In the case of The Permanent Mission of India to the United Nations v. City of New York, 2006, the U.S Supreme Court ruled in favor of New York City's right to impose property taxes on portions of foreign countries' missions that are used for purposes other than diplomatic activities. The dispute arose when India and Mongolia refused to pay millions in property taxes levied by NYC on their mission buildings, arguing they were exempt under international law. However, a significant portion was being used as living quarters for diplomats rather than solely for diplomatic functions. The court held that while federal laws and international treaties protect certain properties from taxation (like embassy buildings), these protections do not extend to parts not strictly used for diplomatic purposes.

In the dissenting opinion for The Permanent Mission of India to the United Nations, et al. v. City of New York, New York case in 2006, Justice Clarence Thomas argued that international law does not support the majority's decision to allow local jurisdictions to tax foreign governments. He stated that this ruling contradicts a long-standing principle known as "diplomatic immunity," which protects diplomats and their property from being subject to local laws or taxes without consent from their home country. According to him, diplomatic properties should be exempted from taxation unless there is explicit agreement otherwise between countries involved because such an imposition could lead to reciprocal actions against U.S missions abroad and potentially harm American interests internationally.