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Supremes: contingent fees taxable

The Supreme Court ruled last week that contingent fees are taxable to the client, even if they pass through directly to the attorney. Calling the position of a client and his attorney the "quintessential principal-agent relationship," Justice Kennedy wrote for a unanimous court in determining that "as a general rule, when a litigant's recovery constitutes income, the litigant's income includes the portion of the recovery paid to the attorney as a contingent fee." The Association of Trial Lawyers of America and various public interest firms were displeased with the decision. (See full text of decision here.)



Rafael Mangual
Project Manager,
Legal Policy

Katherine Lazarski
Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.