UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended December 31, 2016

OR

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

For the transition period from  ______  to  ______

Commission File Number 033-89968

INDEPENDENCE TAX CREDIT PLUS L.P. IV

(Exact name of registrant as specified in its charter)

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 ☐ 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 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. 

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

Table of Contents

Item 1.  Financial Statements.

INDEPENDENCE TAX CREDIT PLUS L.P. IV

AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

See accompanying notes to condensed consolidated financial statements.

INDEPENDENCE TAX CREDIT PLUS L.P. IV

AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)

* Reclassified for comparative purposes.

See accompanying notes to condensed consolidated financial statements.

INDEPENDENCE TAX CREDIT PLUS L.P. IV

AND SUBSIDIARIES

Condensed Consolidated Statement of Changes in Partners’ (Deficit) Capital

(Unaudited)

See accompanying notes to condensed consolidated financial statements.

INDEPENDENCE TAX CREDIT PLUS L.P. IV

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

See accompanying notes to condensed consolidated financial statements.

NOTE 1 – Summary of Significant Accounting Policies

Basis of Presentation

The condensed consolidated financial statements, as of December 31, 2016, include the accounts of Independence Tax Credit Plus L.P. IV (the “Partnership”) and two other limited partnerships (“subsidiary partnerships”, “subsidiaries” or “Local Partnerships”) owning affordable apartment complexes (“Properties”) that are eligible for the low-income housing tax credits.  As of December 31, 2016, the Partnership has an ownership interest in only one remaining investment.  The general partner of the Partnership is Related Independence L.L.C., a Delaware limited liability company (the “General Partner”). Centerline Holding Company (“Centerline”) was the ultimate parent of Centerline Affordable Housing Advisors LLC (“CAHA”), the sole member of the Manager of the General Partner. On April 15, 2015, Alden Torch Financial LLC, a newly formed Delaware limited company (“ATF”), became the indirect owner of 100% of the equity interests in Centerline. Since April 15, 2015, ATF has been the ultimate parent and indirect owner of 100% of the equity interests in CAHA. 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 “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 31st. The remaining Local Partership’s fiscal quarter ends September 30th.  Accounts of the remaining Local Partnership have been adjusted for intercompany transactions from October 1st  through December 31st. The Partnership’s fiscal quarter ends three months after the remaining Local Partnership in order to allow adequate time for the subsidiary’s financial statements to be prepared and consolidated.  All  intercompany accounts and transactions with the remaining Local Partnership have been eliminated in consolidation.

The net (income) loss attributable to noncontrolling interests amounted to approximately $(110) and $(11,000) and $132,000 and $(3,662,000) for the three and nine months ended December 31, 2016 and 2015, respectively.  The Partnership’s investment in each subsidiary is equal to the respective subsidiary’s partners’ equity less noncontrolling interest capital, if any.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been omitted or condensed pursuant to such regulations. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Partnership’s Annual Report on Form 10-K for the year ended March 31, 2016.

The books and records of the Partnership are maintained on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.  In the opinion of the General Partner of the Partnership, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the condensed consolidated financial position of the Partnership as of December 31,  2016 and the results of their operations and their cash flows for the nine months ended December 31, 2016 and 2015.  However, the operating results and cash flows for the nine months ended December 31, 2016 may not be indicative of the results for the entire year.

Accounting Pronouncements Adopted in the Current Year

In April 2015, the FASB issued Accounting Standard Update 2015-03: Simplifying the Presentation of Debt Issuance Costs. This update requires capitalized debt issuance costs to be presented as a reduction to the carrying value of debt instead of being classified as a deferred charge, as currently required. We have adopted the guidance in ASU 2015-03 as of April 1, 2016 and it has been applied retroactively for all periods presented. This update did not have a material impact on the presentation of the Partnership’s financial position.

Recently Issued Accounting Pronouncements

In March of 2016, the Financial Accounting Standards Board issued Accounting Standards Update ASU No. 2016-09, “Compensation – Stock Compensation: Improvements to Employee Shared Based Payment Accounting: Topic 718” (“ASU 2016-09”). ASU 2016-09 simplifies several aspects of how companies account for share-based compensation, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statements of cash flows. ASU 2016-09 is affective for annual periods beginning after December 15, 2016 and early adoption is permitted. The new guidance does not have an impact on the Partnership’s condensed consolidated financial statements.

In February 2016, the Financial Accounting Standards Board issued ASU No. 2016-02 “Leases – Topic 842” (“ASU 2016-02”). ASU 2016-02 requires recognition of lease assets and lease liabilities by lessees for all leases greather than one year in duration and classified as operating leases under previous GAAP. ASU 2016.02 is effective for fiscal years beginning after December 15, 2018, and for interim periods within that fiscal year. The new guidance will not have an impact on the Partnership’s condensed consolidated financial statements.

In February 2015, the Financial Accounting Standards Board issued Accounting Standard Update 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. The ASU modifies existing consolidation guidance  related to (i) limited partnerships and similar legal entities, (ii) the evaluation of variable interests for fees paid to decision makers or service providers, (iii) the effect of fee arrangements and related parties on the primary beneficiary determination, and (iv) certain investment funds. These changes are expected to limit the number of consolidation models and place more emphasis on risk of loss when determining a controlling financial interest. The ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2015 and early adoption is permitted. The new guidance has not had an impact on the Partnership’s condensed consolidated financial statements.

In May 14, 2014, FASB and IASB issued a new joint revenue recognition standard that supersedes nearly all US GAAP guidance on revenue recognition. The core principal of the standard is that revenue recognition should depict the transfer of goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The new standard is effective for the Partnership for the fiscal year beginning April 1, 2018 and the effects of the standard on the Partnership’s condensed consolidated financial statements are not known at this time.

In August 2014, FASB issued ASU No 2014-15, Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern. This standard update provides guidance about management’s responsibility to evaluate whether there is a substantial doubt about an entity’s ability to continue as going concern and to provide related footnote disclosure. The new guidance is effective for all annual and interim periods ending after December 16, 2016. The new guidance has not had an impact on the Partnership’s consolidated financial statements.

Use of Estimates

The preparation of condensed 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 dates of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods.  Actual results could differ from those estimates.

NOTE 2 – Related Party Transactions

A)Related Party Expenses

An affiliate of the General Partner, Independence SLP IV L.P., has a  0.01% interest as a special limited partner in each of the Local Partnerships.

The costs incurred to related parties from operations for the three and nine months ended December 31, 2016 and 2015 were as follows:

*Reclassified for comparative purposes.

The costs incurred to related parties from discontinued operations for the three and nine months ended December 31, 2016 and 2015 were as follows:

*Reclassified for comparative purposes.

As of December 31,  2016 and March 31,  2016, the Partnership owed approximately $0 and $1,000, respectively, to the General Partner for expenses it paid on its behalf.

B)Due to/from Local General Partners and Affiliates

The amounts due to Local General Partners and affiliates from operating liabilities consist of the following:

The amounts due to Local General Partners and affiliates from discontinued operations consist of the following, which are reported as a component of other liaiblities held for sale in the accompanying condensed consolidated balance sheets.

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 and Cash Held in Escrow

The Partneship’s cash and cash equivalents include cash on hand and deposits in banks. Due to their short term nature, the carrying amounts reported in the condensed consolidated balance sheets approximate fair value.

Accounts Payable and Other Liabilities

The carrying amounts approximate fair value due to their short-term nature.

Mortgage Notes Payable

The Partnership has categorized the fair value of financial assets and liabilities based upon the fair value hierarchy specified by ASC Topic 820, Fair Value Measurements (“ASC 820”). This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures.  This standard does not require any new fair value measurements, but discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost).  This standard provides for a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels.  The following is a brief description of those three levels:

The estimated fair value of mortgage notes payable 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:

For the mortgage notes, fair value is estimated using Level 3 inputs and calculated using present value cash flow models based on a discount rate.  The Partnership has not been active in the tender option bond market, through which these bonds

have been securitized in the past. 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.

Due to General Partner and Affiliates and Due to/from Local General Partners and Affiliates

Management believes it is not practical to estimate the fair value of due to General Partner and affiliates and due to/from Local General Partners and affiliates because market information on such obligations is not currently available.

NOTE 4 – Sale of Properties

The Partnership has developed a plan to dispose of its last remaining investment.  It is anticipated that this process will take from six to twelve months. Through December 31, 2016, the Partnership has sold its limited partnership interest in  nine Local Partnerships and the property and the related assets and liabilities of four Local Partnerships have been sold. There can be no assurance as to when the Partnership will dispose of its last remaining investment 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, the proceeds from such sales received by the Partnership will not be sufficient to return to the limited partners their original investments.  All gains and losses on sales are included in discontinued operations.

On September 21, 2016, the Partnership sold its limited partnership interest in Bakery Village Urban Renewal Associates, L.P. (“Bakery Village”) to an affiliate of the Local General Partner for a sales price of approximately $2,200,000. The sale resulted in a gain of approximately $5,247,000 resulting from the write-off of the deficit basis in the Local Partnership plus the cash recived by the Partnership, which was recorded during the quarter ended September 30, 2016.

On July 27, 2015, the Partnership sold its limited partnership interest in First African Kanisa Apartments (“First African”) to an affiliate of the Local General Partner for a sales price of $1. The sale resulted in a gain of approximately $1,603,000 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 quarter ended September 30, 2015. An adjustment to the gain of approximately $88,000 was recorded during the quarter ended March 31, 2016 resulting in an overall gain of $1,515,000.

On June 1, 2015, the Partnership sold its limited partnership interest in KSD Village Apartments Phase II, Ltd. (“KSD Village”) to an unaffiliated third party purchaser for a sales price of $1. The sale resulted in a gain of approximately $293,000 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 quarter ended June 30, 2015. An adjustment to the gain of approximately $61,000 was recorded during the quarter ended March 31, 2016 resulting in an overall gain of $232,000.

On June 15, 2015, the property and the related assets and liabilities of Kaneohe Limited Partnership (“Kaneohe”) were sold to an unaffiliated third party purchaser for a sales price of $10,100,000. The Partnership received $2,893,000 as a distribution from this sale after the repayment of the mortgages, other liabilities and closing costs of approximately $7,207,000. The sale resulted in a gain of approximately $4,587,000 which was recorded during the quarter ended June 30, 2015. An adjustment to the gain of approximately $4,073,000 was recorded during the quarter ended September 30, 2015 due to a distribution from this sale in the form of a Security Agreement to the Local General Partner in the amount of $4,069,000. Additional adjustments to the gain of approximately $1,000 and $196,000 were recorded during the quarter ended March 31, 2016 and December 31, 2015, respectively resulting in an overall gain of $8,857,000.  

NOTE 5 – Assets Held for Sale

On September 13, 2016 Fawcett Street Limited Partnership (“Fawcett”) entered into a sale agreement with Shelter Resources Inc., an unnafiliated third party purchaser, to sell its property and the related assets and liabilities for a sale price of $2,125,000. The sale is contingent on the fulfillment of due diligence and financing obligations by buyer and seller on or before the closing date. It is anticipated that this process will take from six to twelve months. The sale is expected to result in a gain of approximately $3,500,000.

NOTE 6 – Discontinued Operations

The following table summarizes the financial position of Fawcett because it has been classified as assets held for sale (See Note 5). As of March 31, 2016, there were no assets classified as discontinued operations.

The following table summarizes the results of operations of the Local Partnerships that are classified as discontinued operations.  For the nine months ended December 31, 2016, Fawcett was classified as assets held for sale and Bakery Village which was sold during the quarter ended September 30, 2016 was classified as discontinued operations. For the three and nine months ended December 31, 2015, First African Kanisa, which was sold in July 2015, KSD Village and Kaneohe, which were sold in June 2015, Bakery Village and Fawcett Street, in order to present comparable results to the three and nine months ended December 31, 2016, were classified as discontinued operations in the condensed consolidated financial statements.

Condensed Consolidated Statements of Discontinued Operations: