Item 1. Business
Formation
American Tax Credit Trust, a Delaware statutory business trust (the "Trust"), was formed on February 4, 1993 to invest primarily in leveraged low-income multifamily residential complexes (the "Property" or "Properties") which qualify 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 partnership equity interests in partnerships (the "Local Partnership" or "Local Partnerships") that are the owners of the Properties. The Trust considers its activity to constitute a single industry segment.
Richman American Credit Corp. (the "Manager"), a Delaware corporation, was formed on April 5, 1993, under Chapter 1, Title 8 of the Delaware Code, to act as the manager of the Trust. The Manager is wholly-owned by Richard Paul Richman and is an affiliate of The Richman Group, Inc. ("Richman Group"), a Delaware corporation founded by Richard Paul Richman in 1988.
The Amendment No. 4 to the Registration Statement on Form S-11 was filed with the Securities and Exchange Commission (the "Commission") on August 25, 1993 pursuant to the Securities Act of 1933 under Registration Statement No. 33-58032 and was declared effective on August 26, 1993. Reference is made to the prospectus dated September 7, 1993, as supplemented by Supplement No. 1, Supplement No. 2, Supplement No. 3 and Supplement No. 4 dated September 7, 1993, November 16, 1993, November 23, 1994 and December 28, 1994, respectively, filed with the Commission pursuant to Rule 424(b)(3) under the Securities Act of 1933 (the "Prospectus"). Pursuant to Rule 12b-23 of the Commission'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 30 through 48 of the Prospectus is incorporated herein by reference.
On September 13, 1993, the Trust commenced, through Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and PaineWebber Incorporated ("PaineWebber"), the offering of up to 150,000 units of beneficial ownership interest ("Unit") at $1,000 per Unit to investors ("Beneficial Owners") in from one to twenty series (each a "Series"). This filing is presented for Series I only and as used herein, the term Registrant refers to Series I of the Trust. On November 29, 1993, January 28, 1994 and May 25, 1994 the closings for 8,460, 4,909 and 5,285 Units, respectively, took place, amounting to aggregate Beneficial Owners' capital contributions of $18,654,000.
Competition
Pursuant to Rule 12b-23 of the Commission'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 11 through 21 of the Prospectus is incorporated herein by reference.
Employees
Registrant employs no personnel and incurs no payroll costs. All management activities of Registrant are conducted by the Manager. An affiliate of the Manager employs individuals who perform the management activities of Registrant. This entity also performs similar services for other affiliates of the Manager.
Item 1. Business (continued)
Tax Reform Act of 1986, Revenue Act of 1987, Technical and Miscellaneous Revenue Act of 1988, Omnibus Budget Reconciliation Act of 1989, Omnibus Budget Reconciliation Act of 1990, Tax Extension Act of 1991, Omnibus Budget Reconciliation Act of 1993, Uruguay Round Agreements Act, Tax and Trade Relief Extension Act of 1998, Tax and Trade Relief Extension Act of 1999, Community Renewal Tax Relief Act of 2000 and Economic Growth and Tax Relief Reconciliation Act of 2001 (collectively the "Tax Acts")
Registrant is organized as a limited partnership and is a "pass through" tax entity that does not, itself, pay federal income tax. However, the owners of Registrant who are subject to federal income tax may be affected by the Tax Acts. Registrant will consider the effect of certain aspects of the Tax Acts on the owners when making decisions regarding its investments. Registrant does not anticipate that the Tax Acts will currently have a material adverse impact on Registrant's business operations, capital resources and plans or liquidity.
Item 2.
Item 2. Properties
The executive offices of Registrant and the Manager are located at 599 West Putnam Avenue, 3rd floor, Greenwich, Connecticut 06830. Registrant does not own or lease any properties. Registrant pays no rent; all charges for leased space are borne by an affiliate of the Manager.
Registrant's primary objective is to provide Low-income Tax Credits to Beneficial Owners generally over a ten year period. The relevant state tax credit agency has allocated each of Registrant's 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 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"). In addition, certain of the Local Partnerships have 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, regardless of any sale of the Properties by the Local Partnerships after the Compliance Period. The Properties must satisfy various requirements including rent restrictions and tenant income limitations (the "Low-income Tax Credit Requirements") in order to maintain eligibility for the recognition of the Low-income Tax Credit at all times during the Compliance Period. Once a Local Partnership has become eligible for the Low-income Tax Credit, it may lose such eligibility and suffer an event of recapture if its Property fails to remain in compliance with the Low-income Tax Credit Requirements. Through December 31, 2000, none of the Local Partnerships have suffered an event of recapture of Low-income Tax Credits.
Certain 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 subsidies on page 4). The subsidy agreements expire at various times during and after the Compliance Periods of the Local Partnerships. 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 and debt structure of any or all Local Partnerships currently receiving such subsidy or similar subsidies. Three Local Partnerships' Section 8 contracts are currently subject to renewal under applicable HUD guidelines.
Registrant owns a 98.9%-99% limited partnership interest ("Local Partnership Interest") in ten Local Partnerships reflected on page 4.
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.
Item 3.
Item 3. Legal Proceedings
Registrant is not aware of any material legal proceedings.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of the Beneficial Owners of Registrant during the fourth quarter of the fiscal year covered by this report.
PART II
Item 5.
Item 5. Market for Registrant's Common Equity and Related Security Holder Matters
Market Information and Holders
There is no established public trading market for Registrant's Units. Accordingly, accurate information as to the market value of a Unit at any given date is not available. The number of Beneficial Owners of Units as of May 31, 2001 was 869, holding 18,654 Units.
Merrill Lynch and PaineWebber follow 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 and PaineWebber client account statements (such as Registrant's Units) are separately provided to Merrill Lynch and PaineWebber by independent valuation services. These estimated values are based on financial and other information available to the independent services (i) on the prior August 15th for reporting on December year-end and subsequent client account statements through the following May's month-end client account statements and (ii) on March 31st for reporting on June month-end and subsequent client account statements through the November month-end client account statements of the same year. In addition, Registrant may provide an estimate of value to Unit holders from time to time in Registrant's reports to Beneficial Owners. 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. In addition, Unit holders may not realize such estimated values upon the liquidation of Registrant.
Distributions
Registrant owns a limited 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 owners. There were no cash distributions to the owners during the years ended March 30, 2001 and 2000.
Low-income Tax Credits, which are subject to various limitations, may be used by Beneficial Owners to offset federal income tax liabilities. The Low-income Tax Credits per Unit for each of the three closings, generated by Registrant and allocated to the Beneficial Owners for the tax years ended December 31, 2000 and 1999 and the cumulative Low-income Tax Credits allocated from inception through December 31, 2000 are as follows:
Notwithstanding future circumstances which may give rise to recapture or loss of future benefits (see Part I, Item 2 - Properties, herein), Registrant expects to generate total Low-income Tax Credits from investments in Local Partnerships of approximately $1,390 per Unit through December 31, 2006.
Item 6.
Item 6. Selected Financial Data
The information set forth below presents selected financial data of Registrant. Additional detailed financial information is set forth in the audited financial statements included under Part II, Item 8 herein.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
As used herein, the term Registrant refers to Series I of American Tax Credit Trust, a Delaware statutory business trust, (the "Trust"). References to any right, obligation, action, asset or liability of Series I mean such right, obligation, action, asset or liability of the Trust in connection with Series I.
Capital Resources and Liquidity
Registrant admitted beneficial owners (the "Beneficial Owners") in three closings with aggregate Beneficial Owners' capital contributions of $18,654,000. In connection with the offering of the sale of units of beneficial ownership, Registrant incurred organization and offering costs of approximately $2,331,000 and established a working capital reserve of approximately $1,287,000. The remaining net proceeds of approximately $15,036,000 (the "Net Proceeds") were available to be applied to the acquisition of limited partnership interests in local partnerships (the "Local Partnerships") which own low-income multifamily residential complexes (the "Property" or "Properties") which qualify for the low-income tax credit in accordance with Section 42 of the Internal Revenue Code (the "Low-income Tax Credit"). The Net Proceeds were utilized in acquiring an interest in ten Local Partnerships. Restricted cash in the balance sheet as of March 30, 2001 represents an outstanding capital contribution payable to a Local Partnership and accrued interest thereon, which is payable upon such Local Partnership's satisfaction of specified conditions.
As of March 30, 2001, Registrant has unrestricted cash and cash equivalents and investments in bonds totaling $2,052,210, which is available for operating expenses of Registrant and circumstances which may arise in connection with the Local Partnerships. As of March 30, 2001, Registrant's investments in bonds represent corporate bonds of $1,863,424 with various maturity dates ranging from 2003 to 2016. Registrant acquired such investments in bonds with the intention of utilizing proceeds generated by such investments to meet its annual obligations. Future sources of Registrant funds are expected primarily from interest earned on working capital and limited cash distributions from Local Partnerships.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
During the year ended March 30, 2001, Registrant received cash from interest revenue, sale/redemption of bonds and distributions from Local Partnerships and utilized cash for operating expenses, investments in bonds and a capital contribution to a Local Partnership. Cash and cash equivalents and investments in bonds increased, in the aggregate, by approximately $113,000 during the year ended March 30, 2001 (which includes a net unrealized gain on investments in bonds of approximately $32,000 and the amortization of net premium on investments in bonds of approximately $4,000). Notwithstanding circumstances that may arise in connection with the Properties, Registrant does not expect to realize significant gains or losses on its investments in bonds, if any.
During the year ended March 30, 2001, the investment in local partnerships decreased as a result of Registrant's equity in the Local Partnerships' net loss for the year ended December 31, 2000 of $844,680 and cash distributions received from Local Partnerships of $105,311. Payable to manager in the accompanying balance sheet as of March 30, 2001 represents accrued management fees.
Results of Operations
Registrant's operating results are dependent upon the operating results of the Local Partnerships and are significantly 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 which includes capital contributions payable, and is adjusted for Registrant'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 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. As a result, the reported equity in loss of investment in local partnerships is expected to decrease as Registrant's investment balances in the respective Local Partnerships become zero. As of March 30, 2001, no investment in any Local Partnership has reached a zero balance.
Registrant's operations for the years ended March 30, 2001, 2000 and 1999 resulted in net losses of $950,341, $1,146,850 and $1,170,347, respectively. The decrease in loss from fiscal 2000 to fiscal 2001 is primarily attributable to a decrease in equity in loss of investment in local partnerships of approximately $191,000, which decrease resulted primarily from a net decrease in the net operating losses of certain Local Partnerships.
The Local Partnerships' net loss of approximately $853,000 for the year ended December 31, 2000 includes depreciation and amortization expense of approximately $1,248,000 and interest on non-mandatory debt of approximately $284,000, and does not include principal payments on permanent mortgages of approximately $381,000. The Local Partnerships' net loss of approximately $1,047,000 for the year ended December 31, 1999 includes depreciation and amortization expense of approximately $1,289,000 and interest on non-mandatory debt of approximately $295,000, and does not include principal payments on permanent mortgages of approximately $364,000. The Local Partnerships' net loss of approximately $1,068,000 for the year ended December 31, 1998 includes depreciation and amortization expense of approximately $1,396,000 and interest on non-mandatory debt of approximately $300,000, and does not include principal payments on permanent mortgages and construction loans of approximately $349,000. The results of operations of the Local Partnerships for the year ended December 31, 2000 are not necessarily indicative of the results that may be expected in future periods.
Local Partnership Matters
Registrant's primary objective is to provide Low-income Tax Credits to Beneficial Owners generally over a ten year period. The relevant state tax credit agency has allocated each of Registrant's 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 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"). In addition, certain of the Local Partnerships have 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, regardless of any sale of the Properties by the Local Partnerships after the Compliance Period. The Properties must satisfy various requirements including rent restrictions and tenant income limitations (the "Low-income
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Tax Credit Requirements") in order to maintain eligibility for the recognition of the Low-income Tax Credit at all times during the Compliance Period. Once a Local Partnership has become eligible for the Low-income Tax Credit, it may lose such eligibility and suffer an event of recapture if its Property fails to remain in compliance with the Low-income Tax Credit Requirements. Through December 31, 2000, none of the Local Partnerships have suffered an event of recapture of Low-income Tax Credits.
The Properties are principally comprised of subsidized and leveraged low-income multifamily residential complexes located throughout the United States. Certain 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 during the Compliance Periods of the Local Partnerships. 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 and debt structure of any or all Local Partnerships currently receiving such subsidy or similar subsidies. Three Local Partnerships' Section 8 contracts are currently subject to renewal under applicable HUD guidelines.
The Local Partnerships have various financing structures which include (i) required debt service payments ("Mandatory Debt Service") and (ii) debt service payments which 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"). In the event rents are not sufficient to cover operating expenses, Mandatory Debt Service requirements and other charges, certain general partners of the Local Partnerships (the "Local General Partners") are obligated to provide advances to cover deficits for a certain period of time up to certain amounts (the "Deficit Guarantee"). A Local General Partner's funding of such Deficit Guarantee is dependent on its liquidity or ability to borrow the required funds. During the year ended December 31, 2000, revenue from operations of the Local Partnerships has generally been sufficient to cover operating expenses and Mandatory Debt Service. Substantially all of the Local Partnerships are effectively operating at or above break even levels, although certain Local Partnerships' operating information reflects operating deficits that do not represent cash deficits due to their mortgage and financing structure and the required deferral of property management fees. However, as discussed below, one Local Partnership's operating information indicates an operating deficit after taking into account its mortgage and financing structure and any required deferral of property management fees.
The terms of the partnership agreement of St. Christopher's Associates, L.P. V ("St. Christopher") require the Local General Partner to advance funds to cover operating deficits through the Compliance Period. St. Christopher incurred an operating deficit of approximately $83,000 for the year ended December 31, 2000. St. Christopher has an operating reserve of approximately $331,000 as of December 31, 2000. In addition, unpaid Registrant capital contributions and accrued interest thereon total approximately $128,000 as of March 30, 2001. There is no Mandatory Debt Service and payments on the real estate taxes are current. Of Registrant's total annual Low-income Tax Credits, approximately 14% is allocated from St. Christopher.
Inflation
Inflation is not expected to have a material adverse impact on Registrant's operations during its period of ownership of the Local Partnership Interests.
Item 7a.
Item 7a. Quantitative and Qualitative Disclosure about Market Risk
Registrant has invested a significant portion of its working capital reserves in corporate bonds. The market value of such investments is subject to fluctuation based upon changes in interest rates relative to each investment's maturity date. Since Registrant's investments in bonds have various maturity dates through 2016, the value of such investments may be adversely impacted in an environment of rising interest rates in the event Registrant decides to liquidate any such investment prior to its maturity. Although Registrant may utilize reserves to assist an under performing Property, it otherwise intends to hold such investments to their respective maturities. Therefore, Registrant does not anticipate any material adverse impact in connection with such investments.
AMERICAN TAX CREDIT TRUST, a Delaware statutory business trust Series I
Item 8.
Item 8. Financial Statements and Supplementary Data
Table of Contents Page ----------------- ----
Independent Auditors' Report.................................................12
Balance Sheets...............................................................13
Statements of Operations.....................................................14
Statements of Changes in Owners' Equity (Deficit)............................15
Statements of Cash Flows.....................................................16
Notes to Financial Statements................................................18
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.
Independent Auditors' Report
To the Manager and Beneficial Owners American Tax Credit Trust, a Delaware statutory business trust Series I
We have audited the accompanying balance sheets of American Tax Credit Trust, a Delaware statutory business trust Series I as of March 30, 2001 and 2000, and the related statements of operations, changes in owners' equity (deficit) and cash flows for each of the three years in the period ended March 30, 2001. These financial statements are the responsibility of the trust's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. 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 Trust, a Delaware statutory business trust Series I as of March 30, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended March 30, 2001, in conformity with generally accepted accounting principles.
/s/ Reznick Fedder & Silverman - ------------------------------ Bethesda, Maryland May 17, 2001
AMERICAN TAX CREDIT TRUST, a Delaware statutory business trust Series I BALANCE SHEETS MARCH 30, 2001 AND 2000
See Notes to Financial Statements.
AMERICAN TAX CREDIT TRUST, a Delaware statutory business trust Series I STATEMENTS OF OPERATIONS YEARS ENDED MARCH 30, 2001, 2000 AND 1999
See Notes to Financial Statements.
AMERICAN TAX CREDIT TRUST, a Delaware statutory business trust Series I STATEMENTS OF CHANGES IN OWNERS' EQUITY (DEFICIT) YEARS ENDED MARCH 30, 2001, 2000 AND 1999
See Notes to Financial Statements.
AMERICAN TAX CREDIT TRUST, a Delaware statutory business trust Series I STATEMENTS OF CASH FLOWS YEARS ENDED MARCH 30, 2001, 2000 AND 1999
See reconciliation of net loss to net cash provided by (used in) operating activities on page 17. ==============================================================================
See Notes to Financial Statements.
AMERICAN TAX CREDIT TRUST, a Delaware statutory business trust Series I STATEMENTS OF CASH FLOWS - (Continued) YEARS ENDED MARCH 30, 2001, 2000 AND 1999
See Notes to Financial Statements.
AMERICAN TAX CREDIT TRUST, a Delaware statutory business trust Series I NOTES TO FINANCIAL STATEMENTS MARCH 30, 2001, 2000 AND 1999
1. Organization, Purpose and Summary of Significant Accounting Policies
American Tax Credit Trust, a Delaware statutory business trust (the "Trust") was formed on February 4, 1993 under Chapter 38 of Title 12 of the Delaware Code. There was no operating activity until admission of the investors ("Beneficial Owners") on November 29, 1993. The Trust was formed to invest primarily in leveraged low-income multifamily residential complexes (the "Property" or "Properties") which qualify 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 partnership equity interests (the "Local Partnership Interests") in partnerships (the "Local Partnership" or "Local Partnerships") that are the owners of the Properties. Richman American Credit Corp. (the "Manager") was formed on April 5, 1993 to act as the manager of the Trust.
On September 13, 1993, the Trust commenced the offering for sale of units of beneficial ownership ("Units") to Beneficial Owners in one to twenty series ("Series I through Series XX"; each a "Series"). These notes and the accompanying financial statements are presented for Series I only.
Basis of Accounting and Fiscal Year
The Trust's records are maintained on the accrual basis of accounting for both financial reporting and tax purposes. For financial reporting purposes, the Trust'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 Trust and the Local Partnerships each have a calendar year for income tax purposes.
The Trust accounts for its investment in local partnerships in accordance with the equity method of accounting, under which the investment is carried at cost which includes capital contributions payable, and is adjusted for the Trust'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 Trust is recognized to the extent of the Trust's investment balance in each Local Partnership. Equity in loss in excess of the Trust'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 regularly assesses the carrying value of its investments in local partnerships. If the carrying value of an investment in a Local Partnership exceeds the estimated value derived by management (which contemplates remaining Low-income Tax Credits and estimated residual value, among other things), the Partnership reduces its investment in any such Local Partnership and includes such reduction in equity in loss of investment in local partnerships.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles 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.
Cash and Cash Equivalents
The Trust 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.
AMERICAN TAX CREDIT TRUST, a Delaware statutory business trust Series I NOTES TO FINANCIAL STATEMENTS - (Continued) MARCH 30, 2001, 2000 AND 1999
1 Organization, Purpose and Summary of Significant Accounting Policies (continued)
Restricted Cash
Restricted cash is set aside to make the Trust's required capital contribution to a Local Partnership (see Notes 3 and 5).
Investments in Bonds
Investments in bonds are classified as available-for-sale and represent investments that the Trust intends to hold for an indefinite period of time but not necessarily to maturity. Any decision to sell an investment would be based on various factors, including significant movements in interest rates and liquidity needs. Investments in bonds are 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 owners' equity (deficit).
Premiums and discounts on investments in bonds are amortized (accreted) using the straight-line method over the life of the investment. Amortized premiums offset interest revenue, while the accretion of discounts and zero coupon bonds are included in interest revenue. Realized gain (loss) on redemption or sale of investments in bonds are included in, or offset against, interest revenue on the basis of the adjusted cost of each specific investment redeemed or sold.
Interest on Capital Contributions Payable to Local Partnerships
Pursuant to agreements with certain Local Partnerships, interest is accrued on certain installments of capital contributions. Such amounts are recorded as a liability and an offset to interest revenue.
Organization Costs
Organization costs were amortized on a straight-line basis over five (5) years; such costs became fully amortized during the year ended March 30, 1999.
Income Taxes
No provision for income taxes has been made because all income, losses and tax credits are allocated to the owners for inclusion in their respective tax returns. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," the Trust has included in Note 7 disclosures related to differences in the book and tax bases of accounting.
Reclassifications
Certain reclassifications have been made to the prior year Local Partnership balances in Note 5 to conform to the current year presentation.
AMERICAN TAX CREDIT TRUST, a Delaware statutory business trust Series I NOTES TO FINANCIAL STATEMENTS - (Continued) MARCH 30, 2001, 2000 AND 1999
2. Capital Contributions
On September 13, 1993, the Trust commenced the offering of Units through Merrill Lynch, Pierce, Fenner & Smith Incorporated and PaineWebber Incorporated (the "Selling Agents"). On November 29, 1983, January 28, 1994 and May 25, 1994, under the terms of the Fourth Amended and Restated Agreement of Trust of the Trust (the "Trust Agreement"), the Manager admitted Beneficial Owners to the Trust in three closings. At these closings, subscriptions for a total of 18,654 Units representing $18,654,000 in Beneficial Owners' capital contributions were accepted. In connection with the offering of Units, the Trust incurred organization and offering costs of $2,330,819, of which $75,000 was capitalized as organization costs and $2,255,819 was charged to the Beneficial Owners' equity as syndication costs. The Trust received a capital contribution of $100 from the Manager.
Net loss is allocated 99% to the Beneficial Owners and 1% to the Manager in accordance with the Trust Agreement.
3. Cash and Cash Equivalents and Restricted Cash
As of March 30, 2001, the Trust has cash and cash equivalents and restricted cash in the aggregate of $316,941, which are deposited in interest-bearing accounts with an institution that is not insured by the Federal Deposit Insurance Corporation.
4. Investments in Bonds
The Trust carries its investments in bonds as available-for-sale because such investments are used to facilitate and provide flexibility for the Trust's obligations, including resolving circumstances that may arise in connection with the Local Partnerships. Investments in bonds are reflected in the accompanying balance sheets at estimated fair value.
As of March 30, 2001, certain information concerning investments in bonds is as follows:
AMERICAN TAX CREDIT TRUST, a Delaware statutory business trust Series I NOTES TO FINANCIAL STATEMENTS - (Continued) MARCH 30, 2001, 2000 AND 1999
5. Investment in Local Partnerships
As of March 30, 2001, the Trust owns a 98.9%-99% limited partnership interest in the following Local Partnerships:
1. ACP Housing Associates, L.P.; 2. Creative Choice Homes VII, Ltd.; 3. Edgewood Manor Associates, L.P.; 4. Ledge / McLaren Limited Partnership; 5. Penn Apartment Associates; 6. SB-92 Limited Partnership; 7. St. Christopher's Associates, L.P. V *; 8. St. John Housing Associates, L.P.; 9. Starved Rock - LaSalle Manor Limited Partnership; and 10. Vision Limited Dividend Housing Association Limited Partnership.
* Affiliates of the Manager provide services to the Local Partnership.
The Properties are principally comprised of subsidized and leveraged low-income multifamily residential complexes located throughout the United States. 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 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, the Trust has committed to make capital contribution payments in the aggregate amount of $14,741,864, of which the Trust has paid $14,672,564 and $69,300 is payable as of March 30, 2001. Restricted cash in the accompanying balance sheet as of March 30, 2001 represents such outstanding capital contribution along with accrued interest thereon of $58,855. The outstanding capital contribution is payable upon one Local Partnership's satisfaction of specified conditions. As of December 31, 2000, the Local Partnerships have outstanding mortgage loans payable totaling approximately $21,974,000 and accrued interest payable on such loans totaling approximately $1,414,000, which are secured by security interests and liens common to mortgage loans on the Local Partnerships' real property and other assets.
The combined balance sheets of the Local Partnerships as of December 31, 2000 and 1999 and the combined statements of operations of the Local Partnerships for the years ended December 31, 2000, 1999 and 1998 are reflected on pages 22 and 23, respectively.
AMERICAN TAX CREDIT TRUST, a Delaware statutory business trust Series I NOTES TO FINANCIAL STATEMENTS - (Continued) MARCH 30, 2001, 2000 AND 1999
5. Investment in Local Partnerships (continued)
The combined balance sheets of the Local Partnerships as of December 31, 2000 and 1999 are as follows:
AMERICAN TAX CREDIT TRUST, a Delaware statutory business trust Series I NOTES TO FINANCIAL STATEMENTS - (Continued) MARCH 30, 2001, 2000 AND 1999
5. Investment in Local Partnerships (continued)
The combined statements of operations of the Local Partnerships for the years ended December 31, 2000, 1999 and 1998 are as follows:
AMERICAN TAX CREDIT TRUST, a Delaware statutory business trust Series I NOTES TO FINANCIAL STATEMENTS - (Continued) MARCH 30, 2001, 2000 AND 1999
5. Investment in Local Partnerships (continued)
Investment and capital contribution activity with respect to each Local Partnership for the year ended March 30, 2001 is as follows:
AMERICAN TAX CREDIT TRUST, a Delaware statutory business trust Series I NOTES TO FINANCIAL STATEMENTS - (Continued) MARCH 30, 2001, 2000 AND 1999
5. Investment in Local Partnerships (continued)
Investment and capital contribution activity with respect to each Local Partnership for the year ended March 30, 2000 is as follows:
AMERICAN TAX CREDIT TRUST, a Delaware statutory business trust Series I NOTES TO FINANCIAL STATEMENTS - (Continued) MARCH 30, 2001, 2000 AND 1999
5. Investment in Local Partnerships (continued)
Property information for each Local Partnership as of December 31, 2000 is as follows:
AMERICAN TAX CREDIT TRUST, a Delaware statutory business trust Series I NOTES TO FINANCIAL STATEMENTS - (Continued) MARCH 30, 2001, 2000 AND 1999
5. Investment in Local Partnerships (continued)
The summary of property activity during the year ended December 31, 2000 is as follows:
6. Transactions with Manager and Affiliates
For the years ended March 30, 2001, 2000 and 1999, the Trust paid and/or incurred the following amounts to the Manager and/or affiliates in connection with services provided to the Trust:
For the years ended December 31, 2000, 1999 and 1998, the Local Partnerships paid and/or incurred the following amounts to the Manager and/or affiliates in connection with services provided to the Local Partnerships:
AMERICAN TAX CREDIT TRUST, - ------------------------------------------------------------------------------ a Delaware statutory business trust Series I NOTES TO FINANCIAL STATEMENTS - (Continued) MARCH 30, 2001, 2000 AND 1999
7. Taxable Loss
A reconciliation of the financial statement net loss of the Trust for the years ended March 30, 2001, 2000 and 1999 to the tax return net loss for the years ended December 31, 2000, 1999 and 1998 is as follows:
The differences between the investment in local partnerships for tax and financial reporting purposes as of December 31, 2000 and 1999 are as follows:
* Capital contributions payable to Local Partnerships are not included in the investment balance for tax purposes.
Payable to manager in the accompanying balance sheets represents accrued management fees not deductible for tax purposes pursuant to Internal Revenue Code Section 267.
AMERICAN TAX CREDIT TRUST, a Delaware statutory business trust Series I NOTES TO FINANCIAL STATEMENTS - (Continued) MARCH 30, 2001, 2000 AND 1999
8. Commitments and Contingencies
Pursuant to the Trust Agreement, the Trust incurs an annual management fee ("Management Fee") payable to the Manager for its services in connection with the management of the affairs of the Trust. The annual Management Fee is equal to 0.5% of all proceeds as of December 31 of any year, invested or committed for investment in Local Partnerships plus all debts of the Local Partnerships related to the Properties. The Trust incurred a Management Fee of $192,117, $192,117 and $192,238 for the years ended March 30, 2001, 2000 and 1999, respectively. Unpaid Management Fees in the amount of $642,237 and $566,037 are recorded as payable to manager in the accompanying balance sheets as of March 30, 2001 and 2000, respectively.
The rents of the Properties, certain of which receive rental subsidy payments, including payments under Section 8 of Title II of the Housing and Community Development Act of 1974 ("Section 8"), are subject to specific laws, regulations and agreements with federal and state agencies. The subsidy agreements expire at various times during and after the Compliance Periods of the Local Partnerships. 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. The Trust 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 and debt structure of any or all Local Partnerships currently receiving such subsidy or similar subsidies. Three Local Partnerships' Section 8 contracts are currently subject to renewal under applicable HUD guidelines.
9. Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of SFAS No. 107, "Disclosures about 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 and restricted cash
The carrying amounts approximate fair value.
Investments in bonds
Fair value is estimated based on market quotes provided by an independent service as of the balance sheet dates.
Interest receivable
The carrying amount approximates fair value due to the terms of the underlying investments.
Capital contributions payable and interest payable
The carrying amounts approximate fair value in accordance with the Local Partnerships' partnership agreements.
The estimated fair value of the Trust's financial instruments as of March 30, 2001 and 2000 are disclosed elsewhere in the financial statements.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
Registrant has no officers or directors. The Manager manages Registrant's affairs and has general responsibility and authority in all matters affecting its business. The executive officers and directors of the Manager are:
Served in present Name capacity since(1) Position held - ---- -------------- -------------
Richard Paul Richman May 10, 1993 President and Director Stephen B. Smith May 10, 1993 Executive Vice President David A. Salzman May 10, 1993 Vice President and Secretary Neal Ludeke May 10, 1993 Vice President and Treasurer
- ------------------------------------------------------------------------------
1 Director holds office until his successor is elected and qualified. All officers serve at the pleasure of the Director.
Richard Paul Richman, age 53, is the sole Director and President of the Manager. Mr. Richman is the President and principal 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 the Manager and the general partner of Secured Income L.P., a director of Wilder Richman Historic Corporation, an affiliate of the Manager and the general partner of Wilder Richman Historic Properties II, L.P., a director of Richman Tax Credit Properties Inc., an affiliate of the Manager and the general partner of the general partner of American Tax Credit Properties L.P., a director of Richman Tax Credits Inc., an affiliate of the Manager and the general partner of the general partner of American Tax Credit Properties II L.P. and a director of Richman Housing Credits Inc., an affiliate of the Manager and the general partner of the general partner of American Tax Credit Properties III L.P.
Stephen B. Smith, age 57, is the Executive Vice President of the Manager. Mr. Smith is responsible for marketing and investment program development for Richman Group. From 1989 until joining Richman Group in 1993, Mr. Smith was an independent advisor to developers, lenders and institutional investors on matters related to real estate investments.
David A. Salzman, age 40, is a Vice President and the Secretary of the Manager and a minority stockholder of Richman Group. Mr. Salzman is responsible for the acquisition and development of residential real estate for syndication as a Vice President of acquisitions of Richman Group.
Neal Ludeke, age 43, is a Vice President and the Treasurer of the Manager. Mr. Ludeke, a Vice President and the Treasurer of Richman Group, is engaged primarily in the syndication, asset management and finance operations of Richman Group. In addition, Mr. Ludeke is a Vice President and the Treasurer of Richman Asset Management, Inc. ("RAM"), an affiliate of the Manager. Mr. Ludeke's responsibilities in connection with RAM include various partnership management functions.
Item 11.
Item 11. Executive Compensation
Registrant has no officers or directors. Registrant does not pay the officers or director of the Manager any remuneration. During the year ended March 30, 2001, the Manager did not pay any remuneration to any of its officers or its director.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of May 31, 2001, no person or entity was known by Registrant to be the Beneficial Owner of more than five percent of the Units. The Manager is wholly-owned by Richard Paul Richman.
Item 13.
Item 13. Certain Relationships and Related Transactions
The Manager 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 6 and 8 to the audited financial statements included in Item 8 - "Financial Statements and Supplementary Data" herein.
Transactions with Manager and Affiliates
The net tax losses and Low-income Tax Credits generated by Registrant during the year ended December 31, 2000 allocated to the Manager were $11,660 and $26,155, respectively.
Indebtedness of Management
No officer or director of the Manager or any affiliate of the foregoing was indebted to Registrant at any time during the year ended March 30, 2001.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(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 notes thereto.
(3) Exhibits
Incorporated by Exhibit Reference to ------- ------------
10.1 Credit Agreement dated as of Exhibit 10.1 to Form 10-Q December 27, 1993 between Trust Report and Citibank N.A. dated December 30, 1993 (File No. 33-58032)
10.2 Security and Pledge Agreement Exhibit 10.2 to Form 10-Q dated as of December 27, 1993 Report between Trust and Citibank N.A. dated December 30, 1993 (File No. 33-58032)
10.3 Cash Collateral Agreement dated Exhibit 10.3 to Form 10-Q as of December 27, 1993 between Report Trust and Citibank N.A. dated December 30, 1993 (File No. 33-58032)
10.4 Promissory Note dated December Exhibit 10.4 to Form 10-Q 27, 1993 from Trust to Citibank Report N.A. dated December 30, 1993 (File No. 33-58032)
10.5 Tri-Party Agreement dated as of Exhibit 10.5 to Form 10-Q December 27, 1993 between Trust, Report Citibank N.A. and United States dated December 30, 1993 Trust Company of New York (File No. 33-58032)
10.6 ACP Housing Associates, L.P. Exhibit 10.1 to Form 10-Q Amended and Restated Agreement of Report Limited Partnership dated September 29, 1995 (File No. 0-24600)
10.7 Creative Choice Homes VII, Ltd. Exhibit 10.1 to Form 10-Q Amended and Restated Agreement of Report Limited Partnership dated December 30, 1994 (File No. 0-24600)
10.8 Edgewood Manor Associates, L.P. Exhibit 10.6 to Form 10-K Amended and Restated Agreement of Report Limited Partnership dated March 30, 1994 (File No. 33-58032)
10.9 Ledge / McLaren Limited Exhibit 10.2 to Form 10-Q Partnership Amended and Restated Report Agreement of Limited Partnership dated December 30, 1994 (File No. 0-24600)
10.10 Penn Apartment Associates Amended Exhibit 10.7 to Form 10-K and Restated Agreement of Limited Report Partnership dated March 30, 1994 (File No. 33-58032)
Incorporated by Exhibit Reference to ------- ------------ 10.11 First Amendment to Penn Apartment Exhibit 10.8 to Form 10-K Associates Amended and Restated Report Agreement of Limited Partnership dated March 30, 1994 (File No. 33-58032)
10.12 Second Amendment to Penn Exhibit 10.9 to Form 10-K Apartment Associates Amended and Report Restated Agreement of Limited dated March 30, 1994 Partnership (File No. 33-58032)
10.13 SB-92 Limited Partnership Amended Exhibit 10.6 to Form 10-Q and Restated Agreement of Limited Report Partnership dated December 30, 1993 (File No. 33-58032)
10.14 St. Christopher's Associates, Exhibit 10.1 to Form 10-Q L.P. V Amended and Restated Report Agreement of Limited Partnership dated June 29, 1994 (File No. 33-58032)
10.15 St. John Housing Associates, L.P. Exhibit 10.7 to Form 10-Q Amended and Restated Agreement of Report Limited Partnership dated December 30, 1993 (File No. 33-58032)
10.16 Starved Rock - LaSalle Manor Exhibit 10.2 to Form 10-Q Limited Partnership Amended and Report Restated Agreement of Limited dated September 29, 1995 Partnership (File No. 0-24600)
10.17 Vision Limited Dividend Housing Exhibit 10.3 to Form 10-Q Association Limited Partnership Report Amended and Restated Agreement of dated December 30, 1994 Limited Partnership 0-24600) (File No.
99.1 Pages 11 through 21, 26 through Exhibit 99.1 to Form 10-K 48 and 63 through 65 of Report Prospectus of Registrant dated dated March 30, 1994 September 7, 1993 filed pursuant (File No. 33-58032) to Rule 424 (b)(3) under the Securities Act of 1933
99.2 Supplement No. 2 dated November Exhibit 28.1 to Form 10-Q 16, 1993 to Prospectus Report dated December 30, 1993 (File No. 33-58032)
99.3 Supplement No. 3 dated November Exhibit 99.3 to Form 10-K 23, 1994 to Prospectus Report dated March 30, 1995 (File No. 0-24600)
99.4 Supplement No. 4 dated December Exhibit 99.4 to Form 10-K 28, 1994 to Prospectus Report dated March 30, 1995 (File No. 0-24600)
99.5 December 31, 1995 financial Exhibit 99.5 to Form 10-K statements of Report St. John Housing Associates, L.P. dated March 30, 1996 pursuant to Title 17, Code of (File No. 0-24600) Federal Regulations, Section 210.3-9
99.6 December 31, 1996 financial Exhibit 99.6 to Form 10-K statements of Report St. John Housing Associates, L.P. dated March 30, 1997 pursuant to Title 17, Code of (File No. 0-24600) Federal Regulations
99.7 December 31, 1997 financial Exhibit 99.7 to Form 10-K statements of Report St. John Housing Associates, L.P. dated March 30, 1998 pursuant to Title 17, Code of (File No. 0-24600) Federal Regulations
Incorporated by Exhibit Reference to ------- ------------
99.8 December 31, 1998 financial Exhibit 99.8 to Form 10-K statements of Report St. John Housing Associates, L.P. dated March 30, 1999 pursuant to Title 17, Code of (File No. 0-24600) Federal Regulations
99.9 December 31, 1999 financial Exhibit 99.9 to Form 10-K statements of Report St. John Housing Associates, L.P. dated March 30, 2000 pursuant to Title 17, Code of (File No. 0-24600) Federal Regulations
(b) Reports on Form 8-K
No reports on Form 8-K were filed by Registrant during the last quarter of the period covered by this report.
(c) Exhibits
See (a)(3) above.
(d) 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.
AMERICAN TAX CREDIT TRUST, a Delaware statutory business trust Series I
By: Richman American Credit Corp., The Manager
Dated: June 28, 2001 /s/ Richard Paul Richman ------------- ------------------------------------ by: Richard Paul Richman President
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.