Document and Entity Information
Document and Entity Information | 6 Months Ended |
Sep. 30, 2015shares | |
Document And Entity Information | |
Entity Registrant Name | WNC HOUSING TAX CREDIT FUND IV L P SERIES 1 |
Entity Central Index Key | 913,496 |
Document Type | 10-Q |
Document Period End Date | Sep. 30, 2015 |
Amendment Flag | false |
Current Fiscal Year End Date | --03-31 |
Entity's Current Reporting Status | Yes |
Entity Filer Category | Non-accelerated Filer |
Entity Common Stock, Shares Outstanding | 0 |
Document Fiscal Period Focus | Q2 |
Document Fiscal Year Focus | 2,016 |
Condensed Balance Sheets (Unaud
Condensed Balance Sheets (Unaudited) - USD ($) | Sep. 30, 2015 | Mar. 31, 2015 |
ASSETS | ||
Cash and cash equivalents | $ 90,164 | $ 180,631 |
Investments in Local Limited Partnerships, net (Note 2) | 0 | 0 |
Other assets | 108,679 | 57,286 |
Total Assets | 198,843 | 237,917 |
Liabilities: | ||
Accrued fees and expenses due to General Partner and affiliates (Note 3) | 45,947 | 46,708 |
Total Liabilities | 45,947 | 46,708 |
Partners' Equity (Deficit): | ||
General Partner | (99,061) | (92,261) |
Limited Partners (10,000 Partnership Units authorized; 9,936 and 9,939 Partnership Units, respectively, issued and outstanding) | 251,957 | 283,470 |
Total Partners' Equity (Deficit) | 152,896 | 191,209 |
Total Liabilities and Partners' Equity (Deficit) | $ 198,843 | $ 237,917 |
Condensed Balance Sheets (Unau3
Condensed Balance Sheets (Unaudited) (Parenthetical) - shares | Sep. 30, 2015 | Mar. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Limited Partners, Units authorized | 10,000 | 10,000 |
Limited Partners, Units issued | 9,936 | 9,939 |
Limited Partners, Units outstanding | 9,936 | 9,939 |
Condensed Statements of Operati
Condensed Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Operating income: | ||||
Reporting fees | $ 0 | $ 0 | $ 1,000 | $ 10,951 |
Distribution income | 0 | 0 | 637 | 0 |
Total operating income | 0 | 0 | 1,637 | 10,951 |
Operating expenses: | ||||
Asset management fees (Note 3) | 3,359 | 4,259 | 6,718 | 10,056 |
Legal and accounting fees | 17,722 | 17,700 | 22,180 | 17,700 |
Professional services | 1,285 | 4,008 | 1,610 | 5,174 |
Write off of other assets | 297 | 885 | 297 | 993 |
Other | 750 | 990 | 2,681 | 990 |
Total operating expenses | 23,413 | 27,842 | 33,486 | 34,913 |
Loss from operations | (23,413) | (27,842) | (31,849) | (23,962) |
Gain on sale of Local Limited Partnerships | 0 | 22,597 | 0 | 22,597 |
Interest income | 7 | 16 | 18 | 33 |
Net loss | (23,406) | (5,229) | (31,831) | (1,332) |
Net loss allocated to: | ||||
General Partner | (234) | (52) | (318) | (13) |
Limited Partners | $ (23,172) | $ (5,177) | $ (31,513) | $ (1,319) |
Net loss per Partnership Unit | $ (2) | $ (1) | $ (3) | $ 0 |
Outstanding weighted Partnership Units | 9,936 | 9,939 | 9,936 | 9,939 |
Condensed Statement of Partners
Condensed Statement of Partners' Equity (Deficit) (Unaudited) - 6 months ended Sep. 30, 2015 - USD ($) | General Partner [Member] | Limited Partners [Member] | Total |
Partners' equity (deficit) at Mar. 31, 2015 | $ (92,261) | $ 283,470 | $ 191,209 |
Net loss | (318) | (31,513) | (31,831) |
Return of capital (Note 4) | (6,482) | 0 | (6,482) |
Partners' equity (deficit) at Sep. 30, 2015 | $ (99,061) | $ 251,957 | $ 152,896 |
Condensed Statements of Cash Fl
Condensed Statements of Cash Flows (Unaudited) - USD ($) | 6 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Cash flows from operating activities: | ||
Net income (loss) | $ (31,831) | $ (1,332) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||
(Increase) decrease in other assets | (51,393) | 1,098 |
Decrease in accrued fees and expenses due to General Partner and affiliates | (761) | (1,636) |
Gain on sale of Local Limited Partnerships | 0 | (22,597) |
Net cash used in operating activities | (83,985) | (24,467) |
Cash flows from investing activities | ||
Net proceeds fromsale of Local Limited Partnerships | 0 | 22,597 |
Net cash provided by (used in) investing activities | 0 | 22,597 |
Cash flows from financing activities | ||
Return of capital | (6,482) | (20,868) |
Net cash used in financing activities | (6,482) | (20,868) |
Net decrease in cash and cash equivalents | (90,467) | (22,738) |
Cash and cash equivalents, beginning of period | 180,631 | 277,091 |
Cash and cash equivalents, end of period | 90,164 | 204,353 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||
Taxes paid | $ 0 | $ 0 |
1. Summary of Significant Accou
1. Summary of Significant Accounting Policies | 6 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | General The accompanying condensed unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q for quarterly reports under Section 13 or 15(d) of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended September 30, 2015 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2016. For further information, refer to the financial statements and footnotes thereto included in the Partnership's annual report on Form 10-K for the fiscal year ended March 31, 2015. Organization WNC Housing Tax Credit Fund IV, L.P., Series 1 (the Partnership) is a California Limited Partnership formed under the laws of the State of California on May 4, 1993 and commenced operations on October 20, 1993. The Partnership was formed to acquire limited partnership interests in other limited partnerships ("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 Tax Credit Partners IV, L.P. (TCP IV or the General Partner). The General Partner of TCP IV 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 the General Partner, as the Partnership has no employees of its own. The Partnership shall continue in full force and effect until December 31, 2050, 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. The partnership agreement authorized the sale of up to 10,000 units of limited partnership interest (Partnership Units) at $1,000 per Partnership Unit. The offering of Partnership Units had concluded in July 1994, at which time 10,000 Partnership Units representing subscriptions in the amount of $10,000,000 had been accepted. As of September 30, 2015 and March 31, 2015, a total of 9,936 and 9,939 Partnership Units, respectively, remain outstanding. The General Partner has a 1% interest in operating profits and losses, taxable income and losses, cash available for distribution from the Partnership and Low Income Housing Tax Credits of the Partnership. The investors (the Limited Partners) in the Partnership will be allocated the remaining 99% of these items in proportion to their respective investments. The proceeds from the disposition of any of the Local Limited Partnerships 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 Partnership. 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) and the General Partner would then be entitled to receive proceeds equal to its 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. Risks and Uncertainties An investment in the Partnership and the Partnerships 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 Partnerships 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 persons 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 Partnerships 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 Partnerships investment in the Housing Complex would occur. The Partnership is a limited partner or a 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 Partnerships 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 Housing Complexes, 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 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. All of the Low Income Housing Tax Credits anticipated to be realized from the Local Limited Partnerships have been realized. The Partnership does not anticipate being allocated any Low Income Housing Tax Credits from the Local Limited Partnerships in the future. 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 could result in recapture if certain conditions are not met. All of the remaining Housing Complexes have completed their 15-year Compliance Period. 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, 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. The objective is to maximize the Limited Partners return wherever possible and, ultimately, to wind down the Partnership as Low Income Housing Tax Credits are no longer available. Local Limited Partnership interests may be disposed of any time by the General Partner in its discretion. While liquidation of the Housing Complexes continues to be evaluated, the dissolution of the Partnership was not imminent as of September 30, 2015. Upon management of the Partnership identifying a Local Limited Partnership for disposition, costs incurred by the Partnership in preparation for the disposition are deferred. Upon the sale of the Local Limited Partnership interest, the Partnership nets the costs that had been deferred against the proceeds from the sale in determining the gain or loss on sale of the Local Limited Partnership. Deferred disposition costs are included in other assets on the condensed balance sheets. The Partnership has received the majority vote in favor of the plan of liquidation of the Partnership. Therefore, the Partnership is engaging third party appraisers to appraise several or all of the Local Limited Partnerships in this Partnership. The appraisal is one of the preliminary steps that need to be completed in order to move forward with the approved liquidation plan. The expense incurred for the appraisals, or any other disposition related expenses the Partnership incurs, are being capitalized and will remain on the balance sheet until the respective Local Limited Partnership is sold. At the time of disposition the capitalized costs will be netted with any cash proceeds that are received in order to calculate the gain or loss on the disposition. As of March 31, 2015, the Partnership sold its Local Limited Partnership Interest in Beckwood Manor Seven, L.P., Alpine Manor, L.P., Briscoe Manor, Fawn Haven, L.P., Fort Stockton Manor, Pampa Manor Apartments, Vernon Manor Apartments, Baycity Village Apartments, L.P., Madisonville Manor, L.P., Northside Plaza Apartments, L.P., Evergreen Four, L.P., Waterford Place, L.P., Hidden Valley, L.P., Seneca Falls East Apartment Company II, L.P., Indian Creek L.P., Regency Court Apartments, L.P., Yantis Housing, Ltd., Mt. Graham Ltd. and Sandpiper Square, L.P. Each of the Local Limited Partnerships had completed its Compliance Period. As of September 30, 2015, the Partnership has identified two Local Limited Partnerships for possible disposition as listed in the table below. Once the sales are finalized, the Partnership will use the cash proceeds to reimburse the General Partner or an affiliate for expenses paid on its behalf or pay accrued asset management fees. Any remaining proceeds will be placed in the Partnerships reserves for future operating expenses. No distributions will be made to the Limited Partners. The Compliance Period for all Local Limited Partnership has expired so there is no risk of tax credit recapture to the investors in the Partnership. Local Limited Partnership Debt at 12/31/14 Appraisal Value Estimated Sales Price Estimated Sales Related Expenses HOI Limited Partnership of Lenoir (**) $ 239,502 $ 155,000 43,560 $ 48,371 Laurel Creek Apartments - 820,000 * 60,308 * Purchase price is still under negotiation ** Sold subsequent to September 30, 2015 (see Note 5) 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 sum 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 are capitalized as part of the investment account and were amortized over 30 years (see Note 2). Equity in losses of Local Limited Partnerships for the periods ended September 30, 2015 and 2014 has been recorded by the Partnership. Managements estimate for the three and six-month periods is based on either actual unaudited results reported by the Local Limited Partnerships or historical trends in the operations of the Local Limited Partnerships. Equity in losses of 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 (see Note 2). 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. 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 all periods presented, all of the investment balances had reached zero. 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 September 30, 2015 and March 31, 2015, the Partnership had $90,164 and $180,631 in cash and cash equivalents, respectively. Reporting Comprehensive Income The Partnership had no items of other comprehensive income for all periods presented. 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 Partnerships 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 2012 remain open. 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 number of Partnership Units outstanding during the period. Calculation of diluted net loss per Partnership Unit is not required. 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. |
2. Investments in Local Limited
2. Investments in Local Limited Partnerships | 6 Months Ended |
Sep. 30, 2015 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Investments In Local Limited Partnerships | As of September 30, 2015 and March 31, 2015, the Partnership owns limited partnership interests in 2 Local Limited Partnerships, each of which owns one Housing Complex consisting of an aggregate of 58 apartment units. 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 generally entitled to 99%, 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. Selected financial information for the six months ended September 30, 2015 and 2014 from the unaudited combined condensed financial statements of the Local Limited Partnerships in which the Partnership has invested in is as follows: COMBINED CONDENSED STATEMENTS OF OPERATIONS 2015 2014 Revenues $ 224,000 $ 357,000 Expenses Interest expense 7,000 12,000 Depreciation and amortization 50,000 89,000 Operating expenses 155,000 208,000 Total expenses 212,000 309,000 Net income $ 12,000 $ 48,000 Net income allocable to the Partnership $ 12,000 $ 48,000 Net income recorded by the Partnership $ - $ - Certain Local Limited Partnerships have incurred significant 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 may be required to sustain operations of such Local Limited Partnerships. |
3. Related Party Transactions
3. Related Party Transactions | 6 Months Ended |
Sep. 30, 2015 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Under the terms of the Partnership Agreement, the Partnership has paid or is obligated to the General Partner or its affiliates the following fees: (a) An annual asset management fee equal to the greater amount of (i) $2,000 for each Housing complex, or (ii) 0.275% of gross proceeds. In either case, the fee will be decreased or increased annually based on changes to the Consumer Price Index. However, in no event will the maximum amount exceed 0.2% of the invested assets of the limited Partnerships, as defined. Invested Assets means the sum of the Partnerships investment in Local Limited Partnership and the Partnerships allocable share of mortgage loans on and other debts related to the Housing Complexes owned by such Local Limited Partnerships. Asset management fees of $6,718 and $10,056 were incurred during the six months ended September 30, 2015 and 2014, respectively. The Partnership paid the General Partner and or its affiliates $8,518 and $6,132 of those fees during the six months ended September 30, 2015 and 2014, respectively. (b) The Partnership reimburses the General Partner or its affiliates for operating expenses incurred by the Partnership and paid for by the General Partner or its affiliates on behalf of the Partnership. Operating expense reimbursements were $77,121 and $38,722 during the six months ended September 30, 2015 and 2014, respectively. (c) A subordinated disposition fee in an amount equal to 1% of the sale price may be received in connection with the sale or disposition of a Housing Complex or Local Limited Partnership interest. Payment of this fee is subordinated to the Limited Partners receiving a preferred return of 16% through December 31, 2004 and 6 % thereafter (as defined in the Partnership Agreement) and is payable only if the General Partner or its affiliates render services in the sales effort. No such fee was incurred for all periods presented. The accrued fees and expenses due to the General Partner and affiliates consist of the following at: September 30, 2015 March 31, 2015 Expenses paid by the General Partner or an affiliate on behalf of the Partnership $ 34,970 $ 33,931 Asset management fee payable 10,977 12,777 Total $ 45,947 $ 46,708 |
4. Return of Capital
4. Return of Capital | 6 Months Ended |
Sep. 30, 2015 | |
Return Of Capital | |
Return of Capital | During prior years, the Partnership was relieved of debt which was owed to the General Partner or an affiliate. The debt was a result of advances that had previously been made to the Partnership by the General Partner or an affiliate to aid the Partnership in providing funding to several Local Limited Partnerships which were experiencing operational issues. During the six months ended September 30, 2015, $6,482 was reimbursed to the General Partner for repayment of the previously written off amounts. The repayment was a result of sale proceeds received from the disposition of one of the Local Limited Partnerships. |
5. Subsequent Events
5. Subsequent Events | 6 Months Ended |
Sep. 30, 2015 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent to September 30, 2015, the Partnership sold its Local Limited Partnership interest in HOI Limited Partnership of Lenoir, LP (Lenoir) for $43,560. Lenoir was appraised for $155,000, and had a mortgage note balance of $239,502 as of December 31, 2014. The Partnership will use the cash proceeds to reimburse the General Partner or an affiliate for expenses paid on its behalf or pay accrued asset management fees. The Partnership incurred $48,371 in sales related expenses, which were netted against the proceeds from the sale in calculating the loss on sale. The investment balance was zero at the time of the sale of the Local Limited Partnership; therefore a loss of $4,811 will be recorded. The Compliance Period for Lenoir has expired so there is no risk of tax credit recapture to the investors. |
1. Summary of Significant Acc12
1. Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
General | The accompanying condensed unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q for quarterly reports under Section 13 or 15(d) of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended September 30, 2015 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2016. For further information, refer to the financial statements and footnotes thereto included in the Partnership's annual report on Form 10-K for the fiscal year ended March 31, 2015. |
Organization | WNC Housing Tax Credit Fund IV, L.P., Series 1 (the Partnership) is a California Limited Partnership formed under the laws of the State of California on May 4, 1993 and commenced operations on October 20, 1993. The Partnership was formed to acquire limited partnership interests in other limited partnerships ("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 Tax Credit Partners IV, L.P. (TCP IV or the General Partner). The General Partner of TCP IV 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 the General Partner, as the Partnership has no employees of its own. The Partnership shall continue in full force and effect until December 31, 2050, 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. The partnership agreement authorized the sale of up to 10,000 units of limited partnership interest (Partnership Units) at $1,000 per Partnership Unit. The offering of Partnership Units had concluded in July 1994, at which time 10,000 Partnership Units representing subscriptions in the amount of $10,000,000 had been accepted. As of September 30, 2015 and March 31, 2015, a total of 9,936 and 9,939 Partnership Units, respectively, remain outstanding. The General Partner has a 1% interest in operating profits and losses, taxable income and losses, cash available for distribution from the Partnership and Low Income Housing Tax Credits of the Partnership. The investors (the Limited Partners) in the Partnership will be allocated the remaining 99% of these items in proportion to their respective investments. The proceeds from the disposition of any of the Local Limited Partnerships 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 Partnership. 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) and the General Partner would then be entitled to receive proceeds equal to its 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. |
Risks and Uncertainties | An investment in the Partnership and the Partnerships 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 Partnerships 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 persons 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 Partnerships 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 Partnerships investment in the Housing Complex would occur. The Partnership is a limited partner or a 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 Partnerships 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 Housing Complexes, 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 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. All of the Low Income Housing Tax Credits anticipated to be realized from the Local Limited Partnerships have been realized. The Partnership does not anticipate being allocated any Low Income Housing Tax Credits from the Local Limited Partnerships in the future. 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 could result in recapture if certain conditions are not met. All of the remaining Housing Complexes have completed their 15-year Compliance Period. 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, 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. The objective is to maximize the Limited Partners return wherever possible and, ultimately, to wind down the Partnership as Low Income Housing Tax Credits are no longer available. Local Limited Partnership interests may be disposed of any time by the General Partner in its discretion. While liquidation of the Housing Complexes continues to be evaluated, the dissolution of the Partnership was not imminent as of September 30, 2015. Upon management of the Partnership identifying a Local Limited Partnership for disposition, costs incurred by the Partnership in preparation for the disposition are deferred. Upon the sale of the Local Limited Partnership interest, the Partnership nets the costs that had been deferred against the proceeds from the sale in determining the gain or loss on sale of the Local Limited Partnership. Deferred disposition costs are included in other assets on the condensed balance sheets. The Partnership has received the majority vote in favor of the plan of liquidation of the Partnership. Therefore, the Partnership is engaging third party appraisers to appraise several or all of the Local Limited Partnerships in this Partnership. The appraisal is one of the preliminary steps that need to be completed in order to move forward with the approved liquidation plan. The expense incurred for the appraisals, or any other disposition related expenses the Partnership incurs, are being capitalized and will remain on the balance sheet until the respective Local Limited Partnership is sold. At the time of disposition the capitalized costs will be netted with any cash proceeds that are received in order to calculate the gain or loss on the disposition. As of March 31, 2015, the Partnership sold its Local Limited Partnership Interest in Beckwood Manor Seven, L.P., Alpine Manor, L.P., Briscoe Manor, Fawn Haven, L.P., Fort Stockton Manor, Pampa Manor Apartments, Vernon Manor Apartments, Baycity Village Apartments, L.P., Madisonville Manor, L.P., Northside Plaza Apartments, L.P., Evergreen Four, L.P., Waterford Place, L.P., Hidden Valley, L.P., Seneca Falls East Apartment Company II, L.P., Indian Creek L.P., Regency Court Apartments, L.P., Yantis Housing, Ltd., Mt. Graham Ltd. and Sandpiper Square, L.P. Each of the Local Limited Partnerships had completed its Compliance Period. As of September 30, 2015, the Partnership has identified two Local Limited Partnerships for possible disposition as listed in the table below. Once the sales are finalized, the Partnership will use the cash proceeds to reimburse the General Partner or an affiliate for expenses paid on its behalf or pay accrued asset management fees. Any remaining proceeds will be placed in the Partnerships reserves for future operating expenses. No distributions will be made to the Limited Partners. The Compliance Period for all Local Limited Partnership has expired so there is no risk of tax credit recapture to the investors in the Partnership. Local Limited Partnership Debt at 12/31/14 Appraisal Value Estimated Sales Price Estimated Sales Related Expenses HOI Limited Partnership of Lenoir (**) $ 239,502 $ 155,000 43,560 $ 48,371 Laurel Creek Apartments - 820,000 * 60,308 * Purchase price is still under negotiation ** Sold subsequent to September 30, 2015 (see Note 5) |
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 sum 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 are capitalized as part of the investment account and were amortized over 30 years (see Note 2). Equity in losses of Local Limited Partnerships for the periods ended September 30, 2015 and 2014 has been recorded by the Partnership. Managements estimate for the three and six-month periods is based on either actual unaudited results reported by the Local Limited Partnerships or historical trends in the operations of the Local Limited Partnerships. Equity in losses of 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 (see Note 2). 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. 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 all periods presented, all of the investment balances had reached zero. |
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 September 30, 2015 and March 31, 2015, the Partnership had $90,164 and $180,631 in cash and cash equivalents, respectively. |
Reporting Comprehensive Income | The Partnership had no items of other comprehensive income for all periods presented. |
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 Partnerships 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 2012 remain open. |
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 number of Partnership Units outstanding during the period. Calculation of diluted net loss per Partnership Unit is not required. |
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. |
1. Summary of Significant Acc13
1. Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Schedule of Possible Disposition of Local Limited Partnerships | Local Limited Partnership Debt at 12/31/14 Appraisal Value Estimated Sales Price Estimated Sales Related Expenses HOI Limited Partnership of Lenoir (**) $ 239,502 $ 155,000 43,560 $ 48,371 Laurel Creek Apartments - 820,000 * 60,308 * Purchase price is still under negotiation ** Sold subsequent to September 30, 2015 (see Note 5) |
2. Investments in Local Limit14
2. Investments in Local Limited Partnerships (Tables) | 6 Months Ended |
Sep. 30, 2015 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Combined Condensed Statements of Operations | 2015 2014 Revenues $ 224,000 $ 357,000 Expenses Interest expense 7,000 12,000 Depreciation and amortization 50,000 89,000 Operating expenses 155,000 208,000 Total expenses 212,000 309,000 Net income $ 12,000 $ 48,000 Net income allocable to the Partnership $ 12,000 $ 48,000 Net income recorded by the Partnership $ - $ - |
3. Related Party Transactions (
3. Related Party Transactions (Tables) | 6 Months Ended |
Sep. 30, 2015 | |
Related Party Transactions [Abstract] | |
Schedule of Accrued Fees and Expenses Due to General Partner and Affiliates | September 30, 2015 March 31, 2015 Expenses paid by the General Partner or an affiliate on behalf of the Partnership $ 34,970 $ 33,931 Asset management fee payable 10,977 12,777 Total $ 45,947 $ 46,708 |
1. Summary of Significant Acc16
1. Summary of Significant Accounting Policies - Schedule of Possible Disposition of Local Limited Partnerships (Details) - USD ($) | 6 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | ||
HOI Limited Partnership of Lenoir [Member] | |||
Debt at 12/31/14 | [1] | $ 239,502 | |
Appraisal Value | [1] | $ 155,000 | |
Estimated Sales Price | [1] | 43,560 | |
Estimated Sales Related Expenses | [1] | 48,371 | |
Laurel Creek Apartments [Member] | |||
Debt at 12/31/14 | $ 0 | ||
Appraisal Value | $ 820,000 | ||
Estimated Sales Price | [2] | ||
Estimated Sales Related Expenses | $ 60,308 | ||
[1] | Sold subsequent to September 30, 2015 | ||
[2] | Purchase price is still under negotiation |
1. Summary of Significant Acc17
1. Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Mar. 31, 2015 | |
Accounting Policies [Abstract] | |||||
Partnership units remain outstanding | 9,936 | 9,936 | 9,939 | ||
Affiliates for debts previously written off | $ 6,482 | ||||
Gain on sale | $ 0 | $ 22,597 | $ 0 | $ 22,597 |
2. Investments in Local Limit18
2. Investments in Local Limited Partnerships - Combined Condensed Statements of Operations (Details) - Limited Partners [Member] - USD ($) | 6 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Revenues | $ 224,000 | $ 357,000 |
Interest expense | 7,000 | 12,000 |
Depreciation and amortization | 50,000 | 89,000 |
Operating expenses | 155,000 | 208,000 |
Total expenses | 212,000 | 309,000 |
Net income | 12,000 | 48,000 |
Net income allocable to the Partnership | 12,000 | 48,000 |
Net income recorded by the Partnership | $ 0 | $ 0 |
2. Investments in Local Limit19
2. Investments in Local Limited Partnerships (Details Narrative) - Integer | Sep. 30, 2015 | Mar. 31, 2015 |
Equity Method Investments and Joint Ventures [Abstract] | ||
Number of partnership interests in local limited partnerships | 2 | 2 |
Number of apartment units | 58 | 58 |
Percentage of interests in local limited partnership | 99.00% | 99.00% |
3. Related Party Transactions -
3. Related Party Transactions - Schedule of Accrued Fees and Expenses Due to General Partner and Affiliates (Details) - USD ($) | Sep. 30, 2015 | Mar. 31, 2015 |
Related Party Transactions [Abstract] | ||
Expenses paid by the General Partner or an affiliate on behalf of the Partnership | $ 34,970 | $ 33,931 |
Asset management fee payable | 10,977 | 12,777 |
Total | $ 45,947 | $ 46,708 |
3. Related Party Transactions21
3. Related Party Transactions (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Related Party Transactions [Abstract] | ||||
Asset management fees | $ 3,359 | $ 4,259 | $ 6,718 | $ 10,056 |
Paid an affiliate of the General Partner an additional | 8,518 | 6,132 | ||
Operating expense reimbursements | $ 77,121 | $ 38,722 |
4. Return of Capital (Details N
4. Return of Capital (Details Narrative) | 6 Months Ended |
Sep. 30, 2015USD ($) | |
Return Of Capital | |
Affiliates for debts previously written off | $ 6,482 |