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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

 

(Mark One)

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

For the fiscal year ended March 30, 2016

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)

(Exact Name of Registrant as Specified in its Governing Instruments)

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes        No      X      

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes         No      X      

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 requirement 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in a definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     X  

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 "accelerated filer," large accelerated filer and smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer                 Accelerated Filer                  Non-Accelerated Filer                            Smaller Reporting Company     X       

 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes         No    X     

Documents incorporated by reference:

 

Pages 14 through 33, 47 through 70 and 86 through 88 of the Registrant's prospectus dated May 10, 1989, as supplemented by Supplement No. 1 and Supplement No. 2 dated July 25, 1989 and September 18, 1989, respectively, filed pursuant to Rule 424(b)(3) under the Securities Act of 1933, and filed as Exhibits hereto, are incorporated by reference into Part I of this Annual Report.

PART I

Item 1.       Business.

American Tax Credit Properties II L.P. (the "Registrant"), a Delaware limited partnership, was formed on October 26, 1988 to invest primarily in leveraged low-income multifamily residential complexes (the "Property" or "Properties") that qualified for the low-income housing tax credit (the "Low-income Housing Tax Credit") in accordance with Section 42 of the Internal Revenue Code (the "IRC"), through the acquisition of limited partner equity interests (the "Local Partnership Interest" or "Local Partnership Interests") in partnerships (the "Local Partnership" or "Local Partnerships") that are the owners of the Properties. The Local Partnerships hold their respective Properties in fee. Registrant initially invested in fifty such Local Partnerships, including one whose Property also qualified for the historic rehabilitation tax credit in accordance with IRC Section 47 (the "Historic Rehabilitation Tax Credit"). Registrant considers its activity to constitute a single industry segment.

Richman Tax Credit Properties II L.P. (the "General Partner"), a Delaware limited partnership, was formed on October 26, 1988 to act as the General Partner of Registrant. The general partner of the General Partner is Richman Tax Credits Inc. ("Richman Tax Credits"), a Delaware corporation that is wholly-owned by Richard Paul Richman. Richman Tax Credits is an affiliate of The Richman Group, Inc. ("Richman Group"), a Delaware corporation founded by Richard Paul Richman in 1988.

The Amendment No. 2 to the Registration Statement on Form S-11 was filed with the Securities and Exchange Commission (the "SEC") on April 21, 1989 pursuant to the Securities Act of 1933 under Registration Statement File No. 33-25337, and was declared effective on May 9, 1989. Reference is made to the prospectus dated May 10, 1989, as supplemented by Supplement No. 1 and Supplement No. 2 dated July 25, 1989 and September 18, 1989, respectively, filed with the SEC pursuant to Rule 424(b)(3) under the Securities Act of 1933 (the "Prospectus"). Pursuant to Rule 12b-23 of the SEC's General Rules and Regulations promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the description of Registrant's business set forth under the heading "Investment Objectives and Policies" at pages 47 through 70 of the Prospectus is hereby incorporated into this Annual Report by reference.

On June 14, 1989, Registrant commenced, through Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), the offering of up to 100,000 units of limited partnership interest (the "Units") at $1,000 per Unit to investors (the "Limited Partners"). On June 28, 1989, July 31, 1989 and September 22, 1989, the closings for 13,533, 20,560 and 21,653 Units, respectively, took place, amounting to aggregate Limited Partners' capital contributions of $55,746,000.

Registrant's primary objective, to provide Low-income Housing Tax Credits to the Limited Partners, has been completed.  The relevant state tax credit agency allocated each of the Local Partnerships an amount of Low-income Housing Tax Credits, which are generally available for a ten year period from the year the Property is placed in service (the "Ten Year Credit Period"). The Ten Year Credit Period was fully exhausted with respect to all of the Properties as of December 31, 2005. The required holding period of each Property, in order to avoid Low-income Housing Tax Credit recapture, is fifteen years from the year in which the Low-income Housing Tax Credits commence on the last building of the Property (the "Compliance Period"). The Compliance Period of all of the Local Partnerships had expired as of December 31, 2006.  In addition, certain of the Local Partnerships entered into agreements with the relevant state tax credit agencies whereby the Local Partnerships must maintain the low-income nature of the Properties for a period which exceeds the Compliance Period (in certain circumstances, up to 50 years from when the Property is placed in service, but commonly 30 years from the date any such Property is placed in service), regardless of a sale of the Properties by the Local Partnerships after the Compliance Period (the "Extended Use Provisions"). Note that the existence of Extended Use Provisions does not extend the Compliance Period of the respective Local Partnerships. However, such provisions may limit the number and availability of potential purchasers of the Properties. Accordingly, a sale of a Property may happen well after the expiration of the Compliance Period and/or may be significantly discounted.

Registrant has been in the process of disposing of its remaining Local Partnership Interests. As of June 20, 2016, Registrant owns one of the fifty Local Partnership Interests initially acquired. In a prior year, Registrant served a demand on the general partners of all then remaining Local Partnerships (the "Local General Partners") to commence a sale process to dispose of the Properties. In the event a sale cannot be consummated, it is the General Partner's intention to sell or assign Registrant's Local Partnership Interest in Littleton Avenue Community Village, L.P. ("Littleton"). Registrant does not anticipate that it will receive any proceeds in connection with such sale or assignment and may incur certain costs in connection therewith. Registrant intends to dissolve after the final disposition of its Local Partnership Interest in Littleton; there can be no assurance as to when such final disposition will occur.

Registrant is engaged solely in the business of owning a Local Partnership Interest in each of the Local Partnerships. A presentation of information regarding industry segments is not applicable and would not be material to an understanding of Registrant's business taken as a whole. See Item 8 below - Financial Statements and Supplementary Data.

Pursuant to Rule 12b-23 of the SEC's General Rules and Regulations promulgated under the Exchange Act, the description of Registrant's competition, general risks, tax risks and partnership risks set forth under the heading "Risk Factors" at pages 20 through 33 of the Prospectus is hereby incorporated into this Annual Report by reference.

Registrant employs no personnel and incurs no payroll costs. All management activities of Registrant are conducted by the General Partner. Affiliates of the General Partner employ individuals who perform the management activities of Registrant. These entities also perform similar services for other affiliates of the General Partner.

The following is a brief summary of certain regulations applicable to Registrant and is not, nor should it be considered, a full summary of the law or all related issues. Other than as set forth above and below, Registrant is not aware of any existing or probable federal, state or local governmental regulations, or any recent changes to such governmental regulations, which would have an effect on Registrant's business.

Littleton is subject to restrictions on the amount of annual cash distributions to partners under the terms of its loan and regulatory agreements. Registrant does not anticipate any future distributions from Littleton.

Registrant is not aware of any non-compliance by the Local Partnerships with respect to federal, state and local provisions regulating the discharge of material into the environment or otherwise relating to the protection of the environment, and is not aware of any condition that would have a material effect on the capital expenditures or competitive position of Registrant.

Registrant is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this Item.

Not applicable.

Item 2.       Properties.

The executive offices of Registrant and the General Partner are located at 340 Pemberwick Road, Greenwich, Connecticut 06831. Registrant does not own or lease any properties. Registrant pays no rent; all charges for leased space are borne by an affiliate of the General Partner.

Registrant initially acquired Local Partnership Interests in fifty Local Partnerships in 1989 and 1990. As discussed above in Item 1 - Business, the Compliance Period of all of the Local Partnerships had expired as of December 31, 2006 and, accordingly, Registrant has been in the process of disposing of its remaining Local Partnership Interests. As of June 20, 2016, Registrant owns one of the fifty Local Partnership Interests initially acquired. In a prior year, Registrant served a demand on the Local General Partners of all then remaining Local Partnerships to commence a sale process to dispose of the Properties. In the event a sale cannot be consummated, it is the General Partner's intention to sell or assign Registrant's 99% Local Partnership Interest in Littleton. Registrant does not anticipate that it will receive any proceeds in connection with such sale or assignment and may incur certain costs in connection therewith. Registrant intends to dissolve after the final disposition of its Local Partnership Interest in Littleton; there can be no assurance as to when such final disposition will occur.

 

Name of Local Partnership Name of apartment complex Apartment complex location		Number of rental units				Capital contribution				Mortgage loans payable as of December 31, 2015				Subsidy (see footnotes)
1989 Westview Arms Limited Partnership (4), (15) Westview Arms Dumas, Arkansas			60			$	130,796			$	--	(4	)
2000-2100 Christian Street Associates (3), (17) Christian Street Apartments II Philadelphia, Pennsylvania			57				1,654,764				--	(3	)
Ann Ell Apartments Associates, Ltd. (3), (17) Ann Ell Apartments Miami Beach, Florida			54				1,411,983				--	(3	)
Auburn Hills Apartments Limited     Partnership (3), (6) Auburn Hills Apartments Cabot, Arkansas			24				201,649				--	(3	)
Auburn Hills Townhouses Limited     Partnership (3) Auburn Hills Townhouse Apartments Pontiac, Michigan			250				3,206,110				--	(3	)
Batesville Family, L.P. (3), (11) Westridge Apartments Batesville, Mississippi			48				160,741	(2)			--	(3	)
Browning Road Phase I, L.P. (3), (12) Browning Road Apartments, Phase I Greenwood, Mississippi			60				197,808				--	(3	)
Bruce Housing Associates, L.P. (3), (5) Bruce Family Apartments Bruce, Mississippi			40				122,814	(2)			--	(3	)
Canton Partners, L.P. (3), (11) Pecan Village Canton, Mississippi			48				380,199				--	(3	)
Carrington Limited Dividend Housing     Association Limited Partnership (3) Carrington Place Farmington Hills, Michigan			100				1,058,976	(2)			--	(3	)
Christian Street Associates Limited    Partnership (3), (17) Christian Street Apartments Philadelphia, Pennsylvania			72				2,610,886				--	(3	)
Cityside Apartments, Phase II, L.P. (3) Cityside Apartments Phase II Trenton, New Jersey			107				6,592,092				--	(3	)
Cleveland Square, Ltd. (3) Cleveland Square Apartments Cleveland, Texas			48				223,327				--	(3	)

 

Item 2.       Properties (Continued).

 

Name of Local Partnership Name of apartment complex Apartment complex location		Number of rental units				Capital contribution				Mortgage loans payable as of December 31, 2015				Subsidy (see footnotes)
College Avenue Apartments Limited    Partnership (3), (17) College Avenue Apartments Natchitoches, Louisiana			41			$	501,348			$	--	(3)
Corrigan Square, Ltd. (3) Corrigan Square Apartments Corrigan, Texas			96				372,833				--	(3)
DeQueen Villas Limited Partnership    (3), (13) DeQueen Villas Apartments DeQueen, Arkansas			7				296,051				--	(3)
Dermott Villas Limited Partnership (3) Dermott Villas Dermott, Arkansas			32				272,802				--	(3)
Eagle View, Ltd. (3), (7) Eagle View Apartments Clearfield, Kentucky			14				102,850				--	(3)
Elm Hill Housing Limited    Partnership (3) Elm Hill Housing Boston, Massachusetts			142				5,712,391				--	(3)
Eudora Manor Limited Partnership    (3), (13) Eudora Manor Apartments Eudora, Arkansas			37				188,838				--	(3)
Forest Village Housing    Partnership (3), (17) Forest Village Apartments Auburn, Washington			89				1,706,079				--	(3)
Harborside Housing Limited    Partnership (3) Cal-View Apartments East Chicago, Indiana			255				1,789,434				--	(3)
Hill Com I Associates Limited    Partnership (4), (14) Hill Com I Apartments Pittsburgh, Pennsylvania			67				887,635				--	(4)
Hill Com II Associates Limited    Partnership (4), (14) Hill Com II Apartments Pittsburgh, Pennsylvania			48				683,172				--	(4)
Hughes Manor Limited Partnership (3) Hughes Manor Hughes, Arkansas			32				287,261				--	(3)
Ivy Family, L.P. (3), (5) Ivy Apartments Louisville, Mississippi			32				90,878	(2)			--	(3)

Item 2.       Properties (Continued).

 

Name of Local Partnership Name of apartment complex Apartment complex location		Number of rental units				Capital contribution				Mortgage loans payable as of December 31, 2015			Subsidy (see footnotes)
Renova Properties, L.P. (3), (5) Hymon Lucas Manor Renova, Mississippi			24			$	165,582			$	--	(3)
Santa Juanita Limited Dividend    Partnership L.P. (3), (8) Santa Juanita Apartments Bayamon, Puerto Rico			45				584,117	(2)			--	(3)
Simpson County Family, L.P. (3), (5) Azalea Apartments Magee, Mississippi			24				211,823				--	(3)
Summers Village Limited Partnership    (3), (7) Summers Village Apartments Summersville, West Virginia			24				194,674				--	(3)
Tchula Courts Apartments, L.P. (3), (12) Tchula Courts Apartments Tchula, Mississippi			24				150,984				--	(3)
The Pendleton (A Louisiana    Partnership in Commendam) (3), (17) The Pendleton Shreveport, Louisiana			36				447,621				--	(3)
Trenton Heights Apartments, L.P. (3) Trenton Heights Apartments Trenton, Mississippi			40				100,434				--	(3)
Twin Pine Family, L.P. (3), (5) Twin Pine Apartments Louisville, Mississippi			24				163,172				--	(3)
Village Creek Limited Partnership (3), (10) Village Creek Apartments Arkadelphia, Arkansas			40				288,216				--	(3)
York Park Associates Limited    Partnership (3) York Park Apartments Dundalk, Maryland			80				2,146,200				--	(3)
						$	48,460,126			$	4,303,080

 

None.

Item 4.       Mine Safety Disclosures.

Not applicable.

PART II

Item 5.       Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

There is no established public trading market for the Units. Accordingly, accurate information as to the market value of a Unit at any given date is not available. The number of record holders of Units as of June 8, 2016 was approximately 2,061, holding an aggregate of 55,746 Units.

Registrant may provide an estimate of value to Unit holders from time to time in Registrant's reports to Limited Partners. Estimated values for limited partnership interests may also be provided by independent valuation services, whose estimated values are based on financial and other information available to them. The estimated values provided by the independent services and Registrant, which may differ, are not market values and Unit holders may not be able to sell their Units or realize either amount upon a sale of their Units. Unit holders may not realize such estimated values upon the liquidation of Registrant.

Registrant was required to pay nonresident state withholding taxes of $31,810 on behalf of certain of the Limited Partners in April 2014 in connection with gains recognized by a Local Partnership for the year ended December 31, 2013. Registrant made a distribution to the Limited Partners in the amount of approximately $50 per Unit in July 2014 to Unit holders of record as of June 27, 2014; the $50 per Unit includes the nonresident state withholding taxes referred to above. Lakeside Housing Limited Partnership ("Lakeside Housing") was required to pay nonresident state withholding taxes of $258,043 on behalf of the Limited Partners in March 2015 in connection with gains recognized by Lakeside Housing for the year ended December 31, 2014. Registrant made a distribution to the Limited Partners in the amount of approximately $75 per Unit in April 2015 to Unit holders of record as of February 28, 2015. Registrant holds cash and liquid investments as of June 16, 2016 of approximately $3,867,000. After deducting future expenses and reserves, the balance is expected to be distributed to the Limited Partners in the future. There can be no assurance as to the amount and timing of such distribution, if any.

Low-income Housing Tax Credits and Historic Rehabilitation Tax Credits (collectively, the "Tax Credits"), which are subject to various limitations, may be used by the Limited Partners to offset federal income tax liabilities. Registrant generated total Tax Credits from investments in Local Partnerships of approximately $1,499 per Unit, net of circumstances which have given rise to recapture. The Ten Year Credit Period with respect to all of the Properties was fully exhausted as of December 31, 2005 and the Compliance Periods of the Local Partnerships had expired as of December 31, 2006. In a prior year, Registrant served a demand on the Local General Partners of all then remaining Local Partnerships to commence a sale process to dispose of the Properties. In the event a sale cannot be consummated, it is the General Partner's intention to sell or assign Registrant's Local Partnership Interest in Littleton. Registrant does not anticipate that it will receive any proceeds in connection with such sale or assignment and may incur certain costs in connection therewith.

None.

Item 6.       Selected Financial Data.

Registrant is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this Item.

Registrant admitted limited partners (the "Limited Partners") in three closings with aggregate Limited Partners' capital contributions of $55,746,000. In connection with the offering of the sale of units (the "Units"), Registrant incurred organization and offering costs of approximately $6,534,000 and established a working capital reserve of approximately $3,345,000. The remaining net proceeds of approximately $45,867,000 (the "Net Proceeds") were available to be applied to the acquisition of limited partner interests (the "Local Partnership Interest" or "Local Partnership Interests") in partnerships (the "Local Partnership" or "Local Partnerships") that own low-income multifamily residential complexes (the "Property" or "Properties") that qualified for the low-income housing tax credit (the "Low-income Housing Tax Credit") in accordance with Section 42 of the Internal Revenue Code (the "IRC"); one Local Partnership owned a Property that also qualified for the historic rehabilitation tax credit in accordance with IRC Section 47. The Net Proceeds were utilized in acquiring a Local Partnership Interest in fifty Local Partnerships. As of June 20, 2016, Registrant owns one of the fifty Local Partnership Interests initially acquired, Littleton Avenue Community Village, L.P. ("Littleton").

As of March 30, 2016, Registrant has cash and cash equivalents and investment in Pemberwick Fund, a short duration bond fund ("Pemberwick") totaling $4,024,433, which is available for operating expenses of Registrant and circumstances that may arise in connection with Littleton. Future sources of Registrant funds are expected to be primarily from interest earned on working capital.

During the year ended March 30, 2016, Registrant received cash from interest revenue, proceeds from the sale of certain Local Partnership Interests and one Property (see discussion below under Local Partnership Matters) and redemptions from Pemberwick, and utilized cash for operating expenses, investments in Pemberwick and distributions to partners. Cash and cash equivalents and investment in Pemberwick decreased, in the aggregate, by approximately $3,125,000 during the year ended March 30, 2016 (which includes the reclassification of unrealized gain on investment in Pemberwick of approximately $3,000 and an unrealized loss on investment in Pemberwick of approximately $3,000), primarily as the result of distributions to partners of approximately $4,223,000.  Payable to general partner and affiliates in the accompanying balance sheet as of March 30, 2016 represents accrued administration and management fees.

Registrant's operating results are dependent, in part, upon the operating results of the Local Partnerships and are impacted by the Local Partnerships' policies. In addition, the operating results herein are not necessarily the same for tax reporting. Registrant accounts for its investment in local partnerships in accordance with the equity method of accounting. Accordingly, the investment is carried at cost and is adjusted for Registrant's share of each Local Partnership's results of operations and by cash distributions received. In the event the operations of a Local Partnership result in a loss, equity in loss of each investment in Local Partnership allocated to Registrant is recognized to the extent of Registrant's investment balance in each Local Partnership. Equity in loss in excess of Registrant's investment balance in a Local Partnership is allocated to other partners' capital in any such Local Partnership. However, the combined statements of operations of the Local Partnerships reflected in Note 5 to Registrant's financial statements include the operating results of all remaining Local Partnerships in which Registrant owned an interest during the periods, irrespective of Registrant's investment balances (see discussion above in Item 2 - Properties). As a result of cumulative equity losses and distributions and the sale of certain Local Partnerships' Properties and/or Registrant's Local Partnership Interests, Registrant's investment in local partnerships reached a zero balance in a prior year.

Cumulative losses and cash distributions in excess of investment in local partnerships may result from a variety of circumstances, including a Local Partnership's accounting policies, subsidy structure, debt structure and operating deficits, among other things. Accordingly, cumulative losses and cash distributions in excess of the investment are not necessarily indicative of adverse operating results of a Local Partnership.

Registrant's operations for the years ended March 30, 2016 and 2015 resulted in net income of $176,387 and $4,518,605, respectively. The decrease is primarily attributable to (i) a decrease in gain on sale of limited partner interests/local partnership properties of approximately $4,300,000, (ii) a decrease in interest revenue of approximately $35,000 and (iii) a decrease in other income from local partnerships of approximately $23,000. Although total operating expenses remained consistent from year to year, administration and management fees decreased, in the aggregate, by approximately $78,000 and State of New Jersey filing fees increased by approximately $65,000. Other comprehensive loss for the year ended March 30, 2016 resulted from the reclassification of unrealized gain on investment in Pemberwick of $3,492 and an unrealized loss on investment in Pemberwick of $2,838.

The remaining Local Partnerships' net income of approximately $88,000 for the year ended December 31, 2015 includes gain on sale of property of approximately $826,000, depreciation and amortization expense of approximately $514,000 and interest on non-mandatory debt of approximately $241,000, and does not include principal payments on permanent mortgages of approximately $46,000. The remaining Local Partnerships' net income of approximately $8,402,000 for the year ended December 31, 2014 includes gain on sale of property of approximately $8,820,000, depreciation and amortization expense of approximately $1,312,000 and interest on non-mandatory debt of approximately $290,000, and does not include principal payments on permanent mortgages of approximately $515,000. The results of operations of the Local Partnerships for the year ended December 31, 2015 are not indicative of results that may be expected in future periods. Revenue and expense fluctuations from 2014 to 2015 have resulted from Registrant's sales of Local Partnership Interests and certain Local Partnerships' Property sales.

Registrant's primary objective, to provide Low-income Housing Tax Credits to the Limited Partners, has been completed.  The relevant state tax credit agency allocated each of the Local Partnerships an amount of Low-income Housing Tax Credits, which are generally available for a ten year period from the year the Property is placed in service (the "Ten Year Credit Period"). The Ten Year Credit Period was fully exhausted with respect to all of the Properties as of December 31, 2005. The required holding period of each Property, in order to avoid Low-income Housing Tax Credit recapture, is fifteen years from the year in which the Low-income Housing Tax Credits commence on the last building of the Property (the "Compliance Period"). The Compliance Period of all of the Local Partnerships had expired as of December 31, 2006. In addition, certain of the Local Partnerships entered into agreements with the relevant state tax credit agencies whereby the Local Partnerships must maintain the low-income nature of the Properties for a period which exceeds the Compliance Period (in certain circumstances, up to 50 years from when the Property is placed in service, but commonly 30 years from the date any such Property is placed in service), regardless of a sale of the Properties by the Local Partnerships after the Compliance Period (the "Extended Use Provisions"). Although the Extended Use Provisions do not extend the Compliance Period of the respective Local Partnerships, such provisions may limit the number and availability of potential purchasers of the Properties. Accordingly, a sale of a Property may happen well after the expiration of the Compliance Period and/or may be significantly discounted. Registrant has been in the process of disposing of its remaining Local Partnership Interests. As of June 20, 2016, Registrant owns one of the fifty Local Partnership Interests initially acquired. In a prior year, Registrant served a demand on the general partners of all then remaining Local Partnerships (the "Local General Partners") to commence a sale process to dispose of the Properties. In the event a sale cannot be consummated, it is the General Partner's intention to sell or assign Registrant's Local Partnership Interest in Littleton. Registrant does not anticipate that it will receive any proceeds in connection with such sale or assignment and may incur certain costs in connection therewith. Registrant intends to dissolve after the final disposition of its Local Partnership Interest in Littleton; there can be no assurance as to when such final disposition will occur.

Littleton owns a 102 unit subsidized and leveraged low-income multifamily residential complex located in Newark, New Jersey. The non-mandatory mortgages of Littleton matured in October 2006 but have not been repaid or formally extended. During the year ended March 30, 2015, the first mortgage holder (the "Lender") issued a declaration of default demanding Littleton's immediate payment of an amount in excess of $6.5 million. Such amount includes all unpaid principal and accrued interest to date and amounts for real estate tax liens that had been sold to third parties and were redeemed by the Lender. Unpaid principal and accrued interest on the second mortgage as of March 30, 2016 is in excess of $3.1 million. Littleton's Local General Partner reports that a refinancing of the mortgages is unlikely and the Lender has issued a request for offers to purchase the first mortgage. Registrant has no legal obligation to fund any of Littleton's operating deficits.

During the year ended March 30, 2016, Registrant sold its Local Partnership Interests in Hill Com I Associates Limited Partnership and Hill Com II Associates Limited Partnership (collectively the "Hill Com Local Partnerships") to one of the Local General Partners of the Hill Com Local Partnerships; there were no proceeds in connection with the sale. The Hill Com Local Partnerships have the same Local General Partners.

During the year ended March 30, 2016, Registrant sold its Local Partnership Interest in Patton Place Limited Partnership ("Patton Place") to an affiliate of the Local General Partners of Patton Place. Registrant received $45,000 in connection with the sale; such amount is included in gain on sale of limited partner interests/local partnership properties in the accompanying statement of operations and comprehensive income (loss) for the year ended March 30, 2016.

During the year ended March 30, 2016, 1989 Westview Arms Limited Partnership ("Westview Arms") sold its underlying Property to an unaffiliated entity. Registrant received $378,124 in connection with the sale; such amount is included in gain on sale of limited partner interests/local partnership properties in the accompanying statement of operations and comprehensive income (loss) for the year ended March 30, 2016. Westview Arms has since been dissolved.

Inflation is not expected to have a material adverse impact on Registrant's operations.

Registrant is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this Item.

Registrant does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on Registrant's financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

The accompanying financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), which requires Registrant to make certain estimates and assumptions. A summary of significant accounting policies is provided in Note 1 to the accompanying financial statements. The following section is a summary of certain aspects of those accounting policies that may require subjective or complex judgments and are most important to the portrayal of Registrant's financial condition and results of operations. Registrant believes that there is a low probability that the use of different estimates or assumptions in making these judgments would result in materially different amounts being reported in the accompanying financial statements.

As a cautionary note, with the exception of historical facts, the matters discussed in this Annual Report on Form 10-K are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Forward-looking statements may relate to, among other things, current expectations, forecasts of future events, future actions, future performance generally, business development activities, capital expenditures, strategies, the outcome of contingencies, future financial results, financing sources and availability and the effects of regulation and competition. Words such as "anticipate," "expect," "intend," "plan," "seek," "estimate" and other words and terms of similar meaning in connection with discussions of future operating or financial performance signify forward-looking statements. Registrant may also provide written forward-looking statements in other materials released to the public. Such statements are made in good faith by Registrant pursuant to the "Safe Harbor" provisions of the Reform Act. Registrant undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Such forward-looking statements involve known risks, uncertainties and other factors that may cause Registrant's actual results of operations or actions to be materially different from future results of operations or actions expressed or implied by the forward-looking statements.

Registrant is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this Item.

AMERICAN TAX CREDIT PROPERTIES II L.P.

Item 8.       Financial Statements and Supplementary Data.

 

 

No financial statement schedules are included because of the absence of the conditions under which they are required or because the information is included in the financial statements or the notes thereto.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Partners

American Tax Credit Properties II L.P.

We have audited the accompanying balance sheets of American Tax Credit Properties II L.P. (the "Partnership") as of March 30, 2016 and 2015, and the related statements of operations and comprehensive income (loss), changes in partners' equity (deficit) and cash flows for the years then ended. The Partnership's management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of American Tax Credit Properties II L.P. as of March 30, 2016 and 2015 and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

New York, New York

June 20, 2016

AMERICAN TAX CREDIT PROPERTIES II L.P.

BALANCE SHEETS

MARCH 30, 2016 AND 2015

 

 

See Notes to Financial Statements.

AMERICAN TAX CREDIT PROPERTIES II L.P.

STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

YEARS ENDED MARCH 30, 2016 AND 2015

 

See Notes to Financial Statements.

AMERICAN TAX CREDIT PROPERTIES II L.P.

STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT)

YEARS ENDED MARCH 30, 2016 AND 2015

 

See Notes to Financial Statements.

AMERICAN TAX CREDIT PROPERTIES II L.P.

STATEMENTS OF CASH FLOWS

YEARS ENDED MARCH 30, 2016 AND 2015

 

 

See reconciliation of net income to net cash used in operating activities on page 20.

See Notes to Financial Statements.

AMERICAN TAX CREDIT PROPERTIES II L.P.

STATEMENTS OF CASH FLOWS - CONTINUED

YEARS ENDED MARCH 30, 2016 AND 2015

 

See Notes to Financial Statements.

AMERICAN TAX CREDIT PROPERTIES II L.P.

NOTES TO FINANCIAL STATEMENTS

MARCH 30, 2016 AND 2015

1.	Organization, Purpose and Summary of Significant Accounting Policies

American Tax Credit Properties II L.P. (the "Partnership") was formed on October 26, 1988 and the Certificate of Limited Partnership of the Partnership was filed under the Delaware Revised Uniform Limited Partnership Act.  There was no operating activity until admission of the limited partners (the "Limited Partners") on June 28, 1989.  The Partnership was formed to invest primarily in leveraged low-income multifamily residential complexes (the "Property" or "Properties") that qualified for the low-income housing tax credit (the "Low-income Housing Tax Credit") in accordance with Section 42 of the Internal Revenue Code (the "IRC"), through the acquisition of limited partner equity interests (the "Local Partnership Interest" or "Local Partnership Interests") in partnerships (the "Local Partnership" or "Local Partnerships") that are the owners of the Properties. The Partnership invested in one Local Partnership whose Property also qualified for the historic rehabilitation tax credit in accordance with IRC Section 47.  Such interests were acquired in 1989 and 1990. Richman Tax Credit Properties II L.P. (the "General Partner") was formed on October 26, 1988 to act as the General Partner of the Partnership.

The Partnership's records are maintained on the accrual basis of accounting for both financial reporting and tax purposes. For financial reporting purposes, the Partnership's fiscal year ends March 30 and its quarterly periods end June 29, September 29 and December 30. The Local Partnerships have a calendar year for financial reporting purposes. The Partnership and the Local Partnerships each have a calendar year for income tax purposes.

The Partnership accounts for its investment in local partnerships in accordance with the equity method of accounting, under which the investment is carried at cost and is adjusted for the Partnership's share of each Local Partnership's results of operations and by cash distributions received. Equity in loss of each investment in Local Partnership allocated to the Partnership is recognized to the extent of the Partnership's investment balance in each Local Partnership. Equity in loss in excess of the Partnership's investment balance in a Local Partnership is allocated to other partners' capital in any such Local Partnership. Previously unrecognized equity in loss of any Local Partnership is recognized in the fiscal year in which equity in income is earned by such Local Partnership or additional investment is made by the Partnership. Distributions received subsequent to the elimination of an investment balance for any such investment in a Local Partnership are recorded as other income from local partnerships. As a result of cumulative equity losses and distributions and the sale of certain Local Partnerships' Properties and/or the Partnership's Local Partnership Interests, the Partnership's investment in local partnerships reached a zero balance in a prior year.

The Partnership assessed the carrying value (the "Carrying Value") of its investment in local partnerships at least annually in the fourth quarter of its fiscal year or whenever there were indications that a permanent impairment may have occurred. If the Carrying Value of an investment in a Local Partnership exceeded the estimated value derived by management, the Partnership reduced its investment in any such Local Partnership (unless the impairment was considered to be temporary) and included such reduction in equity in income (loss) of investment in local partnerships. Impairment was measured by comparing the investment carrying amount to the estimated residual value of the investment.

The Partnership does not consolidate the accounts and activities of the Local Partnerships, which are considered Variable Interest Entities as defined by the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 810; Subtopic 10, because the Partnership is not considered the primary beneficiary.  The Partnership's balance in investment in local partnerships represents the maximum exposure to loss in connection with such investments. The Partnership's exposure to loss on the Local Partnerships is mitigated by the condition and financial performance of the underlying Properties as well as the financial strength of the general partners of the Local Partnerships (the "Local General Partners"). In addition, the Local Partnerships' partnership agreements grant the Local General Partners the power to direct the activities that most significantly impact the Local Partnerships' economic success. As described above, the Partnership's investment in local partnerships has a zero balance.

Advances and additional capital contributions (collectively the "Advances") that are not required under the terms of the Local Partnerships' partnership agreements but which are made to the Local Partnerships are recorded as investment in local partnerships. Certain Advances are considered by the Partnership to be voluntary loans to the respective Local Partnerships and the Partnership may be reimbursed at a future date to the extent such Local Partnerships generate distributable cash flow or receive proceeds from sale or refinancing.

AMERICAN TAX CREDIT PROPERTIES II L.P.

NOTES TO FINANCIAL STATEMENTS - CONTINUED

MARCH 30, 2016 AND 2015

1.	Organization, Purpose and Summary of Significant Accounting Policies (Continued)

The Partnership considers all highly liquid investments purchased with an original maturity of three months or less at the date of acquisition to be cash equivalents. Cash and cash equivalents are stated at cost, which approximates market value.

ASC Topic 820 clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing the asset or liability and establishes the following fair value hierarchy:

 

For instances in which the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the fair value measurement will fall within the lowest level input that is significant to the fair value measurement in its entirety.

The Partnership carries its investment in Pemberwick Fund ("Pemberwick"), an investment grade institutional short duration bond fund, at estimated fair value. Realized gains (losses) are included in (offset against) interest revenue. Investment in Pemberwick is classified as available-for-sale and unrealized gains (losses) are included as items of comprehensive income (loss) and are reported as a separate component of partners' equity (deficit).

The Partnership is a pass-through entity for income tax purposes and, as such, is not subject to income taxes. Rather, all items of taxable income and deductions are passed through to and are reported by its partners 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 (the "IRS") and other taxing authorities. Income tax returns filed by the Partnership are subject to examination by the IRS for a period of three years. While no Partnership income tax returns are currently being examined by the IRS, tax years subsequent to 2011 remain subject to examination. 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. In accordance with ASC Topic 740; Subtopic 10, the Partnership has included in Note 7 disclosures related to differences in the financial and tax bases of accounting.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

AMERICAN TAX CREDIT PROPERTIES II L.P.

NOTES TO FINANCIAL STATEMENTS - CONTINUED

MARCH 30, 2016 AND 2015

2.	Capital Contributions and Distributions

On June 14, 1989, the Partnership commenced the offering of units (the "Units") through Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Selling Agent"). On June 28, 1989, July 31, 1989 and September 22, 1989, under the terms of the Amended and Restated Agreement of Limited Partnership of the Partnership (the "Partnership Agreement"), the General Partner admitted the Limited Partners to the Partnership in three closings.  At these closings, subscriptions for a total of 55,746 Units representing $55,746,000 in Limited Partners' capital contributions were accepted. In connection with the offering of Units, the Partnership incurred organization and offering costs of $6,534,064, of which $75,000 was capitalized as organization costs and $6,459,064 was charged to the Limited Partners' equity as syndication costs. The General Partner contributed $100 to the Partnership.

Net income is allocated 99% to the Limited Partners and 1% to the General Partner in accordance with the Partnership Agreement. Net income (loss) in the year of dissolution of the Partnership will be allocated to the partners as described in the dissolution provisions of the Partnership Agreement. During the year ended March 30, 2016, the Partnership made a distribution to the Limited Partners in the amount of approximately $75 per Unit ($4,180,950) to Unit holders of record as of February 28, 2015; the pro-rata distribution to the General Partner was $42,232. During the year ended March 30, 2015, the Partnership paid nonresident state withholding taxes of $31,810 on behalf of certain of the Limited Partners in connection with gains recognized by a Local Partnership for the year ended December 31, 2013. The Partnership also made a distribution to the Limited Partners in the amount of approximately $50 per Unit (an additional $2,755,400). The $50 per Unit includes the nonresident state withholding taxes referred to above; the pro-rata distribution to the General Partner was $28,155. As a result of gains recognized in connection with the sale of its underlying Property during the year ended December 31, 2014, Lakeside Housing Limited Partnership ("Lakeside Housing") was required to pay nonresident state withholding taxes of $258,043 and $2,607 on behalf of the Limited Partners and the General Partner, respectively (see Note 5).

3.	Cash and Cash Equivalents

As of March 30, 2016, the Partnership has $560,502 in cash and cash equivalents. Of such amount, $264,890 is held in accounts at two financial institutions in which such accounts are insured up to $250,000 at each institution by the Federal Deposit Insurance Corporation (the "FDIC"). The entire amount is FDIC insured as of March 30, 2016. The remaining $295,612 is held in an account at a financial institution in which such amount is invested in a portfolio of securities that are direct obligations of the U.S. Treasury and are backed by the full faith and credit of the United States of America.

4.	Investment in Pemberwick Fund

The Partnership carries its investment in Pemberwick, an investment grade institutional short duration bond fund, at estimated fair value. Pemberwick was organized in February 2010 as a non-diversified open-end management investment company registered under the Investment Company Act of 1940, as amended, that seeks maximum current income consistent with liquidity and stability of principal. In selecting a portfolio of securities for Pemberwick, the investment advisor of Pemberwick (the "Advisor") will select investments so that 95% of Pemberwick's assets will be rated "A-" or better by a nationally recognized statistical rating organization ("NRSRO") such as Moody's Investor Services, Inc. ("Moody's") and/or by Standard & Poor's Financial Services, LLC ("S&P") (or if commercial paper rated in the highest category) or, if a rating is not available, deemed to be of comparable quality by the Advisor, or securities issued by banking institutions operating in the United States and having assets in excess of $200 billion.

The weighted average duration of Pemberwick's assets is approximately 1.57 years as of March 30, 2016. Redemptions from Pemberwick are immediately liquid and unrestricted. Pemberwick's net asset value ("NAV") is $10.04 and $10.06 per share as of March 30, 2016 and 2015, respectively. The Partnership's investment in Pemberwick as of March 30, 2016 and 2015 is $3,463,931 and $6,884,812, respectively. An unrealized loss of $666 as of March 30, 2016 is reflected as accumulated other comprehensive loss in the accompanying balance sheet as of March 30, 2016. The Partnership has earned $283,934 of interest revenue from the date of its initial investment in Pemberwick through March 30, 2016. The fair value of the Partnership's investment in Pemberwick is classified within Level 1 of the fair value hierarchy of the guidance on Fair Value Measurements (see Note 1). Pemberwick's NAV was $10.04 as of May 31, 2016.

AMERICAN TAX CREDIT PROPERTIES II L.P.

NOTES TO FINANCIAL STATEMENTS - CONTINUED

MARCH 30, 2016 AND 2015

4.	Investment in Pemberwick Fund (Continued)

The Advisor is an affiliate of the General Partner. For its services, the Advisor is entitled to receive an annual advisory fee of 0.50% of the average daily net assets of Pemberwick. The Advisor may, in its discretion, voluntarily waive its fees or reimburse certain Pemberwick expenses; however, the Advisor is not required to do so. The Advisor has waived 70% of its fee earned since Pemberwick's inception and earned $3,075 and $7,913 in connection with the Partnership's investment in Pemberwick for the years ended March 30, 2016 and 2015, respectively, enough to cover its direct costs. The Advisor's asset management affiliate, Richman Asset Management, Inc. ("RAM") has agreed to reduce its administration and management fees (see Note 6) payable by the Partnership to the extent any fee of the Advisor payable by Pemberwick would be duplicative of any profit that RAM would receive from the Partnership.

5.	Investment in Local Partnerships

The Partnership initially acquired a Local Partnership Interest in fifty Local Partnerships. As of March 30, 2016, the Partnership owns a 99% Local Partnership Interest in only one Local Partnership, Littleton Avenue Community Village, L.P. ("Littleton").

In connection with the initial purchase of fifty Local Partnership Interests, under the terms of the partnership agreement of each Local Partnership, as of March 30, 2016 the Partnership is committed to make capital contributions in the aggregate of $48,460,126, which includes Advances to certain Local Partnerships and all of which has been paid.

Littleton owns a 102 unit subsidized and leveraged low-income multifamily residential complex located in Newark, New Jersey. The required holding period of each Property, in order to avoid Low-income Housing Tax Credit recapture, is fifteen years from the year in which the Low-income Housing Tax Credits commence on the last building of the Property (the "Compliance Period"). The Compliance Periods of all the Local Partnerships expired in a prior year. The rents of Littleton are subject to specific laws, regulations and agreements with federal and state agencies. As of December 31, 2015, Littleton has outstanding mortgage loans payable totaling approximately $4,303,000 and accrued interest payable on such loans totaling approximately $5,180,000, which are secured by security interests and liens common to mortgage loans on Littleton's real property and other assets.

The non-mandatory mortgages of Littleton matured in October 2006 but have not been repaid or formally extended. During the year ended March 30, 2015, the first mortgage holder (the "Lender") issued a declaration of default demanding Littleton's immediate payment of an amount in excess of $6.5 million. Such amount includes all unpaid principal and accrued interest to date and amounts for real estate tax liens that had been sold to third parties and were redeemed by the Lender. Unpaid principal and accrued interest on the second mortgage as of March 30, 2016 is in excess of $3.1 million. Littleton's Local General Partner reports that a refinancing of the mortgages is unlikely and the Lender has issued a request for offers to purchase the first mortgage. The Partnership has no legal obligation to fund any of Littleton's operating deficits.

During the year ended March 30, 2016, the Partnership sold its Local Partnership Interests in Hill Com I Associates Limited Partnership and Hill Com II Associates Limited Partnership (collectively the "Hill Com Local Partnerships") to one of the Local General Partners of the Hill Com Local Partnerships; there were no proceeds in connection with the sale. The Hill Com Local Partnerships have the same Local General Partners.

During the year ended March 30, 2016, the Partnership sold its Local Partnership Interest in Patton Place Limited Partnership ("Patton Place") to an affiliate of the Local General Partners of Patton Place. The Partnership received $45,000 in connection with the sale; such amount is included in gain on sale of limited partner interests/local partnership properties in the accompanying statement of operations and comprehensive income (loss) of the Partnership for the year ended March 30, 2016.

During the year ended March 30, 2016, 1989 Westview Arms Limited Partnership ("Westview Arms") sold its underlying Property to an unaffiliated entity, in connection with which Westview Arms recognized a gain of $826,288; such amount is reflected as gain on sale of property in the combined statement of operations of the Local Partnerships for the year ended December 31, 2015 herein Note 5.  The Partnership received $378,124 in connection with the sale; such amount is included in gain on sale of limited partner interests/local partnership properties in the accompanying statement of operations and comprehensive income (loss) of the Partnership for the year ended March 30, 2016. Westview Arms has since been dissolved.

AMERICAN TAX CREDIT PROPERTIES II L.P.

NOTES TO FINANCIAL STATEMENTS - CONTINUED

MARCH 30, 2016 AND 2015

5.	Investment in Local Partnerships (Continued)

During the year ended March 30, 2013, the Partnership sold its Local Partnership Interest in North Hills Farms Limited Partnership ("North Hills Farms") to affiliates of the Local General Partners of North Hills Farms for $3,586,431 under the terms of a purchase agreement (the "North Hills Farms Purchase Agreement"). The Partnership recognized a gain of $2,185,051 in connection with the sale.  During the year ended March 30, 2014, after further resolution of the accounts of North Hills Farms under the terms of the North Hills Farms Purchase Agreement, the sale price was increased by $28,364; such amount was recognized by the Partnership as gain on sale of limited partner interests/local partnership properties during the year ended March 30, 2014. The adjustment to the sale price was later reduced by $7,544; such amount is included in gain on sale of limited partner interests/local partnership properties in the accompanying statement of operations and comprehensive income (loss) of the Partnership for the year ended March 30, 2015.

During the year ended March 30, 2015, the Partnership sold its Local Partnership Interest in Village Creek Limited Partnership ("Village Creek") to an affiliate of the Local General Partner of Village Creek; there were no proceeds in connection with the sale. However, the Partnership received $12,000 for distributions that were due to the Partnership under the terms of the Village Creek partnership agreement. Such amount is included in other income from local partnerships in the accompanying statement of operations and comprehensive income (loss) of the Partnership for the year ended March 30, 2015 (see Note 1).

During the year ended March 30, 2015, the Partnership sold its Local Partnership Interests in Batesville Family, L.P. ("Batesville Family"), Canton Partners, L.P., Lawrence Road Properties, Ltd. ("Lawrence Road"), Magee Elderly, L.P. and Purvis Heights Properties, L.P. ("Purvis Heights") to an affiliate of the Local General Partner of such Local Partnerships for a total of $58,095; such amount is included in gain on sale of limited partner interests/local partnership properties in the accompanying statement of operations and comprehensive income (loss) of the Partnership for the year ended March 30, 2015. In addition, the Partnership received $4,683 for distributions that were due to the Partnership under the terms of the partnership agreements of such Local Partnerships; such amount is included in other income from local partnerships in the accompanying statement of operations and comprehensive income (loss) of the Partnership for the year ended March 30, 2015 (see Note 1). Such Local Partnerships have the same Local General Partner. The 99% Local Partnership Interests in Batesville Family, Lawrence Road and Purvis Heights were acquired along with American Tax Credit Properties III L.P. ("ATCP III"), an investment partnership whose general partner is an affiliate of the General Partner, whereby the Partnership owned 37.25%. ATCP III sold its interest in Batesville Family, Lawrence Road and Purvis Heights as part of the same transaction.

During the year ended March 30, 2015, Lakeside Housing sold its underlying Property to an unaffiliated entity, in connection with which Lakeside Housing recognized a gain of $8,820,227; such amount is reflected as gain on sale of property in the combined statement of operations of the Local Partnerships for the year ended December 31, 2014 herein Note 5.  The Partnership received $4,375,493 in connection with the sale, of which $869,404 was received during the year ended March 30, 2016 and is reflected as due from local partnerships in the accompanying balance sheet of the Partnership as of March 30, 2015.  In addition, Lakeside Housing was required to pay taxes directly to the State and County in which the Property is located totaling $260,650 on behalf of the partners of the Partnership (see Note 2); such amount is included in distributions to partners in the accompanying financial statements of the Partnership as of and for the year ended March 30, 2015. The Partnership recognized a gain on the sale of $4,636,143; such amount is included in gain on sale of limited partner interests/local partnership properties in the accompanying statement of operations and comprehensive income (loss) of the Partnership for the year ended March 30, 2015. Lakeside Housing has since been dissolved.

During the year ended March 30, 2015, the Partnership sold its Local Partnership Interests in Browning Road Phase I, L.P., Lexington Estates Ltd., A Mississippi Limited Partnership, Lula Courts Ltd., L.P. and Tchula Courts Apartments, L.P. to an affiliate of the Local General Partner of such Local Partnerships for a total of $15,000; such amount is included in gain on sale of limited partner interests/local partnership properties in the accompanying statement of operations and comprehensive income (loss) of the Partnership for the year ended March 30, 2015. Such Local Partnerships have the same Local General Partner.

During the year ended March 30, 2015, the Partnership sold its Local Partnership Interests in DeQueen Villas Limited Partnership and Eudora Manor Limited Partnership to unaffiliated entities for a total of $21,350; such amount is included in gain on sale of limited partner interests/local partnership properties in the accompanying statement of operations and comprehensive income (loss) of the Partnership for the year ended March 30, 2015. Such Local Partnerships have the same Local General Partners.

AMERICAN TAX CREDIT PROPERTIES II L.P.

NOTES TO FINANCIAL STATEMENTS - CONTINUED

MARCH 30, 2016 AND 2015

5.	Investment in Local Partnerships (Continued)

During the year ended March 30, 2014, the Partnership sold its Local Partnership Interest in Auburn Hills Apartments Limited Partnership ("Auburn Hills") to an affiliate of the Local General Partner of Auburn Hills. Although the Partnership received no proceeds in connection with the sale, the Partnership received $1,500 during the year ended March 30, 2015 for distributions that were due to the Partnership under the terms of the partnership agreement of Auburn Hills. Such amount was recognized by the Partnership as other income from local partnerships for the year ended March 30, 2014 (see Note 1).

During the year ended March 30, 2014, the Partnership sold its Local Partnership Interests in Eagle View, Ltd. and Summers Village Limited Partnership to the Local General Partner of such Local Partnerships or affiliates thereof for a total of $20,767; such amount was recognized by the Partnership as gain on sale of limited partner interests/local partnership properties during the year ended March 30, 2014. In addition, the Partnership received $14,233 for distributions that were due to the Partnership under the terms of the partnership agreements of such Local Partnerships; such amount was recognized by the Partnership as other income from local partnerships during the year ended March 30, 2014 (see Note 1). The total proceeds of $35,000 were received during the year ended March 30, 2015. The Local General Partners of such Local Partnerships are affiliates of each other.

Equity in loss of investment in local partnerships is limited to the Partnership's investment balance in each Local Partnership; any excess is applied to other partners' capital in any such Local Partnership (see Note 1). The amount of such excess losses applied to other partners' capital was $660,096 and $929,412 for the years ended December 31, 2015 and 2014, respectively, as reflected in the combined statements of operations of the Local Partnerships herein Note 5.

The differences between the Partnership's investment in local partnerships as of March 30, 2016 and 2015 and the amounts reflected as the Partnership's investment balance in the combined balance sheets of the Local Partnerships as of December 31, 2015 and 2014 herein Note 5 are as follows:

The combined balance sheets of the Local Partnerships as of December 31, 2015 and 2014 and the combined statements of operations of the Local Partnerships for the years then ended are reflected on pages 27 and 28, respectively. The combined balance sheets of the Local Partnerships as of December 31, 2015 and 2014 do not include any balances in connection with the Local Partnerships in which the Partnership no longer owns an interest as of such dates, while the combined statements of operations of the Local Partnerships for the years then ended include the results of operations of such Local Partnerships for the period prior to the sales or other dispositions (see discussion above herein Note 5). The combined balance sheet of the Local Partnerships as of December 31, 2015 only includes balances for Littleton.

AMERICAN TAX CREDIT PROPERTIES II L.P.

NOTES TO FINANCIAL STATEMENTS - CONTINUED

MARCH 30, 2016 AND 2015

The combined balance sheets of the Local Partnerships as of December 31, 2015 and 2014 are as follows:

 

 

AMERICAN TAX CREDIT PROPERTIES II L.P.

NOTES TO FINANCIAL STATEMENTS - CONTINUED

MARCH 30, 2016 AND 2015

The combined statements of operations of the Local Partnerships for the years ended December 31, 2015 and 2014 are as follows:

*The allocations of income in 2015 and 2014 are from Westview Arms and Lakeside Housing, respectively, whose Properties were sold. Because the Partnership's investment in such Local Partnerships had reached a zero balance prior to the income allocation, the Partnership has recognized income only to the extent of proceeds received, to be received or paid on behalf of the Partnership in connection with the sales (see discussion above herein Note 5).

AMERICAN TAX CREDIT PROPERTIES II L.P.

NOTES TO FINANCIAL STATEMENTS - CONTINUED

MARCH 30, 2016 AND 2015

6.	Transactions with General Partner and Affiliates

Pursuant to the terms of the Partnership Agreement, the Partnership incurs an annual management fee (the "Management Fee") and an annual additional management fee (the "Additional Management Fee") payable to the General Partner for its services in connection with the management of the affairs of the Partnership. The annual Management Fee is equal to the greater of $100,000 or .14% of Invested Assets (as such term is defined in the Partnership Agreement), while the annual Additional Management Fee is equal to .06% of Invested Assets. The cumulative total of the management fees and administration fees (see discussion below herein Note 6) is limited to 0.5% of Invested Assets. The Partnership incurred Management Fees of $34,223 and $64,079 for the years ended March 30, 2016 and 2015, respectively, and Additional Management Fees of $3,165 and $12,295 for the years ended March 30, 2016 and 2015, respectively. Such amounts are aggregated and reflected under the caption management fees - affiliate in the accompanying statements of operations and comprehensive income (loss). Unpaid Management Fees and Additional Management Fees in the cumulative amount of $11,800 and $16,912 are included in payable to general partner and affiliates in the accompanying balance sheets as of March 30, 2016 and 2015, respectively.

In addition, pursuant to the terms of the Partnership Agreement, the Partnership is authorized to contract for administrative services provided to the Partnership. From the inception of the Partnership through November 23, 1999, such administrative services were provided by ML Fund Administrators Inc. ("MLFA"), an affiliate of the Selling Agent, pursuant to an Administrative Services Agreement. MLFA resigned the performance of its basic services under the Administrative Services Agreement effective November 23, 1999, with certain transitional services continued through April 30, 2000. The General Partner transitioned the administrative services to RAM without any changes to the terms of the Administrative Services Agreement. Pursuant to such agreement, the Partnership incurs an annual administration fee (the "Administration Fee") and an annual additional administration fee (the "Additional Administration Fee") for administrative services provided to the Partnership. The annual Administration Fee is equal to the greater of $100,000 or .14% of Invested Assets, while the annual Additional Administration Fee is equal to .06% of Invested Assets. The cumulative total of the administration fees and management fees is limited as described above herein Note 6. The Partnership incurred Administration Fees of $34,223 and $64,079 for the years ended March 30, 2016 and 2015, respectively, and Additional Administration Fees of $3,165 and $12,295 for the years ended March 30, 2016 and 2015, respectively. Such amounts are aggregated and reflected under the caption administration fees - affiliate in the accompanying statements of operations and comprehensive income (loss). Unpaid Administration Fees and Additional Administration Fees in the cumulative amount of $8,023 and $17,039 are included in due to general partner and affiliates in the accompanying balance sheets as of March 30, 2016 and 2015, respectively.

 

AMERICAN TAX CREDIT PROPERTIES II L.P.

NOTES TO FINANCIAL STATEMENTS - CONTINUED

MARCH 30, 2016 AND 2015

7.	Taxable Income

A reconciliation of the financial statement net income of the Partnership for the years ended March 30, 2016 and 2015 to the tax return income for the years ended December 31, 2015 and 2014 is as follows:

The differences between investment in local partnerships for financial reporting and tax purposes as of December 31, 2015 and 2014 are as follows:

Payable to general partner and affiliate in the accompanying balance sheets represents accrued Management Fees and Administration Fees, which are not deductible for tax purposes until paid pursuant to IRC Section 267.

AMERICAN TAX CREDIT PROPERTIES II L.P.

NOTES TO FINANCIAL STATEMENTS - CONTINUED

MARCH 30, 2016 AND 2015

8.	Fair Value of Financial Instruments

The estimated fair value amounts have been determined using available market information, assumptions, estimates and valuation methodologies.

The carrying amount approximates fair value.

 

The estimated fair value of Pemberwick is based on current market quotes received from active markets. Pemberwick's NAV is calculated and published daily (see Note 4).

 

The Partnership assessed the Carrying Value of its investment in local partnerships at least annually in the fourth quarter of its fiscal year or whenever there were indications that a permanent impairment may have occurred. If the Carrying Value of an investment in a Local Partnership exceeded the estimated value derived by management, the Partnership reduced its investment in any such Local Partnership (unless the impairment was considered to be temporary) and included such reduction in equity in income (loss) of investment in local partnerships. Impairment was measured by comparing the investment carrying amount to the estimated residual value of the investment. The investment in local partnerships, carried at zero as of March 30, 2016, approximates fair value. Although the investment in local partnerships was carried at zero as of March 30, 2015, Westview Arms was able to negotiate a sale of its underlying Property during the year ended March 30, 2016 (see Note 5).

 

None.

Item 9A.    Controls and Procedures.

Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed by Registrant in reports that Registrant files or submits under the Exchange Act is recorded, processed, summarized and timely reported as provided in SEC rules and forms. Registrant periodically reviews the design and effectiveness of its disclosure controls and procedures, including compliance with various laws and regulations that apply to its operations. Registrant makes modifications to improve the design and effectiveness of its disclosure controls and procedures, and may take other corrective action, if its reviews identify a need for such modifications or actions. In designing and evaluating the disclosure controls and procedures, Registrant recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

 

Registrant has carried out an evaluation, under the supervision and the participation of its management, including the Chief Executive Officer and Chief Financial Officer of Richman Tax Credits, of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act), as of the year ended March 30, 2016. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer of Richman Tax Credits concluded that Registrant's disclosure controls and procedures were effective as of March 30, 2016.

Registrant is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer of Richman Tax Credits, Registrant conducted an evaluation of the effectiveness of its internal control over financial reporting based on the framework set forth in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 1992 and updated in 2013. Based on its evaluation, management has concluded that Registrant's internal control over financial reporting was effective as of March 30, 2016.

This Annual Report does not include an attestation report of Registrant's independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by Registrant's independent registered public accounting firm pursuant to rules of the SEC that permit Registrant to provide only management's report in this Annual Report.

There were no changes in Registrant's internal control over financial reporting during the three months ended March 30, 2016 that have materially affected, or are reasonably likely to materially affect, Registrant's internal control over financial reporting.

None.

PART III

Registrant has no officers or directors. The General Partner manages Registrant's affairs and has general responsibility and authority in all matters affecting its business. The responsibilities of the General Partner are currently carried out by Richman Tax Credits. The executive officers and director of Richman Tax Credits are:

¹Director holds office until his successor is elected and qualified. All officers serve at the pleasure of the Director.

Richard Paul Richman, age 68, is the sole Director of Richman Tax Credits. Mr. Richman is the Chairman and a stockholder of Richman Group. Mr. Richman is involved in the syndication, development and management of residential property. Mr. Richman is also the sole director of Richman Housing Credits Inc., an affiliate of Richman Tax Credits and the general partner of the general partner of American Tax Credit Properties III L.P. and the sole director of Richman American Credit Corp., an affiliate of Richman Tax Credits and the manager of American Tax Credit Trust, a Delaware statutory business trust.

Brian Myers, age 52, is the President of Richman Tax Credits and the President of Richman Asset Management, Inc. ("RAM"), an affiliate of Richman Tax Credits. Mr. Myers has been employed by Richman Group or an affiliate since 1997 and is responsible for the overall asset management operations of RAM in connection with Registrant's investment in the Local Partnerships.

James Hussey, age 55, is a Vice President and the Treasurer of Richman Tax Credits. Mr. Hussey, the Treasurer of Richman Group, is engaged primarily in the finance operations of Richman Group. Mr. Hussey, a Certified Public Accountant, has been employed by Richman Group or an affiliate since 2009. In addition, Mr. Hussey is a Vice President and the Treasurer of RAM, engaged primarily in the asset management and finance operations of RAM.

Gina K. Dodge, age 60, is a Vice President and the Secretary of Richman Tax Credits and a Vice President and the Secretary of Richman Group. Ms. Dodge has been employed by Richman Group or an affiliate since 1988 and, as the Director of Investor Services, is responsible for communications with investors.

Charles L. Krafnick, age 54, is an Assistant Treasurer of Richman Tax Credits and an Assistant Treasurer of Richman Group. Mr. Krafnick, a Certified Public Accountant, has been employed by Richman Group or an affiliate since 1994 and is engaged primarily in the finance operations of Richman Group. In addition, Mr. Krafnick is an Assistant Treasurer of RAM. Mr. Krafnick's responsibilities in connection with RAM include various finance and asset management functions.

Registrant is not aware of any family relationship between the director and executive officers listed in this Item 10.

Registrant is not aware of the involvement in certain legal proceedings with respect to the director and executive officers listed in this Item 10.

Mr. Richman, Mr. Hussey and Mr. Krafnick serve on a committee that performs the functions of an audit committee on behalf of Registrant (the "Audit Committee"). Each of Mr. Richman, Mr. Hussey and Mr. Krafnick meets the qualifications of an audit committee financial expert. Mr. Richman, Mr. Hussey and Mr. Krafnick are not independent under the NASDAQ Stock Market independence standards; however Registrant believes that each exercises his judgment in the best interest of Registrant with respect to matters that would ordinarily be passed upon by an audit committee.

The Board of Director of Richman Tax Credits has adopted a code of ethics for senior financial officers of Registrant, applicable to Registrant's principal executive officer, principal financial officer and comptroller or principal accounting officer, or persons performing similar functions. Registrant will provide to any person without charge a copy of such code of ethics upon written request to the General Partner at 340 Pemberwick Road, Greenwich, Connecticut 06831, Attention: Secretary.

Registrant has no officers or directors. Registrant does not pay or accrue any fees, salaries or other forms of compensation to the officers or director of Richman Tax Credits and did not pay any such compensation during the years ended March 30, 2016 and 2015. During the years ended March 30, 2016 and 2015, Richman Tax Credits did not pay any compensation to any of its officers or its director. The director and certain officers of Richman Tax Credits receive compensation from certain affiliates of Richman Tax Credits for services performed for various affiliated entities which may include services performed for Registrant.

Under the terms of the Partnership Agreement, Registrant has entered into certain arrangements with the General Partner and certain of its affiliates which provide for compensation to be paid to the General Partner and certain of its affiliates. See Notes 4 and 6 to the audited financial statements included in Item 8 - Financial Statements and Supplementary Data of this Annual Report.

Tabular information concerning salaries, bonuses and other types of compensation payable to executive officers has not been included in this Annual Report. As noted above, Registrant has no executive officers. The levels of compensation payable to the General Partner and/or its affiliates is limited by the terms of the Partnership Agreement and may not be increased therefrom on a discretionary basis.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Prizm Investments and certain affiliates thereof, having the mailing address P.O. Box 47638, Phoenix, Arizona 85068, are the owners of 6,884 Units, representing approximately 12.35% of all such Units. As of June 8, 2016, no person or entity, other than Prizm Investments and certain affiliates thereof, was known by Registrant to be the beneficial owner of more than five percent of the Units.

Neither the General Partner, Richman Tax Credits nor the director or any officer of Richman Tax Credits own any Units.  Richman Tax Credits is wholly-owned by Richard Paul Richman.

The General Partner and certain of its affiliates are entitled to receive certain fees and reimbursement of expenses and have received/earned fees for services provided to Registrant as described in Notes 4 and 6 to the audited financial statements included in Item 8 - Financial Statements and Supplementary Data herein. Such fees will continue to be incurred by Registrant during the fiscal year ending March 30, 2017.

Pursuant to the terms of the Partnership Agreement, Registrant has specific rights and limitations in conducting business with the General Partner and affiliates. To date, Registrant has followed such provisions of the Partnership Agreement.  Registrant's unwritten policies for transacting business with related parties are to first refer to the Partnership Agreement in connection with conducting such business or making payments and then, if circumstances arise for which a new related party transaction is contemplated, present the proposed transaction to certain officers of Richman Tax Credits for review and approval. If any matter in connection with such transaction might be unclear under the terms of the Partnership Agreement, such matter is presented to general or outside counsel for review prior to any such transaction being entered into by Registrant. 

No officer or director of Richman Tax Credits or any affiliate of the foregoing was indebted to Registrant at any time during the years ended March 30, 2016 and 2015.

As discussed elsewhere in this Annual Report, Registrant does not have any directors, although as noted above Mr. Richman, Mr. Hussey and Mr. Krafnick serve on a committee that performs the functions of an audit committee on behalf of Registrant. Under NASDAQ Stock Market independence standards, Mr. Richman, Mr. Hussey and Mr. Krafnick would not be considered independent as they serve as director/officers of Richman Tax Credits. Although Mr. Richman, Mr. Hussey and Mr. Krafnick are not independent under NASDAQ rules, Registrant believes that each exercises his judgment in the best interest of Registrant with respect to matters that would ordinarily be passed upon by an audit committee.  Registrant is not a listed issuer whose securities are listed on a national securities exchange, or an inter-dealer quotation system which has requirements that a majority of the board of directors be independent, and Registrant is not required to have an audit committee which consists of independent directors and meets the other requirements of the Securities Exchange Act of 1934 and the rules promulgated thereunder.

Registrant's independent registered public accounting firm billed Registrant the following fees for professional services rendered in the years ended March 30, 2016 and 2015:

Audit fees consist of fees for the annual audit and review of Registrant's interim financial statements and review of documents filed with the SEC. Tax fees represent fees for annual tax return preparation and consulting. There were no other accounting fees incurred by Registrant in fiscal 2016 and 2015.

The Audit Committee has adopted a set of pre-approval policies and procedures under which, pursuant to the requirements of the Sarbanes-Oxley Act of 2002, all audit and permitted non-audit services to be performed by the independent registered public accounting firm require pre-approval by the Audit Committee. The Audit Committee approved all fiscal 2016 and 2015 principal accountant fees and services.

 

PART IV

(a)

Financial Statements, Financial Statement Schedules and Exhibits.

(1)

Financial Statements.

See Item 8 - Financial Statements and Supplementary Data.

(2)

Financial Statement Schedules.

No financial statement schedules are included because of the absence of the conditions under which  they are required or because the information is included in the financial statements or the notes thereto.

(3)

Exhibits.