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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended December 31, 2012

 

OR

 

[  ]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: 333-107181

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 12

 

California   72-1566910
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

 

17782 Sky Park Circle, Irvine, CA 92614

(Address of principle executive offices)

(714) 622-5565

(Telephone Number)

 

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 [X] 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 [X] 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. (Check one):

 

Large accelerated filer [  ]      Accelerated filer [  ]      Non-accelerated filer [X]      Smaller reporting company [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes [  ] No [X]

 

 

  

 
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 12

(A California Limited Partnership)

INDEX TO FORM 10-Q

For the quarterly period ended December 31, 2012

 

PART I. FINANCIAL INFORMATION
 
  Item 1. Financial Statements  
       
    Condensed Balance Sheets As of December 31, 2012, and March 31, 2012 F-1
       
    Condensed Statements of Operations For the Three and Nine Months Ended December 31, 2012 and 2011 F-2
       
    Condensed Statement of Partners’ Equity (Deficit) For the Nine Months Ended December 31, 2012 F-3
       
    Condensed Statements of Cash Flows For the Nine Months Ended December 31, 2012 and 2011 F-4
       
    Notes to Condensed Financial Statements F-5
       
  Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 3
       
  Item 3. Quantitative and Qualitative Disclosures about Market Risks 6
       
  Item 4. Controls and Procedures 6
       
PART II. OTHER INFORMATION
 
  Item 1. Legal Proceedings 7
       
  Item 1A. Risk Factors 7
       
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 7
       
  Item 3. Defaults Upon Senior Securities 7
       
  Item 4. Mine Safety Disclosures 7
       
  Item 5. Other Information 7
       
  Item 6. Exhibits 7
       
  Signatures   8

 

2
 

  

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 12

(A California Limited Partnership)

 

CONDENSED BALANCE SHEETS

(Unaudited)

 

   December 31, 2012   March 31, 2012 
ASSETS
           
Cash and cash equivalents  $1,208,802   $929,947 
Investments in Local Limited Partnerships, net (Notes 2 and 3)   4,676,431    5,944,076 
           
Total Assets  $5,885,233   $6,874,023 
           
LIABILITIES AND PARTNERS’ EQUITY (DEFICIT)
           
Liabilities:          
Payables to Local Limited Partnerships (Note 4)  $624,895   $624,895 
Accrued fees and expenses due to General Partner and affiliates (Note 3)   1,031,535    850,692 
           
Total Liabilities   1,656,430    1,475,587 
           
Partners’ Equity (Deficit):          
General Partner   (8,775)   (7,605)
Limited Partners (25,000 Partnership Units authorized; 15,019 Partnership Units issued and outstanding)   4,237,578    5,406,041 
           
Total Partners’ Equity (Deficit)   4,228,803    5,398,436 
           
Total Liabilities and Partners’ Equity (Deficit)  $5,885,233   $6,874,023 

 

See accompanying notes to condensed financial statements

  

F-1
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 12

(A California Limited Partnership)

 

CONDENSED STATEMENTS OF OPERATIONS

For the Three and Nine Months Ended December 31, 2012 and 2011

(Unaudited)

 

   2012   2011 
   Three   Nine   Three   Nine 
   Months   Months   Months   Months 
                 
Reporting fees  $-   $16,860   $-   $4,542 
                     
Operating expenses and loss:                    
Amortization (Note 2)   4,694    19,439    10,212    32,741 
Asset management fees (Note 3)   39,316    121,892    41,682    125,046 
Outsourcing expenses   2,052    17,166    2,228    6,434 
Accounting and legal fees   37,704    75,123    48,925    172,248 
Impairment loss (Note 2)   -    738,270    -    461,442 
Other   3,671    6,867    6,287    10,958 
                     
Total operating expenses and loss   87,437    978,757    109,334    808,869 
                     
Loss from operations   (87,437)   (961,897)   (109,334)   (804,327)
                     
Equity in losses of Local Limited Partnerships (Note 2)   (167,463)   (502,389)   (177,801)   (615,794)
                     
Gain on sale of Local Limited Partnership   -    293,999    -    - 
                     
Interest income   218    654    308    939 
                     
Net loss  $(254,682)  $(1,169,633)  $(286,827)  $(1,419,182)
                     
Net loss allocated to:                     
General Partner  $(255)  $(1,170)  $(287)  $(1,419)
                     
Limited Partners  $(254,427)  $(1,168,463)  $(286,540)  $(1,417,763)
                     
Net loss per Partnership Unit  $(17)  $(78)  $(19)  $(94)
                     
Outstanding weighted Partnership Units   15,019    15,019    15,019    15,019 

 

See accompanying notes to condensed financial statements

  

F-2
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 12

(A California Limited Partnership)

 

CONDENSED STATEMENT OF PARTNERS’ EQUITY (DEFICIT)

For the Nine Months Ended December 31, 2012

(Unaudited)

 

   General   Limited     
   Partner   Partners   Total 
             
Partners’ equity (deficit) at March 31, 2012  $(7,605)  $5,406,041   $5,398,436 
                
Net loss   (1,170)   (1,168,463)   (1,169,633)
                
Partners’ equity (deficit) at December 31, 2012  $(8,775)  $4,237,578   $4,228,803 

 

See accompanying notes to condensed financial statements

 

F-3
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 12

(A California Limited Partnership)

 

CONDENSED STATEMENTS OF CASH FLOWS

For the Nine Months Ended December 31, 2012 and 2011

(Unaudited)

 

   2012   2011 
Cash flows from operating activities:          
           
Net loss  $(1,169,633)  $(1,419,182)
Adjustments to reconcile net loss to net cash used in operating activities:          
Gain on sale of Local Limited Partnerships   (293,999)   - 
Amortization   19,439    32,741 
Impairment loss   738,270    461,442 
Equity in losses of Local Limited Partnerships   502,389    615,794 
Increase in accrued fees and expenses due to General Partner and affiliates   180,843    156,292 
           
Net cash used in operating activities   (22,691)   (152,913)
           
Cash flows from investing activities:          
Net proceeds from sale of Local Limited Partnerships   293,999    - 
Distributions received from Local Limited Partnerships   7,547    6,323 
           
Net cash provided by investing activities   301,546    6,323 
           
Net increase (decrease) in cash and cash equivalents   278,855    (146,590)
           
Cash and cash equivalents, beginning of period   929,947    1,139,693 
           
Cash and cash equivalents, end of period  $1,208,802   $993,103 
           
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:          
Taxes paid  $-   $- 

 

See accompanying notes to condensed financial statements

  

F-4
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 12

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS

For the Quarterly Period Ended December 31, 2012

(Unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

General

 

The accompanying condensed unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q for quarterly reports under Section 13 or 15(d) of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended December 31, 2012 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2013. For further information, refer to the financial statements and footnotes thereto included in the Partnership’s annual report on Form 10-K for the fiscal year ended March 31, 2012.

 

Organization

 

WNC Housing Tax Credit Fund VI, L.P., Series 12 (the “Partnership”) is a California Limited Partnership formed under the laws of the State of California on July 17, 2003, and commenced operations on January 21, 2005. The Partnership was formed to acquire limited partnership interests in other limited partnerships (“Local Limited Partnerships”) which own multi-family housing complexes (“Housing Complexes”) that are eligible for Federal low income housing tax credits (“Low Income Housing Tax Credits”). The local general partners (the “Local General Partners”) of each Local Limited Partnership retain responsibility for maintaining, operating and managing the Housing Complex. Each Local Limited Partnership is governed by its agreement of limited partnership (the “Local Limited Partnership Agreement”).

 

The general partner of the Partnership is WNC National Partners, LLC. (the “General Partner”). The general partner of the General Partner is WNC & Associates, Inc. (“Associates”). The chairman and the president of Associates own all of the outstanding stock of Associates. The business of the Partnership is conducted primarily through Associates as the General Partner and the Partnership have no employees of their own.

 

The Partnership shall continue in full force and effect until December 31, 2065, unless terminated prior to that date, pursuant to the partnership agreement or law.

 

The financial statements include only activity relating to the business of the Partnership, and do not give effect to any assets that the partners may have outside of their interests in the Partnership, or to any obligations, including income taxes, of the partners.

 

The Partnership Agreement authorized the sale of up to 25,000 units of limited partnership interest (“Partnership Units”) at $1,000 per Partnership Unit. The offering of Partnership Units has concluded, and 15,019 Partnership Units representing subscriptions in the amount of $15,009,365, net of dealer discounts of $5,600 and volume discounts of $4,035, had been accepted. The General Partner has a 0.1% interest in operating profits and losses, taxable income and losses, cash available for distribution from the Partnership and Low Income Housing Tax Credits of the Partnership. The investors (the “Limited Partners”) in the Partnership will be allocated the remaining 99.9% of these items in proportion to their respective investments.

  

F-5
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 12

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED

For the Quarterly Period Ended December 31, 2012

(Unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

The proceeds from the disposition of any of the Housing Complexes will be used first to pay debts and other obligations per the respective Local Limited Partnership Agreement. Any remaining proceeds will then be paid to the Partnership. The sale of a Housing Complex may be subject to other restrictions and obligations. Accordingly, there can be no assurance that a Local Limited Partnership will be able to sell its Housing Complex. Even if it does so, there can be no assurance that any significant amounts of cash will be distributed to the Partnership. Should such distributions occur, the Limited Partners will be entitled to receive distributions from the proceeds remaining after payment of Partnership obligations and funding reserves, equal to their capital contributions and their return on investment (as defined in the partnership agreement). The General Partner would then be entitled to receive proceeds equal to its capital contributions from the remainder. Any additional sale or refinancing proceeds will be distributed 90% to the Limited Partners (in proportion to their respective investments) and 10% to the General Partner.

 

Risks and Uncertainties

 

An investment in the Partnership and the Partnership’s investments in Local Limited Partnerships and their Housing Complexes are subject to risks. These risks may impact the tax benefits of an investment in the Partnership, and the amount of proceeds available for distribution to the Limited Partners, if any, on liquidation of the Partnership’s investments. Some of those risks include the following:

 

The Low Income Housing Tax Credits rules are extremely complicated. Noncompliance with these rules results in the loss of future Low Income Housing Tax Credits and the fractional recapture of Low Income Housing Tax Credits already taken. In most cases the annual amount of Low Income Housing Tax Credits that an individual can use is limited to the tax liability due on the person’s last $25,000 of taxable income. The Local Limited Partnerships may be unable to sell the Housing Complexes at a price which would result in the Partnership realizing cash distributions or proceeds from the transaction. Accordingly, the Partnership may be unable to distribute any cash to its Limited Partners. Low Income Housing Tax Credits may be the only benefit from an investment in the Partnership.

 

The Partnership has invested in a limited number of Local Limited Partnerships. Such limited diversity means that the results of operation of each single Housing Complex will have a greater impact on the Partnership. With limited diversity, poor performance of one Housing Complex could impair the Partnership’s ability to satisfy its investment objectives. Each Housing Complex is subject to mortgage indebtedness. If a Local Limited Partnership failed to pay its mortgage, it could lose its Housing Complex in foreclosure. If foreclosure were to occur during the first 15 years (the “Compliance Period”), the loss of any remaining future Low Income Housing Tax Credits, a fractional recapture of prior Low Income Housing Tax Credits, and a loss of the Partnership’s investment in the Housing Complex would occur. The Partnership is a limited partner or a non-managing member of each Local Limited Partnership. Accordingly, the Partnership will have very limited rights with respect to management of the Local Limited Partnerships. The Partnership will rely totally on the Local General Partners. Neither the Partnership’s investments in Local Limited Partnerships, nor the Local Limited Partnerships’ investments in Housing Complexes, are readily marketable. To the extent the Housing Complexes receive government financing or operating subsidies, they may be subject to one or more of the following risks: difficulties in obtaining tenants for the Housing Complexes; difficulties in obtaining rent increases; limitations on cash distributions; limitations on sales or refinancing of Housing Complexes; limitations on transfers of interests in Local Limited Partnerships; limitations on removal of Local General Partners; limitations on subsidy programs; and possible changes in applicable regulations. Uninsured casualties could result in loss of property and Low Income Housing Tax Credits and recapture of Low Income Housing Tax Credits previously taken. The value of real estate is subject to risks from fluctuating economic conditions, including employment rates, inflation, tax, environmental, land use and zoning policies, supply and demand of similar properties, and neighborhood conditions, among others.

  

F-6
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 12

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED

For the Quarterly Period Ended December 31, 2012

(Unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

The ability of Limited Partners to claim tax losses from the Partnership is limited. The IRS may audit the Partnership or a Local Limited Partnership and challenge the tax treatment of tax items. The amount of Low Income Housing Tax Credits and tax losses allocable to the limited partners could be reduced if the IRS were successful in such a challenge. The alternative minimum tax could reduce tax benefits from an investment in the Partnership. Changes in tax laws could also impact the tax benefits from an investment in the Partnership and/or the value of the Housing Complexes.

 

The Partnership currently has insufficient working capital to fund its operations. Associates has agreed to continue providing advances sufficient enough to fund the operations and working capital requirements of the Partnership through February 28, 2014.

 

Anticipated future and existing cash resources of the Partnership are not sufficient to pay existing liabilities of the Partnership. However, substantially all of the existing liabilities of the Partnership are payable to the General Partner and/or its affiliates. Though the amounts payable to the General Partner and/or its affiliates are contractually currently payable, the Partnership anticipates that the General Partner and/or its affiliates will not require the payment of these contractual obligations until capital reserves are in excess of the aggregate of then existing contractual obligations and then anticipated future foreseeable obligations of the Partnership. The Partnership would be adversely affected should the General Partner and/or its affiliates demand current payment of the existing contractual obligations and or suspend services for this or any other reason.

 

No trading market for the Partnership Units exists or is expected to develop. Limited Partners may be unable to sell their Partnership Units except at a discount and should consider their Partnership Units to be a long-term investment. Individual Limited Partners will have no recourse if they disagree with actions authorized by a vote of the majority of Limited Partners.

 

Exit Strategy

 

The Compliance Period for a Housing Complex is generally 15 years following construction or rehabilitation completion. Associates was one of the first in the industry to offer syndicated investments in Low Income Housing Tax Credits. The initial programs have completed their Compliance Periods.

 

Upon the sale of a Local Limited Partnership interest or Housing Complex after the end of the Compliance Period, there would be no recapture of Low Income Housing Tax Credits. A sale prior to the end of the Compliance Period could result in recapture if certain conditions are not met. None of the Housing Complexes have completed their 15-year Compliance Period.

 

With that in mind, the General Partner is continuing its review of the Housing Complexes. The review considers many factors, including extended use requirements (such as those due to mortgage restrictions or state compliance agreements), the condition of the Housing Complexes, and the tax consequences to the Limited Partners from the sale of the Housing Complexes.

 

Upon identifying those Housing Complexes with the highest potential for a successful sale, refinancing or re-syndication, the Partnership expects to proceed with efforts to liquidate them. The objective is to maximize the Limited Partners’ return wherever possible and, ultimately, to wind down the Partnership as Low Income Housing Tax Credits are no longer available. Local Limited Partnership interests may be disposed of any time by the General Partner in its discretion. While liquidation of the Housing Complexes continues to be evaluated, the dissolution of the Partnership was not imminent as of December 31, 2012.

 

During the nine months ended December 31, 2012, the Local Limited Partnership Interest in Saltgrass Landing Apartments, LTD (“Saltgrass”) was sold to an unrelated third party for $294,646. Saltgrass was appraised for $260,000 and had a mortgage note balance of $1,219,501 as of December 31, 2011. The Partnership has incurred $647 in sales related expenses which were netted against the proceeds from the sale in calculating the gain on sale. The Partnership reinvests the net sales proceeds in Local Limited Partnerships so the Limited Partners can receive additional Low Income Housing Tax Credits (LIHTCs). Since Saltgrass never delivered its LIHTCs there is no risk of recapture, but the Partnership’s intent is to acquire additional credits for the Limited Partners. See Note 2 below for a full description of the issues related to Saltgrass.

  

F-7
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 12

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED

For the Quarterly Period Ended December 31, 2012

(Unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

Method of Accounting for Investments in Local Limited Partnerships

 

The Partnership accounts for its investments in Local Limited Partnerships using the equity method of accounting, whereby the Partnership adjusts its investment balance for its share of the Local Limited Partnerships’ results of operations and for any contributions made and distributions received. The Partnership reviews the carrying amount of an individual investment in a Local Limited Partnership for possible impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of such investment may not be recoverable. Recoverability of such investment is measured by the estimated value derived by management, generally consisting of the sum of the remaining future Low Income Housing Tax Credits estimated to be allocable to the Partnership and the estimated residual value to the Partnership. If an investment is considered to be impaired,, the Partnership reduces the carrying value of its investment in any such Local Limited Partnership. The accounting policies of the Local Limited Partnerships, generally, are expected to be consistent with those of the Partnership. Costs incurred by the Partnership in acquiring the investments were capitalized as part of the investment and were being amortized over 27.5 years (see Note 2).

 

“Equity in losses of Local Limited Partnerships” for each of the periods ended December 31, 2012 and 2011 has been recorded by the Partnership. Management’s estimate for the three and nine month periods is based on either actual unaudited results reported by the Local Limited Partnerships or historical trends in the operations of the Local Limited Partnerships. Equity in losses from the Local Limited Partnerships allocated to the Partnership are not recognized to the extent that the investment balance would be adjusted below zero. If the Local Limited Partnerships report net income in future years, the Partnership will resume applying the equity method only after its share of such net income equals the share of net losses not recognized during the period(s) the equity method was suspended (see Note 2).

 

In accordance with the accounting guidance for the consolidation of variable interest entities, the Partnership determines when it should include the assets, liabilities, and activities of a variable interest entity (VIE) in its financial statements, and when it should disclose information about its relationship with a VIE. The analysis that must be performed to determine which entity should consolidate a VIE focuses on control and economic factors. A VIE is a legal structure used to conduct activities or hold assets, which must be consolidated by a company if it is the primary beneficiary because it has (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses or receive benefits that could potentially be significant to the VIE. If multiple unrelated parties share such power, as defined, no party will be required to consolidate the VIE. Further, the guidance requires continual reconsideration of the primary beneficiary of a VIE.

 

Based on this guidance, the Local Limited Partnerships in which the Partnership invests meet the definition of a VIE because the owners of the equity at risk in these entities do not have the power to direct their operations. However, management does not consolidate the Partnership’s interests in these VIEs, as it is not considered to be the primary beneficiary since it does not have the power to direct the activities that are considered most significant to the economic performance of these entities. The Partnership currently records the amount of its investment in these Local Limited Partnerships as an asset on its balance sheets, recognizes its share of partnership income or losses in the statements of operations, and discloses how it accounts for material types of these investments in its financial statements. The Partnership’s balance in investment in Local Limited Partnerships, plus the risk of recapture of tax credits previously recognized on these investments, represents its maximum exposure to loss. The Partnership’s exposure to loss on these Local Limited Partnerships is mitigated by the condition and financial performance of the underlying Housing Complexes as well as the strength of the Local General Partners and their guarantee against credit recapture to the investors in the Partnership.

 

Distributions received by the Partnership are accounted for as a reduction of the investment balance. Distributions received after the investment has reached zero are recognized as distribution income. As of December 31, 2012 two investment accounts in Local Limited Partnerships had reached a zero balance.

  

F-8
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 12

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED

For the Quarterly Period Ended December 31, 2012

(Unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.

 

Cash and Cash Equivalents

 

The Partnership considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. As of December 31, 2012, and March 31, 2012, the Partnership had cash equivalents of approximately $911,725 and $927,517, respectively.

 

Concentration of Credit Risk

 

For all periods presented, the Partnership maintained cash and cash equivalent balances at certain financial institutions in excess of the federally insured maximum. The Partnership believes it is not exposed to any significant financial risk on cash and cash equivalents.

 

Reporting Comprehensive Income

 

The Partnership had no items of other comprehensive income for all periods presented.

 

Income Taxes

 

The Partnership has elected to be treated as a pass-through entity for income tax purposes and, as such, is not subject to income taxes. Rather, all items of taxable income, deductions and tax credits are passed through to and are reported by its owners on their respective income tax returns. The Partnership’s federal tax status as a pass-through entity is based on its legal status as a partnership. Accordingly, the Partnership is not required to take any tax positions in order to qualify as a pass-through entity. The Partnership is required to file and does file tax returns with the Internal Revenue Service and other taxing authorities. Accordingly, these financial statements do not reflect a provision for income taxes and the Partnership has no other tax positions which must be considered for disclosure. Income tax returns filed by the Partnership are subject to examination by the Internal Revenue Service for a period of three years. While no income tax returns are currently being examined by the Internal Revenue Service, tax years since 2009 remain open.

 

Net Loss Per Partnership Unit

 

Net loss per Partnership Unit includes no dilution and is computed by dividing loss available to Limited Partners by the weighted average number of Partnership Units outstanding during the period. Calculation of diluted net loss per Partnership Unit is not required.

 

Revenue Recognition

 

The Partnership is entitled to receive reporting fees from the Local Limited Partnerships. The intent of the reporting fees is to offset (in part) administrative costs incurred by the Partnership in corresponding with the Local Limited Partnerships. Due to the uncertainty of the collection of these fees, the Partnership recognizes reporting fees as collections are made.

  

F-9
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 12

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED

For the Quarterly Period Ended December 31, 2012

(Unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

Amortization

 

Acquisition fees and costs were being amortized over 27.5 years using the straight-line method. Amortization expense for the nine months ended December 31, 2012 and 2011 was $19,439 and $32,741, respectively.

 

Impairment

 

The Partnership reviews its investments in Local Limited Partnership for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value of such investments may not be recoverable. Recoverability is measured by a comparison of the carrying amount of the investment to the sum of the total amount of the remaining Low Income Housing Tax Credits allocated to the Partnership and any estimated residual value of the investment. For the nine months ended December 31, 2012 and 2011, impairment loss related to investments in Local Limited Partnerships was $296,426 and $266,001, respectively.

 

The Partnership also evaluates its intangibles for impairment in connection with its investments in Local Limited Partnerships. Impairment on the intangibles is measured by comparing the Partnership’s total investment balance after impairment of investments in Local Limited Partnerships to the sum of the total of remaining Low Income Housing Tax Credits allocated to the Partnership and the estimated residual value of the investment. For the nine months ended December 31, 2012 and 2011, impairment loss of $441,844 and $195,441, respectively, was recorded against the related intangibles.

  

F-10
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 12

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED

For the Quarterly Period Ended December 31, 2012

(Unaudited)

 

NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS

 

As of December 31, 2012 and March 31, 2012, the Partnership had acquired limited partnership interests in 9 and 10 Local Limited Partnerships, respectively, each of which owns one Housing Complex, consisting of an aggregate of 494 and 550 apartment units, respectively. The respective Local General Partners of the Local Limited Partnerships manage the day to day operations of the entities. Significant Local Limited Partnership business decisions, as defined, require approval from the Partnership. The Partnership, as a Limited Partner, is generally entitled to 99.98%, as specified in the Local Limited Partnership Agreements, of the operating profits and losses, taxable income and losses, and tax credits of the Local Limited Partnerships.

 

The following is a summary of the equity method activity of the investments in Local Limited Partnerships for the periods presented below:

 

   For the Nine
Months Ended
December 31, 2012
   For the Year
Ended
March 31, 2012
 
Investments per balance sheet, beginning of period  $5,944,076   $7,118,320 
Impairment loss   (738,270)   (461,442)
Equity in losses of Local Limited Partnerships   (502,389)   (669,844)
Distributions received from Local Limited Partnerships   (7,547)   (42,923)
Amortization of paid acquisition fees and costs   (19,439)   (35)
Investments per balance sheet, end of period  $4,676,431   $5,944,076 

 

   For the Nine Months
Ended
December 31, 2012
   For the Year
Ended
March 31, 2012
 
Investments in Local Limited Partnerships, net  $4,294,128   $5,100,490 
Acquisition fees and costs, net of accumulated amortization of $9,388 and $30,636   382,303    843,586 
Investments per balance sheet, end of period  $4,676,431   $5,944,076 

  

F-11
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 12

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED

For the Quarterly Period Ended December 31, 2012

(Unaudited)

 

NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS, continued

 

Selected financial information for the nine months ended December 31, 2012 and 2011 from the unaudited combined condensed financial statements of the Local Limited Partnerships in which the Partnership has invested is as follows:

 

COMBINED CONDENSED STATEMENTS OF OPERATIONS

 

   2012   2011 
Revenues  $2,493,000   $2,526,000 
Expenses:          
Interest expense   645,000    690,000 
Depreciation and amortization   803,000    849,000 
Operating expenses   1,662,000    1,644,000 
Total expenses   3,110,000    3,183,000 
           
Net loss  $(617,000)   (657,000)
Net loss allocable to the Partnership  $(616,000)  $(657,000)
Net loss recorded by the Partnership  $(502,000)  $(616,000)

 

Certain Local Limited Partnerships incurred operating losses and/or have working capital deficiencies. In the event these Local Limited Partnerships continue to incur significant operating losses, additional capital contributions by the Partnership and/or the Local General Partners may be required to sustain the operations of such Local Limited Partnerships. If additional capital contributions are not made when they are required, the Partnership’s investment in certain of such Local Limited Partnerships could be impaired, and the loss and recapture of the related Low Income Housing Tax Credits could occur.

 

Troubled Housing Complexes

 

During the period from January 21, 2005 (date operations commenced) through March 31, 2005, the Partnership acquired a Local Limited Partnership interest in Marfa Villa, LTD (“Marfa”). During the year ended March 31, 2006, the Partnership acquired a Local Limited Partnership interest in Saltgrass Landing Apartments, LTD (“Saltgrass”). The Partnership acquired the Local Limited Partnership interests in Marfa and Saltgrass for $246,409 and $733,552, respectively. Upon acquisition, it was expected that Marfa and Saltgrass would generate Low Income Housing Tax Credits amounting to $324,320 and $940,640, respectively. Marfa and Saltgrass are managed by the same third party management company and have the same Local General Partner. Both Housing Complexes were acquisition rehabilitation projects. Additionally, both Housing Complexes have not delivered any Low Income Housing Tax Credits to date due to the fact that the rehabilitation work on the Housing Complexes was not completed within the allowable timeframe required by the Texas Department of Housing Community Affairs (“TDHCA”).

 

During 2010 TDHCA notified the Local General Partner and the Partnership that the Low Income Housing Tax Credits for both of these Housing Complexes were forfeited and could not be claimed. TDHCA has stated that the proper paperwork was not filed with the agency as proof that the rehabilitation work was completed on the Housing Complexes, and therefore Form 8609’s were not and will not be issued for either Housing Complex. After multiple conversations between the Local General Partner and the Partnership, a draft settlement structure was agreed to by all parties. Upon the settlement agreement being routed for signatures, the Local General Partner decided that he did not agree to the terms of the agreement and accordingly, refused to sign the agreement. The Partnership called for an all partners meeting, which took place on July 12, 2011. At the meeting, a vote was taken to remove the Local General Partner. In accordance with the Local Limited Partnership Agreements, the limited partner has the right to remove the Local General Partner for nonperformance. The limited partner voted in favor of removing the Local General Partner, with that vote making up 99.98% of the total votes. The Local General Partner has challenged such removal. Even though a majority was in favor of removal, since the Local General Partner is contesting the removal, he is still legally the Local General Partner. While the Local General Partner challenges this proposed removal, he remains the active Local General Partner and his management company continues to manage the Housing Complexes.

  

F-12
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 12

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED

For the Quarterly Period Ended December 31, 2012

(Unaudited)

 

NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS, continued

 

A lawsuit has been filed against the Local General Partner and the entity owned by the Local General Partner in Travis County District Court on Marfa for specific performance to turn over the necessary documents so that the cost certification can be completed. No lawsuit has been filed against the Local General Partner and the entity owned by the Local General Partner for the Housing Complex to cause his removal. The Local General Partner has not filed the cost certification with Rural Development or TDHCA. The limited partner has been attempting for some time to gather the information and was left with no alternative but to file a lawsuit to compel the Local General Partner to cooperate. In fact, the Local General Partner claimed he had provided all necessary documentation early this year. However, when the CPAs diligently organized the boxes they were provided from the Local General Partner, it was clear that not all information was provided. Once the Local General Partner consulted with legal counsel, the CPA’s were provided with a substantial amount of support. Once the General Partner is replaced, it is the intent that the replacement management company and replacement Local General Partner will submit the 8609 package to TDHCA for the Low Income Housing Tax Credits.

 

A lawsuit has been filed against the Local General Partner and the entity owned by the Local General Partner in Travis County District Court on Saltgrass for breach of contract for failing to obtain the Low Income Housing Tax Credits as contemplated in the respective partnership agreement and by failing to re-purchase the limited partner interests which the Partnership holds as required by the Local Limited Partnership Agreement for Saltgrass. No lawsuit has been filed against the Local General Partner and the entity owned by the Local General Partner for the Housing Complexes to cause his removal. Once the General Partner is replaced, those have been approved and the control of the Housing Complexes has been changed, the intent is to sell the Local Limited Partnership to try and recover a portion of the original capital investment and purchase replacement Low Income Housing Tax Credits.

 

Management of the Partnership deems the Partnership’s investments in Marfa and Saltgrass to be impaired due to the loss of all Low Income Housing Tax Credit associated with these Housing Complexes. As a result of the Low Income Housing Tax Credits not being delivered for this Housing Complex, management of the Partnership had deemed that the Partnership is not liable to fund, and will not fund the remaining capital contributions. As of March 31, 2006, these investments in Local Limited Partnerships were reduced to $0. During the nine months ended December 31, 2012, the Partnership sold its Local Limited Partnership Interest in Saltgrass Landing Apartments for $294,646 (See Note 1).

  

F-13
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 12

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED

For the Quarterly Period Ended December 31, 2012

(Unaudited)

 

NOTE 3 - RELATED PARTY TRANSACTIONS

 

Under the terms of the partnership agreement, the Partnership has paid or is obligated to the General Partner or its affiliates for the following fees:

 

(a)Acquisition fees of 7% of the gross proceeds from the sale of Partnership Units as compensation for services rendered in connection with the acquisition of Local Limited Partnerships. As of all periods presented, the Partnership incurred cumulative acquisition fees of $1,051,330,which have been included in investments in Local Limited Partnerships. Accumulated amortization of these capitalized costs was $9,388 and $28,668 as of December 31, 2012 and March 31, 2012, respectively. Impairment on the intangibles is measured by comparing the Partnership’s total investment balance after impairment of investments in Local Limited Partnerships to the sum of the total of the remaining Low Income Housing Tax Credits allocated to the Partnership and the estimated residual value of the investments. If an impairment loss related to the acquisition fees is recorded, the accumulated amortization is reduced to zero at that time.

 

(b)Acquisition costs of 2% of the gross proceeds from the sale of Partnership Units as reimbursement of costs incurred by the General Partner or by an affiliate of Associates in connection with the acquisition of Local Limited Partnerships. As of all periods presented, the Partnership incurred cumulative acquisition costs of $300,380, which have been included in investments in Local Limited Partnerships. Accumulated amortization of these capitalized costs was $0 and $1,968 as of December 31, 2012 and March 31, 2012, respectively. Impairment on the intangibles is measured by comparing the Partnership’s total investment balance after impairment of investments in Local Limited Partnerships to the sum of the total of the remaining Low Income Housing Tax Credits allocated to the Partnership and the estimated residual value of the investments. If an impairment loss related to the acquisition costs is recorded, the accumulated amortization is reduced to zero at that time. As of December 31, 2012, these costs were fully amortized or impaired.

 

(c)An annual asset management fee not to exceed 0.5% of the invested assets of the Partnership, as defined. “Invested Assets” means the sum of the Partnership’s investment in Local Limited Partnership interests and the Partnership’s allocable share of mortgage loans on and other debts related to the Housing Complexes owned by such Local Limited Partnerships. Asset management fees of $121,892 and $125,046 were incurred during the nine months ended December 31, 2012 and 2011, respectively. The Partnership paid the General Partner or its affiliates $0 and $25,000 of those fees during each of the nine months ended December 31, 2012 and 2011.

 

(d)A subordinated disposition fee in an amount equal to 1% of the sale price of real estate sold by the Local Limited Partnerships. Payment of this fee is subordinated to the Limited Partners receiving distributions equal to their capital contributions and their return on investment (as defined in the Partnership Agreement) and is payable only if services are rendered in the sales effort. No such fee was incurred for all periods presented.

 

(e)The Partnership reimburses the General Partner or its affiliates for operating expenses incurred on behalf of the Partnership. Operating expense reimbursements were$40,853 and $17,461 during the nine months ended December 31, 2012 and 2011, respectively.

  

F-14
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 12

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED

For the Quarterly Period Ended December 31, 2012

(Unaudited)

 

NOTE 3 - RELATED PARTY TRANSACTIONS, continued

 

(f)WNC Holding, LLC (“Holding”), a wholly owned subsidiary of Associates, acquires investments in Local Limited Partnerships using funds from a secured warehouse line of credit. Such investments are warehoused by Holding until transferred to syndicated partnerships as investors are identified. The transfer of the warehoused investments is typically achieved through the admittance of the syndicated partnership as the Limited Partner of the Local Limited Partnership and the removal of Holding as the Limited Partner. Consideration paid to Holding for the transfer of its interest in the Local Limited Partnership generally consists of cash reimbursement of capital contribution installment(s) paid to the Local Limited Partnerships by Holding, assumption of the remaining capital contributions payable due to the Local Limited Partnership and financing costs and interest charged by Holding. As of all periods presented, the Partnership incurred cumulative financing costs of $2,511 and interest of $1,272 which are included in investments in Local Limited Partnerships. The accumulated amortization of these financing costs and interest was $0 as of both December 31, 2012 and March 31, 2012. Impairment on the intangibles is measured by comparing the Partnership’s total investment balance after impairment of investments in Local Limited Partnerships to the sum of the total of the remaining Low Income Housing Tax Credits allocated to the Partnership and the estimated residual value of the investments. If an impairment loss related to the acquisition expenses is recorded, the accumulated amortization is reduced to zero at that time. As of December 31, 2012, the financing costs and interest were fully amortized or impaired.

 

The accrued fees and expenses due to General Partner and affiliates consisted of the following at:

 

   December 31, 2012   March 31, 2012 
         
Asset management fee payable  $962,804   $840,912 
Expenses paid by the General Partner or an affiliate on behalf of the Partnership   68,731    9,780 
Total  $1,031,535   $850,692 

 

The General Partner and/or its affiliates do not anticipate that these accrued fees will be paid in full until such time as capital reserves are in excess of future foreseeable working capital requirements of the Partnership.

 

NOTE 4 - PAYABLES TO LOCAL LIMITED PARTNERSHIPS

 

Payables to Local Limited Partnerships amounting to $624,895 at both December 31, 2012 and March 31, 2012, represent amounts which are due at various times based on conditions specified in the respective Local Limited Partnership Agreements. These contributions are payable in installments and are generally due upon the Local Limited Partnerships achieving certain development and operating benchmarks (generally within two years of the Partnership’s initial investment). The payables to Local Limited Partnerships are subject to adjustment in certain circumstances.

  

F-15
 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward Looking Statements

 

With the exception of the discussion regarding historical information, this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other discussions elsewhere in this Form 10-Q contain forward looking statements. Such statements are based on current expectations subject to uncertainties and other factors which may involve known and unknown risks that could cause actual results of operations to differ materially from those projected or implied. Further, certain forward-looking statements are based upon assumptions about future events which may not prove to be accurate.

 

Risks and uncertainties inherent in forward looking statements include, but are not limited to, the Partnership’s future cash flows and ability to obtain sufficient financing, level of operating expenses, conditions in the Low Income Housing Tax Credit property market and the economy in general, as well as legal proceedings. Historical results are not necessarily indicative of the operating results for any future period.

 

Subsequent written and oral forward looking statements attributable to the Partnership or persons acting on its behalf are expressly qualified in their entirety by cautionary statements in this Form 10-Q and in other reports filed with the Securities and Exchange Commission.

 

The following discussion and analysis compares the results of operations for the three and nine months ended December 31, 2012 and 2011, and should be read in conjunction with the condensed financial statements and accompanying notes included within this report.

 

Financial Condition

 

The Partnership’s assets at December 31, 2012 consisted of $1,209,000 in cash and cash equivalents and aggregate investments in Local Limited Partnerships of $4,676,000. Liabilities at December 31, 2012 consisted of $1,032,000 of accrued fees and expenses due to General Partner and affiliates and $625,000 of payables to Local Limited Partnerships.

 

Results of Operations

 

Three Months Ended December 31, 2012 Compared to Three Months Ended December 31, 2011 The Partnership’s net loss for the three months ended December 31, 2012 was $(255,000), reflecting a decrease of approximately $32,000 from the net loss of $(287,000) for the three months ended December 31, 2011. There was an $11,000 decrease in legal and accounting fees for the three months ended December 31, 2012 due to the timing of the accounting work performed. Equity in losses of Local Limited Partnerships decreased by $11,000 from the three months ended December 31, 2011 due to the operations of the underlying Housing Complexes fluctuating from period to period. Amortization decreased by $5,000 due to the fact that intangibles were partially impaired in the first quarter thereby decreasing the future amortization expense. There was a $2,000 decrease of asset management fees for the three months ended December 31, 2012. These fees are calculated based on the invested assets. As Local Limited Partnerships are sold, the invested assets decrease, thereby decreasing the asset management fee.

 

Nine Months Ended December 31, 2012 Compared to Nine Months Ended December 31, 2011 The Partnership’s net loss for the nine months ended December 31, 2012 was $(1,170,000), reflecting a decrease of approximately $249,000 from the net loss of $(1,419,000) for the nine months ended December 31, 2011. The change is largely due to an increase of $294,000 in gain on sale of Local Limited Partnerships during the nine months ended December 31, 2012. During the current period, a Local Limited Partnership was sold as it was never going to generate Low Income Housing Tax Credits. No such sales occurred during the nine months ended December 31, 2011. Also, there was an increase of $(277,000) in impairment loss for the nine months ended December 31, 2012 compared to the nine months ended December 31, 2011. The impairment loss can vary each year depending on the annual decrease in Low Income Housing Tax Credits allocated to the Partnership compared to the current net investment balance that is being carried for the particular Local Limited Partnerships. In addition, there was an $97,000 decrease in legal and accounting fees for the nine months ended December 31, 2012 due to the timing of the accounting work performed. The Partnership was past due in multiple annual and quarterly reports. All reports were brought current during the nine months ended December 31, 2011. Equity in losses of Local Limited Partnerships decreased by $114,000 from the nine months ended December 31, 2012 due to the operations of the underlying Housing Complexes fluctuating from period to period. The outsourcing expenses increased by $(11,000) for the nine months ended December 31, 2012 due to the Partnership outsourcing data management to improve efficiency. Amortization decreased by $14,000 for the nine months ended December 31, 2012 due to the fact that intangibles were partially impaired in the first quarter thereby decreasing the future amortization expense. There was a $3,000 decrease in asset management fees for the nine months ended December 31, 2012. These fees are calculated based on the invested assets. As Local Limited Partnerships are sold, the invested assets decrease, thereby decreasing the asset management fee. The reporting fees increased by $12,000 for the nine months ended December 31, 2012 compared to the nine months ended December 31, 2011. Local Limited Partnerships pay reporting fees to the Partnership when the Local Limited Partnerships’ cash flow will allow for the payment.

 

3
 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, continued

  

Capital Resources and Liquidity

 

Nine Months Ended December 31, 2012 Compared to Nine Months Ended December 31, 2011 The increase in net cash and cash equivalents used during the nine months ended December 31, 2012 was $279,000, compared to the decrease in net cash and cash equivalents used during the nine months ended December 31, 2011 of $(147,000). The change is due primarily to the fact that during the nine months ended December 31, 2012 the Partnership received $294,000 in net proceeds from the sale of Local Limited Partnerships compared to no such proceeds received during the nine months ended December 31, 2011. The proceeds received will vary from period to period, depending on the number of Housing Complexes that have been identified for disposition, the values of such Housing Complexes and the closing dates of such transactions. The Partnership reimbursed the General Partner or an affiliate for expenses paid on its behalf $(41,000) during the nine months ended December 31, 2012 compared to $(17,000) reimbursed during the nine months ended December 31, 2011. Additionally, during the nine months ended December 31, 2012, the Partnership paid $0 in accrued asset management fees compared to $(25,000) paid during the nine months ended December 31, 2011. Each quarter the Partnership evaluates the cash position and determines how much of the accrued asset management fee and operating expense reimbursements will be paid to the General Partner or affiliates. The Partnership also received $12,000 more of reporting fees from Local Limited Partnerships during the nine months ended December 31, 2012 compared to the nine months ended December 31, 2011 as discussed above.

 

During the nine months ended December 31, 2012 accrued payables, which consist primarily of related party asset management fees and advances due to the General Partner or Affiliates, increased by $181,000 as compared to March 31, 2012. The General Partner does not anticipate that these accrued fees and advances will be paid until such time as capital reserves are in excess of foreseeable working capital requirements of the Partnership.

 

The Partnership expects its future cash flows, together with its net available assets as of December 31, 2012, to be insufficient to meet all currently foreseeable future cash requirements. Associates have agreed to continue providing advances sufficient enough to fund the operations and working capital requirements of the Partnership through February 28, 2014.

 

Recent Accounting Changes

 

In June 2009, the Financial Accounting Standards Board (“FASB”) issued an amendment to the accounting and disclosure requirements for the consolidation of variable interest entities (VIEs). The amended guidance modified the consolidation model to one based on control and economics, and replaced quantitative primary beneficiary analysis with a qualitative analysis. The primary beneficiary of a VIE will be the entity that has (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses or receive benefits that could potentially be significant to the VIE. If multiple unrelated parties share such power, as defined, no party will be required to consolidate the VIE. Further, the amended guidance requires continual reconsideration of the primary beneficiary of a VIE and adds an additional reconsideration event for determination of whether an entity is a VIE. Additionally, the amendment requires enhanced and expanded disclosures around VIEs. This amendment was effective for fiscal years beginning after November 15, 2009. The adoption of this guidance on April 1, 2010 did not have a material effect on the Partnership’s financial statements.

 

4
 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, continued

  

In May 2011, the FASB issued an update to existing guidance related to fair value measurements on how to measure fair value and what disclosures to provide about fair value measurements. For fair value measurements categorized as level 3, a reporting entity should disclose quantitative information of the unobservable inputs and assumptions, a description of the valuation processes and narrative description of the sensitivity of the fair value to changes in unobservable inputs. This update is effective for interim and annual periods beginning after December 15, 2011. The adoption of this update did not materially affect the Partnership’s condensed financial statements.

 

Other matters

 

During the period from January 21, 2005 (date operations commenced) through March 31, 2005, the Partnership acquired a Local Limited Partnership interest in Marfa Villa, LTD (“Marfa”). During the year ended March 31, 2006, the Partnership acquired a Local Limited Partnership interest in Saltgrass Landing Apartments, LTD (“Saltgrass”). The Partnership acquired the Local Limited Partnership interests in Marfa and Saltgrass for $246,409 and $733,552, respectively. Upon acquisition, it was expected that Marfa and Saltgrass would generate Low Income Housing Tax Credits amounting to $324,320 and $940,640, respectively. Marfa and Saltgrass are managed by the same third party management company and have the same Local General Partner. Both Housing Complexes were acquisition rehabilitation projects. Additionally, both Housing Complexes have not delivered any Low Income Housing Tax Credits to date due to the fact that the rehabilitation work on the Housing Complexes was not completed within the allowable timeframe required by the Texas Department of Housing Community Affairs (“TDHCA”).

 

During 2010 TDHCA notified the Local General Partner and the Partnership that the Low Income Housing Tax Credits for both of these Housing Complexes were forfeited and could not be claimed. TDHCA has stated that the proper paperwork was not filed with the agency as proof that the rehabilitation work was completed on the Housing Complexes, and therefore Form 8609’s were not and will not be issued for either Housing Complex. After multiple conversations between the Local General Partner and the Partnership, a draft settlement structure was agreed to by all parties. Upon the settlement agreement being routed for signatures, the Local General Partner decided that he did not agree to the terms of the agreement and accordingly, refused to sign the agreement. The Partnership called for an all partners meeting, which took place on July 12, 2011. At the meeting, a vote was taken to remove the Local General Partner. In accordance with the Local Limited Partnership Agreements, the limited partner has the right to remove the Local General Partner for nonperformance. The limited partner voted in favor of removing the Local General Partner, with that vote making up 99.98% of the total votes. The Local General Partner has challenged such removal. Even though a majority was in favor of removal, since the Local General Partner is contesting the removal, he is still legally the Local General Partner. While the Local General Partner challenges this proposed removal, he remains the active Local General Partner and his management company continues to manage the Housing Complexes.

 

A lawsuit has been filed against the Local General Partner and the entity owned by the Local General Partner in Travis County District Court on Marfa for specific performance to turn over the necessary documents so that the cost certification can be completed. No lawsuit has been filed against the Local General Partner and the entity owned by the Local General Partner for the Housing Complex to cause his removal. The Local General Partner has not filed the cost certification with Rural Development or TDHCA. The limited partner has been attempting for some time to gather the information and was left with no alternative but to file a lawsuit to compel the Local General Partner to cooperate. In fact, the Local General Partner claimed he had provided all necessary documentation early this year. However, when the CPAs diligently organized the boxes they were provided from the Local General Partner, it was clear that not all information was provided. Once the Local General Partner consulted with legal counsel, the CPA’s were provided with a substantial amount of support. Once the General Partner is replaced, it is the intent that the replacement management company and replacement Local General Partner will submit the 8609 package to TDHCA for the Low Income Housing Tax Credits.

 

5
 

 

A lawsuit has been filed against the Local General Partner and the entity owned by the Local General Partner in Travis County District Court on Saltgrass for breach of contract for failing to obtain the Low Income Housing Tax Credits as contemplated in the respective partnership agreement and by failing to re-purchase the limited partner interests which the Partnership holds as required by the Local Limited Partnership Agreement for Saltgrass. No lawsuit has been filed against the Local General Partner and the entity owned by the Local General Partner for the Housing Complexes to cause his removal. Once the General Partner is replaced, those have been approved and the control of the Housing Complexes has been changed, the intent is to sell the Local Limited Partnership to try and recover a portion of the original capital investment and purchase replacement Low Income Housing Tax Credits.

 

Management of the Partnership deems the Partnership’s investments in Marfa and Saltgrass to be impaired due to the loss of all Low Income Housing Tax Credit associated with these Housing Complexes. As a result of the Low Income Housing Tax Credits not being delivered for this Housing Complex, management of the Partnership had deemed that the Partnership is not liable to fund, and will not fund the remaining capital contributions. As of March 31, 2006, these investments in Local Limited Partnerships were reduced to $0. During the nine months ended December 31, 2012, the Partnership sold its Local Limited Partnership Interest in Saltgrass Landing Apartments for $294,646 (See Note 1).

 

Item 3. Quantitative and Qualitative Disclosures About Market Risks

 

NOT APPLICABLE

 

Item 4. Controls and Procedures

 

(a)Disclosure controls and procedures

 

As of the end of the period covered by this report, the Partnership’s General Partner, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer of Associates, carried out an evaluation of the effectiveness of the Partnership’s “disclosure controls and procedures” as defined in Securities Exchange Act of 1934 Rule 13a-15 and 15d-15. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, the Partnership’s disclosure controls and procedures were not effective to ensure that material information required to be disclosed in the Partnership’s periodic report filings with SEC is recorded, processed, summarized and reported within the time period specified by the SEC’s rules and forms, consistent with the definition of “disclosure controls and procedures” under the Securities Exchange Act of 1934.

 

The Partnership must rely on the Local Limited Partnerships to provide the Partnership with certain information necessary to the timely filing of the Partnership’s periodic reports. Factors in the accounting at the Local Limited Partnerships have caused delays in the provision of such information during past reporting periods, and resulted in the Partnership’s inability to file its periodic reports in a timely manner.

 

Once the Partnership has received the necessary information from the Local Limited Partnerships, the Chief Executive Officer and the Chief Financial Officer of Associates believe that the material information required to be disclosed in the Partnership’s periodic report filings with SEC is effectively recorded, processed, summarized and reported, albeit not in a timely manner. Going forward, the Partnership will use the means reasonably within its power to impose procedures designed to obtain from the Local Limited Partnerships the information necessary to the timely filing of the Partnership’s periodic reports.

 

(b)Changes in internal controls

 

There were no changes in the Partnership’s internal control over financial reporting that occurred during the quarter ended December 31, 2012 that materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

 

6
 

   

Part II.    Other Information
     
Item 1.   Legal Proceedings
     
    NONE
     
Item 1A.   Risk Factors
     
    No material changes in risk factors as previously disclosed in the Partnership’s Form 10-K.
     
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds
     
    NONE
     
Item 3.   Defaults Upon Senior Securities
     
    NONE
     
Item 4.  

Mine Safety Disclosures

 

NOT APPLICABLE

     
Item 5.   Other Information
     
    NONE
     
Item 6.   Exhibits

 

31.1Certification of the Chief Executive Officer pursuant to Rule 13a-14 or 15d-14, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)

 

31.2Certification of the Chief Financial Officer pursuant to Rule 13a-14 or 15d-14, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)
   

32.1Section 1350 Certification of the Chief Executive Officer. (filed herewith)

   

32.2Section 1350 Certification of the Chief Financial Officer. (filed herewith)

 

101Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Condensed Balance Sheets at December 31, 2012 and March 31, 2012, (ii) the Condensed Statements of Operations for the three-month and nine-month periods ended December 31, 2012 and December 31, 2011, (iii) the Condensed Statements of Cash Flows for the nine months ended December 31, 2012 and December 31, 2011 and (iv) the Notes to Condensed Financial Statements.

 

Exhibits 32.1, 32.2 and 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section. Such exhibits shall not be deemed incorporated by reference into any filing under the Securities Act of 1933 or Securities Exchange Act of 1934.

 

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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.

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 12

 

By: WNC National Partners, LLC.  General Partner

 

By: /s/ Wilfred N. Cooper, Jr.  
     
  Wilfred N. Cooper, Jr.  
  President and Chief Executive Officer of WNC & Associates, Inc.

 

Date: February 13, 2013

 

By: /s/ Melanie R. Wenks  
     
  Melanie R. Wenk  
  Vice-President - Chief Financial Officer of WNC & Associates, Inc.

 

Date: February 13, 2013

 

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