Item 1. Business
General - -------
Independence Tax Credit Plus L.P. IV (the "Partnership") is a limited partnership which was formed under the laws of the State of Delaware on February 22, 1995. The general partner of the Partnership is Related Independence L.L.C., a Delaware limited liability company (the "General Partner").
On November 17, 2003, CharterMac, acquired CharterMac Capital LLC ("CharterMac Capital") (formerly known as Related Capital Company LLC), which is the parent of RCC Manager LLC, the managing member of the General Partner. Pursuant to the acquisition, CharterMac acquired controlling interests in the General Partner. This acquisition did not affect the Partnership or its day-to-day operations, as the majority of the General Partner's management team remained unchanged.
On November 8, 2005, CharterMac announced that Stuart J. Boesky would step down as Chief Executive Officer and trustee of CharterMac. Upon his resignation, which was effective on November 15, 2005, he also resigned from his position as Senior Vice President and Member of the General Partner. Mr. Boesky will stay on as a consultant to CharterMac for the next year in order to ensure a smooth transition. On March 14, 2006, CharterMac's Board of Trustees named Marc D. Schnitzer the Chief Executive Officer, effective immediately. Mr. Schnitzer replaced Stephen M. Ross, who had served as interim Chief Executive Officer since Stuart J. Boesky resigned in November of 2005. Mr. Schnitzer also replaced Mr. Boesky as Senior Vice President and Member of the General Partner.
On July 6, 1995, the Partnership commenced a public offering (the "Offering") of Beneficial Assignment Certificates ("BACs") representing assignments of limited partnership interests in the Partnership ("Limited Partnership Interests"), managed by Related Equities Corporation (the "Dealer Manager"), pursuant to a prospectus dated July 6, 1995 (the "Prospectus").
The Partnership has received $45,844,000 of aggregate purchase price of BACs excluding selling commissions, discounts or organization and offering expenses ("Gross Proceeds") of the Offering from 2,759 investors ("BACs holders"). The solicitation for the subscription of BACs was terminated as of May 22, 1996 and the final closing occurred on August 15, 1996.
The Partnership's business is primarily to invest in other partnerships ("Local Partnerships", "subsidiaries" or "subsidiary partnerships") owning leveraged apartment complexes that are eligible for the low-income housing tax credit ("Tax Credit") enacted in the Tax Reform Act of 1986, some of which may also be eligible for the historic rehabilitation tax credit ("Historic Tax Credit"). As of March 31, 2006, the Partnership has acquired an interest in fourteen Local Partnerships, all of which have been consolidated. The Partnership's investments in Local Partnerships represent from 98.99% to 99.89% interests except for one investment which is a 58.12% interest. As of March 31, 2006, the Partnership had invested approximately $37,555,000 (including approximately $902,000 classified as a loan repayable from sale/refinancing proceeds in accordance with the contribution agreement and not including acquisition fees of approximately $1,771,000) of the net proceeds of the Offering in fourteen Local Partnerships of which approximately $1,078,000 remains to be paid to the Local Partnerships (including approximately $539,000 being held in escrow) as certain benchmarks, such as occupancy level, are attained prior to the release of the funds. The Partnership does not intend to acquire interests in additional Local Partnerships, but the Partnership may be required to fund potential purchase price adjustments based on tax credit adjustor clauses. See Item 2, Properties, below.
The investment objectives of the Partnership are described below:
1. Entitle qualified BACs holders to Tax Credits over the period of the Partnership's entitlement to claim Tax Credits (for each Property, generally ten years from the date of investment or, if later, the date the Property is leased to qualified tenants; referred to herein as the "Credit Period") with respect to each Apartment Complex.
2. Preserve and protect the Partnership's capital.
3. Participate in any capital appreciation in the value of the Properties and provide distributions of Sale or Refinancing Proceeds upon the disposition of the Properties.
4. Allocate passive losses to individual BACs holders to offset passive income that they may realize from rental real estate investments and other passive activities, and allocate passive losses to corporate BACs holders to offset business income.
One of the Partnership's objectives is to entitle qualified BACs holders to Tax Credits over the Credit Period. Each of the Local Partnerships in which the Partnership has acquired an interest has been allocated by the relevant state credit agencies the authority to recognize Tax Credits during the Credit Period provided that the Local Partnership satisfies the rent restriction, minimum set-aside and other requirements for recognition of the Tax Credits at all times during such period. Once a Local Partnership has become eligible to recognize Tax Credits, it may lose such eligibility and suffer an event of "recapture" if its Property fails to remain in compliance with the Tax Credit requirements. None of the Local Partnerships in which the Partnership has acquired an interest has suffered an event of recapture.
There can be no assurance that the Partnership will achieve its investment objectives as described above.
The Partnership is subject to the risks incident to potential losses arising from the management and ownership of improved real estate and poor economic conditions.
The Tax Credits are attached to a subsidiary partnership ("Local Partnership") for the 10 year Credit Period and are transferable with the Property during the entirety of such ten year period. If trends in the real estate market warranted the sale of a Property, the remaining Tax Credits would transfer to the new owner, thereby adding value to the property on the market. However, such value
declines each year and is not included in the financial statement carrying amount. The Credit Periods are scheduled to expire at various times through December 31, 2010 with respect to the Local Partnerships depending upon when the Credit Period commenced.
A loss on impairment of assets is recorded when management estimates amounts recoverable through future operations and sale of the Property on an undiscounted basis are below depreciated cost. At that time the Property investments themselves are reduced to estimated fair value (generally using the discounted cash flow valuation method). Through March 31, 2006, the Partnership has not recorded any loss on impairment of assets or reduction to estimated fair value.
While the value of the remaining Tax Credits are a factor in calculating fair value, the expiration of the Tax Credit Period, in and of itself, is not the only factor in determining whether there is an impairment and generally does not have any adverse impact on the fair value of the Local Partnerships.
Segments - --------
The Partnership operates in one segment, which is the investment in multi-family residential property. Financial information about this segment is set forth in Item 8 hereto.
Competition - -----------
The real estate business is highly competitive and substantially all of the properties acquired by the Partnership are expected to have active competition from similar properties in their respective vicinities. In addition, various other limited partnerships may, in the future, be formed by the General Partner and/or its affiliates to engage in businesses which may be competitive with the Partnership.
Employees - ---------
The Partnership does not have any direct employees. All services are performed for the Partnership by the General Partner and its affiliates. The General Partner receives compensation in the connection with such activities as set forth in Items 11 and 13. In addition, the Partnership reimburses the General Partner and certain of its affiliates from expenses incurred in connection with the performance by their employees of services for the Partnership in accordance with the Partnership's Amended and Restated Agreement of Limited Partnership (the "Partnership Agreement").
Item 1A.
Item 1A. Risk Factors
The Partnership's investment as a limited partner in the Local Partnerships is subject to the risks of potential losses arising from management and ownership of improved real estate. The Partnership's investments also could be adversely affected by poor economic conditions generally, which could increase vacancy levels and rental payment defaults, and by increased operating expenses, any or all of which could threaten the financial viability of one or more of the Local Partnerships.
There also are substantial risks associated with the operation of Apartment Complexes receiving government assistance. These include governmental regulations concerning tenant eligibility, which may make it more difficult to rent apartments in the Apartment Complexes; difficulties in obtaining government approval for rent increases; limitations on the percentage of income which low and moderate income tenants may pay as rent; the possibility that Congress may not appropriate funds to enable the Department of Housing and Urban Development ("HUD") to make the rental assistance payments it has contracted to make; and that when the rental assistance contracts expire there may not be market demand for apartments at full market rents in a Local Partnership's Apartment Complex.
Item 1B.
Item 1B. Unresolved Staff Comments
Not applicable
Item 2.
Item 2. Properties
As of March 31, 2006, the Partnership has acquired an interest in fourteen Local Partnerships, all of which have been consolidated. Except for the interest in New Zion Apartments, L.P. ("New Zion"), the Partnership's investment in each Local Partnership represents 98.99% or 99.89% of the partnership interests in the Local Partnership. The Partnership's investment in New Zion represents 58.12% of the partnership interest in the subsidiary partnership (the other 41.86% limited partnership interest is owned by an affiliate of the Partnership, with the same management). Through the rights of the Partnership and/or an affiliate of the General Partner, which affiliate has a contractual obligation to act on behalf of the Partnership, to remove the general partner and to approve certain major operating and financial decisions, the Partnership has a controlling financial interest in all of the Local Partnerships it has invested. Set forth below is a schedule of the Local Partnerships including certain information concerning their respective Apartment Complexes (the "Local Partnership Schedule"). Further information concerning the Local Partnerships and their properties, including any encumbrances affecting the properties may be found in Item 15. Schedule III .
Local Partnership Schedule --------------------------
Leases are generally for periods not greater than one to two years and no tenant occupies more than 10% of the total rentable square footage in any single Apartment Complex.
Management continuously reviews the physical state of the properties and suggests to the respective Local General Partners budget improvements which are generally funded from cash flow from operations or release of replacement reserve escrows.
Management periodically reviews the insurance coverage of the properties and believes such coverage is adequate.
See Item 1, Business, above for the general competitive conditions to which the properties described above are subject.
Real estate taxes are calculated using rates and assessed valuations determined by the township or city in which the Property is located. Such taxes have approximated less than 1% of the aggregate cost of the Properties as shown in Schedule III included herein.
Tax Credits with respect to a given Apartment Complex are available for a ten-year period that commences when the property is rented to qualified tenants. However, the annual Tax Credits available in the year in which the Apartment Complex is placed in service must be prorated based upon the months remaining in the year. The amount of the annual Tax Credit not available in the first year will be available in the eleventh year. In certain cases, the Partnership acquired its interest in a Local Partnership after the Local Partnership had placed its Apartment Complex in service. In these cases, the Partnership may be allocated Tax Credits only beginning in the month following the month in which it acquired its interest and Tax Credits allocated in any prior period are not available to the Partnership.
Item 3.
Item 3. Legal Proceedings
None
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5.
Item 5. Market for Registrant's Common Equity and Related Security Holder Matters
As of March 31, 2006, the Partnership had issued and outstanding 45,844 Limited Partnership Interests, each representing a $1,000 capital contribution to the Partnership, or an aggregate capital contribution of $45,844,000. All of the issued and outstanding Limited Partnership Interests have been issued to Independence Assignor Inc. (the "Assignor Limited Partner"), which has in turn issued 45,844 BACs to the purchasers thereof for an aggregate purchase price of $45,844,000. Each BAC represents all of the economic and virtually all of the ownership rights attributable to a Limited Partnership Interest held by the Assignor Limited Partner. BACs may be converted into Limited Partnership Interests at no cost to the holder (other than the payment of transfer costs not to exceed $100), but Limited Partnership Interests so acquired are not thereafter convertible into BACs.
Neither the BACs nor the Limited Partnership Interests are traded on any established trading market. The Partnership does not intend to include the BACs for quotation on NASDAQ or for listing on any national or regional stock exchange or any other established securities market. The Revenue Act of 1987 contained provisions which have an adverse impact on investors in "publicly traded partnerships." Accordingly, the General Partner has imposed limited restrictions on the transferability of the BACs and the Limited Partnership Interests in secondary market transactions. Implementation of the restrictions should prevent a public trading market from developing and may adversely affect the ability of an investor to liquidate his or her investment quickly. It is expected that such procedures will remain in effect until such time, if ever, as further revision of the Revenue Act of 1987 may permit the Partnership to lessen the scope of the restrictions.
As of May 18, 2006, the Partnership has approximately 2,543 registered holders of an aggregate of 45,844 BACs.
All of the Partnership's general partnership interests, representing an aggregate capital contribution of $1,000, are held by the General Partner.
There are no material legal restrictions in the Partnership Agreement on the ability of the Partnership to make distributions.
The Partnership has made no distributions to the BACs holders as of March 31, 2006. The Partnership does not anticipate providing cash distributions to its BACs holders other than from net refinancing or sales proceeds.
Transfer Procedures - ------------------- The Partnership from time to time receives requests by unit holders and others to transfer BACs and/or limited partnership interests. Such requests may occur in connection with tender offers for the Partnership's units. Such requests implicate the Partnership's policies and procedures concerning transfers generally and tender offers in particular, which were adopted by the Partnership pursuant to the terms of its Partnership Agreement, to ensure compliance with applicable law, avoid adverse tax consequences for the Partnership and its investors, and preserve the Partnership's advantageous tax status.
In prior years, the Partnership relied on the 5% safe harbor established by Internal Revenue Service ("IRS") regulations to avoid being characterized as a "publicly-traded partnership" that is taxed as a corporation. The 5% safe harbor, however, expired and is no longer available as of December 31, 2005. Accordingly, the Partnership now relies on a 2% safe harbor established by another IRS regulation to avoid being characterized as a "publicly-traded partnership" that is taxed as a corporation.
A brief summary of certain of the Partnership's key policies, practices and requirements with respect to transfers and tender offers is as follows:
o No transfer (whether for substitution, assignment or otherwise) is effective or binding on the Partnership unless and until it is approved by the General Partner.
o No transfer will be approved unless the transferor and transferee submit complete and properly executed forms of the Partnership's own transfer documentation. The Partnership does not accept forms of transfer documentation other than its own and does not accept signatures made by power of attorney in lieu of original signatures by each of the transferors and transferees.
o The Partnership will not approve transfers that in the cumulative aggregate for any tax year exceed the IRS 2% safe harbor, unless a financially responsible person provides the Partnership and its partners with (i) an indemnity (in form and substance in all ways acceptable to the General Partner) for all liability (including, without limitation, any adverse tax consequences) arising from or relating to exceeding the 2% safe harbor and (ii) a legal opinion (in form and substance in all ways acceptable to the General Partner) that there will be no adverse tax consequences to the Partnership and its partners from exceeding the 2% safe harbor.
o It order to avoid the undesirable situation of one or more tender offers consuming the entire safe harbor limitation early in the tax year and leaving the Partnership's remaining investors with no liquidity opportunity for the rest of that tax year, the Partnership restricts the cumulative aggregate total of transfers made pursuant to all tender offers to 1.5% of its outstanding units in each tax year, unless a financially responsible person conducting such tender offer provides the Partnership with an acceptable indemnity and legal opinion of the type described above. At the end of each tax year, the General Partner, in its discretion, may allow the cumulative total number of transfers (including those by tender offer) to reach the 2% safe harbor limit.
o The Partnership requires that all tender offers for its units be conducted in accordance with all applicable law including, without limitation, the federal securities laws.
The foregoing is solely a summary of the Partnership's policies, requirements and practices with respect to transfers and tender offers. More complete information, including a copy of the Partnership's transfer documentation package, may be obtained from the Partnership.
Item 6.
Item 6. Selected Financial Data
The information set forth below presents selected financial data of the Partnership. Additional financial information is set forth in the audited financial statements in Item 8 hereof.
At March 31, 2006, 2005, 2004 2003 and 2002, total assets decreased approximately $2,571,000, $2,477,000, $2,369,000, $3,104,000 and $2,176,000 due to depreciation and amortization and a reduction in cash and cash equivalents. At March 31, 2006, 2005, 2004, 2003 and 2002, property and equipment decreased approximately $2,296,000, $2,353,000, $2,358,000, $2,532,000 and $1,376,000 primarily due to depreciation expense. At March 31, 2006, 2005, 2004 and 2003, mortgage notes decreased approximately $549,000, $214,000, $89,000 and $339,000, respectively. At March 31, 2002 mortgage notes increased approximately $79,000.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources - -------------------------------
As of March 31, 2006, the Partnership has invested approximately $37,555,000 (including approximately $902,000 classified as a loan repayable from sale/refinancing proceeds in accordance with the contribution agreement and not including acquisition fees of approximately $1,771,000) of the net proceeds of the Offering in fourteen Local Partnerships, of which approximately $1,078,000 remains to be paid to the Local Partnerships (including approximately $539,000 being held in escrow) as certain benchmarks, such as occupancy level, are attained prior to the release of the funds. During the year ended March 31, 2006, approximately $54,000 was paid to Local Partnerships. The Partnership does not anticipate acquiring additional properties, but the Partnership may be required to fund potential purchase price adjustments based on tax credit adjustor clauses. There were no such adjustments made during the year ended March 31, 2006.
The Partnership has received $45,844,000 in gross proceeds for BACs pursuant to a public offering, resulting in net proceeds available for investment of approximately $36,653,000 after volume discounts, payment of sales commissions, acquisition fees and expenses, organization and offering expenses and establishment of a working capital reserve.
Short-Term - ---------- The Partnership's primary source of funds include (i) interest earned on Gross Proceeds which are invested in tax-exempt money market instruments pending purchase price adjustments of Local Partnerships and (ii) working capital reserve and interest thereon. All these sources are available to meet obligations of the Partnership.
As of March 31, 2006, cash and cash equivalents of the Partnership and its fourteen consolidated Local Partnerships decreased approximately ($178,000) due to the acquisition of property and equipment ($82,000), repayments of mortgage notes ($549,000) and a net decrease in due to local general partners and affiliates relating to investing activities ($86,000) which exceeded cash provided by operating activities ($539,000). Included in the adjustments to reconcile the net loss to net cash provided by operations is depreciation and amortization of approximately $2,433,000.
Total expenses for the years ended March 31, 2006, 2005 and 2004 excluding depreciation and amortization, interest and general and administrative - related parties, totaled $3,998,978, $4,062,712 and $3,846,737 respectively. Accounts payable and other liabilities totaled $9,675,759 and $9,075,556, respectively, which are comprised of the following amounts:
As indicated in the above table, accrued interest payable comprised approximately 91% of the total accounts payable and other liabilities amount at both March 31, 2006 and 2005. Such amount represents the accrued interest on all mortgage loans, which include primary and secondary loans. Certain secondary loans have provisions such that interest is accrued but not payable until a future date. The Partnership anticipates the payment of accrued interest on the secondary loans (which make up the majority of the accrued interest payable amount indicated in the above table and which have been accumulating since the Partnership's investment in the respective Local Partnership) will be made from future refinancings or sales proceeds of the respective Local Partnerships. In addition, each Local Partnership's mortgage notes are collateralized by the land and buildings of the respective Local Partnership, and are without further recourse to the Partnership.
Security deposits payable are offset by cash held in security deposits, which are included in "Cash held in escrow" on the financial statements.
Accounts payable are short term liabilities which are expected to be paid from operating cash flows, working capital balances at the Local Partnership level, local general partner advances and in certain circumstances advances from the Partnership. Because the provisions of the secondary loans defer the payment of accrued interest of the respective Local Partnerships, the Partnership believes it (and the applicable Local Partnerships) has sufficient liquidity and ability to generate cash and to meet existing and known or reasonably likely future cash requirements over both the short and long term.
Partnership management fees owed to the General Partner amounting to approximately $2,304,000 and $1,967,000 were accrued and unpaid as of March 31, 2006 and 2005, respectively
A working capital reserve has been designated from the Partnership's funds available for investment, which includes amounts which may be required for potential purchase price adjustments based on tax credit adjustor clauses. At March 31, 2006, approximately $204,000 of this reserve remained unused. The General Partner believes that these reserves, plus any cash distributions received from the operations of the Local Partnerships, will be sufficient to fund the Partnership's ongoing operations for the foreseeable future. During the year ended March 31, 2006, there were no distributions from Local Partnerships. Management anticipates receiving distributions in the future, although not to a level sufficient to permit providing cash distributions to the BACs holders.
The Partnership had negotiated Operating Deficit Guaranty Agreements with the development stage Local Partnerships by which the general partners of such Local Partnerships and/or their affiliates have agreed to fund operating deficits for a specified period of time. The terms of the Operating Deficit Guaranty Agreements vary for each of these Local Partnerships, with maximum dollar amounts to be funded for a specified period of time, generally three years, commencing on the break-even date. As of both March 31, 2006 and 2005, the gross amount of the Operating Deficit Guarantees aggregate approximately $1,897,000. As of both March 31, 2006 and 2005, $0 has been funded under the Operating
Deficit Guaranty Agreements. Amounts funded under such agreements will be treated as non-interest bearing loans, which will be paid only out of 50% of available cash flow or out of available net sale or refinancing proceeds.
Long-Term - ---------
The Partnership has invested all of the net proceeds available for investment in fourteen Local Partnerships, of which all will generate Tax Credits in 2006. Due to increased market demand for investments in properties that were eligible to receive Tax Credits at the time the Partnership was investing its capital and limitations on the types of investments which may be obtained by the Partnership the purchase price for interests in Local Partnerships which are qualified for purchase by the Partnership have increased. As a result of these changes, management does not believe that the Partnership has been able to invest the proceeds available for investment in a manner which will enable the Partnership to achieve Tax Credits in the range of $140-150 for each $1,000 BAC each year in which the Partnership is receiving its full entitlement of Tax Credits.
Management is not aware of any trends or events, commitments or uncertainties, which have not otherwise been disclosed that will or are likely to impact liquidity in a material way. Management believes the only impact would be from laws that have not yet been adopted. The portfolio is diversified by the location of the Properties around the United States so that if one area of the country is experiencing downturns in the economy, the remaining Properties in the portfolio may be experiencing upswings. However the geographic diversification of the portfolio may not protect against a general downturn in the national economy. Tax Credits will be attached to a Property for a period of ten years, and will be transferable with the Property during the remainder of such ten-year period. If trends in the real estate market warranted the sale of a Property, the remaining tax credits would transfer to the new owner, thereby adding value to the Property on the market. However, such value declines each year and is not included in the financial statement carrying amount. The Credit Periods are scheduled to expire at various times through December 31, 2010 with respect to the Local Partnerships depending upon when the Credit Periods commenced.
Tabular Disclosure of Contractual Obligations - ---------------------------------------------
The following table summarizes the Partnership's commitments as of March 31, 2006, to make future payments under its debt agreements and other contractual obligations.
(a) The mortgage loans are payable in aggregate monthly installments of approximately $131,000 including principal and interest with rates varying from 0% to 9.11% per annum and have maturity dates ranging from 2008 through 2051. The loans are collateralized by the land and buildings of the subsidiary partnerships, the assignment of certain subsidiary partnerships' rents and leases, and are without further recourse.
Off Balance Sheet Arrangements - ------------------------------
The Partnership has no off-balance sheet arrangements.
Critical Accounting Policies - ----------------------------
In preparing the consolidated financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Set forth below is a summary of the accounting policies that management believes are critical to the preparation of the consolidated financial statements.
a) Property and Equipment/Valuation of Long-Lived Assets
Property and equipment to be held and used are carried at cost which includes the purchase price, acquisition fees and expenses, and any other costs incurred in acquiring the Properties. The cost of property and equipment is depreciated over their estimated useful lives using accelerated and straight-line methods. Expenditures for repairs and maintenance are charged to expense as incurred; major renewals and betterments are capitalized. At the time property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the assets and accumulated depreciation accounts and the profit or loss on such disposition is reflected in earnings. The Partnership complies with Statement of Financial Accounting Standards ("SFAS") No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets". A loss on impairment of assets is recorded when management estimates amounts recoverable through future operations and sale of the Property on an undiscounted basis are below depreciated cost. At that time Property investments themselves are reduced to estimated fair value (generally using discounted cash flows) when the Property is considered to be impaired and the depreciated cost exceeds estimated fair value.
Through March 31, 2006, the Partnership has not recorded any loss on impairment of assets or reductions to estimated fair value.
b) Revenue Recognition
Rental income is earned under standard residential operating leases and is typically due the first day of each month, but can vary by property due to the terms of the tenant leases. Rental income is recognized when earned and charged to tenants' accounts receivable if not received by the due date. Rental payments received in advance of the due date are deferred until earned. Rental subsidies are recognized as rental income during the month in which it is earned.
Other revenues are recorded when earned and consist of the following items: Interest income earned on cash and cash equivalent balances and cash held in escrow balances, income from forfeited security deposits, late charges, laundry and vending income and other rental related items.
Other revenues include the following amounts at both the Partnership and Local Partnership level:
c) Related Parties
Under the terms of the Partnership Agreement, the Partnership has entered into certain arrangements with the General Partner and its affiliates, which provide for compensation to be paid to the General Partner and its affiliates. Such arrangements include (but are not limited to) agreements to pay nonrecurring acquisition fees, a nonaccountable acquisition expense allowance, an accountable expense reimbursement and subordinated disposition fees to the General Partner and/or its affiliates. In addition, the General Partner is entitled to a subordinated interest in cash from sales or refinancings and a 1% interest in net income, net loss, distributions of adjusted cash from operations and cash from sales or refinancings. Certain members and officers of the General Partner receive compensation from the General Partner and its affiliates for services performed for various affiliated entities which may include services performed for the Partnership. The maximum annual partnership management fee paid to the General Partner is 0.5% of invested assets. See Note 8 in Item 8 above, which is incorporated herein by reference.
New Accounting Pronouncements - -----------------------------
In June 2005, the Financial Accounting Standards Board ("FASB") issued SFAS No. 154, "Accounting Changes and Error Corrections" ("FAS 154"). FAS 154 replaces Accounting Principles Board ("APB") Opinion No. 20, "Accounting Changes" and FAS No. 3, "Reporting Accounting Changes in Interim Financial Statements". APB No. 20 previously required that most voluntary changes in accounting principle be recognized by including in the current period's net income the cumulative effect of changing to the new accounting principle. In contrast, FAS 154 requires that a voluntary change in accounting principle be applied retrospectively to prior periods' financial statements, unless this would be impracticable. In addition, FAS 154 makes a distinction between retrospective application of an accounting principle and the restatement of financial statements to reflect the correction of an error. FAS 154 is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. The Partnership does not expect the adoption of FAS 154 to have a material impact on its consolidated financial statements.
In June 2005, the FASB issued Emerging Issues Task Force No. 04-5, "Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights" ("EITF No. 04-5"). EITF No. 04-5 replaces counterpart requirements in the Statement of Position 78-9, which provides guidance on accounting for investments in real-estate ventures and limited partnerships. Under EITF No. 04-5, the general partner's control would be overcome if the limited partners have either (i) "kick-out rights" - the right to dissolve or liquidate the partnership or otherwise remove the general partner "without cause" or (ii) "participating rights" - the right to effectively participate in significant decisions made in the ordinary course of the partnership's business. The kick-out rights and the participating rights must be substantive in order to overcome the general partner's control. EITF No. 04-5 is now effective. Since the Partnership's financial statements are presented on a consolidated basis, the adoption of EITF No. 04-5 has not had a material effect on Partnership's consolidated financial statements.
Results of Operations - ---------------------
The net loss for the years ended March 31, 2006, 2005 and 2004 totaled $3,046,176, $3,236,710 and $3,061,274, respectively.
The Partnership and BACs holders began recognizing Tax Credits with respect to a Property when the Credit Period for such Property commenced. Because of the time required for the acquisition, completion and rent-up of Properties, the amount of Tax Credits per BAC has gradually increased over the first three years of the Partnership. Tax Credits not recognized in the first three years will be recognized in the 11th through 13th years. The Partnership generated $5,292,899, $5,356,768 and $5,356,768 of Tax Credits during each of the 2005, 2004 and 2003 tax years, respectively.
The Partnership's results of operations for the years ended March 31, 2006, 2005 and 2004 consisted primarily of the results of the Partnership's investment in fourteen consolidated Local Partnerships. The majority of Local Partnership income continues to be in the form of rental income with the corresponding expenses being divided among operations, depreciation and mortgage interest.
2006 vs. 2005 - -------------
Rental income increased approximately 3% for the year ended March 31, 2006 as compared to the corresponding period ended March 31, 2005, primarily due to HUD increasing rents approximately 20% at one Local Partnership, an increase in occupancy at a second Local Partnership and rental rate increases at the other Local Partnerships.
Total expenses, excluding general and administrative-related parties, remained fairly consistent with a decrease of approximately 2% for the year ended March 31, 2006 as compared to the corresponding period ended March 31, 2005.
General and administrative-related parties increased approximately $102,000 for the year ended March 31, 2006, as compared to the corresponding period ended March 31, 2005, primarily due to an increase in expense reimbursements at the Partnership level and a one time adjustment to local administrative fees due to underaccruals of prior years' fees at one Local Partnership.
2005 vs. 2004 - -------------
Rental income increased approximately 1% for the year ended March 31, 2005 as compared to the corresponding period ended March 31, 2004, primarily due to rental rate increases.
Other income increased approximately $43,000 for the year ended March 31, 2005 as compared to the corresponding period ended March 31, 2004, primarily due to the write-off of certain payables at one Local Partnership and an increase in late charges and insufficient funds charges at a second Local Partnership.
Total expenses, excluding general and administrative-related parties and repairs and maintenance, remained fairly consistent with an increase of approximately 1% for the year ended March 31, 2005 as compared to the corresponding period ended March 31, 2004.
General and administrative-related parties increased approximately $69,000 for the year ended March 31, 2005, as compared to the corresponding period ended March 31, 2004, primarily due to two Local Partnerships changing from third party management companies in 2004 to affiliated management companies in 2005.
Repairs and maintenance increased approximately $103,000 for the year ended March 31, 2005, as compared to the corresponding period ended March 31, 2004, primarily due to an increase in supplies and miscellaneous maintenance expense at one Local Partnership, the building exterior being painted and an increase in wheelchair lift repairs at a second Local Partnership and an increase in exterior painting expense at a third Local Partnership.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Mortgage notes are payable in aggregate monthly installments including principal and interest at rates varying from 0% to 9.11% per annum. The Partnership does not believe there is a material risk associated with the various interest rates associated with the mortgage notes as the majority of the Local Partnership mortgage notes have fixed rates. The Partnership currently discloses in Item 8, Note 3 of the Notes to Consolidated Financial Statements, the fair value of the mortgage notes payable.
The Partnership's investment as a limited partner in the Local Partnerships is subject to the risks of potential losses arising from management and ownership of improved real estate. The Partnership's investments also could be adversely affected by poor economic conditions generally, which could increase vacancy levels and rental payment defaults and by increased operating expenses, any or all of which could threaten the financial viability of one or more of the Local Partnerships.
There also are substantial risks associated with the operation of Apartment Complexes receiving government assistance. These include governmental regulations concerning tenant eligibility, which may make it more difficult to rent apartments in the Apartment Complexes; difficulties in obtaining government approval for rent increases; limitations on the percentage of income which low and moderate income tenants may pay as rent; the possibility that Congress may not appropriate funds to enable HUD to make the rental assistance payments it has contracted to make; and that when the rental assistance contracts expire there may not be market demand for apartments at full market rents in a Local Partnership's Apartment Complex.
The Local Partnerships are impacted by inflation in several ways. Inflation allows for increases in rental rates generally to reflect the impact of higher operating and replacement costs. Furthermore, inflation generally does not impact the fixed long-term financing under which real property investments were purchased. Inflation also affects the Local Partnerships adversely by increasing operating costs as, for example, for such items as fuel, utilities and labor. However, continued inflation may result in appreciated values of the Local Partnership's apartment complexes over a period of time as rental revenues and replacement cost continue to increase.
The Partnership does not have any other market risk sensitive instruments.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE PARTNERS OF INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES
We have audited the accompanying consolidated balance sheets of INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES (a Delaware limited partnership) as of March 31, 2006 and 2005, and the related consolidated statements of operations, changes in partners' capital (deficit) and cash flows for each of the years in the three-year period ended March 31, 2006. These consolidated financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the consolidated financial statements of fourteen subsidiary partnerships, whose losses aggregated $2,485,937 for the year ended March 31, 2004 and whose assets constituted 96% of consolidated assets at March 31, 2004. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for these subsidiary partnerships, is based solely on the reports of the other auditors.
We conducted our audits in accordance with the standards of the Public Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES as of March 31, 2006 and 2005, and the results of their operations and their cash flows for each of the years ended in the three-year period ended March 31, 2006, in conformity with accounting principles generally accepted in the United States of America.
/s/ Friedman LLP Friedman LLP New York, New York June 16, 2006
[LETTERHEAD OF REZNICK FEDDER & SILVERMAN]
INDEPENDENT AUDITORS' REPORT
To the Partners BX 8A Team Associates, L.P.
We have audited the accompanying balance sheet of BX 8A Team Associates, L.P., for the years ended December 31, 2003 and 2002, and the related statements of operations, changes in partners' equity (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our 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 BX 8A Team Associates, L.P. as of December 31, 2003 and 2002, 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.
/s/ Reznick Fedder & Silverman Atlanta, Georgia February 3, 2004
[LETTERHEAD OF REZNICK FEDDER & SILVERMAN]
INDEPENDENT AUDITORS' REPORT
To the Partners Westminster Park Plaza, L.P.
We have audited the accompanying balance sheets of Westminster Park Plaza, L.P. as of December 31, 2003 and 2002, and the related statements of operations, partners' deficit and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our 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 Westminster Park Plaza, L.P. as of December 31, 2003 and 2002, and the results of its operations, the changes in partners' deficit and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
/s/ Reznick Fedder & Silverman Sacramento, California January 16, 2004
[LETTERHEAD OF MCDANIEL & HALLSTROM]
To the Partners FAWCETT STREET LIMITED PARTNERSHIP Tacoma, Washington
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying balance sheets of FAWCETT STREET LIMITED PARTNERSHIP as of December 31, 2003 and 2002, and the related statements of operations, partners' equity and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our 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 FAWCETT STREET LIMITED PARTNERSHIP as of December 31, 2003 and 2002, 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.
/s/ McDaniel & Hallstrom, CPA's Belfair, Washington February 6, 2004
[LETTERHEAD OF CLIFFORD R. BENN]
INDEPENDENT AUDITOR'S REPORT
General Partner Figueroa Senior Housing Limited Partnership Los Angeles, California
I have audited the balance sheet of Figueroa Senior Housing Limited Partnership at December 31, 2003, and the related statements of loss, changes in partners' capital, and cash flow for the year then ended. These financial statements are the responsibility of Figueroa Senior Housing Limited Partnership's management. My responsibility is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards used in the United States of America. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Figueroa Senior Housing Limited Partnership at December 31, 2003, and the results of its operations for the year then ended in conformity with generally accepted accounting principles used in the United States of America.
/s/ Clifford Benn, CPA February 12, 2004 Carson, California
[LETTERHEAD OF CLIFFORD R. BENN]
INDEPENDENT AUDITOR'S REPORT
General Partner NNPHI Senior Housing, L.P. Los Angeles, California
I have audited the balance sheet of NNPHI Senior Housing, L.P. at December 31, 2003, and the related statements of loss, changes in partners' capital, and cash flow for the year then ended. These financial statements are the responsibility of NNPHI Senior Housing, L.P.'s management. My responsibility is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards used in the United States of America. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of NNPHI Senior Housing, L.P. at December 31, 2003, and the results of its operations for the year then ended in conformity with generally accepted accounting principles used in the United States of America.
/s/ Clifford Benn, CPA February 14, 2004 Carson, California
[LETTERHEAD OF REZNICK FEDDER & SILVERMAN]
INDEPENDENT AUDITORS' REPORT
To the Partners Belmont/McBride Apartments Urban Renewal Associates Limited Partnership
We have audited the accompanying balance sheets of Belmont/McBride Apartments Urban Renewal Associates Limited Partnership as of December 31, 2003 and 2002, and the related statements of operations, partners' equity (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our 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 Belmont/McBride Apartments Urban Renewal Associates Limited Partnership as of December 31, 2003 and 2002, and the results of its operations, the changes in partners' equity (deficit) and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
/s/ Reznick Fedder & Silverman Baltimore, Maryland January 23, 2004
[LETTERHEAD OF COLE, EVANS & PETERSON]
INDEPENDENT AUDITORS' REPORT ON THE BASIC FINANCIAL STATEMENTS AND SUPPLEMENTAL INFORMATION
To the Partners New Zion Apartments Limited Partnership Shreveport, Louisiana
We have audited the accompanying balance sheet of New Zion Apartments Limited Partnership, HUD Project No. LA48E000011, at December 31, 2003, and the related statements of income, partners' capital and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to in the first paragraph above present fairly, in all material respects, the financial position of New Zion Apartments Limited Partnership, HUD Project No. LA48E000011, at December 31, 2003 and the results of its operations, changes in capital, and cash flows for the year then ended in conformity with U.S. generally accepted accounting principles.
Our audit was made primarily for the purpose of forming an opinion on the basic financial statements for the year ended December 31, 2003 taken as a whole. The supplementary Schedules 1, 2 and 3 are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the audit procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
In accordance with Government Auditing Standards, we have also issued a report dated February 10, 2004 on our consideration of New Zion Apartments Limited Partnership's internal control, and on its compliance with certain provisions of laws, regulations, contracts, and grants. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.
/s/ Cole, Evans & Peterson Shreveport, Louisiana Federal ID No. 72-0506596 Lead Auditor: Steven W. Hedgepeth February 10, 2004
[LETTERHEAD OF REZNICK FEDDER & SILVERMAN]
INDEPENDENT AUDITORS' REPORT
To the Partners Bakery Village Urban Renewal Associates, L.P.
We have audited the accompanying balance sheets of Bakery Village Urban Renewal Associates, L.P. as of December 31, 2003 and 2002, and the related statements of operations, partners' equity (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our 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 Bakery Village Urban Renewal Associates, L.P. as of December 31, 2003 and 2002, and the results of its operations, the changes in partners' equity (deficit) and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
/s/ Reznick Fedder & Silverman Baltimore, Maryland February 3, 2004
[LETTERHEAD OF REZNICK FEDDER & SILVERMAN]
INDEPENDENT AUDITORS' REPORT
To the Partners Marlton Housing Partnership, L.P.
We have audited the accompanying balance sheets of Marlton Housing Partnership, L.P. as of December 31, 2003 and 2002, and the related statements of operations, changes in partners' equity (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Marlton Housing Partnership, L.P. at December 31, 2003 and 2002, and the results of its operations, the changes in its partners' equity (deficit) and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
/s/ Reznick Fedder & Silverman Baltimore, Maryland February 6, 2004
[LETTERHEAD OF FAVORS & ASSOCIATES, CPA's, P.S.]
INDEPENDENT AUDITORS' REPORT
To the Partners GP Kaneohe Limited Partnership
We have audited the accompanying balance sheet of GP Kaneohe Limited Partnership as of December 31, 2003, and the related statements of operations, changes in partners' capital (deficit), and cash flows for the year then ended. These financial statements are the responsibility of the entity's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of GP Kaneohe Limited Partnership as of December 31, 2003, and the results of its operations, the changes in its partners' capital (deficit) and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
In accordance with GOVERNMENT AUDITING STANDARDS, we have also issued a report dated January 29, 2004, on our consideration of GP Kaneohe Limited Partnership's internal control, and our test of its compliance with certain provisions of laws, regulations, contractors and grants. Those reports are an integral part of an audit performed in accordance with GOVERNMENT AUDITING STANDARDS and should be read in conjunction with this report in considering the results of our audit.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supporting data required by HUD shown on pages 11 and 12 is presented for purposes of additional analysis and is not a required part of the basic financial statements for GP Kaneoke Limited Partnership. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ Favors & Associates, CPA's, P.S. Fircrest, Washington January 29, 2004
[LETTERHEAD OF MILLER, MAYER, SULLIVAN, & STEVENS, LLP]
INDEPENDENT AUDITORS' REPORT
To the Partners KSD Village Apartments, Phase II, Ltd,
We have audited the accompanying balance sheets of KSD Village Apartments, Phase II, Ltd. as of December 31, 2003 and 2002 and the related statements of operations, partners' equity (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our 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 KSD Village Apartments, Phase II, Ltd. as of December 31, 2003 and 2002, and the results of its operations, changes in partners' equity (deficit) and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
/s/ Miller, Mayer, Sullivan, & Stevens, LLP Lexington, Kentucky January 23, 2004
[LETTERHEAD OF MILLER, MAYER, SULLIVAN, & STEVENS, LLP]
INDEPENDENT AUDITORS' REPORT
To the Partners Kanisa Apartments Ltd.
We have audited the accompanying balance sheets of Kanisa Apartments, Ltd., complex no. 083-98017-YHA, as of December 31, 2003 and 2002 and the related statements of operations, changes in partners' equity (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in GOVERNMENT AUDITING STANDARDS issued by the Comptroller General of the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our 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 Kanisa Apartments, Ltd. as of December 31, 2003 and 2002, and the results of its operations, changes in partners' equity (deficit), and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
In accordance with GOVERNMENT AUDITING STANDARDS, we have also issued a reports dated February 13, 2004 on our consideration of Kanisa Apartments, Ltd.'s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grants. Those reports are an integral part of an audit performed in accordance with GOVERNMENT AUDITING STANDARDS and should be read in conjunction with this report in considering the results of our audits.
Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental data included in this report is presented for purposes of additional analysis and is not a required part of the basic financial statements of the partnership. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
/s/ Miller, Mayer, Sullivan, & Stevens, LLP Lexington, Kentucky February 13, 2004 EIN: 61-0866166 Lead Auditor: Darren C. Johnson, CPA Audit Principal: John T. Miller, CPA
[LETTERHEAD OF HANKINS & COMPANY]
INDEPENDENT AUDITOR'S REPORT
Partners Guymon Housing Partners Limited Partnership D/B/A Blue Quail Apartments
We have audited the accompanying balance sheets of GUYMON HOUSING PARTNERS LIMITED PARTNERSHIP, D/B/A BLUE QUAIL APARTMENTS as of December 31, 2003 and 2002, and the related statements of operations, changes in partners' capital and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted my audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for my opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of GUYMON HOUSING PARTNERS LIMITED PARTNERSHIP, D/B/A BLUE QUAIL APARTMENTS as of December 31, 2003 and 2002, 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.
/s/ Hankins & Company February 20, 2004 Fort Smith, Arkansas
INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
ASSETS
The accompanying notes are an integral part of these consolidated financial statements.
INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
The accompanying notes are an integral part of these consolidated financial statements.
INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) YEARS ENDED MARCH 31, 2006, 2005 and 2004
The accompanying notes are an integral part of these consolidated financial statements.
INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
*Reclassified for comparative purposes
The accompanying notes are an integral part of these consolidated financial statements.
INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2006
NOTE 1 - General
Independence Tax Credit Plus L.P. IV (a Delaware limited partnership) (the "Partnership") was organized on February 22, 1995 and commenced a public offering on July 6, 1995. The general partner of the Partnership is Related Independence L.L.C., a Delaware limited liability company (the "General Partner").
On November 17, 2003, CharterMac, acquired CharterMac Capital LLC ("CharterMac Capital") (formerly known as Related Capital Company LLC), which is the parent of RCC Manager LLC, the managing member of the General Partner. Pursuant to the acquisition, CharterMac acquired controlling interests in the General Partner. This acquisition did not affect the Partnership or its day-to-day operations, as the majority of the General Partner's management team remained unchanged.
On November 8, 2005, CharterMac announced that Stuart J. Boesky would step down as Chief Executive Officer and trustee of CharterMac. Upon his resignation, which was effective on November 15, 2005, he also resigned from his position as Senior Vice President and Member of the General Partner. Mr. Boesky will stay on as a consultant to CharterMac for the next year in order to ensure a smooth transition. On March 14, 2006, CharterMac's Board of Trustees named Marc D. Schnitzer the Chief Executive Officer, effective immediately. Mr. Schnitzer replaced Stephen M. Ross, who had served as interim Chief Executive Officer since Stuart J. Boesky resigned in November of 2005. Mr. Schnitzer also replaced Mr. Boesky as Senior Vice President and Member of the General Partner.
The Partnership's business is to invest in other partnerships ("Local Partnerships," "subsidiaries" or "subsidiary partnerships") owning leveraged apartment complexes ("Apartment Complexes") that are eligible for the low-income housing tax credit ("Tax Credit") enacted in the Tax Reform Act of 1986, some of which may also be eligible for the historic rehabilitation tax credit. Qualified Beneficial Assignment Certificates ("BACs") holders are entitled to Tax Credits over the period of the Partnership's entitlement to claim Tax Credits (for each Property, generally ten years from the date of investment or, if later, the date the Property is placed in service; referred to herein as the "Credit Period") with respect to each Apartment Complex.
As of March 31, 2006, the Partnership has acquired limited partnership interests in fourteen subsidiary partnerships, all of which have been consolidated. The Partnership does not anticipate acquiring limited partnership interests in additional subsidiary partnerships. The Partnership's investments in Local Partnerships represent from 98.99% to 99.89% interests, except for one investment which is a 58.12% interest.
The Partnership was authorized to issue a total of 100,000 ($100,000,000) Beneficial Assignment Certificates ("BACs") which have been registered with the Securities and Exchange Commission for sale to the public. Each BAC represents all of the economic and virtually all of the ownership rights attributable to a limited partnership interest. The solicitation for the subscription of BACs was terminated as of May 22, 1996 and the final closing occurred on August 15, 1996. The Partnership had raised a total of $45,844,000 representing 45,844 BACs.
NOTE 2 - Summary of Significant Accounting Policies
a) Basis of Accounting
For financial reporting purposes, the Partnership's fiscal year ends on March 31. All subsidiaries have fiscal years ending December 31. Accounts of the subsidiaries have been adjusted for intercompany transactions from January 1 through March 31. The Partnership's fiscal year ends March 31 in order to allow adequate time for the subsidiaries' financial statements to be prepared and consolidated. The books and records of the Partnership are maintained on the accrual basis of accounting, in accordance with U.S. generally accepted accounting principles ("GAAP").
b) Basis of Consolidation
The consolidated financial statements include the accounts of the Partnership and fourteen subsidiary partnerships for the years ended March 31, 2006, 2005 and 2004, respectively, in which the Partnership is a limited partner. Through the rights of the Partnership and/or an affiliate of the General Partner, which affiliate has a contractual obligation to act on behalf of the Partnership, to remove the general partner of the subsidiary local partnerships and to approve certain major operating and financial decisions, the Partnership has a controlling financial interest in the subsidiary partnerships. All intercompany accounts and transactions with the subsidiary partnerships have been eliminated in consolidation.
Increases (decreases) in the capitalization of the consolidated subsidiaries attributable to minority interests arise from cash contributions from and cash distributions to the minority interest partners.
Losses attributable to minority interests which exceed the minority interests' investment in a subsidiary have been charged to the Partnership. Such losses aggregated approximately $10,000, $8,000 and $7,000 for the years ended March 31, 2006, 2005 and 2004, respectively. The Partnership's investment in each subsidiary is equal to the respective subsidiary's partners' equity less minority interest capital, if any. In consolidation, all subsidiary partnership losses are included in the Partnership's capital account except for losses allocated to minority interest capital.
c) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash in banks, and investments in short-term highly liquid investments purchased with original maturities of three months or less.
INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2006
d) Property and Equipment
Property and equipment to be held and used are carried at cost which includes the purchase price, acquisition fees and expenses, construction period interest and any other costs incurred in acquiring the properties. The cost of property and equipment is depreciated over their estimated useful lives using accelerated and straight-line methods. Expenditures for repairs and maintenance are charged to expense as incurred; major renewals and betterments are capitalized. At the time property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the assets and accumulated depreciation accounts and the profit or loss on such disposition is reflected in earnings. The Partnership complies with Statement of Financial Accounting Standards ("SFAS") No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets". A loss on impairment of assets is recorded when management estimates amounts recoverable through future operations and sale of the property on an undiscounted basis are below depreciated cost. At that time property investments themselves are reduced to estimated fair value (generally using estimated future discounted net cash flows) when the property is considered to be impaired and the depreciated cost exceeds estimated fair value.
At the time management commits to a plan to dispose of assets, said assets are adjusted to the lower of carrying amount or fair value less costs to sell. These assets are classified as property and equipment-held for sale and are not depreciated. There are no assets classified as property and equipment-held for sale through March 31, 2006.
Through March 31, 2006, the Partnership has not recorded any loss on impairment of assets or reductions to estimated fair value.
e) Revenue Recognition
Rental income is earned under standard residential operating leases and is typically due the first day of each month, but can vary by property due to the terms of the tenant leases. Rental income is recognized when earned and charged to tenants' accounts receivable if not received by the due date. Rental payments received in advance of the due date are deferred until earned. Rental subsidies are recognized as rental income during the month in which it is earned.
Other revenues are recorded when earned and consist of the following items: Interest income earned on cash and cash equivalent balances and cash held in escrow balances, income from forfeited security deposits, late charges, laundry and vending income and other rental related items.
Other revenues include the following amounts at both the Partnership and Local Partnership level:
f) Income Taxes
The Partnership is not required to provide for, or pay, any federal income taxes. Net income or loss generated by the Partnership is passed through to the partners and is required to be reported by them. The Partnership may be subject to state and local taxes in jurisdictions in which it operates. For income tax purposes, the Partnership has a fiscal year ending December 31 (Note 9).
g) Mortgage Financing and Offering Costs
Costs incurred in connection with obtaining permanent mortgage financing are amortized over the lives of the related mortgage notes. Costs incurred to sell BACs, including brokerage fees and the nonaccountable expense allowance, are considered selling and offering expenses. These costs are charged directly to limited partners' capital.
h) Deferred Acquisition Costs
Acquisition costs and fees incurred in connection with the purchase of interests in certain subsidiary partnerships have been capitalized as property costs and are being amortized over the lives of the related properties.
i) Loss Contingencies
The Partnership records loss contingencies as a charge to income when information becomes available which indicates that it is probable that an asset has been impaired or a liability has been incurred as of the date of the financial statements and the amount of loss can be reasonably estimated.
INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2006
j) Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
NOTE 3 - Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
Cash and Cash Equivalents and Cash Held in Escrow The carrying amount approximates fair value due to the short-term maturity of the instruments.
Mortgage Notes Payable The fair value of mortgage notes payable is estimated, where practicable, based on the borrowing rate currently available for similar loans.
The estimated fair values of the Partnership's mortgage notes payable are as follows:
(a) Management believes it is not practicable to estimate the fair value of certain mortgage notes payable because mortgage programs with similar characteristics are not currently available to each of the subsidiary partnerships.
The carrying amount of other assets and liabilities reported on the consolidated balance sheets that require such disclosure approximates fair value.
Due to General Partner and Affiliates and Due to Local General Partners and - -------------------------------------------------------------------------------- Affiliates - ---------- Management believes it is not practical to estimate the fair value of due to general partner and affiliates and due to local general partners and affiliates because market information on such unique loans are not currently available.
NOTE 4 - Property and Equipment
The components of property and equipment and their estimated useful lives are as follows:
Included in property and equipment at March 31, 2006 and 2005, was $2,750,640 of acquisition fees paid to the General Partner and $708,031 of third party acquisition expenses. In addition, as of March 31, 2006 and 2005, building and improvements includes $343,161 of capitalized interest. No interest was capitalized during the years ended March 31, 2006, 2005 and 2004.
In connection with the rehabilitation of the properties, the subsidiary partnerships have incurred developer's fees of $4,235,495 to the local general partners and affiliates as of both March 31, 2006 and 2005. Such fees have been included in the cost of property and equipment.
INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2006
Depreciation expense for the years ended March 31, 2006, 2005 and 2004 amounted to $ 2,377,963, $2,390,752 and $2,405,192, respectively.
NOTE 5 - Cash Held in Escrow
Cash held in escrow consists of the following:
* Represents amounts to be paid to seller upon meeting specified rental achievement criteria.
NOTE 6 - Deferred Costs
The components of deferred costs and their periods of amortization are as follows:
Amortization expense for the years ended March 31, 2006, 2005 and 2004 amounted to $55,056, $57,251 and $70,756, respectively.
NOTE 7 - Mortgage Loans Payable
The mortgage loans are payable in aggregate monthly installments of approximately $131,000 including principal and interest with rates varying from 0% to 9.11% per annum and have maturity dates ranging from 2008 through 2051. The loans are collateralized by the land and buildings of the subsidiary partnerships, the assignment of certain subsidiary partnerships' rents and leases, and are without further recourse.
Annual principal payments on the permanent debt requirements for mortgage notes payable for each of the next five fiscal years and thereafter are as follows:
The mortgage agreements generally require monthly deposits to replacement reserves and monthly deposits to escrow accounts for real estate taxes, hazard and mortgage insurance and other expenses (Note 5).
Accrued interest payable amounted to approximately $8,792,000 and $8,236,000 as of March 31, 2006 and 2005, respectively. Interest accrues on all mortgage loans, which include primary and secondary loans. Certain secondary loans have provisions such that interest is accrued but not payable until a future date. The Partnership anticipates the payment of accrued interest on the secondary loans (which make up the majority of the accrued interest payable amount
INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2006
indicated in the above table and which have been accumulating since the Partnership's investment in the respective Local Partnership) will be made from future refinancings or sales proceeds of the respective Local Partnerships. In addition, each Local Partnership's mortgage notes are collateralized by the land and buildings of the respective Local Partnership, and are without further recourse to the Partnership. Accrued interest payable is included in accounts payable and other liabilities on the Consolidated Balance Sheets.
NOTE 8 - Related Party Transactions
An affiliate of the General Partner has a .01% interest as a special limited partner in each of the Local Partnerships.
Pursuant to the Partnership Agreement and the Local Partnership Agreements, the General Partner and affiliate receive their pro-rata share of profits, losses and tax credits.
A) Guarantees
The Partnership had negotiated Operating Deficit Guaranty Agreements with the development stage Local Partnerships whereby the general partners of such Local Partnerships and/or their affiliates have agreed to fund operating deficits for a specified period of time. The terms of the Operating Deficit Guaranty Agreements vary for each of these Local Partnerships, with maximum dollar amounts to be funded for a specified period of time, generally three years, commencing on the break-even date. As of both March 31, 2006 and 2005, Operating Deficit Guarantees aggregate approximately $1,897,000. As of both March 31, 2006 and 2005, $0 has been funded under the Operating Deficit Guaranty Agreements. Amounts funded under such agreements will be treated as non-interest bearing loans, which will be paid only out of 50% of available cash flow or out of available net sale or refinancing proceeds.
B) Related Party Expenses
Expenses incurred to related parties for the years ended March 31, 2006, 2005 and 2004 were as follows:
(a) The General Partner is entitled to receive a partnership management fee, after payment of all Partnership expenses, which together with the annual local administrative fees will not exceed a maximum of 0.5% per annum of invested assets (as defined in the Partnership Agreement), for administering the affairs of the Partnership. Subject to the foregoing limitation, the partnership management fee will be determined by the General Partner in its sole discretion based upon its review of the Partnership's investments. Unpaid partnership management fees for any year will be accrued without interest and will be payable only to the extent of available funds after the Partnership has made distributions to the limited partners of sale or refinancing proceeds equal to their original capital contributions plus a 10% priority return thereon (to the extent not previously paid out of cash flow). Partnership management fees owed to the General Partner amounting to approximately $2,304,000 and $1,967,000 were accrued and unpaid as of March 31, 2006 and 2005, respectively.
(b) The Partnership reimburses the General Partner and its affiliates for actual Partnership operating expenses incurred by the General Partner and its affiliates on the Partnership's behalf. The amount of reimbursement from the Partnership is limited by the provisions of the Partnership Agreement. Another affiliate of the General Partner performs asset monitoring for the Partnership. These services include site visits and evaluations of the subsidiary partnerships' performance.
(c) Property management fees incurred by the Local Partnerships amounted to $388,853, $384,730 and $371,375 for the years ended March 31, 2006, 2005 and 2004, respectively. Of these fees, $185,148, $182,830 and $113,194 was incurred to affiliates of the subsidiary partnerships' general partners.
(d) Independence SLP IV L.P., a special limited partner of the subsidiary partnerships, is entitled to receive a local administrative fee of up to $5,000 per year from each subsidiary partnership.
INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2006
C) Due to Local General Partners and Affiliates
Due to local general partners and affiliates consists of the following:
NOTE 9 - Income Taxes
A reconciliation of the financial statement net loss to the income tax loss for the Partnership and its consolidated subsidiaries follows:
* Reclassified for comparative purposes
NOTE 10 - Commitments and Contingencies
a) Uninsured Cash and Cash Equivalents
The Partnership and its subsidiary partnerships maintain their cash and cash equivalents in various banks. The accounts at each bank are insured by the Federal Deposit Insurance Corporation for up to $100,000. At March 31, 2006, uninsured cash and cash equivalents at various banking institutions approximated $1,345,000.
b) Leases
One subsidiary partnership is leasing the land on which the Project is located, for a term of 65 years starting on July 14, 1982. At December 31, 2005, the subsidiary partnership is obligated to pay rent of $1 per annum.
c) Other
The Partnership is subject to the risks incident to potential losses arising from the management and ownership of improved real estate and poor economic conditions.
The Partnership and BACs holders will begin to recognize Tax Credits with respect to a property when the Credit Period for such property (generally ten years from the date of investment or, if later, the date the property is leased to qualified tenants) commences. Because of the time required for the
INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2006
acquisition, completion and rent-up of Properties, it is expected that the amount of Tax Credits per BAC will gradually increase over the first three years of the Partnership. Tax Credits not recognized in the first three years will be recognized in the 11th through 13th years. The Partnership generated $5,292,899, $5,356,758 and $5,356,758 of Tax Credits during each of the 2005, 2004 and 2003 tax years, respectively. The Tax Credits expire at various times through 2010.
NOTE 11 - New Accounting Pronouncements
In June 2005, the Financial Accounting Standards Board ("FASB") issued SFAS No. 154, "Accounting Changes and Error Corrections" ("FAS 154"). FAS 154 replaces Accounting Principles Board ("APB") Opinion No. 20, "Accounting Changes" and FAS No. 3, "Reporting Accounting Changes in Interim Financial Statements". APB No. 20 previously required that most voluntary changes in accounting principle be recognized by including in the current period's net income the cumulative effect of changing to the new accounting principle. In contrast, FAS 154 requires that a voluntary change in accounting principle be applied retrospectively to prior periods' financial statements, unless this would be impracticable. In addition, FAS 154 makes a distinction between retrospective application of an accounting principle and the restatement of financial statements to reflect the correction of an error. FAS 154 is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. The Partnership does not expect the adoption of FAS 154 to have a material impact on its consolidated financial statements.
In June 2005, the FASB issued Emerging Issues Task Force No. 04-5, "Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights" ("EITF No. 04-5"). EITF No. 04-5 replaces counterpart requirements in the Statement of Position 78-9, which provides guidance on accounting for investments in real-estate ventures and limited partnerships. Under EITF No. 04-5, the general partner's control would be overcome if the limited partners have either (i) "kick-out rights"- the right to dissolve or liquidate the partnership or otherwise remove the general partner "without cause" or (ii) "participating rights" - the right to effectively participate in significant decisions made in the ordinary course of the partnership's business. The kick-out rights and the participating rights must be substantive in order to overcome the general partner's control. EITF No. 04-5 is now effective. Since the Partnership's financial statements are presented on a consolidated basis, the adoption of EITF No. 04-5 has not had a material effect on Partnership's consolidated financial statements.
INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2006
NOTE 12 - Selected Quarterly Financial Data (Unaudited)
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
Item 9A. Controls and Procedures
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Chief Executive Officer and Chief Financial Officer of Related Independence L.L.C, the general partner of the Partnership, has evaluated the effectiveness of the Partnership's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended ("Exchange Act") as of the end of the period covered by this report. In designing and evaluating our disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and our management necessarily applied its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer of Related Independence L.L.C, the general partner of the Partnership, concluded that, as of the period covered by this report, our disclosure controls and procedures were (1) designed to ensure that material information relating to us, including our consolidated subsidiaries, is made known to the Chief Executive Officer and Chief Financial Officer of Related Independence L.L.C, the general partner of the Partnership by others within those entities, particularly during the period in which this report was being prepared and (2) effective, in that they provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.
(b) Changes in INTERNAL CONTROLS OVER FINANCIAL REPORTING. During the year ended March 31, 2006, there were no changes in the Partnership's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Partnership's internal control over financial reporting.
Item 9B. Other Information
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
The Partnership has no directors or executive officers. The Partnership's affairs are managed and controlled by Related Independence LLC ("RILLC"), the General Partner. The Partnership has not adopted a separate code of ethics because the Partnership has no directors or executive officers. However, the parent company of CharterMac Capital LLC ("CharterMac Capital") (formerly known as Related Capital Company LLC), which controls the General Partner, has adopted a code of ethics (see http://www.chartermac.com).
On November 17, 2003, CharterMac acquired CharterMac Capital, which is the parent of RCC Manager LLC, the managing member of the General Partner. Pursuant to the acquisition, CharterMac acquired controlling interests in the General Partner. This acquisition did not affect the Partnership or its day-to-day operations, as the majority of the General Partner's management team remained unchanged.
On November 8, 2005, CharterMac announced that Stuart J. Boesky would step down as Chief Executive Officer and trustee of CharterMac. Upon his resignation, which was effective on November 15, 2005, he also resigned from his position as Senior Vice President and Member of the General Partner. Mr. Boesky will stay on as a consultant to CharterMac for the next year in order to ensure a smooth transition. On March 14, 2006, CharterMac's Board of Trustees named Marc D. Schnitzer the Chief Executive Officer, effective immediately. Mr. Schnitzer replaced Stephen M. Ross, who had served as interim Chief Executive Officer since Stuart J. Boesky resigned in November of 2005. Mr. Schnitzer also replaced Mr. Boesky as Senior Vice President and Member of the General Partner.
Certain information concerning the executive officers and directors of the General Partner is set forth below.
Name Position - ----------------- ---------------------------
Alan P. Hirmes Chief Executive Officer and Chief Financial Officer
Marc D. Schnitzer Senior Vice President
Glenn F. Hopps Treasurer
ALAN P. HIRMES, 51, is a Director and President of the General Partner and President of the General Partner. Mr. Hirmes has been a Certified Public Accountant in New York since 1978. Prior to joining CharterMac Capital in October 1983, Mr. Hirmes was employed by Weiner & Co., Certified Public Accountants. Mr. Hirmes is also a Vice President of CharterMac Capital. Mr. Hirmes graduated from Hofstra University with a Bachelor of Arts degree. Mr. Hirmes also serves on the Board of Trustees of CharterMac and American Mortgage Acceptance Company.
MARC D. SCHNITZER, 45, is a Vice President of the General Partner. He is responsible both for financial restructurings of real estate properties and directing CharterMac Capital's acquisitions of properties generating Housing Tax Credits. Mr. Schnitzer received a Masters of Business Administration from The Wharton School of the University of Pennsylvania in December 1987 before joining
CharterMac Capital in January 1988. From 1983 to January 1986, he was a financial analyst for the First Boston Corporation in New York. Mr. Schnitzer graduated summa cum laude with a Bachelor of Science in Business Administration from the School of Management at Boston University in May 1983. In March 2006, Mr. Schnitzer was appointed Chief Executive Officer and President of CharterMac. Mr. Schnitzer also serves on the Board of Trustees of CharterMac.
GLENN F. HOPPS, 43, is Treasurer of the General Partner. Mr. Hopps joined CharterMac Capital in December 1990, and prior to that date was employed by Marks Shron & Company and Weissbarth, Altman and Michaelson, Certified Public Accountants. Mr. Hopps graduated from New York State University at Albany with a Bachelor of Science Degree in Accounting.
Item 11. Executive Compensation.
The Partnership has no officers or directors. The Partnership does not pay or accrue any fees, salaries or other forms of compensation to members or officers of the General Partner for their services. However, under the terms of the Partnership Agreement, the Partnership has entered into certain arrangements with the General Partner and its affiliates, which provide for compensation to be paid to the General Partner and its affiliates. Such arrangements include (but are not limited to) agreements to pay nonrecurring acquisition fees, a nonaccountable acquisition expense allowance, an accountable expense reimbursement and subordinated disposition fees to the General Partner and/or its affiliates. In addition, the General Partner is entitled to a subordinated interest in cash from sales or refinancings and a 1% interest in net income, net loss, distributions of adjusted cash from operations and cash from sales or refinancings. Certain members and officers of the General Partner receive compensation from the General Partner and its affiliates for services performed for various affiliated entities which may include services performed for the Partnership. The maximum annual partnership management fee paid to the General Partner is 0.5% of invested assets. See Note 8 in Item 8
Item 8 above, which are incorporated herein by reference thereto. However, there have been no direct financial transactions between the Partnership and the members and officers of the General Partner.
Item 14. Principal Accountant Fees and Services
Audit Fees - ---------- The aggregate fees by Friedman LLP and its affiliates for professional services rendered for the audit of the Partnership's annual consolidated financial statements for the years ended March 31, 2006 and 2005 and for the reviews of the condensed consolidated financial statements included in the Partnership's quarterly reports on Form 10-Q for those years were $59,000 and $52,000, respectively.
Audit Related Fees - ------------------ None.
Tax Fees - -------- The aggregate fees by Weiser LLP and its affiliates for professional services rendered for the preparation of the Partnership's annual tax returns were $8,700 for each of the years ended December 31, 2005 and 2004.
All Other Fees - -------------- None
The Partnership is not required to have, and does not have a stand alone audit committee.
PART IV
Item 15. Exhibits, Financial Statement Schedules
PART IV
Item 15. Exhibits, Financial Statement Schedules (continued)
Jurisdiction of (c) Subsidiaries of the Registrant (Exhibit 21) Organization ------------------------------------------- ---------------
BX-8A Team Associates, L.P. NY Westminster Park Plaza CA Fawcett Street Limited Partnership WA Figueroa Senior Housing Limited Partnership CA NNPHI Senior Housing Limited Partnership CA Belmont/McBride Apartments Limited Partnership NJ New Zion Apartments Limited Partnership LA Bakery Village Urban Renewal Associates, L.P. NJ Sojourner Douglass, L.P. NJ Marlton Housing Partnership, L.P. PA GP Kaneohe Limited Partnership HI KSD Village Apartments, Phase II, Ltd. KY Kanisa Apartments, Ltd. KY Guymon Housing Partners, L.P. OK
(d) Not applicable
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
INDEPENDENCE TAX CREDIT PLUS L.P. IV ------------------------------------ (Registrant)
By: RELATED INDEPENDENCE L.L.C., a General Partner
Date: June 26, 2006 By: /s/ Alan P. Hirmes ------------- ------------------ Alan P. Hirmes President, Member, Chief Executive Officer and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13a-14(a) OR RULE 15d-14(a)
I, Alan P. Hirmes, Chief Executive Officer and Chief Financial Officer of Related Independence L.L.C. (the "General Partner"), which is the General Partner of Independence Tax Credit Plus L.P. IV (the "Partnership"), certify that:
1) I have reviewed this annual report on Form 10-K for the period ending March 31, 2006 of the Partnership;
2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3) Based on my knowledge, the consolidated financial statements, and other financial information included in this annual report, fairly present in all material respects the consolidated financial condition, results of operations and cash flows of the Partnership as of, and for, the periods presented in this report;
4) I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Partnership and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures, to be designed under my supervision, to ensure that material information relating to the Partnership including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the Partnership's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the Partnership's internal control over financial reporting that occurred during the Partnership's fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Partnership's internal control over financial reporting; and
5) I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the Partnership's auditors and to the board of directors of the General Partners:
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Partnership's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Partnership's internal control over financial reporting.
Date: June 26, 2006 -------------
By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes Chief Executive Officer and Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO RULE 13a-14(b) OR RULE 15d-14(b) AND SECTION 1350 OF TITLE 18 OF THE UNITED STATES CODE (18 U.S.C. 1350)
In connection with the Annual Report of Independence Tax Credit Plus L.P. IV (the "Partnership") on Form 10-K for the period ended March 31, 2006 as filed with the Securities and Exchange Commission ("SEC") on the date hereof (the "Report"), I, Alan P. Hirmes, Chief Executive Officer and Chief Financial Officer of Related Independence L.L.C. which is the general partner of the Partnership, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the consolidated financial condition and result of operations of the Partnership.
A signed original of this written statement required by Section 906 has been provided to the Partnership and will be retained by the Partnership and furnished to the SEC or its staff upon request.
By: /s/Alan P. Hirmes ----------------- Alan P. Hirmes Chief Executive Officer and Chief Financial Officer June 26, 2006
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------------------------------------- ON FINANCIAL STATEMENT SCHEDULES --------------------------------
TO THE PARTNERS OF INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES
In connection with our audits of the consolidated financial statements of INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES included in the Form 10-K as presented in our opinion dated June 16, 2006, we have also audited supporting Schedule I as of March 31, 2006 and 2005 and for the years ended 2006, 2005 and 2004 and Schedule III as of March 31, 2006 and for the years ended March 31, 2006, 2005 and 2004. In our opinion, based on our audits, these schedules present fairly, when read in conjunction with the related financial statements, the financial data required to be set forth therein.
/s/ Friedman LLP Friedman LLP
New York, New York June 16, 2006
INDEPENDENCE TAX CREDIT PLUS L.P. IV SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Not Including Consolidated Subsidiary Partnerships)
CONDENSED BALANCE SHEETS
INDEPENDENCE TAX CREDIT PLUS L.P. IV SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Not Including Consolidated Subsidiary Partnerships)
CONDENSED STATEMENTS OF OPERATIONS
INDEPENDENCE TAX CREDIT PLUS L.P. IV SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Not Including Consolidated Subsidiary Partnerships)
CONDENSED STATEMENTS OF CASH FLOWS
INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Partnership Property Pledged as Collateral MARCH 31, 2006
(a) Depreciation is computed using primarily the straight-line method over the estimated useful lives determined by the Partnership date of acquisition
INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Partnership Property Pledged as Collateral MARCH 31, 2006
At the time the Local Partnerships were acquired by Independence Tax Credit Plus L.P. IV, the entire purchase price paid by Independence Tax Credit Plus L.P. IV was pushed down to the Local Partnerships as property and equipment with an offsetting credit to capital.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Independence SLP IV L.P., a limited partnership whose general partner is the General Partner of the Partnership and which acts as the special limited partner of each Local Partnership, holds a .01% limited partnership interest in the Local Partnerships. See Note 8 in Item 8 above, which information is incorporated herein by reference thereto.
Except as set forth below no person is known by the Partnership to be the beneficial owner of more than five percent of the Limited Partnership Interests and/or BACs; and neither the General Partner nor any director or officer of the General Partner beneficially owns any Limited Partnership Interests or BACs. The following table sets forth the number of BACs beneficially owned as of May 18, 2006 by (i) each BACs holder known to the Partnership to be a beneficial owner of more than 5% of the BACs, (ii) each director and executive officer of the General Partner of RCMP and (iii) the directors and executive officers of the General Partners of RCMP as a group. Unless otherwise noted, all BACs are owned directly with sole voting and dispositive powers.
Amount and Nature of Percentage Name of Beneficial Owner (1) Beneficial Ownership of Class - -------------------------------- -------------------- -------------------
Lehigh Tax Credit Partners, Inc. 2,868.06(2) 6.3% J. Michael Fried 2,868.06(2)(3) 6.3% Michael J. Wechsler - - Alan P. Hirmes 2,868.06(2)(3) 6.3% Stuart J. Boesky 2,868.06(2)(3) 6.3% Stephen M. Ross 2,868.06(2)(3) 6.3% Marc D. Schnitzer 2,868.06(2)(3) 6.3% Glenn F. Hopps - - Teresa Wicelinski - -
All directors and executive officers of the general partner of the Related General Partner as a group (eight persons)
2,868.06(2)(3) 6.3%
(1) The address for each of the persons in the table is 625 Madison Avenue, New York, New York 10022.
(2) As set forth in Schedule 13D filed by Lehigh Tax Credit Partners III L.L.C. ("Lehigh III") and Lehigh Tax Credit Partners, Inc. (the "Managing Member") on January 25, 1999 with the Securities and Exchange Commission (the "Commission") and pursuant to a letter agreement dated October 6, 1998 among the Partnership, Lehigh III and Related Independence Associates IV L.P. ("RIA") (the "Standstill Agreement"), Lehigh III agreed that, prior to October 6, 2008 (the "Standstill Expiration Date"), it will not and it will cause certain affiliates not to (i)
seek to propose to enter into, directly or indirectly, any merger, consolidation, business combination, sale or acquisition of assets, liquidation, dissolution or other similar transaction involving the Partnership, (ii) form, join or otherwise participate in a "group" (within the meaning of Section 13(d)(3) of the Act) with respect to any voting securities of the Partnership, except that those affiliates bound by the Standstill Agreement will not be deemed to have violated it and formed a "group" solely by acting in accordance with the Standstill Agreement, (iii) disclose in writing to any third party any intention, plan or arrangement inconsistent with the terms of the Standstill Agreement, or (iv) loan money to, advise, assist or encourage any person in connection with any action inconsistent with the terms of the Standstill Agreement, Lehigh III also agreed to vote its BACs in the same manner as a majority of all voting BACs holders; provided, however, Lehigh is entitled to vote its BACs as it determines with regard to any proposal (i) to remove RIA as a general partner of the Partnership or (ii) concerning the reduction of any fees, profits, distributions or allocations for the benefit of RIA or its affiliates. The discussion herein of the Standstill Agreement is subject to and qualified in its entirety by reference to such agreement, a copy of which is attached hereto as an exhibit and incorporated herein by reference. The addresses of each of the Partnership, Lehigh III and RIA is 625 Madison Avenue, New York, New York 10022.
(3) Each such party serves as a director and executive officer of the Managing Member and owns an equity interest therein except J. Michael Fried who owns only an economic interest.
Item 13.
Item 13. Certain Relationships and Related Transactions
The Partnership has and will continue to have certain relationships with the General Partner and its affiliates, as discussed in Item 11 and also Note 8 in Item 8 above, which are incorporated herein by reference thereto. However, there have been no direct financial transactions between the Partnership and the members and officers of the General Partner.
Item 14.
Item 14. Principal Accountant Fees and Services
Audit Fees - ---------- The aggregate fees by Friedman LLP and its affiliates for professional services rendered for the audit of the Partnership's annual consolidated financial statements for the years ended March 31, 2006 and 2005 and for the reviews of the condensed consolidated financial statements included in the Partnership's quarterly reports on Form 10-Q for those years were $59,000 and $52,000, respectively.
Audit Related Fees - ------------------ None.
Tax Fees - -------- The aggregate fees by Weiser LLP and its affiliates for professional services rendered for the preparation of the Partnership's annual tax returns were $8,700 for each of the years ended December 31, 2005 and 2004.
All Other Fees - -------------- None
The Partnership is not required to have, and does not have a stand alone audit committee.
PART IV
Item 15.
Item 15. Exhibits, Financial Statement Schedules
PART IV
Item 15. Exhibits, Financial Statement Schedules (continued)
Jurisdiction of (c) Subsidiaries of the Registrant (Exhibit 21) Organization ------------------------------------------- ---------------
BX-8A Team Associates, L.P. NY Westminster Park Plaza CA Fawcett Street Limited Partnership WA Figueroa Senior Housing Limited Partnership CA NNPHI Senior Housing Limited Partnership CA Belmont/McBride Apartments Limited Partnership NJ New Zion Apartments Limited Partnership LA Bakery Village Urban Renewal Associates, L.P. NJ Sojourner Douglass, L.P. NJ Marlton Housing Partnership, L.P. PA GP Kaneohe Limited Partnership HI KSD Village Apartments, Phase II, Ltd. KY Kanisa Apartments, Ltd. KY Guymon Housing Partners, L.P. OK
(d) Not applicable
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
INDEPENDENCE TAX CREDIT PLUS L.P. IV ------------------------------------ (Registrant)
By: RELATED INDEPENDENCE L.L.C., a General Partner
Date: June 26, 2006 By: /s/ Alan P. Hirmes ------------- ------------------ Alan P. Hirmes President, Member, Chief Executive Officer and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13a-14(a) OR RULE 15d-14(a)
I, Alan P. Hirmes, Chief Executive Officer and Chief Financial Officer of Related Independence L.L.C. (the "General Partner"), which is the General Partner of Independence Tax Credit Plus L.P. IV (the "Partnership"), certify that:
1) I have reviewed this annual report on Form 10-K for the period ending March 31, 2006 of the Partnership;
2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3) Based on my knowledge, the consolidated financial statements, and other financial information included in this annual report, fairly present in all material respects the consolidated financial condition, results of operations and cash flows of the Partnership as of, and for, the periods presented in this report;
4) I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Partnership and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures, to be designed under my supervision, to ensure that material information relating to the Partnership including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the Partnership's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the Partnership's internal control over financial reporting that occurred during the Partnership's fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Partnership's internal control over financial reporting; and
5) I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the Partnership's auditors and to the board of directors of the General Partners:
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Partnership's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Partnership's internal control over financial reporting.
Date: June 26, 2006 -------------
By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes Chief Executive Officer and Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO RULE 13a-14(b) OR RULE 15d-14(b) AND SECTION 1350 OF TITLE 18 OF THE UNITED STATES CODE (18 U.S.C. 1350)
In connection with the Annual Report of Independence Tax Credit Plus L.P. IV (the "Partnership") on Form 10-K for the period ended March 31, 2006 as filed with the Securities and Exchange Commission ("SEC") on the date hereof (the "Report"), I, Alan P. Hirmes, Chief Executive Officer and Chief Financial Officer of Related Independence L.L.C. which is the general partner of the Partnership, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the consolidated financial condition and result of operations of the Partnership.
A signed original of this written statement required by Section 906 has been provided to the Partnership and will be retained by the Partnership and furnished to the SEC or its staff upon request.
By: /s/Alan P. Hirmes ----------------- Alan P. Hirmes Chief Executive Officer and Chief Financial Officer June 26, 2006
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------------------------------------- ON FINANCIAL STATEMENT SCHEDULES --------------------------------
TO THE PARTNERS OF INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES
In connection with our audits of the consolidated financial statements of INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES included in the Form 10-K as presented in our opinion dated June 16, 2006, we have also audited supporting Schedule I as of March 31, 2006 and 2005 and for the years ended 2006, 2005 and 2004 and Schedule III as of March 31, 2006 and for the years ended March 31, 2006, 2005 and 2004. In our opinion, based on our audits, these schedules present fairly, when read in conjunction with the related financial statements, the financial data required to be set forth therein.
/s/ Friedman LLP Friedman LLP
New York, New York June 16, 2006
INDEPENDENCE TAX CREDIT PLUS L.P. IV SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Not Including Consolidated Subsidiary Partnerships)
CONDENSED BALANCE SHEETS
INDEPENDENCE TAX CREDIT PLUS L.P. IV SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Not Including Consolidated Subsidiary Partnerships)
CONDENSED STATEMENTS OF OPERATIONS
INDEPENDENCE TAX CREDIT PLUS L.P. IV SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Not Including Consolidated Subsidiary Partnerships)
CONDENSED STATEMENTS OF CASH FLOWS
INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Partnership Property Pledged as Collateral MARCH 31, 2006
(a) Depreciation is computed using primarily the straight-line method over the estimated useful lives determined by the Partnership date of acquisition
INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Partnership Property Pledged as Collateral MARCH 31, 2006
At the time the Local Partnerships were acquired by Independence Tax Credit Plus L.P. IV, the entire purchase price paid by Independence Tax Credit Plus L.P. IV was pushed down to the Local Partnerships as property and equipment with an offsetting credit to capital.