Judicial and Legislative Branches to Continue Discussions on Judiciary Case Management Bill

The Judicial Conference of the United States expressed its opposition to the version of a bill passed by the House this week, saying it “will have devastating budgetary and operational impact on the Judiciary and our ability to serve the public” by imposing radical and costly changes on the Third Branch’s electronic case management system without adequate funding.

The House passed the bill late Tuesday after lengthy discussions between the Judiciary and the House, which were encouraged by House Majority Leader Steny Hoyer and Democratic Rep. Hank Johnson, a bill sponsor and chairman of the Judiciary Subcommittee on Courts, Intellectual Property, and the Internet. The bill that was brought to the floor had some significant changes that addressed some, but not all, of the concerns the Judicial Conference had raised. The Judicial Conference appreciates Leader Hoyer’s offer in his floor statement to “continue refining the bill in mutual discussions.”

“While we are disappointed that the House rushed forward with a vote before critical budget and operational issues could be resolved, we appreciate the work of Mr. Hoyer and Mr. Johnson to begin a serious dialogue on this bill, the goals of which the Judiciary shares,” the AO said in a statement after the vote. “This version is not ready to become law because it could cause catastrophic consequences for the Judiciary. We look forward to discussions in the next Congress to bring forward a bill that the two branches could potentially both support.”

The Judiciary detailed its objections to the bill in a Dec. 7 letter (pdf) to Hoyer in advance of the vote.

“If our cost estimates are correct – or even marginally closer to correct than the bill’s proponents’ – there is no scenario in which the revenue generated by the bill could be sufficient to cover those costs.  This will force the Judiciary to slash funding for staff and other critical operations,” wrote James C. Duff, Director of the Administrative Office of the U.S. Courts (AO) and Secretary of the Judicial Conference.

The Open Courts Act would require a complete overhaul of the Judiciary’s backbone case management and electronic filing system (CM/ECF) within a four-to-five-year period. It provides no appropriations to do so, and instead relies on ill-defined possible revenue streams to pay for the project, including some that are temporary.

It would eliminate the current single, per-page flat fee for the PACER (Public Access to Court Electronic Records) system, which is the public access portal to the CM/ECF, and replace it with a complex and novel fee structure that is untested and possibly unreliable. It would be virtually impossible to estimate accurately the revenue in advance and to ensure that it would be sufficient to build the new system, keep court operations running while it’s being built, and sustain the new system in the future.

Cost estimates done outside the Judiciary have failed to take into account the full scope of the project as it is described in the bill. Those estimates tend to account only for the costs of replacing PACER, which is a small piece of what the entire CM/ECF does.

The CM/ECF is the program that manages the operations of the entire federal court system, handling millions of transactions each day. It manages documents, deadlines, hearing schedules, and trials. It does the docketing for every federal court, and it processes transactions at every step along the way in the progression of a case, from collecting filing fees, to determining deadlines for motions, to sharing vital information among litigants, judges, and court staff.

“This legislation – which will take years to implement – rushes forward without appropriate and necessary assurances and provisions regarding the budget for such an enormous undertaking,” the Judicial Conference said in its letter. “(The Congressional Budget Office’s) CBO’s hurried and preliminary estimates of the cost of developing and implementing a new electronic filing and public access system, in our view, vastly underestimate the cost of the bill.”

The Judiciary also is concerned about the technological feasibility, security, and governance aspects of the bill’s requirements, the letter said. “But the threat of devastating budget consequences for the Third Branch simply cannot be overemphasized.”

The letter notes that House leaders have made significant changes to the bill since it was considered by the House Judiciary Committee, but that critical further safeguards must be included before enactment. The Conference would prefer to work with Congress on achieving a “modern, effective, fair and successfully funded system” in a more collaborative process that would lead to more workable legislation and a better public access system for court records.

The Judicial Conference’s letter requests that Congress wait for the results of a study by the General Services Administration, the first phase of which will be completed in early spring. The study will offer a clearer picture of what a replacement case management system should look like along with realistic cost projections.

The system is currently financed by user fees, and its public access feature, PACER, provides the public with instantaneous access to virtually every document filed in federal court. No tax dollars are expended for its operation and maintenance; it is financed by users. There are approximately 3.4 million registered users for the PACER service, which provides access to 1 billion case documents.

Users are charged 10 cents per page, but they are charged only after incurring fees of $30 or more in a single quarter. Litigants receive free electronic copies of documents in their cases, and judges’ opinions are free. Most users – more than 75 percent – pay no fees for their documents.  Of the remaining users who do incur fees, most are “power users,” including legal database companies and financial firms that collect and aggregate massive amounts of PACER data for resale at a profit. The power users fund 87 percent of the cost of operating and maintaining the system today.

More from: info@uscourts.gov

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    Federal law provides certain tax benefits for transactions involving genuine insurance products, including insurance products held offshore. While taxpayers may lawfully hold offshore insurance products, they contain features that make them vulnerable for use in abusive tax schemes. For example, offshore insurance products can be highly technical and individualized, making enforcement challenging, according to Internal Revenue Service (IRS) officials. Furthermore, insurance is not defined by federal statute, potentially making a determination of what constitutes genuine insurance for federal tax purposes unclear. Offshore micro-captive insurance products, which are made by small insurance companies owned by the businesses they insure, may be abused if the corporate taxpayer improperly claims deductions for payments made to a micro-captive for federal tax purposes. Courts have applied certain considerations to determine whether these deductions can be claimed. For example, one consideration is whether the insurance legitimately distributes risk across participating entities. IRS officials said they expend significant resources reviewing these schemes because of the varied ways insurance companies may work. Offshore variable life insurance products, which are insurance policies with investment components over which the insured has certain control, may be abused if the individual taxpayer fails to meet IRS reporting requirements or pay appropriate federal income taxes. Federal regulations require that taxpayers with certain foreign life insurance accounts report this information to IRS and the Financial Crimes Enforcement Network. The structure of life insurance products may vary and taxpayers are required to pay taxes based on the underlying type of financial product the policy represents. The figure below shows how noncompliance may occur when taxpayers use life insurance and micro-captive insurance in abusive tax schemes. Abusive Use of Micro-captive and Life Insurance When structured in abusive ways, insurance products held offshore can be designed to aid in unlawful tax evasion by U.S. taxpayers. Two products that IRS has recently warned have the potential for such abuse include micro-captive insurance and variable life insurance policies. GAO was asked to review how taxpayers may abuse offshore insurance products. This report describes (1) how offshore insurance tax shelters provide opportunities for income tax abuse; (2) how offshore micro-captive insurance is used and how it is used in abusive tax schemes; and (3) how offshore variable life insurance is used and how it is used in abusive tax schemes. GAO reviewed IRS tax and information return forms, relevant U.S. case law and IRS guidance, academic and trade publications, and applicable statutes and regulations. GAO also interviewed IRS officials and professionals in the tax preparation and insurance industries. For more information, contact Jessica Lucas-Judy at (202) 512-9110 or LucasJudyJ@gao.gov.
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    In Crime News
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    In Crime News
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