In the United States v. New Mexico case of 1977, the Supreme Court ruled that federal agencies must pay state taxes for water used on public lands. The dispute arose when New Mexico imposed a tax on the U.S Forest Service's use of water for recreational purposes in national forests within its borders. The government argued that it was exempt from such taxation under federal law and supremacy clause of the Constitution which states that federal law supersedes state laws when they conflict. However, the court held by a 6-3 majority decision that there was no general immunity for federal instrumentalities from state taxation and unless Congress explicitly stated otherwise, normal tax rules applied to them as well. This ruling established an important precedent regarding intergovernmental relations and resource management.

In the dissenting opinion for United States v. New Mexico, Justice William J. Brennan Jr., joined by Justices Thurgood Marshall and Byron White, argued that the majority's interpretation of federal law was too narrow and failed to consider Congress' intent in enacting it. They contended that the 1905 Use Book did not limit water use to irrigation purposes only but allowed other beneficial uses as well, including recreational activities like fishing and wildlife preservation which are important aspects of national forests’ multiple-use mandate under modern statutes such as Multiple-Use Sustained-Yield Act of 1960 and National Environmental Policy Act (NEPA) of 1969. The dissenters believed this broader understanding is more consistent with evolving public attitudes towards forest conservation over time since these laws were enacted after significant changes in societal values regarding natural resources management occurred post-1905 period when Use Book was written.