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certificate is attributable to ad valorem property taxes or
special assessments has no bearing. Our holding was based upon
an analysis of the nature and substance of the tax certificate
itself. Thus, the fact that part of the interest earned on
petitioner's tax certificates may be attributable to special
assessments would not alter our decision.
The sale of Florida tax certificates is properly
characterized not as an exercise of municipal borrowing power,
but as an exercise of municipal taxing power. In contrast to a
bond offering, or the issuance of special assessment obligations4
to contractors to finance municipal improvements, the sale of tax
certificates is not an activity designed to raise new capital.
Instead, the sale of tax certificates is an effort to collect
outstanding taxes, which are part of the municipality's existing
capital.5 See Consolidated Edison Co. v. United States, 10 F.3d
68, 72 (2d Cir. 1993) ("we think it clear that the City [New
York] was not exercising its borrowing power in accepting Con
4 In this opinion, the terms "special assessment
obligations" and "special assessment indebtedness" are used
interchangeably to refer generally to nonrecourse securities
issued by a municipality to finance public improvements, with the
obligation for repayment limited to funds available from special
assessments on the properties benefited by the improvements.
5 See Barrow v. Commissioner, T.C. Memo. 1983-123, in which
"We cited Florida court opinions that characterize tax
certificates as nothing more than evidence of a lien created
solely to facilitate expedient enforcement of the obligation of a
landowner to pay taxes lawfully assessed." Hernandez v.
Commissioner, T.C. Memo. 1998-46 (citing Beebe v. State Supreme
Court, 151, So. 298, 299 (Fla. 1933)).
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