In Frelinghuysen v. Key, the United States Supreme Court considered the question of whether a state could impose a tax on the income of a foreign diplomat. The case arose when the State of New Jersey attempted to impose a tax on the income of a foreign diplomat, Mr. Key, who was employed by the United States government. The Secretary of State, Mr. Frelinghuysen, argued that the tax was unconstitutional because it violated the principle of diplomatic immunity. The Supreme Court agreed with the Secretary of State and held that the tax was unconstitutional. The Court reasoned that the United States government had exclusive authority to regulate the diplomatic relations of the United States with foreign nations, and that the State of New Jersey had no authority to interfere with this exclusive power. The Court further held that the tax was an interference with the exclusive power of the United States government and was therefore unconstitutional. In conclusion, the Supreme Court held that the State of New Jersey could not impose a tax on the income of a foreign diplomat. The Court reasoned that the United States government had exclusive authority to regulate the diplomatic relations of the United States with foreign nations, and that the State of New Jersey had no authority to interfere with this exclusive power.

In Frelinghuysen v. Key, the Supreme Court was asked to decide whether a state could tax bonds issued by the federal government. The majority opinion held that states do not have this power and cannot impose taxes on these bonds. Justice Field dissented from this decision, arguing that Congress had no authority to prevent states from taxing such bonds as long as they did so in an even-handed manner and without discrimination against any particular bondholder or class of bondholders. He argued further that if Congress wanted to protect its own interests it should pass legislation specifically prohibiting taxation of federal securities rather than relying on constitutional provisions which were never intended for such purpose. In conclusion, he stated that while he agreed with the majority's interpretation of existing law, he felt strongly that it was up to Congress alone to determine how best to protect its financial interests in regards to taxation of federal securities by individual states