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Mr. W* E. Bouse 7. April 2, 1952 taxes assessed against a taxpayer with respect to inter** est earned on bonds issued by the Fort of Hew York Au­thority c r e a te d by the States of New York and New Jersey for the purpose of the development of the Port of New York* The Port Authority did not have the taxing power, but it had the power to borrow money, regulate opera­tions within the harbor area and to generally improve navigation and transportation in that area* It had con­structed several bridges and tunnels between New York and New Jersey, the cost of which was defrayed by the Issuance of bonds payable from revenue and by small preliminary grants of money from the states* This case arose under Section 22(b)(4)(A) and the regulations thereunder. It was contended by the Government that the Authority was not a political subdivision within the meaning of the Code because it was not performing essential Governmental functions which would have entitled it to implied consti­tutional tax immunity. The Commissioner argued that the provisions of the Act last above mentioned were intended to be no broader, than the constitutional limitations up­on the power of the Federal Government to tax the instru­mentalities of a state and further that the activities of the Authority were business activities which the Supreme Court had held in various decisions to be subject to tax­ation by the Federal Government. The majority of the Court held that the exemption provisions involved were intended to be broader than the constitutional immunity of the State from taxation by the Federal^ Government and that the provi­sions of the Code were intended to embrace political subdi­visions of the state which were engaged in public activi­ties such as those performed by the A u th o rity . The major­ity of the Court relied in part upon opinions of the Attor­ney General of the United States to the Secretary of the Treasury that the term "political subdivision" in the stat­ute was broad and comprehensive and denoted any division of the State acting for the purpose of carrying out a por­tion of the functions of the state which by long usage and inherent necessities of Government had always been regard­ed as public. The Attorney General of the United States had ruled that purposes such as the improvement of streets and public highways, the provision of sewerage, gas and