The Mixed Raster Content (MRC) ITU document compression standard (T.44) specifies a multilayer decomposition model for compound documents into two contone image layers and a binary mask layer for independent compression. While T.44 does not recommend any procedure for decomposition, it does specify a set of allowable layer codecs to be used after decomposition. While T.44 only allows older standardized codecs such as JPEG/JBIG/G3/G4, higher compression could be achieved if newer contone and bi-level compression standards such as JPEG2000/JBIG2 were used instead. In this paper, we present a MRC compound document codec using JPEG2000 as the image layer codec and a layer decomposition scheme matched to JPEG2000 for efficient compression. JBIG still codes the mask. Noise removal routines enable efficient coding of scanned documents along with electronic ones. Resolution scalable decoding features are also implemented. The segmentation mask obtained from layer decomposition, serves to sepa...