At the California Constitutional Convention of 1878–79, the state legislature drew up a new constitution that denied railroads "the right to deduct the amount of their debts mortgages from the taxable value of their property, a right which was given to individuals." Southern Pacific Railroad Company refused to pay taxes under these new changes. The taxpaying railroads challenged this law, based on a conflicting federal statute of 1866 which gave them privileges inconsistent with state taxation (14 Stat. 292, §§ 1, 2, 3, 11, 18).