Item 1. Business.
General Development of Business and Narrative Description of Business
American Tax Credit Properties L.P. (the "Registrant"), a Delaware limited partnership, was formed on February 12, 1988 to invest primarily in leveraged low-income multifamily residential complexes (the "Property" or "Properties") that qualified for the low-income tax credit in accordance with Section 42 of the Internal Revenue Code (the "Low-income Tax Credit"), through the acquisition of limited partner equity interests (the “Local Partnership Interests”) in partnerships (the "Local Partnership" or "Local Partnerships") that are the owners of the Properties. The Local Partnerships hold their respective Properties in fee. Registrant invested in nineteen such Properties, including one Property that also qualified for the historic rehabilitation tax credit in accordance with Section 47 of the Internal Revenue Code (the “Historic Rehabilitation Tax Credit”). Registrant considers its activity to constitute a single industry segment.
Richman Tax Credit Properties L.P. (the "General Partner"), a Delaware limited partnership, was formed on February 10, 1988 to act as the General Partner of Registrant. The general partners of the General Partner are Richard Paul Richman and Richman Tax Credit Properties Inc. ("Richman Tax"), a Delaware corporation that is wholly-owned by Richard Paul Richman. Richman Tax is an affiliate of The Richman Group, Inc. ("Richman Group"), a Delaware corporation founded by Richard Paul Richman in 1988.
The Amendment No. 2 to the Registration Statement on Form S-11 was filed with the Securities and Exchange Commission (the "SEC") on April 29, 1988 pursuant to the Securities Act of 1933 under Registration Statement File No. 33-20391, and was declared effective on May 4, 1988. Reference is made to the prospectus dated May 6, 1988, as supplemented by Supplement No. 1 and Supplement No. 2 dated August 11, 1988 and September 20, 1988, respectively, filed with the SEC pursuant to Rule 424(b)(3) under the Securities Act of 1933 (the "Prospectus"). Pursuant to Rule 12b-23 of the SEC's General Rules and Regulations promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the description of Registrant's business set forth under the heading "Investment Objectives and Policies" at pages 51 through 75 of the Prospectus is hereby incorporated into this Annual Report by reference.
On May 11, 1988, Registrant commenced, through Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), the offering of up to 50,000 units of limited partnership interest (the "Units") at $1,000 per Unit to investors (the “Limited Partners”). On August 19, 1988 and November 15, 1988, the closings for 23,603 and 17,683 Units, respectively, took place, amounting to aggregate Limited Partners' capital contributions of $41,286,000.
Registrant's primary objective, to provide Low-income Tax Credits to the Limited Partners, has been completed. The relevant state tax credit agency allocated each of the Local Partnerships an amount of Low-income Tax Credits, which are generally available for a ten year period from the year the Property is placed in service (the “Ten Year Credit Period”). The Ten Year Credit Period was fully exhausted with respect to all of the Properties as of December 31, 2003. The required holding period of each Property, in order to avoid Low-income Tax Credit recapture, is fifteen years from the year in which the Low-income Tax Credits commence on the last building of the Property (the "Compliance Period"). The Compliance Period of all of the Local Partnerships had expired as of December 31, 2004. In addition, certain of the Local Partnerships entered into agreements with the relevant state tax credit agencies whereby the Local Partnerships must maintain the low-income nature of the Properties for a period which exceeds the Compliance Period (in certain circumstances, up to 50 years from when the Property is placed in service, but commonly 30 years from the date any such Property is placed in service), regardless of a sale of the Properties by the Local Partnerships after the Compliance Period (the “Extended Use Provisions”). Note that the existence of Extended Use Provisions does not extend the Compliance Period of the respective Local Partnerships. However, such provisions may limit the number and availability of potential purchasers of the Properties. Accordingly, a sale of a Property may happen well after the expiration of the Compliance Period and/or may be significantly discounted.
Disposal of Local Partnership Interests
Registrant is in the process of disposing of its Local Partnership Interests. As of June 2011, Registrant owns six of the nineteen Local Partnership Interests originally acquired. Registrant has served a demand on the local general partners (the “Local General Partners”) of all remaining Local Partnerships to commence a sale process to dispose of the Properties. In the event a sale cannot be consummated, it is the General Partner’s intention to sell or assign Registrant’s Local Partnership Interests. Following the final disposition of its Local Partnership Interests, Registrant intends to dissolve. It is uncertain as to the amount, if any, that Registrant will receive with respect to each specific Property from such sales or assignments. There can be no assurance as to when Registrant will dispose of its remaining Local Partnership Interests.
Item 1. Business (Continued).
Financial Information About Industry Segments
Registrant is engaged solely in the business of owning a Local Partnership Interest in each of the Local Partnerships. A presentation of information regarding industry segments is not applicable and would not be material to an understanding of Registrant’s business taken as a whole. See Item 8 below - Financial Statements and Supplementary Data.
Competition
Pursuant to Rule 12b-23 of the SEC’s General Rules and Regulations promulgated under the Exchange Act, the description of Registrant's competition, general risks, tax risks and partnership risks set forth under the heading "Risk Factors" at pages 21 through 35 of the Prospectus is hereby incorporated into this Annual Report by reference.
Employees of Registrant
Registrant employs no personnel and incurs no payroll costs. All management activities of Registrant are conducted by the General Partner. An affiliate of the General Partner employs individuals who perform the management activities of Registrant. This entity also performs similar services for other affiliates of the General Partner.
Regulation
The following is a brief summary of certain regulations applicable to Registrant and is not, nor should it be considered, a full summary of the law or all related issues. Other than as set forth above and below, Registrant is not aware of any existing or probable federal, state or local governmental regulations, or any recent changes to such governmental regulations, which would have an effect on Registrant’s business.
Virtually all of the Properties owned by the Local Partnerships have some form of a government funded rental subsidy that affords the low-income tenants the ability to reside at the Properties. During the period that a subsidy agreement between the United States Department of Housing and Urban Development (“HUD”) and a Local Partnership is in existence, the Local Partnership Interest of such Local Partnership may not be sold, and the Property may not be transferred by the Local Partnership to another entity, without HUD’s approval, which may be subject to various conditions. In particular, the transfer of title of the Properties by the Local Partnerships is expected to be required to be closed in escrow pending HUD approval. In addition, as a condition to certain disposals, Registrant anticipates that HUD will require the Local Partnerships to dedicate resources to maintenance in order to correct deficiencies in the physical condition of the Properties. Correction of such deficiencies will probably require expenditures of significant amounts of funds, thus effectively reducing the amount of any net proceeds from the sale of the Property. There can be no assurance that the required governmental agencies will approve any of the requested transfers, that such approvals will be received in a timely manner or that other conditions will not be imposed for such approvals. The failure to obtain or a delay in obtaining any required approvals would have adverse consequences to the Limited Partners.
In the case of certain of the Local Partnerships, the local housing authority has the right, for a period of time, to find a purchaser for the Property prior to the Local General Partner beginning its own efforts to sell the Property. There can be no assurance that the local housing authorities will be successful in finding purchasers for such Properties, which may adversely impact the timing of Property sales.
Certain of the Local Partnerships are subject to restrictions on the amount of annual cash distributions to partners under the terms of such Local Partnerships’ loan, regulatory or other agreements.
Registrant is not aware of any non-compliance by the Local Partnerships with respect to federal, state and local provisions regulating the discharge of material into the environment or otherwise relating to the protection of the environment, and is not aware of any condition that would have a material effect on the capital expenditures or competitive position of Registrant.
Item 1A.
Item 1A. Risk Factors.
Risks Relating to Registrant’s Business and Industry
There is no guarantee that the Properties will be sold or, if sold, that Registrant would receive any proceeds.
As noted above in Item 1 - Business, Registrant has served a demand on the Local General Partners of all remaining Local Partnerships to commence a sale process to dispose of the Properties. However, the market of interested buyers of the Properties is limited. Some of the factors which negatively impact the marketability of the Properties, or equivalently, the Local Partnership Interests, include:
· the Extended Use Provisions;
· the substantial remaining mortgage balances on the Properties, which are typically very near the initial balances as a result of the heavily subsidized debt of the Local Partnership and the lengthy (usually near 40-year) amortization period of the debt; and
· poor economic conditions.
It is generally expected, therefore, that in the event a sale of a Property by a Local Partnership can be consummated, the net proceeds of such sale, after repayment of any outstanding debt and other liabilities, are not likely to be significant. Moreover, a portion of the net proceeds from the sale of a Property by a Local Partnership may be payable to the Local General Partner and/or affiliates thereof for prior operating advances and deferred fees. As such, there will likely not be significant proceeds, if any, upon a sale of a Property that will be available for distribution by the Local Partnership to Registrant. In the event a sale cannot be consummated, it is the General Partner’s intention to sell or assign Registrant’s Local Partnership Interests. However, it is not possible to ascertain the amount, if any, that Registrant will receive with respect to each specific Property from such sales or assignments.
The Local Partnerships may be required to continue to maintain the low-income nature of the Properties beyond the Compliance Period under agreements with state tax credit agencies.
As noted above in Item 1 - Business, certain of the Local Partnerships entered into agreements containing Extended Use Provisions with the relevant state tax credit agencies whereby the Local Partnerships must maintain the low-income nature of the Properties for a period which exceeds the Compliance Period (in certain circumstances, up to 50 years from when the Property is placed in service, but commonly 30 years from the date any such Property is placed in service), regardless of a sale of the Properties by the Local Partnerships after the Compliance Period. Although the Extended Use Provisions do not extend the Compliance Period of the respective Local Partnerships, such provisions may limit the number and availability of potential purchasers of the Properties. Accordingly, a sale of a Property may happen well after the expiration of the Compliance Period and/or may be significantly discounted.
Properties owned by the Local Partnerships are subject to certain risks relating to the real estate industry in general that are outside of the control of the Local Partnerships or Registrant and that may have an adverse effect on Registrant’s investment in such Local Partnerships.
Registrant’s investment in the Local Partnerships is subject to the risks associated with multi-family rental property and real estate in general, including retail, commercial and residential real estate. Such risks, which are subject to change and are not in the control of Registrant, include risks relating to:
·
the adverse use of adjacent or neighborhood real estate;
·
regulated rents, which may adversely impact rent increases;
·
utility allowances, which may adversely impact rents charged to tenants from year to year in certain locations;
·
the inability of tenants to pay rent in light of current market conditions;
·
changes in the demand for or supply of competing properties;
·
changes in state or local tax rates and assessments;
Item 1A. Risk Factors (Continued).
·
increases in utility charges;
·
unexpected expenditures for repairs and maintenance;
·
the discovery of previously undetected environmentally hazardous conditions;
·
costs associated with complying with the Americans with Disabilities Act;
·
uninsured losses relating to real property or excessively expensive premiums for insurance coverage;
·
lawsuits from tenants or guests in connection with injuries that occur on the Properties;
·
changes in local economic conditions; and
·
changes in interest rates and the availability of financing (including changes resulting from current market conditions).
The occurrence of any of the above risks could have a negative impact on the operating results of such Properties and the respective Local Partnerships and, in turn, may render the sale or refinancing of the Properties difficult or unattractive, which could adversely affect Registrant’s investment in such Local Partnerships.
The modification or elimination of government rental subsidies on which the Local Partnerships rely would require the Local Partnerships to use existing funds or obtain additional funds to continue to operate the respective Properties. Because Registrant’s investments in the Local Partnerships are highly leveraged, it would be highly difficult to obtain such additional funds.
Virtually all of the Properties owned by the Local Partnerships have some form of a government funded rental subsidy, which affords the low-income tenants the ability to reside at the Properties. The Local Partnerships are extremely reliant on such subsidies. If the respective rental subsidy programs were to be materially modified or eliminated, the Local Partnerships’ rental revenue would likely be significantly reduced. To the extent that revenues are not sufficient to meet operating expenses and service the respective mortgages of the Properties, such Local Partnership would be required to use reserves and any other funds available to avoid foreclosure of the subject Property. Registrant’s investments in the Local Partnerships are highly leveraged, and there can be no assurance that additional funds would be available to any Local Partnership or Registrant, if needed. In addition, there can be no assurance that, when a Property is sold, the proceeds from a sale will be sufficient to pay the balance due on the mortgage loans or any other outstanding indebtedness to which the Local Partnership is subject.
Limited Partners may not be able to use all of the carried forward Low-income Tax Credits.
While a limited exception is provided for Low-income Tax Credits in the case of individuals, tax losses and credits allocated to a Limited Partner who is an individual, trust, estate or personal service corporation generally may be used to reduce the Limited Partner’s tax liability only to the extent that such liability arises from passive activities. Therefore, tax losses and credits allocated to such a Limited Partner are not expected to be available to offset tax liabilities that arise from salaries, dividends and interest and other forms of income. In addition, Low-income Tax Credits cannot be used to offset alternative minimum tax. Accordingly, there is no guarantee that Limited Partners will be able to utilize all of the carried forward Low-income Tax Credits.
Risks Relating to Ownership of Units of Limited Partnership Interest of Registrant
There is no existing market for the Units.
There is no trading market for Units and there are no assurances that any market will develop. In addition, the Units may be transferred only if certain requirements are satisfied, including requirements that such transfer would not impair Registrant’s tax status for federal income tax purposes and would not be a violation of federal or state securities laws. Accordingly, the Limited Partners may not be able to sell their Units promptly and bear the economic risk of their investment for an indefinite period of time.
Item 1A. Risk Factors (Continued).
Under certain circumstances, Limited Partners of Registrant may incur out-of-pocket tax costs.
At some point, Registrant’s operations (including the sale or refinancing of the Properties owned by the Local Partnerships) may generate less cash flow than taxable income, and the income, as well as the income taxes payable with respect to Registrant’s taxable income, may exceed cash flow available for distribution to the Limited Partners in such years. This may result in an out-of-pocket tax cost to the Limited Partners. In addition, a Limited Partner may experience taxable gain on disposition of Units or upon a disposition of the Local Partnership Interests or of the Properties even though no cash is realized on the disposition; in such circumstances, the Limited Partners may experience an out-of-pocket tax cost.
Limited Partners of Registrant may not receive a return of any portion of their original capital investment in Registrant.
To date, the Limited Partners of Registrant have not received a return of any portion of their original capital. Accordingly, the only benefit of this investment may be the Low-income Tax Credits and Historic Rehabilitation Tax Credits.
Item 1B.
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 2.
Item 2. Properties.
The executive offices of Registrant and the General Partner are located at 340 Pemberwick Road, Greenwich, Connecticut 06831. Registrant does not own or lease any properties. Registrant pays no rent; all charges for leased space are borne by affiliates of the General Partner.
Registrant originally acquired Local Partnership Interests in nineteen Local Partnerships. As discussed above in Item 1 - Business, the Compliance Period of all of the Local Partnerships had expired as of December 31, 2004 and, accordingly, Registrant is in the process of disposing of its Local Partnership Interests. As of June 2011, Registrant owns six of the nineteen Local Partnership Interests originally acquired. Registrant has served a demand on the Local General Partners of all remaining Local Partnerships to commence a sale process to dispose of the Properties, which Registrant intends will result in a termination of Registrant’s Local Partnership Interests and ultimately the dissolution of Registrant.
In the event a sale of the remaining Properties cannot be consummated, it is the General Partner’s intention to sell or assign Registrant’s Local Partnership Interests. It is not possible to ascertain the amount, if any, that Registrant will receive with respect to each specific Property from such sales or assignments. In addition, certain of the Local Partnerships entered into agreements with Extended Use Provisions with the relevant state tax credit agencies whereby the Local Partnerships must maintain the low-income nature of the Properties for a period which exceeds the Compliance Period (in certain circumstances, up to 50 years from when the Property is placed in service, but commonly 30 years from the date any such Property is placed in service), regardless of a sale of the Properties by the Local Partnerships after the Compliance Period. While the Extended Use Provisions do not extend the Compliance Period of the respective Local Partnerships, such provisions may limit the number and availability of potential purchasers of the Properties. Accordingly, a sale of a Property may happen well after the expiration of the Compliance Period and/or may be significantly discounted. There can be no assurance as to when the Local Partnerships will dispose of the Properties, when Registrant will dispose of the Local Partnership Interests or the amount of proceeds which may be received in such dispositions. In addition to amounts that remain outstanding under the terms of the debt structure of the respective Local Partnerships, certain Local Partnerships have outstanding obligations to the Local General Partners and/or affiliates thereof for operating advances made over the years and for certain fees that were deferred.
Although Registrant generally owns a 98.9% to 99% Local Partnership Interest in the Local Partnerships, Registrant and American Tax Credit Properties II L.P. ("ATCP II"), a Delaware limited partnership whose general partner is affiliated with the General Partner, together, in the aggregate, own a 99% interest in Santa Juanita Limited Dividend Partnership L.P. ("Santa Juanita"); the ownership percentages of Registrant and ATCP II of Santa Juanita are 34.64% and 64.36%, respectively. The Local Partnership Interests were acquired by Registrant in 1988 and 1989, with the exception of the Local Partnership Interest in B & V Phase I, Ltd., which was acquired in 1994.
Item 2. Properties (Continued).
Many of the Local Partnerships receive rental subsidy payments, including payments under Section 8 of Title II of the Housing and Community Development Act of 1974 ("Section 8") (see descriptions of the subsidies below). The subsidy agreements expire at various times. Since October 1997, HUD has issued a series of directives related to project based Section 8 contracts that define owners’ notification responsibilities, advise owners of project based Section 8 properties of what their options are regarding the renewal of Section 8 contracts, provide guidance and procedures to owners, management agents, contract administrators and HUD staff concerning renewal of Section 8 contracts, provide policies and procedures on setting renewal rents and handling renewal rent adjustments and provide the requirements and procedures for opting-out of a Section 8 project based contract. Registrant cannot reasonably predict legislative initiatives and governmental budget negotiations, the outcome of which could result in a reduction in funds available for the various federal and state administered housing programs including the Section 8 program. Such changes could adversely affect the future net operating income before debt service (“NOI”) and debt structure of any or all Local Partnerships currently receiving such subsidy or similar subsidies. Five Local Partnerships’ Section 8 contracts are currently subject to renewal under applicable HUD guidelines. Of the five Local Partnerships noted above, two have entered into restructuring agreements, resulting in a change to both rent subsidy and mandatory debt service.
Item 2. Properties (Continued).
Item 2. Properties (Continued).
(1)
Description of Subsidies:
(a) Section 8 of Title II of the Housing and Community Development Act of 1974 allows qualified low-income tenants to pay thirty percent of their monthly income as rent with the balance paid by the federal government.
(b) The Local Partnership's debt structure includes a principal or interest payment subsidy.
(c) The Local Partnership’s Section 8 contracts are currently subject to renewal under applicable HUD guidelines.
(d) The Local Partnership entered into a restructuring agreement of its Section 8 contracts and debt structure under applicable HUD guidelines in 2008.
(2)
Reflects amount attributable to Registrant only.
(3)
The Local Partnership Interest is no longer owned by Registrant; there are no assets or liabilities related to such Local Partnership included in the combined balance sheets of the Local Partnerships as of December 31, 2010 and 2009 in Note 6 to the accompanying financial statements.
Item 2. Properties (Continued).
(4)
The Local Partnership Interest is no longer owned by Registrant; there are no assets or liabilities related to such Local Partnership included in the combined balance sheet of the Local Partnerships as of December 31, 2010 in Note 6 to the accompanying financial statements.
(5)
Registrant sold its Local Partnership Interest in November 2009 to an affiliate of the Local General Partner. The combined statement of operations of the Local Partnerships for the year ended December 31, 2009 included in Note 6 to the accompanying financial statements includes results of operations for such Local Partnership through the date of sale.
(6)
Registrant sold its Local Partnership Interest in November 2010 to an affiliate of the Local General Partner. The combined statement of operations of the Local Partnerships for the year ended December 31, 2010 included in Note 6 to the accompanying financial statements includes results of operations for such Local Partnership for the year ended December 31, 2010 (see Part II, Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations, herein).
(7)
The Local Partnership sold its underlying Property in December 2010 to an affiliate of the Local General Partner. The combined statement of operations of the Local Partnerships for the year ended December 31, 2010 included in Note 6 to the accompanying financial statements includes results of operations for such Local Partnership for the year ended December 31, 2010 (see Part II, Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations, herein).
(8)
Registrant sold its Local Partnership Interest in May 2011 (see Part II, Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations, herein).
(9)
Capital contribution includes voluntary advances made by Registrant to the Local Partnership.
Item 3.
Item 3. Legal Proceedings.
None.
Item 4.
Item 4. Removed and Reserved.
PART II
Item 5.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information and Holders
There is no established public trading market for the Units. Accordingly, accurate information as to the market value of a Unit at any given date is not available. The number of record holders of Units as of May 31, 2011 was approximately 2,020, holding an aggregate of 41,286 Units.
Merrill Lynch follows internal guidelines for providing estimated values of limited partnerships and other direct investments reported on client account statements. Pursuant to such guidelines, estimated values for limited partnership interests reported on Merrill Lynch client account statements (such as Registrant’s Units) are provided to Merrill Lynch by independent valuation services, whose estimated values are based on financial and other information available to them. In addition, Registrant may provide an estimate of value to Unit holders from time to time in Registrant's reports to Limited Partners. The estimated values provided by the independent services and Registrant, which may differ, are not market values and Unit holders may not be able to sell their Units or realize either amount upon a sale of their Units. Unit holders may not realize such estimated values upon the liquidation of Registrant.
Distributions
Registrant owns a Local Partnership Interest in Local Partnerships that are the owners of Properties that are leveraged and receive government assistance in various forms of rental and debt service subsidies. The distribution of cash flow generated by the Local Partnerships may be restricted, as determined by each Local Partnership's financing and subsidy agreements. Accordingly, Registrant does not anticipate that it will provide significant cash distributions to its Limited Partners in the future. There were no cash distributions to the Limited Partners during the years ended March 30, 2011 and 2010.
Low-income Tax Credits and Historic Rehabilitation Tax Credits (together, the "Tax Credits"), which are subject to various limitations, may be used by the Limited Partners to offset federal income tax liabilities. Registrant generated total Tax Credits from investments in Local Partnerships of approximately $1,528 per Unit, net of circumstances which have given rise to recapture. The Ten Year Credit Period with respect to all of the Properties was fully exhausted as of December 31, 2003 and the Compliance Periods of the Local Partnerships had expired as of December 31, 2004. Registrant has served a demand on the Local General Partners of all remaining Local Partnerships to commence a sale process to dispose of the Properties. In the event a sale cannot be consummated, it is the General Partner’s intention to sell or assign Registrant’s Local Partnership Interests. It is not possible to ascertain the amount, if any, that Registrant will receive with respect to each specific Property from such sales or assignments.
Recent Sales of Unregistered Securities
None.
Item 6.
Item 6. Selected Financial Data.
Registrant is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this Item.
Item 7.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Capital Resources and Liquidity
Registrant admitted limited partners (the “Limited Partners”) in two closings with aggregate Limited Partners’ capital contributions of $41,286,000. In connection with the offering of the sale of units (the “Units”), Registrant incurred organization and offering costs of approximately $4,781,000 and established a working capital reserve of approximately $2,271,000. The remaining net proceeds of approximately $34,234,000 (the “Net Proceeds”) were available to be applied to the acquisition of limited partner interests (the “Local Partnership Interests”) in partnerships (the “Local Partnerships”) that own low-income multifamily residential complexes (the “Property” or “Properties”) that qualified for the low-income tax credit in accordance with Section 42 of the Internal Revenue Code (the “Low-income Tax Credit”); one Local Partnership owns a Property that also qualified for the historic rehabilitation tax credit in accordance with Section 47 of the Internal Revenue Code. The Net Proceeds were utilized in acquiring a Local Partnership Interest in eighteen Local Partnerships. Registrant utilized reserves of $140,000 to acquire an additional Local Partnership Interest at a later date.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued).
As of March 30, 2011, Registrant has cash and cash equivalents, investment in Pemberwick Fund (“Pemberwick”) (a short duration bond fund) and investment in bond totaling $1,416,040, which is available for operating expenses of Registrant and circumstances which may arise in connection with the Local Partnerships. Future sources of Registrant funds are expected to be primarily from interest earned on working capital and limited cash distributions from Local Partnerships. In addition, although it is not possible to ascertain the amount, if any, that Registrant will receive with respect to each Local Partnership, Registrant may be entitled to sales proceeds of certain Local Partnerships’ Properties and may receive proceeds in the event of a sale of its Local Partnership Interests.
During the year ended March 30, 2011, Registrant received cash from interest revenue, distributions from Local Partnerships, redemptions from Pemberwick and proceeds in connection with the sale of its Local Partnership Interest in Golden Gates Associates (“Golden Gates”) (see discussion below under Results of Operations and Local Partnership Matters) and utilized cash for operating expenses and investments in Pemberwick and a bond. Cash and cash equivalents, investment in Pemberwick and investment in bond decreased, in the aggregate, by approximately $435,000 during the year ended March 30, 2011, (which includes unrealized gains on investment in Pemberwick and investment in bond in the aggregate of approximately $18,000). Registrant intends to hold the bond until its call date (September 2013) and therefore does not expect to realize significant gains or losses on its investment in bond, if any.
During the year ended March 30, 2011, the investment in local partnerships increased as a result of Registrant’s equity in the Local Partnerships’ net income for the year ended December 31, 2010 of $112,182. Payable to general partner and affiliates in the accompanying balance sheet as of March 30, 2011 represents accrued management and administration fees.
Results of Operations
Registrant’s operating results are dependent, in part, upon the operating results of the Local Partnerships and are impacted by the Local Partnerships’ policies. In addition, the operating results herein are not necessarily the same for tax reporting. Registrant accounts for its investment in local partnerships in accordance with the equity method of accounting. Accordingly, the investment is carried at cost and is adjusted for Registrant’s share of each Local Partnership’s results of operations and by cash distributions received. In the event the operations of a Local Partnership result in a loss, equity in loss of each investment in Local Partnership allocated to Registrant is recognized to the extent of Registrant’s investment balance in each Local Partnership. Equity in loss in excess of Registrant’s investment balance in a Local Partnership is allocated to other partners’ capital in any such Local Partnership. However, the combined statements of operations of the Local Partnerships reflected in Note 6 to Registrant’s financial statements include the operating results of all Local Partnerships, irrespective of Registrant’s investment balances.
Cumulative losses and cash distributions in excess of investment in local partnerships may result from a variety of circumstances, including a Local Partnership's accounting policies, subsidy structure, debt structure and operating deficits, among other things. In addition, the book value of Registrant’s investment in each Local Partnership (the “Local Partnership Carrying Value”) may be reduced if the Local Partnership Carrying Value is considered to exceed the estimated value derived by management. Accordingly, cumulative losses and cash distributions in excess of the investment or an adjustment to a Local Partnership’s Carrying Value are not necessarily indicative of adverse operating results of a Local Partnership.
Registrant’s operations for the years ended March 30, 2011, 2010 and 2009 resulted in net losses of $142,859, $181,569 and $455,469, respectively. The decrease in net loss from fiscal 2010 to 2011 is primarily attributable to (i) an increase in equity in income of investment in local partnerships of approximately $56,000, which increase is primarily the result of an increase in the net operating income of the Local Partnership in which Registrant continues to have an investment balance, (ii) an increase in interest revenue and other income from local partnerships in the aggregate of approximately $46,000 and (iii) a net decrease in operating expenses of approximately $27,000, all partially offset by a decrease in gain on sale of limited partner interests/local partnership properties of approximately $90,000 (see discussion below under Local Partnership Matters). Other comprehensive income for the year ended March 30, 2011 resulted from unrealized gains on investment in Pemberwick and investment in bond of $14,948 and $2,730, respectively. The decrease in net loss from fiscal 2009 to 2010 is primarily attributable to (i) an increase in equity in income of investment in local partnerships of approximately $74,000, which increase is primarily the result of an increase in the net operating income of the Local Partnership in which Registrant continues to have an investment balance and (ii) income of approximately $218,000 recognized in fiscal 2010 in connection with Registrant’s sale of its Local Partnership Interests in Pine Hill Estates Limited Partnership and Winnsboro Homes Limited Partnership.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued).
The Local Partnerships’ net income of approximately $2,973,000 for the year ended December 31, 2010 includes gain on sale of property of approximately $6,124,000, depreciation and amortization expense of approximately $3,304,000 and interest on non-mandatory debt of approximately $586,000, and does not include principal payments on permanent mortgages of approximately $702,000. The Local Partnerships’ net loss of approximately $3,019,000 for the year ended December 31, 2009 includes depreciation and amortization expense of approximately $3,422,000 and interest on non-mandatory debt of approximately $735,000, and does not include principal payments on permanent mortgages of approximately $714,000. The Local Partnerships’ net loss of approximately $3,624,000 for the year ended December 31, 2008 includes depreciation and amortization expense of approximately $3,346,000 and interest on non-mandatory debt of approximately $645,000, and does not include principal payments on permanent mortgages of approximately $658,000. The results of operations of the Local Partnerships for the year ended December 31, 2010 are not necessarily indicative of the results that may be expected in future periods. Income and expense fluctuations over the past three years have resulted from Registrant’s sales of Local Partnership Interests and certain Local Partnerships’ Property sales.
Local Partnership Matters
Registrant's primary objective, to provide Low-income Tax Credits to its Limited Partners, has been completed. The relevant state tax credit agency allocated each of the Local Partnerships an amount of Low-income Tax Credits, which are generally available for a ten year period from the year the Property is placed in service (the “Ten Year Credit Period”). The Ten Year Credit Period was fully exhausted with respect to all of the Properties as of December 31, 2003. The required holding period of each Property, in order to avoid Low-income Tax Credit recapture, is fifteen years from the year in which the Low-income Tax Credits commence on the last building of the Property (the "Compliance Period"). The Compliance Period of all of the Local Partnerships had expired as of December 31, 2004. In addition, certain of the Local Partnerships entered into agreements with the relevant state tax credit agencies whereby the Local Partnerships must maintain the low-income nature of the Properties for a period which exceeds the Compliance Period (in certain circumstances, up to 50 years from when the Property is placed in service, but commonly 30 years from the date any such Property is placed in service), regardless of a sale of the Properties by the Local Partnerships after the Compliance Period (the “Extended Use Provisions”). Although the Extended Use Provisions do not extend the Compliance Period of the respective Local Partnerships, such provisions may limit the number and availability of potential purchasers of the Properties. Accordingly, a sale of a Property may happen well after the expiration of the Compliance Period and/or may be significantly discounted. Registrant is in the process of disposing of its Local Partnership Interests. As of June 2011, Registrant owns six of the nineteen Local Partnership Interests originally acquired. Registrant has served a demand on the local general partners (the “Local General Partners”) of all remaining Local Partnerships to commence a sale process to dispose of the Properties. In the event a sale cannot be consummated, it is the General Partner’s intention to sell or assign Registrant’s Local Partnership Interests. Following the final disposition of its Local Partnership Interests, Registrant intends to dissolve. It is uncertain as to the amount, if any, that Registrant will receive with respect to each specific Property from such sales or assignments. There can be no assurance as to when Registrant will dispose of its remaining Local Partnership Interests.
The Properties are principally comprised of subsidized and leveraged low-income multifamily residential complexes located throughout the United States and in Puerto Rico. Many of the Local Partnerships receive rental subsidy payments, including payments under Section 8 of Title II of the Housing and Community Development Act of 1974 ("Section 8”). The subsidy agreements expire at various times. Since October 1997, the United States Department of Housing and Urban Development (“HUD”) has issued a series of directives related to project based Section 8 contracts that define owners’ notification responsibilities, advise owners of project based Section 8 properties of what their options are regarding the renewal of Section 8 contracts, provide guidance and procedures to owners, management agents, contract administrators and HUD staff concerning renewal of Section 8 contracts, provide policies and procedures on setting renewal rents and handling renewal rent adjustments and provide the requirements and procedures for opting-out of a Section 8 project based contract. Registrant cannot reasonably predict legislative initiatives and governmental budget negotiations, the outcome of which could result in a reduction in funds available for the various federal and state administered housing programs including the Section 8 program. Such changes could adversely affect the future net operating income before debt service (“NOI”) and debt structure of any or all Local Partnerships currently receiving such subsidy or similar subsidies. Five Local Partnerships’ Section 8 contracts are currently subject to renewal under applicable HUD guidelines. Of the five Local Partnerships noted above, two have entered into restructuring agreements, resulting in a change to both rent subsidy and mandatory debt service.
The Local Partnerships have various financing structures which include (i) required debt service payments ("Mandatory Debt Service") and (ii) debt service payments that are payable only from available cash flow subject to the terms and conditions of the notes, which may be subject to specific laws, regulations and agreements with appropriate federal and state agencies ("Non-Mandatory Debt Service or Interest"). Registrant has no legal obligation to fund any operating deficits of the Local Partnerships.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued).
In November 2010, Registrant sold its Local Partnership Interest in Golden Gates to an affiliate of the Local General Partner of Golden Gates for $128,000; such amount is reflected as gain on sale of limited partner interests/local partnership properties in the accompanying statement of operations of Registrant for the year ended March 30, 2011. Registrant’s investment balance in Golden Gates, after cumulative equity losses, became zero during the year ended March 30, 1994.
In December 2010, Dunbar Limited Partnership (“Dunbar”) and Dunbar Limited Partnership No. 2 (“Dunbar 2”), which Local Partnerships have the same Local General Partner (the “Dunbar Local General Partner”), sold their underlying Properties to affiliates of the Dunbar Local General Partner. Although Registrant received no proceeds in connection with the sales, the purchasers agreed to pay Registrant $25,000 each for Dunbar and Dunbar 2 for distributions that were due to Registrant under the terms of the partnership agreements of Dunbar and Dunbar 2. Accordingly, $50,000 is reflected as due from local partnerships in the accompanying balance sheet of Registrant as of March 30, 2011 and is included in other income from local partnerships in the accompanying statement of operations of Registrant for the year then ended. Registrant’s investment balance in Dunbar and Dunbar 2, after cumulative equity losses, became zero during the years ended March 30, 1998 and 1997, respectively.
In May 2011, Registrant sold its Local Partnership Interest in Federal Apartments Limited Partnership (“Federal”) to an affiliate of the Local General Partner of Federal for $334,000. Registrant received a $50,000 nonrefundable deposit in January 2011, which is reflected as deferred revenue in the accompanying balance sheet of Registrant as of March 30, 2011, and the balance in May 2011. Registrant’s investment balance in Federal, after cumulative equity losses, became zero during the year ended March 30, 1997.
Cobbet Hill Associates Limited Partnership (“Cobbet”) was originally financed with a first mortgage with mandatory monthly payment terms with the Massachusetts Housing Finance Agency (“MHFA”) and a second mortgage with MHFA under the State Housing Assistance for Rental Production Program (the “SHARP Operating Loan”) whereby proceeds would be advanced monthly as an operating subsidy (the “Operating Subsidy Payments”). The terms of the SHARP Operating Loan called for declining Operating Subsidy Payments over its term (not more than 15 years). However, due to the economic condition of the Northeast region in the early 1990’s, MHFA instituted an operating deficit loan (the “ODL”) program that supplemented the scheduled reduction in the Operating Subsidy Payments. Effective October 1, 1997, MHFA announced its intention to eliminate the ODL program, such that Cobbet no longer receives the ODL, without which Cobbet is unable to make the full mandatory debt service payments on its first mortgage. MHFA issued a formal notice of default dated February 2, 2004. The Local General Partners of Cobbet have informed MHFA that they would transfer the ownership of the Property to the unaffiliated management agent or to other parties, which might redevelop and recapitalize the Property. Registrant does not believe that it will receive any proceeds from such a transfer. Since the date MHFA ceased funding the ODL through December 31, 2010, Cobbet has accumulated over $10,281,000 of arrearages and other charges on the first mortgage; as a result of the default, principal and accrued interest in excess of $24,000,000 in connection with the first mortgage, the SHARP Operating Loan and the ODL are considered currently due. Registrant’s investment balance in Cobbet, after cumulative equity losses, became zero during the year ended March 30, 1994.
Inflation
Inflation is not expected to have a material adverse impact on Registrant's operations.
Contractual Obligations
Registrant is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this Item.
Off - Balance Sheet Arrangements
Registrant does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on Registrant’s financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to the Limited Partners.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued).
Critical Accounting Policies and Estimates
The accompanying financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), which requires Registrant to make certain estimates and assumptions. A summary of significant accounting policies is provided in Note 1 to the accompanying financial statements. The following section is a summary of certain aspects of those accounting policies that may require subjective or complex judgments and are most important to the portrayal of Registrant’s financial condition and results of operations. Registrant believes that there is a low probability that the use of different estimates or assumptions in making these judgments would result in materially different amounts being reported in the accompanying financial statements.
·
Registrant accounts for its investment in local partnerships in accordance with the equity method of accounting.
·
If the book value of Registrant’s investment in a Local Partnership exceeds the estimated value derived by management, Registrant reduces its investment in any such Local Partnership and includes such reduction in equity in loss of investment in local partnerships. Registrant makes such assessment at least annually in the fourth quarter of its fiscal year or whenever there are indications that a permanent impairment may have occurred. A loss in value of an investment in a Local Partnership other than a temporary decline would be recorded as an impairment loss. Impairment is measured by comparing the investment carrying amount to the estimated residual value of the investment.
·
Registrant does not consolidate the accounts and activities of the Local Partnerships, which are considered Variable Interest Entities as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810; Subtopic 10, because Registrant is not considered the primary beneficiary. Registrant’s balance in investment in local partnerships represents the maximum exposure to loss in connection with such investments. Registrant’s exposure to loss on the Local Partnerships is mitigated by the condition and financial performance of the underlying Properties as well as the financial strength of the Local General Partners. In addition, the Local Partnerships’ partnership agreements grant the Local General Partners the power to direct the activities that most significantly impact the Local Partnerships’ economic success.
Forward-Looking Information
As a cautionary note, with the exception of historical facts, the matters discussed in this Annual Report on Form 10-K are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Forward-looking statements may relate to, among other things, current expectations, forecasts of future events, future actions, future performance generally, business development activities, capital expenditures, strategies, the outcome of contingencies, future financial results, financing sources and availability and the effects of regulation and competition. Words such as “anticipate,” “expect,” “intend,” “plan,” “seek,” “estimate” and other words and terms of similar meaning in connection with discussions of future operating or financial performance signify forward-looking statements. Registrant may also provide written forward-looking statements in other materials released to the public. Such statements are made in good faith by Registrant pursuant to the “Safe Harbor” provisions of the Reform Act. Registrant undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Such forward-looking statements involve known risks, uncertainties and other factors that may cause Registrant’s actual results of operations or actions to be materially different from future results of operations or actions expressed or implied by the forward-looking statements.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk.
Registrant’s investment in Pemberwick is subject to certain risk. The fixed income securities in which Pemberwick invests are subject to interest rate risk, credit risk, prepayment risk, counterparty risk, municipal securities risk, liquidity risk, management risk, government security risk and valuation risk. Typically, when interest rates rise, the market prices of fixed income securities go down. Pemberwick is classified as “non-diversified,” and thus may invest most of its assets in securities issued by or representing a small number of issuers. As a result, Pemberwick may be more susceptible to the risks associated with these particular issuers, or to a single economic, political or regulatory occurrence affecting these issuers. These risks could adversely affect Pemberwick’s net asset value (“NAV”), yield and total return.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk (Continued).
The market value of Registrant’s investment in bond is subject to fluctuation based upon changes in interest rates relative to the investment’s maturity date and the associated bond rating. Since Registrant’s investment in bond is callable in 2013, the value of such investment may be adversely impacted in an environment of rising interest rates in the event Registrant decides to liquidate the investment prior to its call date. Although Registrant may utilize the investment to pay for its operating expenses and/or for certain Local Partnership matters, it otherwise intends to hold such investment to its call date. Therefore, Registrant does not anticipate any material adverse impact in connection with such investment.
AMERICAN TAX CREDIT PROPERTIES L.P.
Item 8.
Item 8. Financial Statements and Supplementary Data.
No financial statement schedules are included because of the absence of the conditions under which they are required or because the information is included in the financial statements or the notes thereto.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners
American Tax Credit Properties L.P.
We have audited the accompanying balance sheets of American Tax Credit Properties L.P. (the “Partnership”) as of March 30, 2011 and 2010, and the related statements of operations, changes in partners' equity (deficit) and cash flows for the years ended March 30, 2011, 2010 and 2009. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of American Tax Credit Properties L.P. as of March 30, 2011 and 2010, and the results of its operations, changes in partners’ equity (deficit) and its cash flows for the years ended March 30, 2011, 2010 and 2009, in conformity with accounting principles generally accepted in the United States of America.
/s/Reznick Group, P.C.
Sacramento, California
June 28, 2011
AMERICAN TAX CREDIT PROPERTIES L.P.
BALANCE SHEETS
MARCH 30, 2011 AND 2010
See Notes to Financial Statements.
AMERICAN TAX CREDIT PROPERTIES L.P.
STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 30, 2011, 2010 AND 2009
See Notes to Financial Statements.
AMERICAN TAX CREDIT PROPERTIES L.P.
STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
YEARS ENDED MARCH 30, 2011, 2010 AND 2009
See Notes to Financial Statements.
AMERICAN TAX CREDIT PROPERTIES L.P.
STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 30, 2011, 2010 AND 2009
See reconciliation of net loss to net cash used in operating activities on page 23.
See Notes to Financial Statements.
AMERICAN TAX CREDIT PROPERTIES L.P.
STATEMENTS OF CASH FLOWS - CONTINUED
YEARS ENDED MARCH 30, 2011, 2010 AND 2009
See Notes to Financial Statements.
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 30, 2011, 2010 AND 2009
1.
Organization, Purpose and Summary of Significant Accounting Policies
American Tax Credit Properties L.P. (the "Partnership") was formed on February 12, 1988 and the Certificate of Limited Partnership of the Partnership was filed under the Delaware Revised Uniform Limited Partnership Act. There was no operating activity until admission of the limited partners (the “Limited Partners”) on August 19, 1988. The Partnership was formed to invest primarily in leveraged low-income multifamily residential complexes (the "Property" or "Properties") that qualified for the low-income tax credit in accordance with Section 42 of the Internal Revenue Code (the “Low-income Tax Credit”), through the acquisition of limited partner equity interests (the "Local Partnership Interests") in partnerships (the "Local Partnership" or "Local Partnerships") that are the owners of the Properties. In addition, the Partnership invested in one Local Partnership whose Property also qualified for the historic rehabilitation tax credit in accordance with Section 47 of the Internal Revenue Code. Such interests were acquired in 1988, 1989 and 1994. Richman Tax Credit Properties L.P. (the "General Partner") was formed on February 10, 1988 to act as the General Partner of the Partnership.
Basis of Accounting and Fiscal Year
The Partnership's records are maintained on the accrual basis of accounting for both financial reporting and tax purposes. For financial reporting purposes, the Partnership's fiscal year ends March 30 and its quarterly periods end June 29, September 29 and December 30. The Local Partnerships have a calendar year for financial reporting purposes. The Partnership and the Local Partnerships each have a calendar year for income tax purposes.
Investment in Local Partnerships
The Partnership accounts for its investment in local partnerships in accordance with the equity method of accounting, under which the investment is carried at cost and is adjusted for the Partnership's share of each Local Partnership’s results of operations and by cash distributions received. Equity in loss of each investment in Local Partnership allocated to the Partnership is recognized to the extent of the Partnership’s investment balance in each Local Partnership. Equity in loss in excess of the Partnership’s investment balance in a Local Partnership is allocated to other partners’ capital in any such Local Partnership. Previously unrecognized equity in loss of any Local Partnership is recognized in the fiscal year in which equity in income is earned by such Local Partnership or additional investment is made by the Partnership. Distributions received subsequent to the elimination of an investment balance for any such investment in a Local Partnership are recorded as other income from local partnerships.
The Partnership assesses the carrying value of its investment in local partnerships at least annually in the fourth quarter of its fiscal year or whenever there are indications that a permanent impairment may have occurred. If the carrying value of an investment in a Local Partnership exceeds the estimated value derived by management, the Partnership reduces its investment in any such Local Partnership (unless the impairment is considered to be temporary) and includes such reduction in equity in loss of investment in local partnerships. Impairment is measured by comparing the investment carrying amount to the estimated residual value of the investment.
The Partnership does not consolidate the accounts and activities of the Local Partnerships, which are considered Variable Interest Entities as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810; Subtopic 10, because the Partnership is not considered the primary beneficiary. The Partnership's balance in investment in local partnerships represents the maximum exposure to loss in connection with such investments. The Partnership's exposure to loss on the Local Partnerships is mitigated by the condition and financial performance of the underlying Properties as well as the financial strength of the local general partners (the “Local General Partners”). In addition, the Local Partnerships’ partnership agreements grant the Local General Partners the power to direct the activities that most significantly impact the Local Partnerships’ economic success.
Advances and additional capital contributions (collectively the “Advances”) that are not required under the terms of the Local Partnerships’ partnership agreements but which are made to the Local Partnerships are recorded as investment in local partnerships. Certain Advances are considered by the Partnership to be voluntary loans to the respective Local Partnerships and the Partnership may be reimbursed at a future date to the extent such Local Partnerships generate distributable cash flow or receive proceeds from sale or refinancing.
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
MARCH 30, 2011, 2010 AND 2009
1.
Organization, Purpose and Summary of Significant Accounting Policies (Continued)
Cash and Cash Equivalents
The Partnership considers all highly liquid investments purchased with an original maturity of three months or less at the date of acquisition to be cash equivalents. Cash and cash equivalents are stated at cost, which approximates market value.
Fair Value Measurements
ASC Topic 820 clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing the asset or liability and establishes the following fair value hierarchy:
●
Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Partnership has the ability to access;
●
Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as interest rates andyield curves that are observable at commonly quoted intervals; and
●
Level 3 inputs are unobservable inputs for the asset or liability that are typically based on an entity’s own assumptions as there is little, if any, related market activity.
For instances in which the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the fair value measurement will fall within the lowest level input that is significant to the fair value measurement in its entirety.
Investment in Pemberwick Fund
The Partnership carries its investment in Pemberwick Fund (”Pemberwick”), an investment grade institutional short duration bond fund, at estimated fair value. Realized capital gains (losses) are included in (offset against) interest revenue. Investment in Pemberwick is classified as available-for-sale and unrealized gains or losses are included as items of comprehensive income (loss) and are reported as a separate component of partners' equity (deficit).
Investment in Bond
Investment in bond is classified as available-for-sale and represents an investment that the Partnership intends to hold for an indefinite period of time but not necessarily to maturity. Any decision to sell such investment would be based on various factors, including significant movements in interest rates and liquidity needs. Investment in bond is carried at estimated fair value and unrealized gains or losses are included as items of comprehensive income (loss) and are reported as a separate component of partners’ equity (deficit).
The premium on investment in bond is amortized using the effective yield method over the life of the investment. The amortized premium offsets interest revenue. Realized gain (loss) on redemption or sale of investment in bond is included in, or offset against, interest revenue on the basis of the adjusted cost of the investment at the date of redemption or sale.
Income Taxes
The Partnership is a pass-through entity for income tax purposes and, as such, is not subject to income taxes. Rather, all items of taxable income and deductions are passed through to and are reported by its owners on their respective income tax returns. The Partnership’s federal tax status as a pass-through entity is based on its legal status as a partnership. Accordingly, the Partnership is not required to take any tax positions in order to qualify as a pass-through entity. The Partnership is required to file and does file tax returns with the Internal Revenue Service and other taxing authorities. Accordingly, these financial statements do not reflect a provision for income taxes and the Partnership has no other tax positions which must be considered for disclosure. In accordance with ASC Topic 740; Subtopic 10, the Partnership has included in Note 8 disclosures related to differences in the financial and tax bases of accounting.
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
MARCH 30, 2011, 2010 AND 2009
1.
Organization, Purpose and Summary of Significant Accounting Policies (Continued)
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Reclassifications
Certain prior year balances have been reclassified to conform to the current year presentation.
2.
Capital Contributions
On May 11, 1988, the Partnership commenced the offering of units (the "Units") through Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Selling Agent"). On August 19, 1988 and November 15, 1988, under the terms of the Amended and Restated Agreement of Limited Partnership of the Partnership (the "Partnership Agreement"), the General Partner admitted the Limited Partners to the Partnership in two closings. At these closings, subscriptions for a total of 41,286 Units representing $41,286,000 in Limited Partners’ capital contributions were accepted. In connection with the offering of Units, the Partnership incurred organization and offering costs of $4,781,252, of which $75,000 was capitalized as organization costs and $4,706,252 was charged to the Limited Partners' equity as syndication costs. The General Partner contributed $100 to the Partnership.
Net loss is allocated 99% to the Limited Partners and 1% to the General Partner in accordance with the Partnership Agreement.
3.
Cash and Cash Equivalents
As of March 30, 2011, the Partnership has $154,743 in cash and cash equivalents. Of such amount, $107,371 is held in accounts at two financial institutions in which all non-interest bearing transaction accounts are fully insured by the Federal Deposit Insurance Corporation (“FDIC”) and the aggregate of all other accounts at each institution is insured up to $250,000 by the FDIC. The entire amount is FDIC insured as of March 30, 2011. The remaining $47,372 is held in an account at a financial institution in which such amount is invested in a portfolio of securities that are direct obligations of the U.S. Treasury and are backed by the full faith and credit of the United States of America.
4.
Investment in Pemberwick Fund
The Partnership carries its investment in Pemberwick, an investment grade institutional short duration bond fund, at estimated fair value. Pemberwick was organized in February 2010 as a non-diversified open-end management investment company registered under the Investment Company Act of 1940, as amended, that seeks maximum current income consistent with liquidity and stability of principal. In selecting portfolio securities for Pemberwick, the investment advisor of Pemberwick (the "Advisor") will select investments so that approximately 90% of Pemberwick’s assets will be rated "A" or better by a nationally recognized statistical rating organization ("NRSRO") such as Moody's Investor Services, Inc. ("Moody's") and/or by Standard & Poor's Financial Services, LLC ("S&P") or, if a rating is not available, deemed to be of comparable quality by the Advisor. It is anticipated that approximately 95% or more of Pemberwick’s assets (excluding floating rate or fixed to float securities issued by banking institutions having assets in excess of $200 billion) will be rated "AA" or better by an NRSRO or, if a rating is not available, deemed to be of comparable quality by the Advisor. In executing this strategy, as of March 30, 2011 approximately 57% of Pemberwick’s assets have a duration of 90 days or less or are securities with LIBOR based floating rates. The weighted average duration of Pemberwick’s assets is approximately 2.5 years as of March 30, 2011. Redemptions from Pemberwick are immediately liquid and unrestricted. Pemberwick’s net asset value ("NAV") is $10.14 and $10.00 per share as of March 30, 2011 and 2010, respectively. The Partnership’s investment in Pemberwick as of March 30, 2011 and 2010 is $1,161,425 and $1,555,638, respectively. The unrealized gain of $14,948 as of March 30, 2011 is included as a component of accumulated other comprehensive income in the accompanying financial statements as of and for the year ended March 30, 2011. There was no unrealized gain or loss as of March 30, 2010. The fair value of the Partnership’s investment in Pemberwick is classified within Level 1 of the fair value hierarchy of the guidance on Fair Value Measurements (see Note 1).
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
MARCH 30, 2011, 2010 AND 2009
4.
Investment in Pemberwick Fund (Continued)
The Advisor is an affiliate of the General Partner. For its services, the Advisor is entitled to receive an annual advisory fee of 0.50% of the average daily net assets of Pemberwick. The Advisor may, in its discretion, voluntarily waive its fees or reimburse certain Pemberwick expenses; however, the Advisor is not required to do so. The Advisor has waived 70% of its fee earned since Pemberwick’s inception and earned $2,184 and $234 from the Partnership’s investment in Pemberwick for the years ended March 30, 2011 and 2010, respectively. The Advisor’s asset management affiliate, Richman Asset Management, Inc. (“RAM”) has agreed to reduce its management and administration fees (see Note 7) payable from the Partnership to the extent any fee of the Advisor payable by Pemberwick would be duplicative of any profit that RAM would receive from the Partnership.
5.
Investment in Bond
The Partnership carries its investment in bond as available-for-sale because such investment is used to facilitate and provide flexibility for its obligations, including resolving circumstances that may arise in connection with the Local Partnerships. Investment in bond is reflected in the accompanying balance sheet as of March 30, 2011 at estimated fair value and is classified within Level 1 of the fair value hierarchy of the guidance on Fair Value Measurements (see Note 1). The unrealized gain of $2,730 is included as a component of accumulated other comprehensive income in the accompanying financial statements as of and for the year ended March 30, 2011.
As of March 30, 2011, certain information concerning investment in bond is as follows:
6.
Investment in Local Partnerships
As of March 30, 2011, the Partnership owns a Local Partnership Interest in the following Local Partnerships:
1.
Cityside Apartments, L.P. (“Cityside”)*;
2.
Cobbet Hill Associates Limited Partnership (“Cobbet”)*;
3.
Federal Apartments Limited Partnership (“Federal”);
4.
Gulf Shores Apartments Ltd.;
5.
Madison-Bellefield Associates (“Madison-Bellefield”);
6.
Santa Juanita Limited Dividend Partnership L.P. (“Santa Juanita”); and
7.
Vista del Mar Limited Dividend Partnership L.P.
*Affiliates of the General Partner are a general partner of and/or provide services to the Local Partnership.
Although the Partnership generally owns a 98.9% to 99% Local Partnership Interest in the Local Partnerships, the Partnership and American Tax Credit Properties II L.P. ("ATCP II"), a Delaware limited partnership whose general partner is affiliated with the General Partner, together, in the aggregate, own a 99% interest in Santa Juanita; the ownership percentages of the Partnership and ATCP II of Santa Juanita are 34.64% and 64.36%, respectively.
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
MARCH 30, 2011, 2010 AND 2009
6.
Investment in Local Partnerships (Continued)
The Properties are principally comprised of subsidized and leveraged low-income multifamily residential complexes located throughout the United States and in Puerto Rico. The rents of the Properties are controlled by federal and state agencies pursuant to applicable laws and regulations. Under the terms of each of the Local Partnership’s partnership agreements, as of March 30, 2011 the Partnership is committed to make capital contributions in the aggregate of $36,228,149, which includes Advances to certain Local Partnerships and all of which has been paid. As of December 31, 2010, the Local Partnerships have outstanding mortgage loans payable totaling approximately $34,468,000 and accrued interest payable on such loans totaling approximately $14,517,000, which are secured by security interests and liens common to mortgage loans on the Local Partnerships' real property and other assets.
Equity in loss of investment in local partnerships is limited to the Partnership's investment balance in each Local Partnership; any excess is applied to other partners' capital in any such Local Partnership (see Note 1). The amount of such excess losses applied to other partners' capital was $2,873,786, $3,007,303 and $3,519,891 for the years ended December 31, 2010, 2009 and 2008, respectively, as reflected in the combined statements of operations of the Local Partnerships herein Note 6.
The difference between the Partnership’s investment in local partnerships as of March 30, 2011 and 2010 and the amounts reflected as the Partnership’s investment balance in the combined balance sheets of the Local Partnerships as of December 31, 2010 and 2009 herein Note 6 represents cumulative carrying value adjustments made by the Partnership (see Note 1) in the amount of $596,586.
In November 2010, the Partnership sold its Local Partnership Interest in Golden Gates Associates (“Golden Gates”) to an affiliate of the Local General Partner of Golden Gates for $128,000; such amount is reflected as gain on sale of limited partner interests/local partnership properties in the accompanying statement of operations of the Partnership for the year ended March 30, 2011. The Partnership’s investment balance in Golden Gates, after cumulative equity losses, became zero during the year ended March 30, 1994.
In December 2010, Dunbar Limited Partnership (“Dunbar”) and Dunbar Limited Partnership No. 2 (“Dunbar 2”), which Local Partnerships have the same Local General Partner (the “Dunbar Local General Partner”), sold their underlying Properties to affiliates of the Dunbar Local General Partner. In connection with the sales, Dunbar and Dunbar 2 recognized a combined gain of $5,594,810, which is reflected as gain on sale of property in the accompanying statement of operations of the Local Partnerships for the year ended December 31, 2010 herein Note 6. Although the Partnership received no proceeds in connection with the sales, the purchasers agreed to pay the Partnership $25,000 each for Dunbar and Dunbar 2 for distributions that were due to the Partnership under the terms of the partnership agreements of Dunbar and Dunbar 2. Accordingly, $50,000 is reflected as due from local partnerships in the accompanying balance sheet of the Partnership as of March 30, 2011 and is included in other income from local partnerships in the accompanying statement of operations of the Partnership for the year then ended (see Note 1). The Partnership’s investment balance in Dunbar and Dunbar 2, after cumulative equity losses, became zero during the years ended March 30, 1998 and 1997, respectively.
In November 2009, the Partnership sold its Local Partnership Interests in Pine Hill Estates Limited Partnership (“Pine Hill”) and Winnsboro Homes Limited Partnership (“Winnsboro”) to affiliates of the Local General Partners of Pine Hill and Winnsboro for a cumulative price of $217,800. Such amount is reflected as gain on sale of limited partner interests/local partnership properties in the accompanying statement of operations of the Partnership for the year ended March 30, 2010. The Partnership’s investment balances in Pine Hill and Winnsboro, after cumulative equity losses, became zero during the years ended March 30, 1997 and 1998, respectively.
In May 2011, the Partnership sold its Local Partnership Interest in Federal Apartments Limited Partnership (“Federal”) to an affiliate of the Local General Partner of Federal for $334,000. The Partnership received a $50,000 nonrefundable deposit in January 2011, which is reflected as deferred revenue in the accompanying balance sheet of the Partnership as of March 30, 2011, and the balance in May 2011. The Partnership’s investment balance in Federal, after cumulative equity losses, became zero during the year ended March 30, 1997.
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
MARCH 30, 2011, 2010 AND 2009
6.
Investment in Local Partnerships (Continued)
Cobbet was originally financed with a first mortgage with mandatory monthly payment terms with the Massachusetts Housing Finance Agency (“MHFA”) and a second mortgage with MHFA under the State Housing Assistance for Rental Production Program (the “SHARP Operating Loan”) whereby proceeds would be advanced monthly as an operating subsidy (the “Operating Subsidy Payments”). The terms of the SHARP Operating Loan called for declining Operating Subsidy Payments over its term (not more than 15 years). However, due to the economic condition of the Northeast region in the early 1990’s, MHFA instituted an operating deficit loan (the “ODL”) program that supplemented the scheduled reduction in the Operating Subsidy Payments. Effective October 1, 1997, MHFA announced its intention to eliminate the ODL program, such that Cobbet no longer receives the ODL, without which Cobbet is unable to make the full mandatory debt service payments on its first mortgage. MHFA issued a formal notice of default dated February 2, 2004. The Local General Partners of Cobbet have informed MHFA that they would transfer the ownership of the Property to the unaffiliated management agent or to other parties, which might redevelop and recapitalize the Property. The Partnership does not believe that it will receive any proceeds from such a transfer. Since the date MHFA ceased funding the ODL through December 31, 2010, Cobbet has accumulated over $10,281,000 of arrearages and other charges on the first mortgage; as a result of the default, principal and accrued interest in excess of $24,000,000 in connection with the first mortgage, the SHARP Operating Loan and the ODL are considered currently due. Cumulative Advances made by the Partnership to Cobbet as of March 30, 2011 and 2010 total $392,829, none of which were made during the three year period ended March 30, 2011. Such Advances were recorded as investment in local partnerships and were written off as additional equity in loss of investment in local partnerships. The Partnership’s investment balance in Cobbet, after cumulative equity losses, became zero during the year ended March 30, 1994.
The equity in income recognized by the Partnership for the years ended March 30, 2011 and 2010 in connection with Madison-Bellefield represents more than 20% of the Partnership’s net loss for such years. The following financial information represents certain balance sheet and operating statement data of Madison-Bellefield as of and for the years ended December 31, 2010 and 2009:
The combined balance sheets of the Local Partnerships as of December 31, 2010 and 2009 and the combined statements of operations of the Local Partnerships for the years ended December 31, 2010, 2009 and 2008 are reflected on pages 30 and 31, respectively.
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
MARCH 30, 2011, 2010 AND 2009
6.
Investment in Local Partnerships (Continued)
The combined balance sheets of the Local Partnerships as of December 31, 2010 and 2009 are as follows:
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
MARCH 30, 2011, 2010 AND 2009
6.
Investment in Local Partnerships (Continued)
The combined statements of operations of the Local Partnerships for the years ended December 31, 2010, 2009 and 2008 are as follows:
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
MARCH 30, 2011, 2010 AND 2009
6.
Investment in Local Partnerships (Continued)
Investment activity with respect to each Local Partnership for the year ended March 30, 2011 is as follows:
(1)
Additional equity in loss of investment is not allocated to the Partnership until equity in income is earned or additional investment is made by the Partnership.
(2)
Included in due from local partnerships in the accompanying balance sheet of the Partnership as of March 30, 2011.
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
MARCH 30, 2011, 2010 AND 2009
6.
Investment in Local Partnerships (Continued)
Investment activity with respect to each Local Partnership for the year ended March 30, 2010 is as follows:
(1)
Additional equity in loss of investment is not allocated to the Partnership until equity in income is earned or additional investment is made by the Partnership.
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
MARCH 30, 2011, 2010 AND 2009
6.
Investment in Local Partnerships (Continued)
Property information for each Local Partnership as of December 31, 2010 is as follows:
Property information for each Local Partnership as of December 31, 2009 is as follows:
The summary of property activity during the year ended December 31, 2010 is as follows:
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
MARCH 30, 2011, 2010 AND 2009
7.
Transactions with General Partner and Affiliates
Pursuant to the terms of the Partnership Agreement, the Partnership incurs an annual management fee (the “Management Fee”) in the maximum amount of $175,466 payable to the General Partner for its services in connection with the management of the affairs of the Partnership, subject to adjustment under the terms of the Partnership Agreement. The Partnership incurred a Management Fee of $175,466 for each of the three years in the period ended March 30, 2011. Unpaid Management Fees in the amount of $87,987 and $169,333 are included in payable to general partner and affiliates in the accompanying balance sheets as of March 30, 2011 and 2010, respectively.
In addition, pursuant to the terms of the Partnership Agreement, the Partnership is authorized to contract for administrative services provided to the Partnership. Pursuant to an agreement with the General Partner, the Partnership incurs an annual administration fee (the "Administration Fee") in the maximum amount of $152,758 and an annual additional administration fee (the “Additional Administration Fee”) in the maximum amount of $30,965 for administrative services provided to the Partnership, subject to adjustment under the terms of the Partnership Agreement. The Partnership incurred an Administration Fee of $152,758 for each of the three years in the period ended March 30, 2011 and an Additional Administration Fee in the amounts of $10,613, $30,965 and $30,965 for the years ended March 30, 2011, 2010 and 2009, respectively. Such amounts are aggregated and reflected under the caption administration fees - affiliate in the accompanying statements of operations. Unpaid Administration Fees in the amount of $64,541 and $200,073 are included in payable to general partner and affiliates in the accompanying balance sheets as of March 30, 2011 and 2010, respectively.
For the years ended December 31, 2010, 2009 and 2008, Cityside paid and/or incurred the following amounts to an affiliate of the General Partner in connection with services provided to Cityside:
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
MARCH 30, 2011, 2010 AND 2009
8.
Taxable Loss
A reconciliation of the financial statement net loss of the Partnership for the years ended March 30, 2011, 2010 and 2009 to the tax return income (loss) for the years ended December 31, 2010, 2009 and 2008 is as follows:
The differences between the investment in local partnerships for tax and financial reporting purposes as of December 31, 2010 and 2009 are as follows:
Payable to general partner and affiliates in the accompanying balance sheets represents accrued Management Fees and Administration Fees, which are not deductible for tax purposes until paid pursuant to Internal Revenue Code Section 267.
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
MARCH 30, 2011, 2010 AND 2009
9.
Fair Value of Financial Instruments
The estimated fair value amounts have been determined using available market information, assumptions, estimates and valuation methodologies.
Cash and Cash Equivalents
The carrying amount approximates fair value.
Interest Receivable
The carrying amount approximates fair value due to the terms of the underlying investment.
Item 9.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 9A.
Item 9A. Controls and Procedures.
Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed by Registrant in reports that Registrant files or submits under the Exchange Act is recorded, processed, summarized and timely reported as provided in SEC rules and forms. Registrant periodically reviews the design and effectiveness of its disclosure controls and procedures, including compliance with various laws and regulations that apply to its operations. Registrant makes modifications to improve the design and effectiveness of its disclosure controls and procedures, and may take other corrective action, if its reviews identify a need for such modifications or actions. In designing and evaluating the disclosure controls and procedures, Registrant recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Registrant has carried out an evaluation, under the supervision and the participation of its management, including the Chief Executive Officer and Chief Financial Officer of Richman Tax, of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act), as of the year ended March 30, 2011. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer of Richman Tax concluded that Registrant’s disclosure controls and procedures were effective as of March 30, 2011.
Management’s Annual Report on Internal Control Over Financial Reporting
Registrant is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer of Richman Tax, Registrant conducted an evaluation of the effectiveness of its internal control over financial reporting based on the framework set forth in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its evaluation, management has concluded that Registrant’s internal control over financial reporting was effective as of March 30, 2011.
This Annual Report does not include an attestation report of Registrant’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by Registrant’s independent registered public accounting firm pursuant to rules of the SEC that permit Registrant to provide only management’s report in this Annual Report.
Changes in Internal Control Over Financial Reporting
There were no changes in Registrant’s internal control over financial reporting during the three months ended March 30, 2011 that have materially affected, or are reasonably likely to materially affect, Registrant’s internal control over financial reporting.
Item 9B.
Item 9B. Other Information.
None.
PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance.
Registrant has no officers or directors. The General Partner manages Registrant's affairs and has general responsibility and authority in all matters affecting its business. The responsibilities of the General Partner are currently carried out by Richman Tax. The executive officers and director of Richman Tax are:
1Director holds office until his successor is elected and qualified. All officers serve at the pleasure of the Director.
Richard Paul Richman, age 63, is the sole Director of Richman Tax. Mr. Richman is the Chairman and a stockholder of Richman Group. Mr. Richman is involved in the syndication, development and management of residential property. Mr. Richman is also a director of Wilder Richman Resources Corp., an affiliate of Richman Tax and a general partner of Secured Income L.P., a director of Wilder Richman Historic Corporation, an affiliate of Richman Tax and the general partner of Wilder Richman Historic Properties II, L.P., the sole director of Richman Tax Credits Inc., an affiliate of Richman Tax and the general partner of the general partner of American Tax Credit Properties II L.P., the sole director of Richman Housing Credits Inc., an affiliate of Richman Tax and the general partner of the general partner of American Tax Credit Properties III L.P. and the sole director of Richman American Credit Corp., an affiliate of Richman Tax and the manager of American Tax Credit Trust, a Delaware statutory business trust.
David A. Salzman, age 50, is the President of Richman Tax and is a stockholder and the President of Richman Group. Mr. Salzman has been employed by Richman Group or an affiliate since 1986 and is responsible for the acquisition of residential real estate for syndication for Richman Group.
James Hussey, age 50, is a Vice President and the Treasurer of Richman Tax. Mr. Hussey, the Treasurer of Richman Group, is engaged primarily in the finance operations of Richman Group. In addition, Mr. Hussey is a Vice President and the Treasurer of Richman Asset Management, Inc. (“RAM”), an affiliate of Richman Tax. Mr. Hussey is engaged primarily in the partnership management and finance operations of RAM. Prior to joining RAM, Mr. Hussey, a Certified Public Accountant, was the Chief Financial Officer of WCI Communities Inc. NE Region and Spectrum Communities, LLC. From 1989 to 1998, Mr. Hussey held various positions with Center Development Corp, a developer of affordable housing in the New York metropolitan area.
Gina K. Dodge, age 55, is the Secretary of Richman Tax and a Vice President and the Secretary of Richman Group. Ms. Dodge has been employed by Richman Group or an affiliate since 1988 and, as the Director of Investor Services, is responsible for communications with investors.
Charles L. Krafnick, age 49, is the Assistant Treasurer of Richman Tax and is the Assistant Treasurer of Richman Group. Mr. Krafnick, a Certified Public Accountant, has been employed by Richman Group or an affiliate since 1994 and is engaged primarily in the finance operations of Richman Group. In addition, Mr. Krafnick is the Assistant Treasurer of RAM. Mr. Krafnick's responsibilities in connection with RAM include various finance and partnership management functions.
Registrant is not aware of any family relationship between the director and executive officers listed in this Item 10.
Registrant is not aware of the involvement in certain legal proceedings with respect to the director and executive officers listed in this Item 10.
Mr. Richman, Mr. Hussey and Mr. Krafnick serve on a committee that performs the functions of an audit committee on behalf of Registrant (the “Audit Committee”). Each of Mr. Richman, Mr. Hussey and Mr. Krafnick meets the qualifications of an audit committee financial expert. Mr. Richman, Mr. Hussey and Mr. Krafnick are not independent under the Nasdaq Stock Market independence standards; however Registrant believes that each exercises his judgment in the best interest of Registrant with respect to matters that would ordinarily be passed upon by an audit committee.
Item 10. Directors, Executive Officers and Corporate Governance (Continued).
The Board of Director of Richman Tax has adopted a code of ethics for senior financial officers of Registrant, applicable to Registrant's principal executive officer, principal financial officer and comptroller or principal accounting officer, or persons performing similar functions. Registrant will provide to any person without charge a copy of such code of ethics upon written request to the General Partner at 340 Pemberwick Road, Greenwich, Connecticut 06831, Attention: Secretary.
Item 11.
Item 11. Executive Compensation.
Registrant has no officers or directors. Registrant does not pay or accrue any fees, salaries or other forms of compensation to the officers or director of Richman Tax and did not pay any such compensation during the year ended March 30, 2011 or during the prior two fiscal years. During the year ended March 30, 2011 and during the prior two fiscal years, Richman Tax did not pay any compensation to any of its officers or its director. The director and certain officers of Richman Tax receive compensation from certain affiliates of Richman Tax for services performed for various affiliated entities which may include services performed for Registrant.
Under the terms of the Partnership Agreement, Registrant has entered into certain arrangements with the General Partner and certain of its affiliates which provide for compensation to be paid to the General Partner and certain of its affiliates. See Notes 4 and 7 to the audited financial statements included in Item 8 - Financial Statements and Supplementary Data of this Annual Report.
Tabular information concerning salaries, bonuses and other types of compensation payable to executive officers has not been included in this Annual Report. As noted above, Registrant has no executive officers. The levels of compensation payable to the General Partner and/or its affiliates is limited by the terms of the Partnership Agreement and may not be increased therefrom on a discretionary basis.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Prizm Investments and certain affiliates thereof, having the mailing address P.O. Box 47638, Phoenix, Arizona 85068, are the owners of 4,617 Units, representing approximately 11.18% of all such Units. As of May 31, 2011, no person or entity, other than Prizm Investments and certain affiliates thereof, was known by Registrant to be the beneficial owner of more than five percent of the Units.
Neither the General Partner, Richman Tax nor the director or any officer of Richman Tax own any Units. Richman Tax is wholly-owned by Richard Paul Richman.
Item 13.
Item 13. Certain Relationships and Related Transactions and Director Independence.
Transactions With Related Persons
The General Partner and certain of its affiliates are entitled to receive certain fees and reimbursement of expenses and have received/earned fees for services provided to Registrant as described in Notes 4 and 7 to the audited financial statements included in Item 8 - Financial Statements and Supplementary Data herein. Such fees will continue to be incurred by Registrant during the fiscal year ending March 30, 2012.
Review, Approval or Ratification of Transactions With Related Parties
Pursuant to the terms of the Partnership Agreement, Registrant has specific rights and limitations in conducting business with the General Partner and affiliates. To date, Registrant has followed such provisions of the Partnership Agreement. Registrant's unwritten policies for transacting business with related parties are to first refer to the Partnership Agreement in connection with conducting such business or making payments and then, if circumstances arise for which a new related party transaction is contemplated, present the proposed transaction to certain officers of Richman Tax for review and approval. If any matter in connection with such transaction might be unclear under the terms of the Partnership Agreement, such matter is presented to general or outside counsel for review prior to any such transaction being entered into by Registrant.
Indebtedness of Management
No officer or director of Richman Tax or any affiliate of the foregoing was indebted to Registrant at any time during the fiscal years ended March 30, 2011 and 2010.
Item 13. Certain Relationships and Related Transactions and Director Independence (Continued).
Corporate Governance
As discussed elsewhere in this Annual Report, Registrant does not have any directors, although as noted above Mr. Richman, Mr. Hussey and Mr. Krafnick serve on a committee that performs the functions of an audit committee on behalf of Registrant. Under Nasdaq Stock Market independence standards, Mr. Richman, Mr. Hussey and Mr. Krafnick would not be considered independent as they serve as officers of Richman Tax. Although Mr. Richman, Mr. Hussey and Mr. Krafnick are not independent under Nasdaq rules, Registrant believes that each exercises his judgment in the best interest of Registrant with respect to matters that would ordinarily be passed upon by an audit committee. Registrant is not a listed issuer whose securities are listed on a national securities exchange, or an inter-dealer quotation system which has requirements that a majority of the board of directors be independent, and Registrant is not required to have an audit committee which consists of independent directors and meets the other requirements of the Securities Exchange Act of 1934 and the rules promulgated thereunder.
Item 14.
Item 14. Principal Accountant Fees and Services.
Registrant’s independent registered public accounting firm billed Registrant the following fees for professional services rendered in the years ended March 30, 2011 and 2010:
Audit fees consist of fees for the annual audit and review of Registrant’s interim financial statements and assistance with and review of documents filed with the SEC. Tax fees generally represent fees for annual tax return preparation. There were no other accounting fees incurred by Registrant in fiscal 2011 and 2010.
The Audit Committee has adopted a set of pre-approval policies and procedures under which, pursuant to the requirements of the Sarbanes-Oxley Act of 2002, all audit and permitted non-audit services to be performed by the independent registered public accounting firm require pre-approval by the Audit Committee.
The Audit Committee approved all fiscal 2011 and 2010 principal accountant fees and services.
PART IV
Item 15.
Item 15. Exhibits and Financial Statement Schedules
(a) Financial Statements, Financial Statement Schedules and Exhibits
(1) Financial Statements
See Item 8 - Financial Statements and Supplementary Data.
(2) Financial Statement Schedules
No financial statement schedules are included because of the absence of the conditions under which they are required or because the information is included in the financial statements or the notes thereto.
(3) Exhibits
Incorporated by
Exhibit
Reference to
3.1
Certificate of Limited Partnership of Registrant
Exhibit 3.2 to Amendment No. 2 to the Registration Statement on Form S-11 dated April 29, 1988 (File No. 33-20391)
4.1
Amended and Restated Agreement of Limited Partnership of Registrant
Exhibit A to Registrant’s Prospectus filed May 6, 1988 (File No. 33-20391)
10.1
4611 South Drexel Limited Partnership Agreement of Limited Partnership
Exhibit 10.3 to Form 10-Q Report for the period ended December 30, 1989 (File No. 0-17619)
10.2
B & V, Ltd. Fourth Amended and Restated Agreement and Certificate of Limited Partnership
Exhibit 10.3 to Form 8-K Report dated January 17, 1989 (File No. 33-20391)
10.3
B & V Phase I, Ltd. Amended and Restated Agreement of Limited Partnership
Exhibit 10.1 to Form 10-Q Report for the period ended September 29, 1994 (File No. 0-17619)
10.4
B & V Phase I, Ltd. Assignment of Partnership Interests, Assumption of Responsibilities, and Waiver of Conditions
Exhibit 10.4 to Form 10-K Report for the year ended March 30, 1997
(File No. 0-17619)
10.5
Blue Hill Housing Limited Partnership Amended and Restated Agreement and Certificate of Limited Partnership
Exhibit 10.7 to Form 8-K Report dated January 17, 1989 (File No. 33-20391)
10.6
Cityside Apartments, L.P. Amended and Restated Agreement of Limited Partnership
Exhibit 10.3 to Form 10-K Report for the year ended March 30, 1990
(File No. 0-17619)
10.7
Amendment No. 1 to Cityside Apartments, L.P. Amended and Restated Agreement of Limited Partnership
Exhibit 10.4 to Form 10-K Report for the year ended March 30, 1992
(File No. 0-17619)
10.8
Amendment No. 2 to Cityside Apartments, L.P. Amended and Restated Agreement of Limited Partnership
Exhibit 10.5 to Form 10-K Report for the year ended March 30, 1992
(File No. 0-17619)
Incorporated by
Exhibit
Reference to
10.9
Amendment No. 3 to Cityside Apartments, L.P. Amended and Restated Agreement of Limited Partnership
Exhibit 10.6 to Form 10-K Report for the year ended March 30, 1992
(File No. 0-17619)
10.10
Cobbet Hill Associates Limited Partnership Amended and Restated Agreement and Certificate of Limited Partnership
Exhibit 10.4 to Form 10-K Report for the year ended March 30, 1990
(File No. 0-17619)
10.11
Cobbet Hill Associates Limited Partnership First Amendment to Amended and Restated Agreement and Certificate of Limited Partnership
Exhibit 10.8 to Form 10-K Report for the year ended March 30, 1993
(File No. 0-17619)
10.12
Cobbet Hill Associates Limited Partnership Second Amendment to the Amended and Restated Agreement and Certificate of Limited Partnership
Exhibit 10.9 to Form 10-K Report for the year ended March 30, 1993
(File No. 0-17619)
10.13
Dunbar Limited Partnership Second Amended and Restated Agreement of Limited Partnership
Exhibit 10.5 to Form 10-K Report for the year ended March 30, 1990
(File No. 0-17619)
10.14
Dunbar Limited Partnership No. 2 Second Amended and Restated Agreement of Limited Partnership
Exhibit 10.6 to Form 10-K Report for the year ended March 30, 1990
(File No. 0-17619)
10.15
Erie Associates Limited Partnership Amended and Restated Agreement and Certificate of Limited Partnership
Exhibit 10.2 to Form 10-K Report for the year ended March 30, 1989
(File No. 33-20391)
10.16
Federal Apartments Limited Partnership Amended and Restated Agreement of Limited Partnership
Exhibit 10.8 to Form 10-K Report for the year ended March 30, 1990
(File No. 0-17619)
10.17
First Amendment to Federal Apartments Limited Partnership Amended and Restated Agreement of Limited Partnership
Exhibit 10.14 to Form 10-K Report for the year ended March 30, 1993 (File No. 0-17619)
10.18
Second Amendment to Federal Apartments Limited Partnership Amended and Restated Agreement of Limited Partnership
Exhibit 10.15 to Form 10-K Report for the year ended March 30, 1993 (File No. 0-17619)
10.19
Golden Gates Associates Amended and Restated Agreement of Limited Partnership
Exhibit 10.1 to Form 8-K Report dated January 17, 1989
(File No. 33-20391)
10.20
Grove Park Housing, A California Limited Partnership Amended and Restated Agreement of Limited Partnership
Exhibit 10.10 to Form 10-K Report for the year ended March 30, 1990 (File No. 0-17619)
10.21
Gulf Shores Apartments Ltd. Amended and Restated Agreement and Certificate of Limited Partnership
Exhibit 10.3 to Form 10-K Report for the year ended March 30, 1989
(File No. 33-20391)
Incorporated by
Exhibit
Reference to
10.35
The B & V Phase I, Ltd.
Investment Agreement
Exhibit 10.3 to Form 10-Q Report for the period ended September 29, 1994
(File No. 0-17619)
*31.1
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
*31.2
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
*32.1
Section 1350 Certification of Chief Executive Officer.
*32.2
Section 1350 Certification of Chief Financial Officer.
99.22
Pages 21 through 35 of Prospectus dated May 6, 1988 filed pursuant to Rule 424(b)(3) under the Securities Act of 1933
Exhibit 99.22 to Form 10-K Report for the year ended March 30, 2009
(File No. 0-17619)
99.23
Pages 51 through 75 of Prospectus dated May 6, 1988 filed pursuant to Rule 424(b)(3) under the Securities Act of 1933
Exhibit 99.23 to Form 10-K Report for the year ended March 30, 2009
(File No. 0-17619)
99.24
Pages 89 through 91 of Prospectus dated May 6, 1988 filed pursuant to Rule 424(b)(3) under the Securities Act of 1933
Exhibit 99.24 to Form 10-K Report for the year ended March 30, 2009
(File No. 0-17619)
99.25
Pages 16 through 19 of Prospectus dated May 6, 1988 filed pursuant to Rule 424(b)(3) under the Securities Act of 1933
Exhibit 99.25 to Form 10-K Report for the year ended March 30, 2009
(File No. 0-17619)
99.26
Supplement No. 1 dated August 11, 1988 to Prospectus dated May 6, 1988 filed pursuant to Rule 424(b)(3) under the Securities Act of 1933
Exhibit 99.26 to Form 10-K Report for the year ended March 30, 2009
(File No. 0-17619)
99.27
Supplement No. 2 dated September 20, 1988 to Prospectus dated May 6, 1988 filed pursuant to Rule 424(b)(3) under the Securities Act of 1933
Exhibit 99.27 to Form 10-K Report for the year ended March 30, 2009
(File No. 0-17619)
99.28
Independent Auditors’ Report of Cobbet Hill Associates Limited Partnership as of and for the years ended December 31, 2005 and 2004
Exhibit 99.26 to Form 10-K Report for the year ended March 30, 2006
(File No. 0-17619)
99.29
Audited Financial Statements of Madison-Bellefield Associates Limited Partnership as of and for the years ended December 31, 2005 and 2004
Exhibit 99.27 to Form 10-K Report for the year ended March 30, 2006
(File No. 0-17619)
99.30
Audited Financial Statements of Madison-Bellefield Associates Limited Partnership as of and for the year ended December 31, 2006
Exhibit 99.28 to Form 10-K Report for the year ended March 30, 2007
(File No. 0-17619)
*Filed herewith.
(b) Exhibits
See (a)(3) above.
(c) Financial Statement Schedules
See (a)(2) above.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.