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EX-99.1 - FINANCIAL STATEMENTS OF DAVENPORT HOUSING VII L.P. - WNC Housing Tax Credit Fund VI, L.P., Series 13wnc_ex991.htm
EX-32.2 - CERTIFICATE PURSUANT TO SECTION 18 U.S.C. PURSUANT TO SECTION 906 OF THE SARBANE - WNC Housing Tax Credit Fund VI, L.P., Series 13wncvi13_ex322.htm
EX-32.1 - CERTIFICATE PURSUANT TO SECTION 18 U.S.C. PURSUANT TO SECTION 906 OF THE SARBANE - WNC Housing Tax Credit Fund VI, L.P., Series 13wncvi13_ex321.htm
EX-31.2 - CERTIFICATION PURSUANT TO RULE 13A-14(A)/15D-14(A) CERTIFICATIONS SECTION 302 OF - WNC Housing Tax Credit Fund VI, L.P., Series 13wncvi13_ex312.htm
EX-31.1 - CERTIFICATION PURSUANT TO RULE 13A-14(A)/15D-14(A) CERTIFICATIONS SECTION 302 OF - WNC Housing Tax Credit Fund VI, L.P., Series 13wncvi13_ex311.htm
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
FORM 10-K
 
(Mark One)
 
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended March 31, 2020
 
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: 333-124115
 
 
WNC HOUSING TAX CREDIT FUND VI, L.P., Series 13
(Exact name of registrant as specified in its charter)
 
California
20-2355224
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
 
17782 Sky Park Circle
 
92614-6404
Irvine, CA
(Zip Code)
(Address of principal executive offices)
 
 
(714) 662-5565
(Telephone number)
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
No
 
 
 
Securities registered pursuant to section 12(g) of the Act:
 
UNITS OF LIMITED PARTNERSHIP INTEREST
(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 Section 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 Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ___X__ No _____
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of 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.☒
 
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 definition 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___X__ Smaller reporting company_____
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes____ No__X__
 
 
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.
 
INAPPLICABLE
 
DOCUMENTS INCORPORATED BY REFERENCE
 
List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980).
 
NONE
 

 
 
 
PART 1.
 
Item 1. Business
 
Organization
 
WNC Housing Tax Credit Fund VI, L.P., Series 13, a California Limited Partnership (the "Partnership"), was formed on February 7, 2005 under the laws of the State of California, and commenced operations on December 14, 2005. The Partnership was formed to invest primarily in other limited partnerships or limited liability companies (the “Local Limited Partnerships”) which own multi-family housing complexes (“Housing Complexes”) that are eligible for Federal low income housing tax credits ("Low Income Housing Tax Credits"). The local general partners (the “Local General Partners”) of each Local Limited Partnership retain responsibility for maintaining, operating and managing the Housing Complex. Each Local Limited Partnership is governed by its agreement of limited partnership or operating agreement (the “Local Limited Partnership Agreement”).
 
The general partner of the Partnership is WNC National Partners, LLC (the "General Partner"). The general partner of the General Partner is WNC & Associates, Inc. ("Associates"). The chairman and the president of Associates own all of the outstanding stock of Associates. The business of the Partnership is conducted primarily through Associates, as the Partnership and the General Partner have no employees of their own.
 
Pursuant to a registration statement filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 18, 2005, the Partnership commenced a public offering of 25,000 units of limited partnership interest (“Partnership Units”) at a price of $1,000 per Partnership Unit. The required minimum offering amount of $1,400,000 was achieved by December 14, 2005. Total subscriptions for 20,981 Partnership Units had been accepted, representing $20,965,400, which is net of volume discounts of $4,540 and dealer discounts of $11,060. Holders of Partnership Units are referred to herein as “Limited Partners.” As of March 31, 2020 and 2019, a total of 20,707 and 20,757 Partnership Units remain outstanding, respectively. The General Partner has a 0.1% interest in operating profits and losses, taxable income and losses, in cash available for distribution from the Partnership and tax credits. The Limited Partners will be allocated the remaining 99.9% interest in proportion to their respective investments. This offering was closed on September 21, 2006.
 
The Partnership shall continue in full force and effect until December 31, 2070, unless terminated prior to that date, pursuant to the Partnership Agreement (as defined below) or law.
 
Description of Business
 
The Partnership's principal business objective is to provide its Limited Partners with Low Income Housing Tax Credits. The Partnership's principal business therefore consists of investing as a limited partner or non-managing member in Local Limited Partnerships, each of which will own and operate a Housing Complex which will qualify for the Low Income Housing Tax Credits. In general, under Section 42 of the Internal Revenue Code, an owner of low income housing can receive the Low Income Housing Tax Credits to be used to reduce Federal taxes otherwise due in each year of a ten-year credit period. Each Housing Complex is subject to a 15-year compliance period (the “Compliance Period”), and under state law may have to be maintained as low income housing for 30 or more years.
 
2
 
As a consequence of the provisions of tax law in effect for dispositions of buildings prior to August 2008, in order to avoid recapture of Low Income Housing Tax Credits, the Partnership expected that it would not dispose of its interests in Local Limited Partnerships (“Local Limited Partnership Interests”) or approve the sale by any Local Limited Partnership of its Housing Complex prior to the end of the applicable Compliance Period. That provision of law was amended in 2008 (i) to provide that there would be no recapture on sale of a Low Income Housing Tax Credit building during the Compliance Period if it were reasonable to expect at the time of sale that the building would continue to be operated as qualified low income housing (see “Exit Strategy” below) and (ii) to eliminate the possibility of posting a bond against potential recapture. The Partnership is not seeking to sell its Local Limited Partnership Interests. And, because of (i) the nature of the Housing Complexes and the Local Limited Partnership Interests, (ii) the difficulty of predicting the resale market for low-income housing, (iii) the current economy, and (iv) the ability of lenders to disapprove of transfer, it is not possible at this time to predict when the liquidation of the Partnership's assets and the disposition of the proceeds, if any, in accordance with the Partnership's Agreement of Limited Partnership dated February 7, 2005 (the "Partnership Agreement"), would occur. Furthermore, the codification of the economic substance doctrine as part of 2010 legislation has created some uncertainty about the deductibility of losses from low income housing that is not generating Low Income Housing Tax Credits, and this could have an adverse effect on the resale market for Housing Complexes and Local Limited Partnership Interests. Until a Local Limited Partnership Interest or the related Housing Complex is sold, it is anticipated that the Local General Partner would continue to operate such Housing Complex.
 
The Partnership originally invested in ten Local Limited Partnerships, eight of which have been sold or otherwise disposed of as of March 31, 2020. Each of these Local Limited Partnerships owns or owned a Housing Complex that is eligible for the Federal Low Income Housing Tax Credits. Certain Local Limited Partnerships may also benefit from additional government programs promoting low or moderate income housing.
 
Exit Strategy
 
The Compliance Period for a Housing Complex is generally 15 years following construction or rehabilitation completion. Associates was one of the first in the industry to offer syndicated investments in Low Income Housing Tax Credits. The initial programs have completed their Compliance Periods. Upon the sale of a Local Limited Partnership Interest or Housing Complex after the end of the Compliance Period, there would be no recapture of Low Income Housing Tax Credits. A sale prior to the end of the Compliance Period must satisfy the reasonable belief test outlined above to avoid recapture.
 
The following table reflects the end of the ten-year credit period and the fifteen-year Compliance Period of each remaining Housing Complex:
 
Local Limited Partnership Name
Expected last
 year of credit delivery
15-year Expiration Date
 
 
 
Crestview Housing, L.P.
2022
2022
Davenport Housing VII, L.P.
2020
2024
 
With that in mind, the General Partner is continuing its review of the Housing Complexes, with special emphasis on the more mature Housing Complexes such as any that have satisfied the IRS compliance requirements. The review considers many factors, including extended use requirements (such as those due to mortgage restrictions or state compliance agreements), the condition of the Housing Complexes, Partnership cash flow, and the tax consequences to the Limited Partners from the sale of the Housing Complexes.
 
During the year ended March 31, 2011, the Partnership sold two Local Limited Partnerships, Fernwood Meadows, L.P. (“Fernwood”) and Sierra’s Run, L.P., (“Sierra’s Run”), in order to generate sufficient equity to complete the purchase of additional Low Income Housing Tax Credits for Davenport VII, L.P. (“Davenport”).
 
 
3
 
 
Fernwood and Sierra’s Run will complete their Compliance Periods in 2022; therefore there is a risk of tax credit recapture. The maximum exposure of recapture (excluding the interest and penalties related to the recapture) is $177,508 and $170,246, respectively, for Fernwood and Sierra’s Run, which equates to $16.75 per Partnership Unit in the aggregate. Under the circumstances, the General Partner believes there is a reasonable expectation that each Local Limited Partnership will continue to be operated as qualified low income housing for the balance of its Compliance Period, and, accordingly, does not anticipate that there will be any recapture.
 
As of March 31, 2019, the underlying Housing complexes of Pleasant Village Limited Partnership (“Pleasant Village”) and Grove Village Limited Partnership (“Grove Village”) had been sold, resulting in the termination of the Partnership’s Local Limited Partnership interest. The Partnership had also gifted its Local Limited Partnership interest in 909 4th YMCA Limited Partnership to an unrelated nonprofit corporation. In addition, the Partnership sold its Local Limited Partnership interest in Head Circle, L.P. (“Head Circle”), FDI-Country Square, LTD (“FDI-Country Square”) and FDI-Park Place, LTD (“FDI-Park Place”). The Compliance Period for Head Circle has been completed, therefore, there is no risk of recapture to the investors of the Partnership. The Compliance Periods for FDI-Country Square and FDI-Park Place expire in 2021. A guaranty agreement was executed with the General Partner to guarantee the repayment of any recaptured tax credits and/or interest arising from any non-compliance as provided in Section 42 of the Internal Revenue Code arising after the date of the sale.
 
Subsequent to March 31, 2020, the Partnership entered into a purchase agreement with an unrelated party to sell its Local Limited Partnership interest in Davenport Housing VII, L.P. (“Davenport VII”). Davenport VII was appraised for $125,000 and had a mortgage note balance of $470,274 as of December 31, 2019. The Partnership will receive $15,000 in cash proceeds, which will be held in the Partnership’s reserves for future operating expenses. The Partnership’s investment balance is $51,622; therefore, a loss of $36,622 will be recorded. The sale is expected to close on May 29, 2020. The Compliance Period for Davenport VII expires in 2024. A guaranty agreement was executed with the General Partner to guarantee the repayment of any recaptured tax credits and/or interest arising from any non-compliance as provided in Section 42 of the Internal Revenue Code arising after the date of the sale.
 
Upon identifying those Housing Complexes with the highest potential for a successful sale, refinancing or re-syndication, the Partnership expects to proceed with efforts to liquidate them or the applicable Local Limited Partnership Interests. The objective is to wind down the Partnership after Low Income Housing Tax Credits are no longer available. Local Limited Partnership Interests may be disposed of at any time by the General Partner in its discretion.
 
The proceeds from the disposition of any Housing Complex will be used first to pay debts and other obligations per the applicable Local Limited Partnership Agreement. Any remaining proceeds will then be paid to the partners of the Local Limited Partnership, including the Partnership, in accordance with the terms of the applicable Local Limited Partnership Agreement.
 
The sale of a Housing Complex may be subject to other restrictions and obligations. Accordingly, there can be no assurance that a Local Limited Partnership will be able to sell its Housing Complex. Even if it does so, there can be no assurance that any amounts of cash will be distributed to the Limited Partners, as the proceeds first would be used to pay Partnership obligations and to fund reserves. Similarly, there can be no assurance that the Partnership will be able to sell its Local Limited Partnership Interests, or that cash therefrom would be available for distribution to the Limited Partners.
 
 
 
4
 
 
Item 1A. Risk Factors
 
Set forth below are the risks the Partnership believes are the most significant to the Limited Partners. The Partnership and the Local Limited Partnerships operate in a continually changing business environment and, therefore, new risks emerge from time to time. This section contains some forward-looking statements. For an explanation of the qualifications and limitations on forward-looking statements, see Item 7.
 
(a)      
Risks arising from the Internal Revenue Code rules governing Low Income Housing Tax Credits
 
Low Income Housing Tax Credits might not be available. If a Housing Complex does not satisfy the requirements of Internal Revenue Code Section 42, then the Housing Complex will not be eligible for Low Income Housing Tax Credits.
 
Low Income Housing Tax Credits might be less than anticipated. The Local General Partners will calculate the amount of the Low Income Housing Tax Credits. No opinion of counsel will cover the calculation of the amount of Low Income Housing Tax Credits. The IRS could challenge the amount of the Low Income Housing Tax Credits claimed for any Housing Complex under any of a number of provisions set forth in Internal Revenue Code Section 42. A successful challenge by the IRS would decrease the amount of the Low Income Housing Tax Credits from the amount paid for by the Partnership.
 
Low Income Housing Tax Credits may be recaptured if Housing Complexes are not owned and operated for 15 years. Housing Complexes must comply with Internal Revenue Code Section 42 for the 15-year Compliance Period. Low Income Housing Tax Credits will be recaptured with interest to the extent that a Housing Complex is not rented as low income housing or in some other way does not satisfy the requirements of Internal Revenue Code Section 42 during the Compliance Period.
 
For these purposes, disposition includes transfer by way of foreclosure. It will be up to the Partnership to determine whether to post a bond. There is no obligation under the agreements with the Local Limited Partnerships that the Local Limited Partnerships must do so.
 
There can be no assurance that recapture will not occur. If it does, recapture will be a portion of all Low Income Housing Tax Credits taken in prior years for that Housing Complex, plus interest. During the first 11 years of the Compliance Period, non-compliance results in one-third of the Low Income Housing Tax Credits up to that point for the particular Housing Complex being recaptured, plus interest. Between years 12 and 15, the recapture is phased out ratably.
 
Sales of Housing Complexes are subject to limitations which may impact a Local Limited Partnership’s ability to sell its Housing Complex. Each Local Limited Partnership executes an extended low income housing commitment with the state in which the Housing Complex is located. The extended low income housing commitment states the number of years that the Local Limited Partnership and any subsequent owners must rent the Housing Complex as low income housing. Under Federal law, the commitment must be for at least 30 years. The commitment, actually agreed to, may be significantly longer than 30 years. In prioritizing applicants for Low Income Housing Tax Credits, most states give additional points for commitment periods in excess of 30 years. On any sale of the Housing Complex during the commitment period, the purchaser would have to agree to continue to rent the Housing Complex as low income housing for the duration of the commitment period. This requirement reduces the potential market, and possibly the sales price, for the Housing Complexes. The sale of a Housing Complex may be subject to other restrictions. For example, Federal Lenders or subsidizers may have the right to approve or disapprove a purchase of a Housing Complex. Accordingly, there can be no assurance that a Local Limited Partnership will be able to sell its Housing Complex. Even if it does so, there can be no assurance that any amount of cash will be distributed to the Limited Partners. The Partnership would first use sale proceeds to pay obligations of the Partnership. As a result, a material portion of the Low Income Housing Tax Credits may represent a return of the money originally invested in the Partnership.
 
 
 
5
 
 
As part of the recently enacted health care legislation, Congress has codified the economic substance doctrine. Because of its recent enactment, the full reach of this provision is unclear. Inasmuch as Housing Complexes might offer no benefit to a purchaser other than tax benefits, it is possible that the economic substance doctrine could be interpreted to limit deduction of tax losses from Housing Complexes, which would be expected to have a significant adverse effect on the sale value of the Housing Complexes and the Local Limited Partnership Interests.
 
Limited Partners can only use Low Income Housing Tax Credits in limited amounts. The ability of an individual or other non-corporate Limited Partner to claim Low Income Housing Tax Credits on his individual tax return is limited. For example, an individual Limited Partner can use Low Income Housing Tax Credits to reduce his tax liability on:
 
an unlimited amount of passive income, which is income from entities such as the Partnership, and
$25,000 in income from other sources.
 
However, the use of Low Income Housing Tax Credits by an individual against these types of income is subject to ordering rules, which may further limit the use of Low Income Housing Tax Credits. Some corporate Limited Partners are subject to similar and other limitations. They include corporations which provide personal services, and corporations which are owned by five or fewer shareholders.
 
Any portion of a Low Income Housing Tax Credit which is allowed to a Limited Partner under such rules is then aggregated with all of the Limited Partner’s other business credits. The aggregate is then subject to the general limitation on all business credits. That limitation provides that a Limited Partner can use business credits to offset the Limited Partner’s annual tax liability equal to $25,000 plus 75% of the Limited Partner’s tax liability in excess of $25,000. However, there may be limits on the use business credits to offset any alternative minimum tax. All of these concepts are extremely complicated.
 
(b)        
Risks related to investment in Local Limited Partnerships and Housing Complexes
 
Because the Partnership has few investments, each investment will have a great impact on the Partnership’s results of operations. Any single Housing Complex experiencing poor operating performance, impairment of value or recapture of Low Income Housing Tax Credits will have a significant impact upon the Partnership as a whole.
 
The failure to pay mortgage debt could result in a forced sale of a Housing Complex. Each Local Limited Partnership leverages the Partnership’s investment therein by incurring mortgage debt. A Local Limited Partnership’s revenues could be less than its debt payments and taxes and other operating costs. If so, the Local Limited Partnership would have to use working capital reserves, seek additional funds, or suffer a forced sale of its Housing Complex, which could include a foreclosure. The same results could occur if government subsidies ceased. Foreclosure would result in a loss of the Partnership’s capital invested in the Housing Complex. Foreclosure could also result in a recapture of Low Income Housing Tax Credits, and a loss of Low Income Housing Tax Credits for the year in which the foreclosure occurs. If the Housing Complex is highly-leveraged, a relatively slight decrease in the rental revenues could adversely affect the Local Limited Partnership’s ability to pay its debt service requirements. Mortgage debt may be repayable in a self-amortizing series of equal installments or with a large balloon final payment. Balloon payments maturing prior to the end of the anticipated holding period for the Housing Complex create the risk of a forced sale if the debt cannot be refinanced. There can be no assurance that additional funds will be available to any Local Limited Partnership if needed on acceptable terms or at all.
 
The Partnership does not control the Local Limited Partnerships and must rely on the Local General Partners. The Local General Partners will make all management decisions for the Local Limited Partnerships and the Housing Complexes. The Partnership has very limited rights with respect to management of the Local Limited Partnerships. The Partnership will not be able to exercise any control with respect to Local Limited Partnership business decisions and operations. Consequently, the success of the Partnership will depend on the abilities of the Local General Partners.
 
 
 
6
 
 
Housing Complexes subsidized by other government programs are subject to additional rules which may make it difficult to operate and sell Housing Complexes. Some or all of the Housing Complexes receive or may receive government financing or operating subsidies in addition to Low Income Housing Tax Credits. The following are risks associated with some such subsidy programs:
 
Obtaining tenants for the Housing Complexes. Government regulations limit the types of people who can rent subsidized housing. These regulations may make it more difficult to rent the residential units in the Housing Complexes.
Obtaining rent increases. In many cases rents can only be increased with the prior approval of the subsidizing agency.
Limitations on cash distributions. The amount of cash that may be distributed to owners of subsidized Housing Complexes is less than the amount that could be earned by the owners of non-subsidized Housing Complexes.
Limitations on sale or refinancing of the Housing Complexes. A Local Limited Partnership may be unable to sell its Housing Complex or to refinance its mortgage loan without the prior approval of the lender or state allocating agency. The lender or state allocating agency may withhold such approval in the discretion of the lender or state allocating agency. Approval may be subject to conditions, including the condition that the purchaser continues to operate the property as affordable housing for terms which could be as long as 30 years or more. In addition, any prepayment of a mortgage may result in the assessment of a prepayment penalty.
Limitations on transfers of interests in Local Limited Partnerships. The Partnership may be unable to sell its interest in a Local Limited Partnership without the prior approval of the lender or state allocating agency. The lender or state allocating agency may withhold such approval in the discretion of the lender or state allocating agency. Approval may be subject to conditions.
Limitations on removal and admission of Local General Partners. The Partnership may be unable to remove a Local General Partner from a Local Limited Partnership except for cause, such as the violation of the rules of the lender or state allocating authority. Regulations may prohibit the removal of a Local General Partner or permit removal only with the prior approval of the lender. Regulations may also require approval of the admission of a successor Local General Partner even upon the death or other disability of a Local General Partner.
Limitations on subsidy payments. Subsidy payments may be fixed in amount and subject to annual legislative appropriations. The rental revenues of a Housing Complex, when combined with the maximum committed subsidy, may be insufficient to meet obligations. Congress or the state legislature, as the case may be, may fail to appropriate or increase the necessary subsidy. In those events, the mortgage lender could foreclose on the Housing Complex unless a workout arrangement could be negotiated.
Possible changes in applicable regulations. Legislation may be enacted which adversely revises provisions of outstanding mortgage loans. Such legislation has been enacted in the past.
Limited Partners may not receive distributions if Housing Complexes are sold. There is no assurance that Limited Partners will receive any cash distributions from the sale or refinancing of a Housing Complex. The price at which a Housing Complex is sold may not be high enough to pay the mortgage and other expenses at the Local Limited Partnership and Partnerships levels which must be paid at such time. If that happens, a Limited Partner’s return would be derived only from the Low Income Housing Tax Credits and tax losses. Similar risks apply to sales of Local Limited Partnership Interests.
 
Uninsured casualties could result in losses and recapture. There are casualties, which are either uninsurable or not economically insurable. These include earthquakes, floods, wars and losses relating to hazardous materials or environmental matters. If a Housing Complex experienced an uninsured casualty, the Partnership could lose both its invested capital and anticipated profits in such property. Even if the casualty were an insured loss, the Local Limited Partnership might be unable to rebuild the destroyed property. A portion of prior Low Income Housing Tax Credits could be recaptured and future Low Income Housing Tax credits could be lost if the Housing Complex was not restored within a reasonable period of time. Any liability judgments against the Local Limited Partnership could exceed available insurance proceeds or otherwise materially and adversely affect the Local Limited Partnership. The cost of liability and casualty insurance has increased in recent years. Casualty insurance has become more difficult to obtain and may require large deductible amounts.
 
 
7
 
 
 
Housing Complexes without financing or operating subsidies may be unable to pay operating expenses. If a Local Limited Partnership were unable to pay operating expenses, one result could be a forced sale of its Housing Complex. If a forced sale occurs during the Compliance Period for a Housing Complex, a partial recapture of Low Income Housing Tax Credits could occur. In this regard, some of the Local Limited Partnerships may own Housing Complexes which have no subsidies other than Low Income Housing Tax Credits. Those Housing Complexes do not have the benefit of below-market-interest-rate financing or operating subsidies which often are important to the feasibility of low income housing. Those Housing Complexes rely solely on rents to pay expenses. However, in order for any Housing Complex to be eligible for Low Income Housing Tax Credits, it must restrict the rent which may be charged to tenants. Over time, the expenses of a Housing Complex will increase. If a Local Limited Partnership cannot increase its rents, it may be unable to pay increased operating expenses.
 
The Partnership’s investment protection policies will be worthless if the net worth of the Local General Partners is not sufficient to satisfy their obligations. There is a risk that the Local General Partners will be unable to perform their financial obligations to the Partnership. The General Partner has not established a minimum net worth requirement for the Local General Partners. Rather, at the time of the Partnership’s investment, each Local General Partner demonstrated a net worth which the General Partner believed was appropriate under the circumstances. The assets of the Local General Partners are likely to consist primarily of real estate holdings and similar assets. The fair market value of these types of assets is difficult to estimate. These types of assets cannot be readily liquidated to satisfy the financial guarantees and commitments which the Local General Partners make to the Partnership. Moreover, other creditors may have claims on these assets. No escrow accounts or other security arrangements will be established to ensure performance of a Local General Partner’s obligations. The cost to enforce a Local General Partner’s obligations may be high. If a Local General Partner does not satisfy its obligations the Partnership may have no remedy, or the remedy may be limited to removing the Local General Partner as general partner of the Local Limited Partnership.
 
Fluctuating economic conditions can reduce the value of real estate. The Partnership’s principal business objective is providing its Limited Partners with Low Income Housing Tax Credits, not the generation of gains from the appreciation of real estate held by the Local Limited Partnerships. In its financial statements, the Partnership has carried its investments in Local Limited Partnerships at values equal to or less than the sum of the total amount of the remaining future Low Income Housing Tax Credits estimated to be allocated to the Partnership and the estimated residual value to the Partnership of its interests in the Local Limited Partnerships.
 
Any investment in real estate is subject to risks from fluctuating economic conditions. These conditions can adversely affect the ability to realize a profit or even to recover invested capital. Among these conditions are:
 
the general and local job market,
the availability and cost of mortgage financing,
monetary inflation,
tax, environmental, land use and zoning policies,
the supply of and demand for similar properties,
neighborhood conditions,
the availability and cost of utilities and water.
 
For each of the years ended March 31, 2020, 2019, and 2018, a loss in value of an investment in a Local Limited Partnership, other than a temporary decline, is recorded by the Partnership in its financial statements as an impairment loss. Impairment is measured by comparing the Partnership’s carrying amount in the investment to the sum of the total amount of the remaining future Low Income Housing Tax Credits estimated to be allocated to the Partnership and any estimated residual value to the Partnership. For the years ended March 31, 2020, 2019, and 2018, impairment loss related to investments in Local Limited Partnerships was $439,109, $511,512, and $652,206, respectively.
 
If a loan made to a Local Limited Partnership is not repaid, the amount of capital available for investment would be reduced. The Partnership has or may make a loan to a Local Limited Partnership before the Partnership's acquisition of an interest therein. If the Partnership doesn't invest in the Local Limited Partnership, the Local Limited Partnership might not repay the loan. If the Local Limited Partnership doesn't repay the loan, the amount of capital available for investment in Local Limited Partnerships would be reduced.
 
 
8
 
 
 
 (c)            
Tax risks other than those relating to tax credits
 
In addition to the risks pertaining specifically to Low Income Housing Tax Credits, there are other Federal income tax risks. Additional Federal income tax risks associated with the ownership of Partnership Units and the operations of the Partnership and the Local Limited Partnerships include, but are not limited to, the following:
 
No opinion of counsel as to certain matters. No legal opinion is obtained regarding matters:
 
the determination of which depends on future factual circumstances,
which are peculiar to individual Limited Partners, or
which are not customarily the subject of an opinion.
 
The more significant of these matters include:
 
allocating purchase price among components of a property, particularly as between buildings and fixtures, the cost of which is depreciable, and the underlying land, the cost of which is not depreciable,
characterizing expenses and payments made to or by the Partnership or a Local Limited Partnership,
identifying the portion of the costs of any Housing Complex which qualify for historic and other tax credits, and
applying to any specific Limited Partner the limitation on the use of tax credits and tax losses. Limited Partners must determine for themselves the extent to which they can use tax credits and tax losses.
 
There can be no assurance, therefore, that the IRS will not challenge some of the tax positions adopted by the Partnership. The courts could sustain an IRS challenge. An IRS challenge, if successful, could have a detrimental effect on the Partnership’s ability to realize its investment objectives.
 
Passive activity rules will limit deduction of the Partnership’s losses and impose tax on interest income. The Internal Revenue Code imposes limits on the ability of most investors to claim losses from investments in real estate. An individual may claim these so-called passive losses only as an offset to income from investments in real estate or rental activities. An individual may not claim passive losses as an offset against other types of income, such as salaries, wages, dividends and interest. These passive activity rules will restrict the ability of most Limited Partners to use losses from the Partnership as an offset of non-passive income.
 
The Partnership may earn interest income on its reserves and loans. The passive activity rules generally will categorize interest as portfolio income, and not passive income. Passive losses cannot be used as an offset to portfolio income. Consequently, a Limited Partner could pay tax liability on portfolio income from the Partnership.
 
At risk rules might limit deduction of the Partnership’s losses. If a significant portion of the financing used to purchase Housing Complexes does not consist of qualified nonrecourse financing, the “at risk” rules will limit a Limited Partner’s ability to claim Partnership losses to the amount the Limited Partner invests in the Partnership. The “at risk” rules of the Internal Revenue Code generally limit a Limited Partner’s ability to deduct Partnership losses to the sum of:
 
the amount of cash the Limited Partner invests in the Partnership, and
the Limited Partner’s share of Partnership qualified nonrecourse financing.
 
Qualified nonrecourse financing is non-convertible, nonrecourse debt which is borrowed from a government, or with exceptions, any person actively and regularly engaged in the business of lending money.
 
 
 
9
 
 
Tax liability on sale of a Housing Complex or Local Limited Partnership Interest may exceed the cash available from the sale. When a Local Limited Partnership sells a Housing Complex it will recognize gain. Such gain is equal to the difference between:
 
the sales proceeds plus the amount of indebtedness secured by the Housing Complex, and
the adjusted basis for the Housing Complex. The adjusted basis for a Housing Complex is its original cost, plus capital expenditures, minus depreciation.
 
Similarly, when the Partnership sells an interest in a Local Limited Partnership the Partnership will recognize gain. Such gain is equal to the difference between:
 
the sales proceeds plus the Partnership’s share of the amount of indebtedness secured by the Housing Complex, and
the adjusted basis for the interest. The adjusted basis for an interest in a Local Limited Partnership is the amount paid for the interest, plus income allocations and cash distributions, less loss allocations.
 
Accordingly, gain will be increased by the depreciation deductions taken during the holding period for the Housing Complex. In some cases, a Limited Partner could have a tax liability from a sale greater than the cash distributed to the Limited Partner from the sale.
 
Alternative minimum tax liability could reduce a Limited Partner’s tax benefits. If a Limited Partner pays alternative minimum tax, the Limited Partner could suffer a reduction in benefits from an investment in the Partnership. The application of the alternative minimum tax is personal to each Limited Partner. Tax credits may not be utilized to reduce alternative minimum tax liability.
 
IRS could audit the returns of the Partnership, the Local Limited Partnerships or the Limited Partners. The IRS can audit the Partnership or a Local Limited Partnership at the entity level with regard to issues affecting the entity. The IRS does not have to audit each Limited Partner in order to challenge a position taken by the Partnership or a Local Limited Partnership. Similarly, only one judicial proceeding can be filed to contest an IRS determination. A contest by the Partnership of any IRS determination might result in high legal fees.
 
An audit of the Partnership or a Local Limited Partnership also could result in an audit of a Limited Partner. An audit of a Limited Partner’s tax returns could result in adjustments both to items that are related to the Partnership and to unrelated items. The Limited Partner could then be required to file amended tax returns and pay additional tax plus interest and penalties.
 
A successful IRS challenge to tax allocations of the Partnership or a Local Limited Partnership would reduce the tax benefits of an investment in the Partnership. Under the Internal Revenue Code, a partnership’s allocation of income, gains, deductions, losses and tax credits must have substantial economic effect. Substantial economic effect is a highly-technical concept. The fundamental principle is two-fold. If a partner will benefit economically from an item of partnership income or gain, that item must be allocated to him so that he bears the correlative tax burden. Conversely, if a partner will suffer economically from an item of partnership deduction or loss, that item must be allocated to him so that he bears the correlative tax benefit. If a partnership’s allocations do not have substantial economic effect, then the partnership’s tax items are allocated in accordance with each partner’s interest in the partnership. The IRS might challenge the allocations made by the Partnership:
 
between the Limited Partners and the General Partner,
among the Limited Partners, or
between the Partnership and a Local General Partner.
 
If any allocations were successfully challenged, a greater share of the income or gain or a lesser share of the losses or tax credits might be allocated to the Limited Partners. This would increase the tax liability or reduce the tax benefits to the Limited Partners.
 
 
10
 
 
 
Tax liabilities could arise in later years of the Partnership. After a period of years following commencement of operations by a Local Limited Partnership, the Local Limited Partnership may generate profits rather than losses. A Limited Partner would have tax liability on his share of such profits unless he could offset the income with:
 
unused passive losses from the Partnership or other investments, or
current passive losses from other investments.
 
In such circumstances, the Limited Partner would not receive a cash distribution from the Partnership with which to pay any tax liability.
 
IRS challenge to tax treatment of expenditures could reduce losses. The IRS may contend that fees and payments of the Partnership or a Local Limited Partnership:
 
should be deductible over a longer period of time or in a later year,
are excessive and may not be capitalized or deducted in full,
should be capitalized and not deducted, or
may not be included as part of the basis for computing tax credits.
 
Any such contention by the IRS could adversely impact, among other things:
 
the eligible basis of a Housing Complex used to compute Low Income Housing Tax Credits,
the adjusted basis of a Housing Complex used to compute depreciation,
the correct deduction of fees,
the amortization of organization and offering expenses and start-up expenditures.
 
If the IRS were successful in any such contention, the anticipated Low Income Housing Tax Credits and losses of the Partnership would be reduced, perhaps substantially.
 
Changes in tax law might reduce the value of Low Income Housing Tax Credits. Although all Low Income Housing Tax Credits are allocated to a Housing Complex at commencement of the 10-year credit period, there can be no assurance that future legislation may not adversely affect an investment in the Partnership. For example, legislation could reduce or eliminate the value of Low Income Housing Tax Credits. In this regard, before 1986, the principal tax benefit of an investment in low income housing was tax losses. These tax losses generally were used to reduce an investor’s income from all sources on a dollar-for-dollar basis. Investments in low income housing were made in reliance on the availability of such tax benefits. However, tax legislation enacted in 1986 severely curtailed deduction of such losses.
 
New administrative or judicial interpretations of the law might reduce the value of Low Income Housing Tax Credits. Many of the provisions of the Internal Revenue Code related to low income housing and real estate investments have not been interpreted by the IRS in regulations, rulings or public announcements, or by the courts. In the future, these provisions may be interpreted or clarified by the IRS or the courts in a manner adverse to the Partnership or the Local Limited Partnerships. The IRS constantly reviews the Federal tax rules, and can revise its interpretations of established concepts. Any such revisions could reduce or eliminate tax benefits associated with an investment in the Partnership.
 
State income tax laws may adversely affect the Limited Partners. A Limited Partner may be required to file income tax returns and be subject to tax and withholding in each state or local taxing jurisdiction in which: a Housing Complex is located, the Partnership or a Local Limited Partnership engages in business activities, or the Limited Partner is a resident. Corporate Limited Partners may be required to pay state franchise taxes.
 
The tax treatment of particular items under state or local income tax laws may vary materially from the Federal income tax treatment of such items. Nonetheless, many of the Federal income tax risks associated with an investment in the Partnership may also apply under state or local income tax law. The Partnership may be required to withhold state taxes from distributions or income allocations to Limited Partners in some instances.
 
 
11
 
 
 
(d)            
Risks related to the Partnership and the Partnership Agreement
 
The Partnership may be unable to timely provide financial reports to the Limited Partners which would adversely affect their ability to monitor Partnership operations. Historically, the Partnership has been unable to timely file and provide investors with all of its required periodic reports. In some instances, the delay has been substantial. Each Local General Partner is required to retain independent public accountants and to report financial information to the Partnership in a timely manner. There cannot be any assurance that the Local General Partners will satisfy these obligations. If not, the Partnership would be unable to provide to the Limited Partners in a timely manner its financial statements and other reports. That would impact the Limited Partners’ ability to monitor Partnership operations. The Partnership’s failure to meet its filing requirements under the Securities Exchange Act of 1934 could reduce the liquidity for the Partnership Units due to the unavailability of public information concerning the Partnership. The failure to file could also result in sanctions imposed by the SEC. Any defense mounted by the Partnership in the face of such sanctions could entail legal and other fees, which would diminish cash reserves.
 
Lack of liquidity of investment. There is no public market for the purchase and sale of Partnership Units, and it is unlikely that one will develop. Accordingly, Limited Partners may not be able to sell their Partnership Units promptly or at a reasonable price. Partnership Units should be considered as a long-term investment because the Partnership is unlikely to sell any Local Limited Partnership Interests for at least 15 years. Partnership Units cannot be transferred to tax-exempt or foreign entities, or through a secondary market. The General Partner can deny effectiveness of a transfer if necessary to avoid adverse tax consequences from the transfer. The General Partner does not anticipate that any Partnership Units will be redeemed by the Partnership.
 
The Limited Partners will not control the Partnership and must rely totally on the General Partner. The General Partner will make all management decisions for the Partnership. Management decisions include exercising powers granted to the Partnership by a Local Limited Partnership. Limited Partners have no right or power to take part in Partnership management.
 
Individual Limited Partners will have no recourse if they disagree with actions authorized by a vote of the majority. The Partnership Agreement grants to Limited Partners owning more than 50% of the Partnership Units the right to:
 
remove the General Partner and elect a replacement general partner,
amend the Partnership Agreement,
terminate the Partnership.
 
Accordingly, a majority-in-interest of the Limited Partners could cause any such events to occur, even if Limited Partners owning 49% of the Partnership Units opposed such action.
 
Limitations on liability of the General Partner to the Partnership. The ability of Limited Partners to sue the General Partner and its affiliates is subject to limitations. The Partnership Agreement limits the liability of the General Partner and its affiliates to the Limited Partners. The General Partner and its affiliates will not be liable to the Limited Partners for acts and omissions: performed or omitted in good faith, and performed or omitted in a manner which the General Partner reasonably believed to be within the scope of its authority and in the best interest of the Limited Partners, provided such conduct did not constitute negligence or misconduct.
 
Therefore, Limited Partners may be less able to sue the General Partner and its affiliates than would be the case if such provisions were not included in the Partnership Agreement.
 
Associates and its affiliates are serving as the general partners of many other partnerships. Depending on their corporate area of responsibility, the officers of Associates initially devote approximately 5% to 50% of their time to the Partnership. These individuals spend significantly less time devoted to the Partnership after the investment of the Partnership’s capital in Local Limited Partnerships.
 
 
 
12
 
 
The interests of Limited Partners may conflict with the interests of the General Partner and its affiliates. The General Partner and its affiliates are committed to the management of more than 100 other limited partnerships that have investments similar to those of the Partnership. The General Partner and its affiliates receive substantial compensation from the Partnership. The General Partner decides how the Partnership’s investments in Housing Complexes are managed, and when the investments will be sold. The General Partner may face a conflict in these circumstances because the General Partner’s share of fees and cash distributions from the transaction may be more or less than their expected share of fees if a Housing Complex was not sold. The Partnership has not developed any formal process for resolving conflicts of interest. However, the General Partner is subject to a fiduciary duty to exercise good faith and integrity in handling the affairs of the Partnership, and that duty will govern its actions in all such matters. Furthermore, the manner in which the Partnership can operate and sell investments is subject to substantial restrictions as outlined in the Partnership Agreement.
 
The Partnership’s accrued payables consist primarily of the asset management fees payable to the General Partner and the capital contributions payable to Local Limited Partnerships. The asset management fees payable increased (decreased) by approximately $41,576, $(4,314), and $(31,000) for the years ended March 31, 2020, 2019, and 2018, respectively. The Partnership’s future contractual cash obligations consist of its obligations to pay future annual asset management fees and the payables due to the Local Limited Partnerships. The future annual asset management fees will equal approximately $42,000 per year through the termination of the Partnership, which must occur no later than December 31, 2070. Though the amounts payable to the General Partner and/or its affiliates are contractually currently payable, the Partnership anticipates that the General Partner and/or its affiliates will not require the payment of these contractual obligations until capital reserves are in excess of the aggregate of the existing contractual obligations and anticipated future foreseeable obligations of the Partnership. The Partnership would be adversely affected should the General Partner and/or its affiliates demand current payment of the existing contractual obligations and or suspend services for this or any other reason.
 
Associates has agreed to continue providing advances sufficient enough to fund the operations and working capital requirements of the Partnership through June 30, 2021.
 
Item 1B. Unresolved Staff Comments
 
Not Applicable
 
 
 
13
 
 
Item 2. Properties
 
Through its investments in Local Limited Partnerships, the Partnership holds indirect ownership interests in the Housing Complexes. The following table reflects the status of the Housing Complexes as of the dates or for the periods indicated:
 
 
 
 
 
As of March 31, 2020
 
 
As of December 31, 2019
 
 
 
Local Limited
Partnership Name
 
 
Location
 
 
General Partner Name
 
 
Partnership’s Total Investment in Local Limited Partnerships
 
 
Amount of Investment Paid to Date
 
 
Number of Units
 
 
Estimated
Aggregate Low Income Housing Tax Credits (1)
 
 
Mortgage Balances of Local Limited Partnership
 
Crestview Housing, L.P.
Bigfork, Montana
American Covenant Senior Housing Foundation, Inc.
 $1,895,000 
 $1,895,000 
  24 
 $2,268,000 
 $614,000 
 
    
    
    
    
    
Davenport Housing VII, L.P.
Davenport, Iowa
Shelter Resource Corporation
  4,744,000 
  4,499,000 
  20 
  6,029,000 
  470,000 
 
    
    
    
    
    
 
    
    
    
    
    
 
 $6,639,000 
 $6,394,000 
  44 
 $8,297,000 
 $1,084,000 
 
(1)
Represents aggregate anticipated Low Income Housing Tax Credits to be received over the 10-year credit period if the Housing Complexes are retained and rented in compliance with credit rules for the Compliance Period. Approximately 98% of the anticipated Low Income Housing Tax Credits have been received from the Local Limited Partnerships.
 
 
 
 For the year ended December 31, 2019
 
 
 
 
Local Limited
Partnership Name
 
 Rental Income
 
 
 Net Loss
 
 
Low Income Housing Tax Credits Allocated to Partnership
 
 
 
 
 
 
 
 
 
 
 
Crestview Housing, L.P.
 $148,000 
 $(74,000)
  99.98%
 
    
    
    
Davenport Housing VII, L.P.
  132,000 
  (172,000)
  99.98%
 
    
    
    
 
 $280,000 
 $(246,000)
    
 
 
 
14
 
 
 
WNC Housing Tax Credit Fund VI, L.P., Series 13
 
         
 
 
 
 
 
Occupancy Rates As of December 31, 
 
Local Limited Partnership Name
Location
General Partner Name
 
 
 
 2019
 
 
 2018
 
 
2017
 
 
2016
 
 
2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Crestview Housing, L.P.
Bigfork, Montana
American Covenant Senior Housing Foundation, Inc.
  92%
  96%
  100%
  100%
  100%
 
    
    
    
    
    
Davenport Housing VII, L.P.
Davenport, Iowa
Shelter Resource Corporation
  90%
  100%
  100%
  100%
  100%
 
    
    
    
    
    
FDI-Country Square, LTD.
Lone Star, Texas
Fieser Holdings, Inc.
  N/A 
  92%
  96%
  96%
  100%
 
    
    
    
    
    
FDI-Park Place, LTD.
Bellville, Texas
Fieser Holdings, Inc.
  N/A 
  70%
  80%
  90%
  85%
 
    
    
    
    
    
 
    
    
    
    
    
Head Circle, L.P.
Ruleville, Mississippi
SEMC, Inc.
  N/A 
  N/A 
  N/A 
  97%
  85%
 
    
    
    
    
    
Pleasant Village, L.P.
Dallas, Texas
Walker Guardian LLC
  N/A 
  N/A 
  N/A 
  N/A 
  85%
 
  91%
  86%
  92%
  96%
  89%
 
N/A – This Local Limited Partnership was sold as of the respective year end.
 
15
 
Item 4. Mine Safety Disclosures
 
NOT APPLICABLE
 
PART II.
 
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 
Item 5a.
 
(a) 
The Partnership Units are not traded on a public exchange but are being sold through a public offering. It is not anticipated that any public market will develop for the purchase and sale of any Partnership Units and none exists. Partnership Units can be assigned or otherwise transferred only if certain requirements in the Partnership Agreement are satisfied.
 
(b)
At March 31, 2020, there were 960 Limited Partners, and there were no assignees of Partnership Units who were not admitted as Limited Partners.
 
(c)
The Partnership was not designed to provide operating cash distributions to Limited Partners. It is possible that the Partnership could make distributions from sale proceeds, if the Partnership is able to sell its Local Limited Partnership Interests or Housing Complexes for more than the related closing costs and any then accrued obligations of the Partnership. There can be no assurance in this regard. Any such distributions would be made in accordance with the terms of the Partnership Agreement. For all periods presented, there were no cash distributions to the Limited Partners.
 
(d)
No securities are authorized for issuance by the Partnership under equity compensation plans.
 
(e)
The Partnership does not issue common stock.
 
(f)
No unregistered securities were sold by the Partnership during the year ended March 31, 2020.
 
Item 5b. Use of Proceeds
 
NOT APPLICABLE
 
Item 5c. Purchases of Equity Securities by the Issuers and Affiliated Purchasers
 
NONE
 
 
16
 
Item 6. Selected Financial Data
 
Selected balance sheet information for the Partnership is as follows:
 
 
 
March 31,
 
 
 
2020
 
 
2019
 
 
2018
 
 
2017
 
 
2016
 
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 $228,845 
 $224,898 
 $305,043 
 $271,941 
 $315,082 
Investments in Local Limited Partnerships, net
  51,621 
  666,713 
  1,406,121 
  2,286,745 
  3,235,861 
Due from affiliates, net
  - 
  - 
  - 
  - 
  - 
Other assets
  - 
  - 
  - 
  - 
  2,643 
 
    
    
    
    
    
     Total Assets
 $280,466 
 $891,611 
 $1,711,164 
 $2,558,686 
 $3,553,586 
 
    
    
    
    
    
LIABILITIES
    
    
    
    
    
 
    
    
    
    
    
Payables to Local Limited Partnerships
 $245,113 
 $245,113 
 $245,113 
 $245,113 
 $245,113 
Accrued fees and expenses due to General Partner and affiliates
  1,525,166 
  1,432,910 
  1,486,897 
  1,479,730 
  1,874,186 
 
    
    
    
    
    
    Total Liabilities
  1,770,279 
  1,678,023 
  1,732,010 
  1,724,843 
  2,119,299 
 
    
    
    
    
    
PARTNERS’ EQUITY (DEFICIT)
  (1,489,813)
  (786,412)
  (20,846)
  833,843 
  1,434,287 
 
    
    
    
    
    
    Total Liabilities and Partners’ Equity (Deficit)
 $280,466 
 $891,611 
 $1,711,164 
 $2,558,686 
 $3,553,586 
 
 
 
 
17
 
 
Selected results of operations, cash flows, and other information for the Partnership are as follows:
 
 
 
For the Years Ended March 31,
 
 
 
2020
 
 
2019
 
 
2018
 
 
2017
 
 
2016
 
Loss from operations (Note 1)
 $(528,637)
 $(603,648)
 $(774,173)
 $(946,854)
 $(1,942,059)
Equity in losses of Local Limited Partnerships
  (175,983)
  (227,896)
  (228,418)
  (245,681)
  (279,147)
Other income
  - 
  - 
  110,491 
  - 
  1,486,040 
Gain on sale of Local Limited Partnerships
  - 
  65,495 
  36,767 
  - 
  1,159,711 
Interest income
  1,219 
  483 
  644 
  306 
  172 
Net income (loss)
 $(703,401)
 $(765,566)
 $(854,689)
 $(1,192,229)
 $424,717 
 
    
    
    
    
    
Net income (loss) allocated to:
    
    
    
    
    
   General Partner
 $(703)
 $(766)
 $(855)
 $(1,192)
 $425 
 
    
    
    
    
    
   Limited Partners
 $(702,698)
 $(764,800)
 $(853,834)
 $(1,191,037)
 $424,292 
 
    
    
    
    
    
Net income (loss) per Partnership Unit
 $(33.94)
 $(36.85)
 $(41.13)
 $(57.24)
 $20.27 
Outstanding Weighted
    
    
    
    
    
 Partnership Units
  20,707 
  20,757 
  20,757 
  20,807 
  20,931 
 
Note 1 – Loss from operations for the years ended March 31, 2020, 2019, 2018, 2017, and 2016, includes a charge for impairment losses on investments in Local Limited Partnerships of $439,109, $511,512, $652,206, $702,972, and $1,052,460, respectively (see Note 2 to the audited financial statements).
 
 
18
 
 
 
 
For the Years Ended March 31,
 
 
 
2020
 
 
2019
 
 
2018
 
 
2017
 
 
2016
 
Net cash provided by (used in):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating activities
 $3,947 
 $(145,640)
 $(3,665)
 $(43,141)
 $701,050 
Investing activities
  - 
  65,495 
  36,767 
  - 
  879,043 
Financing activities
  - 
  - 
  - 
  - 
  (1,590,521)
 
    
    
    
    
    
Net change in cash and cash equivalents
  3,947 
  (80,145)
  33,102 
  (43,141)
  (10,428)
 
    
    
    
    
    
Cash and cash equivalents, beginning of period
  224,898 
  305,043 
  271,941 
  315,082 
  325,510 
 
    
    
    
    
    
Cash and cash equivalents, end of period
 $228,845 
 $224,898 
 $305,043 
 $271,941 
 $315,082 
 
Low Income Housing Tax Credits per Partnership Unit were as follows for the year and period ended December 31:
 
 
 
2019
 
 
2018
 
 
2017
 
 
 2016
 
 
2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Federal
 $30 
 $35 
 $43 
 $57 
 $115 
State
  - 
  - 
  - 
  - 
  - 
 
    
    
    
    
    
Total
 $30 
 $35 
 $43 
 $57 
 $115 
 
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
 
Forward Looking Statements
 
With the exception of the discussion regarding historical information, this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other discussions elsewhere in this Form 10-K contain forward looking statements. Such statements are based on current expectations subject to uncertainties and other factors which may involve known and unknown risks that could cause actual results of operations to differ materially from those projected or implied. Further, certain forward-looking statements are based upon assumptions about future events which may not prove to be accurate.
 
Risks and uncertainties inherent in forward looking statements include, but are not limited to, the Partnership’s future cash flows and ability to obtain sufficient financing, level of operating expenses, conditions in the Low Income Housing Tax Credits property market and the economy in general, changes in law, rules and regulations, and legal proceedings. Historical results are not necessarily indicative of the operating results for any future period.
 
Subsequent written and oral forward looking statements attributable to the Partnership or persons acting on its behalf are expressly qualified in their entirety by cautionary statements in this Form 10-K and in other reports filed with the SEC. The following discussion should be read in conjunction with the financial statements and the notes thereto included elsewhere in this filing.
 
Critical Accounting Policies and Certain Risks and Uncertainties
 
The Partnership believes that the following discussion addresses the Partnership’s most significant accounting policies, which are the most critical to aid in fully understanding and evaluating the Partnership’s reported financial results, and certain of the Partnership’s risks and uncertainties.
 
 
19
 
 
 
Use of Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.
 
Method of Accounting for Investments in Local Limited Partnerships
 
The Partnership accounts for its investments in Local Limited Partnerships using the equity method of accounting, whereby the Partnership adjusts its investment balance for its share of the Local Limited Partnerships’ results of operations and for any contributions made and distributions received. The Partnership reviews the carrying amount of an individual investment in a Local Limited Partnership for possible impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of such investment may not be recoverable. Recoverability of such investment is measured by the estimated value derived by management, generally consisting of the product of the remaining future Low Income Housing Tax Credits estimated to be allocable to the Partnership and any estimated residual value to the Partnership. If an investment is considered to be impaired, the Partnership reduces the carrying value of its investment in any such Local Limited Partnership. The accounting policies of the Local Limited Partnerships, generally, are expected to be consistent with those of the Partnership. Costs incurred by the Partnership in acquiring the investments were capitalized as part of the investment account and were being amortized over 27.5 years (See Notes 2 and 3 to the financial statements).
 
“Equity in losses of Local Limited Partnerships” for each year ended March 31 has been recorded by the Partnership based on the twelve months of reported results provided by the Local Limited Partnerships for each year ended December 31. Equity in losses from the Local Limited Partnerships allocated to the Partnership is not recognized to the extent that the investment balance would be adjusted below zero. If the Local Limited Partnerships report net income in future years, the Partnership will resume applying the equity method only after its share of such net income equals the share of net losses not recognized during the period(s) the equity method was suspended.
 
Distributions received from the Local Limited Partnerships are accounted for as a reduction of the investment balance. Distributions received after the investment has reached zero are recognized as distribution income.
 
In accordance with the accounting guidance for the consolidation of variable interest entities, the Partnership determines when it should include the assets, liabilities, and activities of a variable interest entity (VIE) in its financial statements, and when it should disclose information about its relationship with a VIE. The analysis that must be performed to determine which entity should consolidate a VIE focuses on control and economic factors. A VIE is a legal structure used to conduct activities or hold assets, which must be consolidated by a company if it is the primary beneficiary because it has (1) the power to direct the activities of the VIE that most significantly impact the VIE's economic performance and (2) the obligation to absorb losses or receive benefits that could potentially be significant to the VIE. If multiple unrelated parties share such power, as defined, no party will be required to consolidate the VIE. Further, the guidance requires continual reconsideration of the primary beneficiary of a VIE.
 
Based on this guidance, the Local Limited Partnerships in which the Partnership invests meet the definition of a VIE because the owners of the equity at risk in these entities do not have the power to direct their operations. However, management does not consolidate the Partnership's interests in these VIEs, as it is not considered to be the primary beneficiary since it does not have the power to direct the activities that are considered most significant to the economic performance of these entities. The Partnership currently records the amount of its investment in these Local Limited Partnerships as an asset on its balance sheets, recognizes its share of partnership income or losses in the statements of operations, and discloses how it accounts for material types of these investments in its financial statements. The Partnership's balance in investment in Local Limited Partnerships, plus the risk of recapture of tax credits previously recognized on these investments, represents its maximum exposure to loss. The Partnership's exposure to loss on these Local Limited Partnerships is mitigated by the condition and financial performance of the underlying Housing Complexes as well as the strength of the Local General Partners and their guarantee against credit recapture to the investors in the Partnership.
 
 
20
 
 
 
Income Taxes
 
The Partnership has elected to be treated as a pass-through entity for income tax purposes and, as such, is not subject to income taxes. Rather, all items of taxable income, deductions and tax credits are passed through to and are reported by its owners on their respective income tax returns. The Partnership’s federal tax status as a pass-through entity is based on its legal status as a partnership. Accordingly, the Partnership is not required to take any tax positions in order to qualify as a pass-through entity. The Partnership is required to file and does file tax returns with the Internal Revenue Service and other taxing authorities. Accordingly, these financial statements do not reflect a provision for income taxes and the Partnership has no other tax positions which must be considered for disclosure. Income tax returns filed by the Partnership are subject to examination by the Internal Revenue Service for a period of three years. While no income tax returns are currently being examined by the Internal Revenue Service, tax years since 2016 remain open.
 
Impact of Recent Accounting Pronouncements
 
In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), as amended by subsequent Accounting Standard Updates (collectively, “ASC 606”). The Partnership adopted ASC 606 during 2019 and applied the guidance on a retrospective basis. There was no impact as a result of the adoption of ASC 606 to recognize revenue on the financial statements of the Partnership as of and for the periods ended December 31, 2019 and 2018 as the reporting fee income is immaterial.
 
In August 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update 2016-15 Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. The Partnership adopted the update on a retrospective basis. The effect of the adoption was the application of an accounting policy election to classify distributions received from investees using the nature of the distribution approach. The Partnership classifies distributions from tax credit investments as returns on investment because the design of the local limited partnership is to generate tax credits and losses rather than income from operations. Application of the accounting policy election had no impact on the presentation in the statements of cash flows in the current or prior reporting periods.
 
Certain Risks and Uncertainties
 
See Item 1A for a discussion of risks regarding the Partnership.
 
To date, certain Local Limited Partnerships have incurred significant operating losses and have working capital deficiencies. In the event these Local Limited Partnerships continue to incur significant operating losses, additional capital contributions by the Partnership and/or the Local General Partners may be required to sustain the operations of such Local Limited Partnerships. If additional capital contributions are not made when they are required, the Partnership’s investment in certain of such Local Limited Partnerships could be lost, and the loss and recapture of the related Low Income Housing Tax Credits could occur.
 
Anticipated future and existing cash resources of the Partnership are not sufficient to pay existing liabilities of the Partnership. However, substantially all of the existing liabilities of the Partnership are payable to the General Partner and/or its affiliates. Though the amounts payable to the General Partner and/or its affiliates are contractually currently payable, the Partnership anticipates that the General Partner and/or its affiliates will not require the payment of these contractual obligations until capital reserves are in excess of the aggregate of then existing contractual obligations and then anticipated future foreseeable obligations of the Partnership. The Partnership would be adversely affected should the General Partner and/or its affiliates demand current payment of the existing contractual obligations and or suspend services for this or any other reason.
 
The spread of a novel strain of coronavirus (COVID-19) has caused significant business disruptions in the United States beginning in the first quarter of 2020. The economic impact of the business disruptions caused by COVID-19 is uncertain. The extent of any effects these disruptions may have on the operations and financial performance of the Partnership will depend on future developments, including possible impacts on the operations of the underlying real estate of its investments, which cannot be determined.
 
 
21
 
 
 
 
Financial Condition
 
The Partnership’s assets at March 31, 2020 consisted of $229,000 in cash and cash equivalents and investments in Local Limited Partnerships of $52,000 (See “Method of Accounting for Investments in Local Limited Partnerships). Liabilities at March 31, 2020 consisted of $245,000 of payables due to Local Limited Partnerships and $1,525,000 of accrued fees and expenses due to General Partner and affiliates (See “Future Contractual Cash Obligations” below).
 
Results of Operations
 
Year Ended March 31, 2020 Compared to Year Ended March 31, 2019 The Partnership’s net loss for the year ended March 31, 2020 was $703,000, reflecting a decrease of $63,000 from the net loss for the year ended March 31, 2019 of $766,000. The decrease in net loss is partially due to a $65,000 decrease in gain on sale of Local Limited Partnerships for the year ended March 31, 2020. The gain and loss on sale of Local Limited Partnerships will vary from period to period depending on the values and sale prices of the housing complexes that have been identified for disposition and the closing dates of such transactions. Additionally, impairment loss decreased by $72,000 for the year ended March 31, 2020. Impairment loss varies from year to year depending on the operations of the Local Limited Partnerships and the amount of Low Income Housing Tax Credits that are allocated each year to the Partnership. There was an increase in accounting and legal fees of $6,000 for the year ended March 31, 2020 compared to the year ended March 31, 2019 due to timing of work performed. Asset management fees decreased by $14,000 during the year ended March 31, 2020. The fees are calculated based on the value of invested assets, which decreased due to the sales of Local Limited Partnerships. Other expenses decreased by $2,000 during the year ended March 31, 2020, mainly due to property cost consulting incurred during the year ended March 31, 2019. Reporting fees and distribution income decreased by $8,000 for the year ended March 31, 2020 compared to the year ended March 31, 2019. Local Limited Partnerships pay reporting fees and distributions to the Partnership when the Local Limited Partnerships’ cash flows will allow for the payment.
 
Year Ended March 31, 2019 Compared to Year Ended March 31, 2018 The Partnership’s net loss for the year ended March 31, 2019 was $766,000, reflecting a decrease of $89,000 from the net loss for the year ended March 31, 2018 of $855,000. The decrease in net loss is partially due to a $110,000 decrease in other income for the year ended March 31, 2019. The Partnership received $51,000 of State tax refund resulting from tax overpayment, and $59,000 from the release of a lien account related to the disposition of a Local Limited Partnership during the year ended March 31, 2018 compared to no other income received during the year ended March 31, 2019. Gain on sale of Local Limited Partnerships increased by $29,000 for the year ended March 31, 2019. The gain and loss on sale of Local Limited Partnerships will vary from period to period depending on the values and sale prices of the housing complexes that have been identified for disposition and the closing dates of such transactions. Additionally, impairment loss decreased by $141,000 for the year ended March 31, 2019. Impairment loss varies from year to year depending on the operations of the Local Limited Partnerships and the amount of Low Income Housing Tax Credits that are allocated each year to the Partnership. There was a decrease in accounting and legal fees of $4,000 for the year ended March 31, 2019 compared to the year ended March 31, 2018 due to timing of work performed. Asset management fees decreased by $10,000 during the year ended March 31, 2019. The fees are calculated based on the value of invested assets, which decreased due to the sales of Local Limited Partnerships. Other expenses decreased by $15,000 during the year ended March 31, 2019, mainly due to property cost consulting incurred during the year ended March 31, 2018. Reporting fees and distribution income increased by $2,000 for the year ended March 31, 2019 compared to the year ended March 31, 2018. Local Limited Partnerships pay reporting fees and distributions to the Partnership when the Local Limited Partnerships’ cash flows will allow for the payment.
 
 
 
22
 
 
Liquidity and Capital Resources
 
Year Ended March 31, 2020 Compared to Year Ended March 31, 2019 The net increase in cash and cash equivalents during the year ended March 31, 2020 was $4,000 compared to a net decrease in cash and cash equivalents during the year ended March 31, 2019 of $80,000. The Partnership paid $60,000 in accrued asset management fees and $101,000 to the General Partner or an affiliate for operating expenses paid on its behalf during the year ended March 31, 2019, compared to no payments were made during the year ended March 31, 2020. During the year ended March 31, 2020, the Partnership received $8,000 less in reporting fees and distribution income compared to the year ended March 31, 2019. The Local Limited Partnerships pay the reporting fees and distributions to the Partnership when the Local Limited Partnerships’ cash flows will allow for payments. Additionally, during year ended March 31, 2020, the Partnership received $0 in net proceeds from sale of Local Limited Partners compared to $65,000 received during year ended March 31, 2019. Sale proceeds recorded by the Partnership can vary depending on the sale prices and the values of the Housing Complexes that are sold.
 
Year Ended March 31, 2019 Compared to Year Ended March 31, 2018 The net decrease in cash and cash equivalents during the year ended March 31, 2019 was $80,000 compared to a net increase in cash and cash equivalents during the year ended March 31, 2018 of $33,000. The Partnership received $51,000 of State tax refund from tax overpayment, and $59,000 from the final release of an escrow account related to the disposition of a Local Limited Partnership during the year ended March 31, 2018 compared to no other income received during the year ended March 31, 2019. The Partnership paid $60,000 in accrued asset management fees and $101,000 to the General Partner or an affiliate for operating expenses paid on its behalf during the year ended March 31, 2019, compared to $97,000, and $29,000, respectively, during the year ended March 31, 2018. During the year ended March 31, 2019, the Partnership received $2,000 more in reporting fees and distribution income compared to the year ended March 31, 2018. The Local Limited Partnerships pay the reporting fees and distributions to the Partnership when the Local Limited Partnerships’ cash flows will allow for payments. Additionally, during year ended March 31, 2019, the Partnership received $65,000 in net proceeds from sale of Local Limited Partners compared to $37,000 received during year ended March 31, 2018. Sale proceeds recorded by the Partnership can vary depending on the sale prices and the values of the Housing Complexes that are sold.
 
Accrued payables, which consist primarily of related party asset management fees due to the General Partner, increased (decreased) by approximately $92,000, $(54,000), and $7,000 for the years ended March 31, 2020, 2019, and 2018, respectively.
 
The Partnership currently has insufficient working capital to fund its operations. Associates has agreed to continue providing advances sufficient enough to fund the operations and working capital requirements of the Partnership through June 30, 2021.
 
Other Matters
 
Davenport started construction in October 2006 and was scheduled to be completed in June 2008. Construction was delayed due to the original Local General Partner defaulting on his construction guarantee, and resulting in disputed mechanic liens on the property. In November 2008, a co-Local General Partner, Shelter Resource Corporation, was admitted into the Partnership, due to restrictions implemented by the Iowa Finance Authority (“IFA”). Subsequently, with IFA’s approval, the defaulting original Local General Partner was removed from the Partnership leaving Shelter Resource Corporation as the sole Local General Partner.
 
As of March 31, 2010, the property was 100% completed and a certificate of occupancy was granted for both buildings in December 2009. The Partnership engaged all sub-contractors to sign new construction contracts, along with lien releases for any and all work done after their engagement. During the year ended March 31, 2011, the Partnership voluntarily advanced $846,175 to Davenport for construction related costs. There were no additional advances made to Davenport due to the additional investment made, as discussed below.
 
 
 
23
 
 
The project was fully completed as of March 31, 2010 and it achieved stabilized operations by June 2010. In June 2010 the property achieved 85% occupancy and has maintained occupancy of 80% to 100% to the date of this filing. Davenport has been awarded state historical tax credits from the State of Iowa, federal historical credits and federal Low Income Housing Tax Credits. The State historical credits are given in the form of a refund check from the State in conjunction with the State tax return filing. The net amount of the check after applicable federal taxes will be contributed back to the property to help fund construction shortfalls. Davenport was also allocated additional federal Low Income Housing Tax Credits as well as federal historical tax credits. Upon the Limited Partners’ approval of the dispositions of Sierra’s Run and Fernwood, the Partnership made the additional investment in Davenport. See the exit strategy in Note 1 regarding the dispositions of Sierra’s Run and Fernwood. On July 1, 2010, the Partnership committed additional capital to Davenport in the amount of $2,490,651. This additional commitment generated $408,710 of federal historic credits and $3,582,550 of additional federal Low Income Housing Tax Credits which were allocated to the partners of the Partnership.
 
As of March 31, 2020, Davenport is on the watch list due to a low year-to-date DCR and depleted replacement reserve account.  The property has not generated sufficient cash flow to make the required replacement reserve deposits. The lender is aware of the underfunded replacement reserve balance and, to date, has not issued a Notice of Default. Although the property is operating at its budgeted .61 DCR, it is still operating below break-even, due to increased utilities expense and unanticipated snow removal expense, which were resulted from the heavy snowfall during the first quarter 2019. Due to the small size of the property, any unanticipated expenses will negatively impact operations and financial performance. Two tenants recently vacated due to health reasons.  There is one application in process and the other is being marketed. Operating deficits were paid through the operating cash account, which had a balance of $1,076 as of December 31, 2019. While the operating deficit guarantee has expired, the tax credit guaranty remains in place.
 
Subsequent to March 31, 2020, the Partnership entered into a purchase agreement with an unrelated party to sell its Local Limited Partnership interest in Davenport Housing VII, L.P. (“Davenport VII”). Davenport VII was appraised for $125,000 and had a mortgage note balance of $470,274 as of December 31, 2019. The Partnership will receive $15,000 in cash proceeds, which will be held in the Partnership's reserves for future operating expenses. The Partnership's investment balance is $51,622; therefore, a loss of $36,622 will be recorded. The sale is expected to close on May 29, 2020. The Compliance Period for Davenport VII expires in 2024. A guaranty agreement was executed with the General Partner to guarantee the repayment of any recaptured tax credits and/or interest arising from any non-compliance as provided in Section 42 of the Internal Revenue Code arising after the date of the sale."
 
Grove Village Limited Partnership and Pleasant Village Limited Partnership were disposed of during the year ended March 31, 2016. These Local Limited partnerships were under IRS audit related to the LIHTCs and the Partnership filed a lawsuit against the Local General Partner. During the year ended March 31, 2015, the Partnership settled the dispute and received $1,300,000 of settlement proceeds which were included in other income. The Partnership also received a final escrow release from the sale of Pleasant Village Limited Partnership totaling $59,315 which was also included in other income for the year ended March 31, 2018.
 
Partnership’s Future Contractual Cash Obligations
 
The following table summarizes the Partnership’s future contractual cash obligations as of March 31, 2020:
 
 
 
2021
 
 
2022
 
 
2023
 
 
2024
 
 
2025
 
 
Thereafter
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset management fees (1)
 $1,566,742 
 $41,576 
 $41,576 
 $41,576 
 $41,576 
 $1,870,920 
 $3,603,966 
Payable to Local Limited Partnerships
  245,113 
  - 
  - 
  - 
  - 
  - 
  245,113 
Total contractual obligations
 $1,811,855 
 $41,576 
 $41,576 
 $41,576 
 $41,576 
 $1,870,920 
 $3,849,079 
 
(1) 
Asset management fees are payable annually until termination of the Partnership, which is to occur no later than December 31, 2070. The estimate of the fees payable included herein assumes the retention of the Partnership’s interest in all Housing Complexes owned at March 31, 2020 until December 31, 2070. Amounts due to the General Partner as of March 31, 2020 have been included in the 2021 column. The General Partner does not anticipate that these fees will be paid until such time as capital reserves are in excess of the aggregate of the existing contractual obligations and the anticipated future foreseeable obligations of the Partnership.
 
For additional information regarding our asset management fees and payables due to Local Limited Partnerships, see Notes 3 and 4 to the financial statements included elsewhere herein.
 
Off-Balance Sheet Arrangements
 
The Partnership has no off-balance sheet arrangements.
 
 
24
 
 
 
Exit Strategy
 
See Item 1 for information in this regard.
 
Impact of Recent Accounting Pronouncements
 
See footnote 1 to the financial statements.
 
Item 7A. Quantitative and Qualitative Disclosures Above Market Risk
 
NOT APPLICABLE
 
Item 8. Financial Statements and Supplementary Data
 
 
25
 
 
 
Report of Independent Registered Public Accounting Firm
 
To the General Partner
 
WNC Housing Tax Credit Fund VI, L.P., Series 13
 
Opinion on the Financial Statements
 
We have audited the accompanying balance sheets of WNC Housing Tax Credit Fund VI, L.P., Series 13 (the "Partnership") as of March 31, 2020 and 2019, the related statements of operations, partners' equity (deficit), and cash flows for each of the years in the three-year period ended March 31, 2020, and the related notes and schedule (collectively referred to as the "financial statements"). In our opinion, based on our audits and the reports of the other auditors, the financial statements present fairly, in all material respects, the financial position of the Partnership as of March 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended March 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
 
We did not audit the financial statements of certain Local Limited Partnerships, which investments represent $51,621 and $662,171 of the total Partnership assets as of March 31, 2020 and 2019, respectively, and $(171,552), $(164,014) and $(164,931) of the total Partnership loss for the years ended March 31, 2020, 2019 and 2018, respectively. Those financial statements were audited by other auditors, whose reports have been furnished to us, and our opinion, insofar as it relates to those Local Limited Partnerships, is based solely on the reports of the other auditors.
 
Basis for Opinion
 
These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on the Partnership's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
 
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, 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.
 
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits and the reports of the other auditors provide a reasonable basis for our opinion.
 
Supplemental Information
 
The schedule listed under Part IV, Item 15(a)(2) of Form 10-K related to each of the years in the three-year period ended March 31, 2020 has been subjected to audit procedures performed in conjunction with the audit of WNC Housing Tax Credit Fund VI, L.P., Series 13's financial statements. The schedule is the responsibility of the Partnership's management. Our audit procedures included determining whether the schedule reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the schedule. In forming our opinion on the schedule, we evaluated whether the schedule, including its form and content, is presented in conformity with the Securities and Exchange Commission's rules. In our opinion, the schedule is fairly stated, in all material respects, in relation to the financial statements as a whole.
 
We have served as the Partnership's auditor since 2005.
  
Bethesda, Maryland
May 26, 2020
 
 
26
 
 
 
 
 
27
 
 
 
 
 
 
 
 
 
 
 
 
 
28
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
(A California Limited Partnership)
 
BALANCE SHEETS
 
 
 
March 31,
 
 
 
2020
 
 
2019
 
ASSETS
 
 
 
 
 
 
  Cash and cash equivalents
 $228,845 
 $224,898 
  Investments in Local Limited Partnerships, net (Notes 2 and 3)
  51,621 
  666,713 
  Due from affiliates, net (Note 6)
  - 
  - 
    Total Assets
 $280,466 
 $891,611 
 
    
    
LIABILITIES AND PARTNERS’ EQUITY (DEFICIT)
    
    
 
    
    
Liabilities:
    
    
  Payables to Local Limited Partnerships (Note 5)
 $245,113 
 $245,113 
  Accrued fees and expenses due to General Partner and Affiliates (Note 3)
  1,525,166 
  1,432,910 
     Total Liabilities
  1,770,279 
  1,678,023 
 
    
    
 
    
    
Partners’ Equity (Deficit)
    
    
  General Partner
  571,841 
  572,544 
  Limited Partners (25,000 Partnership Units authorized, 20,707 and 20,757 Partnership Units issued and outstanding, respectively)
  (2,061,654)
  (1,358,956)
 
    
    
Total Partners’ Equity (Deficit)
  (1,489,813)
  (786,412)
 
    
    
       Total Liabilities and Partners’ Equity (Deficit)
 $280,466 
 $891,611 
 
See accompanying notes to financial statements
 
29
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
(A California Limited Partnership)
 
STATEMENTS OF OPERATIONS
 
 
 
 
For the Years Ended March 31,
 
 
 
2020
 
 
2019
 
 
2018
 
Operating income:
 
 
 
 
 
 
 
 
 
    Reporting fees
 $2,728 
 $1,305 
 $3,558 
    Distribution income
  - 
  9,336 
  5,219 
 
    
    
    
   Total operating income
  2,728 
  10,641 
  8,777 
 
    
    
    
Operating expenses and loss:
    
    
    
Asset management fees
  41,576 
  55,686 
  65,975 
Asset management expenses
  932 
  1,691 
  425 
Accounting and legal fees
  31,430 
  25,265 
  29,275 
Impairment loss
  439,109 
  511,512 
  652,206 
Other
  18,318 
  20,135 
  35,069 
 
    
    
    
      Total operating expenses and loss
  531,365 
  614,289 
  782,950 
 
    
    
    
Loss from operations
  (528,637)
  (603,648)
  (774,173)
 
    
    
    
Equity in losses of Local Limited Partnerships
  (175,983)
  (227,896)
  (228,418)
 
    
    
    
Other income
  - 
  - 
  110,491 
 
    
    
    
Gain on sale of Local Limited Partnerships
  - 
  65,495 
  36,767 
 
    
    
    
Interest income
  1,219 
  483 
  644 
 
    
    
    
Net loss
 $(703,401)
 $(765,566)
 $(854,689)
 
    
    
    
Net loss allocated to:
    
    
    
General Partner
 $(703)
 $(766)
 $(855)
 
    
    
    
Limited Partners
 $(702,698)
 $(764,800)
 $(853,834)
 
    
    
    
Net loss per Partnership Unit
 $(33.94)
 $(36.85)
 $(41.13)
 
    
    
    
Outstanding weighted Partnership Units
  20,707 
  20,757 
  20,757 
 
See accompanying notes to financial statements
 
30
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
(A California Limited Partnership)
 
STATEMENTS OF PARTNERS’ EQUITY (DEFICIT)
 
For the Years Ended March 31, 2020, 2019 and 2018
 
 
 
 
General Partner
 
 
Limited Partners
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
Partners’ equity (deficit) at March 31, 2017
 $574,165 
 $259,678 
 $833,843 
 
    
    
    
Net loss
  (855)
  (853,834)
  (854,689)
 
    
    
    
Partners’ equity (deficit) at March 31, 2018
  573,310 
  (594,156)
  (20,846)
 
    
    
    
Net loss
  (766)
  (764,800)
  (765,566)
 
    
    
    
Partners’ equity (deficit) at March 31, 2019
  572,544 
  (1,358,956)
  (786,412)
 
    
    
    
Net loss
  (703)
  (702,698)
  (703,401)
 
    
    
    
Partners’ equity (deficit) at March 31, 2020
 $571,841 
 $(2,061,654)
 $(1,489,813)
 
See accompanying notes to financial statements
 
31
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
(A California Limited Partnership)
 
STATEMENTS OF CASH FLOWS
 
For the Years Ended March 31, 2020, 2019 and 2018
 
 
 
 
2020
 
 
2019
 
 
2018
 
 
Cash flows from operating activities:
 
 
 
 
 
 
 
 
 
 
 Net loss
 $(703,401)
 $(765,566)
 $(854,689)
 
 Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
    
    
    
 
      Equity in losses of Local Limited Partnerships
  175,983 
  227,896 
  228,418 
 
      Impairment loss
  439,109 
  511,512 
  652,206 
 
      Gain on sale of Local Limited Partnerships
  - 
  (65,495)
  (36,767)
 
      Increase (decrease) in accrued fees and expenses due to General Partner and affiliates
  92,256 
  (53,987)
  7,167 
 
    
    
    
 
          Net cash provided by (used in) operating activities
  3,947 
  (145,640)
  (3,665)
 
 
    
    
    
 
Cash flows from investing activities:
    
    
    
 
Net proceeds from sale of Local Limited Partnerships
  - 
  65,495 
  36,767 
 
 
    
    
    
 
          Net cash provided by investing activities
  - 
  65,495 
  36,767 
 
 
    
    
    
 
Net increase (decrease) in cash and cash equivalents
  3,947 
  (80,145)
  33,102 
 
 
    
    
    
 
Cash and cash equivalents, beginning of period
  224,898 
  305,043 
  271,941 
 
 
    
    
    
 
Cash and cash equivalents, end of period
 $228,845 
 $224,898 
 $305,043 
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
    
    
 
    
Taxes paid
 $800 
 $800 
 $800 
 
 
 
 
32
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
(A California Limited Partnership)
 
NOTES TO FINANCIAL STATEMENTS
 
For the Years Ended March 31, 2020, 2019, and 2018
 
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Organization
 
WNC Housing Tax Credit Fund VI, L.P., Series 13, a California Limited Partnership (the “Partnership”), was formed on February 7, 2005 under the laws of the State of California, and commenced operations on December 14, 2005. The Partnership was formed to invest primarily in other limited partnerships and limited liability companies (the “Local Limited Partnerships”) which own multi-family housing complexes (“Housing Complexes”) that are eligible for Federal low income housing tax credits (“Low Income Housing Tax Credits”). The local general partners (the “Local General Partners”) of each Local Limited Partnership retain responsibility for maintaining, operating and managing the Housing Complex. Each Local Limited Partnership is governed by its agreement of limited partnership (the “Local Limited Partnership Agreement”).
 
The general partner of the Partnership is WNC National Partners, LLC (the “General Partner”). The general partner of the General Partner is WNC & Associates, Inc. (“Associates”). The chairman and the president of Associates owns all of the outstanding stock of Associates. The business of the Partnership is conducted primarily through Associates, as the Partnership and General Partner have no employees of their own.
 
The Partnership shall continue in full force and effect until December 31, 2070, unless terminated prior to that date, pursuant to the partnership agreement or law.
 
The financial statements include only activity relating to the business of the Partnership and do not give effect to any assets that the partners may have outside of their interests in the Partnership, or to any obligations, including income taxes of the partners.
 
Pursuant to a registration statement filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 18, 2005, the Partnership commenced a public offering of 25,000 units of limited partnership interest (“Partnership Units”) at a price of $1,000 per Partnership Unit. The required minimum offering amount of $1,400,000 was achieved by December 14, 2005. Total subscriptions for 20,981 Partnership Units had been accepted, representing $20,965,400, which is net of volume discounts of $4,540 and dealer discounts of $11,060. Holders of Partnership Units are referred to herein as “Limited Partners.” As of March 31, 2020 and 2019, a total of 20,707 and 20,757 Partnership Units remain outstanding, respectively. The General Partner has a 0.1% interest in operating profits and losses, taxable income and losses, in cash available for distribution from the Partnership and tax credits. The Limited Partners will be allocated the remaining 99.9% interest in proportion to their respective investments. This offering was closed on September 21, 2006.
 
The proceeds from the disposition of any of the Housing Complexes will be used first to pay debts and other obligations per the respective Local Limited Partnership Agreement. Any remaining proceeds will then be paid to the partners of the Local Limited Partnership, including the Partnership, in accordance with the terms of the particular Local Limited Partnership Agreement. The sale of a Housing Complex may be subject to other restrictions and obligations. Accordingly, there can be no assurance that a Local Limited Partnership will be able to sell its Housing Complex. Even if it does so, there can be no assurance that any significant amounts of cash will be distributed to the Partnership. Should such distributions occur, the Limited Partners will be entitled to receive distributions from the proceeds remaining after payment of Partnership obligations and funding reserves, equal to their capital contributions and their return on investment (as defined in the Partnership Agreement). The General Partner would then be entitled to receive proceeds equal to their capital contributions from the remainder. Any additional sale or refinancing proceeds will be distributed 90% to the Limited Partners (in proportion to their respective investments) and 10% to the General Partner.
 
 
33
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
(A California Limited Partnership)
 
NOTES TO FINANCIAL STATEMENTS – CONTINUED
 
For the Years Ended March 31, 2020, 2019 and 2018
 
 
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
 
Risks and Uncertainties
 
An investment in the Partnership and the Partnership’s investments in Local Limited Partnerships and their Housing Complexes are subject to risks. These risks may impact the tax benefits of an investment in the Partnership, and the amount of proceeds available for distribution to the Limited Partners, if any, on liquidation of the Partnership’s investments. Some of those risks include the following:
 
The Low Income Housing Tax Credits rules are extremely complicated. Noncompliance with these rules results in the loss of future Low Income Housing Tax Credits and the fractional recapture of Low Income Housing Tax Credits already taken. In most cases the annual amount of Low Income Housing Tax Credits that an individual can use is limited to the tax liability due on the person’s last $25,000 of taxable income. The Local Limited Partnerships may be unable to sell the Housing Complexes at a price which would result in the Partnership realizing cash distributions or proceeds from the transaction. Accordingly, the Partnership may be unable to distribute any cash to its Limited Partners. Low Income Housing Tax Credits may be the only benefit from an investment in the Partnership.
 
The Partnership has invested in a limited number of Local Limited Partnerships. Such limited diversity means that the results of operation of each single Housing Complex will have a greater impact on the Partnership. With limited diversity, poor performance of one Housing Complex could impair the Partnership’s ability to satisfy its investment objectives. Each Housing Complex is subject to mortgage indebtedness. If a Local Limited Partnership failed to pay its mortgage, it could lose its Housing Complex in foreclosure. If foreclosure were to occur during the first 15 years (the “Compliance Period”), the loss of any remaining future Low Income Housing Tax Credits, a fractional recapture of prior Low Income Housing Tax Credits, and a loss of the Partnership’s investment in the Housing Complex would occur. The Partnership is a limited partner or non-managing member of each Local Limited Partnership. Accordingly, the Partnership will have very limited rights with respect to management of the Local Limited Partnerships. The Partnership will rely totally on the Local General Partners. Neither the Partnership’s investments in Local Limited Partnerships, nor the Local Limited Partnerships’ investments in Housing Complexes, are readily marketable. To the extent the Housing Complexes receive government financing or operating subsidies, they may be subject to one or more of the following risks: difficulties in obtaining tenants for the Housing Complexes; difficulties in obtaining rent increases; limitations on cash distributions; limitations on sales or refinancing of Housing Complexes; limitations on transfers of interests in Local Limited Partnerships; limitations on removal of Local General Partners; limitations on subsidy programs; and possible changes in applicable regulations. Uninsured casualties could result in loss of property and Low Income Housing Tax Credits and recapture of Low Income Housing Tax Credits previously taken. The value of real estate is subject to risks from fluctuating economic conditions, including employment rates, inflation, tax, environmental, land use and zoning policies, supply and demand of similar properties, and neighborhood conditions, among others.
 
The ability of Limited Partners to claim tax losses from the Partnership is limited. The IRS may audit the Partnership or a Local Limited Partnership and challenge the tax treatment of tax items. The amount of Low Income Housing Tax Credits and tax losses allocable to the Limited Partners could be reduced if the IRS were successful in such a challenge. The alternative minimum tax could reduce tax benefits from an investment in the Partnership. Changes in tax laws could also impact the tax benefits from an investment in the Partnership and/or the value of the Housing Complexes.
 
 
34
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
 (A California Limited Partnership)
 
NOTES TO FINANCIAL STATEMENTS - CONTINUED
 
For the Years Ended March 31, 2020, 2019 and 2018
 
 
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
 
The Partnership currently has insufficient working capital to fund its operations. Associates has agreed to continue providing advances sufficient enough to fund the operations and working capital requirements of the Partnership through June 30, 2021.
 
Anticipated future and existing cash resources of the Partnership are not sufficient to pay existing liabilities of the Partnership. A significant portion of the existing liabilities are the payables to Local Limited Partnerships and those payables are the first priority to be paid. If the Partnership does not have enough cash to pay those liabilities the General Partner or an affiliate will fund the necessary cash to pay the liabilities. The remaining portion of the payables is due to the General Partner or an affiliate. Though the amounts payable to the General Partner and/or its affiliates are contractually currently payable, the Partnership anticipates that the General Partner and/or its affiliates will not require the payment of these contractual obligations until capital reserves are in excess of the aggregate of then existing contractual obligations and then anticipated future foreseeable obligations of the Partnership. The Partnership would be adversely affected should the General Partner and/or its affiliates demand current payment of the existing contractual obligations and or suspend services for this or any other reason.
 
No trading market for the Partnership Units exists or is expected to develop. Limited Partners may be unable to sell their Partnership Units except at a discount and should consider their Partnership Units to be a long-term investment. Individual Limited Partners will have no recourse if they disagree with actions authorized by a vote of the majority of Limited Partners.
 
Exit Strategy
 
The Compliance Period for a Housing Complex is generally 15 years following construction or rehabilitation completion. Associates was one of the first in the industry to offer syndicated investments in Low Income Housing Tax Credits. The initial programs have completed their Compliance Periods. Upon the sale of a Local Limited Partnership Interest or Housing Complex after the end of the Compliance Period, there would be no recapture of Low Income Housing Tax Credits. A sale prior to the end of the Compliance Period must satisfy the reasonable belief test to avoid recapture.
 
With that in mind, the General Partner is continuing its review of the Housing Complexes. The review considers many factors, including extended use requirements (such as those due to mortgage restrictions or state compliance agreements), the condition of the Housing Complexes, Partnership cash flow, and the tax consequences to the Limited Partners from the sale of the Housing Complexes.
 
Upon identifying those Housing Complexes with the highest potential for a successful sale, refinancing or re-syndication, the Partnership expects to proceed with efforts to liquidate them or the applicable Local Limited Partnership Interests. The objective is to wind down the Partnership after Low Income Housing Tax Credits are no longer available. Local Limited Partnership Interests may be disposed of at any time by the General Partner in its discretion.
 
The proceeds from the disposition of any Housing Complex will be used first to pay debts and other obligations per the applicable Local Limited Partnership Agreement. Any remaining proceeds will then be paid to the partners of the Local Limited Partnership, including the Partnership, in accordance with the terms of the applicable Local Limited Partnership Agreement.
 
The sale of a Housing Complex may be subject to other restrictions and obligations. Accordingly, there can be no assurance that a Local Limited Partnership will be able to sell its Housing Complex. Even if it does so, there can be no assurance that any amounts of cash will be distributed to the Limited Partners, as the proceeds first would be used to pay Partnership obligations and to fund reserves. Similarly, there can be no assurance that the Partnership will be able to sell its Local Limited Partnership Interests, or that cash therefrom would be available for distribution to the Limited Partners.
 
 
 
35
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
 (A California Limited Partnership)
 
NOTES TO FINANCIAL STATEMENTS - CONTINUED
 
For the Years Ended March 31, 2020, 2019 and 2018
 
 
 
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
 
During the year ended March 31, 2011, the Partnership sold two Local Limited Partnerships, Fernwood Meadows, L.P. (“Fernwood”) and Sierra’s Run, L.P., (“Sierra’s Run”), in order to generate sufficient equity to complete the purchase of additional Low Income Housing Tax Credits for Davenport VII, L.P. (“Davenport”).
 
Fernwood and Sierra’s Run will complete their Compliance Periods in 2022; therefore there is a risk of tax credit recapture. The maximum exposure of recapture (excluding the interest and penalties related to the recapture) is $177,508 and $170,246, respectively, for Fernwood and Sierra’s Run, which equates to $16.75 per Partnership Unit in the aggregate. Under the circumstances, the General Partner believes there is a reasonable expectation that each Local Limited Partnership will continue to be operated as qualified low income housing for the balance of its Compliance Period, and, accordingly, does not anticipate that there will be any recapture.
 
As of March 31, 2020, the underlying Housing complexes of Pleasant Village Limited Partnership (“Pleasant Village”) and Grove Village Limited Partnership (“Grove Village”) had been sold, resulting in the termination of the Partnership’s Local Limited Partnership interest. The Partnership had also gifted its Local Limited Partnership interest in 909 4th YMCA Limited Partnership to an unrelated nonprofit corporation. In addition, the Partnership sold its Local Limited Partnership interest in Head Circle, L.P. (“Head Circle”), FDI-Country Square, LTD (“FDI-Country Square”) and FDI-Park Place, LTD (“FDI-Park Place”). The Compliance Period for Head Circle has been completed, therefore, there is no risk of recapture to the investors of the Partnership. The Compliance Periods for FDI-Country Square and FDI-Park Place expire in 2021. A guaranty agreement was executed with the General Partner to guarantee the repayment of any recaptured tax credits and/or interest arising from any non-compliance as provided in Section 42 of the Internal Revenue Code arising after the date of the sale.
 
Method of Accounting For Investments in Local Limited Partnerships
 
The Partnership accounts for its investments in Local Limited Partnerships using the equity method of accounting, whereby the Partnership adjusts its investment balance for its share of the Local Limited Partnerships’ results of operations and for any contributions made and distributions received. The Partnership reviews the carrying amount of an individual investment in a Local Limited Partnership for possible impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of such investment may not be recoverable. Recoverability of such investment is measured by the estimated value derived by management, generally consisting of the product of the remaining future Low Income Housing Tax Credits estimated to be allocable to the Partnership and the estimated residual value to the Partnership. If an investment is considered to be impaired, the Partnership reduces the carrying value of its investment in any such Local Limited Partnership. The accounting policies of the Local Limited Partnerships, generally, are expected to be consistent with those of the Partnership. Costs incurred by the Partnership in acquiring the investments were capitalized as part of the investment account and were being amortized over 27.5 years. (See Notes 2 and 3 to the financial statements).
 
“Equity in losses of Local Limited Partnerships” for each year ended March 31 has been recorded by the Partnership based on the twelve months of reported results provided by the Local Limited Partnerships for each year ended December 31. Equity in losses from the Local Limited Partnerships allocated to Partnership is not recognized to the extent that the investment balance would be adjusted below zero. If the Local Limited Partnerships report net income in future years, the Partnership will resume applying the equity method only after its share of such net income equals the share of net losses not recognized during the period(s) the equity method was suspended.
 
 
36
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
 (A California Limited Partnership)
 
NOTES TO FINANCIAL STATEMENTS - CONTINUED
 
For the Years Ended March 31, 2020, 2019 and 2018
 
 
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
 
Distributions received by the Partnership are accounted for as a reduction of the investment balance. Distributions received after the investment has reached zero are recognized as income. As of March 31, 2020 and 2019 one of the remaining investment balances had reached zero.
 
In accordance with the accounting guidance for the consolidation of variable interest entities, the Partnership determines when it should include the assets, liabilities, and activities of a variable interest entity (VIE) in its financial statements, and when it should disclose information about its relationship with a VIE. The analysis that must be performed to determine which entity should consolidate a VIE focuses on control and economic factors. A VIE is a legal structure used to conduct activities or hold assets, which must be consolidated by a company if it is the primary beneficiary because it has (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses or receive benefits that could potentially be significant to the VIE. If multiple unrelated parties share such power, as defined, no party will be required to consolidate the VIE. Further, the guidance requires continual reconsideration of the primary beneficiary of a VIE.
 
Based on this guidance, the Local Limited Partnerships in which the Partnership invests meet the definition of a VIE because the owners of the equity at risk in these entities do not have the power to direct their operations. However, management does not consolidate the Partnership’s interests in these VIEs, as it is not considered to be the primary beneficiary since it does not have the power to direct the activities that are considered most significant to the economic performance of these entities. The Partnership currently records the amount of its investment in these Local Limited Partnerships as an asset on its balance sheets, recognizes its share of partnership income or losses in the statements of operations, and discloses how it accounts for material types of these investments in its financial statements. The Partnership’s balance in investment in Local Limited Partnerships, plus the risk of recapture of tax credits previously recognized on these investments, represents its maximum exposure to loss. The Partnership’s exposure to loss on these Local Limited Partnerships is mitigated by the condition and financial performance of the underlying Housing Complexes as well as the strength of the Local General Partners and their guarantee against credit recapture to the investors in the Partnership.
 
Use of Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.
 
Cash and Cash Equivalents
 
The Partnership considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. As of March 31, 2020 and 2019, the Partnership had $228,845 and $224,898 in cash equivalents, respectively.
 
Reporting Comprehensive Income
 
The Partnership had no items of other comprehensive income for all periods presented.
 
Net Loss Per Partnership Unit
 
Net loss per Partnership Unit includes no dilution and is computed by dividing loss allocated to Limited Partners by the weighted average Partnership Units outstanding during the period. Calculation of diluted net loss per Partnership Unit is not required.
 
 
 
37
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
 (A California Limited Partnership)
 
NOTES TO FINANCIAL STATEMENTS - CONTINUED
 
For the Years Ended March 31, 2020, 2019 and 2018
 
 
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
 
Income Taxes
 
The Partnership has elected to be treated as a pass-through entity for income tax purposes and, as such, is not subject to income taxes. Rather, all items of taxable income, deductions and tax credits are passed through to and are reported by its owners on their respective income tax returns. The Partnership’s federal tax status as a pass-through entity is based on its legal status as a partnership. Accordingly, the Partnership is not required to take any tax positions in order to qualify as a pass-through entity. The Partnership is required to file and does file tax returns with the Internal Revenue Service and other taxing authorities. Accordingly, these financial statements do not reflect a provision for income taxes and the Partnership has no other tax positions which must be considered for disclosure. Income tax returns filed by the Partnership are subject to examination by the Internal Revenue Service for a period of three years. While no income tax returns are currently being examined by the Internal Revenue Service, tax years since 2016 remain open.
 
Revenue Recognition
 
The Partnership is entitled to receive reporting fees from the Local Limited Partnerships. The intent of the reporting fees is to offset (in part) administrative costs incurred by the Partnership in corresponding with the Local Limited Partnerships. Due to the uncertainty of the collection of these fees, the Partnership recognizes reporting fees as collections are made.
 
Impairment
 
The Partnership reviews its investments in Local Limited Partnership for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value of such investments may not be recoverable. Impairment is measured by comparing the Partnership’s carrying amount in the investment to the sum of the total amount of the remaining future Low Income Housing Tax Credits estimated to be allocated to the Partnership and the estimated residual value to the Partnership. For the years ended March 31, 2020, 2019, and 2018, impairment loss related to investments in Local Limited Partnerships was $439,109, $511,512, and $652,206, respectively.
 
Impact of Recent Accounting Pronouncements
 
In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), as amended by subsequent Accounting Standard Updates (collectively, “ASC 606”). The Partnership adopted ASC 606 during 2019 and applied the guidance on a retrospective basis. There was no impact as a result of the adoption of ASC 606 to recognize revenue on the financial statements of the Partnership as of and for the periods ended December 31, 2019 and 2018 as the reporting fee income is immaterial.
 
 
38
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
 (A California Limited Partnership)
 
NOTES TO FINANCIAL STATEMENTS - CONTINUED
 
For the Years Ended March 31, 2020, 2019 and 2018
 
 
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
 
In August 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update 2016-15 Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. The Partnership adopted the update on a retrospective basis. The effect of the adoption was the application of an accounting policy election to classify distributions received from investees using the nature of the distribution approach. The Partnership classifies distributions from tax credit investments as returns on investment because the design of the local limited partnership is to generate tax credits and losses rather than income from operations. Application of the accounting policy election had no impact on the presentation in the statements of cash flows in the current or prior reporting periods.
 
NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS
 
As of March 31, 2020, and 2019, the Partnership owned limited partnership interests in 2 Local Limited Partnerships, each of which owns one Housing Complex consisting of an aggregate of 44 apartment units, respectively. The respective Local General Partners of the Local Limited Partnerships manage the day-to-day operations of the entities. Significant Local Limited Partnership business decisions require approval from the Partnership. The Partnership, as a limited partner, is entitled to 99.98%, as specified in the Local Limited Partnership agreements, of the operating profits and losses, taxable income and losses and Low Income Housing Tax Credits of the Local Limited Partnerships.
 
The Partnership's investments in Local Limited Partnerships as shown in the balance sheets at March 31, 2020 and 2019 is approximately $3,900,000 and $4,414,000, respectively, less than the Partnership's equity at the preceding December 31 as shown in the Local Limited Partnerships’ combined financial statements presented below. This difference is primarily due to acquisition, selection and other costs related to the acquisition of the investments which have been capitalized in the Partnership’s investment account, impairment losses recorded in the Partnership’s investment account and capital contributions payable to the Local Limited Partnerships which were netted against partner capital in the Local Limited Partnerships’ financial statements.
 
At March 31, 2020 and 2019, the investment accounts in certain Local Limited Partnerships had reached a zero balance. Consequently, a portion of the Partnerships’ estimate of its share of losses for the years ended March 31, 2020, 2019 and 2018, amounting to approximately $70,000, $0, and $12,000, respectively, have not been recognized. As of March 31, 2020, the aggregate share of net losses from the remaining Local Limited Partnerships not recognized by the Partnership amounted to $70,000.
 
The Partnership reviews its investments in Local Limited Partnership for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value of such investments may not be recoverable. Recoverability is measured by a comparison of the carrying amount of the investment to the sum of the total amount of the remaining Low Income Housing Tax Credits allocated to the Partnership and any estimated residual value of the investment. For the years ended March 31, 2020, 2019 and 2018, impairment loss related to investments in Local Limited Partnerships was $439,109, $511,512, and $652,206, respectively.
 
The following is a summary of the equity method activity of the investments in Local Limited Partnerships for the periods presented:
 
 
 
For the Years Ended March 31,
 
 
 
2020
 
 
2019
 
 
2018
 
Investments per balance sheet, beginning of year
 $666,713 
 $1,406,121 
 $2,286,745 
Equity in losses of Local Limited Partnerships
  (175,983)
  (227,896)
  (228,418)
Impairment loss
  (439,109)
  (511,512)
  (652,206)
 
    
    
    
Investments per balance sheet, end of year
 $51,621 
 $666,713 
 $1,406,121 
 
 
 
39
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
 (A California Limited Partnership)
 
NOTES TO FINANCIAL STATEMENTS - CONTINUED
 
For the Years Ended March 31, 2020, 2019 and 2018
 
 
NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS, continued
 
The financial information from the individual financial statements of the Local Limited Partnerships includes rental and interest subsidies. Rental subsidies are included in total revenues and interest subsidies are generally netted against interest expense. Approximate combined condensed financial information from the individual financial statements of the Local Limited Partnerships as of December 31 and for the years then ended is as follows:
 
COMBINED CONDENSED BALANCE SHEETS
 
 
 
2019
 
 
2018
 
ASSETS
 
 
 
 
 
 
Buildings and improvements, net of accumulated depreciation of 2,561,000 and $3,549,000 respectively
 $6,799,000 
 $9,414,000 
Land
  300,000 
  368,000 
Other assets
  138,000 
  321,000 
     Total Assets
 $7,237,000 
 $10,103,000 
 
    
    
LIABILITIES
    
    
 
    
    
Mortgages and construction loans payable
 $1,084,000 
 $2,586,000 
Due to related parties
  964,000 
  1,019,000 
Other liabilities
  36,000 
  80,000 
      Total Liabilities
  2,084,000 
  3,685,000 
 
    
    
PARTNERS’ EQUITY
    
    
 
    
    
WNC Housing Tax Credit Fund VI, L.P., Series 13
  3,952,000 
  5,081,000 
Other Partners
  1,201,000 
  1,337,000 
          Total Partners’ Equity
  5,153,000 
  6,418,000 
                  Total Liabilities and Partners’ Equity
 $7,237,000 
 $10,103,000 
 
COMBINED CONDENSED STATEMENTS OF OPERATIONS
 
 
 
2019
 
 
2018
 
 
2017
 
 
 
 
 
 
 
 
 
 
 
Revenues
 $288,000 
 $609,000 
 $738,000 
 
    
    
    
Expenses:
    
    
    
Operating expenses
  251,000 
  479,000 
  460,000 
Interest expense
  31,000 
  44,000 
  155,000 
 Depreciation and amortization
  252,000 
  357,000 
  356,000 
 
    
    
    
Total expenses
  534,000 
  880,000 
  971,000 
 
    
    
    
Net loss
 $(246,000)
 $(271,000)
 $(233,000)
 
    
    
    
Net loss allocable to the Partnership
 $(246,000)
 $(271,000)
 $(232,000)
 
    
    
    
Net loss recorded by the Partnership
 $(176,000)
 $(228,000)
 $(228,000)
 
 
40
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
 (A California Limited Partnership)
 
NOTES TO FINANCIAL STATEMENTS - CONTINUED
 
For the Years Ended March 31, 2020, 2019 and 2018
 
 
NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS, continued
 
Certain Local Limited Partnerships have incurred operating losses and/or have working capital deficiencies. In the event these Local Limited Partnerships continue to incur significant operating losses, additional capital contributions by the Partnership and/or the Local General Partner may be required to sustain the operations of such Local Limited Partnerships. If additional capital contributions are not made when they are required, the Partnership's investment in certain Local Limited Partnerships could be impaired, and the loss and recapture of the related Low Income Housing Tax Credits could occur.
 
Troubled Housing Complex
 
Davenport started construction in October 2006 and was scheduled to be completed in June 2008. Construction was delayed due to the original Local General Partner defaulting on his construction guarantee, and resulting in disputed mechanic liens on the property. In November 2008, a co-Local General Partner, Shelter Resource Corporation, was admitted into the Partnership, due to restrictions implemented by the Iowa Finance Authority (“IFA”). Subsequently, with IFA’s approval, the defaulting original Local General Partner was removed from the Partnership leaving Shelter Resource Corporation as the sole Local General Partner.
 
As of March 31, 2010, the property was 100% completed and a certificate of occupancy was granted for both buildings in December 2009. The Partnership engaged all sub-contractors to sign new construction contracts, along with lien releases for any and all work done after their engagement. During the year ended March 31, 2011, the Partnership voluntarily advanced $846,175 to Davenport for construction related costs. There were no additional advances made to Davenport due to the additional investment made, as discussed below.
 
The project was fully completed as of March 31, 2010 and it achieved stabilized operations by June 2010. In June 2010 the property achieved 85% occupancy and has maintained occupancy of 80% to 100% to the date of this filing. Davenport has been awarded state historical tax credits from the State of Iowa, federal historical credits and federal Low Income Housing Tax Credits. The State historical credits are given in the form of a refund check from the State in conjunction with the State tax return filing. The net amount of the check after applicable federal taxes will be contributed back to the property to help fund construction shortfalls. Davenport was also allocated additional federal Low Income Housing Tax Credits as well as federal historical tax credits. Upon the Limited Partners’ approval of the dispositions of Sierra Run’s and Fernwood, the Partnership made the additional investment in Davenport. See the exit strategy in Note 1 regarding the dispositions of Sierra’s Run and Fernwood. On July 1, 2010, the Partnership committed additional capital to Davenport in the amount of $2,490,651. This additional commitment generated $408,710 of federal historic credits and $3,582,550 of additional federal Low Income Housing Tax Credits which were allocated to the partners of the Partnership.
 
As of March 31, 2020, Davenport is on the watch list due to a low year-to-date DCR and depleted replacement reserve account.  The property has not generated sufficient cash flow to make the required replacement reserve deposits. The lender is aware of the underfunded replacement reserve balance and, to date, has not issued a Notice of Default. Although the property is operating at its budgeted .61 DCR, it is still operating below break-even, due to increased utilities expense and unanticipated snow removal expense, which were resulted from the heavy snowfall during the first quarter 2019. Due to the small size of the property, any unanticipated expenses will negatively impact operations and financial performance. Two tenants recently vacated due to health reasons.  There is one application in process and the other is being marketed. Operating deficits were paid through the operating cash account, which had a balance of $1,076 as of December 31, 2019. While the operating deficit guarantee has expired, the tax credit guaranty remains in place.
 
Subsequent to March 31, 2020, the Partnership entered into a purchase agreement with an unrelated party to sell its Local Limited Partnership interest in Davenport Housing VII, L.P. (“Davenport VII”). Davenport VII was appraised for $125,000 and had a mortgage note balance of $470,274 as of December 31, 2019. The Partnership will receive $15,000 in cash proceeds, which will be held in the Partnership's reserves for future operating expenses. The Partnership's investment balance is $51,622; therefore, a loss of $36,622 will be recorded. The sale is expected to close on May 29, 2020. The Compliance Period for Davenport VII expires in 2024. A guaranty agreement was executed with the General Partner to guarantee the repayment of any recaptured tax credits and/or interest arising from any non-compliance as provided in Section 42 of the Internal Revenue Code arising after the date of the sale."
  
Grove Village Limited Partnership and Pleasant Village Limited Partnership were disposed of during the year ended March 31, 2016. These Local Limited partnerships were under IRS audit related to the LIHTCs and the Partnership filed a lawsuit against the Local General Partner. During the year ended March 31, 2015, the Partnership settled the dispute and received $1,300,000 of settlement proceeds which were included in other income. The Partnership also received a final escrow release from the sale of Pleasant Village Limited Partnership totaling $59,315 which was also included in other income for the year ended March 31, 2018.
 
 
41
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
 (A California Limited Partnership)
 
NOTES TO FINANCIAL STATEMENTS - CONTINUED
 
For the Years Ended March 31, 2020, 2019 and 2018
 
 
NOTE 3 - RELATED PARTY TRANSACTIONS
 
Under the terms of the Partnership Agreement, the Partnership has paid or is obligated to the General Partner or its affiliates for the following items:
 
Acquisition fees of 7% of the gross proceeds from the sale of Partnership Units as compensation for services rendered in connection with the acquisition of Local Limited Partnerships. As of March 31, 2020 and 2019, the Partnership had incurred cumulative acquisition fees of $1,468,670 which were included in investments in Local Limited Partnerships. Impairment on the intangibles is measured by comparing the Partnership’s total investment balance after impairment of investments in Local Limited Partnerships to the sum of the total of the remaining Low Income Housing Tax Credits allocated to the Partnership and the estimated residual value of the investments. If an impairment loss related to the acquisition expenses is recorded, the accumulated amortization is reduced to zero at that time. As of all periods presented, the fees have been fully amortized or impaired.
 
Non-accountable acquisition costs of 2% of the gross proceeds from the sale of Partnership Units as an expense reimbursement in connection with the acquisition of Local Limited Partnerships. As of March 31, 2020 and 2019, the Partnership incurred cumulative acquisition costs of $419,620 which were included in investments in Local Limited Partnerships. Impairment on the intangibles is measured by comparing the Partnership’s total investment balance after impairment of investments in Local Limited Partnerships to the sum of the total of the remaining Low Income Housing Tax Credits allocated to the Partnership and the estimated residual value of the investments. If an impairment loss related to the acquisition expenses is recorded, the accumulated amortization is reduced to zero at that time. As of all periods presented, the costs have been fully amortized or impaired.
 
An annual asset management fee accrues in an amount equal to 0.5% of the Invested Assets of the Partnership, as defined. “Invested Assets” is defined as the sum of the Partnership’s Investment in Local Limited Partnerships, plus the reserves of the Partnership of up to 5% of gross Partnership Unit sales proceeds, and the Partnership’s allocable share of the amount of the mortgage loans and other debts related to the Housing Complexes owned by such Local Limited Partnerships. Management fees of $41,576, $55,686, and $65,975 were incurred during the years ended March 31, 2020, 2019 and 2018, respectively. Payments of $0, $60,000, and $96,706 were made during the years ended March 31, 2020, 2019 and 2018, respectively.
 
The Partnership will reimburse the General Partner or its affiliates for operating expenses incurred on behalf of the Partnership and paid for by the General Partner or its affiliates on behalf of the Partnership. Operating expense reimbursements were $0, $101,270, and $29,315 during the years ended March 31, 2020, 2019 and 2018, respectively.
 
A subordinated disposition fee will be paid in an amount equal to 1% of the sales price of real estate sold. Payment of this fee is subordinated to the Limited Partners receiving a return on investment (as defined in the Partnership Agreement) and is payable only if the General Partner or its affiliates render services in the sales effort. No disposition fees have been incurred for the three years presented.
 
 
 
42
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
 (A California Limited Partnership)
 
NOTES TO FINANCIAL STATEMENTS - CONTINUED
 
For the Years Ended March 31, 2020, 2019 and 2018
 
 
NOTE 3 - RELATED PARTY TRANSACTIONS, continued
 
WNC Holding, LLC (“Holding”), a wholly owned subsidiary of Associates, acquires investments in Local Limited Partnerships using funds from a secured warehouse line of credit. Such investments are warehoused by Holding until transferred to syndicated partnerships as investors are identified. The transfer of the warehoused investments is typically achieved through the admittance of the syndicated partnership as the Limited Partner of the Local Limited Partnership and the removal of Holding as the Limited Partner. Consideration paid to Holding for the transfer of its interest in the Local Limited Partnership generally consists of cash reimbursement of capital contribution installment(s) paid to the Local Limited Partnerships by Holding, assumption of the remaining capital contributions payable due to the Local Limited Partnership and financing costs and interest charged by Holding. As of all periods presented, the Partnership incurred financing costs of $772 and interest of $267 which are included in investments in Local Limited Partnerships. Impairment on the intangibles is measured by comparing the Partnership’s total investment balance after impairment of investments in Local Limited Partnerships to the sum of the total of the remaining Low Income Housing Tax Credits allocated to the Partnership. If an impairment loss related to the capitalized warehouse interest and costs are recorded, the accumulated amortization is reduced to zero at that time. As of all periods presented, the financing costs and interest were fully amortized or impaired.
 
The accrued fees and expenses due to General Partner and affiliates consist of the following at:
 
 
 
March 31,
 
 
 
2020
 
 
2019
 
Asset management fee payable
 $1,434,136 
 $1,392,560 
Reimbursements for expenses paid by the General Partner or an affiliate
  91,030 
  40,350 
 
    
    
    Total
 $1,525,166 
 $1,432,910 
 
The Partnership currently has insufficient working capital to fund its operations. Associates has agreed to continue providing advances sufficient enough to fund the operations and working capital requirements of the Partnership through June 30, 2021.
 
43
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
 (A California Limited Partnership)
 
NOTES TO FINANCIAL STATEMENTS - CONTINUED
 
For the Years Ended March 31, 2020, 2019 and 2018
 
 
NOTE 4 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
 
The following is a summary of the quarterly operations for the years ended March 31 (rounded):
 
 
 
June 30
 
 
September 30
 
 
December 31
 
 
March 31
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2020
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income$
 $1,000 
 $1,000 
 $- 
  2,000 
 
    
    
    
    
Operating expenses and loss
  (459,000)
  (37,000)
  (17,000)
  (18,000)
 
    
    
    
    
Loss from operations
  (458,000)
  (36,000)
  (17,000)
  (16,000)
 
    
    
    
    
Equity in losses of Local Limited Partnerships
  (45,000)
  (41,000)
  (41,000)
  (49,000)
 
    
    
    
    
Net loss
  (503,000)
  (77,000)
  (58,000)
  (65,000)
 
    
    
    
    
Net loss available to Limited Partners
  (503,000)
  (77,000)
  (58,000)
  (65,000)
 
    
    
    
    
Net loss per Partnership Unit
  (24)
  (4)
  (3)
  (3)
 
 
 
 
June 30
 
 
September 30
 
 
December 31
 
 
March 31
 
2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income$
 $11,000 
 $- 
 $- 
  - 
 
    
    
    
    
Operating expenses and loss
  (556,000)
  (19,000)
  (21,000)
  (18,000)