In the case of United States v. Buffalo Savings Bank, 1962, the Supreme Court ruled that interest on a mortgage held by a savings and loan association is taxable income under federal law. The dispute arose when Buffalo Savings Bank argued that it was exempt from paying taxes on such income due to its status as a mutual savings bank in New York State. However, the court disagreed with this interpretation and upheld an earlier decision made by the Second Circuit Court of Appeals which stated that these exemptions did not extend to federal tax laws. This ruling clarified how financial institutions are taxed at both state and national levels.

In the dissenting opinion for United States v. Buffalo Savings Bank, it was argued that the majority's interpretation of Section 371(a) of the Internal Revenue Code was incorrect and overly broad. The dissent contended that this section should not be used to impose a tax on mortgage guarantee insurance premiums paid by a mortgagor because these payments do not constitute income for the bank. Instead, they are more accurately described as an expense incurred by borrowers to secure their loans. Therefore, according to this view, such payments should be deductible from gross income rather than being treated as taxable income for banks or other lending institutions receiving them on behalf of borrowers who pay them directly or indirectly through higher interest rates charged on their loans secured with such insurance policies.