John R. Hernandez - Page 6

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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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