Tank Truck Rentals, Inc. v. Commissioner
356 U.S. 30 (1958)
- Each State has licensing
requirements for trucks, and the cost of the license is related to the
amount of weight the truck can carry.
- Trucks are supposed to stop
at highway 'weigh stations' to check if they are over their weight
- Tank Truck made a business
decision to sometimes overload their trucks even though it meant they
would occasionally get caught and have to pay a fine.
- Tank Truck calculated that
the costs of the fines were less than the costs of upgrading their
- When they filed their taxes,
Tank Truck claimed a deduction for the fines as a business expense. The IRS denied the deduction. Tank Truck
- Tank Truck claimed that the
fines were an ordinary and necessary
expense and therefore deductible under 26 U.S.C. § 23(a)(1)(A)
(now 26 U.S.C. §162).
- Tank Truck argued that it
was a minor law, and it was similar to a decision to repudiate a civil
- The IRS argued that it is
never ordinary and necessary to
violate the law. Therefore, there must be a policy limitation that would
deny a deduction for violating the law.
- The US Supreme Court found for
- The US Supreme Court
interpreted the words ordinary and necessary, should not include punishment by a State
government for violating a law.
- The Court found that
allowing the deduction would "frustrate national or state policies
proscribing particular types of conduct."
- Since this case, Congress has
codified the holding that fines are not deductible in 26 U.S.C. §162(f).