In the United States v. Chicago, Milwaukee, St. Paul & Pacific Railroad Co., et al., 1940 case, the U.S Supreme Court ruled on a dispute involving federal income tax deductions for railroad companies. The railroads had been deducting from their gross incomes amounts paid into reserve funds to cover future expenses related to maintaining and replacing equipment and property as per an Interstate Commerce Commission (ICC) order. However, the Internal Revenue Service (IRS) argued that these were not ordinary or necessary business expenses under Section 23(a) of the Revenue Act of 1936 and therefore should not be deducted from taxable income. The court sided with IRS stating that while ICC's orders might have made such payments mandatory for railroads; they did not automatically qualify them as deductible under federal tax laws unless they met criteria set by Congress in its taxing statutes i.e., being 'ordinary' and 'necessary'. It held that these reserves were essentially capital investments rather than current operational costs since they aimed at securing future benefits for companies instead of meeting present needs.

In the dissenting opinion for United States v. Chicago, Milwaukee, St. Paul & Pacific Railroad Co., it was argued that the Interstate Commerce Commission (ICC) did not have the authority to determine whether a railroad company could abandon its line of operation without approval from state commissions. The dissenting justices believed that this power should be reserved for individual states and their regulatory bodies rather than being centralized in a federal agency like ICC. They contended that such an interpretation would infringe upon states' rights and disrupt the balance between federal and state powers as established by Constitution's commerce clause. Furthermore, they expressed concern over potential negative impacts on local communities if railroads were allowed to cease operations without any input or oversight from local authorities who are more familiar with regional needs and conditions.