In the Department of Revenue of Kentucky vs. Davis, the court must decide if Kentucky can give tax breaks on interest from municipal bonds sold within its borders, while taxing interest earned on bonds sold in other states.

Justice David Souter disagreed with a characterization by Eric Brunstad, a lawyer for George and Catherine Davis -- Kentucky residents who hold out-of-state bonds -- that municipal bonds, like other securities, were traded like commodities.

"Yes, but it's not taxing an out-of-state commodity in the sense of a commodity which is manufactured or produced out-of-state," Souter said.

Still, Justice Anthony Kennedy said the tax breaks go against the commerce clause of the U.S. Constitution.

"All states want to protect their residents and make it look like they're doing something for their residents. And that's exactly the purpose of commerce clause prohibition against explicit discrimination, which is what this is," he said.

The justices also plumbed the strength of the municipal bond market. Justice Souter noted it was "enormous" and the Supreme Court did not know what would happen if it were interrupted.

The justices appeared to support the pandering provision of a 2003 federal law that makes it a crime to promote, distribute or solicit material in a way intended to cause others to believe it contains child pornography.

They were hearing arguments in a case brought by the Bush administration urging them to uphold the law, after a U.S. appeals court struck down that provision on the grounds the government cannot suppress lawful free speech.

Bush administration lawyer Paul Clement argued that the law does not illegally infringe on free-speech or other rights guaranteed by the U.S. Constitution.

He said the law does not inhibit legitimate creative expression, and drew a distinction between mainstream movies and illegal child pornography.

"If you're taking a movie like 'Traffic' or 'American Beauty', which is not child pornography, and you're simply truthfully promoting it, you have nothing to worry about with this statute," Clement told the justices.

"Traffic" has a scene with the high-school daughter of the nation's drug czar appearing to have sex with a drug dealer; "Lolita" portrayed a middle-aged man's obsession with a young girl; "Titanic" depicted a love affair by a young couple on a doomed ship; and "American Beauty" involved a 42-year-old man's attraction to his daughter's best friend.

Chief Justice John Roberts asked the attorney who is challenging the law about the government's distinction between legitimate films and illegal child pornography.

"Not many lawyers of color end up in the Supreme Court and most of those who do are in the area of civil rights litigation," said Robert Harris, who argued once before the court in his career as a lawyer for Pacific Gas and Electric Co.

"We don't have as many of those cases as we used to so clearly that opportunity is not there for many African-American lawyers," said Harris, who is black.

Although the Supreme Court does not keep racial breakdowns of lawyers who argue before the justices, records indicate that the first black to appear before the justices was J. Alexander Chiles in 1910.

Long before he became a judge, Thurgood Marshall regularly argued civil rights cases at the Supreme Court in the 1940s and 1950s. Marshall was a rarity in those years of segregation, a black lawyer in an otherwise white world.

Under President Lyndon Johnson, he was the first black to be solicitor general, the Justice Department's top Supreme Court lawyer. Since then, two other black men — Days and Wade McCree — have held that job.

Two black men, Marshall and Clarence Thomas, have been Supreme Court justices.

Several factors account for the dearth of minorities at the court: continuing problems in recruiting and retaining blacks and other minorities at the top law firms; the rise of a small group of lawyers who focus on Supreme Court cases; the decline in civil rights cases that make it to the high court; and the court's dwindling caseload.

"It breaks my heart. It's the minority pipeline, the dwindling caseload, all of these things," Days told The Associated Press.

Days said he, too, has trouble attracting black lawyers to his firm. He recounted how he lost out to a philanthropic foundation over the services of a former clerk for a Supreme Court justice.

Two recent studies point up the trends. Of 46 Washington law offices with more than 100 attorneys, 28 reported that less than 3 percent of their partners are black. Seven firms had no black partners, according to a report by Building a Better Legal Profession, a group of law students who compiled data provided by the firms.

Morrison & Foerster's Washington office, where Days works, has just two black partners, although that placed the firm fourth in the Washington rankings at 5.6 percent. Blacks are better represented among associates at these firms.

Two-thirds of minority lawyers leave their firms within the first four years of practice, generally too short a period in which to make partner, the American Bar Association has said.

Nationally, about 5 percent of law firm partners are black, a number that has crept higher over the past 30 years. Partners typically share in firms' profits or losses, while associates are employees.

At the same time, a fairly small circle of lawyers controls more and more of the court's caseload even as the number of cases the justices accept is going down, Georgetown University law professor Richard Lazarus argues in a study.

This "increasing domination is evidenced by the rising percentage of oral advocates appearing more than once within a single term, a feat most typically accomplished only by attorneys within the Solicitor General's Office," Lazarus said. The study will be published soon in the Georgetown University Law Journal.

A case in point is Carter Phillips, managing partner of the Sidley Austin firm's Washington office. Phillips has argued 54 cases at the court in his career, more than all but three lawyers who continue to practice. Next month he will argue two cases in one week.

With his 24th oral argument approaching, Days seems to be the only active black lawyer with a high number of cases before the Supreme Court, Lazarus said.

The rise of an elite corps of Supreme Court lawyers rankles others in the profession who say the court regulars solicit their clients once the justices decide to hear a case.

"It perpetuates a little club and denies a lot of lawyers the opportunity to present their case, and it is their case, to the highest court in the land," said Gary LaFayette, a black lawyer from San Francisco who won his only argument in 2002 on behalf of the Oakland Housing Authority.

Harris, who recently retired as a PG&E vice president, said his moment of glory at the court was "highly unusual and not likely to be repeated." He won the case in which the utility argued that it should not be forced to allow consumer groups to put messages in monthly billing envelopes.

Even more than 20 years ago, he said, "You can imagine that it was not a foregone conclusion that I, a young African-American lawyer, would argue the case."

Rhode Island plans to use information from the Internal Revenue Service to track down employers who are failing to properly pay state unemployment insurance taxes.

The Rhode Island Department of Labor and Training has signed an agreement with the IRS to share information that will allow the state agency to identify businesses that should be paying into the state’s unemployment insurance trust fund but are not, said Raymond A. Filippone, who heads the state’s unemployment insurance program.

“It is very important for us. I think it’s a step in the right direction,” Filippone said in a telephone interview yesterday from Nashua, N.H., where he is attending a conference for state unemployment insurance directors.

Based on a statement issued by the state agency yesterday, and on comments by Filippone, the new agreement’s focus would include the following situations in which state unemployment insurance taxes are not being properly paid:

•A business may be registered with the federal government, but not with the state government.

•A company may be registered at the federal level as a business with employees, but at the state level as a sole proprietorship without employees.

•An employer may misclassify employees as independent contractors.

The agreement will help the state agency identify such employers and notify them about the requirement to pay the tax, Filippone said.

Under the current system, businesses that fail to properly report their situations and pay the required unemployment insurance taxes are not caught until after employees file for unemployment insurance benefits.

With the IRS agreement, “Now we can catch them before an employee contacts us with a claim,” Filippone said in a statement.

Adelita Orefice, director of the state Department of Labor and Training, said in a statement that, “Prevention, detection and elimination of abuse in the unemployment insurance program are top priorities for our department. We want to ensure that employers are paying only their fair share of employment taxes and are not subsidizing any dishonest employers.”

The state does not have an estimate of how much in additional unemployment tax revenue it might collect as a result of the agreement, Filippone said in the phone interview.

Nevertheless, he said it is bound to result in some additional collections. This, in turn, could benefit existing employers who currently pay unemployment taxes — they might wind up paying less in tax, or pay less of an increase that would otherwise be due, he said.

If a business has employees, “It has to pay . . . unemployment insurance tax,” said Patricia A. Thompson, former president of the Rhode Island Society of Certified Public Accountants.

The unemployment insurance program is run through a federal-state partnership and is designed to partially replace lost earnings of individuals who become unemployed through no fault of their own. It is also intended to stabilize the economy during downturns.

The program has been a key component in ensuring the financial security of America’s work force for more than 70 years, according to a report issued last month by the U.S. Government Accountability Office (GAO), the investigative arm of Congress.

For the year ended Sept. 30, 2006, the unemployment insurance program covered about 130 million workers and paid about $30 billion in benefits to about 7 million workers nationwide who lost their jobs, the GAO report said.

The program is paid for through state and federal employment taxes. In general, the taxes that employers pay are deposited into an unemployment insurance trust fund.

From that fund, the state pays benefits to workers who lose their jobs and qualify for benefits. The fund has a balance of about $192 million, Filippone said.

Broadly speaking, the tax that an employer pays is based, in part, on how many people have collected unemployment benefits in the past based on that employer’s account, said Thompson, tax partner with Piccerelli Gilstein & Co. LLP, a CPA firm in Providence.

Rhode Island is one of 29 states that will sign a memorandum of understanding with the IRS on Nov. 6. Besides Rhode Island, other New England states in the agreement include Massachusetts and Maine, Filippone said.

A spokesman for the IRS was not immediately available to comment about the agreement. Thompson said that the IRS could benefit from the information-sharing agreement in a number of ways.

For example, if an employer misclassifies a worker as an independent contractor, the employer does not pay federal payroll taxes that would otherwise be due, such as unemployment tax, Social Security tax and Medicare tax.

If the agreement uncovers such situations, the IRS could seek payment from the employers.

That means that as of Jan. 1, Oregon will join eight other states that have approved spousal rights in some form for same-sex couples: Connecticut, Vermont, New Hampshire, New Jersey, Maine, California, Washington and Hawaii. Massachusetts is the only state that allows gay couples to marry.

Later this week, word is expected on whether opponents gathered enough signatures to block a gay-rights law that would ban discrimination based on sexual orientation — though that effort, as well, appears to be lacking sufficient signatures.

Social-conservative and church groups mounted the signature-gathering drive after the two gay-rights laws were approved by the Democratic-controlled Oregon Legislature with strong backing from Gov. Ted Kulongoski, also a Democrat.

The state's largest gay-rights group called Monday's announcement a "proud day for Oregon."

"In refusing to sign these petitions, Oregonians showed that they aren't interested in rolling back our anti-discrimination laws," said John Hummel, executive director of Basic Rights Oregon.

Sponsors of the referral effort had conceded in recent days that they probably hadn't gotten enough signatures. But they vowed to take another avenue to try to derail the laws — an initiative effort to repeal the laws outright. They would have until next July to collect 82,000 valid signatures to repeal each of the two laws.