In the 1941 case United States v. New York, the U.S. Supreme Court ruled that a state cannot impose taxes on federal government activities without consent from Congress. The dispute arose when New York State attempted to levy an estate tax upon the transfer of securities owned by a deceased resident but held in trust by two out-of-state corporations acting as trustees for bonds issued by Federal Land Banks and Joint Stock Land Banks under federal law. The court found this action unconstitutional based on Article I, Section 8, Clause 17 of the Constitution which grants exclusive legislative power over federally-owned property to Congress unless otherwise ceded to states through legislation or constitutional amendment. This decision reinforced principles of federalism and supremacy clause jurisprudence while also highlighting limitations placed upon state taxation powers with respect to federally-related matters.

In the dissenting opinion for United States v. New York, 1941, Justice Frankfurter argued that the federal government did not have authority to impose a tax on state activities without clear congressional intent. He contended that such taxation could interfere with states' ability to perform their functions and potentially undermine federalism principles. The majority's interpretation of the Public Salary Tax Act was too broad in his view as it allowed for taxation of state employees who were carrying out essential governmental duties which he believed should be exempt from such taxes under intergovernmental tax immunity doctrine. He emphasized respect for boundaries between different levels of government and cautioned against overstepping these lines without explicit legislative direction.