THE COURTS
Title 204—JUDICIAL SYSTEM GENERAL PROVISIONS
PART V. PROFESSIONAL ETHICS AND CONDUCT
[ 204 PA. CODE CH. 81 ]
Amendment of IOLTA Board Regulations; No. 153 Disciplinary Rules Doc.
[47 Pa.B. 4802]
[Saturday, August 19, 2017]
Order Per Curiam
And Now, this 7th day of August, 2017, it is Ordered pursuant to Article V, Section 10 of the Constitution of Pennsylvania that the Regulations for the Pennsylvania Interest on Lawyers Trust Account Board in Subchapter B (Rules for Interest on Lawyers Trust Accounts) and Subchapter C (Minor Judiciary Interest on Trust Accounts) are amended in the following form.
To the extent that notice of proposed rulemaking would otherwise be required by Pa.R.J.A. No. 103, the immediate promulgation of the amendments is found to be in the interests of justice and efficient administration.
This Order shall be processed in accordance with Pa.R.J.A. No. 103(b), and the amendments herein shall be effective immediately.
Annex A
TITLE 204. JUDICIAL SYSTEM GENERAL PROVISIONS
PART V. PROFESSIONAL ETHICS AND CONDUCT
Subpart A. PROFESSIONAL RESPONSIBILITY
CHAPTER 81. RULES OF PROFESSIONAL CONDUCT
Subchapter B. RULES FOR INTEREST ON LAWYERS TRUST ACCOUNTS § 81.101. Definitions.
The following words and phrases when used in these [regulations] Regulations shall have the meanings given to them in this section unless the context clearly indicates otherwise:
Comparability Guidance.—Guidance developed and updated from time to time by the IOLTA Board which addresses how Eligible Institutions should determine the comparable interest or dividend rate to be applied to IOLTA Accounts. This guidance is made available online at www.paiolta.org and may also be obtained by writing to the IOLTA Board at P.O. Box 62445, Harrisburg, PA 17106-2445.
Eligible Institution.—An Eligible Institution is a Financial Institution which has been approved as a depository of Trust Accounts pursuant to Pa.R.D.E. 221(h).
* * * * * [Good faith] Good Faith.—Honesty in fact in the conduct or transaction concerned.
Interest on [Lawyer] Lawyers Trust Account (IOLTA) Account.—An IOLTA Account is an [income producing] income-producing Trust Account from which funds may be withdrawn upon request as soon as permitted by law. Qualified Funds are to be held or deposited in an IOLTA Account.
* * * * * Non-IOLTA Account.—A Non-IOLTA Account is an [income producing] income-producing Trust Account from which funds may be withdrawn upon request as soon as permitted by law in which a lawyer deposits Rule 1.15 Funds. Only Nonqualified Funds are to be held or deposited in a Non-IOLTA Account. A Non-IOLTA Account shall be established only as:
* * * * * § 81.105. Eligible Institutions.
* * * * * (b) In order to be approved as an Eligible Institution, the Financial Institution must comply [not only] with applicable provisions of Pa.R.P.C. 1.15, [but also] Pa.R.D.E. 221, and the Regulations contained in this subchapter.
* * * * * (e) Acceptable account title: The lawyer must specifically identify an IOLTA [account] Account with the words ''IOLTA Trust Account'' or ''IOLTA Escrow Account'' and the name of the lawyer or the law firm who maintains the account in the main title of the account.
(f) Acceptable title on checks/deposit slips: The word ''IOLTA'' need not be placed on checks or deposit slips.
(g) Provision of Information[.]: The Eligible Institution must provide the following information to the IOLTA Board and to the lawyer who maintains the IOLTA Account at the time of each remittance:
* * * * * § 81.106. Income on IOLTA Accounts.
(a) The rate of interest or dividend paid on IOLTA Accounts shall be not less than the highest rate of interest or dividend generally available from the Eligible Institution to non-IOLTA customers when the IOLTA Account meets the same minimum balance or other account eligibility qualifications.
(b) An Eligible Institution shall be deemed to have satisfied the requirements of subsection (a) of this regulation only if the Eligible Institution is in compliance with the Comparability Guidance published by the IOLTA Board from time to time.
(c) [Each Eligible Institution shall file with the IOLTA Board a Compliance Certification Form, certifying compliance with Comparability Guidance in effect from time to time. The Eligible Institution shall be responsible for filing a new Compliance Certification Form when information previously provided to the IOLTA Board becomes inaccurate.] Each Eligible Institution shall submit to the IOLTA Board for review and approval a Compliance Certification Form, which identifies the rate of interest or dividend to be paid on IOLTA Accounts and certifies the Eligible Institution's compliance with the IOLTA Regulations and Comparability Guidance. Prior to changing a rate of interest or dividend that was previously approved by the IOLTA Board, or when the rate of interest or dividend for comparable products exceeds the rate listed in the Eligible Institution's most recently approved Compliance Certification Form, the Eligible Institution shall submit a new Compliance Certification Form to the IOLTA Board for review and approval.
(d) Remittance of income: All income earned under the IOLTA program must be remitted to the IOLTA Board at least every quarter. Eligible Institutions shall honor requests by the IOLTA Board to recover income that was not remitted to the IOLTA Board, in accordance with the Eligible Institution's most recently approved Compliance Certification Form, during the twelve months preceding the IOLTA Board's request.
§ 81.112. Refunds.
(a) The IOLTA Board may return income paid to the IOLTA Board under certain circumstances. [If] For example, if a lawyer mistakenly places Nonqualified Funds in an IOLTA Account, or if the lawyer reasonably believed that Rule 1.15 Funds were Qualified Funds, but the Rule 1.15 Funds were in fact not Qualified Funds, then the lawyer may apply for a refund of income paid to the IOLTA Board. Additionally, if an Eligible Institution erroneously remits to the IOLTA Board income that should have been properly directed to a different jurisdiction's interest on lawyers trust account program, then the impacted lawyer, financial institution, or other jurisdiction's interest on lawyers trust account program may apply for a refund of the income paid to the IOLTA Board.
(b) The following guidelines apply to [applications for return of income] requests for a refund:
(i) [The lawyer must make the application in writing on firm letterhead.] All requests must be made on the letterhead of the party making the request (i.e., the impacted lawyer, financial institution, or other jurisdiction's interest on lawyers trust account program), and all requests must set forth in reasonable detail the basis for the requested refund.
(ii) [The application] Requests must be accompanied by verification [from] of the income paid for which a refund is sought. Verification must be made by the Eligible Institution [in] at which the IOLTA Account is maintained [of the income earned on the Rule 1.15 Funds for which a refund is sought]. As needed for auditing purposes, the IOLTA Board may request additional documentation.
(iii) [The application must be received by the IOLTA Board within six months after the Rule 1.15 Funds have been disbursed from the IOLTA Account.] The IOLTA Board will only consider requests where the income to be refunded was received by the IOLTA Board during the twelve-month period prior to the IOLTA Board receiving the written request for a refund.
(iv) [The refund will be remitted to the lawyer for his/her distribution to the Third Party Owner. The IOLTA Board will issue an IRS (Internal Revenue Service) form 1099 to the lawyer who, in turn, is responsible for issuing an IRS form 1099 to the Third Party Owner.] Refunds will be remitted through the Eligible Institution that transmitted the income to the IOLTA Board unless an alternative method is requested and agreed to by the IOLTA Board.
(v) If the Eligible Institution has imposed a service charge with respect to the [deposit] IOLTA Account, only the net amount of income paid to the IOLTA Board (reduced by applicable service charges) will be refunded.
(vi) The IOLTA Board may impose and deduct a processing charge from the refund.
Appendix A
The Pennsylvania Interest on Lawyers Trust Account Board
Promulgated by the Pennsylvania Interest on Lawyers Trust Account Board and Approved by the Supreme Court of Pennsylvania These [regulations] Regulations are to be read and applied in connection with the Pennsylvania Rules of Professional Conduct. Nothing in these [regulations] Regulations shall be construed to relieve a lawyer of any provision of the Pennsylvania Rules of Professional Conduct. Where these [regulations] Regulations contain directives pertaining to the Interest on Lawyers Trust Account program which are more specific than those set forth in the Pennsylvania Rules of Professional Conduct, the provisions of these [regulations] Regulations shall control.
Questions and Answers Concerning Pennsylvania IOLTA STATEMENT OF PURPOSE
The following is a representation of the questions most frequently asked of the Pennsylvania Interest on Lawyers Trust Account Board (the ''IOLTA Board'') and the answers given. Some of the answers paraphrase the actual Rules of Professional Conduct or Regulations of the IOLTA Board. Reference should be made to the Rules and to the Regulations when appropriate.
What is the Basic Concept of IOLTA?
Clients and third persons frequently transfer monies to lawyers to hold. Rule 1.15 of the Pennsylvania Rules of Professional Conduct generally requires the lawyer to deposit all monies of clients and third persons (''Rule 1.15 Funds'') in a Trust Account. When the amount is large or if the funds will be held for an extended period of time, lawyers invest them for the benefit of the owner. These funds are known as Nonqualified Funds. But when the funds are nominal in amount or expected to be held for a short time, they cannot practically be invested to benefit the owner of the funds. These funds are Qualified Funds.
Rule 1.15 of the Pennsylvania Rules of Professional Conduct requires a lawyer to deposit Qualified Funds in a particular type of Trust Account: an [income producing] income-producing IOLTA Account. The result is that funds that would otherwise earn no income can be put to constructive use.
The lawyer's Eligible Institution transfers the income earned on IOLTA Accounts (''IOLTA Funds''), no less frequently than quarterly, to the IOLTA Board. The IOLTA Board distributes the IOLTA Funds for the delivery of civil legal assistance to the poor and disadvantaged, educational legal clinical programs and internships administered by law schools, the administration of justice, and for the administration and development of the IOLTA program.
How do lawyers comply with the IOLTA requirements of Rule 1.15?
IOLTA Accounts may be maintained only at Eligible Institutions approved by the Supreme Court of Pennsylvania.
An ''Enrollment Form for Lawyers and Law Firms'' can be used to direct the Eligible Institution to open or convert one or more of the lawyer's Trust Account(s) to [income producing] income-producing IOLTA Accounts. Submit the second copy of the enrollment form, along with a list of all the lawyers who use the IOLTA Account in the regular course of their practice, to the IOLTA Board.
* * * * * Are any exemptions from IOLTA participation allowed?
Yes, a lawyer may apply for an exemption from the requirement that all Qualified Funds be placed in an IOLTA Account. However, the exemption will be granted by the IOLTA Board only for one of the reasons specified in Rule 1.15. Write to the IOLTA Board if you believe any of the permitted exemptions apply. Exemptions will be granted if:
[(A) the nature of the lawyer's practice does not require the routine maintenance of a Trust Account in Pennsylvania;
(B) the establishment of an IOLTA Account would work an undue hardship on the lawyer or would be extremely impractical, based either on the geographical distance between the lawyer's principal office and the closest Eligible Institution or on other compelling and necessitous factors;
(C) the lawyer's historical annual Trust Account experience, based on information from the Eligible Institution in which the lawyer deposits Rule 1.15 Funds, demonstrates the service charges on the Trust Account would significantly and routinely exceed any income generated.]
(i) Low balance account: If the average daily balance of your current IOLTA Account, as measured over twelve months, is less than $5,000, you may request an exemption.
(ii) Account service charges routinely exceed income: If the bank service charges assessed on your current IOLTA Account routinely exceed the income earned, you may request an exemption.
(iii) Extreme impracticality or undue hardship: Under limited circumstances it would be unduly burdensome for a lawyer to maintain a Trust Account as an IOLTA Account. An example includes the lack of an Eligible Institution that offers IOLTA Accounts in the lawyer's geographical location.
(iv) Other compelling and necessitous reasons: There may be compelling and necessitous reasons justifying an exemption from the requirement that the lawyer maintain a Trust Account as an IOLTA Account. A lawyer who demonstrates a compelling and necessitous reason for not complying with the IOLTA Board Regulations may request an exemption. A philosophical objection to the IOLTA Program or the IOLTA Board Regulations does not constitute a compelling and necessitous reason for an exemption.
What funds are to be placed in IOLTA Accounts?
Qualified Funds are monies of a client or third person received by a lawyer, that in the [good faith] Good Faith judgment of the lawyer, are nominal in amount or which the lawyer reasonably expects to be held for such a short period of time that sufficient income will not be generated to justify the expense of earning income to benefit the client or third person.
A lawyer will not be liable for damages or held to have breached his or her professional responsibility because monies are deposited in an IOLTA Account pursuant to the lawyer's judgment in [good faith] Good Faith that the monies are Qualified Funds.
* * * * * How does the IOLTA program affect financial institutions?
Financial [institutions] Institutions are not mandated to participate in IOLTA. However, [financial institutions] Financial Institutions that wish to offer Trust Accounts into which lawyers can deposit Rule 1.15 Funds (whether Qualified or Nonqualified Funds) must be approved by the Supreme Court of Pennsylvania. A list of Eligible Institutions can be obtained from the Disciplinary Board.
* * * * * What if a lawyer mistakenly deposits funds which are not Qualified Funds into an IOLTA Account?
As long as the lawyer used [good faith] Good Faith judgment, the lawyer will not be liable in damages for placing Nonqualified Funds into an IOLTA Account, nor will the lawyer be held to have breached any fiduciary duty or responsibility because monies were deposited into an IOLTA Account. Additionally, if timely requested, a refund of income earned on an IOLTA Account and received by the IOLTA Board attributable to the mistaken deposit, net of an administrative charge, will be [made to the lawyer for distribution to the Third Party Owner] returned to the remitting Eligible Institution, unless an alternative method is approved by the IOLTA Board.
May all lawyers in a law firm use the same IOLTA Account?
Yes. If a law firm established an IOLTA Account, each lawyer who deposits all Qualified Funds in that account will be deemed to be in compliance with IOLTA. This account must be set up according to IOLTA [regulations] Regulations. Each lawyer is ultimately responsible to ensure that he or she is in compliance with IOLTA.
* * * * * Must a lawyer who receives funds of clients or third persons other than in connection with a client-lawyer relationship deposit those funds in a Trust Account, including an IOLTA Account?
* * * * * Rule of Professional Conduct 5.7 provides that a lawyer is subject to the Pennsylvania Rules of Professional Conduct with respect to the provision of both legal and nonlegal services if a lawyer provides nonlegal services that are not distinct from legal services. Rule of Professional Conduct 5.7(e) defines ''nonlegal services'' as ''services that might reasonably be performed in conjunction with and in substance are related to the provision of legal services, and that are not prohibited as unauthorized practice of law when provided by a [non lawyer] nonlawyer.'' Even if the nonlegal services are distinct from legal services, the lawyer is still subject to the Rules of Professional Conduct: (i) if the lawyer knows or reasonably should know that the recipient of the services might believe that the recipient is receiving the protection of a client-lawyer relationship, or (ii) if the lawyer is an owner, controlling party, employee, agent, or is otherwise affiliated with an entity providing nonlegal services and the lawyer knows or reasonably should know that the recipient of the service might believe that the recipient is receiving the protection of a client-lawyer relationship. In each of these cases, the lawyer will be subject to the obligations of Rule 1.15 of the Pennsylvania Rules of Professional Conduct and these Regulations as if a client-lawyer relationship existed with the recipient of the services. The lawyer then must deposit all funds of the client or a third person which are received in connection with that relationship in a Trust Account, regardless of whether the funds resulted from legal or nonlegal services. If the funds are Qualified Funds, those funds are to be placed in an IOLTA Account.
* * * * *
Subchapter C. MINOR JUDICIARY INTEREST ON TRUST ACCOUNTS
Preamble: Statement of Purpose The Minor Judiciary Interest on Trust Accounts Program (the ''MJ-IOTA Program'') was established by Order of the Supreme Court of Pennsylvania dated August 3, 2004. The judges and justices of all courts created pursuant to Article V, Sections 6 and 7 of the Pennsylvania Constitution are subject to MJ-IOTA. These include Magisterial District Judges, judges of the Philadelphia Municipal Court, judges of the [Traffic Court of Philadelphia and judges of the Pittsburgh Magistrates] Philadelphia Municipal Court, Traffic Division (assuming the jurisdiction and functions of the former Traffic Court of Philadelphia) and judges of the Pittsburgh Municipal Court (judicial unit assigned matters that were formerly within the jurisdiction of the Pittsburgh Magistrates).
The MJ-IOTA Program generates income where formerly there was none. This income aids the citizens of the Commonwealth of Pennsylvania. [Interest] Income earned on MJ-IOTA [accounts] Accounts may be used only for educational legal clinical programs and internships administered by law schools located in Pennsylvania, delivery of civil legal assistance to the poor and disadvantaged in Pennsylvania by non-profit corporations described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, and for the administration and development of the MJ-IOTA [program] Program.
§ 81.301. Minor Judiciary Interest on Trust Accounts Program.
(a) [All qualified funds received by a judge, magistrate or district justice (hereinafter judicial official) in the administration of his/her duties shall be placed in a Minor Judiciary Interest on Trust Account (MJ-IOTA) Account. This rule does not change existing practices with respect to funds (other than qualified funds) received by a judicial official in the administration of his/her duties.] All Qualified Funds received by a judge, magistrate or Magisterial District Judge (hereinafter Judicial Official) in the administration of his/her duties shall be placed in a Minor Judiciary Interest on Trust Account (hereinafter MJ-IOTA Account) as defined in paragraph (c) below; such Qualified Funds placed in MJ-IOTA Accounts are referred to hereinafter as MJ-IOTA Funds. This rule does not change existing practices with respect to funds (other than Qualified Funds) received by a Judicial Official in the administration of his/her duties.
(b) [Qualified funds are monies received by a judicial official in a custodial capacity that, in the good faith judgment of the judicial official] Qualified Funds are monies received by a Judicial Official in a Custodial Capacity that, in the Good Faith judgment of the Judicial Official, are nominal in amount or are reasonably expected to be held for such a short period of time that sufficient [interest] income will not be generated to justify the expense of earning [interest] income to benefit the owner of the funds.
(c) [A MJ-IOTA is an unsegregated interest-bearing account with a depository institution for the deposit of qualified funds maintained by a judicial official.] An MJ-IOTA Account is an unsegregated interest-bearing account with a Depository Institution for the deposit of Qualified Funds maintained by a Judicial Official. An account shall not be considered an MJ-IOTA Account unless the [depository institution] Depository Institution at which the account is maintained shall:
(1) Remit monthly any [interest] income earned on the account to the [IOLTA Board] Interest on Lawyers Trust Account Board of the Supreme Court of Pennsylvania (hereinafter the IOLTA Board), or if that is not possible, remit the [interest] income earned at least quarterly.
(2) Transmit to the IOLTA Board with each remittance a statement showing [at least] not less than the following information: the name of the account[,]; the account number[,]; the service charges [or] and/or fees deducted, if any[,]; the amount of [interest] income remitted from the account[,]; and if available, the average daily collected balance in the account for the period reported.
(3) [Compute the rate of interest paid on MJ-IOTA Accounts at no less than the highest rate of interest generally available from the depository institution to non-MJ-IOTA depositors when MJ-IOTA Accounts meet or exceed the same minimum balance or other account eligibility qualifications as other non-MJ-IOTA depositors. In no event shall the rate of interest payable on MJ-IOTA accounts be less than the rate paid by the depository institution on negotiable order of withdrawal accounts or super negotiable order of withdrawal accounts.] Compute the rate of interest or dividend paid on an MJ-IOTA Account at no less than the highest rate of interest or dividend generally available from the Depository Institution to non-MJ-IOTA customers when the MJ-IOTA Account meets the same minimum balance or other account eligibility qualifications.
(4) [The accounts must be collateralized by the assets of the banks in accordance with Act 72 of 1971.] Collateralize the account with the assets of the Depository Institution in accordance with current practice and Act 72 of 1971.
(d) The MJ-IOTA Program shall be administered by the IOLTA Board. Disbursement and allocation of MJ-IOTA [funds] Funds shall be subject to the prior approval of the Supreme Court of Pennsylvania (hereinafter the Court). A copy of the IOLTA Board's proposed annual budget will be provided to the Court, designating the uses to which MJ-IOTA [Funds] funds are recommended. The IOLTA Board shall submit to the [Supreme] Court a copy of its audited statement of financial affairs, clearly setting forth in detail all funds previously approved for disbursement under the MJ-IOTA Program.
[Interest] Income earned on MJ-IOTA Accounts may be used only for the following purposes:
(1) educational legal clinical programs and internships administered by law schools located in Pennsylvania, with emphasis given to providing grants to these programs such that the total funding they receive from the IOLTA Board is relatively stable and reasonably predictable from year to year in accordance with the allocation plan approved by the Court:
(2) delivery of civil legal assistance to the poor and disadvantaged in Pennsylvania by non-profit corporations described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended; and
(3) administration and development of the MJ-IOTA [program] Program in Pennsylvania.
(e) The IOLTA Board shall hold the beneficial interest in MJ-IOTA Funds. Monies received in the MJ-IOTA [program] Program are not state or federal funds and are not subject to Article VI of the Act of April 9, 1929 (P.L. 177, No. 175) known as the Administrative Code of 1929, or the Act of June 29, 1976 (P.L. 469, No. 117).
§ 81.302. Definitions.
The following words and phrases when used in these [regulations] Regulations shall have the meanings given to them in this section unless the context clearly indicates otherwise:
AOPC. The Administrative Office of Pennsylvania Courts.
AOPC Magisterial District Judge Case Reporting System. The computerized docket activity tracking and accounting system developed by the AOPC for use by the Magisterial District Judges throughout the state.
Beneficial Owner. The third party whose funds are in the custody of a [judicial official] Judicial Official.
[Board. The Pennsylvania Interest on Lawyer Trust Account Board.]
Comparability Guidance. Guidance developed and updated from time to time by the IOLTA Board which addresses how Depository Institutions should determine the comparable interest or dividend rate to be applied to MJ-IOTA Accounts. This guidance is made available online at www.paiolta.org and may also be obtained by writing to the IOLTA Board at P.O. Box 62445, Harrisburg, PA 17106-2445.
Custodial Account. [Any account maintained in a depository institution in which or with respect to which a judicial official holds the funds of a beneficial owner.] Any account maintained in a Depository Institution in which or with respect to which a Judicial Official holds the funds of a Beneficial Owner.
Custodial Capacity. [The capacity in which the judicial official holds funds of a beneficial owner received by a judicial official in his or her capacity as a judicial official.] The capacity in which the Judicial Official holds funds of a Beneficial Owner received by a Judicial Official in his or her capacity as a Judicial Official.
Custodial Funds. Funds, whether cash, check, money order, or other negotiable instrument, received by a [judicial official] Judicial Official in his or her capacity as a [judicial official] Judicial Official.
Depository Institution. [A financial institution in which a member of the minor judiciary holds funds of beneficial owners in a custodial account.] A financial institution in which a Judicial Official holds funds of Beneficial Owners in a Custodial Account.
Good Faith. Honesty in fact in the conduct or transaction concerned.
IOLTA Board. The Pennsylvania Interest on Lawyers Trust Account Board.
Judicial Official. Each judge and justice of all courts created pursuant to Article V, Sections 6 and 7 of the Pennsylvania Constitution are judicial officials. These include Magisterial District Judges, judges of the Philadelphia Municipal Court, judges of the [Traffic Court of Philadelphia and judges of the Pittsburgh Magistrates Court] Philadelphia Municipal Court, Traffic Division and judges of the Pittsburgh Municipal Court.
MJ-IOTA Account. [An un-segregated interest-bearing account with a depository institution for the deposit of qualified funds by a judicial official, the interest from which is beneficially owned by the Board.] An un-segregated income-producing account with a Depository Institution for the deposit of Qualified Funds by a Judicial Official, the income from which is beneficially owned by the IOLTA Board.
MJ-IOTA Order. The Order of the Supreme Court of Pennsylvania dated August 3, 2004 which established the Minor Judiciary Interest on Trust Account Program.
Qualified Funds. Funds, whether cash, check, money order, or other negotiable instrument received by a [judicial official] Judicial Official in his or her capacity as a [judicial official] Judicial Official which, in the [good faith] Good Faith judgment of the [judicial official] Judicial Official, are nominal in amount or are reasonably expected to be held for such a short period of time that sufficient [interest] income will not be generated to justify the expense of earning [interest to benefit the beneficial owner] income to benefit the Beneficial Owner of the funds.
Regulations. These regulations adopted by the IOLTA Board, and approved by the Supreme Court of Pennsylvania, as they may be amended from time to time.
§ 81.303. Scope.
The MJ-IOTA [program] Program applies to each [custodial account] Custodial Account maintained by, or on behalf of, a [judicial official] Judicial Official in the performance of his or her official duties.
§ 81.304. Custodial Funds.
(a) Custodial [funds] Funds must be deposited in a [custodial account] Custodial Account.
(b) [Qualified funds are custodial funds that, in the good faith judgment of the judicial official, are nominal in amount or are reasonably expected to be held for such a short period of time that sufficient interest income will not be generated to justify the expense of earning interest to benefit the beneficial owner of the funds. With few exceptions, custodial funds handled by judicial officials will be qualified funds.] Qualified Funds are Custodial Funds that, in the Good Faith judgment of the Judicial Official, are nominal in amount or are reasonably expected to be held for such a short period of time that sufficient income will not be generated to justify the expense of earning income to benefit the Beneficial Owner of the funds. With few exceptions, Custodial Funds handled by Judicial Officials will be Qualified Funds.
(c) [The judicial official, in the exercise of good faith judgment, should apply an economic benefits test to determine whether particular custodial funds are not qualified funds and hence the beneficial owner of the funds should receive interest on those funds.] The Judicial Official, in the exercise of Good Faith judgment, should apply an economic benefits test to determine whether particular Custodial Funds are not Qualified Funds and hence the Beneficial Owner of the funds should receive the income on those funds.
(1) If the anticipated cost of administering a segregated account for the benefit of the [beneficial owner] Beneficial Owner of the funds is more than the [interest] income expected to be generated on the funds, then the funds are [qualified funds] Qualified Funds.
(2) [Custodial funds that when considered alone are not large enough to earn interest for the beneficial owner thereof are qualified funds.] Custodial Funds that when considered alone are not large enough to earn income for the Beneficial Owner thereof are Qualified Funds.
(3) Funds which are not expected to be held for a sufficient time to provide [interest for the beneficial owner are qualified funds] income for the Beneficial Owner are Qualified Funds.
(d) Factors which should be used to determine whether [custodial funds are qualified funds] Custodial Funds are Qualified Funds include:
(1) the cost of establishing and maintaining separate account(s) benefiting [beneficial owners] Beneficial Owners;
(2) the account and bank service charges of the [depository institution] Depository Institution in which the account is maintained;
(3) the minimum deposit requirements of the [depository institution] Depository Institution in which the account is maintained;
(4) accounting fees incurred in connection with the funds;
(5) tax reporting requirement costs incurred in connection with the funds; and
(6) the length of time the funds are expected to be on deposit and the rate of interest or dividend that will be earned on the funds.
(e) Examples of [qualified funds] Qualified Funds include:
(1) funds collected which represent fines and costs that are awaiting payment to the appropriate governmental entity;
(2) funds collected which represent posting of collateral by individuals who plead not guilty to a charged offense, unless those funds are of such a magnitude that the costs of administering a separate account for those funds, including service charges and other charges, will be less than the [interest] income anticipated to be earned;
(3) funds collected which represent posting of bail by or on behalf of an individual awaiting a hearing, unless those funds are of such a magnitude that the costs of administering a separate account for those funds, including service charges and other charges, will be less than the [interest] income anticipated to be earned;
(4) funds collected which represent restitution to victims pending the payment of the funds to the victims; and
(5) funds collected which represent payment of filing fees and other costs pending payment to the appropriate persons or entities.
§ 81.305. Special Provisions Applicable to Custodial Accounts of Magisterial District Judges.
(a) Each [magisterial district judge] Magisterial District Judge must use the statewide computerized reporting system of the AOPC for reporting all transactions which occur through his or her [custodial account] Custodial Account. [As of the date of these regulations, the AOPC Magisterial District Judge case reporting system is incapable of handling more than one custodial account per magisterial district judge, meaning that each magisterial district judge may maintain only one custodial account.] As of the date of these Regulations, the AOPC Magisterial District Judge Case Reporting System is incapable of handling more than one Custodial Account per Magisterial District Judge, meaning that each Magisterial District Judge may maintain only one Custodial Account.
(b) [Custodial funds received by a magisterial district judge will generally be qualified funds.] Custodial Funds received by a Magisterial District Judge will generally be Qualified Funds. Magisterial District Judges, however, may determine that particular [custodial funds received are not, in fact, qualified funds] Custodial Funds received are not, in fact, Qualified Funds, applying the criteria set forth in § 81.304.
(c) Each [magisterial district judge] Magisterial District Judge is permitted to exercise his or her judgment as to whether [custodial funds received by that magisterial district judge are qualified funds] Custodial Funds received by that Magisterial District Judge are Qualified Funds. [If, in the good faith judgment of the magisterial district judge, custodial funds are not qualified funds, the magisterial district judge may request a refund of interest with respect to those custodial funds.] If, in the Good Faith judgment of the Magisterial District Judge, Custodial Funds are not Qualified Funds, the Magisterial District Judge may request a refund of income with respect to those Custodial Funds. See § 81.308—Refunds.
(d) [If, in the future, the AOPC magisterial district judge case reporting system permits handling of multiple custodial accounts for each magisterial district judge, the provisions of this section shall no longer apply, although magisterial district judges shall remain subject to the remaining provisions of these regulations.] If, in the future, the AOPC Magisterial District Judge Case Reporting System permits handling of multiple Custodial Accounts for each Magisterial District Judge, the provisions of this section shall no longer apply, although Magisterial District Judges shall remain subject to the remaining provisions of these Regulations.
§ 81.306. Requirements Applicable to MJ-IOTA Accounts.
(a) [Unless an exemption has been granted to the judicial official, each judicial official shall establish a MJ-IOTA account at the depository institution of his or her choice.] Unless an exemption has been granted to the Judicial Official, each Judicial Official shall establish an MJ-IOTA Account at the Depository Institution of his or her choice, provided that the Depository Institution complies with the MJ-IOTA Regulations. If local county policies and procedures concerning accounts established by the [judicial official] Judicial Official exist, nothing herein shall be construed as relieving the [judicial official] Judicial Official of complying with such policies and procedures, except to the extent inconsistent herewith.
(b) [In order to qualify as a MJ-IOTA Account, the depository institution must:] In order to qualify an account as an MJ-IOTA Account, the Depository Institution must satisfy the requirements set forth in Section 81.301(c) above.
[(1) Remit monthly any interest earned on the account to the Board, or if that is not possible, remit the interest earned at least quarterly; and
(2) Transmit to the Board with each remittance a statement showing not less than the following information: the name of the account, the account number, the service charges and/or fees deducted, if any, from the account, the amount of interest remitted from the account, and if available, the average daily collected balance in the account for the period reported.]
(c) The following additional requirements apply to MJ-IOTA [accounts] Accounts:
[(1) The rate of interest paid on MJ-IOTA Accounts shall be not less than the highest rate of interest generally available from the depository institution to depositors generally for accounts with the same minimum balance and other account eligibility requirements.
(2) Under no circumstances may the rate of interest payable on a MJ-IOTA account be less than the rate paid by the depository institution on negotiable order of withdrawal accounts or super negotiable order of withdrawal accounts.
(3) The accounts must continue to be collateralized by the assets of the depository institution in accordance with current practice and Act 72 of 1971.]
(1) A Depository Institution shall submit to the IOLTA Board for review and approval a Compliance Certification Form, which identifies the rate of interest or dividend to be provided for MJ-IOTA Accounts and certifies the Depository Institution's compliance with the MJ-IOTA Regulations and the IOLTA Board's Comparability Guidance. Prior to changing a rate that was previously approved by the IOLTA Board, or when the rates for comparable products exceed the rate listed in the Depository Institution's most recently approved Compliance Certification Form, the Depository Institution shall submit a new Compliance Certification Form to the IOLTA Board for review and approval.
(2) Depository Institutions shall grant requests by the IOLTA Board to recover income that was not remitted to the IOLTA Board, in accordance with the Depository Institution's most recently approved Compliance Certification Form, during the twelve months preceding the IOLTA Board's request.
(d) Depository [institutions] Institutions may impose reasonable service charges for the administration of MJ-IOTA [accounts] Accounts.
(1) A [depository institution] Depository Institution may deduct service charges such as maintenance fees and transaction charges against the amount of [interest] income to be paid on the MJ-IOTA [account] Account to which service charges apply.
(2) All costs associated with check printing, overdraft charges, charges for a temporary extension of credit, stopped payments, certified checks, wire transfers and similar bank charges shall not be assessed against [funds in or interest earned on a MJ-IOTA account] Qualified Funds in or income earned on an MJ-IOTA Account.
[(3) All costs for services such as overdrafts on deposited items, stopped payments, certified checks, and wire transfers shall not be assessed against funds in or interest earned on a MJ-IOTA account.]
§ 81.307. Exemptions from MJ-IOTA Participation.
(a) The IOLTA Board may grant exemptions from participation in the MJ-IOTA Program. Exemptions are not automatic. The IOLTA Board may declare a [judicial official] Judicial Official exempt from the requirements of maintaining [a MJ-IOTA account] an MJ-IOTA Account. Alternatively, a [judicial official] Judicial Official may submit a written request for exemption. All requests by a [judicial official must be made on the judicial official's] Judicial Official must be made on the Judicial Official's official letterhead, and all requests must set forth in reasonable detail the basis for the requested exemption.
(b) [Exemptions may be granted only with respect to the maintenance of a MJ-IOTA account for qualified funds. The Board is not empowered to handle other types of exemptions. Judicial officials exempt from maintenance of a MJ-IOTA account are reminded that the judicial official remains subject to other requirements pertaining to custodial funds.] Exemptions may be granted only with respect to the maintenance of an MJ-IOTA Account for Qualified Funds. The IOLTA Board is not empowered to handle other types of exemptions. Judicial Officials exempt from maintenance of an MJ-IOTA Account are reminded that the Judicial Official remains subject to other requirements pertaining to Custodial Funds.
(c) Exemptions will be routinely granted in the following situations:
(1) Low balance account: Any [custodial account] Custodial Account which historically, generally based upon 12 consecutive months of activity, has an average daily balance of three thousand five hundred ($3,500) Dollars or less will be exempt from being [a MJ-IOTA account] an MJ-IOTA Account. The IOLTA Board may exempt from the MJ-IOTA Program, without application, a low balance account. A [judicial official] Judicial Official requesting an exemption based on a low balance account must, as a part of the written request for exemption, include an account analysis or written statement that demonstrates the amount of the average daily balance.
(2) Account service charges routinely exceed [interest] income: Some [custodial accounts] Custodial Accounts may have an average daily balance of more than $3,500, but account service charges routinely exceed [interest] the income earned on the account. A [judicial official] Judicial Official requesting an exemption under this subsection, as part of the written request for exemption, must include an account analysis or written statement that clearly shows the [interest earned, or the interest] income earned, or the income that would have been earned, on the account each month for the past 12 months, plus the account service charges imposed on the account for each of the last 12 months. Only account-related service charges will be considered for the purpose of whether an exemption will be granted.
(3) Extreme impracticality: Under limited circumstances it may be unduly burdensome for a [judicial official to maintain a MJ-IOTA account] Judicial Official to maintain an MJ-IOTA Account. When claiming undue hardship, the [judicial official] Judicial Official should provide appropriate detail demonstrating undue hardship. An example includes the lack of a [depository institution that offers MJ-IOTA accounts in the judicial official's] Depository Institution that offers MJ-IOTA Accounts in the Judicial Official's geographical location.
(4) Other compelling and necessitous reasons: A [judicial official] Judicial Official who demonstrates a compelling and necessitous reason for not complying with the MJ-IOTA Program may request an exemption. A philosophical objection to the MJ-IOTA Program does not constitute a compelling and necessitous reason for an exemption.
(d) If the IOLTA Board denies a [judicial official's] Judicial Official's request for an exemption from maintenance of [a MJ-IOTA account, the judicial official] an MJ-IOTA Account, the Judicial Official may, within 30 days of written notice of denial from the IOLTA Board, request in writing a reconsideration of the IOLTA Board's decision. All requests for reconsideration shall set forth in detail additional facts, if any, not brought before the IOLTA Board in the request for exemption, as well as the reasons, if any, why an exemption should be granted.
(e) [If the Board has determined that a judicial official's custodial account is exempt from MJ-IOTA status, the judicial official may, within 30 days of written notice from the Board that the judicial official is exempt, request in writing a reconsideration of the Board's decision. All requests for reconsideration shall set forth in detail facts, if any, why the judicial official should maintain a MJ-IOTA account, and the manner, if any, in which the Board and the purposes of the MJ-IOTA program will by furthered by the judicial official's maintenance of a MJ-IOTA account.] If the IOLTA Board has determined that a Judicial Official's Custodial Account is exempt from the MJ-IOTA Program, the Judicial Official may, within 30 days of written notice from the IOLTA Board that the Judicial Official is exempt, request in writing a reconsideration of the IOLTA Board's decision. All requests for reconsideration shall set forth in detail facts, if any, why the Judicial Official should maintain an MJ-IOTA Account, and the manner, if any, in which the IOLTA Board and the purposes of the MJ-IOTA Program will be furthered by the Judicial Official's maintenance of an MJ-IOTA Account.
(f) Notice shall be deemed to have been given to a [judicial official] Judicial Official under the provisions of this Section upon the deposit by the IOLTA Board, postage prepaid, with the United States Postal Service of its written determination regarding the exemption, if any, of the [judicial official] Judicial Official from the MJ-IOTA Program.
(g) The IOLTA Board may delegate to its staff or to a committee of the IOLTA Board the authority to determine exemptions from the MJ-IOTA Program or to reconsider exemption denials or determinations.
§ 81.308. Refunds.
(a) [Upon application of a judicial official, the Board may return interest paid to it. For example, if a judicial official mistakenly places custodial funds which are not qualified funds in an MJ-IOTA account, interest earned on those funds may be refunded.] The IOLTA Board may return income paid to the IOLTA Board under certain circumstances. For example, if a Judicial Official mistakenly places Custodial Funds which are not Qualified Funds in an MJ-IOTA Account, then the Judicial Official may apply to the IOLTA Board for a refund of the income paid to the IOLTA Board.
(b) [At the time of the issuance of these regulations, all custodial funds handled by Magisterial District Judges are anticipated to be qualified funds. Magisterial District Judges occasionally may determine that certain custodial funds maintained in their custodial account do not meet this presumption, and are not qualified funds. Upon application of the Magisterial District Judge, the Board may return interest paid to it applicable to the funds which were not qualified funds.] At the time of the issuance of these Regulations, all Custodial Funds handled by Magisterial District Judges are anticipated to be Qualified Funds. Magisterial District Judges occasionally may determine that certain Custodial Funds maintained in their Custodial Account do not meet this presumption, and are not Qualified Funds. Upon application of the Magisterial District Judge, the IOLTA Board may return income paid to it applicable to the funds which were not Qualified Funds.
(c) The following guidelines apply to requests for a refund of [interest] income:
(1) [All requests by a judicial official must be made on the judicial official's] Requests by a Judicial Official must be made on the Judicial Official's official letterhead, and all requests must set forth in reasonable detail the basis for the requested refund[;].
(2) [The request] Requests must be accompanied by verification of the [interest] income paid with respect to the funds mistakenly placed in the MJ-IOTA [account] Account. Verification must be made by the [depository institution] Depository Institution in which the MJ-IOTA [account] Account is maintained. As needed for auditing purposes, the IOLTA Board may request additional documentation[;].
(3) [The request must be made within six months after the beneficial owner's funds have been disbursed from the MJ-IOTA account;] The IOLTA Board will only consider requests where the income to be refunded was received by the IOLTA Board during the twelve-month period prior to the IOLTA Board receiving the written request for a refund.
(4) [Refunds will be remitted to the beneficial owner and the Board will issue an IRS (Internal Revenue Service) form 1099 to the beneficial owner;] Refunds will be remitted through the Depository Institution that transmitted the income to the IOLTA Board unless an alternative method is requested and agreed to by the IOLTA Board.
(5) If the [depository institution] Depository Institution has imposed a service charge with respect to the MJ-IOTA [account] Account, only the net amount of [interest] income paid to the IOLTA Board (i.e., the [interest] income reduced by applicable service charges) will be refunded[; and].
(6) The IOLTA Board may impose and deduct a processing charge from the refund.
[Pa.B. Doc. No. 17-1367. Filed for public inspection August 18, 2017, 9:00 a.m.]
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