In 1945, Congress enacted the McCarran-Ferguson Act, which declared that the business of insurance should be subject to the laws of the several states and that Congress’ silence on regulating the issue shouldn’t be construed as a barrier to state taxation or regulation. Accordingly, § 685 of the California Insurance Code imposed a retaliatory tax on out-of-state insurers doing business in California when the insurer’s State of incorporation imposed higher taxes on California insurers doing business in that State than California would otherwise impose on that State’s insurers doing business in California. § 685 was

Western & Southern Life Insurance Co., an Ohio corporation, paid under protest from 1965 to 1971, but they eventually filed a lawsuit in the California Superior Court to challenge § 685 under the Commerce Clause. The Superior Court found § 685 to be unconstitutional, but the California Court of Appeals reversed. The Supreme Court then granted certiorari.