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Unit: $U81

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PHILLIPS v. WASHINGTON LEGAL FOUNDATION

Opinion of the Court

§ 5(A); Rules 4, 7 of the Texas Rules Governing the Opera-
tion of the Texas Equal Access to Justice Program. Client
funds are considered “nominal in amount” or “held for a
short period of time” if the attorney holding the funds deter-
mines that

“such funds, considered without regard to funds of other
clients which may be held by the attorney, law ﬁrm or
professional corporation, could not reasonably be ex-
pected to earn interest for the client or if the interest
which might be earned on such funds is not likely to be
sufﬁcient to offset the cost of establishing and maintain-
ing the account, service charges, accounting costs and
tax reporting costs which would be incurred in attempt-
ing to obtain the interest on such funds for the client.”
Texas IOLTA Rule 6.

Interest earned by the funds deposited in an IOLTA ac-
count is to be paid to the Texas Equal Access to Justice Foun-
dation (TEAJF), a nonproﬁt corporation established by the
Supreme Court of Texas. Tex. State Bar Rule, Art. XI,
§§ 3, 4; Texas IOLTA Rule 9(a). TEAJF distributes the
funds to nonproﬁt organizations that “have as a primary pur-
pose the delivery of legal services to low income persons.”
Texas IOLTA Rule 10. The Internal Revenue Service does
not attribute the interest generated by an IOLTA account to
the individual clients for federal income tax purposes so long
as the client has no control over the decision whether to place
the funds in the IOLTA account and does not designate who
will receive the interest generated by the account. See Rev.
Rul. 81–209, 1981–2 Cum. Bull. 16; Rev. Rul. 87–2, 1987–1
Cum. Bull. 18.

Respondents are the Washington Legal Foundation (WLF),
Michael Mazzone, and William Summers. WLF is a public-
interest law and policy center with members in the State
of Texas who are opposed to the Texas IOLTA program.
App. 26. Mazzone is an attorney admitted to practice in