In the 1939 case of Delaware River Joint Toll Bridge Commission v. Colburn et al., the U.S. Supreme Court ruled in favor of the Delaware River Joint Toll Bridge Commission, a bi-state entity created by Pennsylvania and New Jersey to manage bridges across the river. The court held that this commission was immune from state taxation under federal law because it was an agency performing essential government functions, not a private corporation subject to state taxes. The defendants, tax officials from Bucks County, Pennsylvania had attempted to impose property taxes on land owned by the commission for bridge purposes but were denied due to this ruling.

In the dissenting opinion for Delaware River Joint Toll Bridge Commission v. Colburn et al., Justice Black argued that the majority's decision to grant immunity from state taxation to an interstate agency was a dangerous expansion of federal power at the expense of states' rights. He contended that such agencies should not be exempted from paying taxes simply because they were created by compact between two states and approved by Congress, as this would allow them to operate free from any financial responsibility towards the communities in which they functioned. Furthermore, he expressed concern about potential abuse of this privilege if other corporations sought similar arrangements in order to evade their tax obligations. In his view, it was crucial for these entities to contribute financially through taxation just like any other corporation or individual within a state's jurisdiction.