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 limits.
  • 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 licenses.
  • When they filed their taxes, Tank Truck claimed a deduction for the fines as a business expense. The IRS denied the deduction. Tank Truck appealed.
    • 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 contract.
    • 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 IRS.
    • 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).