In the United States v. Alabama case of 1940, the Supreme Court ruled that a state could not impose a tax on federal property. The State of Alabama had imposed an ad valorem tax on land owned by the Tennessee Valley Authority (TVA), which was created by Congress as part of President Roosevelt's New Deal to provide navigation, flood control and electricity generation in the region. In its decision, the court held that this taxation violated principles of intergovernmental immunity because it interfered with governmental functions performed by TVA for national purposes such as defense readiness and regional economic development. Therefore, under Supremacy Clause provisions in Article VI of U.S Constitution stating federal law is supreme over state law when there is conflict between two laws or regulations from different levels government, Alabama’s taxing power was deemed unconstitutional against federally-owned properties like those belonging to TVA.

In the dissenting opinion for United States v. Alabama, Justice McReynolds argued that the case should have been dismissed due to lack of jurisdiction. He contended that there was no real controversy between parties and thus, it did not meet the requirements for a judicial proceeding under Article III of the Constitution. Furthermore, he believed that this case represented an overreach by federal courts into state affairs which violated principles of federalism and states' rights. He maintained that issues related to voting registration were within states' purview and any problems should be addressed through political processes rather than court intervention. In his view, allowing such cases would open floodgates for similar lawsuits against states thereby undermining their sovereignty.