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e e penalty of up to twelve percent (12%) of the amount of the tax and accrues interest at the rate of one percent (1%) per month. If the tax is not paid by the following July 1, an additional penalty of up to 15% may under certain circumstances be imposed by the City. The Code also makes provision for the split payment of taxes, discounts for early payment and the postponement of the delinquency date of taxes under certain circumstances. City's Ril!hts in the Event of Tax Delinquencies Taxes levied by the City are a personal obligation of the owner of the property. On January 1 of each year, a tax lien attaches to property to secure the payment of all taxes, penalties and interest ultimately imposed for the year on the property. The lien exists in favor of the State and each taxing unit, including the City, having the power to tax the property. The City's tax lien is on a parity with the tax liens of other such taxing units. A tax lien on real property taxes priority over the claims of most creditors and other holders of liens on the property encumbered by the tax lien, whether or not the debt or lien existed before the attachment of the tax lien. Personal property, under certain circumstances, is subject to seizure and sale for the payment of delinquent taxes, penalty and interest. At any time after taxes on property become delinquent, the city may file suit to foreclose the lien securing payment of the tax, to enforce personal liability for the tax, or both. In filing a suit to foreclose a tax lien on real property, the City must join other taxing units that have claims for delinquent taxes against all or part of the same property. Collection of delinquent taxes may be adversely affected by the amount of taxes owned to other taxing units, by the effects of market conditions on the foreclosure sale price, by taxpayer redemption rights or by bankruptcy proceedings which restrict the collection of taxpayer debts. 14 .~~ I ~. t . e e Collatcral Fcderal Income Tax ConseQucnces The following discussion is a summary of certain collateral federal income tax consequences resulting from the purchase, ownership or disposition of the Refunding Bonds. This discussion is based on existing statutes, regulations, published rulings and court decisions, all of which are subject to change or modification, retroactively. The following discussion is applicable to investors, other than those who are subject to special provisions of the Code, such as rmancial institutions, property and casualty insurance companies, life insurance companies, individual recipients of Social Security or Railroad Retirement benefits, certain S corporations with Subchapter C earnings and profits and taxpayers who may be deemed to have incurred or continued indebtedness to purchase tax-exempt obligations. INVESTORS, INCLUDING THOSE WHO ARE SUBJECT TO SPECIAL PROVISIONS OF THE CODE, SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX TREATMENT WHICH MAYBE ANTICIPATED TO RESULT FROM TIlE PURCHASE, OWNERSHIP AND DISPosmON OF TAX-EXEMPT OBLIGATIONS BEFORE DETERM1NING WHETHER TO PURCHASE THE REFUNDING BONDS. Interest on the Reflmding Bonds will be includable as an adjustment for "adjusted ~ings and profits" to calculate the alternative minimum tax imposed on corporations by section 55 of the Code. Section 55 of the Code imposes a tax equal to 20% for corporations, or 26% for noncorporate taxpayers (28% for taxable income exceeding $175,000), of the taxpayer's "alternative minimum taxable income", if the amount of such alternative minimum tax is greater than the taxpayer's regular income tax for the taxable year. Interest on the Refunding Bonds is includable in the "alternative minimum taxable income" of a corporation (other than a regulated investment company or a real estate investment trust) for purposes of determining the environmental tax imposed by section 59A of the Code. Section 59A of the Code imposes on a corporation an environmental tax, in addition to any other income tax imposed by the Code, equal to 0.12% of the excess of the modified alternative minimum taxable income of such corporation for the taxable year over $2 million. Interest on the Reflmding Bonds may be subject to the "branch profits tax" imposed by section 884 of the Code on the effectively-connected earnings and profits of a foreign corporation doing business in the United States. Under section 6012 of the Code, holders of tax-exempt obligation, such as the Refunding Bonds, may be required to disclose interest received or accrued during each taxable year on their returns of federal income taxation. Section 1276 of the Code provides for ordinary income tax treatment of gain recognized upon the disposition of a tax-exempt obligation, such as the Refunding Bonds, if such obligation was acquired at a "market discount" and if the fixed maturity of such obligation is equal to, or exceeds, one year from the date of issue. Such treatment applies to "market discount bonds" to the extent such gain does not exceed the accrued market discount of such bonds; although for this purpose, a de minimis amount of market discount is ignored. A "market discount bond" is one which is acquired by the holder at a purchase price which is less than the stated redemption price at maturity or, in the case of a bond issued at an original issue discount, the "revised issue price" (i.e., the issue price plus accrued original issue discount). The "accrued market discount" is the amount which bears the same ratio to the market discount as the number of days during which the holder holds the obligation bears to the number of days between the acquisition date and the final maturity date. Statc. Local and Foreil!n Taxes Investors should consult their own tax advisors concerning the tax implications of the purchase, ownership or disposition of the Refunding Bonds under applicable state or local laws. Foreign investors should also consult their own tax advisors regarding the tax consequences unique to investors who are not United States persons. Oualified Tax Exempt Oblil!ations Section 265 of the Code provides, in general, that interest expense incurred to acquire or carry tax-exempt bonds is not deductible for federal income tax purposes. For "Financial Institutions" (as used in such section), complete disallowance of such expense would apply to taxable years beginning after December 31, 1986, with respect to tax-exempt bonds acquired after August 7, 1986. Section 265(b) of the Code provides an exception to this rule for interest expense incurred by financial institutions to carry tax-exempt obligations (other than private activity bonds) which are designated by an issuer as qualified tax-exempt obligations. An issuer may only designate an issue as an issue of "qualified tax-exempt obligations" where the issuer expects to issue less than $10,000,000 of tax-exempt obligations during the calendar year in which the issue so 27