In the United States v. Central Pacific Railroad Company case of 1890, the U.S. Supreme Court was tasked with determining whether or not a railroad company could be taxed on bonds that were issued to it by the federal government. The Central Pacific Railroad Company had been given these bonds as part of an effort to incentivize and fund transcontinental railway construction following the Civil War. However, when California attempted to tax these bonds, the company argued that they should be exempt from such taxation because they were instruments of federal credit and thus fell under national jurisdiction rather than state jurisdiction. The Supreme Court ruled in favor of California's right to levy taxes on these federally-issued bonds held by private corporations like Central Pacific Railroad Company. The court reasoned that while direct obligations (like loans) made by states towards federal entities are immune from state taxation due their inherent connection with governmental functions, this immunity does not extend to third-party recipients who receive benefits indirectly through government aid programs.

In the dissenting opinion for United States v. Central Pacific Railroad Company, the justice disagreed with the majority's interpretation of the Act of 1862 and its amendments. The dissent argued that these laws did not intend to grant railroads a permanent exemption from taxation on lands granted by Congress but rather aimed at promoting rapid construction of transcontinental railways through temporary incentives. They contended that once this purpose was achieved, such tax exemptions should cease to exist. Furthermore, they believed that it was unjustifiable for railroads to continue enjoying these benefits indefinitely while other property owners bore their fair share of public burdens in taxes. This view held that continued tax exemption would amount to an unwarranted privilege given by Congress without clear statutory language supporting it - a violation against principles of equality before law and sound public policy.