In the 1941 case of Gorman, City Treasurer of Kansas City, et al. v. Washington University, the U.S Supreme Court ruled in favor of Washington University. The university had been given a piece of land by a private citizen with the stipulation that it be used for educational purposes only and not be sold or transferred to another party without consent from his heirs. When Kansas City attempted to levy taxes on this property, arguing that since it was located within city limits it should contribute to local tax revenue, Washington University contested this action on grounds that they were exempt as an educational institution under Missouri law. The court held that because the donor's intent was clear - he wanted his gift used solely for education - and because state law recognized such institutions as tax-exempt entities due to their public benefit role in society; therefore taxing them would violate both these principles. This decision upheld non-profit organizations' right against taxation when operating within their stated mission parameters.

In the dissenting opinion for Gorman, City Treasurer of Kansas City, et al. v. Washington University (1941), Justice Frank Murphy argued that the majority's decision to uphold a tax exemption for property owned by Washington University in St. Louis but used and rented out commercially was incorrect. He contended that such an interpretation of Missouri's constitution would allow any charitable organization to engage in commercial activities without paying taxes as long as they use their profits for educational or charitable purposes. This could lead to unfair competition with businesses who have no such exemptions and are required to pay taxes on all income generated from their properties regardless of how they use it afterwards.