NATIONAL TAX CREDIT PARTNERS, L.P.
55 Beattie Place, P.O. Box 1089
Greenville, SC 29602
July 14, 2005
Correspondence Filing Via Edgar and Overnight Delivery
United States Securities and Exchange Commission
Division of Corporation Finance
Mail Stop 4561
450 Fifth Street, NW
Washington, D.C. 20549
Attn: Mr. Steven Jacobs
Re: National Tax Credit Partners, L.P.
Form 10-KSB for the year ended December 31, 2004 File No. 0-18541
Ladies and Gentlemen:
This letter responds to the comments of the staff of the Securities and Exchange
Commission (the "Staff") addressed to National Tax Credit Partners, L.P., a
California limited partnership (the "Partnership"), in a letter dated June 15,
2005, which was sent in response to the Partnership's June 9, 2005 response to
the Staff's second comment letter dated May 25, 2005, which was sent in response
to the Partnership's May 10, 2005 response to the Staff's original comment
letter dated April 26, 2005. The Partnership's response to the Staff's comments
are set forth below and are numbered to correspond to the numbering of the
Staff's comments in the Staff's letter dated June 15, 2005.
As discussed more fully below, the Partnership determined that its evaluation of
paragraph 5(c) of FIN 46R did not properly take into account the guidance in
footnote 11 to FIN 46R as it applies to two local limited partnerships in which
a related party is the general partner. As a result, the Partnership has
determined that the two local limited partnerships are variable interest
entities. This matter and the Partnership's plan to revise its disclosure in
future filings are described below following the Partnership's responses to the
Staff's comments.
* * * * *
Form 10-KSB for the year ended December 31, 2004
Financial Statements and Notes
Note 1 - Summary of Partnership Organization and Significant Accounting
Policies
Recent Accounting Pronouncements
1. Comment: We have reviewed your response to comment 2 in our letter dated
May 25, 2005. Please address the following additional items:
o Tell us the name of the general partner of the local limited
partnerships and if they are currently consolidating the variable
interest entities.
o Please provide us with a representative excerpt from the local
limited partnerships agreements that discuss the fact that the
general partner is prohibited from selling, assigning, transferring,
mortgaging, pledging or otherwise encumbering or disposing of its
interests and identifies the parties with the related consent rights.
Response: The accompanying Exhibit A provides the name of the general
partner of each of the local limited partnerships and the Partnership's
understanding of whether the general partner is consolidating the
respective variable interest entity ("VIE"). Several of the general
partners of the local limited partnerships are not affiliates of the
Partnership and have not informed the Partnership of their accounting
policies with respect to their investments in the local limited
partnerships.
The accompanying Exhibit B provides a representative excerpt from the local
limited partnership agreement for an investee of the Partnership with an
administrative general partner and for an investee of the Partnership
without an administrative general partner, which excerpts describe the
restriction on the general partner's ability to sell, assign, transfer,
mortgage, pledge or otherwise encumber or dispose of its interest in the
local limited partnership.
2. Comment: In your response you list a number of indicators that you
believe make the general partner the principal and the limited partner
the agent. A number of the indicators related to the general partner
appear to be the role of a management company. In addition, under the
terms of the partnership agreement, the general partner is prohibited
from selling, transferring, or encumbering its interest in the
partnership without the approval of the limited partner. This also
appears to indicate that the general partner is the agent. Tell us how
you addressed the above factors in determining which party was the
principal and agent and also discuss any kick-out rights that the
limited partner possesses.
Response: Paragraph 17(b) requires consideration of "The relationship and
significance of the activities of the variable interest entity to various
parties within the related party group" in making the determination of
which party within the related party group is most closely associated with
the VIE. The rights and obligations of the general partners listed in the
Partnership's response dated June 9, 2005 are detailed in Articles V and
VIII of the local limited partnership agreements. These rights and
obligations are granted to the general partner and not to the management
company. The Partnership concluded that these rights and obligations
granted to the general partners were factors that strongly indicated the
general partners are the parties most closely associated with the local
limited partnerships.
Under the terms of the local limited partnership agreements, the general
partner is prohibited from selling, transferring or encumbering its
interest in the local limited partnerships without the consent of the
administrative general partner. For those local limited partnerships
without an administrative general partner, this right has either been
eliminated or the limited partner (the Partnership) is provided a right of
consent with respect to the general partner's sale, transfer or encumbering
of its interest.
The Partnership recognizes that the requirement of limited partner consent
to the general partner's sale, transfer or encumbering of its interest is a
factor that could be interpreted to indicate that the limited partner is
the principal and the general partner is the agent. The Partnership
considered this factor in its determination under paragraph 17 of FIN 46R
of the party that is most closely associated with the local limited
partnerships.
The local limited partnership agreements provide the following with respect
to "material defaults" that provide the administrative general partner with
the right but not the obligation to remove the general partner and appoint
itself or any of its affiliates to succeed such general partner if:
o The general partner materially violates its fiduciary responsibilities
as general partner of the partnership;
o The general partner is in material breach of the local limited
partnership agreement or any related document for ten days after notice
has been given by the administrative general partner, subject to
reasonable time periods provided for the general partner to cure such
breach;
o The general partner willfully violates any law, regulation or order
applicable to the partnership which has or may have a material adverse
effect on the partnership or the apartment complex;
o The general partner becomes bankrupt;
o The partnership is in material breach of any project document or any
other material agreement or document affecting the partnership;
o The partnership at any time after rental achievement has realized cash
flow of less than a designated amount; or
o The partnership has had less than a designated percentage of the
apartment units in the apartment complex eligible to receive tax
credits, or the qualified basis of the apartment complex has been less
than the basis at the close of the preceding year, or the total amount
of tax credits is less than a designated amount through the compliance
period.
In the event the administrative general partner does not act with respect
to one of the above events occurring, the limited partner (the Partnership)
has the right upon a majority vote of its limited partners, to cause the
administrative general partner of the local limited partnership to remove
the general partner and appoint the administrative general partner or one
of its affiliates as successor general partner of the local limited
partnership.
The Partnership believes that the limited partner rights to remove a
general partner without cause would be a factor indicating that the general
partner is the agent of the limited partner. However, the rights described
above may be exercised only in the event of a breach or material default of
a specific obligation. These rights are protective in nature and do not
indicate that the general partner is the agent of the limited partner.
In summary, the factors noted above do not conclusively indicate which
party is principal or agent in the de facto agency relationship that is
deemed to exist under paragraph 16 of FIN 46R. As discussed in the
Partnership's response dated June 9, 2005, the Partnership believes the
general partner has characteristics commonly associated with the principal.
Revised Determination of VIEs and Planned Future Disclosure
In connection with its consideration of the Staff's comments, the Partnership
has determined that it did not properly apply paragraph 5(c) of FIN 46R in
determining whether certain local limited partnerships are VIEs. This
misapplication involves two local limited partnerships where the general
partner is a subsidiary of National Partnership Investments Corp. ("NAPICO"),
the general partner of the Partnership. The Partnership previously determined
that the condition in paragraph 5(c)(ii) was not met because the activities of
the local limited partnership involve or are conducted on behalf of the NAPICO
subsidiary, the general partner, as well as the Partnership, the limited
partner with disproportionately few voting rights. This determination did not
properly consider footnote 11 to paragraph 5(c) of FIN 46R, which states in
part "activities that involve or are conducted on behalf of the related
parties of an investor with disproportionately few voting rights shall be
treated as if they involve or are conducted on behalf of that investor". We
have now concluded that substantially all of the activities of the local
limited partnership should have been treated as if they involve or are
conducted on behalf of the Partnership. Consequently, the local limited
partnerships meet both conditions in paragraph 5(c) and are VIEs.
The Partnership has considered the requirements of paragraphs 16 and 17 of FIN
46R and determined that the general partner is the member of the related party
group that is most closely associated with, and therefore is the primary
beneficiary of, the local limited partnerships that the Partnership now
considers to be VIEs based on the Partnership's reconsideration of paragraph
5(c). Accordingly, the Partnership should not consolidate the VIEs and the
basic financial statements are not affected by the Partnership's determination
that the local limited partnerships are VIEs.
The Partnership will revise its disclosure of significant accounting policies
in future filings to include information required by paragraph 24 of FIN 46R
as it applies to the two additional local limited partnerships that were
determined to be VIEs.
* * * * *
As requested by the Staff in its letter dated April 26, 2005, the Partnership
again acknowledges that: (a) the Partnership is responsible for the adequacy
and accuracy of the disclosure in the filings; (b) Staff comments or changes
to disclosure in response to Staff comments do not foreclose the Commission
from taking any action with respect to the filings; and (c) the Partnership
may not assert Staff comments as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the United
States.
If you have further questions regarding the information provided, please
contact the undersigned or Stephen Waters. Mr. Waters can be reached directly
at (864) 239-1554 or by fax at (864) 239-5824.
Sincerely,
/s/ David R. Robertson
David R. Robertson
President and Chief Executive Officer
National Partnership Investments Corp.,
the general partner of National Tax
Credit Partners, L.P.
Exhibit A - Schedule of General Partners of the Local Limited Partnerships
GP an GP
AIMCO
Registrant Local Limited Partnership General Partner (GP) (1) Affiliate Consolidating
NTCP Comfed Qualified Housing LP XII Commercial Federal Realty No Unknown
Investors Corp.
NTCP Countryview Columbus, Ltd. NTC, Inc. Yes No
NTCP Dickens Associates II D. Egidi No Unknown
NTCP Glenark Associates LP Rhode Island Housing & No Unknown
Mortgage Finance Corp.
NTCP Summit Tax Credit Properties NTC, Inc. Yes No
I, LP
NTCP Summit Tax Credit Properties NTC, Inc. Yes No
II, LP
NTCP Summit Tax Credit Properties NTC, Inc. Yes No
III, LP
NTCP Tyrone Elderly Limited NTC, Inc. Yes No
Partnership
NTCP Vinton Park/School LP Roseland Redevelopment No Unknown
Company
(1) General Partner of the Local Limited Partnership
Exhibit B - Representative Local Limited Partnership Agreement Excerpts
Com Fed Qualified Housing LP XII (Administrative General Partner exists)
11.1 Withdrawal.
A. The Operating General Partner may not Withdraw (other than an Involuntary
Withdrawal) from the Partnership or Assign, pledge or encumber all or any
part of its Interest without the Consent of the Administrative General
Partner, and, to the extent required, of each Authority and each Lender.
The consent of the Limited Partner shall not be required.
Definitions.
"Assignment" means a valid sale, exchange, transfer or other disposition of all
or any portion of an Interest. "Assignor" means a Partner who makes an
Assignment and "Assignee" means a person who receives an Assignment.
"Withdrawing" or "Withdrawal" (including the verb form "Withdraw" and the
adjectival form "Withdrawn") means, as to the Operating General Partner, the
occurrence of the death, adjudication of insanity or incompetence, Bankruptcy,
dissolution or liquidation of such Partner, or the withdrawal, removal or
retirement from the Partnership of such Partner for any reason, including any
Assignment of its Interest and those situations when a General Partner may no
longer continue as a General Partner by reason of any law or pursuant to any
terms of this Agreement.
Tyrone Elderly Limited Partnership (No Administrative General Partner exists)
11.1 Withdrawal.
A. The Operating General Partner may not Withdraw (other than an Involuntary
Withdrawal) from the Partnership or Assign, pledge or encumber all or any
part of its Interest without the Consent of the Limited Partner, and, to
the extent required, of each Authority and each Lender.
Definitions.
"Assignment" means a valid sale, exchange, transfer or other disposition of all
or any portion of an Interest. "Assignor" means a Partner who makes an
Assignment and "Assignee" means a person who receives an Assignment.
"Withdrawing" or "Withdrawal" (including the verb form "Withdraw" and the
adjectival form "Withdrawn") means, as to the Operating General Partner, the
occurrence of the death, adjudication of insanity or incompetence, Bankruptcy,
dissolution or liquidation of such Partner, or the withdrawal, removal or
retirement from the Partnership of such Partner for any reason, including any
Assignment of its Interest and those situations when a General Partner may no
longer continue as a General Partner by reason of any law or pursuant to any
terms of this Agreement.