dissenting: The petitioner herein has leased certain oil and gas lands from the State of Oklahoma. The lands covered by the lease were part of the lands which were conveyed by Congress to the State of Oklahoma at the time of its admission to statehood, and the restrictions which were attached to this land by the terms of the Enabling Act were accepted by the State of Oklahoma in its constitution and subsequently the legislature of the State passed such legislation as was necessary to carry out the terms imposed by Congress. These *1239lands are conveniently described as school lands. The major question in this proceeding is the right of the Federal Government to impose a tax upon the income derived by this petitioner from its operation of its leases on these State-owned school lands.
That the lands here under consideration are the property of the State of Oklahoma is not questioned. Likewise it appears to be conceded that the erection and maintenance of public schools is an essential governmental function of the State. This could not be otherwise in view of the Enabling Acts and other legislation under and by virtue of which Oklahoma became a State and the United States conveyed to it the school lands, the income of which is here under consideration. The issue has been narrowed to the sole question of the right to tax the income derived by a lessee from State-owned school lands.
The leading case on the right of a State to tax the income of a lessee of Federal lands is Gillespie v. State of Oklahoma, 257 U. S. 501. In holding that such income could not be taxed the United States Supreme Court said:
A tax upon the leases is a tax upon the power to malee them, and, could he used to destroy the power to malee them. 240 V. S. 530. The steps from this to the invalidity of the tax upon income from the leases is not long.
In cases where the principal is absolutely immune from interference, and inquiry is allowed into the sources from which net income is derived, and if a part of it comes from such a source, the tax is pro tanto void (Pollock v. Farmers Loan & Trust Co., 157 U. S. 429), a rule lately illustrated by Evans v. Gore, 253 U. S. 245, and applied in a case somewhat like the present by the Supreme Court of Hawaii (Oahu Ry. & Land Co. v. Pratt, 14. Haw. 126.) Whether this property could be taxed in any other form or not, it cannot be reached as profits or income from leases such as those before us. The same considerations that invalidate a tax upon the leases invalidate a tax upon the profits of the leases; and, stopping short of theoretical possibilities, a tax upon such profits is a direct hamper upon the effort of the United States to make the best terms that it can for its wards. (Italics supplied.)
This case is the converse of the Gillespie case. There the State sought to tax income derived by the lessee of Federal lands. Here the United States seek to tax the income derived by the lessee of State lands.
It is also the law that the United States may not tax the agencies’ instrumentalities or property of the States. In Van Brocklin v. State of Tennessee, 111 U. S. 151, the court said:
In Collector v. Day, 11 Wall. 113, it was adjudged that Congress had no power, even by an act taxing all income, to levy a tax upon the salaries of judicial officers of a State, for reasons similar to those in which it had been held in Dobbins v. Erie County Commissioners, 16 Pet. 435, that a State could not tax the salaries of officers of the United States. Mr. Justice Nelson, in delivering judgment, said: “ The general government, and the States, although both exist within the same territorial limits, are separate and distinct sover-*1240eignties, acting separately and independently of each other, within their respective spheres. The former in its appropriate sphere is supreme; but the States, within the limits of their powers not granted, or, in the language of the Tenth Amendment, * reserved are as independent of the general government as that government within its sphere is independent of the States.” 11 Wall. 124.
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The reasons for exempting all the property and income of a State, or of a municipal corporation, which is a political division of the State, from federal taxation, equally require the exemption of all the property and income of the national government from State taxation.
If there were any remaining doubts, the court set them at rest in Pollock v. Farmers Loan & Trust Co,, 157 U. S. 584, when it said:
As the States cannot tax the powers, the operations, or the property of the United States, nor the means which they employ to carry their powers into execution, so it has been held that the United States have no power under the Constitution to tax either the instrumentalities or the property of a State.
The United States have such powers and rights as have been granted to them by the several States. There is nothing in the Constitution which limits the right of either to tax the other. That these limitations exist is, however, beyond question. They grew out of the common necessity that each, within its own sphere, be free from interference from the other. I have been unable to find any intimation that the limitations are more rigorous in the case of one than in the case of the other.
If, then, as was held in the Gillespie case, the State may not tax the income derived by the lessee from the operation of lands leased from an instrumentality of the United States, it follows inevitably that the United States may not tax the income derived by a lessee from the operations of lands leased from the State of Oklahoma or one of its instrumentalities. The effect upon the lessor, of taxing the income of the lessee, is the same irrespective of which is the lessor and the same rule should be applied to either case. The income derived by a lessee on public school lands of the State of Oklahoma is not, in my opinion, subject to Federal taxation.
Maequettb, Phillips, and Sieekin agree with this dissent.