Small banks in bailout pool under pressure

More than 100 smaller banks were able to tap government programs to pay off bailout money they received during the financial crisis but those still owing face a perilous future, a federal watchdog said on Wednesday.

In its latest quarterly report to Congress, the Special Inspector General for the Troubled Asset Relief Program, known as SIGTARP, noted that as of March 31 there were still 351 regional and community banks in the bailout program.

Banks had to agree to give the Treasury Department an ownership interest in the form of preferred stock and warrants to buy more stock as a condition of receiving bailout money. They have to buy the stock back to exit the program.

SIGTARP noted that 137 banks were able to refinance out of the bailout program by using money they received through another program, the Small Business Lending Fund, which was set up in 2010 to let Treasury make capital investments in banks and so boost credit availability for small businesses.

The report notes that the hundreds of banks left behind, still owing bailout money, are mostly smaller and they face a new risk because dividend payments that they are required to pay the government nearly double in late 2013 to 9 percent from 5 percent.

Smaller banks typically have a harder time raising capital than big banks, and are more reliant on lending in smaller communities, many of which still are recovering from the severe recession the economy endured as part of the financial crisis.

The increased dividend kicks in after a bank has been in the bailout program for five years and was intended to be an incentive to pay off bailout money though it now is a fast-approaching new burden for those unable to do so.

SIGTARP said there were signs that some community banks were facing a squeeze as the healthy banks leave the bailout program and the less-healthy remain in it.

"Of the 351 banks remaining in TARP as of March 31, 2012, there were 163, or 46 percent, that were not current in making dividends and interest payments totaling $306 million," the report said.

It noted that industry experts predict a wave of mergers and takeovers among community banks in the next three to five years.

Some 95 of the banks still owing TARP money had missed six or more payments. That gives Treasury the right to appoint directors to their boards, though it had done so only at nine banks by March 31.

SIGTARP said it had already recommended to the Treasury that it prepare "a clear TARP exit path" for the remaining community banks and it consider amending terms of the contracts for banks unable to get out before higher dividend payments start.

"Getting these banks back on their feet without Government assistance must remain a high priority of Treasury and the federal banking regulators," SIGTARP said.

(Reporting By Glenn Somerville; Editing by Neil Stempleman)

ECB's Draghi, seeking growth, throws crisis ball to governments

European Central Bank (ECB) President Mario Draghi addresses the European Parliament economic and monetary affairs committee in Brussels April 25, 2012.

Credit: Reuters/Yves Herman

By Robin Emmott

BRUSSELS | Wed Apr 25, 2012 2:10pm EDT

BRUSSELS (Reuters) - European Central Bank President Mario Draghi called on Wednesday for a "growth compact" but put the onus on euro zone governments to shape-up their economies.

He gave no indication the ECB was poised to provide more support to countries or banks.

There are growing expectations in financial markets that the ECB will have to ride to the rescue again with Spain under intense pressure, the Dutch government having collapsed over budget plans and latest data showing the euro zone is being driven back into recession.

The word from the currency bloc's central bankers is very different - having created more than a trillion euros of low-cast, three-year money via so-called LTROs to avert a credit crunch, governments and banks have been given space to cut debt and clean up balance sheets.

Draghi called for euro zone states to pursue growth-enhancing structural reforms.

"We've had a fiscal compact. Right now what is most present in my mind is to have a growth compact," he told the European Parliament, calling for this to be founded on Europe's 'six pack' of tighter budgetary rules.

He pressed euro zone states to pursue structural reforms to help generate this growth, saying the ECB's contribution was to deliver stable prices.

"Are we doing all we can for growth? Our task is not that. Our task is to ensure price stability and through this contribute to growth. That's what I think we are delivering."

Joerg Asmussen, a member of the ECB's Executive Board, said one possibility would be to channel some of the available EU structural funds towards countries in crisis, "with the goal of promoting employment".

Asmussen was also quoted by Financial Times Deutschland as saying European countries could also carry out labor market reforms like Germany had.

Socialist Francois Hollande, favorite to take the French presidency next month, has called for the ECB's mandate to be revised to add a responsibility for promoting growth.

Draghi insisted the ECB's primary mandate was to ensure price stability and had to remain so. He made clear that after the central bank's LTRO operations in December and February it was now up to governments to act.

"Now, the ball is entirely, squarely in the court of governments and banks," he told the European Parliament's economic committee.

However, he added that any "exit strategy" from the ECB's emergency measures, something Bundesbank chief Jens Weidmann and others have said should be discussed, was premature given weak economic conditions.

Draghi said banks must strengthen their finances further, including by retaining earning and bonus payments, while governments must stick with fiscal austerity drives which in some cases are driving countries deep into recession.

"We are just in the middle of the river that we are crossing," he said. "The only answer is to persevere."

The ECB had played its part in buying governments time.

"Our LTROs have been quite timely and successful. If the only thing we had achieved is to buy time, which by the way is not the only thing we achieved, we would have been successful. I think buying time is not a minor achievement," Draghi said.

SHAKY ECONOMY

The euro zone's business slump deepened at a far faster pace than expected in April, data showed on Monday, suggesting the economy will stay in recession at least until the second half of the year.

Draghi conceded recent data had been mixed though he expected overseas demand and the ECB's still very low interest rates to support growth.

"At the same time, downside risks relate in particular to a renewed intensification of tensions in euro area sovereign debt markets and their potential spillover to the real economy," he said.

Despite the political stand-off in the Netherlands, the immediate pressure is off. Spanish and Italian 10-year government bond yields fell on Wednesday and are both comfortably below the 6 percent mark which starts to flash danger signals.

ECB Executive Board Member Jose Manuel Gonzalez-Paramo said Spain would not find it hard to meet its financing needs for the rest of the year despite rising borrowing costs.

Madrid has already met 50 percent of its planned issuance in medium and long-term bonds for the year, and the ECB policymaker said in an interview published in Expansion newspaper on Wednesday it would complete its plans well before year-end.

Other euro zone central bankers added to the drumbeat of comments suggesting the ECB is in no mood yet to create more long-term money for banks, let alone resume its government bond-buying program, which has essentially been inactive for the past 10 weeks.

Draghi said the bond-buying scheme was "neither eternal nor infinite" while Bundesbank board member Andreas Dombret said banks should not rely on the ECB providing unlimited liquidity as an alternative to adjusting their business practices as the policy will be removed before it creates risks to financial stability.

(Writing by Mike Peacock. Editing by Jeremy Gaunt.)

White House: Closing tax loophole could fund student loans

U.S. President Barack Obama waves before talking about the rising costs of student loans while in Carmichael Arena at the University of North Carolina at Chapel Hill April 24, 2012.

Credit: Reuters/Larry Downing

ABOARD AIR FORCE ONE | Tue Apr 24, 2012 2:30pm EDT

ABOARD AIR FORCE ONE (Reuters) - The White House said on Tuesday that it was reviewing whether a small business tax loophole should be closed to pay for an extension of low interest rates on student loans that President Barack Obama wants Congress to deliver.

The loophole allows some shareholder-employees of so-called "S corporations" to avoid paying the Medicare payroll tax on their earnings.

"We've certainly been in discussions with senators about that - that is certainly an option that is a good potential option," said White House press secretary Jay Carney traveling with Obama. "It meets the standard we set that we cannot pay for it in a way that harms students."

Obama was heading to North Carolina on the first leg of a tour of three battleground election states in which he will urge Congress to stop interest rates from rising on 7.4 million students. The action could appeal to middle class and younger voters vital to his hopes for re-election in November.

Carney said that closing the tax loophole was among a variety of potential ways to pay for the estimated $6 billion cost of a one-year extension of the loan rates, which otherwise will double on July 1 to 6.8 percent.

An S-Corporation does not pay corporate taxes but passes income through to the individual shareholders, who can report it as profits rather than wages in order to lower their tax burden.

It is sometimes called the "John Edwards" loophole after the former Democratic vice presidential nominee, who formed an S-Corporation in the 1990s when he was a trial lawyer.

(Reporting by Jeff Mason; Editing by Jackie Frank)

Britain clashes with France over bank capital

BRUSSELS (Reuters) - Britain clashed with France on Wednesday over demands that London be allowed force banks to top up capital beyond new EU levels, diplomats said, in a long-running dispute threatening to undermine a central plank of European financial reform.

The European Union is attempting to translate higher capital standards set by the Basel Committee of regulators and central bankers into EU law by the end of this year, a move to make it costlier for banks to engage in high-risk lending or investing.

But EU diplomats, meeting on Wednesday, disagreed over the shape of the draft law, with Britain wanting more freedom to set higher standards for its banks, in the face of opposition from France.

Britain argues it is entitled to take extra steps to make banks safer, to protect the interests of taxpayers who could be called on to bail them out if they face collapse.

But France is concerned that international banks based in London could cut lending elsewhere in Europe if they have to beef up capital.

Some diplomats suspect the dispute is fuelled by concern that deposits and other business might flow to British banks were they to be better capitalized than French and German rivals and thus safer in the eyes of investors.

As diplomats debated the issue in central Brussels, the European Central Bank president, visiting the nearby European Parliament, underscored the urgent need to bolster banks.

"I consider it of crucial importance that banks strengthen their resilience further, including by retaining earnings and by retaining bonus payments," Mario Draghi told parliamentarians, who are also pushing for new bonus curbs in the law.

"The soundness of banks' balance sheets will be a key factor in facilitating both an appropriate provision of credit to the economy," he said.

Last year, the ECB took the unprecedented step of lending banks one trillion euros to avert a confidence spiral but many analysts believe that without significant fresh capital, it will be impossible to rebuild confidence in the region's lenders.

The disagreement on Wednesday leaves it to finance ministers from the EU's 27 countries to strike a deal when they meet next week, as time runs out to finalize the rules Europe wants by year-end.

But the chances of a breakthrough next Wednesday are also seen as slim.

"The question is if there should be little room for manoeuvre on Basel or more room for interpretation," said one official. "It is likely this will be the first of many meetings."

Clarifying the precise rules on capital, almost five years after the start of the financial crisis that toppled some lenders and hit many countries hard, would remove some uncertainty for banks, already nervous about lending as Europe slides into recession.

The new European capital regime will also influence how stringently Washington interprets the global Basel standards on Wall Street.

POLITICAL FIGHT

"It is a very political question," said one French diplomat. "It is about the degree of EU regulation and the degree of member states' initiative."

George Osborne, Britain's finance minister, has won backing from countries including Sweden for its position.

Britain also objects to what it sees as a watering down of Basel standards in EU law if it were to recognize a unique form of shareholder capital often used for German regional landesbanks that does not always absorb operational losses.

It is opposed to any use of an insurers' capital in a bank-insurance conglomerate to support the bank in such a group.

One diplomat complained about countries trying to carve out exceptions that best suit them. "They have made a Swiss cheese out of it," he said.

Others struck a conciliatory note, saying that some EU members, including Germany, were prepared to consider British demands for flexibility.

Far more than the technicalities of bank balance sheets, however, the dispute is the result of a struggle for influence and power in a bloc shaken by the worst financial crisis in a generation.

Britain has been fighting to maintain its authority over the City of London, Europe's financial capital, as other EU members move to centralize supervision and regulation of banking and finance.

Under one possible compromise, countries like Britain would be given leeway to impose higher standards of capital on their banks, but the EU's executive Commission would keep tabs on such moves.

Many EU diplomats expressed support for a recent call from the ECB's Draghi that such a task should instead be given to the European Systemic Risk Board, a Frankfurt-based risk-monitoring body dominated by the European Central Bank.

(Writing By John O'Donnell; additional reporting by Robin Emmott; editing by Rex Merrifield)

Analysis: Dow's new corn: "time bomb" or farmers' dream?

A new biotech corn developed by Dow AgroSciences could answer the prayers of U.S. farmers plagued by a fierce epidemic of super-weeds. Or it could trigger a flood of dangerous chemicals that may make weeds even more resistant and damage other important U.S. crops.

Or, it could do both.

"Enlist," entering the final stages of regulatory approval, has become the latest flashpoint in the debate about the risks and rewards about farm technology. With a deadline to submit public comments on Dow's proposal at the end of this week, more than 5,000 individuals and groups have already weighed in. Dow Agrosciences, a unit of Dow Chemical Co, hopes to have the product approved this year and released by the 2013 crop.

The corn itself is not the issue -- rather it is the potent herbicide chemical component 2,4-D that is the center of debate.

The new corn is engineered to withstand liberal dousings of a Dow-developed herbicide containing the compound, commonly used in lawn treatments of broadleaf weeds and for clearing fields of weeds before crops like wheat and barley are planted.

Enlist is the first in a planned series of new herbicide-tolerant crops aimed at addressing a resurgence of crop-choking weeds that have developed resistance to rival Monsanto's popular Roundup herbicide. It is part of an expanding agricultural arsenal advocates say is key to growing enough food to feed a growing global population.

But while 2,4-D has a long history of effective use, the chemical's volatile nature also worries environmentalists because winds, high temperatures, humidity can cause traditional forms of the herbicide to migrate from farm fields where it is sprayed to wreak havoc on far-off crops, gardens, and trees that are unprotected from the invisible agent.

Environmentalists are pushing the government to pause before opening the door to what they say could be a destructive turn.

Opponents include some specialty crop farmers who fear 2,4-D herbicide use could cause widespread damage to crops that are not engineered with a tolerance to it. It is so potent that its use is tightly restricted in some areas and at certain times of the year in some U.S. states.

"It is a major issue for farm country," said John Bode, a lawyer for a coalition of farmers and food companies seeking regulatory restrictions or rejection of Dow's plans.

"Massive amounts of 2,4-D... can cause major changes, threatening specialty crops miles away," said Bode, an assistant Secretary of Agriculture in the Reagan administration.

The financial stakes are high as well. Dow projects a "billion dollar value" in a product line that is its biggest challenge yet to the dominance of top seed company Monsanto's revolutionary Roundup herbicide and its genetically modified "Roundup Ready" seeds. Dow hopes to expand Enlist into soybeans and cotton.

Where Roundup once killed weeds easily, experts say that now, even heavy use of the herbicide using the key chemical glyphosate often fails to kill "super weeds."

NEW HERBICIDE TEMPERS 'DRIFT'

Some weed scientists are supportive of Enlist. In the southern third of Illinois, prime corn-belt country, infestations of the invasive water hemp weed have doubled each year over the past three years, according to Bryan Young, weed scientist at Southern Illinois University.

"The de-regulation of Enlist herbicide-tolerant corn will expand grower options for controlling problematic weeds and has proven in my research to be effective as such," Young wrote to the USDA in a letter supporting Dow's application.

Dow officials say they are aware of the problems with 2,4-D "drift" and volatility, and that the new herbicide has been formulated to reduce those factors dramatically.

Dow says that if farmers use the new Dow version of 2,4-D properly, drift is reduced about 90 percent, and tests show the new product has "ultra-low volatility."

Even many opponents of Dow's new herbicide say it is an improvement of generic rivals using 2,4-D. But they say Dow's version will be expensive enough that many farmers will probably buy cheaper generics to spray on the 2,4-D-tolerant corn.

Dow acknowledges that lure, but says it will work to steer farmers to its brand.

"I don't think you can ever guarantee it, but we are doing all we can to try to incentivize people and educate people," said Tom Wiltrout, Global Strategy Leader for Seeds and Traits at Dow. "We were worried too. That was one of the big debates we had. Chemistry is the key. We think we've got an answer."

David Simmons, an Indiana farmer who grows corn and soybeans but also runs a vineyard and winery, says his young grapevines have suffered significant damage from drifting 2,4-D applications at neighboring farms, forcing him to fight to recover damage claims from fellow farmers' insurance carriers.

"I'm faced with looking five years down the road. Is it even going to be profitable to grow grapes if I continue to get this damage every summer?" Simmons said.

Due to the already-known effects from "drift," opponents have requested that some form of an indemnity fund be established to pay loss claims from farms damaged by inadvertent 2,4-D applications. Dow has opposed that safeguard.

HIGH STAKES

Opponents have flooded the U.S. Department of Agriculture with petitions and pleas for either rejection of Dow's new corn, or strict regulation before use of 2,4-D is expanded into millions of acres in the U.S. agricultural heartland. More than 90 million acres of corn alone will be planted in 2012.

Last week, the Save Our Crops coalition representing more than 2,000 U.S. farmers filed legal petitions with the USDA and the Environmental Protection Agency demanding the government scrutinize Dow's plans more closely. The group has said it could file a lawsuit to try to stop the new type of corn.

Steve Smith, director of agriculture at Indiana-based Red Gold, the world's largest processor of canned tomatoes, calls the 2,4-D issue a "ticking time bomb."

"We are all producers and people who have no problem with new technology. But we see this new piece of it having side effects that we don't think people have adequately thought of," said Smith.

Others fear Enlist and 2,4-D may only be only the beginning of a new wave of dangerous farm chemicals. Chemical giant BASF and Monsanto plan to unveil by the middle of this decade crops tolerant to a mix of the chemicals dicamba and glyphosate.

This increasing use of chemicals will only spell worse weed resistance in years to come, warn weed scientists and environmentalists.

"It's a chemical arms race," said Andrew Kimbrell, a lawyer at the Center for Food Safety opposed to the new crop systems. "It's a scary scenario. We won't be able to do anything with these weeds other than use machetes."

Instead of using more chemicals in order to plant corn on the same field year after year, U.S. farmers should be rotating crops more, a technique proven to challenge weed resistance, many weed scientists say.

Dow says that while Enlist farmers' best option for now, it will not be the only long-term solution for weed resistance.

"There is no silver bullet here," said Joe Vertin, Dow's global business leader for Enlist.

(Reporting By Carey Gillam; Editing by David Gregorio)

Consumers to buoy first-quarter growth

WASHINGTON (Reuters) - The U.S. economy likely suffered only a slight slowdown in growth in the first quarter as Americans stepped up spending on autos and a range of other goods against a backdrop of unusually mild winter weather.

Early in the year, economists worried that growth in the world's largest economy would pull back sharply after a spurt in output in the final three months of last year that reflected a one-off rebuilding of inventories by businesses.

But data on consumer spending, home building and inventories have surprised on the upside, prompting a change of heart.

"We got warmer winter weather, more consumer activity, auto sales were good, housing and inventories were decent and so you get a better GDP number," said Steve Blitz, chief economist at ITG Investment Research in New York.

Gross domestic product probably grew at a 2.5 percent annual rate in the first quarter, according to the median of a Reuters poll. The Commerce Department will release its first snapshot of first-quarter GDP on Friday at 8:30 a.m. EDT (1230 GMT).

The report will come two days after a Federal Reserve policy meeting. The U.S. central bank is not expected to make any policy changes when it concludes the meeting on Wednesday, and most economists believe that the GDP report will reduce the chances of further monetary stimulus.

"If domestic data do disappoint over the next couple of months ... the Fed is likely to become more pessimistic and decide that more policy accommodation is necessary," said Jeremy Lawson, an economist at BNP Paribas in New York.

While the forecast pace of growth would be a step back from the 3 percent rate logged in the fourth quarter, the composition of growth in the first quarter should be encouraging, with consumer spending expected to account for the bulk of the gain.

Some economists expect consumer spending, which makes up about 70 percent of U.S. economic activity, to have increased at a 2.5 percent rate. That would be the fastest pace since the fourth quarter of 2010.

PENT-UP DEMAND

Spending is seen driven largely by motor vehicle purchases, reflecting pent-up demand by households.

A devastating earthquake and tsunami in Japan caused disruptions to auto production last year and left dealers without models that consumers wanted to buy.

Some of the rise in auto sales has been attributed to unseasonably warm weather, which also helped to boost purchases of building materials for home renovations. But the mild temperatures also depressed demand for utilities.

"The weather made a decent amount of contribution, but you cannot chalk all that to warm weather. The gains were too broad-based," said Paul Edelstein, an economist at IHS Global Insight in Lexington Massachusetts.

Inventories are expected to make a contribution to GDP growth, but nowhere near the two-thirds they added to fourth-quarter growth. However, they remain a wild card as the government will only have data for two months when it makes its preliminary GDP estimate for the first quarter.

Excluding inventories, GDP is expected to rise at a rate of about 2.2 percent, with a similar pace anticipated in final sales to domestic purchasers - signs of firming demand.

Should first-quarter growth meet expectations, that could help to explain the solid job gains seen in the first two months of the year, even if the quarter ended on a soft note. U.S. employers added 275,000 workers to their payrolls in January and 240,000 in February, but only 120,000 in March.

"We were wondering where was the growth behind these numbers and here it is perhaps," said Edelstein.

But it is unlikely this pace of GDP growth will be sustained for the rest of the year, given signs of a loss of momentum at the end of the quarter.

Some gauges of regional factory activity eased as the second quarter started, and consumer confidence ebbed somewhat.

First-time applications for state unemployment benefits have spiked in recent weeks, although economists largely blame seasonal quirks for the increase.

"It's very clear that you are coming out the quarter with decreasing momentum. The slowdown in manufacturing is worrisome to anybody looking at what generates GDP growth," said Blitz.

"The European recession is just beginning and China is slowing. We have a more export-oriented economy and prices are up and real disposable income is flat to down. Where are you going to generate your growth?"

Outside consumer spending, growth in the first quarter is seen supported by a rebound in government defense spending.

But business spending on equipment and software is expected to have slowed further, with investment in nonresidential structures likely to have declined for a second straight quarter.

Trade, like inventories, is a wild card as the government will not have full data for the quarter, but economists expect it will be a minor drag on first-quarter growth.

 

Powerful but obscure Tax Court lags on access

WASHINGTON (Reuters) - Unless you are a tax lawyer, the granite building with bronze-tinted windows that looms over Washington's I-395 freeway may be the most influential courthouse you've never heard of.

The Tax Court is a powerful but obscure institution that has been opening itself up to the public, but only very slowly, and it still lags behind other courts on access.

The court hears cases that range from warring spouses to high-stakes challenges by major corporations to the practices of the tax-collecting Internal Revenue Service.

One case that could be decided any day, for instance, is a dispute involving Medtronic Inc and nearly $1 billion in taxes the IRS says the medical devices maker owes in relation to its Puerto Rican subsidiary.

Another soon-to-be-decided case puts more than $350 million at stake in a fight between PepsiCo Inc and the IRS over how the beverages company financed a 1996 reorganization.

Set up in 1924, the Tax Court makes decisions that shape tax law and guide corporate America. Yet its steady flow of legal filings is harder to access than filings at other courts.

The Tax Court's orders and opinions are readily available online, but documents filed as part of its proceedings are not. Seeing these filings requires either a trip to the court to search its sole public computer or a request in writing.

By contrast, proceedings of district, appellate and bankruptcy courts are on the Web through the widely used, paid site known as PACER, or Public Access to Court Electronic Records, run by the Administrative Office of the Courts.

Tax Court officials say they have good reason to be less open to the public. They say they must balance openness with the need to protect taxpayer privacy.

About three-quarters of the court's cases involve small taxpayers representing themselves. Personal tax records are confidential, so the court needs to respect that, Judge Mark Holmes and other officials told Reuters.

"All of our publicly available records, apart from the very occasionally sealed cases, are available here at the courthouse just like in the old days," Holmes, on the court since 2003, said. "There are some problems with that, I understand."

ONLINE in 2008

The court was slow to provide easy access to its opinions and orders on the Internet, doing so only in 2008, years after other courts went online.

In June 2011, the Tax Court put orders issued by the court online in a searchable way, for free, without limits. But that excludes filings from aggrieved corporations or the IRS, including petitions, responses, depositions and the like.

Copies of Tax Court documents cost 50 cents a page - five times the fee charged by PACER.

Sophisticated corporate lawyers have found ways to navigate the system, although some say it still can be frustrating.

"They are moving in a direction of creating greater access, but it is slow and deliberate," said George Hani, a tax lawyer at Miller & Chevalier, who earlier was a Treasury attorney and an IRS counsel.

Given the power of the court, more accountability is in order, said Leandra Lederman, a tax professor at Indiana University who has been a court critic.

"The transparency is a really important policy issue," said Lederman, who clerked at the court.

Lederman said a big improvement would be to put the court under the auspices of the Administrative Office of the Courts, which would put the court's documents on PACER.

TAX COURT CLASHES

About 90 percent of all so-called IRS deficiency cases - in which the government says a taxpayer owes money in taxes - go through the Tax Court, according to the IRS.

These cases can have a major impact on tax policy. A case involving employee stock options used by technology company Xilinx Inc that began in Tax Court is seen as guiding IRS policy on tax treatment of subsidiaries.

Tax lawyers say a clash between the IRS and software company Veritas, now part of Symantec Corp, pushed the IRS to settle so-called transfer pricing cases rather than take them to court.

"It is probably the most important court in interpreting tax law, short of the Supreme Court, because our mission is to create a uniform body of precedent for the country as a whole," Judge Holmes said.

The court's primary allure?

In district courts, which are the general trial courts in the United States, a taxpayer must first pay the government the taxes it wants, then dispute the payment and hope for a refund. In Tax Court, a $60 fee gets the taxpayer's case moving and puts any disputed payment on hold.

There are other differences.

A DIFFERENT ARTICLE

The Tax Court began as a board of judges set up as an independent federal agency to hear tax disputes in 1924. In 1969, Congress removed its administrative agency status.

Chief Judge John Colvin is one of 19 presidentially appointed Tax Court judges, who can serve multiple 15-year terms, but are not appointed for life like most other judges.

Colvin was originally appointed by President Ronald Reagan in 1988. Colvin, who was tax counsel for Senate Republicans before joining the court, has been chief judge since 2006.

The Tax Court operates under a different article of the Constitution than most of the judicial branch does. It has its own distinct rules. Here are some of its quirks:

* There are no juries;

* Rules of evidence are less stringent;

* The court is not covered by the rules of civil procedure or the Administrative Procedures Act;

* Court judges travel to dozens of cities to hear cases.

"They sort of exist in their own world," said Richard Pildes, a New York University professor and part of a legal team that successfully challenged the secrecy of some Tax Court proceedings, a case that made it to the Supreme Court in 2005.

In that case, the Supreme Court delved into Tax Court accountability in a dispute over the secrecy of reports by special trial judges, who handle some smaller cases.

The high court ruled that the Tax Court may not exclude the special trial judge findings from the public record, calling the court's policy "idiosyncratic."

"The Tax Court's practice is extraordinary, for it is routine in federal judicial and administrative decision making both to disclose a hearing officer's initial report ... and to make that report part of the record available to an appellate forum," Justice Ruth Bader Ginsberg wrote in a 7-to-2 ruling.

When the actual findings of the special trial judge were made public, the taxpayers were vindicated, said Pildes, the lawyer who represented the plaintiffs.

"That case sent a signal to the Tax Court - if you're going to be a court, you have to act like a court and be transparent in decision making," said Norman Williams, a law professor at Willamette University who follows the court.

(Additional reporting by Lynnley Browning; editing by Kevin Drawbaugh, Howard Goller and Andre Grenon)