In the 1934 case Domenech, Treasurer of Puerto Rico v. National City Bank of New York, the U.S. Supreme Court ruled in favor of the bank and against Puerto Rico's claim to tax certain bonds issued by it. The court held that under a Congressional Act from 1917, which granted U.S citizenship to residents of Puerto Rico and provided for its government structure, such taxation was prohibited as it would interfere with federal jurisdiction over interstate commerce and violate constitutional protections against double taxation. This decision underscored the complex relationship between federal law and territorial governance in matters related to fiscal policy.

In the dissenting opinion for Domenech, Treasurer of Puerto Rico v. National City Bank of New York, Justice Cardozo disagreed with the majority's decision that a tax imposed by Puerto Rico on foreign corporations was unconstitutional. He argued that the tax did not violate equal protection laws because it treated all non-resident corporations equally and did not discriminate against any particular group or nationality. Furthermore, he contended that there was no violation of due process as the bank had sufficient contacts with Puerto Rico to justify taxation. The justice also pointed out that this case involved an important issue about self-governance in territories like Puerto Rico; he believed they should have more autonomy over their fiscal policies without interference from federal courts unless absolutely necessary.