In the 1940 case of Helvering, Commissioner of Internal Revenue v. Northwest Steel Rolling Mills, Inc., the U.S Supreme Court ruled in favor of the respondent, Northwest Steel Rolling Mills. The court held that a taxpayer corporation could deduct from gross income amounts paid into a reserve fund for future pension payments to its employees under an existing pension plan. The IRS had argued that these contributions were not deductible because they were contingent on events such as employee retirement or death and thus did not represent definite and accrued liabilities. However, the court disagreed with this interpretation stating that it was enough if based on actuarial calculation considering conditions known at close of year; hence ruling in favor of Northwest Steel Rolling Mills' right to claim deductions for their contribution towards their employees' pensions.

The dissenting opinion in the case of Helvering v. Northwest Steel Rolling Mills, Inc., argued that the majority's decision to allow a corporation to deduct dividends received from its income tax was incorrect. The dissenters believed this interpretation contradicted both the language and intent of Congress when it enacted the Revenue Act of 1936. They pointed out that while individual taxpayers could exclude certain dividend income from their gross income, corporations were not granted such an exclusion under Section 115(b) unless they owned at least 85% of each class stock in another corporation paying them dividends. In this case, Northwest Steel only owned about half of one class stock in American Rolling Mill Co., which paid them dividends; hence they did not qualify for any exemption or deduction according to law as interpreted by dissenters. Therefore, allowing such deductions would be tantamount to rewriting legislation contrary to Congressional intent.