Court Opinion

ID: 9449023
Source: CourtListenerOpinion
Date Created: 2023-08-03 23:53:04.985971+00
Date Added: 2024-06-11T17:31:39.337405
License: Public Domain

JONES, Chief Judge
(concurring in part in the result).
I have no doubt that the plaintiff or any business concern would be entitled to a deduction for trade or goodwill advertising simply in the interest of securing public understanding. So long as such advertising is not propaganda directly or indirectly influencing legislation, such advertising is an avenue of good public relationship in the normal course of regular business operations.
In modern times every successful business in the United States finds it necessary to advertise regularly in the ordinary conduct of its operations, not only for business purposes but as a basis of fair and honorable operations. Emerson is reputed to have said many years ago that if a man can write a better book, preach a better sermon, or build a better mousetrap than his neighbor, even though he builds his house in the woods, the world will make a beaten path to his door. That was probably at least measurably true in the circumstances that existed at that time. But in the grueling competition of today the man would probably starve to death before the public found out that he was in the woods. In the tremendous competition of today he would be more like the bashful boy who threw his sweetheart a kiss in the dark. He knew what he was doing but nobody else did.
In the current period, if a business concern should try to operate in the dark it would die on the vine, go broke and be forgotten, or, if operating in a restricted field, would probably bring down upon itself the wrath of the public even though due to a misunderstanding. By its silence it would thus sow the seed of its own destruction either by public revolt or by misunderstanding, or by competition that is wise enough to cultivate an understanding public through the medium of judicious advertising. If that man in the woods, however, would do a little intelligent advertising some enterprising concern would probably make newsreels of him and have an interview in which he and his wife would be asked to tell just how it was all done, including some stress stories of long and persistent struggles and heartbreaks on the way to final success.
No doubt the plaintiff, with all other business concerns, knows the value of and probably engages in appropriate goodwill advertising.
The question naturally arises: Is the advertising in question this type or is it intended primarily for the purpose of influencing legislation or action by the Congress, the exploitation of propaganda, or advertising other than trade advertising?
We have read each of the ads that have been submitted in the record and we can reach no other reasonable conclusion than that they were definitely all of the primary propaganda type intended to stir *446up such a movement as would directly or indirectly affect action to be taken by the Congress.
Plaintiff makes a distinction between what is known as a legislative bill which is usually in the form of a permanent statute, or an appropriation bill, which has for its purpose simply the carrying out — usually for just one year — all or a part of the enacted legislation. There is a distinction, especially in the House, between the manner in which the two kinds of congressional actions are considered and classified. But this is merely a matter of rules and convenience of procedure. The substance remains the same. Most legislation is inanimate and lifeless without the energizing appropriation. Withholding appropriations in this type of legislation renders such legislation useless, thus destroying its whole purpose. Reducing the essential appropriation partially cripples its effectiveness.
Where, as here, legislation is dependent on affirmative action to become effective, the legislative act is not complete until the appropriation is made. No action of any kind can be taken until funds are available. So any effort to induce the Congress to withhold or substantially reduce the appropriation which is essential to the life and effectiveness of the legislative authorizing act becomes an effort to defeat legislation. However, any such distinction becomes relatively unimportant in the instant case in view of the broad terms of the Treasury Regulation which forbids deductions for expenses incurred in propaganda and “advertising other than trade advertising.”
Also bearing on the subject is a provision enacted by the Congress entitled “Title III — Regulation of Lobbying Act,” Chapter 753, 60 Stat. 839, 840. Section 302(e) contains the following language:
“The term ‘legislation’ means bills, resolutions, amendments, nominations, and other matters pending or proposed in either House of Congress, and includes any other matter which may be the subject of action by either House.”
Thus, clearly the purpose of this provision was to include under the ban efforts to influence any action taken by the Congress which, of course, would include a legislative measure or an appropriation bill enacted pursuant to legislative authorization.
In the light of the wording of the advertising and especially in view of this declaration of the Congress, I do not think the plaintiff is entitled to a deduction for the type of advertising shown by the record.
The question remains of the allowance of a deduction for attorneys’ fees. I think that this matter comes in a different category.
In the complication of laws and reports under which modern business must be operated, there is a vital need for counsel. The Commissioner has found that the work of the counsel, Mr. Arnold, was limited to the legal questions involved and that his advice and appearance were on that basis. He so stated in the oral argument and the statement was not questioned by defendant’s counsel.
It appears from the record that the operation and planning of the Southwestern Power Administration in this particular area was done under an executive order issued pursuant to the authorizing act and that the Southwestern Electric Power Company made its plans in accordance therewith. Of course such plans would necessarily be limited to the framework of the act under which the operations were being pursued. Certainly, the business concern was entitled to have counsel advise whether the planners stayed within the limits of the act. Even though it may have stayed within its terms it would be altogether advisable and proper, almost necessary, to have legal advice on whether it had done so.
One of the most highly prized rights of the Anglo-Saxon tradition is to have a day in court and the right to be represented by counsel. I have always thought that one of the chief glories of the Constitution is that the Nation cannot take the shirt from the back of the street *447ragamuffin without either securing the lad’s consent or paying him for the requisitioned rags. A man is entitled to counsel both in civil and criminal matters. In the light of this record, I think plaintiff is entitled to have a deduction for the legal fees and expenses incurred in connection with the services of Mr. Arnold as described by the trial commissioner. The record rather clearly indicates that the other counsel and officials were engaged largely in connection with proposed legislation or action by the Congress, or at least the record is not clear that this is not true.
Our attention has been called to the provisions of section 3 of the Revenue Act of 1962, which permit deductions for expenses incurred in connection with appearances before, or submission of statements to, congressional committees or individual members of the Congress. But this section, especially when read in connection with the House and Senate Reports, would indicate that the law was otherwise prior to the 1962 enactment. At least the wording does not seem to indicate that the amendment was merely a clarifying declaration of what the intention of the Congress had been in the earlier enactment.
Hence, I concur with the majority that the advertising expenses are nondeductible. I would limit plaintiff’s recovery to the fees and traveling expenses of the chief counsel, Mr. Arnold.