Attached files

file	filename
EX-31.2 - EXHIBIT 31.2 - NATIONAL TAX CREDIT INVESTORS II	ntci2_ex31z2.htm
EX-31.1 - EXHIBIT 31.1 - NATIONAL TAX CREDIT INVESTORS II	ntci2_ex31z1.htm
EX-32.1 - EXHIBIT 32.1 - NATIONAL TAX CREDIT INVESTORS II	ntci2_ex32z1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K

(Mark One)

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

For the fiscal year ended December 31, 2010

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

For the transition period from __________ to ___________

Commission File Number 0-20610

NATIONAL TAX CREDIT INVESTORS II

(Exact name of registrant as specified in its charter)

California	93-1017959
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

55 Beattie Place, PO Box 1089

Greenville, South Carolina 29602

(Address of principal executive offices)

Registrant’s telephone number, including area code (864) 239-1000

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Units of Limited Partnership Interests

(Title of class)

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [ ] Yes [ ] No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer £

Accelerated filer £

Non-accelerated filer £(Do not check if a

smaller reporting company)

Smaller reporting company S

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

State the aggregate market value of the voting and non-voting partnership units held by non-affiliates computed by reference to the price at which the partnership units were last sold, or the average bid and asked price of such partnership units as of the last business day of the registrant’s most recently completed second fiscal quarter. No market exists for the limited partnership units of the Registrant, and, therefore, no aggregate market value can be determined.

DOCUMENTS INCORPORATED BY REFERENCE

None

FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements in certain circumstances. Certain information included in this Annual Report contains or may contain information that is forward-looking within the meaning of the federal securities laws. Actual results may differ materially from those described in these forward-looking statements and, in addition, will be affected by a variety of risks and factors, some of which are beyond the Partnership’s control, including, without limitation: financing risks, including the availability and cost of financing and the risk that the Partnership’s cash flows from operations may be insufficient to meet required payments of principal and interest; national and local economic conditions, including the pace of job growth and the level of unemployment; the terms of governmental regulations that affect the Partnership and its investment in limited partnerships and interpretations of those regulations; the competitive environment in which the Partnership operates; real estate risks, including fluctuations in real estate values and the general economic climate in local markets and competition for residents in such markets; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by the limited partnerships in which the Partnership has invested. Readers should carefully review the Partnership’s financial statements and the notes thereto, as well as the other documents the Partnership files from time to time with the Securities and Exchange Commission.

PART I

Item 1. Business

National Tax Credit Investors II (“NTCI-II” or the “Partnership”) is a limited partnership formed under the California Revised Local Partnership Act as of January 12, 1990. The Partnership was formed to invest primarily in other limited partnerships (“Local Partnerships”) which own and operate multifamily housing complexes that are eligible for low income housing federal income tax credits (the “Housing Tax Credit”). The general partner of the Partnership is National Partnership Investments Corp. (the “General Partner” or “NAPICO”), a California corporation. The Partnership shall continue in full force and effect until December 31, 2030, unless terminated earlier pursuant to the Partnership Agreement or law.

On April 23, 1990, the Partnership offered 100,000 Units of Limited Partnership Interests (“Units”) at $1,000 per Unit through a public offering managed by Paine Webber Incorporated. The term of the offering expired on April 22, 1992, at which date a total of 72,404 Units had been sold amounting to $72,404,000 in capital contributions. Offering expenses of approximately $9,413,000 were incurred in connection with the sale of such limited partner interests. Since its initial offering, the Partnership has not received, nor are limited partners required to make additional capital contributions.

The Partnership has no employees. Services are performed for the Partnership by the General Partner and agents retained by the General Partner.

In general, an owner of a low-income housing project is entitled to receive the Housing Tax Credit in each year of a ten-year period (the "Credit Period"). The projects are subject to a minimum compliance period of not less than fifteen years (the "Compliance Period"). Tax Credits are available to the limited partners to reduce their federal income taxes. The ability of a limited partner to utilize such credits may be restricted by the passive activity loss limitation and the general business tax credit limitation rules. NTCI-II has made capital contributions to 37 Local Partnerships.

Prior to 2009, the Partnership lost its interest in 21 Local Partnerships either through the sale of the property held by the Local Partnership, through foreclosure, or the sale of Partnership interests. During 2009 the Partnership lost its interest in one local partnership due to the sale of its investment property. During 2010, the Partnership sold its limited partnership interest in four of the Local Partnerships owning residential projects consisting of 175 apartment units and two of the Local Partnerships sold their investment properties consisting of 100 apartment units. As of December 31, 2010, the Partnership holds limited partner interests in 9 Local Partnerships located in 7 states and Puerto Rico. Each of these Local Partnerships owns a project that is eligible for the Housing Tax Credit. Several of the Local Partnerships also benefit from government programs promoting low or moderate income housing.

The projects owned by the Local Partnerships in which NTCI-II has invested were developed by the local operating general partners (the “Local Operating General Partners”) who acquired the sites and applied for applicable mortgages and subsidies, if any. NTCI-II became the principal limited partner in these Local Partnerships pursuant to arm's-length negotiations with the Local Operating General Partners. As a limited partner, NTCI-II's liability for obligations of the Local Partnership is limited to its investment. The Local Operating General Partner of the Local Partnership retains responsibility for developing, constructing, maintaining, operating and managing the Projects. Under certain circumstances, an affiliate of NAPICO or NTCI-II may act as the Local Operating General Partner. An affiliate, National Tax Credit Inc. II ("NTC-II") is acting either as a special limited partner or non-managing administrative general partner (the “Administrative General Partner”) of each Local Partnership in which the Partnership has an investment.

A further description of the Partnership's business is included in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" included in this Form 10-K.

Item 2. Properties

During 2010, most of the projects in which NTCI-II had invested were substantially rented. The following is a schedule of the occupancy status as of December 31, 2010 and 2009, of the projects owned by Local Partnerships in which NTCI-II is a limited partner.

SCHEDULE OF PROJECTS OWNED BY LOCAL PARTNERSHIPS

IN WHICH NTCI-II HAS AN INVESTMENT

DECEMBER 31, 2010

			Units
		Financed,	Authorized	Occupancy
		Insured	for Rental	Percentage
		and	Assistance	for the Years Ended
	No. of	Subsidized	Under	December 31,
Name and Location	Units	Under	Section 8	2010	2009

Countryside
Howell Township, NJ	180	--	--	98%	98%
Jamestown Terrace
Jamestown, CA	56	(A)	43	95%	98%
Lincoln Grove Apartments
Greensboro, NC	116	--	--	71%	61%
Michigan Beach Apartments
Chicago, IL	239	--	--	91%	94%
Pineview Terrace (1)
Katy, TX	120	--	--	90%	93%
Sitka III
Sitka, AK	16	(A)	16	96%	90%
Soldotna (Northwood
Senior) Apartments
Soldotna, AK	23	(A)	23	97%	99%

SCHEDULE OF PROJECTS OWNED BY LOCAL PARTNERSHIPS

IN WHICH NTCI-II HAS AN INVESTMENT (continued)

DECEMBER 31, 2010

			Units
		Financed,	Authorized	Occupancy
		Insured	for Rental	Percentage
		and	Assistance	for the Years Ended
	No. of	Subsidized	Under	December 31,
Name and Location	Units	Under	Section 8	2010	2009

Torres de Plata II
Toa Alto, PR	78	(A)	78	100%	100%
Virginia Park Meadows
Detroit, MI	83	--	--	82%	87%

	911		160

(A) The mortgage is insured by the Federal Housing Administration under the provisions of Section 515 of the National Housing Act.

(1) Effective February 4, 2011, the Partnership assigned its limited partnership interest in Pineview Terrace to a third party for a net sales price of $1,000,000.

The following table details the Partnership’s ownership percentages of the Local Partnerships and the cost of acquisition of such ownership. All interests are limited partner interests. Also included is the total mortgage and other encumbrances on each property for each of the Local Partnerships as of December 31, 2010.

	NTCI-II	Original Cost
	Percentage	of Ownership	Mortgage	Notes
Name and Location	Interest	Interest	Notes	Payable
		(in thousands)	(in thousands)	(in thousands)
Countryside
Howell Township, NJ	99.00%	$ 95	$ 3,344	$ 143
Jamestown Terrace
Jamestown, CA	99.00%	183	2,750	--
Lincoln Grove Apartments
Greensboro, NC	99.00%	840	2,101	--
Michigan Beach Apartments
Chicago, IL	98.90%	1,575	9,172	3,322
Pineview Terrace
Katy, TX	98.99%	132	2,418	--
Sitka III
Sitka, AK	99.00%	1,277	1,116	--
Soldotna (Northwood
Senior) Apartments
Soldotna, AK	99.00%	1,391	1,414	--
Torres de Plata II
Toa Alto, PR	99.00%	100	2,928	--
Virginia Park Meadows
Detroit, MI	98.90%	248	3,382	422
		$ 5,841	$28,625	$3,887

Although each Local Partnership in which the Partnership has invested owns a project which must compete with other projects for tenants, government mortgage interest and rent subsidies make it possible for some of the Local Partnerships to rent units to eligible tenants at below market rates. In general, this insulates these properties from market competition.

Item 3. Legal Proceedings

The General Partner is involved in various lawsuits arising from transactions in the ordinary course of business. In the opinion of management and the General Partner, the claims will not result in any material liability to the Partnership.

PART II

Item 5. Market for the Registrant’s Common Equity, Related Security Holder Matters and Issuer Purchases of Equity Securities

The limited partnership interests (the “Units”) are not traded on a public exchange but were sold through a public offering managed by PaineWebber Incorporated. It is not anticipated that any active public market will develop for the purchase and sale of any limited partnership interest, therefore an investor may be unable to sell or otherwise dispose of his or her interest in the Partnership. A Unit may not be transferred but can be assigned only if certain requirements in the Partnership Agreement are satisfied. At December 31, 2010, there were 2,952 registered holders of 72,270 Units in NTCI-II. The Partnership has invested in certain government assisted projects under programs which in many instances restrict the cash return available to project owners. The Partnership was not designed to provide cash distributions to limited partners in circumstances other than refinancing or disposition of its investments in Local Partnerships.

The Partnership distributed the following amounts during the years ended December 31, 2010 and 2009 (in thousands, except per unit data):

		Per Limited		Per Limited
	Year Ended	Partnership	Year Ended	Partnership
	December 31, 2010	Unit	December 31, 2009	Unit

Sale(1)	$ 1,763	$ 24.14	$ --	$ --

(1) Proceeds from 2010 sales of partnership interests and investment properties.

AIMCO and its affiliates owned 397.0 Units in the Partnership representing 0.55% of the outstanding Units at December 31, 2010. It is possible that AIMCO or its affiliates will acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. Although the General Partner owes fiduciary duties to the limited partners of the Partnership, the General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the General Partner, as General Partner, to the Partnership and its limited partners may come into conflict with the duties of the General Partner to AIMCO as its sole stockholder.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This item should be read in conjunction with the financial statements and other items contained elsewhere in this report.

The General Partner monitors developments in the area of legal and regulatory compliance.

Liquidity and Capital Resources

Some of the Properties in which the Partnership has invested, through its investment in other limited partnerships ("Local Partnerships"), receive one or more forms of assistance from the Federal Government. As a result, the Local Partnership’s ability to transfer funds either to the Partnership or among themselves in the form of cash distributions, loans or advances may be restricted by these government assistance programs. These restrictions, however, are not expected to impact the Partnership’s ability to meet its cash obligations.

As of December 31, 2010 and 2009, the Partnership has cash and cash equivalents of approximately $1,368,000 and $1,471,000, respectively. The decrease in cash and cash equivalents of approximately $103,000 is due to approximately $1,763,000 and $339,000 of cash used in financing and operating activities, respectively, partially offset by approximately $1,999,000 of cash provided by investing activities. Cash used in financing activities consisted of a distribution to partners. Cash provided by investing activities consisted of proceeds from the sale of the Partnership’s limited partnership interest in Local Partnerships, distributions received from the sale of Local Partnerships’ investment properties and the recovery of advances to Local Partnerships.

The Partnership’s primary source of funds is the receipt of distributions from Local Partnerships in which the Partnership has invested. It is not expected that any of the Local Partnerships in which the Partnership invests will generate cash from operations sufficient to provide distributions to the Limited Partners in any material amount. Such cash from operations, if any, would first be used to meet operating expenses of the Local Partnership. The Partnership's investments are not readily marketable and may be affected by adverse general economic conditions which, in turn, could substantially increase the risk of operating losses for the projects, the Local Partnerships and the Partnership. These problems may result from a number of factors, many of which cannot be controlled by the General Partner.

An infrequent source of funds for the Partnership would be from proceeds received as a result of a sale of a Local Partnership’s investment property or from the sale of the Partnership’s interest in a Local Partnership. In this regard, on January 22, 2010, the Partnership sold its limited partnership interests in Norwalk, Columbus Junction Park and Grimes Park to a third party and received net proceeds of approximately $23,000. The Partnership’s investment balances in Norwalk, Co lumbus Junction Park and Grimes Park were zero at December 31, 2010 and 2009.

During September 2009, the Partnership entered into an assignment and assumption agreement with a third party affiliated with the local general partner of Palm Springs View Apartments, Ltd. The agreement provided for an assignment of the Partnership’s 50.49% limited partnership interest in Palm Springs View Apartments, Ltd. for $200,000. The assignment was subject to HUD approval which was received during the year ended December 31, 2010. Upon receipt of HUD approval the Partnership was able to complete the assignment of its 50.49% limited partnership interest in Palm Springs View Apartments, Ltd. and received $200,000 for the assignment in April 2010. The Partnership has no investment balance remaining in this Local Partnership at December 31, 2010 and 2009.

On August 27, 2010, a Local Partnership, Fourth Street Investors, LP sold its investment property to a third party for a gross sale price of $3,375,000. The Partnership received approximately $1,421,000 in distributable proceeds from the sale during the year ended December 31, 2010, of which approximately $1,112,000 was recognized as income. The Partnership’s investment balance in Fourth Street Investors, LP is zero and approximately $407,000 at December 31, 2010 and 2009, respectively. On September 17, 2010, a Local Partnership, Northwestern Partners, Ltd sold its investment property to a third party for a gross sale price of $1,000,000. The Partnership received approximately $336,000 in distributable proceeds from the sale during the year ended December 31, 2010. The Partnership has no remaining investment balance in Northwestern Partners at December 31, 2010 and 2009.

During the year ended December 31, 2009, one Local Partnership, Quivira Place Associates, LP, sold its investment property in August 2009, to a third party, for a sales price of approximately $6,250,000. The Partnership did not receive any proceeds from the sale as the Local Partnership’s liabilities exceeded the proceeds it received from the sale. The Partnership had no remaining investment balance in this Local Partnership at December 31, 2010 or 2009.

Subsequent to December 31, 2010, the Partnership assigned its limited partnership interest in Pineview Terrace to a third party and received net proceeds of $1,000,000. The Partnership’s investment balance in Pineview Terrace was zero at December 31, 2010 and 2009.

The General Partner is not obligated to advance funds to the Partnership for operations or to fund Partnership advances to Local Partnerships, but may voluntarily do so from time to time. There were no advances received by the Partnership during the years ended December 31, 2010 and 2009. The Partnership may receive future advances of funds from AIMCO Properties, L.P., although AIMCO Properties, L.P. is not obligated to provide such advances. For more information on AIMCO Properties, L.P., including copies of its audited balance sheet, please see its reports filed with the Securities and Exchange Commission.

The General Partner has the right to cause distributions received by the Partnership from the Local Partnerships (that would otherwise be available for distributions as cash flow) to be dedicated to the increase or replenishment of reserves at the Partnership level. The reserves will generally be available to satisfy working capital or operating expense needs of the Partnership (including payment of partnership management fees) and will also be available to pay any excess third-party costs or expenses incurred by the Partnership in connection with the administration of the Partnership, the preparation of reports to the Limited Partners and other investor servicing obligations of the Partnership. At the discretion of the General Partner, reserves may be available for advances to the Local Partnerships.

The Partnership does not have the ability to assess Limited Partners for additional capital contributions to provide capital if needed by the Partnership or Local Partnerships. Accordingly, if circumstances arise that cause the Local Partnerships to require capital in addition to that contributed by the Partnership and any equity of the local general partners, the only sources from which such capital needs will be able to be satisfied (other than the limited reserves available at the Partnership level) will be (i) third-party debt financing (which may not be available if, as expected, the projects owned by the Local Partnerships are already substantially leveraged), (ii) other equity sources (which could adversely affect the Partnership's interest in operating cash flow and/or proceeds of sale or refinancing of the projects which would result in adverse tax consequences to the Limited Partners), or (iii) the sale or disposition of projects. There can be no assurance that any of such sources would be readily available in sufficient proportions to fund the capital requirements of the Local Partnerships. If such sources are not available, the Local Partnerships would risk foreclosure on their projects if they were unable to renegotiate the terms of their first mortgages and any other debt secured by the projects, which would have significant adverse tax consequences to the Limited Partners.

Results of Operations

The Partnership, as a limited partner, does not have a contractual relationship with the Local Partnerships or exercise control over the activities and operations, including refinancing or selling decisions of the Local Partnerships that would require or allow for consolidation. Accordingly, the Partnership accounts for its investment in the Local Partnerships using the equity method. Thus the individual investments are carried at cost plus the Partnership’s share of the Local Partnership’s profits less the Partnership’s share of the Local Partnership’s losses, distributions and impairment charges. However, since the Partnership is not legally liable for the obligations of the Local Partnerships, or is not otherwise committed to provide additional support to them, it does not recognize losses once its investment in each of the Local Partnerships reaches zero. Distributions from the Local Partnerships are accounted for as a reduction of the investment balance until the investment balance is reduced to zero. Subsequent distributions received are recognized as income in the statements of operations. For those investments where the Partnership has determined that the carrying value of its investments approximates the estimated fair value of those investments, the Partnership’s policy is to recognize equity in income of the Local Partnerships only to the extent of distributions received, and amortization of acquisition costs from those Local Partnerships. During the years ended December 31, 2010 and 2009, the Partnership recognized equity in loss and amortization of acquisition costs of approximately $244,000 and $117,000, respectively, from Local Partnerships. Included in equity in loss and amortization of acquisition costs for the years ended December 31, 2010 and 2009 is approximately $243,000 and $43,000, respectively, of equity in loss related to a Local Partnership, Michigan Beach, that reduced the carrying amount of the mortgage note receivable due from the Local Partnership. During the years ended December 31, 2010 and 2009, the Partnership received approximately $126,000 and $85,000, respectively, in operating distributions from Local Partnerships, of which approximately $29,000 and $13,000 was recognized as income in the statements of operations for the years ended December 31, 2010 and 2009, respectively, as these distributions were received from Local Partnerships in which the Partnership’s investment balance had previously been reduced to zero.

At times, advances are made to Local Partnerships. Advances made by the Partnership to the individual Local Partnerships are considered part of the Partnership’s investment in limited partnerships. Advances made to Local Partnerships in which the investment balance has been reduced to zero are charged to expense. During the year ended December 31, 2009, the Partnership advanced a total of approximately $540,000 to three Local Partnerships, Quivira Place Associates, LP, Michigan Beach Apartments and Sitka Three, to cover operating expenses of the Local Partnerships. The Partnership did not make advances during the year ended December 31, 2010. While not obligated to make advances to any of the Local Partnerships, the Partnership made these advances in order to protect its economic investment in the Local Partnerships. The advances of approximately $540,000 were recognized as expense in the statement of operations for the year ended December 31, 2009. During the year ended December 31, 2010, the Partnership received approximately $19,000 as repayment of advances from Quivira Place Associates, LP and has recognized this amount as a recovery of advances previously expensed in the statement of operations for the year ended December 31, 2010.

At December 31, 2010, the investment balance in eight of the nine Local Partnerships had been reduced to zero and as of December 31, 2009, the investment balance in 13 of the 15 Local Partnerships had been reduced to zero.

The Partnership’s net income for the year ended December 31, 2010 was approximately $973,000, compared to a net loss of approximately $1,140,000 for the year ended December 31, 2009. The increase in net income is due to a decrease in advances to Local Partnerships charged to expense, the recognition of gain on the sale of Local Partnership interests, distributions from Local Partnerships recognized as income and the return of advances from Local Partnerships that had been recognized as expense, partially offset by an increase in equity in loss of Local Partnerships and an increase in loss from Partnership operations. The increase in loss from Partnership operations is due to a decrease in total revenues, partially offset by a decrease in total operating expenses. Total revenues decreased primarily due to a decrease in the gain on legal settlement, as discussed below.

A recurring Partnership expense is the annual partnership management fee. The fee, as defined in the Partnership Agreement, is payable to the General Partner and is calculated at 0.5% of the Partnership’s invested assets as of the beginning of the year. The management fee represents the annual recurring fee which will be paid to the General Partner for its continuing management of Partnership affairs. For the years ended December 31, 2010 and 2009, management fees were approximately $245,000 and $279,000, respectively. The decrease in management fees for the year ended December 31, 2010 is due to the loss of investment in one Local Partnership during 2009.

Operating expenses, exclusive of the management fee, consist of legal and accounting expenses for services rendered to the Partnership and general and administrative expenses. Legal and accounting expenses were approximately $95,000 and $129,000 for the years ended December 31, 2010 and 2009, respectively. General and administrative expenses were approximately $94,000 and $105,000 for the years ended December 31, 2010 and 2009, respectively. The decrease in legal and accounting expenses is due to a decrease in legal costs associated with monitoring the Partnership’s investment in Local Partnerships and their potential disposal.

The Partnership is subject to a New Jersey partner tax. For the years ended December 31, 2010 and 2009, the expense was approximately $82,000 and $44,000, respectively. The increase in expense was due to the write off of accruals related to 2002 and 2003 late filings during 2009, partially offset by an increase in tax expense as a result of an increase in the 2009 New Jersey partner tax, which was paid during the second quarter of 2010. During the year ended December 31, 2009, the Partnership paid approximately $14,000 in full satisfaction of the 2002 and 2003 late filings and wrote off approximately $48,000 of prior accruals no longer required.

During 2002, a Local Partnership, Michigan Beach, reached a settlement with the City of Chicago to complete necessary repairs to the exterior façade of the building. As of December 31, 2008, the Partnership had advanced Michigan Beach approximately $1,347,000 to complete these repairs and an additional approximately $1,138,000 for other operational items. During the year ended December 31, 2009, the Partnership advanced Michigan Beach approximately $245,000 for operating expenses. These advances bear interest at prime plus 2% (approximately 5.25% at December 31, 2010) and interest earned by the Partnership was approximately $130,000 and $126,000 for the years ended December 31, 2010 and 2009, respectively. The Partnership has charged to expense all of the advances to Michigan Beach and has not recognized the interest earned on the advances due to the uncertainty of collection of these amounts.

During September 2009, the Partnership entered into an assignment and assumption agreement with a third party affiliated with the local general partner of Palm Springs View Apartments, Ltd. The agreement provided for an assignment of the Partnership’s 50.49% limited partnership interest in Palm Springs View Apartments, Ltd. for $200,000. The assignment was subject to HUD approval which was received during the year ended December 31, 2010. Upon receipt of HUD approval the Partnership was able to complete the assignment of its 50.49% limited partnership in Palm Springs View Apartments, Ltd. and received $200,000 for the assignment in April 2010. The Partnership has no investment balance remaining in this Local Partnership at December 31, 2010 and 2009.

On January 22, 2010, the Partnership sold its limited partnership interests in Norwalk, Columbus Junction Park and Grimes Park to a third party and received net proceeds of approximately $23,000. The Partnership’s investment balances in Norwalk, Columbus Junction Park and Grimes Park were zero at December 31, 2010 and 2009.

During 2001, the Partnership and an affiliated partnership filed a suit against several parties for breach of fiduciary duties and breach of the partnership agreements of Quivira Limited Partnership, in which the Partnership has invested, and another Limited Partnership in which the affiliated partnership is invested. The property in each respective Limited Partnership had been refinanced during 2001; however, the proceeds from the refinancing were being held within the Quivira Limited Partnership instead of being distributed.

During the year ended December 31, 2002, the Partnership received approximately $108,000 from one of the parties involved in this legal action as part of a settlement agreement. Approximately $1,492,000 of its share of the refinancing proceeds of Quivira Limited Partnership were received during August 2002. The Partnership obtained judgments totaling approximately $4,800,000 against certain defendants in 2002. During the year ended December 31, 2003, the Partnership received approximately $1,682,000 from the parties involved in this legal action as part of a global settlement agreement with the local general partner. During the years ended December 31, 2006, 2005 and 2004, the Partnership received approximately $102,000, $80,000 and $193,000, respectively, in additional settlement payments. There were no settlement payments received during the year ended December 31, 2007. During the year ended December 31, 2008, the Partnership received an additional settlement payment of approximately $109,000. During the year ended December 31, 2009, the Partnership received the final settlement payment of approximately $56,000.

The Partnership, as a limited partner in the Local Partnerships in which it has invested, is subject to the risks incident to the management and ownership of improved real estate. The Partnership investments are also subject to adverse general economic conditions, and accordingly, the status of the national economy, including substantial unemployment and concurrent inflation, could increase vacancy levels, rental payment defaults, and operating expenses, which in turn, could substantially increase the risk of operating losses for the projects.

Because of (i) the nature of the apartment complexes, (ii) the difficulty of predicting the resale market for low-income housing in the future, and (iii) the inability of the Partnership to directly cause the sale of apartment complexes by local general partners, but generally only to require such local general partners to use their respective best efforts to find a purchaser for the apartment complexes. It is not possible at this time to predict whether the liquidation of substantially all of the Partnership’s assets and the disposition of the proceeds, if any, in accordance with the Partnership Agreement will occur. If a Local Partnership is unable to sell an apartment complex, it is anticipated that the local general partner will either continue to operate such apartment complexes or take such other actions as the local general partner believes to be in the best interest of the Local Partnership.

Off-Balance Sheet Arrangements

The Partnership owns limited partnership interests in unconsolidated Local Partnerships, in which the Partnership’s ownership percentage ranges from 98.90% to 99%. However, based on the provisions of the relevant partnership agreements, the Partnership, as a limited partner, does not have control or a contractual relationship with the Local Partnerships that would require or allow for consolidation under accounting principles generally accepted in the United States (see “Note 1 – Organization and Summary of Significant Accounting Policies” of the financial statements in “Item 8. Financial Statements and Supplementary Data”). There are no lines of credit, side agreements or any other derivative financial instruments between the Local Partnerships and the Partnership. Accordingly the Partnership’s maximum risk of loss related to these unconsolidated Local Partnerships is limited to the recorded investments in and receivables from the Local Partnerships. See “Note 2 – Investments in and Advances to Local Partnerships” of the financial statements in “Item 8. Financial Statements and Supplementary Data” for additional information about the Partnership’s investments in unconsolidated Local Partnerships.

Variable Interest Entities

The Partnership consolidates any variable interest entities in which the Partnership holds a variable interest and is the primary beneficiary. Generally, a variable interest entity, or VIE, is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) as a group the holders of the equity investment at risk lack (i) the ability to make decisions about an entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The primary beneficiary of a VIE is generally the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

In determining whether it is the primary beneficiary of a VIE, the Partnership considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of the Partnership’s investment; the obligation or likelihood for the Partnership or other investors to provide financial support; and the similarity with and significance to the business activities of the Partnership and the other investors. Significant judgments related to these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions.

In connection with the adoption of Accounting Standards Update 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities or ASU 2009-17 the Partnership performed a reassessment of the Local Partnerships to determine which Local Partnerships would be deemed variable interest entities. As a result of this reassessment the Partnership determined that it holds variable interests in six VIEs at December 31, 2010, for which the Partnership is not the primary beneficiary. The Partnership has concluded, based on its qualitative consideration of the partnership agreement, the partnership structure and the role of the general partner in each of the Local Partnerships, that the general partner of each of the Local Partnerships is the primary beneficiary of the respective Local Partnership. In making this determination, the Partnership considered the following factors:

· the general partners conduct and manage the business of the Local Partnerships;

· the general partners have the responsibility for and sole discretion over selecting a property management agent for the Local Partnerships’ underlying real estate properties;

· the general partners are responsible for approving operating and capital budgets for the properties owned by the Local Partnerships;

· the general partners are obligated to fund any recourse obligations of the Local Partnerships;

· the general partners are authorized to borrow funds on behalf of the Local Partnerships; and

· the Partnership, as a limited partner in each of the Local Partnerships, does not have the ability to direct or otherwise significantly influence the activities of the Local Partnerships that most significantly impact such entities’ economic performance.

The six VIEs at December 31, 2010 consist of Local Partnerships that are directly engaged in the ownership and management of six apartment properties with a total of 752 units. The Partnership is involved with those VIEs as a non-controlling limited partner equity holder. The Partnership’s maximum exposure to loss as a result of its involvement with the unconsolidated VIEs is limited to the Partnership’s recorded investments in and receivables from these VIEs, which was approximately $3,761,000 and $4,411,000 at December 31, 2010 and 2009, respectively. The Partnership may be subject to additional losses to the extent of any financial support that the Partnership voluntarily provides in the future.

Critical Accounting Policies and Estimates

A summary of the Partnership’s significant accounting policies is included in "Note 1 – Organization and Summary of Significant Accounting Policies" which is included in the financial statements in "Item 8. Financial Statements and Supplementary Data". The General Partner believes that the consistent application of these policies enables the Partnership to provide readers of the financial statements with useful and reliable information about the Partnership’s operating results and financial condition. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the Partnership to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements as well as reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Judgments and assessments of uncertainties are required in applying the Partnership’s accounting policies in many areas. The Partnership believes that of its significant accounting policies, the following may involve a higher degree of judgment and complexity.

Method of Accounting for Investments in Limited Partnerships

The individual investments are carried at cost plus the Partnership’s share of the Local Partnership’s profits less the Partnership’s share of the Local Partnership’s losses, distributions and impairment charges. See “Item 8. Financial Statements and Supplementary Data – Note 1 – Organization and Summary of Significant Accounting Policies” for a description of the Partnership’s impairment policy. The Partnership is not legally liable for the obligations of the Local Partnerships and is not otherwise committed to provide additional support to them. Therefore, it does not recognize losses once its investment in each of the Local Partnerships reaches zero. Distributions from the Local Partnerships are accounted for as a reduction of the investment balance until the investment balance is reduced to zero. When the investment balance has been reduced to zero, subsequent distributions received are recognized as income in the statements of operations.

For those investments where the Partnership has determined that the carrying value of its investments approximates the estimated fair value of those investments, the Partnership’s policy is to recognize equity in income of the Local Partnerships only to the extent of distributions received and amortization of acquisition costs from those Local Partnerships. Therefore, the Partnership limits its recognition of equity earnings to the amount it expects to ultimately realize.

Item 8. Financial Statements and Supplementary Data

NATIONAL TAX CREDIT INVESTORS II

LIST OF FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Balance Sheets – December 31, 2010 and 2009

Statements of Operations – Years ended December 31, 2010 and 2009

Statements of Changes in Partners’ (Deficiency) Capital – Years ended December 31, 2010 and 2009

Statements of Cash Flows – Years ended December 31, 2010 and 2009

Notes to Financial Statements

Report of Independent Registered Public Accounting Firm

The Partners

National Tax Credit Investors II

We have audited the accompanying balance sheets of National Tax Credit Investors II as of December 31, 2010 and 2009, and the related statements of operations, changes in partners' (deficiency) capital and cash flows for each of the two years in the period ended December 31, 2010. 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 the standards of the Public Company 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. We were not engaged to perform an audit of the Partnership’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, based on our audits, the financial statements referred to above present fairly, in all material respects, the financial position of National Tax Credit Investors II at December 31, 2010 and 2009, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles.

/s/Ernst & Young LLP

Greenville, South Carolina

April 14, 2011

NATIONAL TAX CREDIT INVESTORS II

BALANCE SHEETS

(in thousands)

	December 31,
	2010	2009
ASSETS

Investments in and advances to Local Partnerships (Note 2)	$ --	$ 407
Cash and cash equivalents	1,368	1,471
Receivable – limited partners	--	64
Mortgage note receivable (Note 4)	3,761	4,004
Total assets	$ 5,129	$ 5,946

LIABILITIES AND PARTNERS' (DEFICIENCY) CAPITAL

Liabilities:
Accounts payable and accrued expenses	$ 74	$ 101

Contingencies (Note 9)

Partners' (deficiency) capital:
General partner	(578)	(570)
Limited partners	5,633	6,415
	5,055	5,845
Total liabilities and partners' (deficiency) capital	$ 5,129	$ 5,946

See Accompanying Notes to Financial Statements

NATIONAL TAX CREDIT INVESTORS II

STATEMENTS OF OPERATIONS

(in thousands, except per interest data)

	Years Ended December 31,
	2010	2009
Revenues:
Interest income	$ --	$ 3
Other income	--	2
Gain on legal settlement (Note 7)	--	56
Total revenues	--	61

Operating expenses:
Management fees - General Partner (Note 5)	245	279
General and administrative (Note 5)	94	105
Tax expense (Note 6)	82	44
Legal and accounting	95	129
Total operating expenses	516	557

Loss from Partnership operations	(516)	(496)

Gain on sale of limited partnership interest
in Local Partnerships (Note 2)	223	--
Distributions from Local Partnerships recognized
as income (Note 2)	1,491	13
Advances made to Local Partnerships recognized
as expense (Note 2)	--	(540)
Recovery of advances made to Local Partnerships
previously recognized as expense (Note 2)	19	--
Equity in loss of Local Partnerships and amortization
of acquisition costs, net (Notes 2 and 4)	(244)	(117)

Net income (loss) (Note 6)	$ 973	$(1,140)

Net income (loss) allocated to general partner (1%)	$ 10	$ (11)
Net income (loss) allocated to limited partners (99%)	963	(1,129)

	$ 973	$(1,140)

Net income (loss) per limited partnership interest (Note 1)	$ 13.32	$(15.61)

Distribution per limited partnership interest	$ 24.14	$ --

See Accompanying Notes to Financial Statements

NATIONAL TAX CREDIT INVESTORS II

STATEMENTS OF CHANGES IN PARTNERS'(DEFICIENCY) CAPITAL

(in thousands, except interests)

	General	Limited
	Partner	Partners	Total

Limited Partnership Interests (Note 1)		72,270

Partners’ (deficiency) capital at
December 31, 2008	$ (559)	$ 7,544	$ 6,985

Net loss for the year ended December 31, 2009	(11)	(1,129)	(1,140)

Partners’ (deficiency) capital at
December 31, 2009	(570)	6,415	5,845

Distribution to partners	(18)	(1,745)	(1,763)

Net income for the year ended December 31, 2010	10	963	973

Partners’ (deficiency) capital at
December 31, 2010	$ (578)	$ 5,633	$ 5,055

See Accompanying Notes to Financial Statements

NATIONAL TAX CREDIT INVESTORS II

STATEMENTS OF CASH FLOWS

(in thousands)

	Years Ended December 31,
	2010	2009
Cash flows from operating activities:
Net income (loss)	$ 973	$(1,140)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Gain on sale of limited partnership interest in Local
Partnerships	(223)	--
Distributions recognized as income from sale of Local
Partnerships’ investment properties	(1,448)	--
Distributions from Local Partnerships recognized as
a return on investment	97	72
Advances made to Local Partnerships recognized as
expense	--	540
Recovery of advances made to Local Partnerships
previously recognized as expense	(19)	--
Equity in loss of Local Partnerships and amortization
of acquisition costs	244	117
Change in accounts:
Accounts receivable	64	--
Accounts payable and accrued expenses	(27)	(24)
Net cash used in operating activities	(339)	(435)

Cash flows from investing activities:
Distributions from sale of Local Partnership’s investment
properties	1,757	--
Advances to Local Partnerships	--	(540)
Recovery of advances to Local Partnerships	19	--
Proceeds from sale of limited partnership interest in
Local Partnerships	223	--
Net cash provided by (used in) investing activities	1,999	(540)

Cash flows used in financing activities:
Distribution to partners	(1,763)	--

Net decrease in cash and cash equivalents	(103)	(975)
Cash and cash equivalents, beginning of year	1,471	2,446
Cash and cash equivalents, end of year	$ 1,368	$ 1,471

Supplemental disclosure of non-cash activity:
Pass through operating distribution from a Local
Partnership for non-resident withholding taxes paid
on behalf of the Partnership’s limited partners	$ 15	$ --

See Accompanying Notes to Financial Statements

NATIONAL TAX CREDIT INVESTORS II

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2010

Note 1 - Organization and Summary of Significant Accounting Policies

Organization

National Tax Credit Investors II (“NTCI II” or the “Partnership”) is a limited partnership formed under the California Revised Local Partnership Act as of January 12, 1990. The Partnership was formed to invest primarily in other limited partnerships (“Local Partnerships”) which own and operate multifamily housing complexes that are eligible for low income housing federal income tax credits (the “Housing Tax Credit”). The general partner of the Partnership is National Partnership Investments Corp. (the “General Partner” or “NAPICO”), a California corporation. The Partnership shall continue in full force and effect until December 31, 2030, unless terminated earlier pursuant to the Partnership Agreement or law.

The General Partner has a one percent interest in operating profits and losses of the Partnership. The limited partners will be allocated the remaining 99 percent interest in proportion to their respective investments.

Upon total or partial liquidation of the Partnership or the disposition or partial disposition of a project or project interest and distribution of the proceeds, the General Partner will be entitled to a property disposition fee as mentioned in the partnership agreement. The limited partners will have a priority item equal to their invested capital plus 6 percent priority return as defined in the partnership agreement. This property disposition fee may accrue but shall not be paid until the limited partners have received distributions equal to 100 percent of their capital contributions plus the 6 percent priority return. No disposition fees have been paid or accrued.

Basis of Presentation

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States.

Subsequent Events

The Partnership’s management evaluated subsequent events through the time this Annual Report on Form 10-K was filed.

Reclassifications

Certain reclassifications have been made to the 2009 information to conform to the 2010 presentation.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and in banks. At certain times, the amount of cash deposited at a bank may exceed the limit on insured deposits. The entire cash balances at December 31, 2010 and 2009 are maintained by an affiliated management company on behalf of affiliated entities in a cash concentration account.

Method of Accounting for Investments in Local Partnerships

The investments in Local Partnerships are accounted for using the equity method. Acquisition fees, selection fees and other costs related to the acquisition of the projects have been capitalized as part of the investment account and are being amortized by the straight line method over the estimated lives of the underlying assets, which is generally 30 years.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Net Income (Loss) and Distribution Per Limited Partnership Interest

Net income (loss) per limited partnership interest was computed by dividing the limited partners' share of net income (loss) by the number of limited partnership interests outstanding at the beginning of the year. Distribution per limited partnership interest for the year ended December 31, 2010 was computed by dividing the limited partners’ distribution by the number of limited partnership interests outstanding at the beginning of the year. The number of limited partnership interests used was 72,315 at January 1, 2009 and 72,288 at January 1, 2010.

Abandoned Interests

During 2010 and 2009, the number of limited partnership interests decreased by 18 and 27 units, respectively, due to limited partners abandoning their interests. In abandoning his or her partnership interests, a limited partner relinquishes all right, title and interest in the Partnership as of the date of the abandonment.

Mortgage Note Receivable

The Partnership reviews its mortgage note receivable whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The Partnership has recorded its mortgage note receivable at December 31, 2010 and 2009 at the amount at which the Partnership acquired the mortgage note receivable during 2006 less equity in loss recognized with respect to the Local Partnership that is obligated under the mortgage note. No reserve was recognized during the years ended December 31, 2010 and 2009, respectively. See “Note 4 – Mortgage Note Receivable” for further information.

Impairment of Long-Lived Assets

The Partnership reviews long-lived assets to determine if there has been any impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the sum of the expected future cash flows is less than the carrying amount of the assets, the Partnership recognizes an impairment loss. The Partnership did not recognize any impairment losses during the years ended December 31, 2010 and 2009.

Fair Value of Financial Instruments

Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 825, “Financial Instruments”, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Fair value is defined as the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. At December 31, 2010, the Partnership believes that the carrying amounts of other assets and liabilities reported on the balance sheet that require such disclosure approximated their fair value due to the short-term maturity of these instruments.

Segment Reporting

ASC Topic 280-10, “Segment Reporting”, established standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. ASC Topic 280-10 also established standards for related disclosures about products and services, geographic areas, and major customers. As defined in ASC Topic 280-10, the Partnership has only one reportable segment.

Recent Accounting Pronouncement

In December 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, or ASU 2009-17, which is effective for fiscal years beginning after November 15, 2009. ASU 2009-17, which modifies the guidance in ASC Topic 810, “Consolidation”, introduces a more qualitative approach to evaluating VIEs for consolidation and requires a company to perform an analysis to determine whether its variable interests give it a controlling financial interest in a VIE. This analysis identifies the primary beneficiary of a VIE as the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. In determining whether it has the power to direct the activities of the VIE that most significantly affect the VIE’s performance, ASU 2009-17 requires a company to assess whether it has an implicit financial responsibility to ensure that a VIE operates as designed, requires continuous reassessment of primary beneficiary status rather than periodic, event-driven assessments as previously required, and incorporates expanded disclosure requirements. The Partnership adopted ASU 2009-17 effective January 1, 2010. The adoption of ASU 2009-17 did not have a significant effect on the Partnership’s financial statements.

Variable Interest Entities

In connection with the adoption of ASU 2009-17 the Partnership performed a reassessment of the Local Partnerships to determine which Local Partnerships would be deemed variable interest entities. As a result of this reassessment the Partnership determined that it holds variable interests in six VIEs at December 31, 2010, for which the Partnership is not the primary beneficiary. The Partnership has concluded, based on its qualitative consideration of the partnership agreement, the partnership structure and the role of the general partner in each of the Local Partnerships, that the general partner of each of the Local Partnerships is the primary beneficiary of the respective Local Partnership. In making this determination, the Partnership considered the following factors:

· the general partners conduct and manage the business of the Local Partnerships;

· the general partners have the responsibility for and sole discretion over selecting a property management agent for the Local Partnerships’ underlying real estate properties;

· the general partners are responsible for approving operating and capital budgets for the properties owned by the Local Partnerships;

· the general partners are obligated to fund any recourse obligations of the Local Partnerships;

· the general partners are authorized to borrow funds on behalf of the Local Partnerships; and

Note 2 - Investments in and Advances to Local Partnerships

As of December 31, 2010 and 2009, the Partnership holds limited partnership interests in 9 and 15 Local Partnerships, respectively, located in 7 and 9 states, respectively, and Puerto Rico. As a limited partner of the Local Partnerships, the Partnership does not have authority over day-to-day management of the Local Partnerships or their properties (the "Apartment Complexes"). The general partners responsible for management of the Local Partnerships (the "Local Operating General Partners") are not affiliated with the General Partner of the Partnership, except as discussed below.

At December 31, 2010 and 2009, the Local Partnerships own residential projects consisting of 911 and 1,186 apartment units, respectively.

The projects owned by the Local Partnerships in which NTCI-II has invested were developed by the Local Operating General Partners who acquired the sites and applied for applicable mortgages and subsidies, if any. NTCI-II became the principal limited partner in these Local Partnerships pursuant to arm's-length negotiations with the Local Operating General Partners. As a limited partner, NTCI-II's liability for obligations of the Local Partnerships is limited to its investment. The Local Operating General Partner of the Local Partnerships retains responsibility for developing, constructing, maintaining, operating and managing the Projects. Under certain circumstances, an affiliate of NAPICO or NTCI-II may act as the Local Operating General Partner. An affiliate, National Tax Credit Inc. II ("NTC-II") is acting either as a special limited partner or non-managing administrative general partner (the “Administrative General Partner”) of each Local Partnership in which the Partnership had an investment.

The individual investments are carried at cost plus the Partnership’s share of the Local Partnership’s profits less the Partnership’s share of the Local Partnership’s losses, distributions and impairment charges. See “Note 1 – Organization and Summary of Significant Accounting Policies” for a description of the impairment policy. The Partnership is not legally liable for the obligations of the Local Partnerships and is not otherwise committed to provide additional support to them. Therefore, it does not

recognize losses once its investment in each of the Local Partnerships reaches zero. Distributions from the Local Partnerships are accounted for as a reduction of the investment balance until the investment balance is reduced to zero. When the investment balance has been reduced to zero, subsequent distributions received are recognized as income in the accompanying statements of operations.

As of December 31, 2010, the investment balance in eight of the nine Local Partnerships had been reduced to zero and as of December 31, 2009, the investment balance in 13 of the 15 Local Partnerships had been reduced to zero.

At times, advances are made to Local Partnerships. Advances made by the Partnership to the individual Local Partnerships are considered part of the Partnership’s investment in limited partnerships. Advances made to Local Partnerships in which the investment balance has been reduced to zero are charged to expense. During the year ended December 31, 2009, the Partnership advanced a total of approximately $540,000 to three Local Partnerships, Quivira Place Associates, LP, Michigan Beach Apartments and Sitka Three, to cover operating expenses of the Local Partnerships. The Partnership did not make any advances during the year ended December 31, 2010. While not obligated to make advances to any of the Local Partnerships, the Partnership made these advances in order to protect its economic investment in the Local Partnerships. The advances of approximately $540,000 were recognized as expense on the accompanying statements of operations for the year ended December 31, 2009. During the year ended December 31, 2010, the Partnership received approximately $19,000 as repayment of advances from Quivira Place Associates, LP and has recognized this amount as a recovery of advances previously expensed in the statement of operations for the year ended December 31, 2010.

The following is a summary of the investments in and advances to Local Partnerships for the years ended December 31, 2010 and 2009 (in thousands):

	2010	2009
Investment balance, beginning of year	$ 407	$ 553
Equity in income (losses) of Local Partnerships
(see Note 4)	4	(51)
Distributions recognized as a return of investment	(309)	--
Distributions recognized as a return
on investment	(97)	(72)
Advances to Local Partnerships	--	540
Advances made to Local Partnerships
recognized as expense	--	(540)
Amortization of capitalized acquisition
costs and fees	(5)	(23)
Investment balance, end of year	$ --	$ 407

The difference between the investment per the accompanying balance sheets at December 31, 2010 and 2009 and the equity per the Local Partnerships' condensed combined financial statements is due primarily to cumulative unrecognized equity in losses of certain Local Partnerships, costs capitalized to the investment account, and cumulative distributions recognized as income.

The Partnership’s value of its investments and its equity in the income/loss and/or distributions from the Local Partnerships are, for certain Local Partnerships, individually, not material to the overall financial position of the Partnership. The financial information from the unaudited condensed combined financial statements of such Local Partnerships at December 31, 2010 and 2009 and for each of the two years in the period then ended is presented below. The Partnership’s value of its investments in Michigan Beach Limited Partnership, (the “Material Investee”) is considered material to the Partnership’s financial position and amounts included below for the Material Investee is included on an audited basis.

The following are condensed combined statements of operations for the years ended December 31, 2010 and 2009 for the Local Partnerships in which the Partnership has investments. The 2010 and 2009 amounts exclude Quivira Place, due to the sale of its investment property in August 2009; Columbus Junction Park, Grimes Park Apartments and Norwalk Park Apartments, for which the Partnership sold its limited partnership interests in January 2010; Palm Springs View for which the Partnership sold its limited partnership interest in April 2010 and Fourth Street and Northwestern Partners due to the sale of the Local Partnerships’ investment property in August and September 2010, respectively.

Condensed Combined Balance Sheet of the Local Partnerships
(in thousands)
	December 31, 2010
		Material
Assets	Unaudited	Investee	Total
Land	$ 1,385	$ 843	$ 2,228
Building and improvements, net of
accumulated depreciation of $20,648
and $3,118, respectively	11,962	4,467	16,429

Other assets	3,133	707	3,840
Total assets	$ 16,480	$ 6,017	$ 22,497

Liabilities and Partners Deficit:
Liabilities:
Mortgage notes payable	$ 19,453	$ 9,172	$ 28,625
Other liabilities	2,639	8,681	11,320
	22,092	17,853	39,945

Partners’ deficit	(5,612)	(11,836)	(17,448)

Total liabilities and partners' deficit	$ 16,480	$ 6,017	$ 22,497



	December 31, 2009
		Material
Assets	Unaudited	Investee	Total

Land	$ 1,383	$ 843	$ 2,226
Building and improvements, net of
accumulated depreciation of $19,519
and $2,675, respectively	12,991	4,699	17,690

Other assets	2,835	749	3,584
Total assets	$ 17,209	$ 6,291	$ 23,500

Liabilities and Partners Deficit:
Liabilities:
Mortgage notes payable	$ 19,784	$ 9,216	$ 29,000
Other liabilities	2,538	8,192	10,730
	22,322	17,408	39,730

Partners’ deficit	(5,113)	(11,117)	(16,230)

Total liabilities and partners' deficit	$ 17,209	$ 6,291	$ 23,500

Condensed Combined Results of Operations of the Local Partnerships
(in thousands)
	For the years ended December 31,

	2010	2010	2010	2009	2009	2009
		Material			Material
	Unaudited	Investee	Total	Unaudited	Investee	Total

Total revenues	$ 4,828	$ 2,182	$ 7,010	$ 4,840	$ 2,205	$ 7,045

Expenses:
Operating expenses	3,028	1,794	4,822	2,981	1,631	4,612
Interest	1,059	660	1,719	1,090	649	1,739
Depreciation and
amortization	1,154	448	1,602	1,152	426	1,578
Total expenses	5,241	2,902	8,143	5,223	2,706	7,929

Loss from continuing
operations	$ (413)	$ (720)	$(1,133)	$ (383)	$ (501)	$ (884)

An affiliate of the General Partner is currently the Local Operating General Partner in one of the Partnership’s 9 Local Partnerships included above, and another affiliate currently receives property management fees of approximately 5 percent of gross revenues from the same Local Partnership (see “Note 5 – Transactions with Affiliated Parties").

During the years ended December 31, 2010 and 2009, the Partnership received operating distributions of approximately $126,000 and $85,000, respectively, from Local Partnerships, of which approximately $29,000 and $13,000 was recognized as income in the statement of operations for the years ended December 31, 2010 and 2009, respectively.

Note 3 - Distributions

The Partnership distributed the following amounts during the years ended December 31, 2010 and 2009 (in thousands except per unit data):

	Year Ended	Per Limited	Year Ended	Per Limited
	December 31,	Partnership	December 31,	Partnership
	2010	Unit	2009	Unit

Sale (1)	$ 1,763	$ 24.14	$ --	$ --

(1) Proceeds from 2010 sales of partnership interests and investment properties.

Note 4 – Mortgage Note Receivable

On May 30, 2006, the Partnership purchased the second mortgage for a Local Partnership, Michigan Beach, from the second mortgage holder, PAMI Midatlantic, LLC (“PAMI”) for a purchase price of $4,320,000. PAMI had filed an action for foreclosure and the appointment of a receivor for the alleged failure to make surplus cash payments and provide required financial reporting. As a result of the purchase, the Partnership was substituted in place of PAMI in the foreclosure action and then the Partnership dismissed the foreclosure action with prejudice on June 9, 2006. The Partnership is the sole limited partner in Michigan Beach. The Partnership borrowed $4,320,000 from an affiliate of NAPICO in order to purchase the second mortgage at Michigan Beach. This advance was repaid during the year ended December 31, 2007.

The second mortgage had a principal balance of approximately $3,596,000 at the time of purchase and accrues interest at a fixed rate of 6.11%. Semiannual payments from 50% of surplus cash are required and the note matures in July of 2031. There is an option to the noteholder to accelerate maturity of the second mortgage after October of 2008. There have been no payments made on the loan and Michigan Beach did not generate any surplus cash for the years ended December 31, 2010 and 2009. The accrued interest at the time the Partnership purchased the second mortgage was approximately $1,605,000. The accrued interest balance at December 31, 2010 was approximately $2,612,000. The Partnership recognized approximately $243,000 and $43,000 in equity in loss from Michigan Beach during the years ended December 13, 2010 and 2009, respectively, and reduced the carrying value of the mortgage note receivable. The Partnership currently expects to receive payment in full on the second mortgage from Michigan Beach upon ultimate sale of the property and accordingly no reserve has been established against the carrying value of the mortgage note receivable at December 31, 2010 or 2009, however, the Partnership has fully reserved any additional accrued interest.

The following is a summary of the mortgage note receivable activity for the year ended December 31, 2010 and 2009 (in thousands):

	2010	2009
Mortgage note receivable balance, beginning of year	$ 4,004	$ 4,047
Equity in losses of Local Partnership	(243)	(43)
Mortgage note receivable balance, end of year	$ 3,761	$ 4,004

Note 5 – Transactions with Affiliated Parties

Under the terms of its Partnership Agreement, the Partnership is obligated to the General Partner for the following fees:

(a) An annual Partnership management fee in an amount equal to 0.5 percent of invested assets (as defined in the Partnership Agreement) as of the beginning of the year is payable to the General Partner. For the years ended December 31, 2010 and 2009, partnership management fees in the amount of approximately $245,000 and $279,000, respectively, were recorded as an expense.

(b) A property disposition fee is payable to the General Partner in an amount equal to the lesser of (i) one-half of the competitive real estate commission that would have been charged by unaffiliated third parties providing comparable services in the area where the apartment complex is located, or (ii) 3 percent of the sale price received in connection with the sale or disposition of the apartment complex or local partnership interest, but in no event will the property disposition fee and all amounts payable to unaffiliated real estate brokers in connection with any such sale exceed in the aggregate, the lesser of the competitive rate (as described above) or 6 percent of such sale price. Receipt of the property disposition fee will be subordinated to the distribution of sale or refinancing proceeds by the Partnership until the limited partners have received distributions of sale or refinancing proceeds in an aggregate amount equal to (i) their 6 percent priority return for any year not theretofore satisfied (as defined in the partnership agreement) and (ii) an amount equal to the aggregate adjusted investment (as defined in the partnership agreement) of the limited partners. No disposition fees have been paid or accrued.

(c) The Partnership reimburses NAPICO for certain expenses. The reimbursement charged by NAPICO was approximately $73,000 and $77,000 for the years ended December 31, 2010 and 2009, respectively, and is included in general and administrative expenses.

NTC-II or another affiliate of the General Partner is the Local Operating General Partner in one of the Partnership's 9 Local Partnerships at December 31, 2010. In addition, NTC-II is typically either a special limited partner or an administrative general partner in each Local Partnership in which the Partnership has an investment.

An affiliate of the General Partner managed one property owned by a Local Partnership during the years ended December 31, 2010 and 2009. The Local Partnership pays the affiliate property management fees in the amount of five percent of its gross rental revenues and data processing fees. The amounts paid were approximately $104,000 and $108,000 for the years ended December 31, 2010 and 2009, respectively.

AIMCO and its affiliates owned 397.0 limited partnership interests (the "Units") in the Partnership representing 0.55% of the outstanding Units at December 31, 2010. It is possible that AIMCO or its affiliates will acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. Although the General Partner owes fiduciary duties to the limited partners of the Partnership, the General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the General Partner, as General Partner, to the Partnership and its limited partners may come into conflict with the duties of the General Partner to AIMCO as its sole stockholder.

Note 6 - Income Taxes

The Partnership is not taxed on its income. The partners are taxed in their individual capacities based upon their distributive share of the Partnership's taxable income or loss and are allowed the benefits to be derived from off-setting their distributive share of the tax losses against taxable income from other sources subject to passive loss limitations. The taxable income or loss differs from amounts included in the statements of operations because different methods are used in determining the losses of the Local Partnerships as discussed below. The tax loss is allocated to the partner groups in accordance with Section 704(b) of the Internal Revenue Code and therefore is not necessarily proportionate to the interest percentage owned.

A reconciliation follows:

	Years Ended December 31,
	2010	2009
	(in thousands)
Net income (loss) per financial statements	$ 973	$(1,140)
Sale of partnership interest	845	259
Other	(199)	(186)
Bad debt	(19)	508
Investment in Local Partnerships	(646)	(198)
Income (loss) per tax return	954	(757)

Income (loss) per limited partnership interest	$ 13.07	$(10.36)

The following is a reconciliation between the Partnership’s reported amounts and the Federal tax basis of net assets at December 31, 2010 and 2009 (in thousands):

	2010	2009

Net assets as reported	$ 5,055	$ 5,845
Add (deduct):
Deferred offering costs	9,367	9,367
Investment in Local Partnerships	(14,336)	(17,448)
Other	3,797	6,929
Net assets – Federal tax basis	$ 3,883	$ 4,693

The Partnership is subject to a New Jersey tax based upon the number of resident and non-resident limited partners and apportionment of income related to the Partnership’s investment in certain Local Partnerships. For the years ended December 31, 2010 and 2009 the expense related to this tax is reflected in tax expense in the accompanying statement of operations. At December 31, 2010 and 2009, the Partnership’s estimate of the balance of the tax due for 2010 and 2009 to the state of New Jersey is approximately $38,000 and $35,000, respectively, and these amounts are included in accounts payable and accrued expenses on the accompanying balance sheets as of December 31, 2010 and 2009. The actual balance of the tax due for 2009 was approximately $41,000 and was paid during the year ended December 31, 2010. The Partnership’s estimate of the tax due for 2010 is approximately $76,000, of which approximately $38,000 was paid during the year ended December 31, 2010. During the year ended December 31, 2009, the Partnership paid approximately $14,000 in full satisfaction of taxes, penalties and interest due to the state of New Jersey for 2002 and 2003. The Partnership had previously accrued approximately $62,000 for this liability. During the year ended December 31, 2009, the Partnership wrote off the overaccrual of approximately $48,000 and this amount is reflected as a reduction of tax expense for the year ended December 31, 2009.

Note 7 – Gain on Legal Settlement

During 2001, the Partnership and an affiliated partnership filed a suit against several parties for breach of fiduciary duties and breach of the partnership agreements of Quivira Limited Partnership, in which the Partnership has invested, and another Limited Partnership in which the affiliated partnership is invested. The property in each respective Limited Partnership had been refinanced during 2001; however, the proceeds from the refinancing were being held within the respective Limited Partnership instead of being distributed.

Note 8 - Real Estate and Accumulated Depreciation of Local Partnerships in which NTCI-II Has Invested (in thousands)

(1) Schedule of Encumbrances and Investment Properties (all amounts unaudited except for those amounts relative to the Material Investee – see Note 2) (in thousands):

			Buildings
			And
			Related
			Personal		Accumulated
Description	Encumbrances	Land	Property	Total	Depreciation

Countryside Place	$ 3,344	$ 482	$ 8,907	$ 9,389	$ 6,125
Lincoln Grove	2,101	185	3,988	4,173	2,029
Michigan Beach	9,172	843	7,585	8,428	3,118
Pineview Terrace	2,418	82	3,241	3,323	1,639
Sitka III (Spruce Grove)	1,116	42	1,521	1,563	1,109
Soldotna (Northwood Senior)	1,414	59	2,002	2,061	1,008
Torres de Plata II	2,928	158	3,904	4,062	2,946
Virginia Park Meadows	3,382	79	5,376	5,455	4,002
Jamestown Terrace	2,750	298	3,671	3,969	1,790
Total	$28,625	$ 2,228	$40,195	$42,423	$23,766

(2) Reconciliation of real estate (all amounts unaudited except for those amounts relative to the Material Investee – see Note 2) (in thousands):

	Years Ended December 31,
	2010	2010	2010	2009	2009	2009
		Material			Material
	Unaudited	Investee	Total	Unaudited	Investee	Total
Real estate:
Balance at beginning of year	$33,893	$ 8,217	$42,110	$40,287	$ 7,815	$48,102
Improvements	102	211	313	190	402	592
Assets held for sale	--	--	--	(6,584)	--	(6,584)
Balance at end of year	$33,995	$ 8,428	$42,423	$33,893	$ 8,217	$42,110

(3) Reconciliation of accumulated depreciation (all amounts unaudited except for those amounts relative to the Material Investee – see Note 2) (in thousands):

	Years Ended December 31,
	2010	2010	2010	2009	2009	2009
		Material			Material
	Unaudited	Investee	Total	Unaudited	Investee	Total
Accumulated depreciation:
Balance at beginning
of year	$ 19,519	$ 2,675	$22,194	$ 22,180	$ 2,253	$24,433
Depreciation expense	1,129	443	1,572	1,347	422	1,769
Assets held for sale	--	--	--	(4,008)	--	(4,008)
Balance at end of year	$ 20,648	$ 3,118	$23,766	$ 19,519	$ 2,675	$22,194

Note 9 - Contingencies

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

(a) Disclosure Controls and Procedures

The Partnership’s management, with the participation of the principal executive officer and principal financial officer of the General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the principal executive officer and principal financial officer of the General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, have concluded that, as of the end of such period, the Partnership’s disclosure controls and procedures are effective.

Management’s Report on Internal Control Over Financial Reporting

The Partnership’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, the principal executive and principal financial officers of the General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, and effected by the Partnership’s management and other personnel 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 and includes those policies and procedures that:

· pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets;

· provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of the Partnership’s management; and

· provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Partnership’s management assessed the effectiveness of the Partnership’s internal control over financial reporting as of December 31, 2010. In making this assessment, the Partnership’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.

Based on their assessment, the Partnership’s management concluded that, as of December 31, 2010, the Partnership’s internal control over financial reporting is effective.

This annual report does not include an attestation report of the Partnership’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Partnership’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Partnership to provide only management’s report in this annual report.

(b) Changes in Internal Control Over Financial Reporting

There has been no change in the Partnership’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of 2010 that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers, and Corporate Governance.

National Tax Credit Investors II (the “Partnership” or the “Registrant”) has no directors. The general partner responsible for conducting the business of the Partnership is National Partnership Investments Corp., a California Corporation (“NAPICO” or the “General Partner”).

The names and ages of, as well as the positions and offices held by, the present directors and officers of NAPICO are set forth below: The General Partner manages and controls substantially all of the Partnership’s affairs and has general responsibility and ultimate authority in all matters affecting its business. There are no family relationships between or among any directors or officers.

Name	Age	Position
John Bezzant	48	Director and Executive Vice President
Ernest M. Freedman	40	Director, Executive Vice President and Chief Financial Officer
Lisa R. Cohn	42	Executive Vice President, General Counsel and Secretary
Paul Beldin	37	Senior Vice President and Chief Accounting
		Officer
John McGrath	39	Senior Vice President
Stephen B. Waters	49	Senior Director of Partnership Accounting

John Bezzant was appointed as a Director of the General Partner effective December 16, 2009. Mr. Bezzant was appointed Executive Vice President of the General Partner and AIMCO in January 2011 and prior to that time was a Senior Vice President of the General Partner and AIMCO since joining AIMCO in June 2006. Prior to joining AIMCO, Mr. Bezzant spent over 20 years with Prologis, Inc. and Catellus Development Corporation in a variety of executive positions, including those with responsibility for transactions, fund management, asset management, leasing and operations. Mr. Bezzant brings particular expertise to the Board in the areas of real estate finance, property operations, sales and development.

Ernest M. Freedman was appointed Director, Executive Vice President and Chief Financial Officer of the General Partner and Executive Vice President and Chief Financial Officer of AIMCO in November 2009. Mr. Freedman joined AIMCO in 2007 as Senior Vice President of Financial Planning and Analysis and has served as Senior Vice President of Finance since February 2009, responsible for financial planning, tax, accounting and related areas. Prior to joining AIMCO, from 2004 to 2007, Mr. Freedman served as chief financial officer of HEI Hotels and Resorts. Mr. Freedman brings particular expertise to the Board in the areas of finance and accounting.

Lisa R. Cohn was appointed Executive Vice President, General Counsel and Secretary of the General Partner and AIMCO in December 2007. From January 2004 to December 2007, Ms. Cohn served as Senior Vice President and Assistant General Counsel of AIMCO. Ms. Cohn joined AIMCO in July 2002 as Vice President and Assistant General Counsel. Prior to joining AIMCO, Ms. Cohn was in private practice with the law firm of Hogan and Hartson LLP.

Paul Beldin joined AIMCO in May 2008 and has served as Senior Vice President and Chief Accounting Officer of AIMCO and the General Partner since that time. Prior to joining AIMCO, Mr. Beldin served as controller and then as chief financial officer of America First Apartment Investors, Inc., a publicly traded multifamily real estate investment trust, from May 2005 to September 2007 when the company was acquired by Sentinel Real Estate Corporation. Prior to joining America First Apartment Investors, Inc., Mr. Beldin was a senior manager at Deloitte and Touche LLP, where he was employed from August 1996 to May 2005, including two years as an audit manager in SEC services at Deloitte’s national office.

John McGrath was appointed to serve as Senior Vice President of the General Partner and the equivalent of the chief executive officer of the Partnership effective January 18, 2011. Mr. McGrath was appointed Senior Vice President of AIMCO in January 2010, with responsibility for AIMCO’s third party asset management and fund management business. Mr. McGrath joined AIMCO in 2005 as a Vice President of Finance.

Stephen B. Waters was appointed Senior Director of Partnership Accounting of AIMCO and the General Partner in June 2009. Mr. Waters has responsibility for partnership accounting with AIMCO and serves as the principal financial officer of the Partnership. Mr. Waters joined AIMCO as a Director of Real Estate Accounting in September 1999 and was appointed Vice President of the General Partner and AIMCO in April 2004. Prior to joining AIMCO, Mr. Waters was a senior manager at Ernst & Young LLP.

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

One or more of the above persons are also directors and/or officers of a general partner (or general partner of a general partner) of limited partnerships which either have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15(d) of such Act. Further, one or more of the above persons are also officers of Apartment Investment and Management Company and the general partner of AIMCO Properties, L.P., entities that have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15 (d) of such Act.

The board of directors of the General Partner does not have a separate audit committee. As such, the board of directors of the General Partner fulfills the functions of an audit committee. The board of directors has determined that John McGrath meets the requirement of an "audit committee financial expert".

The directors and officers of the General Partner with authority over the Partnership are all employees of subsidiaries of AIMCO. AIMCO has adopted a code of ethics that applies to such directors and officers that is posted on AIMCO's website (www.AIMCO.com). AIMCO's website is not incorporated by reference to this filing.

Item 11. Executive Compensation

Neither the directors nor the officers received any remuneration from the Partnership for the year ended December 31, 2010.

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

(a) Security Ownership of Certain Beneficial Owners

The General Partner owns all of the outstanding general partnership interests of NTCI II. No person or entity is known to own beneficially in excess of 5 percent of the outstanding limited partnership interests.

(b) None of the officers or directors of the General Partner own directly or beneficially any limited partnership interests in NTCI II.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Under the terms of its Partnership Agreement, the Partnership is obligated to the General Partner for the following fees:

Neither of the General Partner's directors is independent under the independence standards established for New York Stock Exchange listed companies as both directors are employed by the parent of the General Partner.

Item 14. Principal Accounting Fees and Services

The General Partner has reappointed Ernst & Young LLP as independent auditors to audit the financial statements of the Partnership for 2011. The aggregate fees billed for services rendered by Ernst & Young LLP for 2010 and 2009 are described below.

Audit Fees. Fees for audit services totaled approximately $45,000 and $43,000 for 2010 and 2009, respectively. Fees for audit services also include fees for the reviews of the Partnership’s Quarterly Reports on Form 10-Q.

Tax Fees. Fees for tax services totaled approximately $20,000 and $22,000 for 2010 and 2009, respectively.

PART IV

Item 15. Exhibits, Financial Statement Schedules

(a) The following financial statements of the Partnership are included in Item 8:

Balance Sheets - December 31, 2010 and 2009.

Statements of Operations - Years ended December 31, 2010 and 2009.

Statements of Changes in Partners' (Deficiency) Capital - Years ended December 31, 2010 and 2009.

Statements of Cash Flows - Years ended December 31, 2010 and 2009.

Notes to Financial Statements.

Schedules are omitted for the reason that they are inapplicable or equivalent information has been included elsewhere herein.

(b) Exhibits:

See Exhibit Index.

The agreements included as exhibits to this Form 10-K contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:

should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

may apply standards of materiality in a way that is different from what may be viewed as material to an investor; and

were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. The Partnership acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this Form 10-K not misleading. Additional information about the Partnership may be found elsewhere in this Form 10-K and the Partnership’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

	NATIONAL TAX CREDIT INVESTORS II
	(a California limited partnership)

	By: National Partnership Investments Corp.
	General Partner

Date: April 14, 2011	By: /s/John McGrath
	John McGrath
	Senior Vice President

Date: April 14, 2011	By: /s/Stephen B. Waters
	Stephen B. Waters
	Senior Director of Partnership Accounting

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.

/s/John Bezzant	Director and Executive Vice	Date: April 14, 2011
John Bezzant	President

/s/Ernest M. Freedman	Director and Executive	Date: April 14, 2011
Ernest M. Freedman	Vice President

/s/John McGrath	Senior Vice President	Date: April 14, 2011
John McGrath

/s/Stephen B. Waters	Senior Director of Partnership	Date: April 14, 2011
Stephen B. Waters	Accounting

NATIONAL TAX CREDIT INVESTORS II

EXHIBIT INDEX

Exhibit Description of Exhibit

3 Partnership Agreement (herein incorporated by reference to the Partnership's Form S-11 Registration No. 33-27658)

10 Loan Sale Agreement between Pami Midatlantic LLC, a Delaware limited liability company and National Tax Credit Investors II, a California limited partnership dated May 30, 2006. Incorporated by reference to the Partnership’s Current Report on Form 8-K dated May 30, 2006.

10.5 Assignment and Assumption Agreement by and among Investment Concepts, Inc., a California corporation, National Tax Credit, Inc. II, a California corporation, and National Tax Credit Investors II, a California limited partnership, and GAC Realty Advisors, LP, a Nevada limited partnership, dated September 8, 2009. Incorporated by reference to the Partnership’s Current Report on Form 8-K dated September 8, 2009.

10.6 Contract for Purchase and Sale of Partnership Interests by and between National Tax Credit, Inc. II, a California corporation, National Tax Credit Investors II, a California limited partnership, and Oswald Investments, L.C., an Iowa limited liability company, or its assign and Ted Oswald, individually or his assigns, dated November 17, 2009. Incorporated by reference to the Partnership’s Current Report on Form 8-K dated November 17, 2009.

10.7 Contract for Purchase and Sale of Partnership Interests by and between National Tax Credit, Inc. II, a California corporation, National Tax Credit Investors II, a California limited partnership, and Oswald Investments, L.C., an Iowa limited liability company, or its assign and Ted Oswald, individually or his assigns, dated November 17, 2009. Incorporated by reference to the Partnership’s Current Report on Form 8-K dated November 17, 2009.

10.8 Contract for Purchase and Sale of Partnership Interests by and between National Tax Credit, Inc. II, a California corporation, National Tax Credit Investors II, a California limited partnership, and Oswald Investments, L.C., an Iowa limited liability company, or its assign and Ted Oswald, individually or his assigns, dated November 17, 2009. Incorporated by reference to the Partnership’s Current Report on Form 8-K dated November 17, 2009.

10.9 First Amendment to Assignment and Assumption Agreement by and among Investment Concepts, Inc., a California corporation, National Tax Credit, Inc. II, a California corporation, National Tax Credit Investors II, a California limited partnership, and GAC Realty Advisors, LP, a Nevada limited partnership, effective January 31, 2010. Incorporated by reference to the Partnership’s Current Report on Form 8-K dated January 31, 2010.

10.10 Second Amendment to Assignment and Assumption Agreement by and among Investment Concepts, Inc., a California corporation, National Tax Credit, Inc. II, a California corporation, National Tax Credit Investors II, a California limited partnership, and GAC Realty Advisors, LP, a Nevada limited partnership, effective March 1, 2010. Incorporated by reference to the Partnership’s Current Report on Form 8-K dated March 1, 2010.

10.11 Assignment and Assumption Agreement by and between National Tax Credit Investors II, a California limited partnership and National Tax Credit, Inc. II, a California corporation, Munson Pineview Associates, a Texas general partnership and RCC Pineview Associates, L.P., a Delaware limited partnership, effective February 1, 2011. Incorporated by reference to the Partnership’s Current Report on Form 8-K dated January 31, 2011.

31.1 Certification of equivalent of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of equivalent of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of the equivalent of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

NATIONAL TAX CREDIT INVESTORS II - FORM 10-K - April 14, 2011

Attached files

Variable Interest Entities

2010

2009

Item 10. Directors, Executive Officers, and Corporate Governance.

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

Item 13. Certain Relationships and Related Transactions, and Director Independence

SIGNATURES

NATIONAL TAX CREDIT INVESTORS II Reports