INDEPENDENCE TAX CREDIT PLUS L P II - FORM 10-Q

Attached files

file	filename
EXCEL - IDEA: XBRL DOCUMENT - INDEPENDENCE TAX CREDIT PLUS L P II	Financial_Report.xls
EX-32.1 - CFO SECTION 1350 CERTIFICATION - INDEPENDENCE TAX CREDIT PLUS L P II	exhibit32-1.htm
EX-31.2 - CEO CERTIFICATION - INDEPENDENCE TAX CREDIT PLUS L P II	exhibit31-2.htm
EX-32.2 - CEO SECTION 1350 CERTIFICATION - INDEPENDENCE TAX CREDIT PLUS L P II	exhibit32-2.htm
EX-31.1 - CFO CERTIFICATION - INDEPENDENCE TAX CREDIT PLUS L P II	exhibit31-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________

FORM 10-Q

______________

(Mark One)

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

For the quarterly period ended December 31, 2011

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

For the transition period from

Commission File Number 0-13782

INDEPENDENCE TAX CREDIT PLUS L.P. II

(Exact name of registrant as specified in its charter)

Delaware		13-3646846
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

625 Madison Avenue, New York, New York		10022
(Address of principal executive offices)		(Zip Code)

(212) 317-5700

Registrant’s telephone number, including area code

(Former name, former address and former fiscal year, if changed since last report)

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

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

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

Large accelerated filer o		Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company þ

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

PART I – Financial Information
Item 1. Financial Statements.
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
Consolidated Balance Sheets

	December 31,			March 31,
	2011			2011
	(Unaudited)			(Audited)
ASSETS

Operating assets
Property and equipment at cost, net of accumulated depreciation of $7,591,528 and $28,173,471, respectively	$	2,966,409		$	16,574,109
Cash and cash equivalents		1,913,812			1,479,226
Cash held in escrow		482,529			2,086,911
Deferred costs, net of accumulated amortization of $21,149 and $63,134, respectively		33,703			90,211
Other assets		347,082			385,197

Total operating assets		5,743,535			20,615,654

Assets from discontinued operations (Note 6)
Property and equipment held for sale, net of accumulated depreciation of $15,136,280 and $3,055,377, respectively		5,737,579			1,699,698
Net assets held for sale		1,615,102			99,678
Total assets from discontinued operations		7,352,681			1,799,376

Total assets	$	13,096,216		$	22,415,030

LIABILITIES AND PARTNERS’ (DEFICIT) CAPITAL

Liabilities
Mortgage notes payable	$	8,653,114		$	20,243,830
Accounts payable		125,253			599,843
Security deposit payable		69,080			254,770
Accrued interest		6,859,030			16,805,364
Due to local general partners and affiliates		619,194			1,023,346
Due to general partner and affiliates		4,977,982			5,270,129

Total operating liabilities		21,303,653			44,197,282

Liabilities from discontinued operations (Note 6)
Mortgage notes payable of assets held for sale		7,183,664			4,139,881
Net liabilities held for sale		10,909,817			1,493,357
Total liabilities from discontinued operations		18,093,481			5,633,238

Total liabilities		39,397,134			49,830,520

Commitments and contingencies (Note 7)

Partners’ (deficit) capital
Limited partners (58,928 BACs issued and outstanding)		(26,741,992	)		(26,466,187	)
General partner		359,686			283,722

Independence Tax Credit Plus L.P. II total		(26,382,306	)		(26,182,465	)

Noncontrolling interests		81,388			(1,233,025	)

Total partners’ deficit		(26,300,918	)		(27,415,490	)

Total liabilities and partners’ (deficit) capital	$	13,096,216		$	22,415,030

See accompanying notes to consolidated financial statements.

- 2 -

INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)

	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2011			2010*			2011			2010*

Revenues
Rental income	$	277,195		$	270,902		$	829,341		$	839,583
Other income		6,490			15,424			20,744			28,441

Total revenues		283,685			286,326			850,085			868,024

Expenses
General and administrative		130,296			84,710			337,220			308,089
General and administrative-related parties (Note 2)		81,419			156,715			227,430			517,369
Repairs and maintenance		70,576			101,955			197,681			354,791
Operating		32,941			39,397			135,085			144,169
Taxes		18,477			18,272			55,543			55,393
Insurance		14,814			13,500			41,264			40,500
Financial, principally interest		109,055			109,761			327,337			329,445
Depreciation and amortization		39,938			51,455			123,592			153,327

Total expenses from operations		497,516			575,765			1,445,152			1,903,083

Loss from operations		(213,831	)		(289,439	)		(595,067	)		(1,035,059	)
Income (loss) from discontinued operations		2,394,789			(402,158	)		1,630,889			574,410

Net income (loss)		2,180,958			(691,597	)		1,035,822			(460,649	)

Net loss attributable to noncontrolling interests from operations		775			1,203			2,676			4,677
Net (income) loss attributable to noncontrolling interests from discontinued operations		(32,046	)		4,025			(1,317,089	)		(921,045	)

Net (income) loss attributable to noncontrolling interests		(31,271	)		5,228			(1,314,413	)		(916,368	)

Net income (loss) attributable to Independence Tax Credit Plus L.P. II	$	2,149,687		$	(686,369	)	$	(278,591	)	$	(1,377,017	)

Loss from operations – limited partners		(210,925	)		(285,353	)		(586,467	)		(1,020,078	)
Income (loss) from discontinued operations (including gain on sale of properties) – limited partners		2,339,115			(394,152	)		310,662			(343,169	)

Net income (loss) – limited partners	$	2,128,190		$	(679,505	)	$	(275,805	)	$	(1,363,247	)

Number of BACs outstanding		58,928			58,928			58,928			58,928

Loss from operations per weighted average BAC	$	(3.57	)	$	(4.84	)	$	(9.95	)	$	(17.31	)
Income (loss) from discontinued operations per weighted average BAC		39.69			(6.69	)		5.27			(5.82	)

Net income (loss) per weighted average BAC	$	36.12		$	(11.53	)	$	(4.68	)	$	(23.13	)

* Reclassified for comparative purposes.

See accompanying notes to consolidated financial statements.

- 3 -

INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
Consolidated Statement of Changes in Partners’ (Deficit) Capital
(Unaudited)




				Limited			General			Noncontrolling
	Total			Partners			Partner			Interests

Partners’ (deficit) capital – April 1, 2011	$	(27,415,490	)	$	(26,466,187	)	$	283,722		$	(1,233,025	)

Net income (loss)		1,035,822			(275,805	)		(2,786	)		1,314,413

Contributions - write-off of related party debt		78,750			-			78,750			-
Partners’ (deficit) capital – December 31, 2011	$	(26,300,918	)	$	(26,741,992	)	$	359,686		$	81,388

See accompanying notes to consolidated financial statements.

- 4 -

INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)

	Nine Months Ended
	December 31,
	2011			2010

Cash flows from operating activities:
Net income (loss)	$	1,035,822		$	(460,649	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Gain on sale of properties		(2,217,179	)		(1,815,882	)
Depreciation and amortization		940,453			1,595,335
Changes in operating assets and liabilities:
(Decrease) increase in accounts payable		(393,111	)		19,755
(Decrease) increase in security deposit payable		(300	)		9,643
Increase in accrued interest		1,075,453			1,391,960
Increase in cash held in escrow		(128,160	)		(116,455	)
Increase in other assets		(543,592	)		(98,158	)
Increase (decrease) in due to local general partners and affiliates		28,875			(84,521	)
Decrease in due to general partner and affiliates		(162,022	)		(215,414	)

Total adjustments		(1,399,583	)		686,263

Net cash (used in) provided by operating activities		(363,761	)		225,614

Cash flows from investing activities:
Proceeds from sale of properties		1,481,329			1,045,822
Costs paid relating to sale of properties		-			(2,105	)
Improvements to property and equipment		-			(297,790	)
(Increase) decrease in cash held in escrow		(138,720	)		28,303

Net cash provided by investing activities		1,342,609			774,230

Cash flows from financing activities:
Principal payments of mortgage notes		(367,191	)		(491,969	)
Repayment of advances to local general partners and affiliates		-			(67,660	)
Decrease in capitalization of consolidated subsidiaries attributable to noncontrolling interests		-			(75,000	)

Net cash used in financing activities		(367,191	)		(634,629	)

Net increase in cash and cash equivalents		611,657			365,215
Cash and cash equivalents at beginning of period		1,479,226			1,587,016
Cash and cash equivalents at end of period*	$	2,090,883		$	1,952,231

Summarized below are the components of the loss (gain) on sale of properties:
Proceeds from sale of properties – net	$	(1,481,329	)	$	(1,043,717	)
Property and equipment, net of accumulated depreciation		8,631,864			5,285,972
Deferred costs		12,522			35,534
Other assets		409,618			42,363
Cash held in escrow		746,486			78,112
Accounts payable and other liabilities		168,488			149,395
Due to general partners and affiliates		(108,750	)		(5,726	)
Due to local general partners and affiliates		(394,655	)		22,772
Mortgage payable		(8,179,742	)		(6,310,623	)
Accrued interest		(1,953,342	)		(27,714	)
Security deposits		(147,089	)		(42,250	)
Contribution - General Partner		78,750			-

* Cash and cash equivalents at end of period, includes cash and cash equivalents from discontinued operations of $177,071 and $103,701, respectively.

See accompanying notes to consolidated financial statements.

- 5 -

INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2011

(Unaudited)

NOTE 1 – General

The consolidated financial statements include the accounts of Independence Tax Credit Plus L.P. II (the “Partnership”) and twelve other limited partnerships (“subsidiary partnerships”, “subsidiaries” or “Local Partnerships”) owning leveraged apartment complexes that are eligible for the low-income housing tax credit. The general partner of the Partnership is Related Independence Associates L.P., a Delaware limited partnership (the “General Partner”), which is managed by an affiliate of Centerline Holding Company (“Centerline”), which is the ultimate parent of the manager of the general partner of the General Partner. Through the rights of the Partnership and/or an affiliate of the General Partner, which affiliate has a contractual obligation to act on behalf of the Partnership, to remove the general partner of each of the subsidiary partnerships (each a “Local General Partner”) and to approve certain major operating and financial decisions, the Partnership has a controlling financial interest in the subsidiary partnerships.

For financial reporting purposes, the Partnership’s fiscal quarter ends December 31 . All subsidiaries have fiscal quarters ending September 30. Accounts of the subsidiaries have been adjusted for intercompany transactions from October 1 through December 31 . The Partnership’s fiscal quarter ends December 31 in order to allow adequate time for the subsidiaries’ financial statements to be prepared and consolidated. All intercompany accounts and transactions with the subsidiary partnerships have been eliminated in consolidation.

In accordance with FASB Accounting Standards Codification (“ASC”) Topic 810, Noncontrolling Interests in Consolidated Financial Statements (“ASC 810”), (income) loss attributable to noncontrolling interests amounted to approximately $(31,000), $5,000, $(1,314,000) and $(916,000) for the three and nine months ended December 31, 2011 and 2010, respectively. The Partnership’s investment in each subsidiary is equal to the respective subsidiary’s partners’ equity less noncontrolling interest capital, if any.

Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted or condensed. These condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Partnership’s Annual Report on Form 10-K for the year ended March 31, 2011.

The books and records of the Partnership are maintained on the accrual basis of accounting in accordance with GAAP. In the opinion of the General Partner of the Partnership, the accompanying unaudited financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position of the Partnership as of December 31, 2011, the results of its operations for the three and nine months ended December 31, 2011 and 2010 and its cash flows for the nine months ended December 31, 2011 and 2010. However, the operating results and cash flows for the nine months ended December 31, 2011 may not be indicative of the results for the entire year.

Recent Accounting Pronouncements

In December 2011, the FASB issued under Topic 220, Comprehensive Income, ASU 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05”. The amendments in this ASU are being made to allow the Board time to redeliberate whether to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income for all periods presented. While the Board is considering the operational concerns about the presentation requirements for reclassification adjustments and the needs of financial statement users for additional information about reclassification adjustments, entities should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before Update 2011-05. All other requirements in Update 2011-05 are not affected by this Update. For public entities, the amendments are effective for fiscal years and interim periods within those years, beginning after December 15, 2011. However, early adoption is permitted. The adoption of this accounting standard will not have a material effect on the Partnership’s consolidated financial statements.

In December 2011, the FASB issued under Topic 210, Balance Sheet, ASU 2011-11, “Disclosures about Offsetting Assets and Liabilities”. The amendments require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. The adoption of this accounting standard will not have a material effect on the Partnership’s consolidated financial statements.

In December 2011, the FASB issued under Topic 360, Property, Plant, and Equipment, ASU 2011-10, “Derecognition of in Substance Real Estate—a Scope Clarification (a consensus of the FASB Emerging Issues Task Force)”. Under the amendments in this Update, when a parent (reporting entity) ceases to have a controlling financial interest (as described in Subtopic 810-10) in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt, the reporting entity should apply the guidance in Subtopic 360-20 to determine whether it should derecognize the in substance real estate. For public entities, the amendments in this Update are effective for fiscal years, and interim periods within those years, beginning on or after June 15, 2012. The adoption of this accounting standard will not have a material effect on the Partnership’s consolidated financial statements.

- 6 -

INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2011

(Unaudited)

NOTE 2 – Related Party Transactions

An affiliate of the General Partner, Independence SLP L.P., has a .01% interest as a special limited partner in each of the subsidiary partnerships. An affiliate of the General Partner also has a minority interest in certain local partnerships.

A)	Other Related Party Expenses

The costs incurred to related parties for the three and nine months ended December 31, 2011 and 2010 were as follows:

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2011		2010*		2011		2010*

Partnership management fees (a)	$	41,500	$	114,150	$	76,429	$	352,650
Expense reimbursement (b)		23,630		25,906		102,305		113,535
Local administrative fee (c)		1,750		1,750		5,250		5,250
Total general and administrative - General Partner		66,880		141,806		183,984		471,435

Property management fees incurred to affiliates of the subsidiary partnerships’ general partners		14,539		14,909		43,446		45,934
Total general and administrative-related parties	$	81,419	$	156,715	$	227,430	$	517,369

* Reclassified for comparative purposes.

The costs incurred to related parties from discontinued operations for the three and nine months ended December 31, 2011 and 2010 were as follows:

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2011		2010*		2011		2010*

Local administrative fees (c)	$	2,250	$	6,625	$	10,500	$	23,000

Total general and administrative – General Partner		2,250		6,625		10,500		23,000

Property management fees incurred to affiliates of the subsidiary partnerships’ general partners		16,956		51,169		139,384		199,268

Total general and administrative-related parties	$	19,206	$	57,794	$	149,884	$	222,268

* Reclassified for comparative purposes.

(a)

The General Partner is entitled to receive a partnership management fee, after payment of all Partnership expenses, which together with the annual local administrative fees will not exceed a maximum of 0.5% per annum of invested assets (as defined in the Partnership Agreement), for administering the affairs of the Partnership. Subject to the foregoing limitation, the partnership management fee will be determined by the General Partner in its sole discretion based upon its review of the Partnership’s investments. Unpaid partnership management fees for any year will be accrued without interest and will be payable from working capital reserves or to the extent of available funds after the Partnership has made distributions to the limited partners of sale or refinancing proceeds equal to their original capital contributions plus a 10% priority return thereon (to the extent not theretofore paid out of cash flow). Partnership management fees owed to the General Partner amounting to approximately $4,805,000 and $4,930,000 were accrued and unpaid as of December 31, 2011 and March 31, 2011, respectively, and are included in the line item Due to general partners and affiliates in the consolidated balance sheets. During the year ended March 31, 2011, management deemed the unpaid partnership management fees related to sold properties uncollectible and wrote off approximately $967,000, resulting in a noncash General Partner contribution of the same amount. Current year partnership management fees may be paid out of operating reserves or refinancing and sales proceeds. As such, the General Partner cannot demand payment of the deferred fees except as noted above.

- 7 -

INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2011

(Unaudited)

(b)

The Partnership reimburses the General Partner and its affiliates for actual Partnership operating expenses incurred by the General Partner and its affiliates on the Partnership’s behalf. The amount of reimbursement from the Partnership is limited by the provisions of the Partnership Agreement. Another affiliate of the General Partner performs asset monitoring for the Partnership. These services include site visits and evaluations of the subsidiary partnerships’ performance. Expense reimbursements and asset monitoring fees owed to the General Partner and its affiliates amounting to approximately $63,000 and $39,000 were accrued and unpaid as of December 31, 2011 and March 31, 2011, respectively. The General Partner does not intend to demand payment of the deferred payables beyond the Partnership’s ability to pay them. The Partnership anticipates that these will be paid, if at all, from working capital reserves or future sales proceeds.

(c)

Independence SLP L.P., a special limited partner of the subsidiary partnerships, is entitled to receive a local administrative fee of up to $5,000 per year from each subsidiary partnership. As of December 31, 2011 and March 31, 2011, the subsidiary partnerships owed approximately $149,000 and $241,000, respectively, of these fees to Independence SLP L.P. These fees have been deferred in certain cases and the Partnership anticipates that they will be paid, if at all, from working capital reserves or future sales proceeds.

As of December 31, 2011 and March 31, 2011, the Partnership owed $3,000 and $0, respectively, to the General Partner for expenses it paid on its behalf, and $0 and $80,000, respectively, to Independence SLP L.P. for the fees it received from a Local Partnership on its behalf.

B) Due to Local General Partners and Affiliates

Due to local general partners and affiliates at December 31, 2011 and March 31, 2011 consists of the following:

	December 31,		March 31,
	2011		2011

Operating advances	$	-	$	413,318
Construction costs payable		382,200		382,200
Management and other operating advances		-		(9,166	)
Loans payable to local general partner and affiliates (a)		236,994		236,994

	$	619,194	$	1,023,346

(a) Affordable Green Associates, L.P. borrowed monies from affiliates of the Local General Partners while the building was being constructed. Interest was accrued at rates from 8% to 11% during the construction period. The loans are now due on demand and do not accrue interest.

Due to local general partners and affiliates at December 31, 2011 and March 31, 2011 included in the discontinued liabilities consists of the following:

	December 31,		March 31,
	2011		2011

Management and other operating advances	$	38,372	$	-

	$	38,372	$	-

- 8 -

INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2011

(Unaudited)

NOTE 3 – Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments (all of which are held for nontrading purposes) for which it is practicable to estimate that value:

Cash and Cash Equivalents, Investments Available-for-Sale and Cash Held in Escrow

The carrying amount approximates fair value.

Mortgage Notes Payable

The Partnership adopted FASB ASC 820 – “Fair Value Measurements” for financial assets and liabilities. ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard does not require any new fair value measurements of reported balances.

As permitted, we chose not to elect the fair value option as prescribed by ASC 825 – “Financial Instruments” – Including an Amendment of ASC 320 – “Investments – Debt and Equity Securities”, for our financial assets and liabilities that had not been previously carried at fair value. Therefore, we did not elect to fair value any additional items under ASC 825.

The estimated fair value of financial instruments has been determined using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Consequently, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange. The following are financial instruments for which the Partnership’s estimate of fair value differs from the carrying amounts:

	At December 31, 2011						At March 31, 2011
	Carrying						Carrying
	Amount			Fair Value			Amount			Fair Value

LIABILITIES:
Mortgage notes		$	15,836,778		$	10,787,272		$	24,383,711		$	11,934,332

For the mortgage notes, fair value is calculated using present value cash flow models based on a discount rate. It was determined that the Tender Option Bond market, through which these bonds have been securitized in the past, continued to see a dramatic slowdown with limited liquidity and significantly reduced transaction levels. To assist in valuing these notes, the Partnership held separate discussions with various third party investment banks who are leaders in the municipal bond business. The discussions produced assumptions that were based on market conditions as well as the credit quality of the underlying property partnerships, which held the mortgage notes, to determine what discount rates to utilize.

NOTE 4 – Sale of Properties

The Partnership is in the process of disposing of all of its investments. During the nine months ended December 31, 2011, the Partnership sold its limited partnership interest in four Local Partnerships. As of December 31, 2011, the Partnership has sold its limited partnership interests in eleven Local Partnerships. In addition, as of December 31, 2011, the Partnership has entered into an agreement to sell its limited partnership interests in one Local Partnership and one Local Partnership has entered into an agreement to sell its property and the related assets and liabilities (see Note 5). There can be no assurance as to when the Partnership will dispose of its remaining investments or the amount of proceeds which may be received. However, based on the historical operating results of the Local Partnerships and the current economic conditions, including changes in tax laws, it is unlikely that the proceeds from such sales received by the Partnership will be sufficient to return to the limited partners their original investments. All gains and losses on sales are included in discontinued operations.

On December 31, 2011, the Partnership sold its limited partnership interest in Lincoln Renaissance (“Abraham Lincoln Court”) to an affiliate of the Local General Partner for a sales price of $10. The sale resulted in a gain of approximately $2,667,000 resulting from the write-off of the deficit basis in the Local Partnership of approximately $2,667,000, which was recorded during the quarter ended December 31, 2011. During the years ended March 31, 2011 and March 31, 2010, in accordance with ASC 360, the Partnership deemed the building impaired and wrote it down to its fair value, which resulted in a loss on impairment of approximately $277,000 and $2,892,000, respectively. In addition, the sale resulted in a noncash contribution to the Local Partnership from the General Partner of approximately $27,000 as a result of the write-off of fees owed by the Local Partnership to an affiliate of the General Partner.

On September 21, 2011, the Partnership sold its limited partnership interest in NLEDC, Limited Partnership (“Paradise Arms”) to the Local General Partner for a sales price of $5,000. The sale resulted in a gain of approximately $3,846,000 resulting from the write-off of the deficit basis in the Local Partnership of approximately $3,841,000 and the $5,000 cash received from the sale, which was recorded during the quarter ended September 30, 2011. An adjustment to the gain of approximately $16,000 was recorded during the quarter ended December 31, 2011, resulting in an overall gain of approximately $3,862,000. During the year ended March 31, 2010, in accordance with ASC 360, the Partnership deemed the building impaired and wrote it down to its fair value, which resulted in a loss on impairment of $1,769,000. In addition, the sale resulted in a noncash contribution to the Local Partnership from the General Partner of approximately $2,000 as a result of the write-off of fees owed by the Local Partnership to an affiliate of the General Partner.

- 9 -

INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2011

(Unaudited)

On June 30, 2011, the Partnership redeemed its limited partnership interest in Neptune Venture L.P. (“Winding Ridge”) to the Local General Partner for a sales price of $1,476,329. The sale resulted in a loss of approximately $5,836,000 resulting from the write-off of the basis in the Local Partnership of approximately $7,313,000 and the $1,476,329 cash received from the sale, which was recorded during the quarter ended June 30, 2011. An adjustment to the loss of approximately ($96,000) was recorded during the quarter ended September 30, 2011, resulting in an overall loss of approximately $5,932,000. In accordance with the partnership agreement of Winding Ridge, the Local General Partner was to be paid certain fees and distributions, based on the selling price, contingent upon the completion of a sale. These fees, amounting to $6,725,000, were based on the implied sales price of $8,201,828 as determined by an independent real estate service agency. No cash payments were made for these fees. In addition, the sale resulted in a noncash contribution to the Local Partnership from the General Partner of approximately $4,000 as a result of the write-off of fees owed by the Local Partnership to an affiliate of the General Partner.

On May 12, 2011, the Partnership sold its limited partnership interest in Mansion Court Associates (“Mansion Court”) to an affiliate of the Local General Partner for a sales price of $1. The sale resulted in a gain of approximately $1,698,000 resulting from the write-off of the deficit basis in the Local Partnership of the same amount at the date of sale, which was recorded during the quarter ended June 30, 2011. An adjustment to the gain of approximately $1,000 was recorded during the quarter ended September 30, 2011, resulting in an overall gain of approximately $1,699,000. During the year ended March 31, 2011, in accordance with ASC 360, the Partnership deemed the building impaired and wrote it down to its fair value, which resulted in a loss on impairment of $301,000. In addition, the sale resulted in a noncash contribution to the Local Partnership from the General Partner of approximately $46,000 as a result of the write-off of fees owed by the Local Partnership to an affiliate of the General Partner.

On March 31, 2011, the Partnership sold its limited partnership interest in Brynview Terrace, L.P. (“Brynview”) to the Local General Partner for a sales price of $2. The Partnership did not receive any cash from this sale and paid other liabilities of $5,000 in relation to the sale. The sale resulted in a gain of approximately $1,024,000 resulting from the write-off of the deficit basis in the Local Partnership of approximately $1,029,000 and the $5,000 cost incurred relating to the sale, which was recorded during the year ended March 31, 2011. An adjustment to the gain of approximately ($4,000) was recorded during the quarter ended June 30, 2011, resulting in an overall gain of approximately $1,020,000.

On March 31, 2011, the Partnership sold its limited partnership interest in Colden Oaks Limited Partnership (“Colden Oaks”) to an affiliate of the Local General Partner for a sales price of $2. The Partnership did not receive any cash from this sale and paid other liabilities of $5,000 in relation to the sale. The sale resulted in a gain of approximately $5,061,000 resulting from the write-off of the deficit basis in the Local Partnership of approximately $5,066,000 and the $5,000 cost incurred relating to the sale, which was recorded during the year ended March 31, 2011. In addition, the sale resulted in a noncash contribution to the Local Partnership from the General Partner of approximately $85,000 as a result of the write-off of fees owed by the Local Partnership to an affiliate of the General Partner. An adjustment to the gain of approximately $7,000 was recorded during the quarter ended June 30, 2011, resulting in an overall gain of approximately $5,068,000.

On February 9, 2011, the Partnership sold its limited partnership interest in P&P Home for the Elderly, L.P. (“P&P”) to an unaffiliated third party purchaser for a sales price of $50,000. The Partnership received $79,363 (including a distribution from sale of $49,363) after the payment of other liabilities of approximately $20,000. The sale resulted in a gain of approximately $6,288,000 resulting from the write-off of the deficit basis in the Local Partnership of approximately $6,208,000 and the $79,363 cash received from the sale, which was recorded during the year ended March 31, 2011. An adjustment to the gain of approximately ($112,000) was recorded during the quarter ended June 30, 2011, resulting in an overall gain of approximately $6,176,000.

On February 9, 2011, the Partnership sold its limited partnership interest in Martha Bryant Manor, L.P. (“Martha Bryant”) to an unaffiliated third party purchaser for a sales price of $15,000. The Partnership did not receive any cash from this sale and paid other liabilities of $15,000 in relation to the sale. The sale resulted in a gain of approximately $6,158,000 resulting from the write-off of the deficit basis in the Local Partnership of the same amount at the date of sale, which was recorded during the year ended March 31, 2011. An adjustment to the gain of approximately $30,000 was recorded during the quarter ended June 30, 2011, resulting in an overall gain of approximately $6,188,000.

On July 30, 2010, the Partnership sold its limited partnership interest in Derby Run Associates (“Derby Run”) to an affiliate of the Local General Partner for a sales price of $1,045,822. The Partnership received $1,043,717 after the repayment of other liabilities of approximately $2,000. The sale resulted in a gain of approximately $1,777,000 resulting from the write-off of the deficit basis in the Local Partnership of approximately $733,000 and the $1,043,717 cash received from the sale, which was recorded during the quarter ended September 30, 2010. An adjustment to the gain of approximately ($56,000) was recorded during the quarter ended March 31, 2011, resulting in an overall gain of approximately $1,721,000.

On March 31, 2010, the Partnership sold its limited partnership interest in Tasker Village Associates (“Tasker”) to an affiliate of the Local General Partner for a sales price of $20,000. The Partnership did not receive any cash from this sale after the repayment of other liabilities of $20,000. The sale resulted in a gain of approximately $2,361,000, resulting from the write-off of the deficit basis in the Local Partnership of the same amount at the date of the sale, which was recorded during the year ended March 31, 2010. Adjustments to the gain of approximately $39,000 and ($7,000) were recorded during the quarters ended June 30, 2010 and March 31, 2011, respectively, resulting in an overall gain of approximately $2,400,000. In addition, the sale resulted in a non-cash contribution to the Local Partnership from (i) the General Partner of approximately $28,000 as a result of the write-off of fees owed by the Local Partnership to an affiliate of the General Partner; and (ii) the Local General Partners of approximately $99,000 as a result of the write-off of fees owed by the Local Partnership to the Local General Partner.

- 10 -

INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2011

(Unaudited)

NOTE 5 – Assets Held for Sale

On December 5, 2011, the Partnership entered into an assignment and assumption agreement to sell its limited partnership interest in United- Germano Millgate Limited Partnership (“United-Germano”) to an unaffiliated third party purchaser for a sales price of $141,875. As of December 31, 2011, United-Germano had property and equipment, at cost, of approximately $18,294,000, accumulated depreciation of approximately $13,527,000 and mortgage debt of approximately $6,610,000. The sale is contingent upon Illinois Housing Development Authority and U.S. Department of Housing and Urban Development (“HUD”) approval and is expected to be consummated during the first quarter of 2012.

On August 29, 2011, Clear Horizons Limited Partnership (“Clear Horizons”) entered into a purchase and sale agreement to sell the property and the related assets and liabilities to an unaffiliated third party purchaser for a sales price of $2,100,000. As of December 31, 2011, Clear Horizon had property and equipment, at cost, of approximately $2,425,000, accumulated depreciation of approximately $1,537,000 and mortgage debt of approximately $573,000. The sale is contingent upon approval of all governmental agencies, including HUD, and is expected to be consummated during the first quarter of 2012. In the event the closing does not occur by March 31, 2012, Clear Horizons may terminate this agreement by written notice and shall be entitled to receive and retain a deposit and any accrued interest.

NOTE 6 – Discontinued Operations

The following table summarizes the financial position of the Local Partnerships that are classified as discontinued operations because the respective Local Partnerships were classified as assets held for sale or were sold. As of December 31, 2011, Abraham Lincoln Court, Paradise Arms, Mansion Court and Winding Ridge, which were sold during the nine months ended December 31, 2011, and Clear Horizons and United-Germano, which were classified as assets held for sale, were all classified as discontinued operations on the consolidated balance sheets. As of March 31, 2011, Paradise Arms, which was classified as an asset held for sale, was classified as discontinued operations on the consolidated balance sheets.

Consolidated Balance Sheets:

	December 31,		March 31,
	2011		2011

Assets
Property and equipment – less accumulated depreciation of $15,136,280 and $3,055,377, respectively	$	5,737,579	$	1,699,698
Cash and cash equivalents		177,071		-
Cash held in escrow		1,218,204		93,428
Other assets		178,339		6,250
Total assets	$	7,352,681	$	1,799,376

Liabilities
Mortgage notes payable	$	7,183,664	$	4,139,881
Accounts payable		266,275		16,308
Accrued interest payable		10,493,458		1,425,013
Security deposit payable		70,337		32,036
Due to local general partners and affiliates		38,372		-
Due to general partners and affiliates		41,375		20,000
Total liabilities	$	18,093,481	$	5,633,238

- 11 -

INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2011

(Unaudited)

The following table summarizes the results of operations of the Local Partnerships that were classified as discontinued operations. For the three and nine months ended December 31, 2011, Martha Bryant, P&P, Colden Oaks and Brynview, which were sold during the year ended March 31, 2011, Abraham Lincoln Court, Paradise Arms, Mansion Court and Winding Ridge , which were sold during the nine months ended December 31, 2011, and Clear Horizons and United-Germano, which were classified as assets held for sale, were all classified as discontinued operations in the consolidated statements of operations. For the three and nine months ended December 31, 2010, Tasker, which was sold during the year ended March 31, 2010, Derby Run, which was sold during the nine months ended December 31, 2010, and Martha Bryant, P&P, Colden Oaks, Brynview, Abraham Lincoln Court, Paradise Arms, Mansion Court, Winding Ridge, Clear Horizons and United-Germano, in order to present comparable results to the nine months ended December 31, 2011, were all classified as discontinued operations in the consolidated statements of operations.

Consolidated Statements of Discontinued Operations:

	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2011			2010*				2011		2010*

Revenues

Rental income	$	1,222,432		$	2,016,491		$	4,749,675		$	7,052,526
Other		19,870			72,411			38,110			382,855
Gain on sale of properties (Note 4)		2,683,269			-			2,217,179			1,815,882

Total revenue		3,925,571			2,088,902			7,004,964			9,251,263

Expenses
General and administrative		522,496			643,144			1,574,665			2,212,334
General and administrative-related parties (Note 2)		19,206			57,794			149,884			222,268
Repairs and maintenance		309,034			481,579			1,099,747			1,599,705
Operating and other		102,421			249,223			458,051			854,449
Taxes		63,505			65,605			305,841			356,213
Insurance		46,439			69,402			168,653			239,257
Interest		234,074			505,804			800,373			1,750,619
Depreciation and amortization		233,607			418,509			816,861			1,442,008

Total expenses		1,530,782			2,491,060			5,374,075			8,676,853

Income (loss) from discontinued operations	$	2,394,789		$	(402,158	)	$	1,630,889		$	574,410

Noncontrolling interest in (income) loss of subsidiaries from discontinued operations		(32,046	)		4,025			(1,317,089	)		(921,045	)

Income (loss) from discontinued operation – Independence Tax Credit Plus LP II	$	2,362,743		$	(398,133	)	$	313,800		$	(346,635	)

Income (loss) – limited partners from discontinued operations	$	2,339,115		$	(394,152	)	$	310,662		$	(343,169	)

Number of BACs outstanding		58,928			58,928			58,928			58,928

Income (loss) from discontinued operations per BAC	$	39.69		$	(6.69	)	$	5.27		$	(5.82	)

* Reclassified for comparative purposes.

- 12 -

INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2011

(Unaudited)

Cash Flows from Discontinued Operations:

	Nine Months Ended
	December 31,
	2011			2010*

Net cash (used in) provided by operating activities	$	(1,494,480	)	$	57,493
Net cash provided by investing activities	$	1,125,282		$	99,330
Net cash used in financing activities	$	(7,934	)	$	(469,105	)

* Reclassified for comparative purposes.

NOTE 7 – Commitments and Contingencies

a)	Going Concern Consideration

At December 31, 2011, the Partnership’s liabilities exceeded assets by $26,300,918 and for the nine months ended December 31, 2011, had net income of $ 1,035,822, including gain on sale of properties of $2,217,179. These factors raise substantial doubt about the Partnership’s ability to continue as a going concern. As discussed in Note 2, partnership management fees of approximately $4,805,000 will be payable out of sales or refinancing proceeds only to the extent of available funds after payments on all other Partnership liabilities have been made and after the Limited Partners have received a 10% return on their capital contributions. As such, the General Partner cannot demand payment of these deferred fees beyond the Partnership’s ability to pay them. In addition, where the Partnership has unpaid partnership management fees related to sold properties, such management fees are written off and recorded as capital contributions.

All of the mortgage payable balance of $15,836,778 and the accrued interest payable balance of $17,352,488 is of a nonrecourse nature and secured by the respective properties. The Partnership is currently in the process of disposing of all of its investments. Historically, the mortgage notes and accrued interest thereon have been assumed by the buyer in instances of sales of the Partnership’s interest or have been paid off from sales proceeds in instances of sales of the property. In most instances when the Partnership’s interest was sold and liabilities were assumed, the Partnership recognized a gain from the sale. The Partnership owns the limited partner interest in all its investments, and as such has no financial responsibility to fund operating losses incurred by the Local Partnerships. The maximum loss the Partnership would incur is its net investment in the respective Local Partnerships and the potential recapture of the Tax Credits if the investment is lost before the expiration of the Compliance Period. Dispositions of any investment in a Local Partnership should not impact the future results of operations, liquidity, or financial condition of the Partnership.

The Partnership has working capital reserves of approximately $1,725,000 at December 31, 2011. Such amount is considered sufficient to cover the Partnership’s day to day operating expenses, excluding fees to the General Partner, for at least the next year. The Partnership’s operating expenses, excluding the Local Partnerships’ expenses and related party expenses amounted to approximately $148,000 for the nine months ended December 31, 2011.

Management believes the above mitigating factors enable the Partnership to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

b)	Subsidiary Partnerships – Going Concern

Mansion Court Associates (“Mansion Court”)

On May 12, 2011, the Partnership sold its limited partnership interest in Mansion Court (see Note 4). Mansion Court had net income of approximately $1,751,000, including a gain on sale of approximately $1,772,000, for the nine months ended December 31, 2011. Mansion Court had sustained operating losses over the years and had not generated sufficient cash flow from operations to meet its obligations. The Local General Partner had provided funding in the past years; however there was no obligation to do so. The property also had experienced a high number of vacancies due to deteriorating conditions in the area. As of April 30, 2011, the project had 23 out of 30 vacant units. Vacancies continued to increase due to declining conditions in the surrounding neighborhood, and the expenditure of funds to make improvements would not benefit the property. The Local General Partner was exploring options to mitigate increased crime and deteriorating neighborhood conditions. These options included assistance from local government housing agencies and transfer of ownership.

During the year ended March 31, 2011, in accordance with ASC 360, the Partnership deemed the building of Mansion Court impaired and wrote it down to its estimated fair value of $0, which resulted in a loss on impairment of approximately $301,000. Fair value was obtained from an assessment made by the management after indications that the carrying value of the assets were not recoverable, evidenced by a history of net operating losses over the past few years as discussed above.

- 13 -

INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2011

(Unaudited)

c)	Uninsured Cash and Cash Equivalents

The Partnership maintains its cash and cash equivalents in various banks. The accounts at each bank are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”).

d)	Cash Distributions

Cash distributions from the Local Partnerships to the Partnership are restricted by the provisions of the respective agreements of limited partnership of the Local Partnerships and/or the U.S. Department of Housing and Urban Development.

e)	Property Management Fees

Property management fees incurred by the Local Partnerships amounted to $108,255, $177,672, $422,581 and $569,249 for the three and nine months ended December 31, 2011 and 2010, respectively. Of these fees $31,495, $66,078, $182,830 and $245,202 were earned by affiliates of the Local General Partners for the three and nine months ended December 31, 2011 and 2010, respectively, which include $16,956, $51,169, $139,384 and $199,268 of fees relating to discontinued operations for the three and nine months ended December 31, 2011 and 2010, respectively.

Other

The Partnership is subject to the risks incident to potential losses arising from the management and ownership of improved real estate. The Partnership can also be affected by poor economic conditions generally; however, no more than 25% of the properties are located in any single state. There are also substantial risks associated with owning properties receiving government assistance; for example, the possibility that Congress may not appropriate funds to enable HUD to make rental assistance payments. HUD also restricts annual cash distributions to partners based on operating results and a percentage of the owner’s equity contribution. The Partnership cannot sell or substantially liquidate its investments in subsidiary partnerships during the period that the subsidy agreements are in existence without HUD’s approval. Furthermore, there may not be market demand for apartments at full market rents when the rental assistance contracts expire.

The Partnership and BACs holders began to recognize Tax Credits with respect to a property when the Credit Period for such Property (generally ten years from the date of investment or, if later, the date the Property is leased to qualified tenants) commenced. Because of the time required for the acquisition, completion and rent-up of Properties, the amount of Tax Credits per BAC gradually increased over the first three years of the Partnership. Tax Credits not recognized in the first three years were recognized in the 11th through 13th years. As of December 31, 2007, all the Local Partnerships had completed their Credit Periods. However, each Local Partnership must continue to comply with the Tax Credit requirements until the end of the Compliance Period in order to avoid recapture of the Tax Credits. The Compliance Periods will continue through December 31, 2012 with respect to the Properties depending upon when the Compliance Period commenced. At December 31, 2008, Mansion Court was required to recapture $190,635 of low-income housing tax credits.

g)	Subsequent Events

We evaluated all subsequent events from the date of the balance sheet through the issuance date of this report and determined that there were no events or transactions occurring during the subsequent event reporting period which require recognition or disclosure in the financial statements.

- 14 -

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

Liquidity and Capital Resources

The Partnership originally invested all of its net proceeds in fifteen Local Partnerships. The Partnership is in the process of disposing of all of its investments. During the nine months ended December 31, 2011, the Partnership sold its limited partnership interest in four Local Partnerships. As of December 31, 2011, the Partnership has sold its limited partnership interests in eleven Local Partnerships. In addition, as of December 31, 2011, the Partnership has entered into an agreement to sell its limited partnership interests in one Local Partnership and one Local Partnership has entered into an agreement to sell its property and the related assets and liabilities (see Item1, Note 5). There can be no assurance as to when the Partnership will dispose of its remaining investments or the amount of proceeds which may be received. However, based on the historical operating results of the Local Partnerships and the current economic conditions, including changes in tax laws, it is unlikely that the proceeds from such sales received by the Partnership will be sufficient to return to the BACs holders their original investments. All gains and losses on sales are included in discontinued operations.

Short-Term

The Partnership’s primary sources of funds include: (i) working capital reserves; (ii) interest earned on the working capital reserves; (iii) cash distributions from operations of the Local Partnerships; and (iv) sales proceeds and distributions. Such funds are available to meet the obligations of the Partnership. The Partnership does not anticipate providing cash distributions to BACs holders in circumstances other than refinancing or sales. Cash distributions received from the Local Partnerships, as well as the working capital reserves referred to above, will be used towards the future operating expenses of the Partnership. During the nine months ended December 31, 2011 and 2010, the amounts received from operations of the Local Partnerships were approximately $12,000 and $15,000, respectively. In addition, during the nine months ended December 31, 2011 and 2010, distributions to the Partnership from sales proceeds amounted to approximately $1,481,000 and $1,046,000, respectively. The Partnership does not anticipate being able to make distributions sufficient to return to BACs holders their original capital contributions.

During the nine months ended December 31, 2011, cash and cash equivalents of the Partnership and its consolidated Local Partnerships increased approximately $612,000. This increase was due to net proceeds from sale of properties ($1,481,000), which exceeded cash used in operating activities ($364,000), an increase in cash held in escrow relating to investing activities ($139,000) and principal payments of mortgage notes ($367,000). Included in the adjustment to reconcile the net income to cash used in operating activities is depreciation and amortization of approximately $940,000 and gain on sale of properties of approximately $2,217,000.

Total expenses from operations for the three and nine months ended December 31, 2011 and 2010 excluding depreciation and amortization, interest and general and administrative – related parties, totaled $267,104, $257,834, $766,793 and $902,942, respectively.

Accounts payable from operations as of December 31, 2011 and March 31, 2011 were $125,253 and $599,843, respectively. Accounts payable are short term liabilities which are expected to be paid from operating cash flows, working capital balances at the Local Partnership level, Local General Partner advances and in certain circumstances advances from the Partnership. Accounts payable from discontinued operations totaled $266,275 and $16,308 as of December 31, 2011 and March 31, 2011, respectively. Accrued interest payable from operations as of December 31, 2011 and March 31, 2011 was $6,859,030 and $16,805,364, respectively. Accrued interest payable from discontinued operations totaled $10,493,458 and $1,425,013 as of December 31, 2011 and March 31, 2011, respectively. Such amount represents the accrued interest on all mortgage loans, which include primary and secondary loans. Certain secondary loans have provisions such that interest is accrued but not payable until a future date. The Partnership anticipates the payment of accrued interest on the secondary loans (which make up the majority of the accrued interest payable amount and which have been accumulating since the Partnership’s investment in the respective Local Partnership) will be made from future refinancings or sales proceeds of the respective Local Partnerships. In addition, each Local Partnership’s mortgage notes are collateralized by the land and buildings of the respective Local Partnership, and are without further recourse to the Partnership.

Because the provisions of the secondary loans defer the payment of accrued interest of the respective Local Partnerships, and the General Partner continues to defer the payment of fees as discussed below and in Note 2 to the Financial Statements, the Partnership (and the applicable Local Partnerships) believes it has sufficient liquidity and ability to generate cash and to meet existing and known or reasonably likely future cash requirements over both the short and long term.

The Partnership has an unconsolidated working capital reserve of approximately $1,725,000 at December 31, 2011.

Long-Term

Partnership management fees owed to the General Partner amounting to approximately $4,805,000 and $4,930,000 were accrued and unpaid as of December 31, 2011 and March 31, 2011, respectively and are included in Due to General Partner and affiliates on the Consolidated Balance Sheets. During the year ended March 31, 2011, management deemed the unpaid partnership management fees related to sold properties uncollectible and wrote off approximately $967,000, resulting in a noncash General Partner contribution of the same amount. Unpaid partnership management fees for any year are deferred without interest and will be payable out of sales or refinancing proceeds only to the extent of available funds after payments on all Partnership liabilities have been made other than to those owed to the General Partner and its affiliates, and after the Limited Partners have received a 10% return on their capital contributions.

All other amounts included in Due to General Partner and affiliates are expected to be paid, if at all, from working capital reserves. See Note 2 in Item 1 for further discussion of amounts due to the General Partner and its affiliates. The General Partner does not anticipate making any future advances of operating funds to any of the Local Partnerships in which the Partnership has invested. Even if a situation arose where the General Partner and its affiliates needed to but were not able to make operating advances in the future due to lack of funds, the only impact on the Partnership would be that it would lose its investment in that particular Local Partnership. The Partnership’s ability to continue its operations would not be affected.

Based on the foregoing, the Partnership’s going concern consideration is mitigated by factors as discussed in Note 7a in Item 1.

- 15 -

For a discussion of contingencies affecting certain Local Partnerships, see Results of Operations below. Since the maximum loss the Partnership would be liable for is its net investment in the respective subsidiary partnerships, the resolution of the existing contingencies is not anticipated to impact future results of operations, liquidity or financial condition in a material way. However, the Partnership’s loss of its investment in a Local Partnership may result in recapture of Tax Credits if the investment is lost before expiration of the Compliance Period.

Except as described above, management is not aware of any trends or events, commitments or uncertainties, which have not otherwise been disclosed that will or are likely to impact liquidity in a material way. Management believes the only impact would be from laws that have not yet been adopted. The portfolio is diversified by the location of the Properties around the United States so that if one area of the country is experiencing downturns in the economy, the remaining Properties in the portfolio may be experiencing upswings. However the geographic diversification of the portfolio may not protect against a general downturn in the national economy. The Partnership had originally invested the proceeds of its Offering in 15 Local Partnerships, all of which had their Tax Credits fully in place during the Credit Periods. As of December 31, 2007, all the Local Partnerships had completed their Credit Periods. However, each Local Partnership must continue to comply with the Tax Credit requirements until the end of the Compliance Period in order to avoid recapture of the Tax Credits. The Compliance Periods will continue through December 31, 2012 with respect to the Properties depending upon when the Compliance Period commenced. At December 31, 2008, Mansion Court Associates was required to recapture $190,635 of low-income housing tax credits.

Off-Balance Sheet Arrangements

The Partnership has no off-balance sheet arrangements.

Tabular Disclosure of Contractual Obligations

The Partnership discloses in Item 7 of the Partnership’s Annual Report on Form 10-K for the year ended March 31, 2011, the Partnership’s commitments to make future payments under its debt agreements and other contractual obligations. There are no material changes to such disclosure or amounts as of December 31, 2011.

Fair Value Measurements

Cash and Cash Equivalents, Investments Available-for-Sale and Cash Held in Escrow

The carrying amount approximates fair value.

Mortgage Notes Payable

	At December 31, 2011				At March 31, 2011
	Carrying				Carrying
	Amount		Fair Value		Amount		Fair Value

LIABILITIES:
Mortgage notes	$	15,836,778	$	10,787,272	$	24,383,711	$	11,934,332

- 16 -

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of certain accounting estimates considered critical by the Partnership. The summary should be read in conjunction with the more complete discussion of the Partnership’s accounting policies included in Item 8, Note 2 to the consolidated financial statements in the Partnership’s Annual Report on Form 10-K for the year ended March 31, 2011.

Property and Equipment

Property and equipment to be held and used are carried at cost which includes the purchase price, acquisition fees and expenses, construction period interest and any other costs incurred in acquiring the Properties. The cost of property and equipment is depreciated over their estimated useful lives using accelerated and straight-line methods. Expenditures for repairs and maintenance are charged to expense as incurred; major renewals and betterments are capitalized. At the time property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the assets and accumulated depreciation accounts and the profit or loss on such disposition is reflected in earnings. The Partnership complies with ASC 360, Property, Plant and Equipment. A loss on impairment of assets is recorded when management estimates amounts recoverable through future operations and sale of the Property on an undiscounted basis are below depreciated cost. At that time, Property investments themselves are reduced to estimated fair value (generally using discounted cash flows) when the Property is considered to be impaired and the depreciated cost exceeds estimated fair value.

At the time management commits to a plan to dispose of a specific asset, said asset is adjusted to the lower of carrying amount or fair value less costs to sell. These assets are classified as property and equipment-held for sale and are not depreciated. Property and equipment that are held for sale are included in discontinued operations. There are two assets classified as property and equipment-held for sale as of December 31, 2011.

During the nine months ended December 31, 2011, the Partnership has not recorded any loss on impairment of assets. Through December 31, 2011, the Partnership has recorded approximately $29,131,000 as an aggregate loss on impairment of property.

Revenue Recognition

Rental income is earned primarily under standard residential operating leases and is typically due the first day of each month, but can vary by Property due to the terms of the tenant leases. Rental income is recognized when earned and charged to tenants’ accounts receivable if not received by the due date. Rental payments received in advance of the due date are deferred until earned. Rental subsidies are recognized as rental income during the month in which it is earned.

Other revenues are recorded when earned and consist of the following items: interest income earned on cash and cash equivalent balances and cash held in escrow balances, income from forfeited security deposits, late charges, laundry and vending income and other rental related items.

Income Taxes

The Partnership is not required to provide for, or pay, any federal income taxes. Net income or loss generated by the Partnership is passed through to the partners and is required to be reported by them. The Partnership may be subject to state and local taxes in jurisdictions in which it operates. For income tax purposes, the Partnership has a fiscal year ending December 31.

Results of Operations

The Partnership’s results of operations for the three and nine months ended December 31, 2011 and 2010 consisted primarily of the results of the Partnership’s investment in Local Partnerships. The following discussion excludes the Partnership’s results of its discontinued operations, which are not reflected below.

Rental income increased approximately 2% and decreased approximately 1% for the three and nine months ended December 31, 2011, as compared to the corresponding periods in 2010. The decrease for the nine months is primarily due to the annual rent increase and decrease in occupancy at one Local Partnership partially offset by an increase in vacancy at another Local Partnership.

General and administrative expenses increased approximately $46,000 and $29,000 for the three and nine months ended December 31, 2011, as compared to the corresponding periods in 2010, primarily due to an increase in legal fees due to higher sales activity and consulting fees pertaining to the Partnership’s use of new software in order to comply with new reporting requirements at the Partnership level.

General and administrative-related parties expenses decreased approximately $75,000 and $290,000 for the three and nine months ended December 31, 2011, as compared to the corresponding periods in 2010, primarily due to a decrease in partnership management fees and expense reimbursements resulting from the sale of properties at the Partnership level.

Repairs and maintenance expenses decreased approximately $31,000 and $157,000 for the three and nine months ended December 31, 2011, as compared to the corresponding periods in 2010. The decrease for the three months is primarily due to a decrease in general maintenance expenses at one Local Partnership. The decrease for the nine months is primarily due to a decrease in painting and decorating, boiler and heating, and cooling system repairs at another Local Partnership.

Depreciation and amortization expenses decreased approximately $12,000 and $30,000 for the three and nine months ended December 31, 2011, as compared to corresponding periods in 2010, primarily due to a reduction in carrying amounts relating to impairment of assets recorded during the year ended March 31, 2011 at one Local Partnership.

- 17 -

Item 4. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures. The Chief Executive Officer and Chief Financial Officer of Related Independence Associates, L.P., the general partner of the Partnership, have evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”) as of the end of the period covered by this report. Based on such evaluation, such officers have concluded that, as of the end of such period, the Partnership’s disclosure controls and procedures are effective.

(b) Changes in Internal Controls over Financial Reporting. During the period ended December 31, 2011, there were no changes in the Partnership’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

- 18 -

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings. – None

Item 1A.	Risk Factors. – No Changes

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds. – None

Item 3.	Defaults Upon Senior Securities. – None

Item 4.	(Removed and reserved)

Item 5.	Other Information. – None

Item 6.	Exhibits.

	(3A)	Agreement of Limited Partnership of Independence Tax Credit Plus L.P. II as adopted on February 11, 1992*

	(3B)	Form of Amended and Restated Agreement of Limited Partnership of Independence Tax Credit Plus L.P. II, attached to the Prospectus as Exhibit A**

	(3C)	Certificate of Limited Partnership of Independence Tax Credit Plus L.P. II as filed on February 11, 1992*

	(10A)	Form of Subscription Agreement attached to the Prospectus as Exhibit B**

	(10B)	Escrow Agreement between Independence Tax Credit Plus L.P. II and Bankers Trust Company*

	(10C)	Form of Purchase and Sales Agreement pertaining to the Partnership’s acquisition of Local Partnership Interests*

	(10D)	Form of Amended and Restated Agreement of Limited Partnership of Local Partnerships*

	(31.1)+	Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a)

	(31.2)+	Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a)

	(32.1)+	Certification Pursuant to Section 1350 of Title 18 of the United States Code (18 U.S.C. 1350).

	(32.2)+	Certification Pursuant to Section 1350 of Title 18 of the United States Code (18 U.S.C. 1350)

	*	Incorporated herein as an exhibit by reference to exhibits filed with Post-Effective Amendment No. 4 to the Registration Statement on Form S-11 (Registration No. 33-37704).

	**	Incorporated herein as an exhibit by reference to exhibits filed with Post-Effective Amendment No. 8 to the Registration Statement on Form S-11 (Registration No. 33-37704).

	+	Filed herewith.

- 19 -

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

INDEPENDENCE TAX CREDIT PLUS L.P. II

(Registrant)

		By:	RELATED INDEPENDENCE ASSOCIATES L.P.,
			General Partner



			By:	INDEPENDENCE ASSOCIATES GP LLC,
				General Partner



Date:	February 13, 2012			By:	/s/ Robert A. Pace
					Robert A. Pace
					Chief Financial Officer and Principal Accounting Officer


Date:	February 13, 2012			By:	/s/ Robert L. Levy
					Robert L. Levy
					President and Chief Executive Officer

- 20 -

INDEPENDENCE TAX CREDIT PLUS L P II - FORM 10-Q - February 13, 2012

Attached files

INDEPENDENCE TAX CREDIT PLUS L P II Reports