In the case of Long, Commissioner v. Rockwood (1927), the United States Supreme Court dealt with a dispute over taxation on federal bonds owned by a Massachusetts resident. The state had imposed an inheritance tax on the estate of George H. Norman, which included these bonds. The executor of his will, Arthur D. Hill, contested this tax in court arguing that it was unconstitutional for states to levy taxes on federal securities. The Supreme Court ruled in favor of Hill and against William A. Long who was serving as Commissioner of Corporations and Taxation for Massachusetts at that time; thus invalidating the state's attempt to impose inheritance taxes on federally issued bonds held by residents within its jurisdiction. This decision reinforced previous rulings establishing immunity from local or state taxation for instruments used by the U.S government to perform constitutional functions - such as issuing debt securities - under principles known as intergovernmental tax immunity doctrine.

In the dissenting opinion for Long, Commissioner v. Rockwood, Justice Holmes argued that the state of Massachusetts had not violated any constitutional rights by imposing a tax on federal securities held in trust by a resident of another state. He contended that there was no interference with interstate commerce or violation of due process because the trustee voluntarily chose to reside and hold property in Massachusetts, thus subjecting himself to its laws and taxes. Furthermore, he asserted that it was within the power of each individual state to decide how they would levy their own taxes as long as it did not infringe upon federal authority or violate fundamental principles of justice. Therefore, according to Holmes' view, since this case involved neither issue but rather an internal matter concerning taxation policy within one particular state's jurisdictional boundaries - which is traditionally left up to states themselves - there should be no grounds for declaring such action unconstitutional at all.