In the case of Newark Fire Insurance Co. v. State Board of Tax Appeals et al., 1938, the U.S Supreme Court ruled in favor of the New Jersey tax authorities, upholding their right to levy taxes on insurance companies based outside of New Jersey but conducting business within its borders. The Newark Fire Insurance Company, an Ohio-based corporation with a significant portion of its business conducted in New Jersey, challenged this taxation as unconstitutional under both due process and commerce clause grounds. However, the court found that since these out-of-state corporations were availing themselves to protections and benefits offered by New Jersey (such as access to courts for contract enforcement), it was fair and constitutional for them to contribute towards state revenue through taxation.

In the dissenting opinion for Newark Fire Insurance Co. v. State Board of Tax Appeals, Justice McReynolds argued that the majority's decision violated both the Due Process and Equal Protection Clauses of the Fourteenth Amendment. He contended that New Jersey's tax law unfairly discriminated against foreign corporations by imposing a higher tax rate on them than domestic companies, without any justifiable reason for this differential treatment. Furthermore, he believed that it was unconstitutional to base a corporation’s franchise tax on its entire capital stock when only part of those assets were used in business operations within New Jersey state lines. This taxation method resulted in an excessive burden being placed upon interstate commerce which contradicted previous court rulings and principles established under federal law.