358 U.S.

498
79 S.Ct. 524
3 L.Ed.2d 462

William B. CAMMARANO and Louise Cammarano, his wife,

Petitioners,
v.
UNITED STATES of America. F. STRAUSS & SON, INC., of
Arkansas, Petitioner, v. COMMISSIONER OF INTERNAL
REVENUE.
Nos. 29 and 50.
Argued Nov. 19, 1958.
Decided Feb. 24, 1959.

Frederick Bernays Wiener, Washington, D.C., for petitioners, William B.

Cammarano and Louise Cammarano.
Oscar H. Davis, Washington, D.C., for the United States.
E. Chas. Eichenbaum, Little Rock, Ark., for petitioner, F. Strauss & son,
inc.
Mr. Justice HARLAN delivered the opinion of the Court.

These cases, coming to us from two different Circuits, present identical issues,
and may appropriately be dealt with together in one opinion. The issues involve
the interpretation and validity of Treas. Reg. 111, 29.23(o)1 and 29.23(q)
1 as applied by the courts below to deny deduction as 'ordinary and
necessary' business expenses under 23(a)(1)(A) of the Internal Revenue Code
of 19391 to sums expended by the respective taxpayer petitioners in furtherance
of publicity programs designed to help secure the defeat of initiative measures
then pending before the voters of the States of Washington and Arkansas.

The Treasury Regulations in question each provides in pertinent part that no

deduction shall be allowed to 'sums of money expended for lobbying purposes,
the promotion or defeat of legislation, the exploitation of propaganda, including

advertising other than trade advertising * * *.'2 Both Courts of Appeals held
that these provisions render nondeductible sums paid by petitioners to
organizations which expended them in extensive publicity programs designed to
persuade the voters to cast their ballots against state initiative measures, even
though the passage of those measures would have seriously affected, or indeed
wholly destroyed, the taxpayers' businessesand that so interpreted the
Regulations are a valid exercise of the Commissioner's rule-making power. We
granted certiorari because of the recurring nature of the question, and because
of its importance to the proper administration of the Internal Revenue laws. 355
U.S. 952, 78 S.Ct. 541, 2 L.Ed.2d 529; 356 U.S. 966, 78 S.Ct. 1007, 2 L.Ed.2d
1073.
3

A brief review of the facts in the two cases is necessary to an understanding of

the issues.

No. 29: In 1948 petitioners William and Louise Cammarano, husband and wife,
jointly owned a one-fourth interest in a partnership engaged in the distribution
of beer at wholesale in the State of Washington. The partnership was a member
of the Washington Beer Wholesalers Association. In December 1947 the
Association had established a trust fund as a repository for assessments
collected from its members to help finance a statewide publicity program
urging the defeat of 'Initiative to the Legislature No. 13,' a measure to be
submitted to the electorate at the general election of November 2, 1948, which
would have placed the retail sale of wine and beer in Washington exclusively in
the hands of the State. During 1948 petitioners' partnership paid to the trust
fund $3,545.15, of which petitioners' pro rata share was $886.29. The trust fund
collected a total of $53,500, which was turned over to an Industry Advisory
Committee organized by wholesale and retail wine and beer dealers, which in
turn expended it as part of contributions totaling $231,257.10 for various kinds
of advertising directed to the public, none of which referred to petitioners' wares
as such and all of which urged defeat of Initiative No. 13.3 The initiative was
defeated.

In preparing their joint income tax return for 1948, petitioners deducted as a
business expense the $886.29 paid to the Association's trust fund as their share
of the partnership assessment. The deduction was disallowed by the
Commissioner, and petitioners paid under protest the additional sum thus due
and sued in the District Court for refund. That court ruled that the payments
made to the trust fund were 'expended for * * * the * * * defeat of legislation'
within the meaning of Treas. Reg. 111, 29.23(o)1 and were therefore not
deductible as ordinary and necessary business expenses under 23(a)(1)(A) of
the Internal Revenue Code of 1939. The Court of Appeals affirmed, holding the

Regulation applicable and valid as applied. 9 Cir., 246 F.2d 751.4

6

No. 50: Petitioner F. Strauss & Son, Inc., is a corporation engaged in the
wholesale liquor business in Arkansas. In 1950 an initiative calling for an
election on statewide prohibition was placed on the ballot to be voted on in the
state general election on November 7, 1950. In May of that year Strauss,
together with eight other Arkansas liquor wholesalers, organized Arkansas
Legal Control Associates, Inc., as a means of coordinating their efforts to
persuade the voters of Arkansas to vote against the proposed prohibition
measure. Between May 30 and November 30, 1950, Arkansas Legal Control
Associates collected a total of $126,265.84, which was disbursed for various
forms of publicity concerning the proposed Act.5 Strauss' contribution
amounted to $9,252.67.

The initiative measure was defeated in the November election. On its 1950
income tax return Strauss deducted the $9,252.67 as a business expense. The
Commissioner disallowed the deduction and Strauss filed a timely petition in
the Tax Court seeking a redetermination of the deficiency asserted. That court
upheld the action of the Commissioner in disallowing the claimed deduction,
and the Court of Appeals unanimously affirmed. 8 Cir., 251 F.2d 724.

Since 1918 regulations promulgated by the Commissioner under the Internal

Revenue Code have continuously provided that expenditures for the 'promotion
or defeat of legislation * * *,' or for any of the other purposes specified in the
'corporate' Regulation now before us, are not deductible from gross corporate
income; and since 1938 regulations containing identical language have
forbidden such deductions from individual income.6 During this period of more
than 40 years these regulatory provisions have been before this Court on only
one occasion. In Textile Mills Security Corporation v. Commissioner of
Internal Revenue, 314 U.S. 326, 62 S.Ct. 272, 86 L.Ed. 249, it was held that the
Commissioner properly disallowed the deduction of sums paid by a corporation
to a publicist and two legal experts employed to help secure the passage of
legislation designed to secure the return of certain properties in this country
seized during World War I under the provisions of the Trading With the Enemy
Act, 50 U.S.C.A. Appendix, 1 et seq. This holding was squarely based on the
regulatory provisions now embodied in Treas.Reg. 111, 29.23(q) 1, which
were found valid and applicable to the facts involved in that case, although the
very business of the taxpayer seeking the deduction was the direction of the
publicity program in the course of which the expenditures were made.

Petitioners suggest that Textile Mills is not dispositive of the present cases,
either as to the applicability of the Regulations upon the facts disclosed by

these records or as to the validity of those Regulations under the statute if they
are found to be applicable. Essentially, petitioners' contentions are (1) that the
Regulations cannot properly be construed as applicable to expenditures made in
connection with efforts to promote or defeat the passage of legislation by
persuasion of the general public as opposed to direct influence on legislative
bodies, that is 'lobbying'; (2) that in any case the Regulations are inapplicable to
expenditures made in connection with initiative measures; and (3) that if
construed as applicable to the facts here presented the Regulations are invalid
as contrary to the plain terms of 23(a) (1)(A) of the 1939 Code and possibly
as unconstitutional under the First Amendment.
10

We need not be long detained by the question of the applicability of the

Regulations to petitioners' expenditures. First, we see no justification for
reading into these regulatory provisions the implied exceptions which
petitioners would have us there find. We cannot accept petitioners' argument
that Textile Mills should be read as limiting such provisions to direct dealings
with legislators, insidious or otherwise. The deductions whose propriety was
before the Court in that case were for expenditures, characterized by the Court
of Appeals as being for 'matters of publicity, 'including the making of
arrangements for speeches, contacting the press, in respect of editorial
comments, and news items," and for the preparation of 'brochures' involving 'a
comprehensive study of the history of the treatment of persons and property in
war,' 3 Cir., 117 F.2d 62, 65, 63, all designed to influence the opinions of the
general public.7 Apart from Textile Mills, the Courts of Appeals have
uniformly applied these Regulations to expenditures for publicity directed to
the general public on legislative matters. See e.g., Revere Racing Ass'n v.
Scanlon, 1 Cir., 232 F.2d 816; American Hardware & Equipment Co. v.
Commissioner of Internal Revenue, 4 Cir., 202 F.2d 126; Roberts Dairy Co. v.
Commissioner of Internal Revenue, 8 Cir., 195 F.2d 948; Sunset Scavenger Co.
v. Commissioner of Internal Revenue, 9 Cir., 84 F.2d 453. Petitioners' reading
of these Regulations would make all but the reference to 'lobbying' pure
surplusage. We think that the Regulations must be construed to mean what they
saythat not only lobbying expenses, but also sums spent for 'the promotion or
defeat of legislation, the exploitation of propaganda, including advertising other
than trade advertising' are nondeductible. 8

11

Likewise unpersuasive is petitioners' suggested distinction between expenses

incurred in attempting to promote or defeat legislation pending before
legislatures and those incurred in furthering or combatting an initiative
measure. We think that initiatives are plainly 'legislation' within the meaning of
these Regulations. Had the measures involved in these cases been passed by the
people of Washington and Arkansas they would have had the effect and status

of ordinary laws in every respect. The Constitutions of the States of Washington

and Arkansas both explicitly recognize that in providing for initiatives they are
vesting legislative power in the people.9 Every court which has considered the
question has found these provisions to be fully as applicable to initiatives and
referendums as to any other kind of legislation. See Revere Racing Ass'n v.
Scanlon, supra; Old Mission Portland Cement Co. v. Commissioner of Internal
Revenue, 9 Cir., 69 F.2d 676, affirmed on other issues, 293 U.S. 289, 55 S.Ct.
158, 79 L.Ed. 367; Mosby Hotel Co. v. Commissioner, decided October 22,
1954, PH 1954 TC Mem.Dec. 54,288; McClintock-Trunkey Co. v.
Commissioner of Internal Revenue, 19 T.C. 297, reversed on other issues, 9
Cir., 217 F.2d 329 (involving payments, like those of petitioners Cammarano,
made to the Washington Beer Wholesalers Association in connection with
'Initiative to the Legislature No. 13').
12

A contrary reading of the Regulations would, indeed, be anomalous, for it

would mean that expenses of publicity campaigns directed to the public to
influence it in turn to persuade its legislative representatives to vote for or
against pending bills would be encompassed by the Regulations and denied
deductibility, whereas a lessdiluted form of persuasion and influence, directed
to the voters as legislators, would be left at large so far as the Regulations are
concerned. We see no reason to give so artificial and strained a construction to
the pertinent language.10

13

The cornerstone of petitioners' argument is that Treas.Reg. 111, 29.23(o)1

and 29.23(q)1 are invalid if interpreted to apply to the expenditures here at
issue. It is contended that sums expended by a taxpayer to preserve his business
from destruction are deductible as ordinary and necessary business expenses
under the Code as a matter of law, and that therefore a regulation purporting to
deny deductibility to such expenditures is plainly contrary to the statute and
ipso facto invalid. Petitioners rely upon Commissioner of Internal Revenue v.
Heininger, 320 U.S. 467, 64 S.Ct. 249, 88 L.Ed. 171, where this Court held that
attorney's fees incurred by a mail-order dentist in resisting a postal fraud charge
which would have ended his business were deductible as an ordinary and
necessary business expense.

14

We do not think that Heininger governs the present cases, nor that it establishes
as broad a rule of law as petitioners suggest. In Heininger this Court held no
more than that expenditures without which a business enterprise would
inevitably suffer adverse effects, and the granting of deductibility to which
would frustrate no 'sharply defined national or state policies,' 320 U.S., at page
473, 64 S.Ct. at page 253 (see also Commissioner of Internal Revenue v.
Sullivan, 356 U.S. 27, 78 S.Ct. 512, 2 L.Ed.2d 559), were deductible as

ordinary and necessary business expenses under the statute.11 Here the
deductions sought are prohibited by Regulations which themselves constitute
an expression of a sharply defined national policy, further demonstration of
which may be found in other sections of the Internal Revenue Code.12
15

As was said in Textile Mills, 'the words 'ordinary and necessary' are not so clear
and unambiguous in their meaning and application as to leave no room for an
interpretative regulation. The numerous cases which have come to this Court on
that issue bear witness to that.' 314 U.S., at page 338, 62 S.Ct. at page 279. In
the present cases there is before us regulatory language of more than 40 years'
continuous duration expressly providing that sums expended for the activities
here involved shall not be considered an ordinary and necessary business
expense under the statute. The provisions of the Internal Revenue Code which
underlie the Regulations have been repeatedly re-enacted by the Congress
without the slightest suggestion that the policy expressed in these regulatory
measures does other than precisely conform to its intent.13

16

In 1934 the Court of Appeals for the Ninth Circuit denied deduction to
expenses incurred in connection with a referendum which would, if passed,
have increased the taxpayer's business. Old Mission Portland Cement Co. v.
Commissioner of Internal Revenue, supra.14 And in 1936 the same court in
Sunset Scavenger Co. v. Commissioner of Internal Revenue, supra, reversed
the Board of Tax Appeals to hold that the regulatory language now before us,
through repeated re-enactment by Congress of the underlying legislation,
already had acquired the force of law, and applied it to deny deductibility to
expenditures made by an incorporated association of garbage collectors for a
publicity program directed to the general public urging the defeat of legislation
which would have injured the business of the Association's membership. The
court recognized that the Board of Tax Appeals had twice previously held
similar expenditures deductible so long as not made for an illegal purpose,15 but
pointed out that in both of those cases the effect of the Regulation had been
entirely disregarded, and that they were therefore not sound authority. Three
years later the Congress, in the face of these decisions, again re-enacted
without change in the 1939 Code the 'ordinary and necessary' business expense
section.

17

It is also noteworthy that Congress, in its 1954 re-enactment of the Internal

Revenue Code, again adopted the 'ordinary and necessary' provision without
substantive change,16 following consistent rulings by the courts subsequent to
the 1939 re-enactment holding these Regulations applicable to sums spent in
efforts to persuade the general public of the desirability or undesirability of
proposed legislation affecting the taxpayer's business. See Textile Mills;

American Hardware & Equipment Co. v. Commissioner of Internal Revenue,

supra; Roberts Dairy Co. v. Commissioner of Internal Revenue, supra;
McClintock-Trunkey Co. v. Commissioner of Internal Revenue, supra.
Although the tax years involved in the cases before us are 1948 and 1950, and a
1954 re-enactment of course cannot conclusively demonstrate the propriety of
an administrative and judicial interpretation and application as made to
transactions occurring befofe the re-enactment, the 1954 action of Congress is
significant as indicating satisfaction with the interpretation consistently given
the statute by the Regulations here at issue and in demonstrating its prior intent.
Cf. United States v. Stafoff, 260 U.S. 477, 480, 43 S.Ct. 197, 199, 67 L.Ed.
358.
18

Under these circumstances we think that the Regulations have acquired the
force of law. This is not a case where the Government seeks to cloak an
interpretative regulation with immunity from judicial examination as to
conformity with the statute on which it is based simply because Congress has
for some period failed affirmatively to act to change the interpretation which
the regulation gives to an otherwise unambiguous statute. Cf. Jones v. Liberty
Glass Co., 332 U.S. 524, 68 S.Ct. 229, 92 L.Ed. 142. Nor is it a case where no
reliable inference as to Congress' intent can be drawn from re-enactment of a
statute because of a conflict between administrative and judicial interpretation
of the statute at the time of its re-enactment. Cf. Commissioner of Internal
Revenue v. Glenshaw Glass Co., 348 U.S. 426, 431, 75 S.Ct. 473, 476, 99
L.Ed. 483. Here we have unambiguous regulatory language, adopted by the
Commissioner in the early days of federal income tax legislation, in continuous
existence since that time, and consistently construed and applied by the courts
on many occasions to deny deduction of sums expended in efforts to persuade
the electorate,17 even when a clear business motive for the expenditure has been
demonstrated.

19

In these circumstances we consider that what was said in Massachusetts Mutual

Life Ins. Co. v. United States, 288 U.S. 269, 273, 53 S.Ct. 337, 339, 77 L.Ed.
739, applies here:

20

'This action (of Congress in re-enacting a statute) was taken with knowledge of
the construction placed upon the section by the official charged with its
administration. If the legislative body had considered the Treasury
interpretation erroneous, it would have amended the section. Its failure so to do
requires the conclusion that the regulation was not inconsistent with the intent
of the statute (citations) unless, perhaps, the language of the act is
unambiguous and the regulation clearly inconsistent with it. (citation).'18

21

This Court has heretofore recognized that the 'ordinary and necessary' language
of the Code is hardly unambiguous, see Textile Mills Securities Corporation v.
Commissioner of Internal Revenue, supra, and we cannot say that these
Regulations are clearly, or even apparently, inconsistent with it. Cf. Trust of
Bingham v. Commissioner of Internal Revenue, 325 U.S. 365, 65 S.Ct. 1232,
89 L.Ed. 1670.

22

The statutory policy is further evidenced by the treatment given by Congress to

the tax status of organizations, otherwise qualified for exemption as organized
exclusively for 'religious, charitable, scientific, literary or educational
purposes,' which engage in activities designed to promote or defeat legislation.
As early as 1934 Congress amended the Code expressly to provide that no tax
exemption should be given to organizations, otherwise qualifying, a substantial
part of the activities of which 'is carrying on propaganda, or otherwise
attempting, to influence legislation,' and that deductibility should be denied to
contributions by individuals to such organizations. Revenue Act of 1934,
101(6), 23(o)(2), 48 Stat. 700, 690. And a year thereafter, when the Code was
for the first time amended to permit corporations to deduct certain contributions
not qualifying as 'ordinary and necessary' business expenses, an identical
limitation was imposed. Revenue Act of 1935, 102(c), 49 Stat. 1016. These
limitations, carried over into the 1939 and 1954 Codes,19 made explicit the
conclusion derived by Judge Learned Hand in 1930 that 'political agitation as
such is outside the statute, however innocent the aim * * *. Controversies of
that sort must be conducted without public subvention; the Treasury stands
aside from them.' Slee v. Commissioner of Internal Revenue, 2 Cir., 42 F.2d
184, 185, 72 A.L.R. 400. The Regulations here contested appear to us to be but
a further expression of the same sharply defined policy.

23

Petitioners suggest that if the Regulations are construed to deny them

deduction, a substantial constitutional issue under the First Amendment is
presented. They rely upon Speiser v. Randall, 357 U.S. 513, 78 S.Ct. 1332, 2
L.Ed.2d 1460, where a California statute, Wests' Ann.Rev. & Tax.Code, 32
requiring the taking of a loyalty oath as a condition of property tax exemption
was struck down on grounds of procedural due process. This contention, made
by neither petitioner below, is without merit. Speiser has no relevance to the
cases before us. Petitioners are not being denied a tax deduction because they
engage in constitutionally protected activities, but are simply being required to
pay for those activities entirely out of their own pockets, as everyone else
engaging in similar activities is required to do under the provisions of the
Internal Revenue Code. Nondiscriminatory denial of deduction from gross
income to sums expended to promote or defeat legislation is plainly not "aimed
at the suppression of dangerous ideas." 357 U.S., at page 519, 78 S.Ct. at page

1338. Rather, it appears to us to express a determination by Congress that since

purchased publicity can influence the fate of legislation which will affect,
directly or indirectly, all in the community, everyone in the community should
stand on the same footing as regards its purchase so far as the Treasury of the
United States is concerned.
24

Affirmed.

25

Mr. Justice DOUGLAS (concurring).

26

Valentine v. Chrestensen, 316 U.S. 52, 54, 62 S.Ct. 920, 921, 86 L.Ed. 1262,
held that business advertisements and commercial matters* did not enjoy the
protection of the First Amendment, made applicable to the States by the
Fourteenth. The ruling was casual, almost offhand. And it has not survived
reflection. That 'freedom of speech or of the press,' directly guaranteed against
encroachment by the Federal Government and safeguarded against state action
by the Due Process Clause of the Fourteenth Amendment, is not in terms or by
implication confined to discourse of a particular kind and nature. It has often
been stressed as essential to the exposition and exchange of political ideas, to
the expression of philosophical attitudes, to the flowering of the letters.
Important as the First Amendment is to all those cultural ends, it has not been
restricted to them. Individual or group protests against action which results in
monetary injuries are certainly not beyond the reach of the First Amendment, as
Thornhill v. State of Alabama, 310 U.S. 88, 60 S.Ct. 736, 84 L.Ed. 1093, which
placed picketing within the ambit of the First Amendment, teaches. And see
Newell v. Chauffeurs, Teamsters & Helpers Local Union 795, 181 Kan. 898,
317 P.2d 817, 182 Kan. 205, 319 P.2d 171, reversed, 356 U.S. 341, 78 S.Ct.
779, 2 L.Ed.2d 809. A protest against government action that affects a business
occupies as high a place. The profit motive should make no difference, for that
is an element inherent in the very conception of a press under our system of free
enterprise. Those who make their living through exercise of First Amendment
rights are no less entitled to its protection than those whose advocacy or
promotion is not hitched to a profit motive. We held as much in Follett v. Town
of McCormick, 321 U.S. 573, 64 S.Ct. 717, 88 L.Ed. 938. And I find it difficult
to draw a line between that group and those who in other lines of endeavor
advertise their wares by different means. Chief Justice Hughes speaking for the
Court in Lovell v. City of Griffin, 303 U.S. 444, 452, 58 S.Ct. 666. 669, 82
L.Ed. 949, defined the First Amendment right with which we now deal in the
broadest terms, 'The press in its historic connotation comprehends every sort of
publication which affords a vehicle of information and opinion.' And see
Jamison v. State of Texas, 318 U.S. 413, 416, 63 S.Ct. 669, 671, 87 L.Ed. 869;
Martin v. City of Struthers, Ohio, 319 U.S. 141, 143, 63 S.Ct. 862, 863, 87

L.Ed. 1313; Burstyn, Inc. v. Wilson, 343 U.S. 495, 501502, 72 S.Ct. 777,
780, 96 L.Ed. 1098.
27

In spite of the overtones of Valentine v. Chrestensen, supra, I find it impossible

to say that the owners of the present business who were fighting for their lives
in opposing these initiative measures were not exercising First Amendment
rights. If Congress had gone so far as to deny all deductions for 'ordinary and
necessary business expenses' if a taxpayer spent money to promote or oppose
initiative measures, then it would be placing a penalty on the exercise of First
Amendment rights. That was in substance what a State did in Speiser v.
Randall, 357 U.S. 513, 78 S.Ct. 1332, 2 L.Ed.2d 1460. 'To deny an exemption
to claimants who engage in certain forms of speech is in effect to penalize them
for such speech.' Id., 357 U.S. at page 518, 78 S.Ct. at page 1338. Congress,
however, has taken no such action here. It has not undertaken to penalize
taxpayers for certain types of advocacy; it has merely allowed some, not all,
expenses as deductions. Deductions are a matter of grace, not of right.
Commissioner of Internal Revenue v. Sullivan, 356 U.S. 27, 78 S.Ct. 512, 2
L.Ed.2d 559. To hold that this item of expense must be allowed as a deduction
would be to give impetus to the view favored in some quarters that First
Amendment rights must be protected by tax exemptions. But that proposition
savors of the notion that First Amendment rights are somehow not fully
realized unless they are subsidized by the State. Such a notion runs counter to
our decisions (Grosjean v. American Press Co., 297 U.S. 233, 250, 56 S.Ct.
444, 449, 80 L.Ed. 660; Murdock v. Commonwealth of Pennsylvania, 319 U.S.
105, 112, 63 S.Ct. 870, 874, 87 L.Ed. 1292; Follett v. Town of McCormick,
supra, 321 U.S. at page 578, 64 S.Ct. at page 719), and may indeed conflict
with the underlying premise that a complete hands-off policy on the part of
government is at times the only course consistent with First Amendment rights.
See People of State of Ill. ex rel. McCollum v. Board of Education of School
Dist. No. 71, Champaign County, Ill., 333 U.S. 203, 68 S.Ct. 461, 92 L.Ed.
649.

28

With this addendum, I concur in the opinion of the Court.

That section (26 U.S.C. 23(a)(1)(A)) provides in pertinent part:

23. Deductions from gross income. In computing net income there shall be
allowed as deductions:
'(a) Expenses.

'(1) Trade or Business Expenses.

'(A) In General. All the ordinary and necessary expenses paid or incurred
during the taxable year in carrying on any trade or business * * *.' 26 U.S.C.A.
23(a)(1)(A).
2

Only 29.23(o)1, which reads on individuals, is involved as to petitioners

Cammarano, and only 29.23(q)1, reading on corporations, as to petitioner
F. Strauss & Son, Inc. Because the language and effect of the two Regulations
are in all relevant respects identical they will be discussed throughout this
opinion as if they were one.

A typical advertisement paid for by the Industry Advisory Committee, signed

by 'Men & Women Against Prohibition,' begins 'We intend to Vote Against
Initiative 13because it would mean a return to the speakeasy, the bootlegger,
the gangsterand, finally, state-wide Prohibition! We urge our friends and
neighbors to do likewise.'

The Court of Appeals alternatively held that judgment in favor of the

Commissioner was required by a trial court finding that petitioners Cammarano
had failed to show that passage of the initiative would have impaired their
partnership's business as a beer distributor. 246 F.2d at page 754. This ground
of decision is not strongly defended by the Government in this Court, and on
our view of the principles which control it need not be considered.

A typical advertisement, which ran in all Arkansas daily and weekly

newspapers, and which shows as its sponsor 'Arkansas Against Prohibition,'
begins:
'What Does 'One Quart' Prohibition Really Mean? There's nothing like it
anywhere * * * it's novel * * * it's unique. But it's sinister * * * it's a plan to
destroy the strictly-regulated alcohol beverage business and to turn that
business over to the bootlegger.'

Article 143 of Treas.Reg. 33 (1918 ed.) denied deductibility as ordinary and

necessary business expenses to corporate expenditures for 'lobbying purposes,
the promotion or defeat of legislation, the exploitation of propaganda * * *.'
The prohibition against corporate deduction of such expenditures first appears
in its present form in Art. 562 of Treas.Reg. 45 (1919 ed.), promulgated under
the Revenue Act of 1918. Thereafter it so appears continuously without change.
See Art. 562 of Treas.Reg. 45 (1920 ed.), 62, 65, and 69, promulgated under the
Revenue Acts of 1918, 1921, 1924, and 1926, Art. 262 of Treas.Reg. 74 and 77,
promulgated under the Revenue Acts of 1928 and 1932, Art. 23(o)2 of
Treas.Reg. 86, promulgated under the Revenue Act of 1934, Art. 23(q)1 of

Treas.Reg. 94 and 101, promulgated under the Revenue Acts of 1936 and 1938,
19.23(q)1, 29.23(q)1, and 39.23(q)1 of Treas.Reg. 103, 111, and
118, respectively, promulgated under the Internal Revenue Code of 1939.
The prohibition against individual deductibility of such expenditures first
appears in Art. 23(o)1 of Treas.Reg. 101, promulgated under the Revenue
Act of 1938, and thereafter in 19.23(o)1, 29.23(o)1, and 39.23(o)1 of
Treas.Reg. 103, 111, and 118, respectively, promulgated under the Internal
Revenue Code of 1939.
In the proposed Income Tax Regulations under the 1954 Code the prohibitions
are consolidated in 1.16215.
7

Petitioners Cammarano suggest that in fact 'lobbying' was involved in Textile

Mills because of the activities of one Mondell whose services had also been
engaged by the petitioner there. But the opinion of the Court of Appeals shows
that none of the payments made to Mondell were involved in the litigation (see
117 F.2d at page 64), and the opinion of this Court makes no reference to any of
Mondell's activities.

Petitioners point to United States v. Rumely, 345 U.S. 41, 73 S.Ct. 543, 97
L.Ed. 770, and United States v. Harriss, 347 U.S. 612, 74 S.Ct. 808, 98 L.Ed.
989, where this Court interpreted the term 'lobbying' in a congressional
resolution and in the Federal Regulation of Lobbying Act, 2 U.S.C. 261
270, 2 U.S.C.A. 261 270, to mean only representations and communications
made directly to Congress and its members concerning pending or proposed
legislation. These cases do not advance petitioners' cause, since the regulatory
provisions here explicitly embrace more than 'lobbying.' Cf. United States v.
Rumely supra, 345 U.S. at page 47, 73 S.Ct. at page 546.

Amendment 7 of the Constitution of the State of Washington provides in

pertinent part:
'Art. 2, Sec. 1. Legislative Powers, Where VestedThe legislative authority of
the state of Washington shall be vested in the legislature, consisting of a senate
and house of representatives, which shall be called the legislature of the State of
Washington, but the people reserve to themselves the power to propose bills,
laws, and to enact or reject the same at the polls, independent of the legislature
* * *.'
Amendment 7 of the Arkansas Constitution contains a virtually identical
provision.

10

Petitioners place heavy reliance on the Commissioner's acquiescence until 1958

in a 1944 decision of the Tax Court allowing deduction to expendituresfound

otherwise to qualify under 23(a)(1), (A) of the 1939 Codeincurred by a
taxpayer in connection with a self-operative amendment to the Missouri
Constitution, on the ground that 'no legislation was needed or involved.' Smith
v. Commissioner, 3 T.C. 696. Whether or not under the Regulations here at
issue a distinction can rationally be drawn between a popularly enacted
constitutional amendment and an initiative, we do not see how the fact that the
Tax Court and the Commissioner for a period made such a distinction, compare
Smith v. Commissioner, supra, with McClintock-Trunkey Co. v.
Commissioner, 19 T.C. 297, reversed on other isssues, 9 Cir., 217 F.2d 329,
helps petitioners' case, as the Commissioner and the Tax Court have been
entirely consistent in their position that expenditures connected with initiatives
as in the present cases are not deductible.
The Tax Court appears to have modified its view since the Smith case even as
to expenditures made in connection with constitutional amendments. See
Mosby Hotel Co. v. Commissioner, decided October 22, 1954, PH 1954 TC
Mem.Dec. 54,288. And the Commissioner has recently withdrawn his
acquiescence in the Smith decision. See Rev.Rul. 58255, 19581 Cum.Bull.
91.
11

The Court noted that in judging the issues before it 'we do not have the benefit
of an interpretative departmental regulation defining the application of the word
'ordinary and necessary' to the particular expenses here involved.' 320 U.S., at
page 470, 64 S.Ct. at page 252.

12

See 79 S.Ct. at page 533, post.

13

See Note 6, supra.

14

The suggestion of petitioners Cammarano that the decision in that case turned
on factors of the kind involved in McDonald v. Commissioner of Internal
Revenue, 323 U.S. 57, 65 S.Ct. 96, 89 L.Ed. 68, is contradicted by the
statement of the Court of Appeals concerning Old Mission in Sunset Scavenger
Co. v. Commissioner of Internal Revenue, 9 Cir., 84 F.2d at page 457.

15

G. T. Wofford v. Commissioner of Internal Revenue, 15 B.T.A. 1225; Los

Angeles & Salt Lake R. Co. v. Commissioner of Internal Revenue, 18 B.T.A.
168. Cf. Lucas v. Wofford, 5 Cir., 49 F.2d 1027, where a petition by the
Commissioner for review of the decision in G. T. Wofford, supra, was denied
upon a finding that the expenditures involved were not made 'to secure the
passage or defeat of any legislation.' 49 F.2d at page 1028.
After this Court's decision in Textile Mills the Board of Tax Appeals

recognized that the Regulation was applicable to expenditures incurred in a

'proper and legal attempt to prevent (business) injury' by endeavoring to secure
the defeat of legislation. Bellingrath v. Commissioner of Internal Revenue, 46
B.T.A. 89, 92.
16

Internal Revenue Code of 1954, 26 U.S.C.(Supp. V) 162, 26 U.S.C.A. 162.

17

Smith v. Commissioner, supra, can hardly be regarded as a break in the uniform

chain of decisions. See Note 10, supra.

18

See also Helvering v. Winmill, 305 U.S. 79, 83, 59 S.Ct. 45, 46, 83 L.Ed. 52:
'Treasury regulations and interpretations long continued without substantial
change, applying to unamended or substantially ree acted statutes, are deemed
to have received congressional approval and have the effect of law.'

19

Internal Revenue Code of 1939, 26 U.S.C. 23(o)(2), (q)(2), 101(6), 26

U.S.C.A. 23(o)(2), (q)(2), 101(6); Internal Revenue Code of 1954, 26
U.S.C. (Supp. V) 170(c)(2)(D), 501(c)(3), 26 U.S.C.A. 170(c)(2)(D),
501(c)(3).

Two decisions prior to the Valentine case approved broad regulation of

commercial advertising. Fifth Avenue Coach Co. v. City of New York, 221
U.S. 467, 31 S.Ct. 709, 55 L.Ed. 815, was decided long befofe Stromberg v.
People of State of California, 283 U.S. 359, 51 S.Ct. 532, 75 L.Ed. 1117,
extended the application of the First Amendment to the States. In Packer
Corporation v. State of Utah, 285 U.S. 105, 52 S.Ct. 273, 76 L.Ed. 643, the
First Amendment problem was not raised. The extent to which such advertising
could be regulated consistently with the First Amendment (cf. Cantwell v. State
of Connecticut, 310 U.S. 296, 60 S.Ct. 900, 84 L.Ed. 1213; Martin v. City of
Struthers, Ohio, 319 U.S. 141, 63 S.Ct. 862, 87 L.Ed. 1313; Breard v. City of
Alexandria, 341 U.S. 622, 71 S.Ct. 920, 95 L.Ed. 1233; Roth v. United States,
354 U.S. 476, 77 S.Ct. 1304, 1 L.Ed.2d 1498) has therefore never been
authoritatively determined.