Attached files
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
______________
FORM
10-Q
______________
(Mark
One)
þ
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended September 30, 2009
OR
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Commission
File Number 0-24650
INDEPENDENCE
TAX CREDIT PLUS L.P. III
(Exact
name of registrant as specified in its charter)
Delaware
|
13-3746339
|
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
|
625
Madison Avenue, New York, New York
|
10022
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant’s
telephone number, including area code (212) 317-5700
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes þ No
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files). Yes No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of “large accelerated filer”,
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer
|
Accelerated
filer
|
|
Non-accelerated
filer (Do not check if a smaller reporting
company)
|
Smaller
reporting company þ
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange
Act). Yes No þ
PART I –
FINANCIAL INFORMATION
Item
1. Financial Statements
INDEPENDENCE
TAX CREDIT PLUS L.P. III
AND
SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
September
30,
2009
|
March
31,
2009
|
||||||
(Unaudited)
|
(Audited)
|
||||||
ASSETS
|
|||||||
Operating
Assets
|
|||||||
Property
and equipment, at cost, net of accumulated depreciation of $28,111,632 and
$28,830,729, respectively
|
$
|
46,947,897
|
$
|
49,495,584
|
|||
Cash
and cash equivalents
|
2,903,166
|
2,920,187
|
|||||
Cash
held in escrow
|
5,209,727
|
5,154,827
|
|||||
Deferred
costs, net of accumulated amortization of $546,702 and $604,510,
respectively
|
472,854
|
503,291
|
|||||
Other
assets
|
1,220,521
|
1,192,915
|
|||||
Total
assets
|
$
|
56,754,165
|
$
|
59,266,804
|
|||
LIABILITIES
AND PARTNERS’ CAPITAL (DEFICIT)
|
|||||||
Operating
Liabilities
|
|||||||
Mortgage
notes payable
|
$
|
36,394,202
|
$
|
38,658,408
|
|||
Accounts
payable
|
1,195,431
|
902,181
|
|||||
Accrued
interest payable
|
11,371,530
|
10,702,346
|
|||||
Security
deposits payable
|
393,790
|
424,241
|
|||||
Due
to local general partners and affiliates
|
2,184,618
|
2,309,783
|
|||||
Due
to general partners and affiliates
|
6,375,058
|
6,348,322
|
|||||
Total
liabilities
|
57,914,629
|
59,345,281
|
|||||
Commitments
and contingencies (Note 7)
|
|||||||
Partners’
capital (deficit)
|
|||||||
Limited
partners (43,440 BACs issued and outstanding)
|
(1,370,150
|
)
|
(382,825
|
)
|
|||
General
partners
|
(107,622
|
)
|
(102,649
|
)
|
|||
Independence
Tax Credit Plus L.P. III total
|
(1,477,772
|
)
|
(485,474
|
)
|
|||
Noncontrolling
interests
|
317,308
|
406,997
|
|||||
Total
partners’ capital (deficit)
|
(1,160,464
|
)
|
(78,477
|
)
|
|||
Total
liabilities and partners’ capital (deficit)
|
$
|
56,754,165
|
$
|
59,266,804
|
|||
See
accompanying notes to consolidated financial
statements.
|
- 2
-
INDEPENDENCE
TAX CREDIT PLUS L.P. III
AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
Three
Months Ended
September
30,
|
Six
Months Ended
September
30,
|
||||||||||||
2009
|
2008*
|
2009
|
2008*
|
||||||||||
Revenues
|
|||||||||||||
Rental
income
|
$
|
1,583,285
|
$
|
1,585,166
|
$
|
3,183,768
|
$
|
3,149,104
|
|||||
Other
income
|
54,344
|
83,550
|
142,691
|
149,605
|
|||||||||
Gain
on extinguishment of debt (Note 6)
|
172,373
|
0
|
172,373
|
0
|
|||||||||
Total
revenues
|
1,810,002
|
1,668,716
|
3,498,832
|
3,298,709
|
|||||||||
Expenses
|
|||||||||||||
General
and administrative
|
454,576
|
440,885
|
924,358
|
924,973
|
|||||||||
General
and administrative-related parties (Note 2)
|
219,965
|
208,124
|
438,982
|
413,608
|
|||||||||
Repairs
and maintenance
|
430,405
|
483,181
|
793,785
|
808,163
|
|||||||||
Operating
|
198,486
|
208,181
|
439,980
|
447,456
|
|||||||||
Taxes
|
91,352
|
96,580
|
177,569
|
178,976
|
|||||||||
Insurance
|
114,123
|
122,181
|
235,069
|
242,651
|
|||||||||
Financial,
principally interest
|
422,380
|
411,249
|
853,935
|
835,694
|
|||||||||
Depreciation
and amortization
|
556,024
|
560,532
|
1,116,467
|
1,115,106
|
|||||||||
Total
expenses from operations
|
2,487,311
|
2,530,913
|
4,980,145
|
4,966,627
|
|||||||||
Loss
from operations
|
(677,309
|
)
|
(862,197
|
)
|
(1,481,313
|
)
|
(1,667,918
|
)
|
|||||
Income
from discontinued operations
|
546,550
|
11,225
|
512,387
|
6,423
|
|||||||||
Net
loss
|
(130,759
|
)
|
(850,972
|
)
|
(968,926
|
)
|
(1,661,495
|
)
|
|||||
Net
loss attributable to noncontrolling interests from
operations
|
64,179
|
55,198
|
122,914
|
130,559
|
|||||||||
Net
income attributable to noncontrolling interests from discontinued
operations
|
(151,626
|
)
|
(235
|
)
|
(151,286
|
)
|
(422
|
)
|
|||||
Net
(income) loss attributable to noncontrolling interests
|
(87,447
|
)
|
(54,963
|
)
|
(28,372
|
)
|
130,137
|
||||||
Net
loss attributable to Independence Tax Credit Plus L.P. III
|
$
|
(218,206
|
)
|
$
|
(796,009
|
)
|
$
|
(997,298
|
)
|
$
|
(1,531,358
|
)
|
|
Loss
from operations – limited partners
|
$
|
(606,999
|
)
|
$
|
(798,929
|
)
|
$
|
(1,344,815
|
)
|
$
|
(1,521,985
|
)
|
|
Income
from discontinued operations – limited partners
|
390,975
|
10,880
|
357,490
|
5,941
|
|||||||||
Net
loss – limited partners
|
$
|
(216,024
|
)
|
$
|
(788,049
|
)
|
$
|
(987,325
|
)
|
$
|
(1,516,044
|
)
|
|
Number
of BACs outstanding
|
43,440
|
43,440
|
43,440
|
43,440
|
|||||||||
Loss
from operations per BAC
|
$
|
(13.97
|
)
|
$
|
(18.39
|
)
|
$
|
(30.96
|
)
|
$
|
(35.04
|
)
|
|
Income
from discontinued operations per BAC
|
9.00
|
0.25
|
8.23
|
0.14
|
|||||||||
Net
loss per BAC
|
$
|
(4.97
|
)
|
$
|
(18.14
|
)
|
$
|
(22.73
|
)
|
$
|
(34.90
|
)
|
* Reclassified
for comparative purpose.
See
accompanying notes to consolidated financial statements.
|
- 3
-
INDEPENDENCE
TAX CREDIT PLUS L.P. III
AND
SUBSIDIARIES
CONSOLIDATED
STATEMENT OF CHANGES IN PARTNERS’ (DEFICIT) CAPITAL
(Unaudited)
Total
|
Limited
Partners
|
General
Partner
|
Noncontrolling
Interests |
||||||||||
Partners’
capital (deficit) – April 1, 2009
|
$
|
(78,477
|
)
|
$
|
(382,825
|
)
|
$
|
(102,649
|
)
|
$
|
406,997
|
||
Net
(loss) income – six months ended September 30, 2009
|
(968,926
|
)
|
(987,325
|
)
|
(9,973
|
)
|
28,372
|
||||||
Distributions
|
(118,061
|
)
|
0
|
0
|
(118,061
|
)
|
|||||||
Contributions
– write-off of related party debt
|
5,000
|
0
|
5,000
|
0
|
|||||||||
Partners’
(deficit) capital – September 30, 2009
|
$
|
(1,160,464
|
)
|
$
|
(1,370,150
|
)
|
$
|
(107,622
|
)
|
$
|
317,308
|
See
accompanying notes to consolidated financial statements.
- 4
-
INDEPENDENCE
TAX CREDIT PLUS L.P. III
AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
Six
months Ended
September
30,
|
|||||||
2009
|
2008*
|
||||||
Cash
flows from operating activities:
|
|||||||
Net
loss
|
$
|
(968,926
|
)
|
$
|
(1,661,495
|
)
|
|
Adjustments
to reconcile net loss to net cash provided by operating
activities:
|
|||||||
Gain
on sale of property
|
(638,380
|
)
|
0
|
||||
Gain
on extinguishment of debt
|
(172,373
|
)
|
0
|
||||
Depreciation
and amortization
|
1,204,852
|
1,302,702
|
|||||
Increase
in accounts payable
|
314,517
|
315,612
|
|||||
Increase
in accrued interest payable
|
669,184
|
657,682
|
|||||
Decrease
in security deposit payable
|
(4,070
|
)
|
(67,001
|
)
|
|||
Increase
in cash held in escrow
|
(209,687
|
)
|
(138,017
|
)
|
|||
Increase
in other assets
|
(27,606
|
)
|
(188,426
|
)
|
|||
(Decrease)
increase in due to local general partners and affiliates
|
(4,137
|
)
|
73,322
|
||||
Increase
in due to general partner and affiliates
|
31,736
|
39,468
|
|||||
Total
adjustments
|
1,164,036
|
1,995,342
|
|||||
Net
cash provided by operating activities
|
195,110
|
333,847
|
|||||
Cash
flows from investing activities:
|
|||||||
Purchase
of property and equipment
|
0
|
(447
|
)
|
||||
Proceeds
from sale of property
|
250,000
|
0
|
|||||
Costs
related to sale of property
|
(59,235
|
)
|
0
|
||||
Decrease
in cash held in escrow
|
50,121
|
47,081
|
|||||
Decrease
in due to local general partners and affiliates
|
(101,028
|
)
|
(117,673
|
)
|
|||
Net
cash provided by (used in) investing activities
|
139,858
|
(71,039
|
)
|
||||
Cash
flows from financing activities:
|
|||||||
Repayments
of mortgage notes
|
(213,928
|
)
|
(305,060
|
)
|
|||
Decrease
in due to local general partners and affiliates
|
(20,000
|
)
|
(2,000
|
)
|
|||
Decrease
in capitalization of consolidated subsidiaries attributable to
noncontrolling interests
|
(118,061
|
)
|
(57,181
|
)
|
|||
Net
cash used in financing activities
|
(351,989
|
)
|
(364,241
|
)
|
|||
Net
decrease in cash and cash equivalents
|
(17,021
|
)
|
(101,433
|
)
|
|||
Cash
and cash equivalents at beginning of period
|
2,920,187
|
1,129,466
|
|||||
Cash
and cash equivalents at end of period
|
$
|
2,903,166
|
$
|
1,028,033
|
|||
Summarized
below are the components of the gain on sale of property:
|
|||||||
Proceeds
from sale of property – net
|
$
|
(190,765
|
)
|
$
|
0
|
||
Decrease
in property and equipment, net of accumulated depreciation
|
1,371,465
|
0
|
|||||
Decrease
in deferred costs
|
1,808
|
0
|
|||||
Decrease
in cash held in escrow
|
104,666
|
0
|
|||||
Decrease
in accounts payable and other liabilities
|
(21,268
|
)
|
0
|
||||
Decrease
in security deposit payable
|
(26,381
|
)
|
0
|
||||
Decrease
in mortgage note payable
|
(1,877,905
|
)
|
0
|
||||
Decrease
in due to General Partners and affiliates
|
(5,000
|
)
|
0
|
||||
Capital
contribution – General Partners
|
5,000
|
0
|
* Reclassified
for comparative purpose.
See
accompanying notes to consolidated financial
statements.
|
- 5
-
INDEPENDENCE
TAX CREDIT PLUS L.P. III
AND
SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
September
30, 2009
(Unaudited)
NOTE 1 –
General
The
consolidated financial statements include the accounts of Independence Tax
Credit Plus L.P. III (the “Partnership”) and nineteen other limited partnerships
(“subsidiary partnerships”, “subsidiaries” or “Local Partnerships”) owning
apartment complexes that are eligible for the federal low-income housing tax
credit (“Tax Credit”). The general partner of the Partnership is
Related Independence Associates III L.P., a Delaware limited partnership (the
“General 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 Partnerships, to remove the general partner of the Local
Partnerships and to approve certain major operating and financial decisions, the
Partnership has a controlling financial interest in the subsidiary partnerships
(“Local General Partners”). As of September 30, 2009, the Partnership
has sold its limited partnership interest in two Local Partnerships (see Note
4).
For
financial reporting purposes, the Partnership’s fiscal quarter ends September
30, 2009. All subsidiaries have fiscal quarters ending June 30,
2009. Accounts of the subsidiaries have been adjusted for
intercompany transactions from July 1 through September 30. The
Partnership’s fiscal quarter ends September 30 in order to allow adequate time
for the subsidiaries’ financial statements to be prepared and
consolidated.
All
intercompany accounts and transactions with the subsidiary partnerships have
been eliminated in consolidation.
The
Partnership has adopted FASB Accounting Standards Codification (“ASC”) Topic
810, Noncontrolling Interests
in Consolidated Financial Statements, (“ASC 810”) which is effective for
fiscal year ends beginning after December 15, 2008. In accordance
with ASC 810, income attributable to noncontrolling interests amounted to
approximately $87,000 and $28,000 for the three and six months ended September
30, 2009. Prior to the adoption of this ASC, losses attributable to
noncontrolling interests which exceeded the noncontrolling interests’ investment
in a subsidiary partnership were charged to the Partnership. There
were no such losses for the three and six months ended September 30,
2008. Increases (decreases) in the capitalization of consolidated
subsidiaries attributable to noncontrolling interest arise from cash
contributions from and cash distributions to the noncontrolling interest
partners. The Partnership’s investment in each subsidiary is equal to the
respective subsidiary’s partners’ equity less noncontrolling interest capital,
if any.
Certain
information and note disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America (“GAAP”) have been omitted or condensed. These
condensed financial statements should be read in conjunction with the financial
statements and notes thereto included in the Partnership’s Annual Report on Form
10-K for the year ended March 31, 2009.
The books
and records of the Partnership are maintained on the accrual basis of accounting
in accordance with GAAP. In the opinion of the General Partner of the
Partnership, the accompanying unaudited financial statements contain all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial position of the Partnership as of September 30,
2009 and the results of operations for the three and six months ended September
30, 2009 and 2008 and its cash flows for the six months ended September 30, 2009
and 2008. However, the operating results for the six months ended
September 30, 2009 may not be indicative of the results for the
year.
Recent Accounting
Pronouncements
In June
2009, the FASB issued ASC 105-10 (formerly SFAS No. 168), “The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles”. The objective of this statement is to replace SFAS No.
162 and to establish the FASB Accounting Standards Codification as the source of
the authoritative accounting principles recognized by the FASB to be applied by
nongovernmental entities in the preparation of financial statements in
conformity with GAAP. Rules and interpretive releases of the SEC
under authority of federal securities laws are also sources of authoritative
GAAP for SEC registrants. This ASC is effective for financial statements issued
for interim and annual periods ending after September 15, 2009 and was adopted
by the Partnership for its second quarter reporting. The adoption did
not have a significant impact on the reporting of our financial position,
results of operations or cash flows.
- 6
-
INDEPENDENCE
TAX CREDIT PLUS L.P. III
AND
SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
September
30, 2009
(Unaudited)
NOTE 2 –
Related Party Transactions
An
affiliate of the General Partner has a .01% interest, as a special limited
partner, in each of the Local Partnerships.
The costs
incurred to related parties from operations for the three and six months ended
September 30, 2009 and 2008 were as follows:
Three
Months Ended
September
30,
|
Six
Months Ended
September
30,
|
||||||||||||
2009
|
2008*
|
2009
|
2008*
|
||||||||||
Partnership
management fees (a)
|
$
|
84,132
|
$
|
74,900
|
$
|
167,632
|
$
|
156,397
|
|||||
Expense
reimbursement (b)
|
48,324
|
42,705
|
96,647
|
85,410
|
|||||||||
Local
administrative fee (c)
|
17,277
|
16,875
|
34,556
|
33,750
|
|||||||||
Total
general and administrative-General Partner
|
149,733
|
134,480
|
298,835
|
275,557
|
|||||||||
Property
management fees incurred to affiliates of the subsidiary
partnerships' general partners
|
70,232
|
73,644
|
140,147
|
138,051
|
|||||||||
Total
general and administrative-related parties
|
$
|
219,965
|
$
|
208,124
|
$
|
438,982
|
$
|
413,608
|
|||||
*Reclassified
for comparative purposes.
|
The costs
incurred to related parties from discontinued operations for the three and six
months ended September 30, 2009 and 2008 were as follows:
Three
Months Ended
September
30,
|
Six
Months Ended
September
30,
|
||||||||||||
2009
|
2008
|
2009
|
2008
|
||||||||||
Local
administrative fee (c)
|
$
|
625
|
$
|
3,125
|
$
|
1,250
|
$
|
6,250
|
|||||
Total
general and administrative-General Partner
|
625
|
$
|
3,125
|
$
|
1,250
|
$
|
6,250
|
||||||
Property
management fees incurred to affiliates of the subsidiary
partnerships' general partners
|
0
|
14,751
|
0
|
28,594
|
|||||||||
Total
general and administrative-related parties
|
$
|
625
|
$
|
17,876
|
$
|
1,250
|
$
|
34,844
|
(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
will be accrued without interest and will be payable only to the extent of
available funds after the Partnership has made distributions to the
limited partners of sale or refinancing proceeds equal to their original
capital contributions plus a 10% priority return thereon (to the extent
not theretofore paid out of cash flow). Partnership management fees owed
to the General Partner amounting to approximately $3,803,000 and
$3,636,000 were accrued and unpaid as of September 30, 2009 and March 31,
2009, respectively. During the year ended March 31, 2009,
management deemed the unpaid partnership management fees that were related
to the property sold during the year ended March 31, 2009 uncollectible
and as a result, wrote them off in the amount of approximately $286,000,
resulting in a non-cash General Partner contribution of the same
amount. Without the General Partner’s continued accrual without
payment the Partnership will not be in a position to meet its
obligations. The General Partner has continued allowing the
accrual without payment of these amounts but is under no obligation to
continue to do so.
|
(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.
|
(c)
|
Independence
SLP III 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.
|
- 7
-
INDEPENDENCE
TAX CREDIT PLUS L.P. III
AND
SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
September
30, 2009
(Unaudited)
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,
Investments Available-for-Sale and Cash Held in Escrow
The
carrying amount approximates fair value.
Mortgage Notes
Payable
The
Partnership adopted FASB ASC 820 – “Fair Value Measurements” for
financial assets and liabilities. ASC 820 defines fair value,
establishes a framework for measuring fair value, and expands disclosures about
fair value measurements. ASC 820 applies to reported balances that
are required or permitted to be measured at fair value under existing accounting
pronouncements; accordingly, the standard does not require any new fair value
measurements of reported balances.
As
permitted, we chose not to elect the fair value option as prescribed by FASB
SFAS No. 159, “The Fair Value
Option for Financial Assets and Financial Liabilities” – Including an
Amendment of FASB Statement No. 115, for our financial assets and liabilities
that had not been previously carried at fair value. Therefore, we did
not elect to fair value any additional items under SFAS No. 159.
The
estimated fair value of financial instruments 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. The following are financial instruments for which the
Partnership’s estimate of fair value differs from the carrying
amounts:
At
September 30, 2009
|
At
March 31, 2009
|
||||||||||||
Carrying
Amount |
Fair
Value
|
Carrying
Amount |
Fair
Value
|
||||||||||
LIABILITIES:
|
|||||||||||||
Mortgage
notes
|
$
|
36,394,202
|
$
|
27,312,736
|
$
|
38,658,408
|
$
|
27,222,726
|
For the
mortgage notes, fair value is 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.
NOTE 4 –
Sale of Property
During
the six months ended September 30, 2009, the Partnership sold its limited
partnership interests in one Local Partnership. Through September 30,
2009, the Partnership sold its limited partnership interest in two Local
Partnerships (Note 5). 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 investment.
On August
26, 2009, the Partnership sold its limited partnership interest in Pacific-East
L.P. (“Eastern Parkway”) to an affiliate of the Local General Partner for a
sales price of $250,000. The sale resulted in a gain of approximately
$638,000, resulting from the write-off of the deficit basis in the Local
Partnership of approximately $388,000 at the date of the sale and the $250,000
cash received from the sale. The sale also resulted in a write-off of
operating advances of approximately $1,016,000 owed to the Partnership which are
eliminated in consolidation. In addition, the sale resulted in a
non-cash contribution to the Local Partnership from the General Partner of
approximately $5,000 as a result of the write-off of fees owed by the Local
Partnership to an affiliate of the General Partner.
NOTE 5 –
Discontinued Operations
The
following table summarizes the results of operations of the Local Partnerships
that are classified as a discontinued operations. For the three and
six months ended September 30, 2009, Eastern Parkway, which was sold during the
six months ended September 30, 2009, was classified as discontinued operation in
the consolidated financial statements. For the three and six months
ended September 30, 2008, and in order to present comparable results to the
three and six months ended September 30, 2009, Eastern Parkway, which was sold
during the six months ended September 30, 2009, and 2301 First Avenue, which was
sold during the year ended March 31, 2009, were classified as a discontinued
operations in the consolidated financial statements.
- 8
-
INDEPENDENCE
TAX CREDIT PLUS L.P. III
AND
SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
September
30, 2009
(Unaudited)
Consolidated Statements of
Discontinued Operations:
Three
Months Ended
September
30,
|
Six
Months Ended
September
30,
|
||||||||||||
2009
|
2008
|
2009
|
2008
|
||||||||||
Revenues
|
|||||||||||||
Rental
income
|
$
|
137,368
|
$
|
318,554
|
$
|
214,438
|
$
|
639,370
|
|||||
Other
|
0
|
3,919
|
1,237
|
7,476
|
|||||||||
Gain
on sale of property
|
638,380
|
0
|
638,380
|
0
|
|||||||||
Total
revenue
|
775,748
|
322,473
|
854,055
|
646,846
|
|||||||||
Expenses
|
|||||||||||||
General
and administrative
|
46,161
|
67,659
|
68,356
|
112,687
|
|||||||||
General
and administrative-related parties (Note 2)
|
625
|
17,876
|
1,250
|
34,844
|
|||||||||
Repairs
and maintenance
|
20,541
|
29,571
|
30,237
|
58,566
|
|||||||||
Operating
and other
|
87,544
|
56,991
|
122,240
|
153,589
|
|||||||||
Insurance
|
11,000
|
18,803
|
17,253
|
39,532
|
|||||||||
Taxes
|
0
|
1,000
|
0
|
1,000
|
|||||||||
Interest
|
8,551
|
25,641
|
13,947
|
52,609
|
|||||||||
Depreciation
and amortization
|
54,776
|
93,707
|
88,385
|
187,596
|
|||||||||
Total
expenses
|
229,198
|
311,248
|
341,668
|
640,423
|
|||||||||
Income
from discontinued operations before noncontrolling
interests
|
546,550
|
11,225
|
512,387
|
6,423
|
|||||||||
Noncontrolling
interest in income of subsidiaries from discontinued
operations
|
(151,626
|
)
|
(235
|
)
|
(151,286
|
)
|
(422
|
)
|
|||||
Income
from discontinued operations
|
$
|
394,924
|
$
|
10,990
|
$
|
361,101
|
$
|
6,001
|
|||||
Income
– limited partners from discontinued operations
|
$
|
390,975
|
$
|
10,880
|
$
|
357,490
|
$
|
5,941
|
|||||
Number
of BACs outstanding
|
43,440
|
43,440
|
43,440
|
43,440
|
|||||||||
Income
from discontinued operations per BAC
|
$
|
9.00
|
$
|
0.25
|
$
|
8.23
|
$
|
0.14
|
Cash
flows from Discontinued Operations:
Six
Months Ended
September
30,
|
|||||||
2009
|
2008
|
||||||
Net
cash provided by operating activities
|
$
|
237,347
|
$
|
70,916
|
|||
Net
cash (used in) provided by investing activities
|
$
|
(215,467
|
)
|
$
|
2,141
|
||
Net
cash provided by (used in) financing activities
|
$
|
41,109
|
$
|
(116,585
|
)
|
NOTE 6 –
Gain on Extinguishment of Debt
In June
of 2009, BK-10K Partners L.P. (“Knickerbocker”) recognized a gain on
extinguishment of debt on its New York City Department of Housing Preservation
and Development (“HPD”) Third Mortgage, which had a balance of $172,373 and a
construction period interest rate of 0.25% per annum, and subsequent rate of
0%. No regular payments of principal were required under the HPD
mortgage. The terms included provisions that the HPD mortgage would
be canceled and extinguished if Knickerbocker did not default on its first and
second mortgages during the first fifteen years of their terms, which
Knickerbocker complied with in 2009.
- 9
-
INDEPENDENCE
TAX CREDIT PLUS L.P. III
AND
SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
September
30, 2009
(Unaudited)
NOTE 7 –
Commitments and Contingencies
a)
|
Subsidiary
Partnerships – Going Concerns and
Uncertainties
|
Mansion Court Phase II
Venture (“Mansion Court”)
In prior
years and in 2009, Mansion Court has sustained operating losses and has not
generated sufficient cash flow from operations to meet its obligations,
primarily payable to related parties. The Local General Partner has
provided funding in the past years; however, there is no obligation to do
so. Mansion Court also has experienced a high number of vacancies due
to deteriorating conditions in the area. Management of Mansion Court
continues to explore options to mitigate increased crime and deteriorating
neighborhood conditions. These options include assistance from local
government housing agencies and could include transfer of
ownership.
The
Partnership’s investment in Mansion Court at September 30, 2009 and March 31,
2009 was zero as a result of prior years’ losses and the noncontrolling
interests balance was $0 at each date. Mansion Court’s net loss after
noncontrolling interests amounted to approximately $42,000 and $41,000 for the
six months ended September 30, 2009 and 2008, respectively.
During
the year ended March 31, 2009, in accordance with ASC 360, Property Plant and Equipment,
the Partnership deemed the building of Mansion Court further impaired and wrote
it down to its new reduced fair value of approximately $207,000, which resulted
in a further loss on impairment of approximately $437,000. 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.
b)
|
Leases
|
Savannah
Park Housing L.P. (“Tobias”), one of the subsidiary partnerships, is leasing the
land on which its apartment complex is located for a term of 50 years, which
commenced in August 1996, with monthly rent payments of $1,771. As of
September 30, 2009, the lease agreement was current. Estimated
aggregate future minimum payments due under the term of the lease were $789,866
as of June 30, 2009.
c)
|
Uninsured
Cash and Cash Equivalents
|
The
Partnership maintains its cash and cash equivalents in various
banks. The accounts at each bank are guaranteed by the Federal
Deposit Insurance Corporation up to $250,000.
d)
|
Cash
Distributions
|
Cash
distributions from the Local Partnerships to the Partnership are restricted by
the provisions of the respective limited partnership agreements of the Local
Partnerships and/or the U.S. Department of Housing and Urban Development (“HUD”)
based on operating results and a percentage of the owner’s equity
contribution. Such cash distributions are typically made from surplus
cash flow.
e)
|
Property
Management Fees
|
Property
management fees incurred by Local Partnerships amounted to $126,588 and $134,077
and $237,436 and $257,735 for the three and six months ended September 30, 2009
and 2008, respectively.
f)
|
Other
|
The
Partnership and holders of Beneficial Assignment Certificates (“BACs”) began to
recognize Tax Credits with respect to a property when 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) 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 will
be recognized in the 11th through 13th years. The Partnership
generated $290,438 and $1,999,760 in Tax Credits during the 2008 and 2007 tax
years, respectively. At December 31, 2008, only Mansion Court was
required to recapture $489,362 of low-income housing tax credits.
g)
|
Subsequent
Events
|
We
evaluated all subsequent events from the date of the balance sheet through
November 5, 2009, which represents the issuance date of these financial
statements. There were no events or transactions occurring during
this subsequent event reporting period which require recognition or disclosure
in the financial statements.
- 10
-
Item
2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital
Resources
The
Partnership originally invested all of its net proceeds in twenty Local
Partnerships of which approximately $120,000 remains to be paid to the Local
Partnerships (including approximately $115,000 being held in
escrow). The Partnership is in the process of selling its
investments. During the six months ended September 30, 2009, the
Partnership sold its limited partnership interests in one Local
Partnership. As of September 30, 2009, the Partnership has sold its
limited partnership interest in two Local Partnerships (see Note
4).
Off-Balance Sheet
Arrangements
The
Partnership has no off-balance sheet arrangements.
Tabular Disclosure of
Contractual Obligations
The
Partnership disclosed in Item 7 of the Partnership’s Annual Report on Form 10-K
for the year ended March 31, 2009, the Partnership’s commitments to make future
payments under its debt agreements and other contractual
obligations. There are no material changes to such disclosure or
amounts as of September 30, 2009.
Short-Term
The
Partnership’s primary source of funds is rental revenues, which are fully
utilized at the property level, and sales proceeds. Such sales
proceeds are available to meet the obligations of the Partnership.
During
the six months ended September 30, 2009, cash and cash equivalents of the
Partnership and its consolidated Local Partnerships decreased approximately
($17,000). This decrease was due to repayment of mortgage notes
($214,000), a net decrease in due to local general partners and affiliates
relating to investing and financing activities ($121,000), costs related to sale
of property ($59,000) and a decrease in capitalization of consolidated
subsidiaries attributable to noncontrolling interests ($118,000), which exceeded
net cash provided by operating activities ($195,000), proceeds from sale of
property ($250,000) and a decrease in cash held in escrow relating to investing
activities ($50,000). 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 ($1,205,000), extinguishment of debt
($172,000) and a gain on sale of property of approximately
($638,000).
During
the six months ended September 30, 2009 and 2008, the Partnership received
$48,000 and $112,000, respectively, in distributions from operations of the
Local Partnerships. Additionally, during the six months ended
September 30, 2009 and 2008, the Partnership received approximately $250,000 and
$0, respectively, of distributions from the sale of Local
Partnerships. Management anticipates receiving distributions from
operations in the future, although not to a level sufficient to permit providing
cash distributions to the BACs holders. These distributions will be set aside as
working capital reserves and although likely not sufficient to cover all
Partnership expenses, will be used to meet the operating expenses of the
Partnership.
Total
expenses from operations for the three and six months ended September 30, 2009
and 2008, excluding depreciation and amortization, interest and general and
administrative-related parties, totaled $1,288,942 and $1,351,008 and $2,570,761
and $2,602,219, respectively.
Accounts
payable as of September 30, 2009 and March 31, 2009, were $1,195,431 and
$902,181, 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. The Partnership
believes it (and the applicable Local Partnerships) 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.
Accrued
interest payable as of September 30, 2009 and March 31, 2009, was $11,371,530
and $10,702,346, 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. The Partnership anticipates the payment of accrued
interest on the secondary loans (which make up the majority of the accrued
interest payable and which have been accumulating since the Partnership’s
investment in the respective Local Partnership) will be made from future
refinancing or sales proceeds of the respective Local Partnerships. 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.
Security
deposits payable are offset by cash held in security deposits, which are
included in “Cash held in escrow” on the consolidated balance
sheets.
Long-Term
Partnership
management fees owed to the General Partner amounting to approximately
$3,803,000 and $3,636,000 were accrued and unpaid as of September 30, 2009 and
March 31, 2009, respectively. During the year ended March 31, 2009,
management deemed the unpaid partnership management fees that were related to
the property sold during the year ended March 31, 2009, uncollectible and as a
result, wrote them off in the amount of approximately $286,000, resulting in a
non-cash General Partner contribution of the same amount. Without the
General Partner’s continued accrual without payment of certain fees and expense
reimbursements, the Partnership will not be in a position to meet its
obligations. The General Partner has continued allowing the accrual without
payment of these amounts but is under no obligation to continue to do
so.
For a
discussion of contingencies affecting certain Local Partnerships, see Item 1,
Note 7. Since the maximum loss the Partnership would be liable for is
its net investment in the respective subsidiary partnerships, the resolution of
the existing contingencies is not anticipated to impact future results of
operations, liquidity or financial condition in a material way. However, the
Partnership’s loss of its investment in a Local Partnership will eliminate the
ability to generate future Tax Credits from such Local Partnership and may also
result in recapture of Tax Credits if the investment is lost before the
expiration of the compliance period. At December 31, 2008, only
Mansion Court was required to recapture $489,362 of low-income housing tax
credits.
- 11
-
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.
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. Management believes the only impact would be from laws that have
not yet been adopted. 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. The Partnership has invested the proceeds of its offering in
twenty Local Partnerships, all of which have their Tax Credits fully in
place. The Tax Credits are attached to the property for a period of
ten years, and are transferable with the property during the remainder of the
ten-year period. If trends in the real estate market warranted the
sale of a property, the remaining Tax Credits would transfer to the new owner,
thereby adding value to the property on the market. However, such value declines
each year and is not included in the financial statement carrying
amount.
Fair Market
Valuations
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,
Investments Available-for-Sale and Cash Held in Escrow
The
carrying amount approximates fair value.
Mortgage Notes
Payable
The
Partnership adopted FASB ASC 820 – “Fair Value Measurements” for
financial assets and liabilities. ASC 820 defines fair value,
establishes a framework for measuring fair value, and expands disclosures about
fair value measurements. ASC 820 applies to reported balances that
are required or permitted to be measured at fair value under existing accounting
pronouncements; accordingly, the standard does not require any new fair value
measurements of reported balances.
As
permitted, we chose not to elect the fair value option as prescribed by FASB
SFAS No. 159, “The Fair Value
Option for Financial Assets and Financial Liabilities” – Including an
Amendment of FASB Statement No. 115, for our financial assets and liabilities
that had not been previously carried at fair value. Therefore, we did
not elect to fair value any additional items under SFAS No. 159.
The
estimated fair value of financial instruments 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. The following are financial instruments for which the
Partnership’s estimate of fair value differs from the carrying
amounts:
At
September 30, 2009
|
At
March 31, 2009
|
||||||||||||
Carrying
Amount |
Fair
Value
|
Carrying
Amount |
Fair
Value
|
||||||||||
LIABILITIES:
|
|||||||||||||
Mortgage
notes
|
$
|
36,394,202
|
$
|
27,312,736
|
$
|
38,658,408
|
$
|
27,222,726
|
For the
mortgage notes, fair value is 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.
Critical Accounting Policies
and Estimates
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 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. The summary should be read in
conjunction with the more complete discussion of the Partnership’s accounting
policies included in Item 8, Note 2 to the consolidated financial statements in
its Annual Report on Form 10-K for the year ended March 31, 2009.
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 (generally
using discounted cash flows).
- 12
-
Through
September 30, 2009, the Partnership has recorded approximately $1,840,000 as an
aggregate loss on impairment of assets or reduction to estimated fair
value.
At the
time management commits to a plan to dispose of assets, said assets are 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. There are no Local Partnerships whose assets are
classified as property and equipment as held for sale as of September 30,
2009.
Revenue
Recognition
Rental
income is earned primarily 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 it is 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.
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
Partnership’s results of operations for the three and six months ended September
30, 2009 and 2008 consisted of the results of the Partnership’s investment in
Local Partnerships. The following discussion excludes the
Partnership’s results of its discontinued operation which is not reflected below
(see Note 5).
Rental
income decreased slightly by less than 1% and increased by approximately 1% for
the three and six months ended September 30, 2009, respectively, as compared to
the corresponding periods in 2008. The increase for the six month
period is primarily due to an increase in tenant assistance payments, rental
rates and occupancies at several Local Partnerships, offset by a decrease in
occupancy at one Local Partnership.
Other
income decreased approximately $29,000 and $7,000 for the three and six months
ended September 30, 2009 as compared to the corresponding periods in 2008,
primarily due to insurance proceeds received during the second quarter of 2008
resulting from fire damage at one Local Partnership offset by insurance proceeds
received during the first quarter of 2009 resulting from a broken water pipe
damage at a second Local Partnership.
Gain on
extinguishment of debt totaled approximately $172,000 for the three and six
months ended September 30, 2009 resulting from the extinguishment of a mortgage
note at one Local Partnership (see Note 6).
Repairs
and maintenance expenses decreased approximately $53,000 for the three months
ended September 30, 2009 as compared to the corresponding period in 2008,
primarily due to a decrease in security services and contracts in the second
quarter of 2009 as compared to the first quarter of 2009 at one Local
Partnership and a decrease in building exterior repairs in the second quarter of
2009 as compared to the first quarter of 2009 at a second and third Local
Partnership.
Total
expenses excluding repairs and maintenance remained consistent with a decrease
of approximately 3% and less than 1% for the three and six months ended
September 30, 2009 as compared to the corresponding periods in
2008.
Item
3. Quantitative and Qualitative Disclosures about Market
Risk
The
Partnership has mortgage notes that are payable in aggregate monthly
installments including principal and interest at rates varying from 0% to 10%
per annum. The Partnership does not believe there is a material risk associated
with the various interest rates associated with the mortgage notes as the
majority of the Local Partnership mortgage notes have fixed
rates. The Partnership disclosed in Item 8, Note 3 to the
consolidated financial statements in the Partnership’s Annual Report on Form
10-K for the year ended March 31, 2009, as well as in Item 2, the fair value of
the mortgage notes payable. There are no material changes to such
disclosure or amounts as of September 30, 2009.
The
Partnership does not have any other market risk sensitive
instruments.
Item
4T. Controls and Procedures
(a) Evaluation of Disclosure Controls
and Procedures. The Chief Executive Officer and Chief
Financial Officer of Related Independence Associates III, L.P., 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.
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(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, 2009. 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 Partnership; (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 Partnership are being made only in accordance with
authorizations of management and directors of the Partnership; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the Partnership’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,
2009, (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
deficiencies noted in the audit reports for such
subsidiaries. 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.
The
Partnership’s Annual Report on Form 10-K did not include an attestation report
of the Partnership’s registered public accounting firm regarding internal
control over financial reporting. The Partnership’s internal control
over financial reporting was not subject to attestation by the Partnership’s
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the Partnership to provide only this
report.
(c) Changes in Internal Controls over Financial
Reporting. Except as noted in (b) above, during the period
ended September 30, 2009, 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.
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PART II -
OTHER INFORMATION
Item
1.
|
Legal
Proceedings – None
|
|
Item
1A.
|
Risk
Factors – No changes
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds – None
|
|
Item
3.
|
Defaults
upon Senior Securities – None
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders – None
|
|
Item
5.
|
Other
Information – None
|
|
Item
6.
|
Exhibits
|
|
(3A)
|
Agreement
of Limited Partnership of Independence Tax Credit Plus L.P. III as adopted
on December 23, 1993*
|
|
(3B)
|
Form
of Amended and Restated Agreement of Limited Partnership of Independence
Tax Credit Plus L.P. III, attached to the Prospectus as Exhibit
A**
|
|
(3C)
|
Certificate
of Limited Partnership of Independence Tax Credit Plus L.P. III as filed
on December 23, 1993*
|
|
(10A)
|
Form
of Subscription Agreement attached to the Prospectus as Exhibit
B**
|
|
(10B)
|
Escrow
Agreement between Independence Tax Credit Plus L.P. III and Bankers Trust
Company*
|
|
(10C)
|
Form
of Purchase and Sales Agreement pertaining to the Partnership’s
acquisition of Local Partnership Interests*
|
|
(10D)
|
Form
of Amended and Restated Agreement of Limited Partnership of Local
Partnerships*
|
|
(31.1)
|
||
(31.2)
|
||
(32.1)
|
||
*
|
Incorporated
herein as an exhibit by reference to exhibits filed with Post-Effective
Amendment No. 4 to the Registration Statement on Form S-11 {Registration
No. 33-37704}
|
|
**
|
Incorporated
herein as an exhibit by reference to exhibits filed with Post-Effective
Amendment No. 8 to the Registration Statement on Form S-11 {Registration
No. 33-37704}
|
- 15
-
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. III
(Registrant)
By:
|
RELATED
INDEPENDENCE ASSOCIATES III L.P.,
|
|||||||
General
Partner
|
||||||||
By:
|
RELATED
INDEPENDENCE ASSOCIATES III INC.,
|
|||||||
General
Partner
|
||||||||
Date:
|
November 6, 2009
|
By:
|
/s/ Robert L. Levy
|
|||||
Robert
L. Levy
|
||||||||
Chief
Financial Officer, Principal Accounting Officer and
Director
|
||||||||
|
||||||||
Date:
|
November 6, 2009
|
By:
|
/s/ Andrew J. Weil
|
|||||
Andrew
J. Weil
|
||||||||
President
and Chief Executive Officer
|
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