strained taxpayers to refrain from using these percentages and actually to set them aside is immaterial; such setting aside was not required by the terms of the written contracts, and therefore did not satisfy § 26 (c) (2). Cf. Helvering v. Northwest Steel Mills, 311 U. S. 46, 52. Likewise, the fact that taxpayers actually irrevocably set the funds aside by anticipatory payments within the taxable year is of no moment, because these payments were voluntary and not pursuant to the command of the agreements.

That Congress did not intend that the statutory condition of an irrevocable setting aside would be satisfied by a contract which, without more, merely requires that a percentage of earnings of the taxable year be paid in some future year for the discharge of a debt, is evident, because such a construction reduces the alternative condition of § 26 (c) (2), relating to actual payment within the taxable year, to a meaningless superfluity. The date specified for payment would become immaterial for all purposes if the mere requirement by contract of future payment out of earnings in a given year automatically entails an "irrevocable setting aside" within that year.

Taxpayers here place great emphasis upon the different prepositions used in the alternative phrases-"to be paid within the taxable year in discharge of a debt, or to be irrevocably set aside within the taxable year for the discharge of a debt"-to show that payment may be made after the taxable year compatibly with § 26 (c) (2). True enough, payment can be postponed to a future year and a credit allowed if, but only if, the contract directing such future payments requires, in terms, the irrevocable setting aside within the taxable year of those future payments. The instant contracts do not so provide.

Respondents, the Ohio Leather Company and Warren Tool Corporation, contend that because they were on an accrual basis of accounting, they were entitled to the

credit by virtue of § 43,' which states that it is to be disregarded in computing the credit provided by § 27 and makes no statement with regard to § 26. The contention is without merit because principles of accrual accounting have no bearing on the question of whether a contract in terms requires a payment or an irrevocable setting aside. within the taxable year. The question here is not whether taxpayers made payment, either on a cash or an accrual basis, within the taxable year, but whether their contracts required them to pay or irrevocably set aside within the taxable year.

Taxpayers insist that it would be unreasonable to hold that only contracts expressly requiring payment or an irrevocable setting aside of a percentage of earnings within the taxable year satisfy § 26 (c) (2), because many corporations are unable to determine their earnings until after the close of their fiscal year, and consequently their contracts disposing of a percentage of earnings in satisfaction of debt customarily allow some short period after the close of the year, before payment is required. The legislative history of the 1936 Act reveals that Congress was conversant with the problem of computing earnings before the end of the taxable year, in connection with dividend payments, but declined to act. Corporations

8

7 “Sec. 43. PERIOD FOR WHICH DEDUCTIONS AND CREDITS TAKEN. "The deductions and credits (other than the dividends paid credit provided in section 27) provided for in this title shall be taken for the taxable year in which 'paid or accrued' or 'paid or incurred,' dependent upon the method of accounting upon the basis of which the net income is computed, . . ."

The original House bill (H. R. 12395, 74th Cong., 2d Sess., introduced at 80 Cong. Rec. 5978) provided for the use of the "dividend year" in computing undistributed net income under § 13 and dividend credit under § 15. Section 27 defined "dividend year" as the period beginning on the 15th day of the third month after the day before the beginning of the taxable year, and ending on the 14th day of the third month after the close of the taxable year. Thus, where the calendar

Opinion of the Court.

317 U.S.

with oral contracts, or written contracts executed after May 1, 1936, dealing with the disposition of profits in satisfaction of debts, also probably think § 26 (c) (2) is a most unreasonable statute. But arguments urging the broadening of a tax deduction statute beyond its plain meaning to avoid harsh results are more properly addressed to Congress than to the courts. White v. United States, 305 U. S. 281, 292.

Finally, taxpayers contend that the legislative history of § 26 (c) (2) supports the view that their contracts are covered by that section. An examination of the entire legislative background of the undistributed profits tax demonstrates, contrary to taxpayers' contentions, that Congress intended the tax to be imposed primarily upon income not distributed in the form of dividends, rather than only upon corporate income which was not distributed at all, and accordingly meant to limit severely credits for a corporation's payment of debts and precisely to define the area in which taxpayers were to be entitled to the credit. Thus, while the original House bill contained complicated provisions affording some relief to corporations with deficits, or contractually obligated either to pay debts or not to pay dividends, the Senate Finance

year and the taxable year coincided, the "dividend year" would cover the period from March 15 of the taxable year to March 14 of the following year. Congressman Hill, chairman of the subcommittee of the House Ways and Means Committee, explained that the "dividend year" was designed to allow corporations time to cast up their accounts after the close of the taxable year and then determine what dividends should be distributed. 80 Cong. Rec. 6005. Nevertheless, Congressman Hill later offered, and the House adopted, a committee amendment substituting the "taxable year" for the "dividend year." 80 Cong. Rec. 6308. See also 80 Cong. Rec. 10265.

9

Appeals to Congress because of the limited scope of § 26 (c) (2) were successful in 1938. Section 27 (a) (4) of the Revenue Act of 1938 allows a credit without reference to the particular terms or requirements of the indebtedness. See H. Rep. No. 1860, 75th Cong., 3d Sess., p. 4,

Committee struck them all out, substituting only a provision dealing with a credit for contractual prohibitions against the payment of dividends.10 An amendment offered from the Senate floor, giving a broad credit for all portions of adjusted net income used to purchase or replace machinery, equipment, etc., or "expended or applied during the taxable year for the liquidation, payment, or reduction of the principal of any bona-fide indebtedness outstanding at the date of enactment of this Act," was rejected." The much narrower amendment which became § 26 (c) (2) was then offered, with little explanation other than that it was intended to supplement the credit for contractual prohibition against dividend payments, the provision which became § 26 (c) (1).12

We conclude that the judgments below were erroneous. Accordingly they are reversed, and the causes remanded with directions to uphold the determination of the Commissioner.

Reversed.

WICKARD, SECRETARY OF AGRICULTURE, ET AL. v. FILBURN.

APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF OHIO.

No. 59. Argued May 4, 1942. Reargued October 13, 1942.-Decided November 9, 1942.

1. Pending a referendum vote of farmers upon wheat quotas proclaimed by the Secretary of Agriculture under the Agricultural Adjustment Act of 1938, the Secretary made a radio address in which he advocated approval of the quotas and called attention to the recent enactment by Congress of the amendatory act, later approved

10 This legislative history is discussed in Helvering v. Northwest Steel Mills, 311 U. S. 46, 50.

11 80 Cong. Rec. 9055, 9070, 74th Cong., 2d Sess.

12 80 Cong, Rec. 9071, 74th Cong., 2d Sess.

May 26, 1941. The speech mentioned the provisions of the amendment for increase of loans on wheat but not the fact that it also increased the penalty on excess production, and added that because of the uncertain world situation extra acreages of wheat had been deliberately planted and "farmers should not be penalized because they have provided insurance against shortages of food." There was no evidence that the subsequent referendum vote approving the quotas was influenced by the speech. Held, that, in any event and even assuming that the penalties referred to in the speech were those prescribed by the Act, the validity of the vote was not thereby affected. P. 117.

2. The wheat marketing quota and attendant penalty provisions of the Agricultural Adjustment Act of 1938, as amended by the Act of May 26, 1941, when applied to wheat not intended in any part for commerce but wholly for consumption on the farm are within the commerce power of Congress. P. 118.

3. The effect of the Act is to restrict the amount of wheat which may be produced for market and the extent as well to which one may forestall resort to the market by producing for his own needs. P. 127.

4. That the production of wheat for consumption on the farm may be trivial in the particular case is not enough to remove the grower from the scope of federal regulation, where his contribution, taken with that of many others similarly situated, is far from trivial. P. 127.

5. The power to regulate interstate commerce includes the power to regulate the prices at which commodities in that commerce are dealt in and practices affecting such prices. P. 128.

6. A factor of such volume and variability as wheat grown for home consumption would have a substantial influence on price conditions on the wheat market, both because such wheat, with rising prices, may flow into the market and check price increases and, because, though never marketed, it supplies the need of the grower which would otherwise be satisfied by his purchases in the open market. P. 128.

7. The amendatory Act of May 26, 1941, which increased the penalty upon "farm marketing excess" and included in that category wheat which previously had not been subject to penalty, held not invalid as retroactive legislation repugnant to the Fifth Amendment when applied to wheat planted and growing before it was enacted but harvested and threshed thereafter. P. 131.

43 F. Supp. 1017, reversed.