In the 1923 case of Clallam County, Washington, et al. v. United States and United States Spruce Production Corporation, the Supreme Court ruled in favor of the U.S government and its corporation. The dispute arose over a tax assessment by Clallam County on property owned by the federal government's Spruce Production Corporation during World War I for aircraft production purposes. The county argued that since this was a business operation rather than strictly governmental function, it should be subject to local taxation laws. However, Justice Sutherland delivered an opinion stating that even though this corporation was created for war efforts and operated as a commercial entity with its own board of directors separate from direct government control; it still remained immune from state or local taxation because it was essentially an instrumentality of federal sovereignty performing essential governmental functions.

The dissenting opinion in the case of Clallam County, Washington, et al. v. United States and United States Spruce Production Corporation argued that the majority's decision to uphold a lower court ruling was incorrect because it failed to properly interpret federal law regarding land ownership rights. The dissenters believed that the county should have been allowed to tax certain properties owned by a government corporation as these lands were not held for public use but rather for commercial purposes. They contended that such interpretation could potentially lead to an unjust expansion of federal power at the expense of state and local governments' ability to raise revenue through property taxation. Furthermore, they expressed concern over potential abuse where corporations might seek refuge under governmental control simply for tax evasion purposes.