In the case of Bonet, Treasurer of Puerto Rico v. Yabucoa Sugar Co., 1938, the United States Supreme Court ruled on a dispute regarding tax laws in Puerto Rico. The Yabucoa Sugar Company had challenged an additional income tax imposed by the Insular Treasury Department of Puerto Rico, arguing that it was unconstitutional as it violated their rights under the Fifth Amendment's due process clause and amounted to double taxation. However, the court upheld this additional tax assessment against Yabucoa Sugar Co., ruling that there was no constitutional violation involved in imposing such taxes. The decision clarified that while U.S federal law did apply to territories like Puerto Rico, these territories also had certain powers allowing them to levy taxes independently from those imposed by Congress.

In the dissenting opinion for Bonet, Treasurer of Puerto Rico v. Yabucoa Sugar Co., Justice Black argued that the majority's decision to exempt certain corporations from taxation in Puerto Rico was inconsistent with previous rulings and violated principles of equal protection under the law. He contended that there was no rational basis for distinguishing between domestic and foreign corporations in this context, as both types of entities conducted business and earned income within Puerto Rican territory. Furthermore, he pointed out that such differential treatment could lead to arbitrary results depending on a corporation's formal place of incorporation rather than its actual economic activities or contributions to local society. Therefore, he believed it would be more equitable and consistent with constitutional values if all businesses operating in Puerto Rico were subject to similar tax obligations regardless of their corporate structure or origin.