August 14 , 2007
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Boston Financial Qualified Housing Tax Credits L.P. IV
Report on Form 10-QSB for the Quarter Ended June 30, 2007
File Number 0-19765
Dear Sir/Madam:
Pursuant to the requirements of section 15(d) of the Securities Exchange Act of
1934, filed herewith a copy of subject report.
Very truly yours,
/s/Patricia Olsen-Goldberg
Patricia Olsen-Goldberg
Controller
QH4-10Q1.DOC
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2007
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 0-19765
Boston Financial Qualified Housing Tax Credits L.P. IV
(Exact name of registrant as specified in its charter)
Massachusetts 04-3044617
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 Arch Street, Boston, Massachusetts 02110-1106
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 439-3911
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 .
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Balance Sheet (Unaudited) - June 30, 2007 1
Statements of Operations (Unaudited) - For the Three
Months Ended June 30, 2007 and 2006 2
Statement of Changes in Partners' Equity
(Unaudited) - For the Three Months Ended June 30, 2007 3
Statements of Cash Flows (Unaudited) - For the
Three Months Ended June 30, 2007 and 2006 4
Notes to the Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 3. Controls and Procedures 13
PART II - OTHER INFORMATION
Items 1-6 14
SIGNATURE 15
CERTIFICATIONS 16
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partner)
BALANCE SHEET
June 30, 2007
(Unaudited)
Assets
Cash and cash equivalents $ 16,474,540
Investments in Local Limited Partnerships (Note 1) 3,264,951
Accounts receivable (Note 1) 1,100,000
Total Assets $ 20,839,491
Liabilities and Partners' Equity
Due to affiliate $ 41,186
Accrued expenses 76,521
Total Liabilities 117,707
General, Initial and Investor Limited Partners' Equity 20,721,784
Total Liabilities and Partners' Equity $ 20,839,491
The accompanying notes are an integral part of these financial statements.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
STATEMENTS OF OPERATIONS
For the Three Months Ended June 30, 2007 and 2006
(Unaudited)
2007 2006
Revenue:
Investment $ 18,376 $ 50,467
Other - 35,000
Total Revenue 18,376 85,467
Expense:
Asset management fees, affiliate 20,593 26,785
Provision for valuation allowance on advances to Local
Limited Partnerships (Note 1) 13,291 50,006
General and administrative (includes
reimbursements to an affiliate in the amount
of $21,430 and $31,432 in 2007 and
2006, respectively) 71,225 745,183
Amortization 6,834 6,834
Total Expense 111,943 828,808
Loss before equity in losses of Local Limited Partnerships
and gain on sale of investments in Local Limited Partnerships (93,567) (743,341)
Equity in losses of Local Limited Partnerships (Note 1) (97,060) (79,726)
Gain on sale of investments in Local Limited Partnerships 75,000 -
Net Loss $ (115,627) $ (823,067)
Net Loss allocated:
General Partners $ (1,154) $ (8,231)
Limited Partners (114,473) (814,836)
$ (115,627) $ (823,067)
Net Loss per Limited Partner Unit
(68,043 Units) $ (1.68) $ (11.98)
The accompanying notes are an integral part of these financial statements.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' EQUITY
For the Three Months Ended June 30, 2007
(Unaudited)
Initial Investor Net
General Limited Limited Unrealized
Partners Partner Partners Losses Total
Balance at March 31, 2007 $ 208,371 $ 5,000 $ 20,624,040 $ (248) $20,837,163
Comprehensive Income (Loss):
Change in net unrealized
losses on investment securities
available for sale - - - 248 248
Net Loss (1,154) - (114,473) - (115,627)
Comprehensive Income (Loss) (1,154) - (114,473) 248 115,379)
Balance at June 30, 2007 $ 207,217 $ 5,000 $ 20,509,567 $ - $ 20,721,784
The accompanying notes are an integral part of these financial statements.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
For the Three Months Ended June 30, 2007 and 2006
(Unaudited)
2007 2006
Net cash used for operating activities $ (46,958) $ (32,003)
Net cash provided by investing activities 652,260 498,994
Net increase in cash and cash equivalents 605,302 466,991
Cash and cash equivalents, beginning 15,869,238 1,884,202
Cash and cash equivalents, ending $ 16,474,540 $ 2,351,193
The accompanying notes are an integral part of these financial statements
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
The unaudited financial statements presented herein have been prepared in
accordance with the instructions to Form 10-QSB and do not include all of the
information and note disclosures required by accounting principles
generally accepted in the United States of America. These statements should
be read in conjunction with the financial statements and notes thereto
included with the Partnership's Form 10-KSB for the year ended
March 31, 2007. In the opinion of the Managing General Partner, these
financial statements include all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the Partnership's
financial position and results of operations. The results of operations for
the periods may not be indicative of the results to be expected for the year.
The Managing General Partner of the Partnership has elected to report
results of the Local Limited Partnerships in which the Partnership has a
limited partnership interest on a 90 day lag basis because the Local Limited
Partnerships report their results on a calendar year basis. Accordingly, the
financial information of the Local Limited Partnerships that is included in
the accompanying financial statements is as of March 31, 2007 and 2006.
Generally, profits, losses, tax credits and cash flows from operations are
allocated 99% to the Limited Partners and 1% to the General Partners. Net
proceeds from a sale or refinancing will be allocated 95% to the Limited
Partners and 5% to the General Partners, after certain priority payments.
The General Partners may have an obligation to fund deficits in their capital
accounts,subject to limits set forth in the Partnership Agreement. However,
to the extent that the General Partner's capital accounts are in a deficit
position certain items of net income may be allocated to the General Partners
in accordance with the Partnership Agreement.
1. Investments in Local Limited Partnerships
The Partnership has limited partnership interests in eight Local Limited
Partnerships which were organized for the purpose of owningand operating
multi-family housing complexes, all of which are government-assisted.
The Partnership's ownership interest in each Local Limited Partnership is 99%,
except for Leawood Manor where the Partnership's ownership interest is 89%.
The Partnership may have negotiated or may negotiate options with the
Local General Partners to purchase or sell the Partnership's interests in the
Local Limited Partnerships at the end of the Compliance Period at nominal
prices. In the event that Properties are sold to a third party
or upon dissolution of the Local Limited Partnerships, proceeds will be
distributed according to the terms of each Local Limited Partnership agreement.
The following is a summary of investments in Local Limited Partnerships at
June 30, 2007:
Capital contributions and advances paid to Local Limited Partnerships and purchase
price paid to withdrawing partners of Local Limited Partnerships $ 23,116,426
Cumulative equity in losses of Local Limited Partnerships (excluding cumulative
unrecognized losses of $7,225,927) (14,457,344)
Cumulative cash distributions received from Local Limited Partnerships (2,438,270)
Investments in Local Limited Partnerships before adjustments 6,220,812
Excess investment costs over the underlying assets acquired:
Acquisition fees and expenses 2,042,689
Cumulative amortization of acquisition fees and expenses (776,406)
Investments in Local Limited Partnerships before valuation allowance 7,487,095
Valuation allowance on investments in Local Limited Partnerships (4,222,144)
Investments in Local Limited Partnerships $ 3,264,951
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (continued)
(Unaudited)
1. Investments in Local Limited Partnerships (continued)
For the three months ended June 30, 2007, the Partnership advanced $13,291 to
one of the Local Limited Partnerships, all of which was reserved. The
Partnership has recorded a valuation allowance for its investments in certain
Local Limited Partnerships in order to appropriately reflect the estimated net
realizable value of these investments.
The Partnership's share of the net losses of the Local Limited Partnerships
for the three months ended June 30, 2007 is $336,688. For the three months
ended June 30, 2007, the Partnership has not recognized $239,628 of equity
in losses relating to certain Local Limited Partnerships in which cumulative
equity in losses and cumulative distributions exceeded its total investments
in these Local Limited Partnerships.
As of June 30, 2007, $1,100,000 is receivable related to the sale of two Local
Limited Partnerships in the year ended March 31, 2007.
2. Significant Subsidiaries
The following Local Limited Partnerships invested in by the Partnership
represent more than 20% of the Partnership's total assets or equity as of
June 30, 2007 or 2006 or net losses for the three months ended either
June 30, 2007 or 2006. The following financial information represents the
performance of these Local Limited Partnerships for the three months ended
March 31, 2007 and 2006:
Leawood Associates, L.P. A Limited Partnership 2007 2006
Revenue $ 516,463 $ 508,658
Net Loss $ (71,093) $ (73,776)
Allentown Towne House, L.P.
Revenue $ 354,325 $ 347,696
Net Loss $ (23,585) $ (28,633)
Prince Street Towers, L.P. A Limited Partnership
Revenue $ 456,959 $ 457,945
Net Loss $ (27,698) $ (17,392)
Sencit Towne House, L.P.
Revenue $ 497,797 $ 493,598
Net Income $ 17,155 $ 31,818
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain matters discussed herein constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. The
Partnership intends such forward-looking statements to be covered by the safe
harbor provisions for forward-looking statements and is including this
statement for purposes of complying with these safe harbor provisions.
Although the Partnership believes the forward-looking statements are based
on reasonable assumptions, the Partnership can give no assurance that its
expectations will be attained. Actual results and timing of certain events
could differ materially from those projected in or contemplated by the
forward-looking statements due to a number of factors, including, without
limitation, general economic and real estate conditions and interest rates.
Critical Accounting Policies
The Partnership's accounting policies include those that relate to its
recognition of investments in Local Limited Partnerships using the equity
method of accounting. The Partnership's policy is as follows:
The Local Limited Partnerships in which the Partnership invests are Variable
Interest Entities ("VIE"s). The Partnership is involved with the VIEs as
a non-controlling limited partner equity holder. Because the Partnership is
not the primary beneficiary of these VIEs, it accounts for its investments in
the Local Limited Partnerships using the equity method of accounting. As a
result of its involvement with the VIEs, the Partnership's exposure to
economic and financial statement losses is limited to its investments in the
VIEs ($3,264,951 at June 30, 2007). The Partnership may be subject to
additional losses to the extent of any financial support that the
Partnership voluntarily provides in the future. Under the equity method,
the investment is carried at cost, adjusted for the Partnership's share of
net income or loss and for cash distributions from the Local Limited
Partnerships; equity in income or loss of the Local Limited Partnerships is
included currently in the Partnership's operations. Under the equity
method, a Local Limited Partnership investment will not be carried below
zero. To the extent that equity in losses are incurred when the
Partnership's carrying value of the respective Local Limited Partnership
has been reduced to a zero balance, the losses will be suspended and offset
against future income. Income from Local Limited Partnerships, where
cumulative equity in losses plus cumulative distributions have exceeded
the total investment in Local Limited Partnerships, will not be recorded
until all of the related unrecorded losses have been offset. To the extent
that a Local Limited Partnership with a carrying value of zero distributes
cash to the Partnership, that distribution is recorded as income on the
books of the Partnership and is included in "other revenue"in the accompanying
financial statements.
The Partnership has implemented policies and practices for assessing
other-than-temporary declines in values of its investments in Local Limited
Partnerships. Periodically, the carrying values of the investments
are compared to their respective fair values. If an other-than-temporary
decline in carrying value exists, a provision to reduce the asset to
fair value, as calculated based primarily on remaining tax benefits, will be
recorded in the Partnership's financial statements. Generally, the carrying
values of most Local Limited Partnerships will decline through losses and
distributions in amounts sufficient to prevent other-than-temporary
impairments. However, the Partnership may record similar impairment losses
in the future if the expiration of tax credits outpaces losses and
distributions from any of the Local Limited Partnerships.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Liquidity and Capital Resources
The Partnership had an increase in cash and cash equivalents of $605,302
from $15,869,238 at March 31, 2007 to $16,474,540 at June 30, 2007. The
increase is primarily attributable to the maturity of investments
securities, proceeds received from the sale of investments in Local Limited
Partnerships and cash distributions from Local Limited Partnerships,
partially offset by cash used for operating activities and advances to Local
Limited Partnerships.
The Managing General Partner originally designated 4% of the Gross Proceeds
as Reserves, as defined in the Partnership Agreement. The Reserves were
established to be used for working capital of the Partnership and
contingencies related to the ownership of Local Limited Partnership interests.
The Managing General Partner may increase or decrease such Reserves from
time to time, as it deems appropriate. At June 30, 2007, $16,474,540 of cash
and cash equivalents has been designated as Reserves.
To date, professional fees relating to various Property issues totaling
approximately $1,985,000 have been paid from Reserves. To date, Reserve funds
in the amount of approximately $304,000 also have been used to make additional
capital contributions to one Local
Limited Partnership. In the event a Local Limited Partnership encounters
operating difficulties requiring additional funds, the Managing General
Partner might deem it in its best interest to voluntarily provide such funds in
order to protect its investment. As of June 30, 2007, the Partnership has
advanced approximately $1,467,000 to Local Limited Partnerships to fund
operating deficits.
The Managing General Partner believes that the investment income earned on the
Reserves, along with cash distributions received from Local Limited
Partnerships, to the extent available, will be sufficient to fund the
Partnership's ongoing operations. Reserves may be used to fund Partnership
operating deficits, if the Managing General Partner deems funding
appropriate. If Reserves are not adequate to cover the Partnership's
operations, the Partnership will seek other financing sources including,
but not limited to, the deferral of Asset Management Fees paid to an affiliate
of the Managing General Partner or working with Local Limited Partnerships to
increase cash distributions. To date, the Partnership has used approximately
$17,510,000 of operating funds to replenish Reserves.
Since the Partnership invests as a limited partner, the Partnership has no
contractual obligation to provide additional funds to Local Limited
Partnerships beyond its specified investment. Thus, at June 30, 2007, the
Partnership had no contractual or other obligation to any Local Limited
Partnership which had not been paid or provided for.
Cash Distributions
No cash distributions were made during the three months ended June 30, 2007.
Results of Operations
The Partnership's results of operations for three months ended June 30, 2007
resulted in a net loss of $115,627 as compared to a net loss of $823,067 for
the same period in 2006. The decrease in net loss is primarily attributable
to a decrease in general and administrative expenses, an increase in gain on
sale of investments in Local Limited Partnerships and a decrease in
provision for valuation allowance on advances to Local Limited Partnerships
partially offset by a decrease in other income and a decrease in investment
income. General and administrative expenses decreased primarily due to a
decrease in legal expenses, associated with litigation in which the
Partnership was involved. The increase in gain on sale of investments in Local
Limited Partnerships is due to additional proceeds from the
February 28, 2007 sale of Oakview Square. The decrease in provision for
valuation allowance on advances to Local Limited Partners is the result of a
decrease in advances made to Local Limited Partnerships during the three
months ended June 30, 2007. The decrease in other income is due to a
decrease in distributions from Local Limited Partnerships with
carrying values of zero.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Portfolio Update
The Partnership was formed on March 30, 1989 under the laws of the
Commonwealth of Massachusetts for the primary purpose of investing, as a
limited partner, in Local Limited Partnerships which own and operate apartment
complexes, most of which benefit from some form of federal, state or local
assistance program and each of which qualifies for low-income housing
tax credits. The Partnership's objectives are to: (i) provide current tax
benefits in the form of tax credits which qualified investors may use to
offset their federal income tax liability; (ii) preserve and protect the
Partnership's capital; (iii) provide limited cash distributions which are
not expected to constitute taxable income during Partnership operations; and
iv) provide cash distributions from sale or refinancing transactions.
The General Partners of the Partnership are Arch Street VIII, Inc., which
serves as the Managing General Partner, and Arch Street IV L.P., which also
serves as the Initial Limited Partner. Both of the General Partners are
affiliates of MMA. The fiscal year of the Partnership ends on March 31.
As of June 30, 2007, the Partnership's investment portfolio consisted of
limited partnership interests in eight Local Limited Partnerships, each of
which owns and operates a multi-family apartment complex and each of which
has generated Tax Credits. Since inception, the Partnership has generated
Tax Credits, net of recapture, of approximately $1,287 per Limited
Partner Unit. The aggregate amount of Tax Credits generated by the
Partnership was consistent with the objective specified in the
Partnership's prospectus.
Properties that receive low income housing Tax Credits must remain in compliance
with rent restriction and set-aside requirements for at least 15 calendar
years from the date the property is placed in service. Failure to do so would
result in recapture of a portion of the property's Tax Credits. The Compliance
Periods of the eight remaining Properties in which the Partnership has an
interest all expired on or before December 31, 2006.
The Managing General Partner has negotiated an agreement that will ultimately
allow the Partnership to dispose of its interest in all of the Local Limited
Partnerships. The Partnership did not dispose of any Local Limited
Partnership interests during the three months ended June 30, 2007.
The Managing General Partner will continue to closely monitor the
operations of the Properties and will formulate disposition strategies with
respect to the Partnership's remaining Local Limited Partnership interests.
The Partnership shall dissolve and its affairs shall be wound up upon the
disposition of the final Local Limited Partnership interest and other assets
of the Partnership. Investors will continue to be Limited Partners, receiving
K-1s and quarterly and annual reports, until the Partnership is dissolved.
As previously reported, for the past several years the following three
litigation proceedings had been pending between certain investors and
various affiliates of the General Partners, including the Partnership,
concerning, among other things, those investors' requests to inspect certain
alleged "books and records" of the Partnership and the affiliates:
Park G.P., Inc. ("Park") brought a lawsuit against the Partnership and various
affiliates of the General Partners and their purported general partners
(collectively, the "Fund Parties") in state court in Missouri
(the "Missouri Lawsuit"); the Fund Parties brought a declaratory judgment
lawsuit against Everest Housing Investors 2, LLC and several other
Everest-related entities (collectively, the "Everest Entities") in
Massachusetts state court (the "Everest Massachusetts Lawsuit"); and the
Partnership and its General Partners brought a lawsuit against Park and its
affiliate Bond Purchase, L.L.C. ("Bond") in Massachusetts state court
(the "Park and Bond Massachusetts Lawsuit").
As of April 21, 2007, the Fund Parties and the Partnership reached an
agreement with Park, Bond and the Everest Entities to resolve these lawsuits
(the "Settlement Agreement"). Under the terms of the Settlement Agreement,
the claims and counterclaims asserted in the Everest Massachusetts Lawsuit
have been dismissed with prejudice and the claims in the Missouri
Lawsuit and the Park and Bond Massachusetts Lawsuit have been dismissed without
prejudice, all in exchange for options, subject to various conditions, to
purchase certain Local Limited Partnership interests held by the Partnership,
Boston Financial Qualified Housing Tax Credits L.P. III, Boston
Financial Qualified Housing Tax Credits L.P. V and Boston Financial Tax
Credit Fund VII, A Limited Partnership at specified prices.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Portfolio Update (continued)
With respect to the Partnership, the Settlement Agreement provides
options, subject to various conditions, to purchase the Partnership's
interests in Prince Street Towers, L.P., located in Lancaster, PA, Sencit Towne
House L.P., located in Shillington, PA, Allentown Towne House, L.P.,
located in Allentown, PA, Brookscrossing Apartments, L.P., located in
Atlanta, GA, and Leawood Associates, L.P., located in Leawood, KS, for
specified prices aggregating to $13,300,000.
Except as noted above, the Partnership is not a party to any other pending legal
or administrative proceeding, and to the best of its knowledge, no legal or
administrative proceeding is threatened or contemplated against it.
Property Discussions
A majority of the Properties in which the Partnership has an interest had
stabilized operations and operated above breakeven as of March 31, 2007. Some
Properties generate cash flow deficits that the Local General Partners of
those Properties fund through project expense loans, subordinated loans or
operating escrows. However, a few Properties have had persistent operating
difficulties that could either: (i) have an adverse impact on the
Partnership's liquidity; (ii) result in their foreclosure; or (iii) result
in the Managing General Partner deeming it appropriate for the Partnership
to dispose of its interest in the Local Limited Partnership. Also, the Managing
General Partner, in the normal course of the Partnership's business, may
arrange for the future disposition of its interest in certain Local Limited
Partnerships. The following Property discussions focus only on such Properties.
As previously reported, an IRS audit of 1993 tax return for Bentley Court II
Limited Partnership questioned the treatment of certain items and had findings
of non-compliance in 1993. The IRS then expanded the scope of the audit to
include the 1994 and 1995 tax returns. As a result, the IRS disallowed the
Property's Tax Credits for each of these years (the disallowance of the 1993,
1994 and 1995 Tax Credits applies only to the Limited Partners of the
Partnership that claimed Tax Credits for those years and the recapture applies
to all current Limited Partners of the Partnership). On behalf of the
Partnership, the Managing General Partner retained counsel to appeal the
IRS's findings in order to minimize the loss of Tax Credits. This
administrative appeal has been unsuccessful, and the IRS has not retracted its
position of disallowing Tax Credits for 1993, 1994 and 1995, a total of
$2,562,173, plus accrued interest of approximately $3,000,000, or
approximately $80 per Unit. Based on of advice of tax counsel, the Managing
General Partner determined to concede the disallowance of Tax Credits for those
three years.
In addition, the Local General Partner received notification that the IRS
was expanding its claims to recapturing $502,472 of Tax Credits taken in 1990,
1991 and 1992, plus accrued interest of approximately $800,000, or
approximately $20 per Unit. Based on advice of tax counsel, the Managing
General Partner determined to challenge the IRS's findings with respect to
this $502,472 of recapture, and a trial was held on this issue in November
2005. Last year, the Tax Court ruled against the Partnership. Upon advice
of counsel, this decision was not appealed by the Managing General Partner.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Property Discussions (continued)
It is possible that the IRS will further expand its claims for additional
amounts with respect to other years. However, counsel has advised that the
statute of limitations has expired for the tax years 1996, 1997 and 1998.
At this point, there appears to be no possibility of a settlement with the
IRS, and the Managing General Partner anticipates that the IRS will forward
the assessments for disallowance and recapture directly to the affected
Limited Partners and that this could occur in 2007. The accrued interest
calculations above respecting the disallowance and recapture of Tax
Credits are estimates only based upon a rate of 8% simple interest from the
dates that the taxes were deemed to be owed. The Managing General Partner has
not included estimates for penalties because it is not expecting them.
However, it is possible that the IRS will attempt to claim penalties.
Tax counsel has advised that Limited Partners that acquired Units after 1998
will not be affected by these assessments. The Managing General Partner
strongly recommends that Limited Partners consult with their tax advisors
regarding the appropriate treatment of any disallowance or recapture
assessments.
As previously reported, the Partnership's interest in the Local Limited
Partnership that owns Mayfair Mansions, located in Washington, DC, was
terminated upon the July 2006 sale of the Property to an unaffiliated entity.
The Partnership received net sales proceeds of $12,794,835, or $188.04 per
Unit, resulting in taxable income of $17,236,598, or $253.32 per Unit.
The Managing General Partner believed that the Partnership had a claim of
up to an additional $1,500,000 of sale proceeds under the terms of the
partnership agreement and investment documents for this Local Limited
Partnership. The Local General Partners disputed that at least a portion of
this amount is due. On behalf of the Partnership, the Managing General
Partner retained counsel and filed suit in the Superior Court of the District
of Columbia (Civil Action No. 0006755-06) seeking a declaratory judgment
and damages. The Local General Partners filed counter-claims and disputed the
Partnership's claims. On January 10, 2007, representatives of the Managing
General Partner and the Local General Partners reached a settlement during
court-ordered mediation with regard to all of the above referenced legal
claims. The settlement requires an additional distribution to the
Partnership in the amount of approximately $1,050,000, or $15.23 per Unit.
This payment, originally expected to be received in the first quarter of
the fiscal year ending March 31, 2008, is now expected to be received in the
second quarter of the fiscal year ending March 31, 2008, upon the receipt by
the Local Limited Partnership of all outstanding amounts due from the sale
of the Property including lender held escrows and reserves. All pending
legal matters were subsequently dismissed with prejudice. The Partnership
no longer has an interest in this Local Limited Partnership.
As previously reported, the Managing General Partner anticipated the
termination of the Partnership's interest in the Local Limited Partnership that
owned Oakview Square, located in Chesterfield, Michigan, upon the sale of the
Property. The sale of this Property, presently resulting in net proceeds to
the Partnership of $100,000, or $1.47 per Unit, occurred on February 28,
2007, effectively terminating the Partnership's interest in this Local
Limited Partnership. The Managing General Partner expects the Partnership to
receive additional proceeds of approximately $50,000, or $0.73 per Unit,
upon a reconciliation of issues related to tax and utility payments. This sale
will result in 2007 taxable income projected to be approximately $824,000,
or $12.11 per Unit. The Partnership will no longer have an interest in this
Local Limited Partnership upon receipt of all sale proceeds.
As previously reported, the Managing General Partner negotiated an agreement
to transfer the Local General Partner interest in West Pine, located in Findlay,
Pennsylvania, to an affiliate of the Allegheny County Housing Authority
("ACHA"), contingent upon receiving approval from the U.S. Department of Housing
and Urban Development ("HUD"). HUD approval was received, and the Local
General Partner interest was transferred on October 17, 2003. In addition,
the ACHA had informed the Managing General Partner of its interest in
acquiring the Partnership's interest in the Local Limited Partnership,
pending their assumption of the Local General Partner interest.
Concurrent with the replacement of the Local General Partner, another ACHA
affiliate acquired 30% of the Partnership's limited partner interest in the
Local Limited Partnership. As part of this transaction, the Partnership
acquired a put option
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Property Discussions (continued)
for the remaining 70% exercisable for $1 anytime after the expiration
of the Compliance Period on December 31, 2006. West Pine
generated its final year of Tax Credits in 2001. The Managing General
continues to pursue an exit strategy that may result in a 2007 disposal of the
Partnership's interest in the Local Limited Partnership.
As previously reported, although occupancy levels at 46th and Vincennes,
located in Chicago, Illinois, improved to acceptable levels throughout the
three-month period ending December 31, 2006, increases in utility
costs and bad debt expense have resulted in unfavorable debt service
coverage while working capital levels remain well below appropriate levels
as of March 31, 2007. A site visit by the Managing General Partner in
October 2006 found the Property in need of some capital improvements.
Although advances from the Local General Partner have enabled the Property to
remain current on its loan obligations, the Managing General Partner
believes that the Local General Partner and its affiliated management company
are not adequately performing their responsibilities with respect to the
Property. The Managing General Partner has expressed these concerns to
the Local General Partner and will continue to closely monitor the
Property's operations. Based on the results of a fairly recent market
valuation, the Managing General Partner will most likely enter into a put
agreement, pending the HUD's approval of a Transfer of Physical Assets
Application, and subsequently transfer the Partnership's interest in the
Local Limited Partnership during 2007. The Property's Compliance Period
ended on December 31, 2005.
In connection with the Settlement Agreement described in the "Portfolio
Update" section above, the Partnership has granted options, subject to various
conditions, to sell its interests in Prince Street Towers, L.P., located in
Lancaster, PA, Sencit Towne House L.P., located in Shillington, PA, Allentown
Towne House, L.P., located in Allentown, PA, Brookscrossing Apartments, L.P.,
located in Atlanta, GA, and Leawood Associates, L.P., located in Leawood, KS,
for a price of $13,300,000 specified in the Settlement Agreement.
In accordance with the terms of the previously mentioned Settlement Agreement,
the Managing General Partner anticipates that the Partnership's interest in
the Local Limited Partnership that owns Leawood Manor, located in Leawood,
Kansas, will be terminated upon the sale of the Local Limited Partnership
interest. At present, no closing date has been scheduled for the sale of this
interest.
..
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures.
As of the end of the period covered by this report, with the participation of
the Partnership's management, the Partnership's principal executive officer and
principal financial officer conducted an evaluation of the Partnership's
disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule
15d-15(e) under the Exchange Act). Based on this evaluation, our PEO and PFO
concluded that our disclosure controls and procedures were effective as of June
30, 2007, to provide reasonable assurance that information required to be
disclosed in our reports filed or submitted under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms.
(b) Changes in Internal Control over Financial Reporting.
There have been no significant changes in the Partnership's internal control
over financial reporting identified in connection with the evaluation required
by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that
occurred during the Partnership's last fiscal quarter that has materially
affected, or is reasonably likely to affect, the Partnership's internal control
over financial reporting.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
PART II OTHER INFORMATION
Items 1-5 Not applicable
Item 6 Exhibits and reports on Form 8-K
(b) Exhibits
31.1 Certification of Principal Executive Officer and Principal Financial
Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Principal Executive Officer and Principal Financial
Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002
(c) Reports on Form 8-K were filed during the quarter ended June 30, 2007:
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
DATED: August 14, 2007 BOSTON FINANCIAL QUALIFIED HOUSING
TAX CREDITS L.P. IV
By: Arch Street VIII, Inc.,
its Managing General Partner
/s/Gary Mentesana
Gary Mentesana
President
Arch Street VIII, Inc.