In the 1932 case of Indian Territory Illuminating Oil Co. v. Board of Equalization of Tulsa County, the U.S Supreme Court ruled in favor of Indian Territory Illuminating Oil Company (ITIO). The company had challenged a tax imposed by Tulsa County on oil and gas leases it held on restricted Osage tribal lands, arguing that these were federal properties and therefore exempt from local taxation under existing law. The court agreed with ITIO's argument, stating that since Congress had not explicitly allowed for such taxes to be levied against lessees operating on restricted Native American lands, they could not be enforced. This decision upheld the principle that state or local governments cannot impose taxes on federally controlled land without explicit congressional approval.

In the dissenting opinion for Indian Territory Illuminating Oil Co. v. Board of Equalization of Tulsa County, Justice Stone argued that the majority's decision was inconsistent with previous rulings and principles regarding state taxation powers over federal lands leased to private entities. He contended that a leasehold interest in restricted Indian lands should be considered personal property under Oklahoma law, thus subject to local taxation. Furthermore, he disagreed with the majority's view that Congress had intended to exempt such leases from state taxes when it passed legislation allowing Indians to lease their lands under federal supervision. Instead, he believed this exemption only applied to direct taxes on land ownership itself rather than indirect ones like those on leaseholds or improvements made by lessees.