3), other than
organizations that meet one of the four requirements found in IRC
Sec. 509(a). In other words, a private foundation includes most
501(c)(3) charities, other than ``public charities'' and other
specifically excluded charities, within the meaning of the Internal
---------------------------------------------------------------------------
Revenue Code.
Due to the self-imposed restrictions on an L3C created by the
Louisiana Legislature, a validly formed and operating L3C likely
complies with the stringent requirements of IRC Sec. 4944(c), which are
otherwise known as ``program-related investments'' or ``PRIs'' and are
imposed on L3Cs.
PRIs are investments made by private foundations in a for-profit
venture that are in furtherance of the foundations' charitable,
educational or religious activity. Historically, private foundations
have carefully analyzed and limited such funding because these types of
investments could jeopardize the foundation's exempt purpose, which in
turn could jeopardize its qualified status with the Internal Revenue
Service. A private foundation and its managers could have taxes imposed
upon them for making investments in violation of IRC Sec. 4944. The
designation as an L3C is intended to eliminate this risk by labeling
these types of companies as presumptively pre-qualified to receive
funding from a private foundation. L3Cs provide a new opportunity for a
private foundation to utilize its resources and assist in addressing
social issues that ordinarily would be limited to organizations that
are qualified as nonprofit entities.
Compliance with IRC Sec. 4944(c) by an L3C opens up a new avenue of
financing for those companies that focus on achieving one or more
social benefits. An L3C is able to leverage a private foundation's
status and access capital for its ventures, while offering in return
the prospect of a positive social impact and reasonable assurance of
its compliance with IRC Sec. 4944.
Pros and Cons of an L3C
The L3C structure limits its purpose. While it is apparent than an
L3C is a ``sub- set'' of an LLC (as it is contained within the relevant
portions of Chapter 22, Title 12 of the Louisiana Revised Statutes),
there is no history for this entity in Louisiana, and likewise there is
little, if any, legal precedent on this entity in the United States.
As of now, L3C legislation is available in a handful of states,
including Louisiana. While the Internal Revenue Service has issued a
few nonbinding opinion letters, nothing definitive has been said
concerning whether a private foundation's investment in a L3C will
qualify as a PRI.
Louisiana law provides that the L3C status is revoked and converted
to an LLC if the entity does not comply with the primary purpose
requirements found in La. R.S. 12:1302. On a practical level, how is
failure determined or invoked, and by whom? Similarly, what are the tax
implications to the private foundation's investment upon such
conversion from an L3C to an LLC?
L3Cs offer a competitive edge to those businesses established in
Louisiana whose primary goal is to achieve one or more charitable or
educational purposes. Only time will tell whether L3Cs can reach their
full potential and serve as a conduit for investments in Louisiana
through private foundations. Certainly clarity from the IRS will go a
long way in helping L3Cs reach this goal.\6\
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\6\ For more information on L3Cs, check out Americans for Community
Development at https://americansforcommunitydevelopment.org/.
______
Exhibit B-5
Compliance With the Patient Protection and Affordable Care Act (PPACA)
November 12, 2012
By Christian N. Weiler
In the wake of the U.S. Supreme Court ruling upholding the Patient
Protection and Affordable Care Act (the ``Affordable Care Act'')--
employers and individual taxpayers alike must now face the reality of
compliance with this new legislation. In particular, business clients
must soon determine which employees will be covered under the
Affordable Care Act or face penalties by the IRS.
The tax attorneys at Weiler and Rees hold the knowledge and expertise
to accurately advise clients on the tax and business ramifications of
this legislation. The firm stands ready to advise employers, both large
and small, on the legal requirements to provide affordable health
insurance, penalties for failing to comply, eligibility for tax
credits, and additional informational reporting requirements to the
IRS.
Weiler and Rees is also prepared to advise individual clients on the
penalty for failing to satisfy the individual mandate requirement, the
additional FICA, Medicare and other taxes provided for in the
Affordable Care Act and other relevant tax related provisions found in
the Affordable Care Act.
For more information about this topic, please contact Christian N.
Weiler.
This information is provided by Weiler and Rees for educational and
informational purposes only and is not intended, nor should it be
construed, as legal advice.
New Orleans Office Northshore Office
Weiler and Rees, LLC Weiler and Rees, LLC
909 Poydras Street, Suite 1250 7039 Hwy 190 E Service, Ste. A
New Orleans, LA 70112 Covington, LA 70433
504-524-2944--Phone 985-674-1443--Phone
504-524-2969--FAX 985-674-9082--FAX
______
Exhibit B-6
The Angel Investor Tax Credit--A Unique Way
to Invest Capital in a Louisiana Business
April 10, 2013
By Christian N. Weiler
Among other Louisiana state tax credits--such as the Louisiana film and
entertainment tax credit--the Louisiana angel investor tax credit
offers a unique opportunity for investors to make investments in
certain Louisiana start-up businesses. The program provides a 35% tax
credit on investments made by an accredited investor who makes an
investment in a business certified by Louisiana Economic Development
(``LED''), a state agency. These businesses must be certified as
Louisiana entrepreneurial businesses by LED. It is important to note
that the total annual tax credits allotted by the State are capped at
$5,000,000.00 and the accredited investor may only invest up to
$1,000,000.00 per year and $2,000,000.00 in total in a qualified
business. Under the current law, the program is set to expire in June
of 2015.
The angel investor tax credits are not available for all investments in
Louisiana businesses. In general, the credits are not available for
businesses involved in retail sales, real estate, professional
services, gaming, natural gas exploration and other financial services.
Furthermore, only certain uses of the funds invested qualify for
credits, namely; capital improvements, research and development, and
general working capital. Investments may not be used to pay dividends
and/or repay shareholder loans and debt.
It is important to note that an accredited investor is generally
defined as any natural person who has a net worth of over $1,000,000.00
and an individual income of $200,000.00 or joint income of $300,000.00,
if married. A pool of Angel Investors, all of whom are accredited--may
also be eligible to make an investment.
An application to LED should be submitted through its website and
include proof of investment. In exchange, LED will issue a tax
certification letter stating that the investment qualifies for tax
credits and the years of eligibility for which the credits may be
applied against Louisiana income and corporate franchise tax
liabilities of the investor. The tax credits may also be sold to a
third party. Applications are received on a first-come, first-served
basis, and the tax credits are issued in the order in which they are
received until the annual allotment has been exhausted.
If you or a client has an interest in learning more about the Angel
Investment Tax Credit Program, please contact Christian Weiler at
[email protected] or (504) 524-2944.
This information is provided by Weiler and Rees, LLC for educational
and informational purposes only and is not intended, nor should it be
construed as legal advice.
______
Exhibit B-7
Current Federal Taxation Update 2017
March 25, 2018
By Christian N. Weiler
Congress Has Authorized the Denial or Revocation of U.S. Passports for
Serious Delinquent Tax Accounts.
In December 2015, Congress enacted Sec. 7345 of the Internal Revenue
Code (26 U.S.C. 7345) which requires the IRS to notify the U.S. State
Department of those taxpayers certified as owing a serious delinquent
tax debt to the United States. Within the Fixing Americas Surface
Transportation Act of 2015, the State Department is generally
prohibited from issuing or renewing a passport to a taxpayer with a
serious tax debt. A ``serious tax debt'' is any balance over $50,000,
and in which a federal tax lien has been filed and all administrative
remedies per IRC Sec. 6320 (collection due process appeal rights) have
passed.
Failure of a taxpayer to make arrangements with the IRS to repay the
delinquent taxes, will allow IRS to notify the State Department that
the taxpayer has a serious delinquent tax debt. Even if you hold a
valid passport, the State Department can revoke the passport upon
notification by IRS.
A previously certified debt is no longer seriously delinquent when:
You and the IRS enter into an installment agreement allowing you
to pay the debt over time.
The IRS accepts an offer in compromise to satisfy the debt.
The Justice Department enters into a settlement agreement to
satisfy the debt.
Collection is suspended because you request innocent spouse
relief under IRC Sec. 6015.
You make a timely request for a collection due process hearing
in connection with a levy to collect the debt.
The IRS is required to notify you in writing at the time the IRS
certifies your account as a serious delinquent tax debt to the State
Department. The IRS is also required to notify you in writing at the
time it reverses certification. IRS will notify the State Department of
the reversal of your certification within 30 days your tax debt is
resolved. If your U.S. passport application is de11ied or your U.S.
passport is revoked, the State Department will notify you in writing.
On January 1, 2018 IRS started certifying serious tax debts to the
State Department.
For more information about this topic, please contact Christian N.
Weiler.
This information is provided by Weiler and Rees for educational and
informational purposes only and is not intended, nor should it be
construed, as legal advice.
______
Exhibit B-8
Understanding U.S. Taxation of Virtual or ``Crypto-Currency''
Transactions
August 22, 2018
By Christian N. Weiler
It wasn't very long ago that few people had heard of the term ``Crypto-
currency.'' While today the word is a well known term; however
understanding the tax implications of crypto-currency is often a
mystery.
``Crypto-currency'' or virtual currency may be used to pay for goods or
services, or held for investment. Virtual currency is a digital
representation of value that functions as a medium of exchange, a unit
of account, and/or a store of value. It can also operate like ``real''
currency--i.e., the coin and paper money of the United States, or of
any other country, that is designated as legal tender, circulates, and
is customarily used and accepted as a medium of exchange in the country
of issuance--but it does not have legal tender status in any
jurisdiction.
There are a variety of different participants in virtual currency: (i)
miners who cause the currency to go into circulation by ``mining''
them, using specialized computer hardware and software to solve complex
algorithms; (ii) consumers who have obtained virtual currency either
through mining or purchase, and who use virtual currency to purchase
goods and services; (iii) dealers in virtual currency who buy and sell
and/or operate specialized exchanges; (iv) traders who speculate on
short-term price movements of virtual currency by purchasing and
selling virtual currency on exchanges or privately; and (v) investors
who obtain and hold virtual currency with the hopes of longer-term
price appreciation, like any other investment asset.
In general, the sale or exchange of convertible virtual currency, or
the use of convertible virtual currency to pay for goods or services in
a real-world economy transaction, has tax consequences that may result
in a tax liability.
For U.S. income tax purposes, virtual currency is treated as property.
A taxpayer who receives virtual currency as payment for goods or
services must, in computing gross income, include the fair market value
of the virtual currency, measured in U.S. dollars, as of the date that
the virtual currency was received. The basis of virtual currency that a
taxpayer receives as payment for goods or services is the fair market
value of the virtual currency in U.S. dollars as of the date of
receipt.
For U.S. tax purposes, transactions using virtual currency must be
reported in U.S. dollars. Therefore, taxpayers will be required to
determine the fair market value of virtual currency in U.S. dollars as
of the date of payment or receipt. If a virtual currency is listed on
an exchange, and the exchange rate is established by market supply and
demand, the fair market value of the virtual currency is determined by
converting the virtual currency into U.S. dollars (or into another real
currency which, in turn, can be converted into U.S. dollars) at the
exchange rate, in a reasonable manner that is consistently applied.
If the fair market value of property received in exchange for virtual
currency exceeds the taxpayer's adjusted basis of the virtual currency,
the taxpayer has taxable gain. The taxpayer has a loss if the fair
market value of the property received is less than the adjusted basis
of the virtual currency. The character of the gain or loss generally
depends on whether the virtual currency is a capital asset in the hands
of the taxpayer.
``Mining'' Virtual Currencies
When a taxpayer successfully ``mines'' virtual currency, the fair
market value of the virtual currency, as of the date of receipt, is
includible in gross income of the taxpayer. If a taxpayer's ``mining''
of virtual currency constitutes a trade or business, and the ``mining''
activity is not undertaken by the taxpayer as an employee, the net
earnings from self-employment (generally, gross income derived from
carrying on a trade or business less allowable deductions) resulting
from those activities constitute self-employment income and are subject
to the self-employment tax.
Is a Payment Made Using Virtual Currency Subject to Information
Reporting to IRS?
Yes, a person who in the course of a trade or business makes a payment
of fixed and determinable income using virtual currency with a value of
$600 or more in a year is required to report the payment to the IRS and
to the payee. Examples of payments of fixed and determinable income
include rent, salaries, wages, premiums, annuities, and compensation.
For more information about this topic, please contact Christian Weiler
at [email protected] or (504) 524-2944.
This information is provided by Weiler and Rees for educational and
informational purposes only and is not intended, nor should it be
construed, as legal advice.
______
Exhibit C
2019 IAAO Conference
Title: Rent-to-Own Personal Property,
Is it Taxable or Exempt?
By: Assessor Erroll G. Williams and the Orleans Parish Assessor's
Office
Presenters:
Erroll G. Williams, Assessor
Orleans Parish Assessor's Office
1300 Perdido Street
City Hall, Room 4E01
New Orleans, LA 70122
Christian N. Weiler, Esq.
Weiler and Rees
909 Poydras St., Suite 1250
New Orleans, LA 70112
Direct: 504-527-0480
Email: [email protected]
Mainline: 504-524-2944
Summary of Topic:
Historically rent-to-own business property has been reported as
personal property, and subject to ad valorem taxation in the State of
Louisiana. However, rent-to-own businesses in Louisiana and other
States have now challenged the status quo, and claim their business
property is exempt from taxation. This panel will discuss the arguments
being raised by rent-to-own businesses in Louisiana, and other States,
and the challenges currently facing tax assessors in the assessment of
rent-to-own personal property.
Detailed Topic:
``Rent-to-own'' is a transaction under which tangible personal
property, such as furniture, electronics and appliances, is leased and
the customer acquires ownership of merchandise at the end of a fixed
lease term, usually 12 to 24 months, by making all weekly, semi-
monthly, or monthly lease payments. Customers have the option to return
the merchandise or purchase it for a specified price. Rent-to-own
businesses exist throughout the United States and serve approximately
3.8 million customers at any given time in the year.
In Louisiana, rent-to-own businesses annually report to the various
local tax assessors business personal property, including office
equipment and furniture, inventory and property ``out on lease'' to its
customers. This business personal property reported to assessors is
then depreciated and assessed local ad valorem taxes. However, rent-to-
own businesses in Louisiana have now challenged the inclusion of its
``out on lease'' property, claiming this personal property is exempt
from ad valorem taxes.
Like other States, the Louisiana State Constitution provides a tax
exemption for personal property ``used in the home.'' Rent-to-own
businesses have challenged the assessment made against ``out on lease''
properties, claiming this property is tax exempt, since its customers
use the property in their homes. In the alternative, rent-to-own
businesses have also argued, pursuant to the Louisiana Rental Purchase
Agreement Act, the rent-to-own transaction is deemed to be a completed
sale, and therefore no ad valorem tax is due by rent-to-own businesses,
since they no longer own the personal property.
While in the State of North Carolina, rent-to-own businesses have
made arguments contrary to the arguments being made in Louisiana. In
North Carolina, rent-to-own businesses have argued its ``out on lease''
property remains ``inventory'' of the business, and therefore exempt
from ad valorem taxes. North Carolina, like many States, exempts
business ``inventory'' from ad valorem taxes.
This panel will make a detailed presentation on challenges facing
tax assessors when assessing rent-to-own personal property in Louisiana
and other States. This panel will also make a detailed presentation on
arguments being made by rent-to-own businesses, and their challenges to
personal property ad valorem tax assessments in Louisiana and other
States.
Summary of Facts Governing Rent-to-Own Transactions:
A Rent-to-Own Lease Purchase Agreement is entered into between
the business and its customers.
An example Lease Purchase Agreement for a 4.5 washer king sized
aqua jet provided as follows:
The purchase price, called the ``cash price,''
which can be exercised by the customer within the first 120 days of the
Rent-to-Own Agreement: $683.19.
The number of total lease payments to be made in
order to own the Tangible Property: 24 monthly payments or 48 semi-
monthly payments.
Total cost to own, meaning total amount paid by
the customer in order to obtain title and ownership to the leased
property: 4.5 washer king sized aqua jet--(i) $1,309.44 paid over 24
months, or (ii) $1,596.96 paid in 48 semi-monthly payments;
The initial lease term: one month;
The initial monthly payment: $54.56 (broken down
and set forth as (i) lease payment of $45.50 a month, (ii) service fee
of $4.55 per month, and (iii) taxes of $4.51 a month);
The monthly renewal payment: $54.56 (broken down
and set forth as (i) lease payment of $45.50 a month, (ii) service fee
of $4.55 per month, and (iii) taxes of $4.51 a month);
The semi-monthly renewal payment (paid twice a
month): $33.27 (broken down and set forth as (i) lease payment of
$27.75 a month, (ii) service fee of $2.77 per month, and (iii) taxes of
$2.75 a month);
The monthly renewal payment option is $54.56 per
month, while the semi-monthly renewal payment option is $66.54 per
month;
The Lease Purchase Agreement provides:
``Ownership. I will not own nor obtain any equity interest in the
Leased Property until I have either made the Total Number of Payments
to Own, and paid the Total Cost to Own, or exercised my early purchase
option.''
Under the terms of the ``early purchase option,''
the customer can purchase the Tangible Property, after 120 days, ``at
any time by paying an amount equal to the Total Cash Price [specified
in the Lease Purchase Agreement] less 50% of the Lease portion of the
Total Initial Payment and all Renewal Payments made by me as of the
date of my purchase.''
The Lease Purchase Agreement contains a provision that there is
no obligation or requirement that the customer continue renting or
using the Tangible Property beyond the 30-day initial lease term.
If the customer returns the Tangible Property during a renewal
term, the customer is obligated to make the full renewable payments and
other charges through the date of surrender or return.
The Lease Purchase Agreement provides for various other charges,
such as a late charge of $5.00, and return-of-check charge of $15.00,
and a repossession charge of $10.00.
Risk of loss is born by The Business due to normal wear and
tear, or any flood or windstorm, and the customer is only responsible
should the merchandise be lost, stolen or damaged.
Should the Tangible Property break or malfunction, The Business
will repair the item at no charge to the customer, which is included in
the ``service plus fee,'' for which the customer is charged $4.50 per
month, or $2.77 semi-monthly.
The Business retains legal title to the Tangible Property unless
title passes to the customers pursuant to the Lease Purchase Agreement.
Taxing Inventory
Inventory is one of the most common business ad valorem tax
exemptions.
According to the Tax Foundation, in 2016 some 10 States imposed
a tax on inventory: Texas, Oklahoma, Arkansas, Louisiana, Mississippi,
Maryland, Kentucky, West Virginia, Virginia and Vermont.
According to the Tax Foundation, a partial local inventory tax
is imposed by some municipalities in four states: Alaska,
Massachusetts, Georgia and Michigan.
States have explored ways to repeal or limit the burden of
inventory taxes, but local funding is a common sticking point.
Because property taxes tend to be locally assessed and
collected, the bulk of the revenue generated goes to local governments,
meaning that elimination could strain local budgets.
Some states, such as Louisiana, have sought to solve this issue
by creating state income tax credits to offset a business's inventory
tax liability.
Localities still get to assess the tax and reap the revenue, but
the business's liability disappears. However, a system like this adds
complexity to the tax code and could create an environment where games
with income tax credits can occur.
Louisiana, like other states, has guidelines for ascertaining FMV of
Inventory:
Inventory includes goods in waiting, work in process, raw
materials and supplies.
Inventory is to be reported at cost or purchase price at the
point of origin, plus any carrying charges.
The average value for the preceding year is the basis for the
assessed value of a taxpayer's inventory.
Inventory is reported on LAT5 Form, per business location.
Louisiana Law Governing Assessment of Inventory:
Sec. 1701. Guidelines for Ascertaining the Fair Market Value of
Inventories. The term ``inventory'' is defined as the aggregate of
those items of tangible personal property, which are: (1) held for sale
in the ordinary course of business; (2) are currently in the process of
production for subsequent sale; (3) are ultimately to be consumed in
the production of the goods or services to be available for sale; or,
(4) are utilized in marketing or distribution activities.
The term ``inventory'' embraces the following: (1) goods awaiting
sale--goods or commodities awaiting sale which include, but, are not
limited to: the merchandise of a retail or wholesale concern; the
finished goods of a manufacturer; commodities from farms, mines and
quarries; goods which are used or trade-in merchandise and by-products
of a manufacturer; (2) work in process--goods or commodities which are
in the course of production, i.e., work in process; (3) raw materials
and supplies--goods which will be consumed or used in either the
Louisiana manufacturing process or in any other manner by the taxpayer,
directly or indirectly. This category would include, but, not be
limited to: raw materials, supplies, repair parts, expendable tools and
samples; (4) does not include oil stored in tanks held by a producer
prior to the first sale of the oil. Oil stored in tanks held by a
producer prior to the first sale of the oil, shall not be subject to ad
valorem tax.
Inventory Records.
The law provides that: all persons engaged in business in
Louisiana, whose gross sales shall be in excess of $15,000, shall make
and keep an inventory of their merchandise, fixtures, machinery,
equipment and other assets within the state showing the quantity,
description and value thereof as of the first day of January of each
year; such persons shall likewise make and keep on hand a true and
accurate record of all other business transactions had in connection
with their stores, mercantile or manufacturing establishments.
Inventory Values.
The law provides that: in the assessment of merchandise or stock in
trade on hand, the inventory value of the merchandise shall be
ascertained by computing the cost or purchase price at the point of
origin, plus the carrying charges to the point of destination, and the
average value as so determined during the year preceding the calendar
year in which the assessment is made shall be the basis for fixing the
assessed value (R.S. 47:1961).
Assessment of Inventory.
The assessed value shall be based upon 15 percent of the average
inventory cost for the preceding calendar or fiscal year. Any IV-3
(2017) inventory that existed less than a full year shall be averaged
for the months it had situs at the reported location. However, this
does not mean to annualize the monthly inventory costs if less than 12
months are used to calculate the average inventory to be assessed.
Is Leased Property Inventory?
Inventory is the most common business ad valorem tax exemption.
According to the Tax Foundation, in 2016 some 10 States imposed a tax
on inventory: Texas, Oklahoma, Arkansas, Louisiana, Mississippi,
Maryland, Kentucky, West Virginia, Virginia and Vermont. According to
the Tax Foundation, a partial local inventory tax is imposed by some
municipalities in 2016 four states, Alaska, Massachusetts, Georgia and
Michigan.
What is inventory?
Traditionally, inventory is a term for goods available for sale,
and raw materials used to produce goods available for sale. Finished
goods is often termed as ``merchandise.'' Inventory is classified as a
current asset on a company's balance sheet. When inventory is sold, its
carrying cost is transferred to cost of goods sold.
Florida Dept. of Revenue defines inventory as:
``Inventory'' means only those chattels consisting of items
commonly referred to as goods, wares, and merchandise (as well as
inventory) which are held for sale or lease to customers in the
ordinary course of business. Supplies and raw materials shall be
considered to be inventory only to the extent that they are acquired
for sale or lease to customers in the ordinary course of business, or
will physically become a part of merchandise intended for sale or lease
to customers in the ordinary course of business. Partially finished
products, which when completed will be held for sale or lease to
customers in the ordinary course of business, shall be deemed items of
inventory. All livestock shall be considered inventory. Items of
inventory held for lease to customers in the ordinary course of
business, rather than for sale, shall be deemed inventory only prior to
the initial lease of such items. For the purposes of this section,
fuels used in the production of electricity shall be considered
inventory. From 2018 FLA Statutes, Title XIV, 192.001, Definitions.
Texas imposes ad valorem taxes on inventory.
Texas has specific rules for valuing what it describes as ``Special
Inventory.'' Texas law provides for the special appraisal of dealers'
inventory, including heavy equipment, motor vehicles, vessels and
outboard motors, and manufactured housing retailers. Special inventory
appraisal is generally based on sales. Dealers and retailers must file
inventory declaration forms with the county appraisal district each
year, listing the total sales, leases or rentals, as applicable, in the
preceding year, and an inventory tax statement with the tax office each
month.
Litigation in Louisiana
I. In Louisiana, Taxpayer has argued that its property leased in a
Rent-to- Own Transaction is exempt from ad valorem
taxation.
La. Const. Art. VII, Sec. 21(C)(9) exempts the owner of Tangible
Property used by the owner in his or her home from parish ad valorem
taxes. In other words, it prevents the assessor from imposing ad
valorem taxes on the owner of Tangible Property when the owner uses the
property in his or her home. Otherwise, a homeowner would be subject to
parish ad valorem taxes on his or her living room couch, kitchen table,
dishwasher, etc. La. R.S. Sec. 47:1951.
La. Const. Art. VII, Sec. 21(C)(9) provides an exemption for
``personal property used in the home or on loan in a public place.''
Taxpayer now claims that the Tangible Property it owns, and which
has been leased to customers pursuant to its ``rent-to-own'' program,
is exempt from ad valorem taxes under La. Const. Art. VII,
Sec. 21(C)(9) La. Const. Art. VII, Sec. 21(C)(9) provides an exemption
for ``personal property used in the home or on loan in a public
place.''
The Assessor argued to the Court that it is well-settled law that
any claim for exemption from ad valorem taxation is strictly construed
in favor of the taxing authority and against the party desiring the
exemption. The Assessor argued the intent behind the exemption afforded
by La. Const. Art. VII, Sec. 21(c)(9) is to exempt owners of Tangible
Property used by them in their home, such as furniture, electronics and
appliances, from the imposition of ad valorem taxes. Without the
exemption, the property owner would be subject to ad valorem tax on
Tangible Property in their home. La. R.S. Sec. 47:1951.
II. Taxpayer's argument, that a Rent-to-Own Transaction is a sale
under Louisiana law, is contrary to Louisiana law.
Taxpayer argues, pursuant to the ``Louisiana Rental Purchase Act
Agreement'' set forth in La. R.S. Sec. Sec. 9:3351, et. seq., that the
transaction in question, namely a Rent-to-Own Transaction, is in fact a
sale for state and local tax purposes. Specifically, Taxpayer argues
that La. R.S. Sec. 9:3362 applies to all state and local taxes,
including ad valorem property taxes. La. R.S. Sec. 9:3362 provides as
follows:
Rental-purchase agreements, as defined by R.S. 9:3362, shall be
deemed to be sales for state and local tax purposes only. The
tax due on such transactions shall be payable in equal monthly
installments over the entire term of the rental-purchase
agreement, rather than at the inception of the agreement.
III. Taxpayer has taken a contrary position in its 2013 litigation
against the Louisiana Department of Revenue.
In that litigation, which involved the availability of a tax credit
against state income tax for ad valorem taxes paid, Taxpayer took the
position that it was entitled to a credit against its state income
taxes for ad valorem taxes it paid on its inventory it leased pursuant
to its Rent-to-Own Agreements. Taxpayer filed a refund suit against the
Louisiana Department of Revenue, taking the position that it was
entitled to an inventory tax credit for ad valorem taxes paid for the
property out on lease. The outcome of litigation was that the Louisiana
Department of Revenue agreed that the property out on lease was, in
fact, inventory subject to ad valorem taxes. Taxpayer took the position
that it was the owner of the property out on lease for ad valorem tax
purposes.
IV. Rent-to-Own Transaction is not a sale under Louisiana law; rather,
the contract is a lease to purchase agreement under
Louisiana law.
The local Assessor argued to the Court that the Louisiana Civil
Code defines a lease as a bilateral contract by which one party, the
lessor, binds himself to give the other party, the lessee, the use and
enjoyment of a thing for a term in exchange for a rent that the lessee
binds himself to pay. La. Civ. Code. art 2668.
Where there is a conflict between the general law of leases
contained in the Civil Code and the terms of the specific contract, the
contract prevails unless the terms of the contract are contrary to
public policy; the articles in the Civil Code regulate the relationship
between lessor and lessee when the lease is silent. Tassin v. Slidell
Mini-Storage, Inc., 396 So.2d 1261, 1264 (La. 1981); Pace v. Loyal
Order of Moose, Metairie Lodge No. 2195, 538 So.2d 299, 304 (La. App. 5
Cir. 1989).
The contractual terms of a Lease Purchase Agreement are clear; the
business owner retains ownership of the leased property until all
payments are made by the customer. Title and ownership to the lease
property is not conveyed to the customer until after all payments are
made. After the customer makes all lease payments, the business then
furnishes in writing evidence that it is transferring ownership of the
leased property to the customer, and is also transferring all
warranties in reference to the leased property.
The property is leased to the customer through a series of short-
term leases, and the customer has the option to return the leased
property to Taxpayer at the end of these short-term leases without
further obligation, and without any right or claim to the property that
had been leased. In other words, the title at all times stays with
Taxpayer during the lease period, and is only transferred to the
customer upon the payments of all lease payments called for under the
Lease Purchase Agreement.
Outcome of Litigation in Louisiana
The District Court ruled in favor of the Assessor in this
litigation, and found that property out on lease in Louisiana was, in
fact, subject to ad valorem tax. The Taxpayer has appealed this ruling
and the case is currently pending before the Louisiana Court of Appeal.
Litigation in North Carolina--
In the Matter of the Appeal of Aaron's, Inc. No. COA18-607
- North Carolina does not impose ad valorem taxes on inventory.
- Taxpayer filed written exception to the deficiency, arguing that
the property subject to its Lease Purchase Agreements, as property that
was ``in the process of being sold,'' qualified as ``inventories'' and
was therefore exempt from taxation.
- After conducting an audit, on November 6, 2015, the Sampson
County Office of Tax Assessor sent Taxpayer a notice and appraisal
assessing a tax deficiency of $2,636,576.00 for the tax years 2010
through 2015.
- Taxpayer argues that such property constitutes ``inventories
owned by retail and wholesale merchants,'' and is thus exempt from
taxation pursuant to N.C. Gen. Stat. Sec. 105-275(34).
The N. Carolina Tax Commission and Court of Appeal:
- Looked at the Lease Purchase Agreement and concluded the
taxpayer retained title to and ownership of the tangible personal
property.
- Taxpayer maintains that the transfer of its property to the
possession of a lessee, pursuant to a Lease Purchase Agreement, effects
a form of ``sale,'' such as a conditional sale, and that such property
thus constitutes exempt inventory under N.C. Gen. Stat. Sec. 105-
275(34).
- The Tax Commission and Court of Appeal disagreed and found that
the transfer of possession of property following the execution of
Taxpayer's Lease Purchase Agreement is not properly categorized as a
``sale,'' and therefore the property held thereunder does not fall
within the class of exempt ``inventories'' described in N.C. Gen. Stat.
Sec. 105-275(34).
We reach this conclusion primarily due to the fact that
Taxpayer's lessees are, in fact, under no obligation to either
purchase the subject property or to pay the ``Total Cost to
Own'' the property pursuant to the terms of Taxpayer's Lease
Purchase Agreements.
The Court of Appeal also analyzed the Rent-to-Own transaction and
noted that ordinarily it would cost a customer $1,639.12 if purchased
through a direct sale, while a rent-to-own transaction would cost
$2,917.63--or an additional $1,278.51--if the customer were to purchase
that same item by exercising the purchase option under a Lease Purchase
Agreement.
The substantial increase in cost is consistent with the
denomination of Taxpayer's ``rent-to-own'' transactions as a lease,
rather than a sale of the property.
Ultimately, the North Carolina Tax Commission ruled against the
Taxpayer and its claim for exemption, concluding the evidence shows
that the property of Taxpayer is primarily used for rental purposes,
and therefore, ``Taxpayer, by renting the equipment to third parties,
is not entitled to the inventory tax exclusion for the rented
equipment.''
Interestingly, this Taxpayer is taking a contrary position in
Louisiana, and claiming it is no longer the owner of Tangible Property
once it is leased, since the transaction is a ``sale'' for ad valorem
tax purposes.
How Other States Classify Rent-to-Own Transactions
All States, except for Oklahoma, exempt personal property used in
the home. Even most counties in Oklahoma exempt the property.
There are no federal laws that specifically regulate the rent-to-
own industry. There are, however, two proposed laws awaiting approval
by Congress: the Rent to Own Protection Act and the Consumer Rental
Purchase Agreement Act.
The Rent to Own Protection Act would regulate rent-to-own as credit
sales. This would mean federal laws like the Truth in Lending Act, the
Equal Credit Opportunity Act, the Fair Debt Collection Practices Act,
and the Fair Credit Reporting Act, would also apply to rent-to-own
transactions.
State Rent-to-Own Legislation
In the United States, 47 states have state laws regulating rent-to-
own transactions. These laws require that businesses disclose to
customers the rules rent-to-own contracts must follow. California, for
instance, has the Karnette Rental-
Purchase Act. This Act defines the terms of rent-to-own agreements and
provides consumer protection provisions. For example, it is illegal for
rent-to-own businesses to enter agreements where the total of
``payments'' toward an item is higher than 2.25 times its cash price.
States Without Rent-to-Own Specific Legislation
Only four states do not have working rent-to-own legislation:
Minnesota, New Jersey, North Carolina and Wisconsin. Minnesota does
have rent-to-own legislation, but the Minnesota Supreme Court has ruled
that rent-to-own agreements are also a credit sale, and thus limited to
an 8 percent annual rate of interest. Similar rulings have occurred in
New Jersey, North Carolina and Wisconsin.
According to the Association of Progressive Rental Organizations,
the lack of legislation and adverse judicial rulings have severely
restricted the growth of rent-to-own businesses, and in the case of
Minnesota, done away with the industry altogether.
______
Weiler and Rees
OVERVIEW OF THE 2017 TAX CUTS AND JOBS ACT
PRESENTED BY: CHRISTIAN WEILER, LL.M.
A board-certified tax law specialist
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Individual income tax rates
Lowers rates to 10%, 12%, 22%, 24%, 32%, 35%, and 37%; adjusts rate
bracket thresholds.
Roughly doubles standard deduction; suspends deduction for personal
exemptions; repeals overall limitation on itemized deductions; repeals
all miscellaneous itemized deductions subject to the 2% floor under
present law.
Alternative minimum tax (AMT)
Retains the individual AMT.
Increases the exemption amounts ($70,300 single/$109,400 married filing
jointly) and phase-out thresholds ($500,000 single/$1m married filing
jointly).
State and local tax deduction
Caps deduction at $10,000 which can be taken for the aggregate of state
and local real property and income taxes or state and local sales
taxes.
Mortgage interest deduction
Caps deduction at $750,000 of debt; $1m for debt incurred before 12/15/
17. Reverts back to $1m 1/1/26, regardless of when debt incurred.
Available for second homes.
Eliminates deduction for interest on home equity debt.
Medical expense deduction
Applies to expenses that exceed 7.5% of adjusted gross income (AGI) in
2017 and 2018, and expenses that exceed 10% of AGI thereafter.
Child tax credit
Increases child tax credit to $2,000 per qualifying child (of which
$1,400 refundable); phase-out starts at AGI over $400,000 (mfj). New
$500 nonrefundable dependent credit.
Estate tax
Retains estate, gift, and generation-skipping transfer taxes; doubles
$10m basic exclusion and indexes it for inflation.
ACA individual mandate
Reduces shared responsibility payment (individual mandate) to zero,
effective months beginning after 12/31/18.
Provision does not sunset.
Charitable donations
Retains deduction for charitable donations and increases the AGI
limitation for charitable contributions from 50% to 60%.
Deductions for higher education
Continues to allow graduate students to exclude the value of reduced
tuition from taxes.
Continues to allow deductions for student loan interest and for
qualified tuition and related expenses.
Section 529 plans
Allows distributions of up to $10k per student tax-free from 529
accounts to be used for elementary, secondary and higher tuition; can
be used for some expenses associated with home school.
Tax-free retirement vehicles
Retains retirement savings options such as 401(k)s and Individual
Retirement Accounts (IRAs).
Generally repeals rule allowing IRA contributions to one type to be
recharacterized as a contribution to the other type.
Capital gains and dividends
Net capital gains and qualified dividends would continue to be taxed at
the current 0%, 15%, and 20% rates, and also would continue to be
subject to the 3.8% net investment income tax.
Deductions
Repeals deductions for tax preparation, moving expenses and alimony
payments (after 2018).
All itemized deductions subject to the 2% floor would be repealed
(e.g., home office deductions, license and regulatory fees, dues to
professional societies).
Gain from sale of principal residence
Retains current law ownership period for the exclusion of gain from the
sale of a principal residence
Other credits
Retains adoption credit.
Corporate tax rate and corporate AMT
21% tax rate, effective 1/1/18.
Eliminates corporate AMT.
Interest expense deduction
Limits deduction to net interest expense that exceeds 30% of adjusted
taxable income (ATI). Initially, ATI computed without regard to
depreciation, amortization, or depletion. Beginning in 2022, ATI would
be decreased by those items. Regulated utilities generally excepted.
Net operating losses (NOLs)
Limits NOLs to 80% of taxable income for losses arising in tax years
beginning after 2017. Repeals carryback provisions, except for certain
farm and property and casualty losses; allows NOLs to be carried
forward indefinitely.
Expands the Section 162(m) $1 million deduction limit that applies to
compensation paid top executives of publicly held companies for TY
beginning after 12/31/17.
Covered employees would include the CFO and all executives once
identified.
Eliminates the performance-based compensation exceptions and
extends deduction limitation to deferred compensation paid to
executives who previously held a covered employee position.
Expands applicability of the deduction limitation to certain
foreign private issuers and private companies that have
publicly traded debt.
Provides a transition rule for compensation paid pursuant to a
plan under a written binding contract that is in effect on 11/
2/17 and is not materially modified thereafter.
Eliminates deduction for certain fringe benefit expenses.
Business entertainment activities and membership dues;
transportation or commuting expenses are not excludable from
income or deductible by the employer.
Employee achievement awards may not be deducted or excluded
from income if the award is paid in cash, gift cards, meals,
lodging, tickets, securities, or other similar items.
No longer exempts employer-provided eating facilities from 50%
deduction limitation; in 2026, deductions are completely
disallowed for employer-provided eating facilities and meals
provided for the convenience of the employer.
Adds a new income inclusion deferral election allowing deferral of tax
for options and restricted stock units issued to qualified employees of
private companies; applies on or after 12/31/17.
New section 199A generally provides a deduction for 20% of the
``Qualified Business Income'' (``QBI'') from an S corporation,
partnership, LLC (taxed as a partnership) or a sole proprietorship.
Although new Section 199A also provides rules for dividends
from qualified real estate investment trusts, dividends from
qualified cooperatives and income from publicly traded
partnerships, we will focus on the deduction applicable for
owners of S corporations, partnerships, LLCs and sole
proprietorships.
For taxable years beginning after December 31, 2017 and before January
1, 2026, a taxpayer other than a corporation (which includes estates
and trusts under the final bill) may generally deduct 20% of the QBI of
an S corporation, partnership, LLC or a sole proprietorship allocable
to such shareholder, partner, member or sole proprietor.
In order to obtain the full benefit of the deduction without being
subject to the wage and capital limitations, the taxable income of the
shareholder, partner, member or sole proprietor must be less than
$157,500 or less than $315,000 in the case of a married taxpayer filing
jointly.
The deduction reduces a taxpayer's taxable income but not his or her
adjusted gross income (i.e., it is a ``below the line'' deduction).
However, the deduction is available whether the taxpayer itemizes
deductions or takes the standard deduction.
QBI generally means the net amount of ``qualified items of income,
gain, deduction and loss'' with respect to any ``qualified trade or
business'' of the taxpayer.
Qualified items of income, gain, deduction and loss means items of
income, gain, deduction and loss to the extent such items are
effectively connected with the conduct of a trade or business within
the United States.
QBI generally only includes domestic income and not foreign
income.
However, in the case of a taxpayer who otherwise has QBI from
sources within the commonwealth of Puerto Rico, provided all of
the income is taxable, the taxpayer's income from Puerto Rico
will be included in determining the individual's QBI.
This provision does not define what constitutes a ``trade or business''
for purposes of determining the deduction. There are several
definitions elsewhere in the Code and regulations--guidance may be
necessary.
Qualified items also do not include specified investment-related
income, deductions or losses. Specifically, qualified items do not
include short-term capital gain or loss, long-term capital gain or
loss, dividend income or interest income. Additionally, QBI does not
include any amount paid by an S corporation that is treated as
reasonable compensation to the taxpayer, nor does it include any
guaranteed payments made by a partnership to a partner for services
rendered with respect to the trade or business or any other amounts
paid or incurred by a partnership to a partner who is acting other than
in his or her capacity as a partner for services.
A qualified trade or business includes a trade or business other than a
``specified service trade or business'' and other than the trade or
business of being an employee.
For businesses other than a ``specified trade or service business'' and
for which the taxpayer's taxable income exceeds $207,500, or $415,000
if married filing jointly, the deducible amount for each trade or
business carried on by the S corporation, partnership, LLC or sole
proprietorship is the lesser of:
20% of the taxpayer's allocable share of QBI with respect to
the qualified trade or business; or
the greater of:
(a) the taxpayer's allocable share of 50% of the W-2 wages with
respect to the qualified trade or business, or
(b) the taxpayer's allocable share of the sum of 25% of the W-2
wages with respect to the qualified trade or business, plus
2.5% of the unadjusted basis immediately after acquisition of
all ``qualified property'' (the ``wage and capital
limitations'').
W-2 wages are wages paid to an employee, including any elective
deferrals into a Section 401(k)-type vehicle or other deferred
compensation. W-2 wages do not include, however, payments to an
independent contractor or management fees or similar items.
For purposes of the provision, ``qualified property'' means tangible
property of a character subject to depreciation that is held by, and
available for use in, the qualified trade or business at the close of
the taxable year, which is used in the production of QBI sometime
during the taxable year, and for which the depreciable period has not
expired before the close of the taxable year.
The depreciable period with respect to qualified property of a
taxpayer means the period beginning on the date the property is
first placed in service by the taxpayer and ending on the later
of (a) the date ten years after such date; or (b) the last day
of the full year in the asset's normal depreciation period.
For taxpayers having taxable income between $157,500 and $207,500
($157,500 plus $50,000), or with respect to married individuals filing
jointly having taxable income between $315,000 and $415,000 ($315,000
plus $100,000), the wage and capital limitations are phased in.
That is, if the wage and capital limit is less than 20% of the
taxpayer's QBI with respect to the qualified trade or business, the
taxpayer's deductible amount is determined by reducing 20% of QBI by
the same proportion of the difference between 20% of the QBI and the
wage and capital limit as the excess of the taxable income of the
taxpayer over the threshold amount bears to $50,000 ($100,000 in the
case of a joint return).
If the taxpayer has $207,500 of taxable income, or $415,000 of taxable
income in the case of a married individual filing a joint return, the
wage and capital limitations apply fully to the taxpayer.
The provision defines a ``specified service trade or business'' as any
trade or business involving the performance of services in the fields
of health, law, consulting, athletics, financial services, brokerage
services, or any trade or business where the principal asset of such
trade or business is the reputation or skill of one or more of its
employees who are owners, or which involves the performance of services
that consist of investing and investment management trading, or dealing
in securities, partnership interests, or commodities.
It should be noted that engineering and architecture services
are specifically excluded from the definition of a specified
service trade or business.
Determining whether a business is a specified service trade or business
because it includes ``any trade or business where the principal asset
of such trade or business is the reputation or skill of one or more of
its employees who are owners,'' may be difficult.
Though a specified service trade or business is not a qualified trade
or business, such business may nevertheless be eligible for the 20% of
QBI deduction provided that the taxpayer's taxable income is less than
the threshold amounts of $315,000 in the case of married individuals
filing joint returns and $157,500 for all other taxpayers.
The ability to take the deduction for 20% of QBI for a specified
service trade or business is phased out for a taxpayer having taxable
income between $315,000 and $415,000 in the case of married individuals
filing joint returns, and between $157,500 and $207,500 for all other
taxpayers.
Specifically, for a taxpayer with taxable income within the
phase-out range, the taxpayer takes into account only the
``applicable percentage'' of qualified items of income, gain,
deduction or loss, and of allowable W-2 wages. The applicable
percentage with respect to any taxable year is 100% reduced by
the percentage equal to the ratio of the excess of the taxable
income of the taxpayer over the threshold amount bears to
$50,000 (or $100,000 in the case of a joint return).
Consequently, the deduction for 20% of QBI is not available at all for
shareholders, partners, members or sole proprietors of a specified
service trade or business whose taxable income is $207,500 or above, or
in the case of married individuals filing a joint return, $415,000 or
above.
______
Questions Submitted for the Record to Christian N. Weiler
Question Submitted by Hon. Chuck Grassley
Question. Generally, a best practice in protecting and promoting
healthy whistleblowing is to secure whistleblowers' access to
independent judicial reviews of their claims. This is no less true for
those who blow the whistle on tax fraud to the Internal Revenue
Service. In 2006, I authored an amendment that established a mandatory
IRS whistleblower award program and transferred review of whistleblower
cases away from the U.S. Court of Claims to the U.S. Tax Court. The Tax
Court has, in the past, decided whistleblower cases using a de novo
standard of review, but hadn't made a decision on the standard of
review for over 12 years. However, the Tax Court, in Kasper v.
Commissioner of Internal Revenue (2018), applied an arbitrary and
capricious standard of review. I am concerned that the Kasper case may
negatively affect whistleblowers coming forward in the future, though I
am pleased to know that the Tax Court has decided to revisit the
standard of review for whistleblowers in Tax Court case 11099-13W. To
that end, my question to you is this:
Will you commit to having an open mind when considering the
appropriate standard of review for whistleblower cases--looking to the
plain language of the statute and the meaning of the words when the
statute was adopted in 2006?
Answer. Yes, I am committed to having an open mind, when
considering the Tax Court's appropriate standard of review for a
whistleblower claim brought under IRC Sec. 7623 (b)(4), governing a
taxpayer's right to challenge a reduction or denial of a statutory
whistleblower award. I will also look to the plain language and meaning
of the statute, at the time the law was enacted, for the Tax Court's
interpretation of congressional intent with respect to the Tax Court's
independent judicial review of whistleblower claims.
______
Questions Submitted by Hon. Todd Young
Question. The Tax Court's decision to conduct remote proceedings
reflects the new ``normal'' that we are all experiencing during these
unprecedented times.
As a result, parties must take steps to ensure that they and their
witnesses have adequate technology and Internet resources to
participate in a remote proceeding.
Today, the vast majority of Americans have, or can use, a
telephone. But proceedings that require a personal computer with
Internet service may not be accessible to many litigants.
With that said, I have concerns with how remote proceedings will
work for vulnerable, low-income taxpayers.
How do you plan to address the socioeconomic ``digital divide''
with respect to remote proceedings and ensure there's an easily
accessible platform so low-income taxpayers can fairly participate?
How do you anticipate the general use of remote proceedings will
impact the current lengthy delay in issuing a judgment in the Tax
Court, while still ensuring a just process?
Answer. Thank you for this question. I plan to address the so-
called ``digital divide'' by being flexible and empathetic with the
parties, particularly pro se taxpayers. I believe the digital divide
applies to many pro se taxpayers, including low-income taxpayers, as
well as other taxpayers, such as the elderly and those who do not speak
English. Technology can be daunting for many, and it will particularly
impact unsophisticated and low-income taxpayers. Therefore, I am
committed to flexibility and do not intend to require taxpayers to use
a remote proceeding. It is my understanding that the Tax Court intends
to use ZoomGov for remote proceedings, which is a user-friendly cell
phone app and allows petitioners to also call in.
Also, I believe the parties should be given the option at any point
during a remote proceeding to ask for a continuance of the matter and
to keep the trial record open until the parties and the Court have a
chance to meet and complete an in-person trial. There are also other
options at the Tax Court's disposal for resolution of the case,
including submission of the trial by full stipulation of facts and by a
summary judgment motion. Although the current impact of the digital
divide and remote proceedings makes things less than ideal for pro se
petitioners, it is something that has come about due to necessity and
will likely not be used permanently.
Finally, I do anticipate remote proceedings will delay the time in
which a case will be heard or submitted to the Court; however, I
believe there should be no substantial delay on the part of the Tax
Court in issuing a judgment, unless the parties or the Court agree to
the keep the record open until a remote trial can be completed in
person.
Question. Like any other court proceeding, there is a waiting
period that may be required.
There is no fixed time in which a judge must make a decision, but
in most cases, it can be at least 6 months between when the petition is
filed to when the case is called for trial, and then another 6 months
or year before an opinion is issued--especially given the current
backlog.
With the possibility of interest continuing to accrue on an
individual's unpaid tax balance throughout the course of the
proceeding, do you plan to address the waiting period and the time it
takes to render a decision? If so, what are your plans?
Will you commit to issuing opinions within a year of the trial
date?
Answer. Thank you for this question. I am unaware of the current
practices at the Court with respect to minimum delays between the date
in which all issues have been joined (meaning the date after a petition
and answer by IRS have been filed) to the date of trial. It is my
general understanding that the Clerk or Chief Judge waits until there
are a minimum number of filed petitions to set a trial calendar for a
specific city. I believe as a judge of the Tax Court, I could examine
these waiting period practices and recommend best practices to ensure
all cases are being heard efficiently and timely.
With respect to the period between trial and a decision, I am
committed to allowing the parties prompt and simultaneous briefing of
the legal issues (when possible) and issuing a prompt decision of those
cases that can be handled quickly. I suspect certain type of cases,
particularly factual determinations, can be promptly ruled on by the
Court.
Finally, yes, I will commit to issuing the vast majority of my
opinions within a year or hopefully in a much shorter period of time.
Question. Given your previous experience with the Southeast
Louisiana Legal Service Pro Bono Tax Clinic, how will you commitment to
ensuring low-income individuals are fairly represented--especially
those with tight financial situations?
How important was your service in this clinic to better
understanding the needs of taxpayers?
Answer. Thank you for this question. In my mind, adequate
representation of low-income taxpayers is a critical issue for the Tax
Court. I am committed to making all taxpayers aware of the pro bono
calendar call and other pro bono services offered by the various pro
bono tax clinics. I am also committed to working with the ABA Tax
Section and other State Bar Tax Sections to expand pro bono
representation for pro se taxpayers appearing before the Tax Court,
including the Court's recently adopted policy governing a
practitioner's limited entry of appearances.
I believe my experience at the tax clinic has been critical in
developing my understanding of the unique needs and types of claims
commonly faced by low-income taxpayers. Without my experience at the
tax clinic, I would not have been exposed to the types of cases that
are routinely before a Tax Court Judge.
______
Prepared Statement of Hon. Ron Wyden,
a U.S. Senator From Oregon
The Finance Committee meets today to discuss two nominations to the
U.S. Tax Court and one for a position as Deputy U.S. Trade
Representative. The Tax Court is all about fairness for the taxpayer--
giving them a venue to dispute potentially mistaken charges before
having to pay. And USTR is facing big challenges, because the Phase One
China trade deal that the President called the biggest deal anywhere in
the world is already failing. The new NAFTA is in danger of becoming
only so many words on paper if this administration does not step up on
implementation of the labor obligations and other commitments. In the
fight against trade cheats, American workers and businesses need USTR
to do better. So these are both important roles, and the nominees
before the committee today are qualified to fill them.
With that said, this is the committee's first meeting after a
recess that the Senate should not have taken. In this pandemic,
virtually every new day is the worst day yet. And tens of millions of
jobless Americans are headed over an income cliff if the Senate does
not act in the coming days. So, while the nominations before this
committee are important and I'm looking forward to the discussion with
our witnesses, the committee also needs to move quickly past business
as usual.
There are COVID hot spots all over the country. Just like in March
and April, the testing cannot keep up with the spread of the virus.
Health-care workers don't have adequate PPE. You can count on one hand
the States that have the pandemic under control.
Parents are afraid to send their kids back to school, and too many
school districts don't know when or how they'll be able to bring kids
back safely. It's a disaster for teachers and staff, for kids and for
parents, many of whom might have to drop out of the workforce to
provide their own child care.
Any hope for a quick economic rebound is disappearing. Consumer
spending is dropping. Short-term furloughs are turning into permanent
layoffs. The number of new weekly unemployment claims, which before
this year had never crossed 700,000, has been a million or more for 17
weeks straight.
Everyone understands that this country is at the beginning of a
once-in-a-century unemployment crisis. But if not for supercharged
unemployment benefits keeping families afloat, this country would also
be in the middle of a second Great Depression. Those benefits, however,
will expire in a matter of days. They will lapse if Senate Republicans
refuse to act by July 25th. That will be a moral and economic disaster
that would hit this country like a wrecking ball.
Colleagues, the Trump administration doesn't have a real plan for
any of it. The administration is hiding COVID data from the public.
Going by media reports, their big economic idea is to cut jobless
workers' incomes and give others a fake tax cut they'll have to repay
after the election.
Renewing supercharged unemployment benefits at $600 per week cannot
wait any longer. Leader Schumer and I have a proposal called the
American Workforce Rescue Act that would tether those benefits to the
economic conditions on the ground, instead of going by arbitrary
extensions. The Senate should have passed it 2 weeks ago, instead of
leaving town for recess.
By delaying on unemployment benefits, the Republican leader is
exploiting for political leverage all those Americans who are walking
an economic tightrope. It is wrong, and it ought to end this week.
So today's hearing will examine some important nominations. I
appreciate why Chairman Grassley called this hearing. I look forward to
Q&A. And in the days ahead, I hope that this committee turns again to
address the economic cliff and the pandemic that has killed 140,000
Americans and is threatening to do extraordinary, long-lasting damage
to our economy.
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