The U.S. Supreme Court case Ivan Allen Co. v. United States in 1974 revolved around the issue of whether or not a taxpayer could deduct from his gross income, under section 162(a) of the Internal Revenue Code, payments made to a competitor for agreeing not to bid on certain contracts. The petitioner, Ivan Allen Company had paid its competitor $205k over three years as part of an agreement that they would refrain from bidding against each other on office supply contracts with Georgia's state government agencies and institutions. The IRS disallowed these deductions and assessed deficiencies which led to this litigation. In their decision, the court ruled against Ivan Allen Co., stating that such payments were illegal under Georgia law and therefore violated public policy - making them non-deductible for federal income tax purposes according to Section 162(c)(2). This ruling established precedent regarding what types of business expenses can be deducted from gross income for tax purposes.

In the dissenting opinion for Ivan Allen Co. v. United States, Justice Douglas argued that the majority's decision to uphold a tax provision favoring small businesses over larger ones was inconsistent with previous rulings and principles of equal protection under law. He contended that there is no rational basis for Congress to discriminate against large businesses in this way, as it does not serve any legitimate public interest or policy objective. Furthermore, he pointed out that such discrimination could have harmful economic consequences by discouraging growth and competition among businesses. Therefore, he concluded that the tax provision should be struck down as unconstitutional.