William O. Douglas

“ Tax statutes and tax regulations never have been static. Experience, changing needs, changing philosophies inevitably produce constant change in each. One making an election in the 1925 return took the risk that the method of treatment of depletion might be changed by the Congress, or, where power existed, by the Commissioner. Any other conclusion would make the application of changes pursuant to regulations, though prospective, dependent on fortuitous circumstances under which each taxpayer made such an election. ”

“ To be sure that Treasury Decision contained no notice of any projected change in the meaning of 'net income * * * from property' as used in § 114 (b) (3) . But in September 1927 there issued a General Counsel's Memorandum [9] in which it was stated that thereafter 'if a taxpayer elects to treat development expenditures as ordinary and necessary business expenses * * * in computing taxable net income, such expenditures must be deducted in determining the net income from the property, which amount is used as a limitation in the computation of the depletion allowance based on income'. ”

“ It does not mean that a regulation interpreting a provision of one act becomes frozen into another act merely by reenactment of that provision, so that that administrative interpretation cannot be changed prospectively through exercise of appropriate rule-making powers. ”