In the United States v. Allen case of 1922, the Supreme Court ruled on a matter involving federal income tax law and its application to state municipal bonds. The defendant, Allen, was a resident of New York who had purchased municipal bonds issued by the city of Seattle in Washington State. He did not include interest earned from these bonds as part of his gross income when filing his federal income tax return for 1919. The government argued that this interest should be taxable under federal law. The court held that while Congress has broad powers to levy taxes under the Constitution's Sixteenth Amendment, it does not have unlimited power over all forms of revenue or property within states' jurisdiction without their consent. Therefore, according to Justice Oliver Wendell Holmes Jr., who delivered the opinion for a unanimous court (8-0), interest from state municipal bonds is exempted from federal taxation because such an imposition would infringe upon states' rights and sovereignty protected by our system's principles of dual sovereignty.

In the dissenting opinion for United States v. Allen, Justice McReynolds expressed his disagreement with the majority's interpretation of Section 35 of the Criminal Code. He argued that this section was not intended to cover cases where a person merely fails to perform an act required by law, but rather it is meant for situations where someone actively obstructs or impedes public officials in their duties. In this case, he believed that Allen did not commit any such obstruction; instead, she simply failed to file her income tax return on time as required by law. Therefore, according to Justice McReynolds' interpretation of Section 35 and its intent, Allen should not be held criminally liable under this provision for her failure to comply with tax laws.