The Economy Light & Power Company v. United States case in 1920 revolved around the issue of whether a public utility company, specifically the Economy Light & Power Company, was exempt from federal income tax under Section 38 of the Act of Congress approved September 8, 1916. The Supreme Court ruled that it was not exempt because it did not fall within any category specified by law for exemption. The court clarified that exemptions to taxation are subject to strict interpretation and must be clearly expressed in legislation; they cannot be implied or inferred. Therefore, since there were no explicit provisions stating that such companies were exempted from paying taxes under this act, the Economy Light & Power Company had an obligation to pay its due share of federal income tax.

In the dissenting opinion for Economy Light & Power Company v. United States, Justice McReynolds argued that the majority's decision was a misinterpretation of the Hepburn Act. He contended that Congress did not intend to regulate private contracts between carriers and shippers under this act, but rather aimed at preventing unjust or unreasonable rates in public tariffs. The justice believed that there was no evidence showing any harm done to the public interest by these private contracts; thus, they should be allowed as long as they do not result in discrimination against other shippers or violate antitrust laws. Furthermore, he pointed out inconsistencies within previous court decisions regarding similar issues and expressed concern over potential negative impacts on business practices due to uncertainty about what constitutes lawful conduct under federal law.