Document ID: ./input/supremecourt_opinions/opinions/boundvolumes/524bv.pdf
Page Number: 206

524US1

Unit: $U81

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Cite as: 524 U. S. 156 (1998)

161

Opinion of the Court

outweighed the inconvenience caused by the lack of check-
writing capabilities.

In 1980, Congress authorized the creation of Negotiable
Order of Withdrawal (NOW) accounts, which for the ﬁrst
time permitted federally insured banks to pay interest on
§ 303, 94 Stat. 146, as amended, 12 U. S. C.
demand deposits.
§ 1832. NOW accounts are permitted only for deposits that
“consist solely of funds in which the entire beneﬁcial inter-
est is held by one or more individuals or by an organization
which is operated primarily for religious, philanthropic, char-
itable, educational, political, or other similar purposes and
which is not operated for proﬁt.”
§ 1832(a)(2). For-proﬁt
corporations and partnerships are thus prohibited from earn-
ing interest on demand deposits. See ibid. However, in-
terpreting § 1832(a), the Federal Reserve Board has con-
cluded that corporate funds may be held in NOW accounts
if the funds are held in trust pursuant to a program under
which charitable organizations have “the exclusive right
to the interest.” Letter from Federal Reserve Board Gen-
eral Counsel Michael Bradﬁeld to Donald Middlebrooks (Oct.
15, 1981), reprinted in Middlebrooks, The Interest on Trust
Accounts Program: Mechanics of its Operation, 56 Fla. B. J.
115, 117 (Feb. 1982) (hereinafter Federal Reserve’s IOLTA
Letter).2

Beginning with Florida in 1981, a number of States moved
quickly to capitalize on this change in the banking regula-
tions by establishing IOLTA programs. Texas followed suit
in 1984.
Its Supreme Court issued an order, now codiﬁed as
Article XI of the State Bar Rules, providing that an attorney
who receives client funds that are “nominal in amount or are
reasonably anticipated to be held for a short period of time”
must place such funds in a separate, interest-bearing NOW
account (an IOLTA account). Tex. State Bar Rule, Art. XI,

2 We express no opinion as to the reasonableness of this interpretation
of § 1832(a). See Chevron U. S. A. Inc. v. Natural Resources Defense
Council, Inc., 467 U. S. 837, 844 (1984).