Item 1. Business.
General
Independence Tax Credit Plus L.P. IV (the “Partnership”) is a limited partnership which was formed under the laws of the State of Delaware on February 22, 1995. The general partner of the Partnership is Related Independence L.L.C., a Delaware limited liability company (the “General Partner”). Centerline Holding Company (“Centerline”) is the ultimate parent of Centerline Affordable Housing Advisors LLC (“CAHA”), the managing member of the General Partner.
On July 6, 1995, the Partnership commenced a public offering (the "Offering") of Beneficial Assignment Certificates ("BACs") representing assignments of limited partnership interests in the Partnership ("Limited Partnership Interests"). The Partnership received $45,844,000 of gross proceeds from the Offering (the "Gross Proceeds") from 2,759 investors ("BACs holders"). The Offering was terminated on May 22, 1996.
The Partnership’s initial business was to invest in other partnerships (“Local Partnerships”, “subsidiaries” or “subsidiary partnerships”) owning leveraged apartment complexes (“Apartment Complexes” or “Properties”) that are eligible for the low-income housing tax credit (“Tax Credit”) enacted in the Tax Reform Act of 1986, some of which may also be eligible for the historic rehabilitation tax credit. As of March 31, 2013, the Partnership had originally invested approximately $37,555,000 (not including acquisition fees of approximately $1,771,000) of the net proceeds of the Offering in fourteen Local Partnerships of which approximately $148,000 remains to be paid to the Local Partnerships (including approximately $123,000 being held in escrow) as certain benchmarks, such as occupancy level, are attained prior to the release of the funds. The Partnership does not intend to acquire interests in additional Local Partnerships, but the Partnership may be required to fund potential purchase price adjustments based on tax credit adjustor clauses. The Partnership is currently invested in eight Local Partnerships. The Partnership’s investment in each Local Partnership represents from 98.99% to 99.89%. See Item 2, Properties, below.
The Partnership is currently in the process of developing a plan to dispose of all of its investments. It is anticipated that this process will take a number of years. During the fiscal year ended March 31, 2013, the Partnership sold its limited partnership interest in two Local Partnerships and one Local Partnership sold its property and the related assets and liabilities. Through March 31, 2013, the Partnership has sold its limited partnership interest in four Local Partnerships, and the property and the related assets and liabilities of two Local Partnerships have been sold. There can be no assurance as to when the Partnership will dispose of its remaining investments or the amount of proceeds which may be received. However, based on the historical operating results of the Local Partnerships and the current economic conditions, including changes in tax laws, it is unlikely that the proceeds from such sales received by the Partnership will be sufficient to return to the limited partners their original investments.
The investment objectives of the Partnership are described below:
1.Entitle qualified BACs holders to Tax Credits over the period of the Partnership’s entitlement to claim Tax Credits (for each Property, generally ten years from the date of investment or, if later, the date the Property is leased to qualified tenants; referred to herein as the “Credit Period”) with respect to each Apartment Complex.
2.Preserve and protect the Partnership’s capital.
3.Participate in any capital appreciation in the value of the Properties and provide distributions of Sale or Refinancing Proceeds upon the disposition of the Properties.
4.Allocate passive losses to individual BACs holders to offset passive income that they may realize from rental real estate investments and other passive activities, and allocate passive losses to corporate BACs holders to offset business income.
One of the Partnership’s objectives is to entitle qualified BACs holders to Tax Credits over the Credit Period. Each of the Local Partnerships in which the Partnership has acquired an interest has been allocated by the relevant state credit agencies the authority to recognize Tax Credits during the Credit Period provided that the Local Partnership satisfies the rent restriction, minimum set-aside and other requirements for recognition of the Tax Credits at all times during such period. Once a Local Partnership has become eligible to recognize Tax Credits, it may lose such eligibility and suffer an event of “recapture” if its Property fails to remain in compliance with the Tax Credit requirements during the 15-year period commencing at the beginning of the Credit Period (“Compliance Period”). As of December 31, 2012, all the Local Partnerships have completed their Credit Periods. However, each Local Partnership must continue to comply with the Tax Credit requirements until the end of the Compliance Period in order to avoid recapture of the Tax Credits. The Compliance Periods will continue through December 31, 2017 with respect to the Properties depending upon when the Compliance Period commenced.
A loss on impairment of assets is recorded when management estimates amounts recoverable through future operations and sale of the Property on an undiscounted basis are below depreciated cost. At that time the Property investments themselves are reduced to estimated fair value (using the fair market value based on comparative sales). During the year ended March 31, 2013, the Partnership recorded approximately $5,333,000 as an aggregate loss on impairment of assets. Through March 31, 2013, the Partnership has recorded approximately $33,280,000 as an aggregate loss on impairment of assets.
There can be no assurance that the Partnership will achieve its investment objectives, as described above, and it is unlikely that the Partnership will meet objectives 2 and 3, also as noted above.
The Partnership is subject to the risks incidental to potential losses arising from the management and ownership of improved real estate and poor economic conditions.
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Sale of Underlying Local Partnerships
The Partnership is currently in the process of developing a plan to dispose of all of its investments. It is anticipated that this process will take a number of years. During the fiscal year ended March 31, 2013, the Partnership sold its limited partnership interest in two Local Partnerships and one Local Partnership sold its property and the related assets and liabilities. Through March 31, 2013, the Partnership has sold its limited partnership interest in four Local Partnerships, and the property and the related assets and liabilities of two Local Partnerships have been sold. There can be no assurance as to when the Partnership will dispose of its remaining investments or the amount of proceeds which may be received. However, based on the historical operating results of the Local Partnerships and the current economic conditions, including changes in tax laws, it is unlikely that the proceeds from such sales received by the Partnership will be sufficient to return to the limited partners their original investments. All gains and losses on sales are included in discontinued operations.
On December 31, 2012, the Partnership sold its limited partnership interest in Belmont/McBride Apartments Limited Partnership (“Belmont”) to an affiliate of the Local General Partner for a sales price of $10. The sale resulted in a gain of approximately $2,646,000 resulting from the write-off of the basis in the Local Partnership of the same amount at the date of sale, which was recorded during the quarter ended December 31, 2012. In addition, the sale resulted in a noncash contribution to the Local Partnership from the General Partner of approximately $13,000 as a result of the write-off of fees owed by the Local Partnership to an affiliate of the General Partner. An adjustment to the gain of approximately $58,000 was recorded during the quarter ended March 31, 2013, resulting in an overall gain of approximately $2,704,000.
On September 28, 2012, the property and the related assets and liabilities of New Zion Limited Partnership (“New Zion”) were sold to an unaffiliated third party purchaser for a sales price of $2,450,000. The Partnership received $709,755 as distributions from this sale after the repayment of the mortgages, other liabilities, closing costs and distributions to other partners of approximately $1,740,000. (New Zion was owned approximately 58% by the Partnership and 42% by an affiliate of the Partnership under the same management) The sale resulted in a gain of approximately $883,000 which was recorded during the quarter ended September 30, 2012. In addition, the sale resulted in a write-off of operating advances of approximately $191,000 owed to an affiliate of the General Partner. The sale also resulted in a noncash contribution to the Local Partnership from the General Partner of approximately $4,000 as a result of the write-off of fees owed by the Local Partnership to an affiliate of the General Partner. Adjustments to the gain of approximately $(226,000) and $(4,000) were recorded during the quarters ended December 31, 2012 and March 31, 2013, resulting in an overall gain of approximately $653,000.
On June 11, 2012, the Partnership sold its limited partnership interest in Marlton Housing Partnership, L.P (“Marlton”) to an affiliate of the Local General Partner for a sales price of $1. The sale resulted in a gain of approximately $2,125,000 resulting from the write-off of the deficit basis in the Local Partnership of the same amount at the date of sale, which was recorded during the quarter ended June 30, 2012. An adjustment to the gain of approximately $(91,000) was recorded during the quarter ended September 30, 2012, resulting in an overall gain of approximately $2,034,000.
On December 13, 2011, the Partnership sold its limited partnership interest in Sojourner Douglass, L.P (“Sojourner Douglass”) to an affiliate of the Local General Partner for a sales price of $212,500. The sale resulted in a gain of approximately $2,269,000 resulting from a disposition of a net deficiency in capital in the Local Partnership of approximately $2,056,000 and the $212,500 cash received from the sale, which was recorded during the quarter ended December 31, 2011. An adjustment to the gain of approximately $43,000 was recorded during the quarter ended March 31, 2012, resulting in an overall gain of approximately $2,312,000.
Segments
The Partnership operates in one segment, which is the investment in multi-family residential property. Financial information about this segment is set forth in Item 8 herein.
Competition
The real estate business is highly competitive and substantially all of the properties acquired by the Partnership are expected to have active competition from similar properties in their respective vicinities. In addition, various other limited partnerships may, in the future, be formed by the General Partner and/or its affiliates to engage in businesses which may be competitive with the Partnership.
Employees
The Partnership does not have any direct employees. All services are performed for the Partnership by the General Partner and its affiliates. The General Partner receives compensation in connection with such activities as set forth in Items 11 and 13. In addition, the Partnership reimburses the General Partner and certain of its affiliates for expenses incurred in connection with the performance by their employees of services for the Partnership in accordance with the Partnership’s Amended and Restated Agreement of Limited Partnership (the “Partnership Agreement”).
Item 1A.
Item 1A. Risk Factors.
Not applicable.
Item 1B.
Item 1B. Unresolved Staff Comments.
Not applicable.
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Item 2.
Item 2. Properties.
The Partnership’s investment in each of the remaining eight Local Partnerships represents 98.99% or 99.89% of the partnership interests in each Local Partnership. Through the rights of the Partnership and/or an affiliate of the General Partner, which affiliate has a contractual obligation to act on behalf of the Partnership, to remove the Local General Partner and to approve certain major operating and financial decisions, the Partnership has a controlling financial interest in all of the Local Partnerships in which it has invested. Set forth below is a schedule of the Local Partnerships including certain information concerning their respective Apartment Complexes (the “Local Partnership Schedule”). Further information concerning the Local Partnerships and their properties, including any encumbrances affecting the properties, may be found in Item 15. Schedule III.
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(a)The property and the related assets and liabilities were sold during the fiscal year ended March 31, 2008 (see Note 10 in Item 8).
(b)The Partnership’s limited partnership interest was sold during the fiscal year ended March 31, 2009 (see Note 10 in Item 8).
(c)The Partnership’s limited partnership interest was sold during the fiscal year ended March 31, 2012 (see Note 10 in Item 8).
(d)The Partnership’s limited partnership interest was sold during the fiscal year ended March 31, 2013 (see Note 10 in Item 8).
(e)The property and the related assets and liabilities were sold during the fiscal year ended March 31, 2013 (see Note 10 in Item 8).
Leases are generally for periods not greater than one to two years and no tenant occupies more than 10% of the total rentable square footage in any single Apartment Complex.
Management continuously reviews the physical state of the properties and suggests to the Local General Partners budget improvements which are generally funded from cash flow from operations or release of replacement reserve escrows.
Management periodically reviews the insurance coverage of the properties and believes such coverage is adequate.
See Item 1, Business, above for the general competitive conditions to which the Properties described above are subject.
Real estate taxes are calculated using rates and assessed valuations determined by the township or city in which the Property is located. Such taxes have approximated less than 1% of the aggregate cost of the Properties as shown in Schedule III included herein.
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Tax Credits with respect to a given Apartment Complex were available for a ten-year period that commenced when the Property was rented to qualified tenants. However, the annual Tax Credits available in the year in which the Apartment Complex was placed in service were prorated based upon the months remaining in the year. The amount of the annual Tax Credit not available in the first year was available in the eleventh year. In certain cases, the Partnership acquired its interest in a Local Partnership after the Local Partnership had placed its Apartment Complex in service. In these cases, the Partnership was allocated Tax Credits only beginning in the month following the month in which it acquired its interest and Tax Credits allocated in any prior period were not available to the Partnership.
Item 3.
Item 3. Legal Proceedings.
None.
Item 4.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
As of March 31, 2013, the Partnership had issued and outstanding 45,844 Limited Partnership Interests, each representing a $1,000 capital contribution to the Partnership, or an aggregate capital contribution of $45,844,000. All of the issued and outstanding Limited Partnership Interests have been issued to Independence Assignor Inc. (the “Assignor Limited Partner”), which has in turn issued 45,844 BACs to the purchasers thereof for an aggregate purchase price of $45,844,000. Each BAC represents all of the economic and virtually all of the ownership rights attributable to a Limited Partnership Interest held by the Assignor Limited Partner. BACs may be converted into Limited Partnership Interests at no cost to the holder (other than the payment of transfer costs not to exceed $100), but Limited Partnership Interests so acquired are not thereafter convertible into BACs.
Neither the BACs nor the Limited Partnership Interests are traded on any established trading market. The Partnership does not intend to include the BACs for quotation on NASDAQ or for listing on any national or regional stock exchange or any other established securities market. The Revenue Act of 1987 contained provisions which have an adverse impact on investors in “publicly traded partnerships.” Accordingly, the General Partner has imposed limited restrictions on the transferability of the BACs and the Limited Partnership Interests in secondary market transactions. Implementation of the restrictions should prevent a public trading market from developing and may adversely affect the ability of an investor to liquidate his or her investment quickly. It is expected that such procedures will remain in effect until such time, if ever, as further revision of the Revenue Act of 1987 may permit the Partnership to lessen the scope of the restrictions.
As of June 24, 2013, the Partnership has 2,505 registered holders of an aggregate of 45,844 BACs.
All of the Partnership’s general partnership interests, representing an aggregate capital contribution of $1,000, are held by the General Partner.
The Partnership has made no distributions to the BACs holders from inception through March 31, 2013. There are no material legal restrictions in the Partnership Agreement on the ability of the Partnership to make distributions. However, the Partnership does not anticipate providing cash distributions to its BACs holders other than from net refinancing or sales proceeds.
On July 16, 2012, the Partnership dismissed its independent registered public accounting firm, Friedman LLP, and on July 20, 2012 engaged Raich Ende Malter & Co. LLP as the Partnership’s new independent registered public accounting firm.
Transfer Procedures
The Partnership from time to time receives requests by unit holders and others to transfer BACs and/or limited partnership interests. Such requests may occur in connection with tender offers for the Partnership’s units. Such requests implicate the Partnership’s policies and procedures concerning transfers generally and tender offers in particular, which were adopted by the Partnership pursuant to the terms of its Partnership Agreement, to ensure compliance with applicable law, avoid adverse tax consequences for the Partnership and its investors, and preserve the Partnership’s advantageous tax status.
The Partnership relies on a 2% safe harbor established by an Internal Revenue Service (“IRS”) regulation to avoid being characterized as a “publicly-traded partnership” that is taxed as a corporation.
A brief summary of certain of the Partnership’s key policies, practices and requirements with respect to transfers and tender offers is as follows:
·No transfer (whether for substitution, assignment or otherwise) is effective or binding on the Partnership unless and until it is approved by the General Partner.
·No transfer will be approved unless the transferor and transferee submit complete and properly executed forms of the Partnership’s own transfer documentation. The Partnership does not accept forms of transfer documentation other than its own and does not accept signatures made by power of attorney in lieu of original signatures by each of the transferors and transferees.
·The Partnership will not approve transfers that in the cumulative aggregate for any tax year exceed the IRS 2% safe harbor, unless a financially responsible person provides the Partnership and its partners with (i) an indemnity (in form and substance in all ways acceptable to the General Partner) for all liability (including, without limitation, any adverse tax consequences) arising from or relating to exceeding the 2% safe harbor and (ii) a legal opinion (in form and substance in all ways acceptable to the General Partner) that there will be no adverse tax consequences to the Partnership and its partners from exceeding the 2% safe harbor.
·In order to avoid the undesirable situation of one or more tender offers consuming the entire safe harbor limitation early in the tax year and leaving the Partnership’s remaining investors with no liquidity opportunity for the rest of that tax year, the Partnership restricts the cumulative aggregate total of transfers made pursuant to all tender offers to 1.5% of its outstanding units in each tax year, unless a financially responsible person conducting such tender offer provides the Partnership with an acceptable indemnity and legal opinion of the type described above. At the end of each tax year, the General Partner, in its discretion, may allow the cumulative total number of transfers (including those by tender offer) to reach the 2% safe harbor limit.
·The Partnership requires that all tender offers for its units be conducted in accordance with all applicable law including, without limitation, the federal securities laws.
The foregoing is solely a summary of the Partnership’s policies, requirements and practices with respect to transfers and tender offers. More complete information, including a copy of the Partnership’s transfer documentation package, may be obtained from the Partnership.
Item 6.
Item 6. Selected Financial Data.
Not applicable.
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Item 7.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Liquidity and Capital Resources
The Partnership originally invested approximately $37,555,000 (not including acquisition fees of approximately $1,771,000) of the net proceeds of the Offering in fourteen Local Partnerships, of which approximately $148,000 remains to be paid to the Local Partnerships (including approximately $123,000 being held in escrow) as certain benchmarks, such as occupancy level, are attained prior to the release of the funds. The Partnership does not anticipate acquiring additional properties, but the Partnership may be required to fund potential purchase price adjustments based on tax credit adjustor clauses.
The Partnership is currently in the process of developing a plan to dispose of all of its investments. It is anticipated that this process will continue to take a number of years. During the fiscal year ended March 31, 2013, the Partnership sold its limited partnership interest in two Local Partnerships and one Local Partnership sold its property and the related assets and liabilities. Through March 31, 2013, the Partnership has sold its limited partnership interest in four Local Partnerships, and the property and the related assets and liabilities of two Local Partnerships have been sold. There can be no assurance as to when the Partnership will dispose of its remaining investments or the amount of proceeds which may be received. However, based on the historical operating results of the Local Partnerships and the current economic conditions, including changes in tax laws, it is unlikely that the proceeds from such sales received by the Partnership will be sufficient to return to the limited partners their original investments.
Short-Term
The Partnership’s primary sources of funds include: (i) working capital reserves, exclusive of the Local Partnership working capital; (ii) interest earned on the working capital reserves; (iii) cash distributions from operations of the Local Partnerships; and (iv) sales and/or refinance proceeds and distributions. Such funds, although minimal (other than possible sales and/or refinance proceeds and distributions), are available to meet the obligations of the Partnership. During the years ended March 31, 2013 and 2012, distributions from operations of the Local Partnerships amounted to approximately $40,000 and $17,000, respectively. In addition, during the years ended March 31, 2013 and 2012, distributions to the Partnership from sales proceeds amounted to approximately $710,000 and $213,000 respectively. The Partnership does not anticipate providing cash distributions to BACs holders in circumstances other than refinancing or sales.
For the year ended March 31, 2013, cash and cash equivalents of the Partnership and its consolidated Local Partnerships increased approximately $224,000. This increase was primarily due to proceeds from sales of property ($2,450,000) and net cash provided by operating activities ($140,000), which exceeded acquisition of property and equipment ($30,000), costs paid relating to sales of property ($493,000), net advances to local general partners and affiliates ($40,000), repayment of mortgage notes ($416,000), an increase in cash held in escrow (26,000), an increase in deferred costs related to financing activities (10,000) and net distributions to noncontrolling interests ($1,351,000). Included in the adjustments to reconcile the net loss to net cash provided by operating activities is depreciation and amortization in the amount of approximately ($780,000), gain on sales of properties of approximately ($5,391,000), loss on impairment of assets ($5,333,000) and a change from interest rate swap of approximately ($7,000).
Total expenses for the years ended March 31, 2013 and 2012, excluding depreciation and amortization, interest, general and administrative - related parties, loss on impairment of assets and change in fair value of an interest rate swap, totaled $2,747,085 and $2,805,812, respectively.
Accounts payable arising from operations totaled $309,287 and $375,336 as of March 31, 2013 and 2012, respectively. Accounts payable are short term liabilities which are expected to be paid from operating cash flows, working capital balances at the Local Partnership level, Local General Partner advances and, in certain circumstances, advances from the Partnership. Accounts payable from discontinued operations totaled $0 and $9,017 as of March 31, 2013 and 2012, respectively. Accrued interest payable arising from operations as of March 31, 2013 and 2012 was $4,350,317 and $5,963,032, respectively. Accrued interest payable represents the accrued interest on all mortgage loans, which include primary and secondary loans. Certain secondary loans have provisions such that interest is accrued but not payable until a future date. Accrued interest payable from discontinued operations totaled $0 and $3,282, as of March 31, 2013 and 2012, respectively. The Partnership anticipates the payment of accrued interest on the secondary loans (which make up the majority of the accrued interest payable amount and which has been accumulating since the Partnership’s investment in the respective Local Partnerships) will be made from future refinancings or sales proceeds of the respective Local Partnerships. Furthermore, each Local Partnership’s mortgage notes are collateralized by the land and buildings of the respective Local Partnership, and are without further recourse to the Partnership. The maximum loss the Partnership would incur is its net investment in the respective Local Partnership.
The Partnership has an unconsolidated working capital reserve of approximately $563,000 at March 31, 2013. Such amount is considered sufficient to cover the Partnership’s day to day operating expenses, excluding fees to the General Partner, for at least the next fiscal year.
At March 31, 2013, the Partnership’s liabilities exceeded assets by $18,880,008 and for the year ended March 31, 2013, the Partnership had net loss of $967,365, including gain on sale of properties of $5,390,970. However, because 1) the provisions of the secondary loans defer the payment of accrued interest of the respective Local Partnerships and will be made from future refinancing or sales proceeds of the respective Local Partnerships, 2) the General Partner continues to defer the payment of fees as discussed below and in Note 8 to the Financial Statements in Item 8, and 3) the Partnership has sufficient unconsolidated working capital reserves to cover the Partnership’s day to day operating expenses, the Partnership (and the applicable Local Partnerships) believes it has sufficient liquidity and ability to generate cash and to meet existing and known or reasonably likely future cash requirements over both the short and long term.
Long-Term
Partnership management fees owed to the General Partner amounting to approximately $2,544,000 and $2,388,000 were accrued and unpaid as of March 31, 2013 and 2012, respectively, and are included in the line item Due to general partner and affiliates in the consolidated balance sheets. Unpaid partnership management fees for any year are to be deferred without interest and will be payable out of sales or refinancing proceeds only to the extent of available funds after payments on all Partnership liabilities have been made other than those owed to the General Partner and its affiliates.
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All other payables are expected to be paid, if at all, from working capital reserves. The General Partner does not anticipate making any future advances of operating funds to any of the Local Partnerships in which the Partnership has invested. Even if a situation arose where the General Partner and its affiliates needed to but were not able to make operating advances in the future due to lack of funds, the only impact on the Partnership would be that it would lose its investment in that particular Local Partnership. The Partnership’s ability to continue its operations would not be affected.
The Partnership’s liquidity considerations are discussed in Note 12a in Item 8.
Since the maximum loss the Partnership would be liable for is its net investment in the respective subsidiary partnerships, the resolution of any existing contingencies is not anticipated to impact future results of liquidity or financial condition of the Partnership. However, the Partnership’s loss of its investment in a Local Partnership may result in recapture of Tax Credits if the investment is lost before expiration of the Compliance Period.
The Local Partnerships are impacted by inflation in several ways. Inflation allows for increases in rental rates generally to reflect the impact of higher operating and replacement costs. Furthermore, inflation generally does not impact the fixed long-term financing under which real property investments were purchased. Inflation also affects the Local Partnerships adversely by increasing operating costs, such as fuel, utilities, and labor. Since revenues from sales of assets are driven by market conditions, inflation has little impact on sales. However, continued inflation may result in appreciated values of the Local Partnership’s apartment complexes over a period of time as rental revenues and replacement costs continue to increase.
Management is not aware of any trends or events, commitments or uncertainties, which have not otherwise been disclosed that will or are likely to impact liquidity in a material way. The portfolio is diversified by the location of the Properties around the United States so that if one area of the country is experiencing downturns in the economy, the remaining Properties in the portfolio may be experiencing upswings. However, the geographic diversification of the portfolio may not protect against a general downturn in the national economy. As of December 31, 2012, all the Local Partnerships have completed their Credit Periods. The Compliance Periods will continue to expire through December 31, 2017 with respect to the remaining properties depending on when the Compliance Period commenced.
Sale of Underlying Properties/Local Partnership Interests
For a discussion of the sale of properties in which the Partnership owns direct and indirect interests, see Note 10 in Item 8.
Discontinued Operations
The Partnership is currently in the process of developing a plan to dispose of all of its investments. Any dispositions would meet the criteria established for recognition as a discontinued operation under ASC 360, Property, Plant and Equipment (“ASC 360”), which specifically requires that such amounts must differentiate a component of a business comprised of operations and cash flows that can be clearly distinguished operationally and for financial reporting purposes, from the rest of the entity. There are no assets classified as property and equipment-held for sale at March 31, 2013.
Off-Balance Sheet Arrangements
The Partnership has no off-balance sheet arrangements.
Critical Accounting Policies
In preparing the consolidated financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Set forth below is a summary of the accounting policies that management believes are critical to the preparation of the consolidated financial statements.
Property and Equipment
Property and equipment to be held and used are carried at cost which includes the purchase price, acquisition fees and expenses, construction period interest and any other costs incurred in acquiring the Properties. The cost of property and equipment is depreciated over their estimated useful lives using accelerated and straight-line methods. Expenditures for repairs and maintenance are charged to expense as incurred; major renewals and betterments are capitalized. At the time property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the assets and accumulated depreciation accounts and the profit or loss on such disposition is reflected in earnings. The Partnership complies with ASC 360, Property, Plant and Equipment. A loss on impairment of assets is recorded when management estimates amounts recoverable through future operations and sale of the Property on an undiscounted basis are below depreciated cost. At that time, Property investments themselves are reduced to estimated fair value (using the fair market value based on comparative sales) when the Property is considered to be impaired and the depreciated cost exceeds estimated fair value.
At the time management commits to a plan to dispose of a specific asset, said asset is adjusted to the lower of carrying amount or fair value less costs to sell. These assets are classified as property and equipment-held for sale and are not depreciated. Property and equipment that are held for sale are included in discontinued operations. There are no assets classified as property and equipment-held for sale at March 31, 2013.
During the year ended March 31, 2013, the Partnership recorded approximately $5,333,000 as a loss on impairment of assets. Through March 31, 2013, the Partnership has recorded approximately $33,280,000 as an aggregate loss on impairment of assets.
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Fair Value Measurements
The estimated fair value of mortgage notes payable and the interest rate swap have been determined using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Consequently, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange. Fair value for the mortgage notes have been estimated using Level 3 inputs. Fair value for the interest rate swap has been estimated using Level 2 inputs. The carrying amount of accounts payable and other liabilities and other assets approximates fair value due to their short-term nature. For further discussion, please see Note 3, Item 8.
Revenue Recognition
Rental income is earned under standard residential operating leases and is typically due the first day of each month, but can vary by property due to the terms of the tenant leases. Rental income is recognized when earned and charged to tenants’ accounts receivable if not received by the due date. If rental payments are received in advance of the due date, revenue is deferred until earned. Rental subsidies are recognized as rental income during the month in which they are earned.
Other revenues are recorded when earned and consist of the following items: interest income earned on cash and cash equivalent balances and cash held in escrow balances, income from forfeited security deposits, late charges, laundry and vending income and other rental related items (see Item 8, Note 2e).
Related Parties
Under the terms of the Partnership Agreement, the Partnership has entered into certain arrangements with the General Partner and its affiliates, which provide for compensation to be paid to the General Partner and its affiliates. Such arrangements include (but are not limited to) agreements to pay annual Partnership management fees, nonrecurring acquisition fees, a nonaccountable acquisition expense allowance, an accountable expense reimbursement and subordinated disposition fees to the General Partner and/or its affiliates. In addition, the General Partner is entitled to a subordinated interest in cash from sales or refinancings and a 1% interest in net income, net loss, distributions of adjusted cash from operations and cash from sales or refinancings. Certain members and officers of the General Partner receive compensation from the General Partner and its affiliates for services performed for various affiliated entities which may include services performed for the Partnership. The maximum annual partnership management fee paid to the General Partner is 0.5% of invested assets. See Note 8 in Item 8, which is incorporated herein by reference.
Income Taxes
The Partnership is not required to provide for, or pay, any federal income taxes. Net income or loss generated by the Partnership is passed through to the partners and is required to be reported by them. The Partnership may be subject to state and local taxes in jurisdictions in which it operates. For income tax purposes, the Partnership has a fiscal year ending December 31.
Results of Operations
The following is a summary of the results of operations of the Partnership for the years ended March 31, 2013 and 2012, respectively, excluding the results of its discontinued operations which are not reflected in the following discussion (see Item 8, Note 11).
The net (loss) income for the years ended March 31, 2013 and 2012 totaled $(967,365) and $970,124, respectively.
The Partnership and BACs holders began recognizing Tax Credits with respect to a Property when the Credit Period for such Property commenced. Because of the time required for the acquisition, completion and rent-up of Properties, the amount of Tax Credits per BAC gradually increased over the first three years of the Partnership. Tax Credits not recognized in the first three years were recognized in the 11th through 13th years. The Partnership generated $8,276 of Tax Credits during each of the 2012 and 2011 tax years.
2013 vs. 2012
Rental income increased approximately 3% for the year ended March 31, 2013 as compared to the corresponding period ended March 31, 2012, primarily due to decreases in vacancies as well as rental rate increases at several Local Partnerships.
Total expenses, excluding loss on impairment of asset and change in fair value of interest rate swap, remained fairly consistent with a decrease of approximately 2% for the year ended March 31, 2013 as compared to the corresponding period ended March 31, 2012.
Change in fair value of interest rate swap decreased approximately $83,000 for the year ended March 31, 2013 as compared to the corresponding period in 2012, primarily due to the change in fair value of the interest rate swap agreement at one Local Partnership.
Loss on impairment of fixed assets amounted to approximately $5,333,000 and $0 for the years ended March 31, 2013 and 2012, respectively. At March 31, 2013 and 2012, cumulative impairment loss was approximately $33,280,000. See Note 3 in Item 8 for detailed discussion on impairments.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners
Independence Tax Credit Plus L.P. IV and Subsidiaries
We have audited the accompanying consolidated balance sheet of Independence Tax Credit Plus L.P. IV and Subsidiaries (A Delaware Limited Partnership) as of March 31, 2013, and the related consolidated statements of operations, changes in partners’ deficit, and cash flows for the years ended March 31, 2013 (the 2012 Fiscal Year). Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We did not audit the financial statements for five subsidiary partnerships whose losses aggregated $1,713,512 for the year ended March 31, 2013, and whose assets constituted 40% of the Partnership’s assets at March 31, 2013, presented in the accompanying consolidated financial statements. The financial statements for these five subsidiary partnerships were audited by other auditors whose reports thereon have been furnished to us and our opinion expressed herein, insofar as it relates to the amounts included for these subsidiary partnerships is based solely upon the reports of the other auditors.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit 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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, 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, based upon our audit, and the reports of the other auditors referred to above, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Independence Tax Credit Plus L.P. IV and Subsidiaries as of March 31, 2013, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 12(b), the consolidated financial statements include the financial statements of two subsidiary partnerships with significant uncertainties. The financial statements of these subsidiary partnerships were prepared assuming that they will continue as going concerns. These two subsidiary partnerships’ net losses aggregated $329,681 (2012 Fiscal Year) and their assets aggregated $267,730 at March 31, 2013. Management’s plan in regard to this matter is also described in Note 12(b). The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ RAICH ENDE & MALTER CO. LLP
RAICH ENDE & MALTER CO. LLP
New York, New York
July 1, 2013
- 12 -
To the Partners
Independence Tax Credit Plus L.P. IV and Subsidiaries
We have audited the accompanying consolidated balance sheets of Independence Tax Credit Plus L.P. IV (a Delaware limited partnership) and Subsidiaries as of March 31, 2012 and the related consolidated statements of operations, changes in partners’ capital (deficit) and cash flows for the year ended March 31, 2012. These consolidated financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We did not audit the consolidated financial statements of five subsidiary partnerships, whose losses aggregated $382,469 for the year ended March 31, 2012, and whose assets constituted 55% of consolidated assets at March 31, 2012. Those financial statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for these subsidiary partnerships, is based solely on the reports of the other auditors.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit 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 audit and the reports of the other auditors provides a reasonable basis for our opinion.
In our opinion, based on our audit and the reports of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Independence Tax Credit Plus L.P. IV and Subsidiaries as of March 31, 2012, and the results of their operations and their cash flows for the year ended March 31, 2012 in conformity with accounting principles generally accepted in the United States of America.
/s/ Friedman LLP
New York, New York
June 20, 2012
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[LETTERHEAD OF CLIFFORD R. BENN, CPA]
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
General Partner
Figueroa Senior Housing Limited Partnership
Los Angeles, California
I have audited the balance sheet of Figueroa Senior Housing Limited Partnership, at December 31, 2012, and the related statements of loss, changes in partners' capital, and cash-flow for the year then ended. These financial statements are the responsibility of Figueroa Senior Housing Limited Partnership's management. My responsibility is to express an opinion on these financial statements based on my audits.
I conducted my audit in accordance with standards of the Public Company Accounting Oversight Board, used in the United States of America. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. 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 over all financial statement presentation. I believe that my audit provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Figueroa Senior Housing Limited Partnership on December 31, 2012, and the results of its operations and its cash-flow for the year then ended in conformity with generally accepted accounting principles used in the United States of America.
/s/ Clifford R. Benn, CPA
February 25, 2013
Torrance, California
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[LETTERHEAD OF CLIFFORD R. BENN, CPA]
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
General Partner
Figueroa Senior Housing Limited Partnership
Los Angeles, California
I have audited the balance sheet of Figueroa Senior Housing Limited Partnership, at December 31, 2011, and the related statements of loss, changes in partners' capital, and cash-flow for the year then ended. These financial statements are the responsibility of Figueroa Senior Housing Limited Partnership's management. My responsibility is to express an opinion on these financial statements based on my audits.
I conducted my audit in accordance with standards of the Public Company Accounting Oversight Board, used in the United States of America. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. 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 over all financial statement presentation. I believe that my audit provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Figueroa Senior Housing Limited Partnership on December 31, 2011, and the results of its operations and its cash-flow for the year then ended in conformity with generally accepted accounting principles used in the United States of America.
/s/ Clifford R. Benn, CPA
February 27, 2012
Carson, California
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[LETTERHEAD OF CLIFFORD R. BENN, CPA]
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
General Partner
NNPHI Senior Housing Limited Partnership
Los Angeles, California
I have audited the balance sheet of NNPH1 Senior Housing Limited Partnership, at December 31, 2012, and the related statements of loss, changes in partners' capital, and cash-flow for the year then ended. These financial statements are the responsibility of NNPHI Senior Housing Limited Partnership's management. My responsibility is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with standards of the Public Company Accounting Oversight Board, used in the United States of America. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. 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 over all financial statement presentation. I believe that my audit provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of NNPHI Senior Housing Limited Partnership on December 31, 2012, and the results of its operations and its cash-flow for the year then ended in conformity with generally accepted accounting principles used in the United States of America.
/s/ Clifford Benn, CPA
February 25, 2013
Torrance, California
- 16 -
[LETTERHEAD OF CLIFFORD R. BENN, CPA]
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
General Partner
NNPHI Senior Housing Limited Partnership
Los Angeles, California
I have audited the balance sheet of NNPH1 Senior Housing Limited Partnership, at December 31, 2011, and the related statements of loss, changes in partners' capital, and cash-flow for the year then ended. These financial statements are the responsibility of NNPHI Senior Housing Limited Partnership's management. My responsibility is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with standards of the Public Company Accounting Oversight Board, used in the United States of America. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. 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 over all financial statement presentation. I believe that my audit provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of NNPHI Senior Housing Limited Partnership on December 31, 2011, and the results of its operations and its cash-flow for the year then ended in conformity with generally accepted accounting principles used in the United States of America.
/s/ Clifford Benn, CPA
February 27, 2012
Carson, California
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[Letterhead of COHNREZNICK LLP.]
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners
New Zion Apartments Limited Partnership
We have audited the accompanying balance sheet of New Zion Apartments Limited Partnership, HUD Project No. LA48E000011, as of September 26, 2012, and the related statements of operations, partners’ equity (deficit) and cash flows for the period January 1, 2012 through September 26, 2012. 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 audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States) and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit 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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
As described in note 1 to the financial statements, the Partnership’s financial statements have been prepared on the basis of accounting and reporting practices prescribed by the U.S. Department of Housing and Urban Development (HUD). These prescribed practices are a comprehensive basis of accounting other than accounting principles accepted in the United States of America.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of New Zion Apartments Limited Partnership as of September 26, 2012, and the results of its operations, the changes in partners’ equity (deficit), and cash flows for the period January 1, 2012 through September 26, 2012, in conformity with the basis of accounting discussed in note 1.
In accordance with Government Auditing Standards, we have also issued a report, dated May 23, 2013 on our consideration of New Zion Apartments Limited Partnership’s internal control over financial reporting. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and the results of that testing and not to provide an opinion on the internal control over financial reporting. In accordance with Government Auditing Standards, we have also issued an opinion dated May 23, 2013, on New Zion Apartments Limited Partnership’s compliance with certain provisions of laws, regulations, contracts, and grant agreements, and other matters applicable with certain transactions for certain nonmajor HUD-assisted programs. Those reports are an integral part of an audit in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying supplementary information on pages 23 through 36 is presented for purposes of additional analysis as required by the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, Office of the Inspector General, and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole.
/s/ CohnReznick LLP
Baltimore, Maryland Taxpayer Identification Number:
May 23, 2013 22-1478099
Lead Auditor: Scott H. Szeliga, CPA
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[Letterhead of REZNICK GROUP, P.C.]
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners
New Zion Apartments Limited Partnership
We have audited the accompanying balance sheet of New Zion Apartments Limited Partnership, HUD Project No. LA48E000011, as of December 31, 2011, and the related statements of operations, partners’ equity (deficit) and cash flows for the year then ended. 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 audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States) and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit 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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
As described in note 1 to the financial statements, the Partnership’s financial statements have been prepared on the basis of accounting and reporting practices prescribed by the U.S. Department of Housing and Urban Development (HUD). These prescribed practices are a comprehensive basis of accounting other than accounting principles accepted in the United States of America.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of New Zion Apartments Limited Partnership as of December 31, 2011, and the results of its operations, the changes in partners’ equity (deficit), and cash flows for the year then ended, in conformity with the basis of accounting discussed in note 1.
In accordance with Government Auditing Standards, we have also issued a report, dated February 14, 2012 on our consideration of New Zion Apartments Limited Partnership’s internal control over financial reporting. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and the results of that testing and not to provide an opinion on the internal control over financial reporting. In accordance with Government Auditing Standards, we have also issued an opinion dated February 14, 2012, on New Zion Apartments Limited Partnership’s compliance with certain provisions of laws, regulations, contracts, and grant agreements, and other matters applicable with certain transactions for certain nonmajor HUD-assisted programs. Those reports are an integral part of an audit in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying supplemental information on pages 24 through 36 is presented for purposes of additional analysis as required by the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, Office of the Inspector General, and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole.
/s/ Reznick Group, P.C.
Baltimore, Maryland Taxpayer Identification Number:
February 14, 2012 52-1088612
Lead Auditor: Scott H. Szeliga, CPA
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[Letterhead of COHNREZNICK, LLP]
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners
Bakery Village Urban Renewal Associates, L.P.
We have audited the accompanying financial statements of Bakery Village Urban Renewal Associates, L.P., which comprise the balance sheet as of December 31, 2012, and the related statements of operations, changes in partners’ equity (deficit) and cash flows for the year then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bakery Village Urban Renewal Associates, L.P. as of December 31, 2012, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
/s/ COHNREZNICK LLP
Baltimore, Maryland
February 26, 2013
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[Letterhead of REZNICK GROUP, P.C.]
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners
Bakery Village Urban Renewal Associates, L.P.
We have audited the accompanying balance sheet of Bakery Village Urban Renewal Associates, L.P. as of December 31, 2011, and the related statements of operations, changes in partners’ equity (deficit) and cash flows for the year then ended. 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 audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit 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 audit 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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides 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 Bakery Village Urban Renewal Associates, L.P. as of December 31, 2011, and the results of its operations, the changes in its partners’ equity (deficit) and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
/s/ REZNICK GROUP, P.C.
Baltimore, Maryland
February 24, 2012
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[Letterhead of REZNICK GROUP, P.C.]
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners
Marlton Housing Partnership, L.P.
We have audited the accompanying balance sheet of Marlton Housing Partnership, L.P. as of June 11, 2012, and the related statements of operations, changes in partners’ deficit and cash flows for the period January 1, 2012 through June 11, 2012 (date of investor transfer). 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 audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit 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 audit 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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides 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 Marlton Housing Partnership, L.P. as of June 11, 2012, and the results of its operations, the change in partners’ deficit and its cash flows for the period January 1, 2012 through June 11, 2012 (date of investor transfer), in conformity with accounting principles generally accepted in the United States of America.
/s/ REZNICK GROUP
Baltimore, Maryland
September 19, 2012
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[Letterhead of REZNICK GROUP, P.C.]
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners
Marlton Housing Partnership, L.P.
We have audited the accompanying balance sheet of Marlton Housing Partnership, L.P. as of December 31, 2011, and the related statements of operations, changes in partners’ deficit and cash flows for the year then ended. 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 audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit 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 audit 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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides 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 Marlton Housing Partnership, L.P. as of December 31, 2011, and the results of its operations, the change in partners’ deficit and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
/s/ REZNICK GROUP
Baltimore, Maryland
February 28, 2012
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INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
* Reclassified for comparative purposes.
The accompanying notes are an integral part of these consolidated financial statements.
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INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
* Reclassified for comparative purposes.
The accompanying notes are an integral part of these consolidated financial statements.
- 25 -
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ DEFICIT
YEARS ENDED MARCH 31, 2013 and 2012
The accompanying notes are an integral part of these consolidated financial statements.
- 26 -
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
The accompanying notes are an integral part of these consolidated financial statements.
- 27 -
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013 and 2012
NOTE 1 - General
Independence Tax Credit Plus L.P. IV (a Delaware limited partnership) (the “Partnership”) was organized on February 22, 1995. The general partner of the Partnership is Related Independence L.L.C., a Delaware limited liability company (the “General Partner”). Centerline Holding Company (“Centerline”) is the ultimate parent of Centerline Affordable Housing Advisors LLC (“CAHA”), the managing member of the General Partner. For information on Centerline’s unaudited balance sheet for the most recent fiscal year, see http://sec.gov.
The Partnership’s business is primarily to invest in other partnerships (“Local Partnerships,” “subsidiaries” or “subsidiary partnerships”) owning leveraged apartment complexes (“Apartment Complexes” or “Properties”) that are eligible for the low-income housing tax credit (“Tax Credit”) enacted in the Tax Reform Act of 1986, some of which may also be eligible for the historic rehabilitation tax credit. Qualified Beneficial Assignment Certificates (“BACs”) holders are entitled to Tax Credits over the period of the Partnership’s entitlement to claim Tax Credits (for each Property, generally ten years from the date of investment or, if later, the date the Property is placed in service; referred to herein as the “Credit Period”) with respect to each Apartment Complex.
The Partnership had originally acquired limited partnership interests in fourteen subsidiary partnerships, all of which have been, or were, consolidated. The Partnership does not anticipate acquiring limited partnership interests in additional subsidiary partnerships. The Partnership’s investments in Local Partnerships represent from 98.99% to 99.89% interests.
The Partnership was authorized to issue a total of 100,000 ($100,000,000) Beneficial Assignment Certificates (“BACs”) which have been registered with the Securities and Exchange Commission for sale to the public. Each BAC represents all of the economic and virtually all of the ownership rights attributable to a limited partnership interest. The Partnership had raised a total of $45,844,000 representing 45,844 BACs.
NOTE 2 - Summary of Significant Accounting Policies
a) Basis of Accounting
For financial reporting purposes, the Partnership’s fiscal year ends on March 31. All subsidiaries have fiscal years ending December 31. Accounts of the subsidiaries have been adjusted for intercompany transactions from January 1 through March 31. The Partnership’s fiscal year ends March 31 in order to allow adequate time for the subsidiaries’ financial statements to be prepared and consolidated. The books and records of the Partnership are maintained on the accrual basis of accounting, in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
b) Basis of Consolidation
The consolidated financial statements include the accounts of the Partnership and its eleven and twelve subsidiary partnerships for the years ended March 31, 2013 and 2012, respectively, in which the Partnership is a limited partner. Through the rights of the Partnership and/or an affiliate of the General Partner, which affiliate has a contractual obligation to act on behalf of the Partnership, to remove the general partner of the subsidiary local partnerships (the “Local General Partner”) and to approve certain major operating and financial decisions, the Partnership has a controlling financial interest in the subsidiary partnerships. All intercompany accounts and transactions with the subsidiary partnerships have been eliminated in consolidation.
Income attributable to noncontrolling interests amounted to approximately $(1,042,000) and $(45,000) for the years ended March 31, 2013 and 2012, respectively. The Partnership’s investment in each subsidiary is equal to the respective subsidiary’s partners’ equity less noncontrolling interest capital, if any.
c) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash in banks, and investments in short-term highly liquid investments purchased with original maturities of three months or less.
d) Property and Equipment
Property and equipment to be held and used are carried at cost which includes the purchase price, acquisition fees and expenses, construction period interest and any other costs incurred in acquiring the properties. The cost of property and equipment is depreciated over their estimated useful lives using accelerated and straight-line methods. Expenditures for repairs and maintenance are charged to expense as incurred; major renewals and betterments are capitalized. At the time property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the assets and accumulated depreciation accounts and the profit or loss on such disposition is reflected in earnings. The determination of asset impairment is a two-step process. First, management estimates amounts recoverable through future operations and sale of the property on an undiscounted basis. If such estimates are below depreciated cost, management estimates fair value (using the fair market value based on comparative sales). The property is considered to be impaired when the depreciated cost exceeds estimated fair value.
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INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013 and 2012
At the time management commits to a plan to dispose of a specific asset, said asset is adjusted to the lower of carrying amount or fair value less costs to sell. These assets are classified as property and equipment-held for sale and are not depreciated. Property and equipment that are held for sale are included in discontinued operations. There are no assets classified as property and equipment-held for sale at March 31, 2013.
e) Revenue Recognition
Rental income is earned under standard residential operating leases and is typically due the first day of each month, but can vary by property due to the terms of the tenant leases. Rental income is recognized when earned and charged to tenants’ accounts receivable if not received by the due date. Rental payments received in advance of the due date are deferred until earned. Rental subsidies are recognized as rental income during the month in which they are earned.
Other revenues are recorded when earned and consist of the following items: Interest income earned on cash and cash equivalent balances and cash held in escrow balances, income from forfeited security deposits, late charges, laundry and vending income and other rental related items.
f) Income Taxes
The Partnership is not a tax paying entity for income tax purposes and, accordingly, no provision has been made for income taxes. The Partnership may be subject to state and local taxes in jurisdictions in which it operates.
The Partnership has no material liability for unrecognized tax benefits and no material change to the beginning partners’ capital of the Partnership. As of and during the year ended March 31, 2013, the Partnership did not have a liability for any unrecognized tax benefits or related interest and penalties.
The Partnership relies on a 2% safe harbor established by an Internal Revenue Service (“IRS”) regulation to avoid being characterized as a “publicly-traded partnership” that is taxed as a corporation.
Income tax returns for the years prior to 2009 are no longer subject to examination by tax authorities.
g) Mortgage Financing and Offering Costs
Costs incurred in connection with obtaining permanent mortgage financing are capitalized and amortized over the lives of the related mortgage notes. Costs incurred to sell BACs, including brokerage fees and the nonaccountable expense allowance, are considered selling and offering expenses. These costs are charged directly to limited partners’ capital.
h) Deferred Costs
Deferred costs and fees incurred in connection with the purchase of interests in certain subsidiary partnerships have been capitalized as property costs and are being amortized over the lives of the related properties.
i) Loss Contingencies
The Partnership records loss contingencies as a charge to income when information becomes available which indicates that it is probable that an asset has been impaired or a liability has been incurred as of the date of the consolidated financial statements and the amount of loss can be reasonably estimated.
j) Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
k) Recent Accounting Pronouncements
In February 2013, the FASB issued an accounting standards update ("ASU") No. 2013-02 "Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income," requiring new disclosures for items reclassified out of accumulated other comprehensive income ("AOCI"), including (1) changes in AOCI balances by component and (2) significant items reclassified out of AOCI. The guidance does not amend any existing requirements for reporting net income or OCI in the financial statements. The standards update was effective for reporting periods beginning after December 15, 2012, to be applied prospectively. The Partnership evaluated the impact of adopting this standard and does not expect it to have a significant impact on its consolidated financial statements.
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INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013 and 2012
NOTE 3 - Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of each class of financial instruments (all of which are held for nontrading purposes) for which it is practicable to estimate that value:
Cash and Cash Equivalents and Cash Held in Escrow
The carrying amount approximates fair value.
Accounts Payable and Other Liabilities
The carrying amounts approximate fair value due to their short-term nature.
Mortgage Notes Payable, Accrued Interest and Interest Rate Swap Agreement
The Partnership has categorized the fair value of financial assets and liabilities based upon the fair value hierarchy specified by ASC Topic 820, Fair Value Measurements (“ASC 820”). This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). This standard provides for a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
Level 1:	Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2:	Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3:	Unobservable inputs that reflect the Partnership’s own assumptions.
The estimated fair value of mortgage notes payable has been determined using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Consequently, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange.
* Reclassified for comparative purpose.
For the mortgage notes, fair value is estimated using Level 3 inputs and calculated using present value cash flow models based on a discount rate. It was determined that the Tender Option Bond market, through which these bonds have been securitized in the past, continued to see a dramatic slowdown with limited liquidity and significantly reduced transaction levels. To assist in valuing these notes, the Partnership held separate discussions with various third party investment banks who are leaders in the municipal bond business. The discussions produced assumptions that were based on market conditions as well as the credit quality of the underlying property partnerships, which held the mortgage notes, to determine what discount rates to utilize.
Interest Rate Swap Agreement
For the interest rate swap, in the absence of readily determinable fair values, the fair value is estimated by the Partnership with the assistance of valuations obtained from the Bank of Hawaii (the “Bank”), at which the swap transaction is held. The interest rate swap is valued based on the Bank’s estimate of the net present value of the expected cash flows from each transaction subject to the interest rate swap using relevant mid-market data inputs and based on the assumption of no unusual market conditions or forced liquidation. The preceding method described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Partnership believes its valuation method is appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
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INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013 and 2012
On August 24, 2010, GP Kaneohe Limited Partnership (“Kaneohe”), a subsidiary partnership, entered into an interest rate swap agreement with the Bank as a prerequisite for obtaining refinancing on its original mortgage note payable in the amount of $2,297,000. The agreement provides a fixed rate of interest on the notional amount, as provided in the agreement, in exchange for the variable rate. The swap contract became effective September 1, 2010. The following are the terms under the swap:
Fair value for the interest rate swap is estimated using Level 2 inputs. At March 31, 2013 and 2012, the fair value of the interest rate swap was a reduction of the mortgage note liability of approximately $69,000 and $76,000, respectively.
Derivative instruments not meeting the criteria for hedge accounting (or for which an entity elects not to apply hedge accounting to the derivative in the event that the criteria are met) are recorded at fair value with any change in fair value reflected in the statement of operations in the period of change.
Due to General Partner and Affiliates and Due to/from Local General Partners and Affiliates
Management believes it is not practical to estimate the fair value of due to General Partner and affiliates and due to/from Local General Partners and affiliates because market information on such obligations is not currently available.
NOTE 4 - Property and Equipment
The components of property and equipment from operations and their estimated useful lives are as follows:
Depreciation expense for the years ended March 31, 2013 and 2012 amounted to $663,015 and $661,583, respectively.
The components of property and equipment from discontinued operations and their estimated useful lives are as follows:
Depreciation expenses for the discontinued property and equipment for the years ended March 31, 2013 and 2012 amounted to $78,444 and $161,269, respectively. During the year ended March 31, 2013, there was a decrease in accumulated depreciation on dispositions in the amount of $5,287,824.
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INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013 and 2012
Impairments
During the years ended March 31, 2013 and 2012, the Partnership performed a fair value analysis on all of its investments. Impairment of assets is a two-step process. First, management estimated amounts recoverable through future operations and sale of the Property on an undiscounted basis. If such estimates were below depreciated cost, Property investments themselves were reduced to estimated fair value (using the fair market value based on comparative sales). Each Local Partnership must continue to comply with its Tax Credit requirements until the end of the Compliance Period in order to avoid recapture of the Tax Credits. Therefore, a 5-year cash flow projection was used, as this period is indicative of the average holding period left on the remaining investments. Based on this analysis, the Partnership deemed the properties of the below Local Partnerships impaired and wrote them down to their estimated fair value, which resulted in $5,332,554 of losses on impairment for the year ended March 31, 2013. Impairments have been estimated using Level 3 inputs.
Impairments from operations recorded for the year ended March 31, 2013 are as follows:
NOTE 5 - Cash Held in Escrow
Cash held in escrow from operations consists of the following:
* Represents amounts to be paid to seller upon meeting specified rental achievement criteria.
Cash held in escrow from discontinued operations consists of the following:
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INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013 and 2012
NOTE 6 - Deferred Costs
The components of deferred costs and their periods of amortization from operating assets are as follows:
Amortization expense for the years ended March 31, 2013 and 2012 amounted to $33,800 and $33,801, respectively. During the year ended March 31, 2013, fully amortized deferred costs and the related accumulated amortization of $479,826 was written off.
Amortization expense from discontinued operations for the years ended March 31, 2013 and 2012 amounted to $4,817 and $6,871, respectively. During the year ended March 31, 2013, there was a decrease in deferred costs and accumulated amortization of $141,260 and $90,103, respectively, related to discontinued operations.
NOTE 7 - Mortgage Notes Payable
The mortgage loans from operations are payable in aggregate monthly installments of approximately $127,000 including principal and interest with rates varying from 0% to 8.13% per annum and have maturity dates ranging from 2018 through 2051. The loans are collateralized by the land and buildings of the subsidiary partnerships and the assignment of certain subsidiary partnerships’ rents and leases, and are without further recourse. Certain obligations are guaranteed by affiliates of the general partner.
Annual principal payments on the permanent debt requirements for mortgage notes payable from operations for each of the next five calendar years and thereafter are as follows:
Accrued interest payable from operations amounted to approximately $4,350,000 and $5,963,000 as of March 31, 2013 and 2012, respectively. Accrued interest payable from discontinued operations as of March 31, 2013 and 2012 was approximately $0 and $3,000, respectively. Interest accrues on all mortgage loans, which include primary and secondary loans. Certain secondary loans have provisions such that interest is accrued but not payable until a future date. The Partnership anticipates the payment of accrued interest on the secondary loans (which make up the majority of the accrued interest payable amount and which have been accumulating since the Partnership’s investment in the respective Local Partnership) will be made from future refinancings or sales proceeds of the respective Local Partnership or through assumption by the buyer upon sale of the Partnership’s interest in the respective Local Partnership. In addition, each Local Partnership’s mortgage notes are collateralized by the land and buildings of the respective Local Partnership, and are without further recourse to the Partnership.
The mortgage agreements generally require monthly deposits to replacement reserves. Monthly deposits of approximately $13,000 from operations were made to escrow accounts for real estate taxes, hazard and mortgage insurance and other expenses (Note 5).
NOTE 8 - Related Party Transactions
An affiliate of the General Partner has a .01% interest as a special limited partner in each of the Local Partnerships.
Pursuant to the Partnership Agreement and the Local Partnership Agreements, the General Partner, the Local General Partners and their respective affiliates receive their pro-rata share of profits, losses and tax credits.
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INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013 and 2012
A) Related Party Expenses
Expenses incurred to related parties from operations for the years ended March 31, 2013 and 2012 were as follows:
* Reclassifed for comparative purposes.
Expenses incurred to related parties from discontinued operations for the years ended March 31, 2013 and 2012 were as follows:
* Reclassified for comparative purposes.
(a)The General Partner is entitled to receive a partnership management fee, after payment of all Partnership expenses, which together with the annual local administrative fees will not exceed a maximum of 0.5% per annum of invested assets (as defined in the Partnership Agreement), for administering the affairs of the Partnership. Subject to the foregoing limitation, the partnership management fee will be determined by the General Partner in its sole discretion based upon its review of the Partnership’s investments. Unpaid partnership management fees for any year are accrued without interest and will be payable out of sales or refinancing proceeds only to the extent of available funds after payments on all Partnership liabilities have been made other than those owed to the General Partner and its affiliates. Partnership management fees owed to the General Partner amounting to approximately $2,544,000 and $2,388,000 were accrued and unpaid as of March 31, 2013 and 2012, respectively. Current year partnership management fees may be paid out of operating reserves or refinancing and sales proceeds. However, the General Partner cannot demand payment of the deferred fees beyond the Partnership’s ability to pay them.
(b)The Partnership reimburses the General Partner and its affiliates for actual Partnership operating expenses incurred by the General Partner and its affiliates on the Partnership’s behalf. The amount of reimbursement from the Partnership is limited by the provisions of the Partnership Agreement. Another affiliate of the General Partner performs asset monitoring for the Partnership. These services include site visits and evaluations of the subsidiary partnerships’ performance. Expense reimbursements and asset monitoring fees owed to the General Partner and its affiliates amounting to approximately $37,000 and $127,000 were accrued and unpaid as of March 31, 2013 and 2012, respectively. The General Partner does not intend to demand payment of the deferred payables beyond the Partnership’s ability to pay them. The Partnership anticipates that these will be paid, if at all, from working capital reserves or future sales proceeds.
(c)Independence SLP IV L.P., a special limited partner of the subsidiary partnerships, is entitled to receive a local administrative fee of up to $5,000 per year from each subsidiary partnership. Local administrative fees owed to Independence SLP IV L.P. amounting to $271,000 and $272,000 were accrued and unpaid as of March 31, 2013 and 2012, respectively. These fees have been deferred in certain cases and the Partnership anticipates that they will be paid, if at all, from working capital reserves or future sales proceeds.
As of March 31, 2013 and 2012, the Partnership owed the General Partner and its affiliates approximately $0 and $191,000, respectively, for advances made by the General Partner and its affiliates to a Local Partnership. These advances represented historical amounts loaned in conjunction with the initial capital contributions to the Local Partnerships. These advances were forgiven during the year ended March 31, 2013 in conjunction with the sale of one Local Partnership (see Note 10).
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INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013 and 2012
B) Due to/from Local General Partners and Affiliates
Due to Local General Partners and affiliates from operating liabilities consists of the following:
* Reclassified for comparative purposes.
The amounts due to Local General Partners and affiliates from discontinued liabilities consist of the following:
Due from Local General Partners and affiliates from operating liabilities consists of the following:
NOTE 9 - Taxable Net Loss
A reconciliation of the consolidated financial statement net (loss) income to the income tax loss for the Partnership and its consolidated subsidiaries follows:
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INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013 and 2012
No provision for income taxes related to the operations of the Partnership has been included in the accompanying financial statements because, as a partnership, it is not subject to federal or material state income taxes and the tax effect of its activities accrues to the BACs holders. Net income for financial statement purposes may differ significantly from taxable income reportable to BACs holders as a result of differences between the tax bases and financial reporting bases of assets and liabilities and the taxable income allocation requirements under its Partnership Agreement. In the event of an examination of the Partnership’s tax return, the tax liability of the partners could be changed if an adjustment in the Partnership’s income is ultimately sustained by the taxing authorities. At March 31, 2013, the tax basis net assets exceeded the financial statement net assets by approximately $19,600,000 due to depreciation differences, impairments of property and equipment, and related party accruals.
NOTE 10 - Sale of Properties
The Partnership is currently in the process of developing a plan to dispose of all of its investments. It is anticipated that this process will take a number of years. During the fiscal year ended March 31, 2013, the Partnership sold its limited partnership interest in two Local Partnerships and one Local Partnership sold its property and the related assets and liabilities. Through March 31, 2013, the Partnership has sold its limited partnership interest in four Local Partnerships, and the property and the related assets and liabilities of two Local Partnerships have been sold. There can be no assurance as to when the Partnership will dispose of its remaining investments or the amount of proceeds which may be received. However, based on the historical operating results of the Local Partnerships and the current economic conditions, including changes in tax laws, it is unlikely that the proceeds from such sales received by the Partnership will be sufficient to return to the limited partners their original investments. All gains and losses on sales are included in discontinued operations.
On December 31, 2012, the Partnership sold its limited partnership interest in Belmont/McBride Apartments Limited Partnership (“Belmont”) to an affiliate of the Local General Partner for a sales price of $10. The sale resulted in a gain of approximately $2,646,000 resulting from the write-off of the basis in the Local Partnership of the same amount at the date of sale, which was recorded during the quarter ended December 31, 2012. In addition, the sale resulted in a noncash contribution to the Local Partnership from the General Partner of approximately $13,000 as a result of the write-off of fees owed by the Local Partnership to an affiliate of the General Partner. An adjustment to the gain of approximately $58,000 was recorded during the quarter ended March 31, 2013, resulting in an overall gain of approximately $2,704,000.
On September 28, 2012, the property and the related assets and liabilities of New Zion Limited Partnership (“New Zion”) were sold to an unaffiliated third party purchaser for a sales price of $2,450,000. The Partnership received $709,755 as distributions from this sale after the repayment of the mortgages, other liabilities, closing costs and distributions to other partners of approximately $1,740,000. (New Zion was owned approximately 58% by the Partnership and 42% by an affiliate of the Partnership under the same management) The sale resulted in a gain of approximately $883,000 which was recorded during the quarter ended September 30, 2012. In addition, the sale resulted in a write-off of operating advances of approximately $191,000 owed to an affiliate of the General Partner. The sale also resulted in a noncash contribution to the Local Partnership from the General Partner of approximately $4,000 as a result of the write-off of fees owed by the Local Partnership to an affiliate of the General Partner. Adjustments to the gain of approximately $(226,000) and $(4,000) were recorded during the quarters ended December 31, 2012 and March 31, 2013, resulting in an overall gain of approximately $653,000.
On June 11, 2012, the Partnership sold its limited partnership interest in Marlton Housing Partnership, L.P (“Marlton”) to an affiliate of the Local General Partner for a sales price of $1. The sale resulted in a gain of approximately $2,125,000 resulting from the write-off of the deficit basis in the Local Partnership of the same amount at the date of sale, which was recorded during the quarter ended June 30, 2012. An adjustment to the gain of approximately $(91,000) was recorded during the quarter ended September 30, 2012, resulting in an overall gain of approximately $2,034,000.
On December 13, 2011, the Partnership sold its limited partnership interest in Sojourner Douglass, L.P (“Sojourner Douglass”) to an affiliate of the Local General Partner for a sales price of $212,500. The sale resulted in a gain of approximately $2,269,000 resulting from a disposition of a net deficiency in capital in the Local Partnership of approximately $2,056,000 and the $212,500 cash received from the sale, which was recorded during the quarter ended December 31, 2011. An adjustment to the gain of approximately $43,000 was recorded during the quarter ended March 31, 2012, resulting in an overall gain of approximately $2,312,000.
NOTE 11 - Discontinued Operations
The following table summarizes the financial position of the Local Partnerships that are classified as discontinued operations because the respective Local Partnerships were classified as assets held for sale or were sold. As of March 31, 2013, there were no assets classified as discontinued operations on the consolidated balance sheets. As of March 31, 2012, Sojourner Douglass, which was sold during the year ended March 31, 2012 and New Zion, which was classified as an asset held for sale, were classified as discontinued operations on the consolidated balance sheets.
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INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013 and 2012
Consolidated Balance Sheets:
The following table summarizes the results of operations of the Local Partnerships that are classified as discontinued operations. For the year ended March 31, 2013, Belmont, Marlton and New Zion, which were sold during the year ended March 31, 2013, were classified as discontinued operations in the consolidated financial statements. For the year ended March 31, 2012, Sojourner Douglass, which was sold during the year ended March 31, 2012, and Belmont, Marlton and New Zion, in order to present comparable results to the year ended March 31, 2013, were classified as discontinued operations in the consolidated financial statements.
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INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013 and 2012
Consolidated Statements of Discontinued Operations:
* Reclassified for comparative purposes.
Cash flows from discontinued operations:
* Reclassified for comparative purposes.
NOTE 12 - Commitments and Contingencies
a) Liquidity
At March 31, 2013, the Partnership’s liabilities exceeded assets by $18,880,008 and for the year ended March 31, 2013, the Partnership had a net loss of $(967,365), including gain on sale of properties of $5,390,970. These factors raise substantial doubt about the Partnership’s ability to continue as a going concern. As discussed in Note 8, partnership management fees of approximately $2,544,000 will be payable out of sales or refinancing proceeds only to the extent of available funds after payments of all other Partnership liabilities have been made other than those owed to the General Partner and its affiliates. As such, the General Partner cannot demand payment of these deferred fees beyond the Partnership’s ability to pay them.
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INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013 and 2012
All of the mortgage payable balance of $18,102,636 and the accrued interest payable balance of $4,350,317 is of a nonrecourse nature and secured by the respective properties. The Partnership is currently in the process of developing a plan to dispose of all of its investments. Historically, the mortgage notes and accrued interest thereon have been assumed by the buyer in instances of sales of the Partnership’s interest or have been paid off from sales proceeds in instances of sales of the property. In most instances when the Partnership’s interest was sold and liabilities were assumed, the Partnership recognized a gain from the sale. The Partnership owns the limited partner interest in all its investments, and as such has no financial responsibility to fund operating losses incurred by the Local Partnerships. The maximum loss the Partnership would incur is its net investment in the respective Local Partnerships and the potential recapture of the Tax Credits if the investment is lost before the expiration of the Compliance Period. Dispositions of any investment in a Local Partnership are not anticipated to impact the future results of liquidity or financial condition of the Partnership.
The Partnership has unconsolidated working capital reserves of approximately $563,000 at March 31, 2013. Such amount is considered sufficient to cover the Partnership’s day to day operating expenses, excluding fees to the General Partner, for at least the next fiscal year. The Partnership’s operating expenses, excluding the Local Partnerships’ expenses and related party expenses amounted to approximately $137,000 for the year ended March 31, 2013.
Management believes the above mitigating factors enable the Partnership to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
b) Subsidiary Partnerships - Going Concerns and Uncertainties
KSD Village Apartments, Phase II, Ltd. (“KSD II”)
The financial statements for the year ended December 31, 2012 for KSD II were prepared in conformity with accounting principles generally accepted in the United States of America, which contemplated continuation of KSD II as a going concern. In prior years and in 2012, KSD II experienced financial difficulty because revenues are not sufficient to meet obligations. Operations have been financed in part by withholding management fee payments and operating reimbursements payable to the management agent, withholding monthly deposits to the reserve for replacements and operating loans from affiliates of the general partner.
During the year ended March 31, 2013, in accordance with ASC 360, Property, Plant and Equipment, the Partnership deemed the building of KSD II impaired and wrote it down to its fair value of zero, which resulted in a loss on impairment of approximately $271,000. Fair value was obtained from an assessment made by management after indications that the carrying value of the assets were not recoverable, evidenced by a history of net operating losses over the past few years.
Kanisa Apartments, Ltd. (“First African”)
The financial statements for the year ended December 31, 2012 for First African were prepared in conformity with accounting principles generally accepted in the United States of America, which contemplated continuation of First African as a going concern. In prior years and in 2012, First African experienced financial difficulty because revenues are not sufficient to meet obligations. Operations have been financed in part by withholding mortgage payments under deferred payment agreements, operating loans from affiliates of the general partner, and withholding management fees and operating reimbursements payable to the management agent.
c) Uninsured Cash and Cash Equivalents
The Partnership and its subsidiary partnerships maintain their cash and cash equivalents in various banks. The accounts at each bank are insured by the Federal Deposit Insurance Corporation (“FDIC”). At March 31, 2013, there were no uninsured cash and cash equivalents.
d) Cash Distributions
Cash distributions from the Local Partnerships to the Partnership are restricted by the provisions of the respective agreements of limited partnership of the Local Partnerships and/or the U.S. Department of Housing and Urban Development.
e) Leases
Certain subsidiary partnerships have land lease arrangements whereby they are obligated to pay $1 per annum through June 2054.
f) Property Management Fees
Property management fees incurred by the Local Partnerships amounted to $494,074 and $467,200 for the years ended March 31, 2013 and 2012, respectively. Of these fees $357,037 and $362,789 were incurred to the Local General Partners for the years ended March 31, 2013 and 2012, respectively, which include $39,505 and $59,261 of fees relating to discontinued operations for the years ended March 31, 2013 and 2012, respectively.
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INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013 and 2012
g) Other
The Partnership is subject to the risks incidental to potential losses arising from the management and ownership of improved real estate and poor economic conditions. The Partnership can also be affected by poor economic conditions generally; however, no more than 25% of the properties are located in any single state. There are also substantial risks associated with owning properties receiving government assistance; for example, the possibility that Congress may not appropriate funds to enable HUD to make rental assistance payments. HUD also restricts annual cash distributions to partners based on operating results and a percentage of the owner’s equity contribution. The Partnership cannot sell or substantially liquidate its investments in subsidiary partnerships during the period that the subsidy agreements are in existence without HUD’s approval. Furthermore, there may not be market demand for apartments at full market rents when the rental assistance contracts expire.
The Partnership and BACs holders began to recognize Tax Credits with respect to a Property when the Credit Period for such Property commenced. The Credit Period generally runs for ten years from the date it commenced with respect to each eligible Property. Because of the time required for the acquisition, completion and rent-up of Properties, as expected, the amount of Tax Credits per BAC gradually increased over the first three years of the Partnership. Tax Credits not recognized in the first three years were recognized in the 11th through 13th years. The Partnership generated $8,276 of Tax Credits during each of the 2012 and 2011 tax years. As of December 31, 2012, all the Local Partnerships have completed their Credit Periods. However, each Local Partnership must continue to comply with the Tax Credit requirements until the end of the Compliance Period in order to avoid recapture of the Tax Credits. The Compliance Periods will continue through December 31, 2017 with respect to the Properties depending upon when the Compliance Period commenced.
h) Subsequent Events
We evaluated all subsequent events from the balance sheet date through the issuance date of this report and determined that there were no events or transactions occurring during this subsequent event reporting period, which require recognition or disclosure in the financial statements.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures. The Chief Executive Officer and Chief Financial Officer of Related Independence L.L.C, the general partner of the Partnership, have evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), as of the end of the period covered by this report. Based on such evaluation, such officers have concluded that, as of the end of such period, the Partnership’s disclosure controls and procedures are effective.
(b) Management’s Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). In evaluating the Partnership’s internal control over financial reporting, management has adopted the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring organizations of the Treadway Commission (the “COSO Framework”). Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer of the General Partner, the Partnership conducted an evaluation of the effectiveness of its internal control over financial reporting as of March 31, 2013. The Partnership’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. However, because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Based on management’s evaluation under the COSO Framework, it has concluded that the Partnership’s internal control over financial reporting, was, as of March 31, 2013, (1) effective at the Partnership level, in that they provide reasonable assurance that information required to be disclosed by the Partnership in the reports it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (2) ineffective at the subsidiary level due to certain control deficiencies. Management will attempt to cause the Local General Partner’s to remedy such deficiencies; however, the General Partner does not have control over the internal controls at the subsidiary level. Management believes they have sufficient controls at the Partnership level to mitigate these deficiencies, and such deficiencies do not have a material impact on the consolidated financial statements.
(c) Changes in Internal Controls over Financial Reporting. During the period ended March 31, 2013, there were no changes in the Partnership’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.
Item 9B. Other Information.
Not applicable.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The Partnership has no directors or executive officers. The Partnership’s affairs are managed and controlled by Related Independence LLC (“RILLC”), the General Partner. The Partnership has not adopted a separate code of ethics because the Partnership has no directors or executive officers. However, Centerline Holding Company (“Centerline”), the ultimate parent company of Centerline Affordable Housing Advisors (“CAHA”) which controls the General Partner, has adopted a code of ethics (see http://www.centerline.com).
Certain information concerning the executive officers of the General Partner is set forth below.
Name
Position
Robert A. Pace
Chief Financial Officer
Robert L. Levy
President and Chief Executive Officer
ROBERT A. PACE, 40, is the Chief Financial Officer of RILLC and a Director of Centerline. Mr. Pace oversees the accounting operations of the General Partner, and is also responsible for overseeing the accounting operations of Centerline’s Affordable Housing Group. Mr. Pace joined Centerline’s predecessor in January of 2003 as an Assistant Controller. Prior to joining Centerline’s predecessor, Mr. Pace worked for KPMG in the financial services real estate group as an audit manager. He received a Bachelor of Science Degree from Wagner College in 1994 and is a Certified Public Accountant.
ROBERT L. LEVY, 47, is the President and Chief Executive Officer of RILLC and is also a managing trustee and President and Chief Operating Officer of Centerline. Mr. Levy was appointed as Chief Financial Officer of Centerline from November 2006 to May 2012 and was appointed its President and Chief Operating Officer in April 2010. He directs the day-to-day operations of Centerline and is also responsible for overseeing all of Centerline’s business and operations. Mr. Levy joined Centerline in November of 2001 as the Director of Capital Markets. From 1998 through 2001, he was a Vice President in the Real Estate Equity Research and Investment Banking Departments at Robertson Stephens, an investment banking firm in San Francisco. Prior to 1998, Mr. Levy was employed by Prudential Securities in the Real Estate Equity Research Group and at the Prudential Realty Group, the real estate investment arm of the Prudential Insurance Company. He received his Master’s in Business Administration from the Leonard N. Stern School of Business at New York University and his Bachelor of Arts from Northwestern University.
Item 11. Executive Compensation.
The Partnership has no officers or directors. The Partnership does not pay or accrue any fees, salaries or other forms of compensation to members or officers of the General Partner for their services. However, under the terms of the Partnership Agreement, the Partnership has entered into certain arrangements with the General Partner and its affiliates, which provide for compensation to be paid to the General Partner and its affiliates. Such arrangements include (but are not limited to) agreements to pay annual partnership management fees, nonrecurring acquisition fees, a nonaccountable acquisition expense allowance, an accountable expense reimbursement and subordinated disposition fees to the General Partner and/or its affiliates. In addition, the General Partner is entitled to a subordinated interest in cash from sales or refinancings and a 1% interest in net income, net loss, distributions of adjusted cash from operations and cash from sales or refinancings. Certain members and officers of the General Partner receive compensation from the General Partner and its affiliates for services performed for various affiliated entities which may include services performed for the Partnership. The maximum annual partnership management fee paid to the General Partner is 0.5% of invested assets. See Note 8 in Item 8
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Independence SLP IV L.P., a limited partnership whose general partner is the General Partner of the Partnership and which acts as the special limited partner of each Local Partnership, holds a .01% limited partnership interest in the Local Partnerships. See Note 8 in Item 8 above, which information is incorporated herein by reference thereto.
Except as set forth below no person is known by the Partnership to be the beneficial owner of more than five percent of the Limited Partnership Interests and/or BACs; and neither the General Partner nor any officer of the General Partner beneficially owns any Limited Partnership Interests or BACs. The following table sets forth the number of BACs beneficially owned as of June 24, 2013 by (i) each BACs holder known to the Partnership to be a beneficial owner of more than 5% of the BACs, (ii) each executive officer of the General Partner of RILLC and (iii) the directors and executive officers of the general partner of RILLC as a group. Unless otherwise noted, all BACs are owned directly with sole voting and dispositive powers.
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(1)The address for each of the persons in the table is 100 Church Street, New York, New York 10007.
(2)As set forth in Schedule 13D filed by Lehigh Tax Credit Partners III L.L.C. and Lehigh Tax Credit Partners, Inc. (the “Managing Member”) on January 25, 1999 with the Securities and Exchange Commission.
(3)Only owns an economic interest in the Managing Member.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The Partnership has and will continue to have certain relationships with the General Partner and its affiliates, as discussed in Item 11 and also Note 8 in Item 8 above, which are incorporated herein by reference thereto. However, there have been no direct financial transactions between the Partnership and the members and officers of the General Partner.
Item 14.
Item 14. Principal Accountant Fees and Services.
Audit Fees
The aggregate fees billed by Raich Ende Malter & Co LLP and Friedman LLP for professional services rendered for the audit of the Partnership’s annual consolidated financial statements for the years ended March 31, 2013 and 2012 and for the reviews of the financial information included in the Partnership’s quarterly reports on Form 10-Q for those years were $67,000 and $84,000, respectively.
Audit Related Fees
None.
Tax Fees
None.
All Other Fees
None.
The Partnership is not required to have, and does not have, a stand-alone audit committee.
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PART IV
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PART IV
Item 15.
Item 15. Exhibits, Financial Statement Schedules (continued).
(c) Subsidiaries of the Registrant (Exhibit 21)
Jurisdiction of
Organization
Fawcett Street Limited Partnership
WA
Figueroa Senior Housing Limited Partnership
CA
NNPHI Senior Housing Limited Partnership
CA
Bakery Village Urban Renewal Associates, L.P.
NJ
GP Kaneohe Limited Partnership
HI
KSD Village Apartments, Phase II, Ltd.
KY
Kanisa Apartments, Ltd.
KY
Guymon Housing Partners, L.P.
OK
(d) Not applicable
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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.
INDEPENDENCE TAX CREDIT PLUS L.P. IV
(Registrant)
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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 and in the capacities and on the dates indicated:
Signature
Title
Date
/s/ Robert A. Pace
Chief Financial Officer and Principal Accounting Officer of Related Independence L.L.C.
Robert A. Pace
July 1, 2013
/s/ Robert L. Levy
President (Chief Executive Officer) of Related Independence L.L.C.
Robert L. Levy
July 1, 2013
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REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM ON SUPPLEMENTARY INFORMATION
To the Partners
Independence Tax Credit Plus L.P. IV and Subsidiaries
In connection with our audit of the consolidated financial statements of Independence Tax Credit Plus L.P. IV and Subsidiaries (A Delaware Limited Partnership) included in this Form 10-K as presented in our opinion dated July 1, 2013 on page 12, and based on the reports of other auditors, we have also audited supporting Schedule I for the 2012 Fiscal Year and Schedule III at March 31, 2013. In our opinion, and based on the reports of the other auditors, these consolidated schedules present fairly, when read in conjunction with the related consolidated financial statements, the financial data required to be set forth therein.
As discussed in Note 12(b), the consolidated financial statements include the financial statements of two subsidiary partnerships with significant uncertainties. The financial statements of these subsidiary partnerships were prepared assuming that they will continue as going concerns. These two subsidiary partnerships’ net losses aggregated $329,681 (2012 Fiscal Year) and their assets aggregated $267,730 at March 31, 2013. Management’s plan in regard to this matter is also described in Note 12(b). The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ RAICH ENDE & MALTER CO. LLP
RAICH ENDE & MALTER CO. LLP
New York, New York
July 1, 2013
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REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM ON SUPPLEMENTARY INFORMATION
To the Partners
Independence Tax Credit Plus L.P. IV and Subsidiaries
Under date of June 20, 2012, we reported on the basic consolidated balance sheets of Independence Tax Credit Plus L.P. IV and Subsidiaries as of March 31, 2012, and the related consolidated statements of operations, changes in partners’ capital (deficit) and cash flows for the year ended March 31, 2012.
In connection with our audit of the basic aforementioned consolidated financial statements, we have also audited supporting Schedule I as of March 31, 2012 and for the year ended March 31, 2012, and Schedule III as of March 31, 2012 and for the year ended March 31, 2012. These supporting schedules are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these condensed schedules based on our audit. In our opinion, these condensed schedules present fairly, when read in conjunction with the basic consolidated financial statements, the financial data required to be set forth therein.
/s/ Friedman LLP
New York, New York
June 20, 2012
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INDEPENDENCE TAX CREDIT PLUS L.P. IV
SCHEDULE I
CONDENSED SCHEDULE OF FINANCIAL INFORMATION OF REGISTRANT
Condensed financial information of registrant (not including consolidated subsidiary partnerships)
CONDENSED BALANCE SHEETS
See Independent Registered Public Accounting Firm’s Report on Supplementary Information.
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INDEPENDENCE TAX CREDIT PLUS L.P. IV
SCHEDULE I
CONDENSED SCHEDULE OF FINANCIAL INFORMATION OF REGISTRANT
(Not Including Consolidated Subsidiary Partnerships)
CONDENSED STATEMENTS OF OPERATIONS
See Independent Registered Public Accounting Firm’s Report on Supplementary Information.
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INDEPENDENCE TAX CREDIT PLUS L.P. IV
SCHEDULE I
CONDENSED SCHEDULE OF FINANCIAL INFORMATION OF REGISTRANT
(Not Including Consolidated Subsidiary Partnerships)
CONDENSED STATEMENTS OF CASH FLOWS
See Independent Registered Public Accounting Firm’s Report on Supplementary Information.
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INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
SCHEDULE III
CONSOLIDATED SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
Partnership Property Pledged as Collateral
MARCH 31, 2013
(a)The Partnership’s limited partnership interest was sold during the fiscal year ended March 31, 2013.
(b)The property and the related assets and liabilities were sold during the fiscal year ended March 31, 2013.
*	Depreciation is computed using primarily the straight-line method over the estimated useful lives determined by the Partnership at the date of acquisition.
See Independent Registered Public Accounting Firm’s Report on Supplementary Information.
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INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
SCHEDULE III
CONSOLIDATED SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
Partnership Property Pledged as Collateral
MARCH 31, 2013
(continued)
At the time the Local Partnerships were acquired by Independence Tax Credit Plus L.P. IV, the entire purchase price paid by Independence Tax Credit Plus L.P. IV was pushed down to the Local Partnerships as property and equipment with an offsetting credit to capital.
See Independent Registered Public Accounting Firm’s Report on Supplementary Information.
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