In the case of Krauss Brothers Lumber Company v. Mellon et al., 1927, the U.S Supreme Court was tasked with determining whether a tax imposed on domestic corporations by Section 215(a) of Revenue Act (1924 and 1926), based on income derived from sources within United States, violated constitutional rights when applied to an American corporation's income earned in foreign countries. The plaintiff, Krauss Brothers Lumber Co., argued that this imposition infringed upon their right to equal protection under law as it did not apply equally to all domestic corporations - only those earning abroad were affected. However, the court ruled against them stating that Congress had authority over taxation matters and could legally differentiate between various classes for tax purposes if there was reasonable ground for doing so. In this instance, they found no violation of equality since differentiation was based on geographical source of income which is a legitimate factor in taxation policy.

In the dissenting opinion for Krauss Brothers Lumber Company v. Mellon et al., Justice Holmes argued that the tax imposed on lumber manufacturers was not a direct tax, but an excise tax. He contended that it was levied upon the business of manufacturing and selling lumber, rather than on property or income derived from property. Therefore, he believed it should be considered constitutional under Congress's power to levy excise taxes provided in Article I Section 8 of the Constitution. Furthermore, he disagreed with majority’s interpretation of Pollock v Farmers’ Loan & Trust Co., arguing that this case did not establish a principle applicable to all forms of taxation other than those explicitly mentioned in Constitution as being subject to apportionment among states according to their populations.