In United States v. B. & 0. Ry.51 it was held that the United States could not collect a tax on money due a municipality of one of the States, the court saying: "A municipal corporation like the City of Baltimore, is a representative not only of the State, but is a portion of its governmental power. It is one of its creatures, made for a specific purpose, to exercise within a limited sphere the powers of the State. The State may withdraw these local powers of government at pleasure, and may, through its legislature or other appointed channels, govern the local territory as it governs the State at large. It may enlarge or contract its powers or destroy its existence. As a portion of the State in the exercise of a limited portion of the powers of the State, its revenues, like those of the State, are not subject to taxation." 52

In Mercantile Nat Bank v. New York53 it was decided that the United States might not tax bonds issued by a State or one of its municipal bodies, under its authority, and held by private corporations.

In the Income Tax case54 it was held that a federal tax-might not be levied on income derived from municipal bonds.

In Ambrosini v. United States55 the court held that bonds given to secure the proper enforcement of state laws in respect to the sale of intoxicating liquors, were not subject to federal taxation.