In the case of Mobil Alaska Pipeline Co. v. United States et al., 1977, the Supreme Court ruled in favor of the federal government and against Mobil Oil Corporation's Alaskan subsidiary. The dispute centered around whether or not oil companies could deduct from their gross income certain transportation costs incurred while moving oil through a pipeline owned by another company before selling it to consumers. The Internal Revenue Service (IRS) had denied these deductions, arguing that they were capital expenditures rather than ordinary and necessary business expenses as defined by tax law. In its decision, the court upheld this interpretation by IRS officials, stating that such costs should be considered part of an asset’s cost basis for depreciation purposes rather than deductible operating expenses.

In the dissenting opinion for Mobil Alaska Pipeline Co. v. United States, it was argued that the majority's interpretation of Section 7 of the Trans-Alaska Pipeline Authorization Act (TAPAA) was incorrect and overly broad. The dissenters believed that this section should not be interpreted to grant a blanket immunity from all state taxes to pipeline owners during construction, but rather only those directly related to property used in constructing or operating pipelines. They pointed out that such an expansive reading could potentially exempt these companies from any number of unrelated state taxes, which would have significant implications for Alaskan revenue streams and public services funded by these taxes. Furthermore, they contended that Congress did not intend such a sweeping tax exemption when passing TAPAA; instead, its goal was merely to expedite pipeline construction by preventing potential legal disputes over specific property-related levies.