In the case of Hillsboro National Bank v. Commissioner of Internal Revenue, 1982, the U.S Supreme Court was tasked with determining whether a bank could deduct from its taxable income the cost of Federal Deposit Insurance Corporation (FDIC) insurance premiums paid on behalf of depositors. The court ruled in favor of the Commissioner and held that these payments were not deductible as ordinary and necessary business expenses under section 162(a) of the Internal Revenue Code because they did not directly benefit or have a proximate relationship to Hillsboro's banking business. Instead, they were capital expenditures made for securing an advantage to their business which would last beyond one year and thus should be capitalized rather than expensed immediately. This decision clarified tax law regarding what constitutes an ordinary expense versus a capital expenditure within businesses.

In the dissenting opinion for Hillsboro National Bank v. Commissioner of Internal Revenue, Justice Blackmun argued that the majority's decision to allow banks to deduct estimated losses from loans was inconsistent with both tax law and accounting principles. He contended that allowing such deductions would result in a significant loss of revenue for the government and could potentially encourage reckless lending practices by banks. Furthermore, he believed it was not within the court's jurisdiction to make decisions about financial reporting standards or banking regulations, which should be left up to Congress and regulatory agencies respectively. Thus, he disagreed with the majority’s interpretation of Section 585(c) of Internal Revenue Code as permitting an accrual-basis bank to establish a reserve for bad debts deduction on basis other than specific identification method.