Attached files

file filename
EXCEL - IDEA: XBRL DOCUMENT - INDEPENDENCE TAX CREDIT PLUS LP IVFinancial_Report.xls
EX-32.2 - SECTION 1350 CEO CERTIFICATION - INDEPENDENCE TAX CREDIT PLUS LP IVexhibit32-2.htm
EX-32.1 - SECTION 1350 CFO CERTIFICATION - INDEPENDENCE TAX CREDIT PLUS LP IVexhibit32-1.htm
EX-32.2 - CEO CERTIFICATION - INDEPENDENCE TAX CREDIT PLUS LP IVexhibit31-2.htm
EX-31.1 - CFO CERTIFICATION - INDEPENDENCE TAX CREDIT PLUS LP IVexhibit31-1.htm
 
 
 

 

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 December 31, 2011

OR

o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from   
 
to
 


Commission File Number 0-17015


INDEPENDENCE TAX CREDIT PLUS L.P. IV
(Exact name of registrant as specified in its charter)


Delaware
 
13-3809869
(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)

(212) 317-5700
Registrant’s telephone number, including area code
 
 
(Former name, former address and former fiscal year, if changed since last report)


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.  þ Yes o 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).  þ Yes   o 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  o
 
Accelerated filer  o
 
Non-accelerated filer  o  (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).  o Yes   þ No
 
 
 

 
 
 

 
 
 
 
 
PART I – FINANCIAL INFORMATION
 
Item 1. Financial Statements.
 
INDEPENDENCE TAX CREDIT PLUS L.P. IV
 
AND SUBSIDIARIES
 
Condensed Consolidated Balance Sheets
 
(Unaudited)
 
   
   
 
 
December 31,
   
March 31,
 
 
 
2011
   
2011
 
ASSETS
 
 
   
 
 
 
 
 
   
 
 
Operating assets
 
 
   
 
 
Property and equipment - (at cost, net of accumulated depreciation of $21,908,098 and $24,041,023, respectively)
  $ 12,958,475     $ 14,995,942  
Cash and cash equivalents
    775,122       1,402,683  
Cash held in escrow
    1,581,175       2,005,507  
Deferred costs (net of accumulated amortization of $774,494 and $758,921, respectively)
    412,306       446,127  
Due from local general partners and affiliates (Note 3)
    508,891       474,935  
Other assets
    465,332       397,837  
 
               
Total operating assets
    16,701,301       19,723,031  
 
               
Assets of discontinued operations (Note 7)
               
Property and equipment held for sale, net of accumulated depreciation of $1,508,513 and $0, respectively
    1,359,012       -  
Other assets related to discontinued operations
    398,691       -  
Total discontinued assets
    1,757,703       -  
 
               
Total assets
  $ 18,459,004     $ 19,723,031  
 
               
LIABILITIES AND PARTNERS’ CAPITAL (DEFICIT)
               
 
               
Operating liabilities
               
Mortgage notes payable
  $ 22,932,409     $ 25,811,620  
Accounts payable and other liabilities
    397,853       443,014  
Accrued interest payable
    6,291,941       6,210,704  
Security deposits payable
    277,127       299,570  
Interest rate swap (Note 4)
    75,951       -  
Due to local general partners and affiliates (Note 3)
    1,477,224       1,948,426  
Due to general partners and affiliates (Note 3)
    2,633,112       2,682,152  
Total operating liabilities
               
 
    34,085,617       37,395,486  
Liabilities of discontinued operations  (Note 7)
               
Mortgage notes payable of assets held for sale
    580,941       -  
Other liabilities related to discontinued operations
    229,972       -  
Total discontinued liabilities
    810,913       -  
 
               
Total liabilities
    34,896,530       37,395,486  
 
               
Commitments and contingencies (Note 8)
               
 
               
Partners’ capital (deficit)
               
 
               
Limited partners – 45,844 Beneficial Assignment Certificates (“BACs”) issued and outstanding
    (16,733,835 )     (18,028,454 )
General partners
    (575,680 )     (588,757 )
 
               
Independence Tax Credit Plus L.P. IV total
    (17,309,515 )     (18,617,211 )
 
               
Noncontrolling interests
    871,989       944,756  
 
               
Total partners’ capital (deficit)
    (16,437,526 )     (17,672,455 )
 
               
Total liabilities and partners’ capital (deficit)
  $ 18,459,004     $ 19,723,031  
 
               
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
 
 
 
- 2 -

 
 
 
 
INDEPENDENCE TAX CREDIT PLUS L.P. IV
 
AND SUBSIDIARIES
 
Condensed Consolidated Statements of Operations
 
(Unaudited)
 
   
   
 
 
Three Months Ended
   
Nine Months Ended
 
 
 
December 31,
   
December 31,
 
 
 
2011
    2010*     2011     2010*  
 
 
 
                         
Operations:
 
 
                         
 
 
 
                         
Revenues
 
 
                         
Rental income
  $ 1,118,346     $ 1,057,276     $ 3,308,204     $ 3,152,708  
Other
    26,436       95,115       69,777       137,275  
 
                               
Total revenues
    1,144,782       1,152,391       3,377,981       3,289,983  
 
                               
Expenses
                               
General and administrative
    350,334       347,657       965,404       958,983  
General and administrative-related parties (Note 3)
    135,279       136,106       444,800       451,716  
Repairs and maintenance
    210,254       163,318       611,910       533,134  
Operating and other
    175,834       188,183       533,016       514,396  
Real estate taxes
    36,319       17,558       101,226       76,984  
Insurance
    42,006       45,787       139,243       144,996  
Interest
    306,355       322,997       919,794       959,660  
Change in fair value of interest rate swap (Note 4)
    (1,650 )     -       75,951       -  
Depreciation and amortization
    193,785       237,562       581,324       724,589  
 
                               
Total expenses
    1,448,516       1,459,168       4,372,668       4,364,458  
 
                               
Loss from operations
    (303,734 )     (306,777 )     (994,687 )     (1,074,475 )
Income (loss) from discontinued operations (including gain on sale of property) (Note 7)
    2,259,687       (12,905 )     2,323,769       (23,751 )
 
                               
Net income (loss)
    1,955,953       (319,682 )     1,329,082       (1,098,226 )
 
                               
Net loss attributable to noncontrolling interests from operations
    239       1,226       1,696       2,835  
Net loss (income) attributable to noncontrolling interests from discontinued operations
    3,777       (3,967 )     (23,082 )     (16,976 )
 
                               
Net loss (income) attributable to noncontrolling interests
    4,016       (2,741 )     (21,386 )     (14,141 )
 
                               
Net income (loss) attributable to Independence Tax Credit Plus L.P. IV
  $ 1,959,969     $ (322,423 )   $ 1,307,696     $ (1,112,367 )
 
                               
Loss from operations – limited partners
    (300,460 )     (302,496 )     (983,061 )     (1,060,923 )
Income (Loss) from discontinued operations – limited partners
    2,240,829       (16,703 )     2,277,680       (40,320 )
 
                               
Net income (loss) – limited partners
  $ 1,940,369     $ (319,199 )   $ 1,294,619     $ (1,101,243 )
 
                               
Number of BACs outstanding
    45,844       45,844       45,844       45,844  
 
                               
Loss from operations per weighted average BAC
  $ (6.55 )   $ (6.60 )   $ (21.44 )   $ (23.14 )
Income (loss) from discontinued operations per weighted average BAC
    48.88       (0.36 )     49.68       (0.88 )
 
                               
Net income (loss) per weighted average BAC
  $ 42.33     $ (6.96 )   $ 28.24     $ (24.02 )
 
                               
 
                               
* Reclassified for comparative purposes.
                               
 
                               
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
 
 
 
 
 
- 3 -

 
 
 
 
INDEPENDENCE TAX CREDIT PLUS L.P. IV
 
AND SUBSIDIARIES
 
Condensed Consolidated Statement of Changes in Partners’ Capital (Deficit)
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Limited
 
General
 
Noncontrolling
 
 
Total
 
Partners
 
Partner
 
Interests
 
 
 
 
 
 
 
 
 
 
Partners’ capital (deficit) – April 1, 2011
$ (17,672,455 ) $ (18,028,454 ) $ (588,757 ) $ 944,756  
 
                       
Net income
  1,329,082     1,294,619     13,077     21,386  
 
                       
Distributions
  (94,153 )   -     -     (94,153 )
 
                       
Partners’ capital (deficit) – December 31, 2011
$ (16,437,526 ) $ (16,733,835 ) $ (575,680 ) $ 871,989  
 
                       
 
                       
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
 
 
 
 
 
 
 
- 4 -

 
 
 
 
 
INDEPENDENCE TAX CREDIT PLUS L.P. IV
 
AND SUBSIDIARIES
 
Condensed Consolidated Statements of Cash Flows
 
(Unaudited)
 
 
 
Nine Months Ended
 
 
 
December 31,
 
 
 
2011
   
2010
 
 
 
 
   
 
 
Cash flows from operating activities:
 
 
   
 
 
Net income (loss)
  $ 1,329,082     $ (1,098,226 )
Adjustments to reconcile net income (loss) to net cash used in operating activities:
               
Depreciation and amortization
    662,223       838,590  
Gain on sale of property
    (2,268,822 )     -  
Change in fair value of rate swap
    75,951       -  
Changes in assets and liabilities:
               
Increase in cash held in escrow
    (73,077 )     (28,957 )
Increase in other assets
    (111,728 )     (163,080 )
(Decrease) increase in accounts payable
    (89,382 )     12,703  
Increase (decrease) in accrued interest payable
    397,224       (297,504 )
Increase in security deposit payable
    328       2,772  
Increase in due from general partner and affiliates
    (33,956 )     (23,068 )
Decrease in due to local general partners and affiliates
    (39,569 )     (49,596 )
Increase in due to general partner and affiliates
    150,030       90,127  
 
               
Total adjustments
    (1,330,778 )     381,987  
 
               
Net cash used in operating activities
    (1,696 )     (716,239 )
 
               
Cash flows from investing activities:
               
Proceeds from sale of property
    212,500       -  
Decrease (increase) in cash held in escrow
    86,652       (39,283 )
Acquisition of property and equipment
    (4,149 )     (20,384 )
Net (advances) repayments from local general partners and affiliates
    (429,363 )     102,495  
 
               
Net cash (used in) provided by investing activities
    (134,360 )     42,828  
 
               
Cash flows from financing activities:
               
Repayments of mortgage notes
    (320,920 )     (1,861,658 )
Net Proceeds from refinance
    -       3,050,000  
Increase in deferred costs
    (8,116 )     (180,557 )
Distributions to noncontrolling interests
    (94,153 )     (10,833 )
 
               
Net cash (used in) provided by financing activities
    (423,189 )     996,952  
 
               
Net (decrease) increase in cash and cash equivalents
    (559,245 )     323,541  
Cash and cash equivalents at beginning of period
    1,402,683       1,176,371  
Cash and cash equivalents at end of period*
  $ 843,438     $ 1,499,912  
 
               
Summarized below are the components of the gain on sale of property:
               
Proceeds from sale of property – net
  $ (212,500 )   $ -  
Property and equipment, net of accumulated depreciation
    46,635       -  
Deferred costs
    8,116       -  
Other assets
    25,165       -  
Cash held in escrow
    99,450       -  
Accounts payable and other liabilities
    61,598       -  
Mortgage payable
    (1,977,350 )     -  
Accrued interest
    (310,308 )     -  
Security deposits
    (9,628 )     -  
 
               
* Cash and cash equivalents at end of period, includes cash and cash equivalents from discontinued operations of $68,316 and $0, respectively.
 
 
               
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
 
 
 
 
 
 
- 5 -

 
 
 
 
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
December 31, 2011
(Unaudited)
 
 
 
 
 
NOTE 1 – General
 
The condensed consolidated financial statements, as of December 31, 2011, include the accounts of Independence Tax Credit Plus L.P. IV (the “Partnership”) and twelve other limited partnerships (“subsidiary partnerships”, “subsidiaries” or “Local Partnerships”) owning affordable apartment complexes (“Properties”) that are eligible for the low-income housing tax credits.  Some of the Properties may also be eligible for the historic rehabilitation tax credits.  The general partner of the Partnership is Related Independence L.L.C., a Delaware limited liability company (the “General Partner”), which is managed by an affiliate of Centerline Holding Company (“Centerline”), the ultimate parent of the manager of the general partner of 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 Partnership to remove the general partner of the subsidiary partnerships (“Local General Partners”) and to approve certain major operating and financial decisions, the Partnership has a controlling financial interest in the subsidiary partnerships.  The Partnership is currently in the process of developing a plan to dispose of all its investments.
 
For financial reporting purposes, the Partnership’s third fiscal quarter ends December 31.  The third quarter for all subsidiaries ends September 30.  Accounts of the subsidiaries have been adjusted for intercompany transactions from October 1 through December 31.  The Partnership’s fiscal quarter ends three months after the subsidiaries 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.
 
In accordance with Accounting Standards Codification (“ASC”) Topic 810, “Consolidation” (“ASC 810”), loss (income) attributable to noncontrolling interests amounted to approximately $4,000 and $(3,000) and $(21,000) and $(14,000) for the three and nine months ended December 31, 2011 and 2010, respectively.  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 consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Partnership’s Annual Report on Form 10-K for the year ended March 31, 2011.
 
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 condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the condensed consolidated financial position of the Partnership as of December 31, 2011, the results of its operations for the three and nine months ended December 31, 2011 and 2010 and its cash flows for the nine months ended December 31,  2011 and 2010.  However, the operating results and cash flows for the nine months ended December 31, 2011 may not be indicative of the results for the entire year.
 
Property and Equipment/Valuation of Long-Lived Assets
 
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, property investments are reduced to estimated fair value (using estimated future discounted net cash flows) 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 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 is one asset classified as property and equipment-held for sale at December 31, 2011(see Note 6).
 
Use of Estimates
 
The preparation of the condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods.  Estimates are adjusted to reflect actual experience when necessary.  Significant accounting estimates reflected in the Partnership’s condensed consolidated financial statements include fair value of financial instruments and the properties and the useful lives of property and equipment.
 
 
 
 
 
 
- 6 -

 
 
 
 
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
December 31, 2011
(Unaudited)
 
 
 
 
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 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 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.
 
 
NOTE 2 – Liquidity
 
At December 31, 2011, the Partnership’s liabilities exceeded assets by $16,437,526 and for the nine months ended December 31,  2011 earned  net income of $1,329,082 (including gain on sale of property of $2,268,822). However, the Partnership has working capital reserves of approximately $379,000 at December 31, 2011.  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 year.  The Partnership’s operating expenses, excluding the Local Partnerships’ expenses and related party expenses, amounted to approximately $132,000 for the nine months ended December 31,  2011.
 
As discussed in Note 3, partnership management fees of approximately $2,316,000 will be payable out of sales or refinancing proceeds only to the extent of available funds after payments on 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.
 
The mortgage notes payable balance of $23,513,350 and the accrued interest payable balance of $6,297,620 are 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 Tax Credits if the investment is lost before the expiration of the Compliance Period.  Dispositions of any investment in a Local Partnership should not impact the future results of liquidity and financial condition of the Partnership.
 
 
NOTE 3 – Related Party Transactions
 
A)
Guarantees
 
The Partnership has Operating Deficit Guaranty Agreements with the Local Partnerships whereby the Local General Partners of such Local Partnerships and/or their affiliates agree to fund operating deficits for a specified period of time. The terms of the Operating Deficit Guaranty Agreements vary for each of these Local Partnerships, with maximum dollar amounts to be funded for a specified period of time, generally three years, commencing on the break-even date. As of December 31, 2011 and 2010, Operating Deficit Guarantees aggregate approximately $123,000 for these periods. Amounts funded under such agreements will be treated as non-interest bearing loans, which will be paid only out of 50% of available cash flow or out of available net sale or refinancing proceeds.  As of December 31, 2011 and 2010, there has been no funding under the Operating Deficit Guaranty Agreements.
 
B)
Related Party Expenses
 
An affiliate of the General Partner has a .01% interest as a special limited partner in each of the Local Partnerships.
 

 

 
 
- 7 -

 
 
 
 
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
December 31, 2011
(Unaudited)
 
 
 
 
 
The costs incurred to related parties from operations for the three and nine months ended December 31, 2011 and 2010 were as follows:
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
December 31,
 
December 31,
 
 
2011 
 
2010 *
 
2011 
 
2010 *
 
 
 
 
 
 
 
 
 
 
 
 
 
Partnership management fees (a)
 
$
 30,530 
 
$
 72,425 
 
$
 177,705 
 
$
 221,925 
Expense reimbursement (b)
 
 
 61,978 
 
 
 12,925 
 
 
 126,603 
 
 
 90,476 
Local administrative fee (c)
 
 
 8,375 
 
 
 8,125 
 
 
 25,125 
 
 
 24,375 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total general and administrative-General Partners
 
 
 100,883 
 
 
 93,475 
 
 
 329,433 
 
 
 336,776 
Property management fees incurred to affiliates of the subsidiary partnerships’ general partners
 
 
 34,396 
 
 
 42,631 
 
 
 115,367 
 
 
 114,940 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total general and administrative-related parties
 
$
 135,279 
 
$
 136,106 
 
$
 444,800 
 
$
 451,716 
 
 
 
 
 
 
 
 
 
 
 
 
 
* Reclassified for comparative purposes.
 
 
 
 
 
 
 
 
 
 
 
 
 

The costs incurred to related parties from discontinued operations for the three and nine months ended December 31, 2011 and 2010.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
December 31,
 
December 31,
 
 
2011 
 
2010 *
 
2011 
 
2010 *
 
 
 
 
 
 
 
 
 
 
 
 
 
Local administrative fee (c)
 
$
 1,625 
 
$
 1,625 
 
$
 4,875 
 
$
 4,875 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total general and administrative-General Partner
 
 
 1,625 
 
 
 1,625 
 
 
 4,875 
 
 
 4,875 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property management fees incurred to affiliates of the subsidiary partnerships' general partners
 
 
 10,980 
 
 
 10,980 
 
 
 32,940 
 
 
 32,940 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total general and administrative-related parties
 
$
 12,605 
 
$
 12,605 
 
$
 37,815 
 
$
 37,815 
 
 
 
 
 
 
 
 
 
 
 
 
 
* 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 $2,316,000 and $2,138,000 were accrued and unpaid as of December 31, 2011 and March 31, 2011, 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 $127,000 and $65,000 were accrued and unpaid as of December 31, 2011 and March 31, 2011, 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 $195,000 and $224,000 were accrued and unpaid as of December 31, 2011 and March 31, 2011, 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.
 
 
 
 
 
- 8 -

 
 
 
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
December 31, 2011
(Unaudited)
 
 
 
 
 
As of December 31, 2011 and March 31, 2011, the Partnership owed the General Partner and its affiliates approximately $191,000 and $256,000, respectively for advances made by the General Partner and its affiliates to a Local Partnership.  These advances represent historical amounts loaned in conjunction with the initial capital contributions to the Local Partnerships.  Payments of these advances have been deferred and may be paid out of operating reserves or refinancing and sales proceeds. During the nine months ended December 31, 2011, approximately $65,000 was repaid out of the sales proceeds of one Local Partnership (see Note 5). The General Partner does not intend to demand payment of the deferred advances beyond the Partnership’s ability pay them. As of December 31, 2011, the Partnership owed the General Partner and its affiliates approximately $3,000 for expenses paid on its behalf by the General Partner and its affiliates. The Partnership intends to repay this amount in the subsequent quarter.
 
C) Due to/from Local General Partners and Affiliates
 
 
 
 
 
 
 
 
 
The amounts due to Local General Partners and affiliates from operating liabilities consist of the following:
 
 
 
 
 
 
 
 
 
 
 
 
December 31,
 
March 31,
 
 
 
 
2011 
 
2011 
 
 
 
 
 
 
 
 
 
 
 
Development fee payable
 
$
 1,091,118 
 
$
 1,578,347 
 
 
Construction costs payable
 
 
 50,000 
 
 
 50,000 
 
 
Operating advances
 
 
 326,782 
 
 
 296,965 
 
 
Management and other fees
 
 
 9,324 
 
 
 23,114 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
 1,477,224 
 
$
 1,948,426 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The amounts due to Local General Partners and affiliates from discontinued liabilities consist of the following:
 
 
 
 
 
 
 
 
 
 
 
 
December 31,
 
March 31,
 
 
 
 
2011 
 
2011 
 
 
 
 
 
 
 
 
 
 
 
Development fee payable
 
$
 2,270 
 
$
 - 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
 2,270 
 
$
 - 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Due from Local General Partners and affiliates from operating assets consists of the following:
 
 
 
 
 
 
 
 
 
 
 
 
December 31,
 
March 31,
 
 
 
 
2011 
 
2011 
 
 
 
 
 
 
 
 
 
 
 
Local general partner loan receivable
 
$
508,891 
 
$
 474,935 
 


NOTE 4– 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 amount approximates fair value.
 
 
 
 
 
- 9 -

 
 
 
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
December 31, 2011
(Unaudited)
 
 
 
 
 
Mortgage Notes Payable, Accrued Interest and Interest Rate Swap Agreement
The Partnership has categorized its 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 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.
 
Mortgage Notes Payable and Accrued Interest
The estimated fair value of mortgage notes payable and accrued interest 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.
 
 
 
 
At December 31, 2011
 
At March 31, 2011
 
 
 
Carrying
 
 
 
 
Carrying
 
 
 
 
 
 
Amount
 
Fair Value
 
Amount
 
Fair Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES:
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage notes and accrued interest
 
$
 29,810,970 
 
$
 13,222,070 
 
$
 32,022,324 
 
$
 13,190,132 


Fair value for the mortgage notes has been estimated using Level 3 inputs.  Fair value for interest rate swaps has been estimated using Level 2 inputs.
 
At December 31, 2011, the fair value of the interest rate swap was an increase of the mortgage note liability and a corresponding charge to operations of approximately $76,000.
 
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.
 
Interest Rate Swap Agreement
 
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:
 
Fixed swap – notional amount
 
$
 3,050,000 
 
Fixed rate
 
 
4.65 
%
Variable rate at December 31, 2011
 
 
3.75 
%
Termination date
 
 
September 1, 2015
 


Pursuant to ASC Topic 815-10, Derivative Instruments (“ASC 815-10”), 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.
 
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.
 
 
 
 
 
- 10 -

 
 
 
 
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
December 31, 2011
(Unaudited)
 
 
 
 
 
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 unique obligations are not currently available.
 
 
NOTE 5 – Sale of Properties
 
The Partnership is currently in the process of developing a plan to dispose of all its investments.  It is anticipated that this process will continue to take a number of years.  During the nine months ended December 31, 2011, the Partnership sold its limited partnership interest in one Local Partnership. Through December 31, 2011, the Partnership’s limited partnership interest in two Local Partnerships and the property and the related assets and liabilities of one Local Partnership have been sold. In addition, as of December 31, 2011, one Local Partnership has entered into an agreement to sell its property and the related assets and liabilities (see Note 6). 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.
 
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. During the year ended March 31, 2011, in accordance with ASC 360, the Partnership deemed this property impaired and wrote it down to its fair value, which resulted in a loss on impairment of $17,000.
 
 
NOTE 6 – Assets Held for Sale
 
On August 29, 2011, New Zion Apartments Limited Partnership (“New Zion”) entered into a purchase and sale agreement to sell the property and the related assets and liabilities to an unaffiliated third party purchaser for a sales price of $2,450,000. The sale is expected to be consummated during the first quarter of 2012. As of December 31, 2011, New Zion had property and equipment, at cost, of approximately $2,791,000, accumulated depreciation of approximately $1,478,000 and mortgage debt of approximately $581,000. There can be no assurance of the timing of such sale or that the sale will be consummated.
 
 
 
 
 
 
 
 
 
 
 
 
- 11 -

 
 
 
 
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
December 31, 2011
(Unaudited)
 
 
 
 
 
NOTE 7 – 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 December 31, 2011, Sojourner Douglass which was sold during the nine months ended December 31, 2011 and New Zion, which was classified as an asset held for sale, were classified as discontinued operations on the consolidated balance sheets.  As of March 31, 2011, there were no assets classified as discontinued operations on the consolidated balance sheets.
 
Consolidated Balance Sheets:
 
 
 
December 31,
   
March 31,
 
 
 
2011
    2011*  
 
 
 
         
Assets
 
 
         
Property and equipment – less accumulated depreciation of $1,508,513 and $2,688,543, respectively
  $ 1,359,012     $ 1,485,998  
Cash and cash equivalents
    68,316       130,320  
Cash held in escrow
    311,307       379,747  
Deferred costs, net of accumulated amortization of $0 and $10,132, respectively
    -       8,116  
Other assets
    19,068       21,131  
Total assets
  $ 1,757,703     $ 2,025,312  
 
               
Liabilities
               
Mortgage notes payable
  $ 580,941     $ 2,608,055  
Accounts payable
    9,810       55,941  
Accrued interest payable
    5,679       297,020  
Security deposit payable
    13,143       23,182  
Due to Local general partners and affiliates
    2,270       460,455  
Due to general partners and affiliates
    199,070       295,473  
Total liabilities
  $ 810,913     $ 3,740,126  
 
               
* The balances as of March 31, 2011 above have been presented for comparative purposes and are not classified separately on the balance sheet as discontinued operations.
 
 
 
 
 
 
 
 

 
 
- 12 -

 
 
 
 
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
December 31, 2011
(Unaudited)
 
 
 
 
 
The following table summarizes the results of operations of the Local Partnerships that are classified as discontinued operations.  For the three and nine months ended December 31, 2011, Sojourner Douglass, which was sold during the nine months ended December 31, 2011 and New Zion, which was classified as asset held for sale, were classified as discontinued operations in the consolidated financial statements.  For the three and nine months ended December 31, 2010, Sojourner Douglass and New Zion, in order to present comparable results to the three and the nine months ended December 31, 2011, were classified as discontinued operations in the consolidated financial statements.
 
Consolidated Statements of Discontinued Operations:
 
 
 
Three Months Ended
   
Nine Months Ended
 
 
 
December 31,
   
December 31,
 
 
 
2011
    2010* *   2011     2010*  
 
 
 
                         
Revenues
 
 
                         
 
 
 
                         
Rental income
  $ 155,679     $ 197,564     $ 613,498     $ 604,801  
Other
    6,385       4,054       17,762       13,034  
 
                               
Total revenue
    162,064       201,618       631,260       617,835  
 
                               
Expenses
                               
General and administrative
    60,879       63,345       192,906       212,235  
General and administrative-related parties (Note 3)
    12,605       12,605       37,815       37,815  
Repairs and maintenance
    14,680       38,184       88,191       93,437  
Operating and other
    27,527       31,040       83,045       87,206  
Real estate taxes
    3,670       4,291       11,208       11,819  
Insurance
    10,068       10,115       30,360       30,470  
Interest
    15,215       16,836       51,889       54,603  
Depreciation and amortization
    26,555       38,107       80,899       114,001  
 
                               
Total expenses
    171,199       214,523       576,313       641,586  
 
                               
(Loss) income from discontinued operations
    (9,135 )     (12,905 )     54,947       (23,751 )
 
                               
Gain on sale of property  (Note 5)
    2,268,822       -       2,268,822       -  
Noncontrolling interest in loss (income) of subsidiaries from discontinued operations
    3,777       (3,967 )     (23,082 )     (16,976 )
 
                               
Income (loss) from discontinued operations – Independence Tax Credit Plus IV
  $ 2,263,464     $ (16,872 )   $ 2,300,687     $ (40,727 )
 
                               
Income (loss) from discontinued operations – limited partners
  $ 2,240,829     $ (16,703 )   $ 2,277,680     $ (40,320 )
 
                               
Number of BACs outstanding
    45,844       45,844       45,844       45,844  
 
                               
Income (loss) from discontinued operations per weighted average BAC
  $ 48.88     $ (0.36 )   $ 49.68     $ (0.88 )
 
                               
* Reclassified for comparative purpose.
                               
 
 
 
 
 

 
 
- 13 -

 
 
 
 
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
December 31, 2011
(Unaudited)
 
 
 
 
 

Cash Flows from Discontinued Operations:
 
 
   
 
 
 
 
 
   
 
 
 
 
Nine Months Ended
 
 
 
December 31,
 
 
 
2011
    2010*  
 
 
 
         
Net cash provided by operating activities
  $ 273,843     $ 13,102  
 
               
Net cash (used in) provided by investing activities
  $ (277,967 )   $ 17,068  
 
               
Net cash used in financing activities
  $ (57,880 )   $ (47,325 )
 
               
* Reclassified for comparative purposes.
               


NOTE 8 – Commitments and Contingencies
 
There have been no material changes and/or additions to the disclosures regarding the subsidiary partnerships which were included in the Partnership’s Annual Report on Form 10-K for the fiscal year ended March 31, 2011.
 
a)
Property Management Fees
 
The Local Partnerships have entered into management agreements with ten managing agents to manage the Partnership's eleven properties.  Of these, six managing agents are affiliates of the Local General Partner for six properties.  The base management fee percentage ranges between 5% and 10% of all rents collected, and the management agreement for one of the properties provides for a monthly payment of $2,024. Property management fees incurred by the Local Partnerships amounted to $84,097 and $85,539 and $261,092 and $251,966 for the three and nine months ended December 31, 2011 and 2010, respectively.  Of these fees, $45,376 and $53,611 and $148,307 and $147,880 were incurred to the Local General Partners for the three and nine months ended December 31, 2011 and 2010, respectively, which include $10,980 and $10,980 and $32,940 and $32,940 of fees relating to discontinued operations for the three and nine months ended December 31, 2011 and 2010, respectively.
 
b)
Other
 
The Partnership is subject to risks incident to potential losses arising from the management and ownership of real estate.  The Partnership can also be affected by poor economic conditions generally; however no more than 18% of the properties are located in any single state.  The properties are concentrated in New Jersey (18%), Kentucky (18%) and California (18%). There are also substantial risks associated with owning properties receiving government assistance, for example the possibility that Congress may not appropriate funds to enable the U.S. Department of Housing and Urban Development (“HUD”) to make rental assistance payments. HUD also restricts annual cash distributions to partners based on operating results and a percentage of the owners’ equity contribution.  As of December 31, 2011,  there were three Local Partnerships subsidized by HUD.  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 contract expires.
 
The Partnership and BACs holders began to recognize Tax Credits with respect to a Property when the Credit Period for such Property commenced.  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 fifteen year compliance period (“Compliance Period”) in order to avoid recapture of the Tax Credits.  The Compliance Periods will continue through December 31, 2015 with respect to the remaining Properties depending upon when the Compliance Period commenced.
 
Except as described above, 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 not be affected. However, the geographic diversification of the portfolio may not protect against a general downturn in the national economy.
 
 
 
 
 
 
- 14 -

 
 
 
 
 
Item 2.  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 net proceeds in fourteen Local Partnerships of which, as of December 31, 2011, approximately $151,000 remains to be paid to the Local Partnerships (including approximately $123,000 being held in escrow) as certain benchmarks, such as occupancy level, must be attained prior to the release of the funds.  During the nine months ended December 31, 2011, payments of approximately $641,000 were made to the Local Partnerships.  The Partnership does not anticipate acquiring additional properties. During the nine months ended December 31, 2011, the Partnership sold its limited partnership interest in one Local Partnership. Through December 31, 2011, the Partnership’s limited partnership interest in two Local Partnerships and the property and the related assets and liabilities of one Local Partnership have been sold. In addition, as of December 31, 2011, one Local Partnership has entered into an agreement to sell its property and the related assets and liabilities (see Note 6 in Item 1).
 
Short-Term
 
The Partnership’s primary sources of funds include:  (i) working capital reserves, exclusive of Local Partnerships’ 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 nine months ended December 31, 2011, and 2010, distributions from operations of the Local Partnerships amounted to approximately $17,000 and $2,000, respectively. In addition, during the nine months ended December 31, 2011 and 2010, distributions to the Partnership from sales proceeds amounted to approximately $213,000 and $0, respectively. The Partnership does not anticipate providing cash distributions to BACs holders in circumstances other than refinancing or sales.
 
 For the nine months ended December 31, 2011, cash and cash equivalents of the Partnership and its consolidated Local Partnerships decreased approximately $559,000.  This decrease was due to net cash  used in operating activities of approximately $2,000, acquisition of property and equipment of approximately $4,000, repayment of mortgage notes of approximately $321,000, net advances to local general partners and affiliates of approximately $429,000, increase in deferred costs of approximately $8,000 and distributions to noncontrolling interests of approximately $94,000, which exceeded  net proceeds from sale of property of approximately $213,000 and a decrease in cash held in escrow relating to investing activities of approximately $87,000.  Included in the adjustments to reconcile the net income to net cash used in operating activities is depreciation and amortization in the amount of approximately $662,000, gain on sale of property of approximately $2,269,000 and a change from interest rate swap of approximately $76,000.
 
Total expenses from operations for the three and nine months ended December 31, 2011, and 2010, excluding depreciation and amortization, interest, unrealized loss on interest rate swap and general and administrative-related parties, totaled $814,747 and $762,503 and $2,350,799 and $2,228,493, respectively.
 
Accounts payable totaled $397,853 and $443,014 as of December 31, 2011, and March 31, 2011, 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 $9,810 and $0 as of December 31, 2011 and March 31, 2011, respectively. Accrued interest payable as of December 31, 2011, and March 31, 2011 was $6,291,941 and $6,210,704, respectively.  Accrued interest payable represents the accrued interest on all mortgage notes, which include primary and secondary notes. Certain secondary notes have provisions such that interest is accrued but not payable until a future date. Accrued interest payable from discontinued operations totaled $5,679 and $0 as of December 31, 2011 and March 31, 2011, respectively. The Partnership anticipates the payment of accrued interest on the secondary notes (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 Partnership) will be made from future refinancing 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 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 not including fees owed to the General Partner.  Assuming the General Partner continues to defer the payment of fees as discussed below and in Note 3 to the Financial Statements, the Partnership 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.
 
Security deposits payable are offset by cash held in security deposits, which are included in “Cash held in escrow” on the financial statements.
 
At December 31, 2011, the Partnership has approximately $379,000 in working capital reserves.  The General Partner believes that these reserves, plus any cash distributions received from the operations of the Local Partnerships, will be sufficient to fund the Partnership’s ongoing operations for the foreseeable future not including fees owed to the General Partner.
 
The Partnership has Operating Deficit Guaranty Agreements with the Local Partnerships by which the general partners of such Local Partnerships and/or their affiliates agree to fund operating deficits for a specified period of time. The terms of the Operating Deficit Guaranty Agreements vary for each of these Local Partnerships, with maximum dollar amounts to be funded for a specified period of time, generally three years, commencing on the break-even date.  As of December 31, 2011, and 2010, the gross amount of the Operating Deficit Guarantees aggregate approximately $123,000 for these periods.  As of December 31, 2011, and 2010, no amounts have been funded under the Operating Deficit Guaranty Agreements.  Amounts funded under such agreements will be treated as non-interest bearing loans, which will be paid only out of 50% of available cash flow or out of available net sale or refinancing proceeds.
 
 
 
 
 
 
- 15 -

 
 
 
 
Long-Term
 
Partnership management fees owed to the General Partner amounting to approximately $2,316,000 and $2,138,000 were accrued and unpaid as of December 31, 2011, and March 31, 2011, respectively, and are included in the line item Due to general partners and affiliates in the condensed 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 to those owed to the General Partner and its affiliates.
 
All other payables are expected to be paid, if at all, from working capital reserves.  See Note 3 in Item 1 for further discussion of amounts due to the General Partner and its affiliates.  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 consideration is discussed in Note 2 in Item 1.
 
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, 2010, the Credit Periods have expired.  However, each Local Partnership must continue to comply with the Tax Credit requirements until the end of the Compliance Period, which is December 31, 2015, in order to avoid recapture of the Tax Credits.
 
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, 2011, 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 December 31, 2011.
 
Critical Accounting Policies and Estimates
 
In preparing the unaudited condensed 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 in Note 1 in Item 1 is the summary of the accounting policies that management believes are critical to the preparation of the condensed 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 which are included in the Partnership’s Annual Report on Form 10-K for the year ended March 31, 2011.
 
Results of Operations
 
The results of operations for the three and nine months ended December 31, 2011, and 2010, continued to be primarily in the form of rental income with corresponding operating expenses, depreciation and mortgage interest.  The following discussion excludes the Partnership’s results of its discontinued operations, which are not reflected below.
 
Rental income increased approximately 6% and 5% for the three and nine months ended December 31, 2011, as compared to the corresponding periods in 2010, primarily due to an increase in tenant assistance payments at two Local Partnerships and an increase in occupancies at two other Local Partnerships.
 
Other income decreased approximately $69,000 and $67,000 for the three and nine months ended December 31, 2011, as compared to the corresponding periods in 2010, primarily due to a settlement received from a class action suit at one Local Partnership in the prior year and a decrease in other income at a second Local Partnership.
 
Total expenses, excluding repairs and maintenance, taxes, depreciation and amortization and unrealized loss on interest rate swap remained fairly consistent, with a decrease of approximately 3% and less than 1% for the three and nine months ended December 31, 2011 as compared to the corresponding periods in 2010.
 
Repairs and maintenance expense increased approximately $47,000 and $79,000 for the three and nine months ended December 31, 2011 as compared to the corresponding periods in 2010, primarily due to increases in painting, decorating and monitoring and protection service upgrades at one Local Partnership, an increase in repairs contract and materials at a second Local Partnership and an increase in appliance replacement and flooring at a third Local Partnership.
 
 
 
 
 
 
- 16 -

 
 
 
 
Taxes  increased approximately $19,000 and $24,000 for the three and nine months ended December 31, 2011 as compared to the corresponding periods in 2010, primarily due to the write off of excess PILOT tax expense accruals from previous years at one Local Partnership.
 
Depreciation and amortization decreased approximately $44,000 and $143,000 for the three and nine months ended December 31, 2011 as compared to the corresponding periods in 2010, primarily due to the reduction in carrying amounts relating to impairment of assets recorded during the year ended March 31, 2011 at six Local Partnerships.
 
Unrealized loss on interest rate swap decreased for approximately $(2,000) and increased for $76,000 for the three and nine months ended December 31, 2011 as compared to the corresponding periods in 2010, primarily due to the change in fair value of the interest rate swap agreement at one Local Partnership.
 
 
Item 4.  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)           Changes in Internal Controls over Financial Reporting.  During the period ended December 31, 2011, 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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
- 17 -

 
 
 
 
 
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.
(Removed and Reserved)
 
 
 
Item 5.
Other Information. – None
 
 
 
Item 6.
Exhibits.
 
 
 
 
(4)
Form of Amended and Restated Agreement of Limited Partnership of the Partnership (attached to the Prospectus as Exhibit A)*
 
 
 
 
(10A)
Form of Subscription Agreement (attached to the Prospectus as Exhibit B)*
 
 
 
 
(10B)
Form of Escrow Agreement between the Partnership and the Escrow Agent**
 
 
 
 
(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)+
 
 
 
 
(32.2)+
 
 
 
 
*
Incorporated herein by reference to the final Prospectus as filed pursuant to Rule 424 under the Securities Act of 1933.
 
 
 
 
**
Filed as an exhibit to the Registration Statement on Form S-11 of the Partnership (File No. 33-89968) and incorporated herein by reference thereto.
 
 
 
 
+
Filed herewith.
 
 
 
 
 
 
- 18 -

 
 
 
 
SIGNATURES



Pursuant to the requirements 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)



     
By:
RELATED INDEPENDENCE L.L.C.,
       
a General Partner
             
             
             
Date:
February 13, 2012
     
By:
/s/ Robert A. Pace
 
           
Robert A. Pace
 
           
Chief Financial Officer and Principal Accounting Officer
               
               
               
Date:
February  13, 2012
     
By:
/s/ Robert  L. Levy
 
           
Robert L. Levy
 
           
President and Chief Executive Officer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
- 19 -