RESPONDENT: United States
LOCATION: Fargo, North Dakota
DOCKET NO.: 29
DECIDED BY: Warren Court (1958-1962)
LOWER COURT: United States Court of Appeals for the Ninth Circuit
CITATION: 358 US 498 (1959)
ARGUED: Nov 19, 1958
DECIDED: Feb 24, 1959
Facts of the case
Media for Cammarano v. United States
Audio Transcription for Oral Argument - November 19, 1958 in Cammarano v. United States
Number 50, F. Strauss & Son, Incorporated, of Arkansas, Petitioner, versus Commissioner of Internal Revenue.
Mr. Eichenbaum, you may proceed.
E. Chas. Eichenbaum:
Mr. Chief Justice, may it please the Court.
In this case, certiorari to the Eight Circuit tried in the Tax Court, there ruled against the petitioner on the grounds that there was lobbying.
There was a practically similar fact situation as in the case described by Colonel Wiener and initiative in referendum measured opposed by the clients F. Strauss, Incorporated, a liquor wholesaler.
Was it initiative or referendum (Voice Overlap) --
E. Chas. Eichenbaum:
It was an initiated act.
And the initiated act would have brought back prohibition to the State of Arkansas.
And I may say that in this case, there is no 90% question of whether or not the business of the taxpayer would've been destroyed.
There is no question as to percentage.
The record clearly indicates, and it has never been contravened, our taxpayer would've been out of business.
I should like to say that our record differs but it's likely with reference to the state of facts other than with that situation.
There are, in this record, a typical advertisement such as have been heretofore discussed.
I should also like to say, and I think that it is the crux of this situation that the ordinary and necessary expense undergone by this taxpayer apart from the regulation would be completely allowed.
I repeat, apart from the regulation, the expenditures would have been ordinary and necessary expense.
Now, why ordinary and necessary?
We may deal slightly with the elementals for a moment, but I think it gets back to something that was in the question by Mr. -- Mr. Chief Justice a few moments ago.
What is ordinary in the sense of the statute and the deductions which are permitted under the statute?
Ordinary or the expenses in the sense that they are usual and customary in the business community and so to the challenge and so to defend is ordinary.
I -- if I may say so that which embarks upon a new course, a new venture, again becomes an ad hoc situation, again becomes a matter for determination of whether it is ordinary and necessary.
But there can be no dispute that to defend the preservation of the taxpayer, I need not cite the well-known phrases in Heininger from the circuit court which is -- I have cited approvingly by this Court in the Levy case that if you have no business, you have no income, if you have no income, you have no tax.
In this case, ordinary is in the sense of the usual and customary and it becomes ordinary to defend against the challenge.
And necessary is necessary, necessary in the usual sense and in the tax import.
Necessary, because it becomes appropriate and helpful and in this sense, necessary for survival.
So, apart from the regulation with which we shall deal in this case expense allowable ordinary and necessary.
Now, we take the position and we differ slightly probably only in the order of presentation with our Brother Colonel Wiener, we take the position that the regulation does not apply.
We take the -- the position that it is not intended by its terms so to apply.
Now, the reason that we take that position is that we say that legislation, in its ordinary sense, does not include the initiative and referendum procedures or the constitutional procedures of amendment.
And we advance that reason for -- on two bases.
The first is that we think that it may well have been out of contemplation of Congress in the enactment of the statute or out of contemplation by the Commissioner in the promulgation of the regulation that those appeals directly to the people should have supervision or governing restrictions.