In the case of Eldorado Coal & Mining Company v. Mager, Collector of Internal Revenue for the First District of Illinois (1920), the U.S. Supreme Court ruled in favor of Eldorado Coal & Mining Company. The company had challenged a tax assessment by arguing that it was not liable to pay an excess profits tax on its 1917 income because it did not have any invested capital during that year as defined under federal law at that time. The court agreed with this argument and held that since there was no invested capital, there could be no excess profit and thus, no liability for an excess profits tax under existing legislation.

In the dissenting opinion for Eldorado Coal & Mining Company v. Mager, it was argued that the tax in question should not be considered a direct tax but rather an excise or duty. The justice contended that this interpretation would align with historical precedent and constitutional intent. They believed that defining such taxes as direct could potentially undermine federal revenue systems by limiting Congress's ability to impose income taxes on corporations without apportionment among states according to population, which they saw as impractical and unworkable given modern economic realities. Furthermore, they disagreed with the majority's reliance on Pollock v. Farmers' Loan & Trust Co., arguing instead for a broader understanding of what constitutes indirect taxation under Article I, Section 8 of the Constitution.