In the case of Franklin National Bank of Franklin Square v. New York in 1953, the U.S Supreme Court ruled that national banks could not be taxed by states under federal law. The bank had been assessed a franchise tax by New York State, which it challenged on grounds that such taxation was prohibited under Section 5219 of the Revised Statutes. This section stipulated that state taxation could only apply to shares in such associations held by any person or body corporate, and not directly on the capital or profits earned by these institutions themselves. The court agreed with this interpretation and concluded that since Congress had provided for specific methods through which states may impose taxes on national banking associations, no other forms of taxation were permissible unless explicitly authorized.

In the dissenting opinion for Franklin National Bank of Franklin Square v. New York, Justice Jackson argued that the majority's decision to allow national banks to branch within state lines without explicit permission from state authorities was a misinterpretation of federal banking laws. He contended that Congress intended for states to have control over banking within their borders and only allowed national banks as an exception where necessary. Therefore, he believed it was inappropriate for a national bank to establish branches in direct competition with state-chartered institutions without express authorization from the state government. This interpretation, according to Justice Jackson, would maintain balance between federal and state powers while still allowing both types of financial institutions to coexist harmoniously.