UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549









FORM
10-Q





(Mark
One)


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





For the
Quarterly Period Ended December
30, 2010





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: 0-19217





American Tax Credit
Properties III L.P.


(Exact
Name of Registrant as Specified in its Charter)





Delaware
              
              13-3545006(State
      or Other Jurisdiction of
              
              (I.R.S.
      EmployerIncorporation
      or Organization)
              
              Identification
      No.)





Richman
      Tax Credit Properties III L.P.340
      Pemberwick RoadGreenwich, Connecticut
              
              06831(Address
      of Principal Executive Offices)
              
              (Zip
      Code)





Registrant’s
Telephone Number, Including Area Code:  (203)
869-0900





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 filing requirements for the
past 90 days.





Yes  x  No  ̈





Indicate
by check mark whether the Registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
Registrant was required to submit and post such files).





Yes   ̈   No
 ̈





Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.





Large
Accelerated Filer   ̈  Accelerated
Filer  ̈  Non-Accelerated
Filer  ̈   Smaller
Reporting Company  x





Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).





Yes  ̈  No x





As of
February 11, 2011, there are 35,883 units of limited partnership interest
outstanding.





AMERICAN
TAX CREDIT PROPERTIES III L.P.





PART
I - FINANCIAL
INFORMATION





Table of
Contents


PageItem
      1.
                              Financial Statements.Balance
      Sheets
                              
                              3Statements
      of Operations
                              
                              4Statements
      of Cash Flows
                              
                              5Notes
      to Financial Statements
                              
                              6Item
      2.
                              Management’s Discussion and Analysis of Financial
      Condition and Results of Operations.
                              
                              9Item
      3.
                              Quantitative and Qualitative Disclosure About
      Market Risk.
                              
                              12Item
      4.
                              Controls and Procedures.
                              
                              12Item
      4T.
                              Internal Control Over Financial
      Reporting.
                              
                              12


2


AMERICAN
TAX CREDIT PROPERTIES III L.P.


BALANCE
SHEETS


(UNAUDITED)





December
      30,
                
                
                March
      30,2010
                
                
                2010ASSETSCash
      and cash equivalents
                
                $
                494,158
                
                
                $
                312,127Investment
      in mutual fund
                
                
                520,940
                
                
                
                512,962Investment
      in bond
                
                
                101,238
                
                
                
                —Interest
      receivable
                
                
                2,341
                
                
                
                —Investment
      in local partnerships
                
                
                —
                
                
                
                516,163$
                1,118,677
                
                
                $
                1,341,252LIABILITIES
      AND PARTNERS’ EQUITY (DEFICIT)LiabilitiesAccounts
      payable and accrued expenses
                
                $
                343,994
                
                
                $
                518,831Payable
      to general partner and affiliates
                
                
                3,406,648
                
                
                
                3,217,1893,750,642
                
                
                
                3,736,020Commitments
      and contingenciesPartners’
      equity (deficit)General
      partner
                
                
                (2,638,536
                )
                
                
                (2,394,768
                )Limited
      partners (35,883 units of limited partnership interest
      outstanding)
                
                
                —
                
                
                
                —Accumulated
      other comprehensive income
                
                
                6,571
                
                
                
                —(2,631,965
                )
                
                
                (2,394,768
                )$
                1,118,677
                
                
                $
                1,341,252





See Notes
to Financial Statements.


3


AMERICAN
TAX CREDIT PROPERTIES III L.P.


STATEMENTS
OF OPERATIONS


THREE
AND NINE MONTH PERIODS ENDED DECEMBER 30, 2010 AND 2009


(UNAUDITED)





Three Months
                  Ended
                  December 30,
                
                
                Nine Months
                  Ended
                  December 30,
                
                
                Three Months
                  Ended
                  December 30,
                
                
                Nine Months
                  Ended
                  December 30,2010
                
                
                2010
                
                
                2009
                
                
                2009REVENUEInterest
                
                $
                4,191
                
                
                $
                9,915
                
                
                $
                780
                
                
                $
                1,727Other
      income from local partnerships
                
                
                2,243
                
                
                
                22,646
                
                
                
                5,660
                
                
                
                35,677TOTAL
      REVENUE
                
                
                6,434
                
                
                
                32,561
                
                
                
                6,440
                
                
                
                37,404EXPENSESAdministration
      fees
                
                
                78,610
                
                
                
                168,029
                
                
                
                32,160
                
                
                
                137,392Management
      fees
                
                
                78,611
                
                
                
                168,030
                
                
                
                32,159
                
                
                
                137,391Professional
      fees
                
                
                13,421
                
                
                
                46,857
                
                
                
                14,939
                
                
                
                67,858State
      of New Jersey filing fee
                
                
                4,363
                
                
                
                13,264
                
                
                
                4,763
                
                
                
                9,946Printing,
      postage and other
                
                
                5,755
                
                
                
                13,614
                
                
                
                2,390
                
                
                
                7,036TOTAL
      EXPENSES
                
                
                180,760
                
                
                
                409,794
                
                
                
                86,411
                
                
                
                359,623(174,326
                )
                
                
                (377,233
                )
                
                
                (79,971
                )
                
                
                (322,219
                )Equity
      in income of investment in local partnerships
                
                
                15,171
                
                
                
                99,594
                
                
                
                18,892
                
                
                
                37,333Loss
      prior to gain (loss) on sale of limited partner interests/local
      partnership properties
                
                
                (159,155
                )
                
                
                (277,639
                )
                
                
                (61,079
                )
                
                
                (284,886
                )Gain
      (loss) on sale of limited partner interests/local partnership
      properties
                
                
                (15,171
                )
                
                
                33,871
                
                
                
                
                
                
                
                10NET
      LOSS
                
                
                (174,326
                )
                
                
                (243,768
                )
                
                
                (61,079
                )
                
                
                (284,876
                )Other
      comprehensive income, net
                
                
                1,235
                
                
                
                6,571COMPREHENSIVE
      LOSS
                
                $
                (173,091
                )
                
                $
                (237,197
                )
                
                $
                (61,079
                )
                
                $
                (284,876
                )NET
      LOSS ATTRIBUTABLE TOGeneral
      partner
                
                $
                (174,326
                )
                
                $
                (243,768
                )
                
                $
                (61,079
                )
                
                $
                (284,876
                )Limited
      partners
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —$
                (174,326
                )
                
                $
                (243,768
                )
                
                $
                (61,079
                )
                
                $
                (284,876
                )NET LOSSper unit of
      limited partnership interest (35,883 units of limited partnership
      interest)
                
                $
                —
                
                
                $
                —
                
                
                $
                —
                
                
                $
                —





See Notes
to Financial Statements.


4


AMERICAN
TAX CREDIT PROPERTIES III L.P.


STATEMENTS
OF CASH FLOWS


NINE
MONTHS ENDED DECEMBER 30, 2010 AND 2009


(UNAUDITED)




2010
                
                
                2009CASH
      FLOWS FROM OPERATING ACTIVITIESInterest
      received
                
                $
                10,757
                
                
                $
                1,727Cash
      paid forAdministration
      fees
                
                
                (146,600
                )
                
                
                (14,225
                )Management
      fees
                
                
                (140,000
                )
                
                
                (50,000
                )Professional
      fees
                
                
                (77,989
                )
                
                
                (97,997
                )State
      of New Jersey filing fee
                
                
                (15,398
                )
                
                
                (16,369
                )Printing,
      postage and other expenses
                
                
                (15,185
                )
                
                
                (8,067
                )Net
      cash used in operating activities
                
                
                (384,415
                )
                
                
                (184,931
                )CASH
      FLOWS FROM INVESTING ACTIVITIESInvestments
      in mutual fund
                
                
                (4,888
                )Investment
      in bond
                
                
                (100,940
                )Proceeds
      in connection with sale of limited partner interests/local partnership
      properties
                
                
                649,628
                
                
                
                10Distributions
      received from local partnerships
                
                
                22,646
                
                
                
                55,677Net
      cash provided by investing activities
                
                
                566,446
                
                
                
                55,687Net
      increase (decrease) in cash and cash equivalents
                
                
                182,031
                
                
                
                (129,244
                )Cash
      and cash equivalents at beginning of period
                
                
                312,127
                
                
                
                946,612CASH
      AND CASH EQUIVALENTS AT END OF PERIOD
                
                $
                494,158
                
                
                $
                817,368RECONCILIATION
      OF NET LOSS TO NET CASH USED IN OPERATING ACTIVITIESNet
      loss
                
                $
                (243,768
                )
                
                $
                (284,876
                )Adjustments
      to reconcile net loss to net cash used in operating
    activitiesEquity
      in income of investment in local partnerships
                
                
                (99,594
                )
                
                
                (37,333
                )Other
      income from local partnerships
                
                
                (22,646
                )
                
                
                (35,677
                )Gain
      on sale of limited partner interests/local partnership
      properties
                
                
                (33,871
                )
                
                
                (10
                )Amortization
      of premium on investment in bond
                
                
                1,433Interest
      purchased at date of investment in bond
                
                
                1,750Increase
      in interest receivable
                
                
                (2,341
                )Increase
      in payable to general partner and affiliates
                
                
                189,459
                
                
                
                210,558Decrease
      in accounts payable and accrued expenses
                
                
                (174,837
                )
                
                
                (37,593
                )NET
      CASH USED IN OPERATING ACTIVITIES
                
                $
                (384,415
                )
                
                $
                (184,931
                )SIGNIFICANT
      NONCASH INVESTING ACTIVITIESUnrealized
      gain on investment in mutual fund
                
                $
                3,090Unrealized
      gain on investment in bond
                
                $
                3,481





See Notes
to Financial Statements.


5


AMERICAN
TAX CREDIT PROPERTIES III L.P.


NOTES
TO FINANCIAL STATEMENTS


DECEMBER
30, 2010


(UNAUDITED)





1.
            Basis
      of Presentation





The
accompanying unaudited financial statements of American Tax Credit Properties
III L.P. (the “Partnership”) have been prepared in accordance with accounting
principles generally accepted in the United States of America (“GAAP”) for
interim financial information.  They do not include all information
and footnotes required by GAAP for complete financial statements.  The
results of operations are impacted, in part, by the combined results of
operations of the Local Partnerships, which are provided by the Local
Partnerships on an unaudited basis during interim
periods.  Accordingly, the accompanying unaudited financial statements
are dependent on such unaudited information.  In the opinion of the
General Partner, the accompanying unaudited financial statements include all
adjustments necessary to present fairly the financial position as of December
30, 2010 and the results of operations and cash flows for the interim periods
presented.  All adjustments are of a normal recurring
nature.  The results of operations for the nine months ended December
30, 2010 are not necessarily indicative of the results that may be expected for
the entire year.





2.
            Investment
      in Local Partnerships





The
Partnership originally acquired limited partner interests (the “Local
Partnership Interests”) in forty-three Local Partnerships representing capital
contributions in the aggregate amount of $29,384,966, which includes voluntary
advances made to a certain Local Partnership.  As of December 30,
2010, the Partnership holds a Local Partnership Interest in thirty-six Local
Partnerships.  See discussion below regarding the sale of the Property
owned by Christian Street Commons Associates (“Christian Street”) subsequent to
December 30, 2010.  The Partnership has no legal obligation to fund
any operating deficits of the Local Partnerships.





For the
nine months ended December 30, 2010, the investment in local partnerships
activity consists of the following:





Investment
      in local partnerships as of March 30, 2010
                    
                    $
                    516,163Equity
      in income of investment in local partnerships
                    
                    
                    99,594
                    *Distributions
      received in connection with sale of Local Partnership Interest applied
      against investment in local partnerships
                    
                    
                    (615,757
                    )Distributions
      received from Local Partnerships
                    
                    
                    (22,646
                    )Distributions
      classified as other income
                    
                    
                    22,646Investment
      in local partnerships as of December 30, 2010
                    
                    $
                    —





* In the
event the operations of a Local Partnership result in a loss, equity in loss of
each investment in Local Partnership allocated to the Partnership is recognized
to the extent of the Partnership’s investment balance in each Local
Partnership.  Equity in loss in excess of the Partnership’s investment
balance in a Local Partnership is allocated to other partners’ capital in any
such Local Partnership.





In August
2010, the Partnership sold its Local Partnership Interest in NP-89 Limited
Dividend Housing Association Limited Partnership (“NP-89”) to an affiliate of
the Local General Partner of NP-89 for $649,628.  In connection with
the sale, the Partnership recognized a gain of $33,871; such amount is reflected
as gain on sale of limited partner interests/local partnership properties in the
accompanying unaudited statement of operations for the nine months ended
December 30, 2010.  As a result of the sale, the Partnership’s
investment in local partnerships has a zero balance as of December 30,
2010.  The equity in income from the Partnership’s investment in NP-89
for the nine months ended September 30, 2010 represents more than 20% of the
Partnership’s net loss as reflected in the accompanying unaudited statement of
operations for the nine months ended December 30, 2010.  The following
financial information represents certain 2010 unaudited operating statement data
of NP-89 through the date of the Partnership’s sale of its Local Partnership
Interest:





Revenue
                  
                  $
                  863,386Net
      income
                  
                  $
                  100,600


6


AMERICAN
TAX CREDIT PROPERTIES III L.P.


NOTES
TO FINANCIAL STATEMENTS - CONTINUED


DECEMBER
30, 2010


(UNAUDITED)





2.
            Investment
      in Local Partnerships (Continued)





In
November 2010, the Partnership assigned its Local Partnership Interest in Orange
City Plaza, Limited Partnership (“Orange City”) to an unaffiliated third party;
no proceeds were received in connection with the assignment.  The
Partnership’s investment balance in Orange City, after cumulative equity losses,
became zero during the year ended March 30, 2002.





In
December 2010, the Partnership withdrew from Chestnut Park Associates, L.P.
(“Chestnut Park”), thereby transferring its Local Partnership Interest to the
Local General Partners of Chestnut Park; no proceeds were received in connection
with the withdrawal.  The Partnership’s investment balance in Chestnut
Park, after cumulative equity losses, became zero during the year ended March
30, 2000.





In
January 2011, Christian Street sold its underlying Property, in connection with
which the Partnership received $404,317.  Such amount includes $63,229
of distributions that were due to the Partnership under the terms of Christian
Street’s partnership agreement.  There may be additional proceeds
after further resolution of Christian Street’s accounts. The Partnership’s
investment balance in Christian Street, after cumulative equity losses, became
zero during the year ended March 30, 1998.





The Local
General Partner of Queen Lane Investors (“Queen Lane”) represents that, as a
result of a dispute between the local housing agency (the “Agency”) and the
Local General Partner of Queen Lane regarding the adequacy of certain unit
repairs mandated by the Agency, the Local General Partner of Queen Lane
requested that the Agency cancel the voucher contract in connection with the
Property that provided rent subsidies to tenants under Section 8 of Title II of
the Housing and Community Development Act of 1974.  As a result, the
Property has been vacant since October 2007.  Two of Queen Lane’s
mortgages matured in 2007 but have not been repaid or formally extended,
representing principal and accrued interest of approximately $2,086,000 as of
January 2011.  The Local General Partner of Queen Lane further
represents that the lender has not issued a notice of default and that real
estate taxes are in arrears approximately $22,000 as of January
2011.  The Local General Partner of Queen Lane is attempting to
refinance the mortgages and make the necessary repairs to the
Property.  The Partnership’s investment balance in Queen Lane, after
cumulative equity losses, became zero during the year ended March 30,
2001.





3.
            Investment
      in Mutual Fund





The
Partnership carries its investment in mutual fund (the “Fund”) at estimated fair
value.  The fair value of the Partnership’s investment in mutual fund
is classified within Level 1 of the fair value hierarchy of the guidance on
Fair Value Measurements as defined in Accounting Standards Codification (“ASC”)
Topic 820.  Level 1 inputs utilize quoted prices (unadjusted) in
active markets for identical assets or liabilities that the Partnership has the
ability to access.  The Fund’s net asset value (“NAV”) is $10.06 per
share as of December 30, 2010.  The unrealized gain of $3,090 is
included as a component of accumulated other comprehensive income in the
accompanying unaudited financial statements as of and for the nine months ended
December 30, 2010.





4.
            Investment
      in Bond





The
Partnership carries its investment in bond as available-for-sale because such
investment is used to facilitate and provide flexibility for its obligations,
including resolving circumstances that may arise in connection with the Local
Partnerships.  Investment in bond is reflected in the accompanying
unaudited balance sheet as of December 30, 2010 at estimated fair value and is
classified within Level 1 of the fair value hierarchy of the guidance on
Fair Value Measurements (see discussion in Note 3 above).  The
unrealized gain of $3,481 is included as a component of accumulated other
comprehensive income in the accompanying unaudited financial statements as of
and for the nine months ended December 30, 2010.


7


AMERICAN
TAX CREDIT PROPERTIES III L.P.


NOTES
TO FINANCIAL STATEMENTS - CONTINUED


DECEMBER
30, 2010


(UNAUDITED)





4.
            Investment
      in Bond (Continued)





As of
December 30, 2010, certain information concerning investment in bond is as
follows:





Description and maturity
                      
                      Amortized
                          cost
                      
                      
                      Gross
                          unrealized
                          gain
                      
                      
                      Gross
                          unrealized
                          loss
                      
                      
                      Estimated
                          fair valueCorporate
      debt securityCallable
      in September 2013
                      
                      $
                      97,757
                      
                      
                      $
                      3,481
                      
                      
                      $
                      —
                      
                      
                      $
                      101,238





5.
            Additional
      Information





Additional
information, including the audited March 30, 2010 Financial Statements and the
Organization, Purpose and Summary of Significant Accounting Policies, is
included in the Partnership's Annual Report on Form 10-K for the fiscal year
ended March 30, 2010 on file with the Securities and Exchange Commission. As the
result of a correction to the calculation of the administration fees and
management fees under the terms of the Partnership’s partnership agreement, such
fees were under accrued in the cumulative amount of approximately $72,000 as of
March 30, 2010.  Such amount is included in the accompanying
statements of operations for the three and nine month periods ended December 30,
2010.  This correction had no impact on cash flow for any period
presented herein this Form 10-Q and the General Partner has determined the
adjustment to be qualitatively immaterial.




8




AMERICAN
TAX CREDIT PROPERTIES III L.P.





Item
      2.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.





Material Changes in
Financial Condition





As of
December 30, 2010, American Tax Credit Properties III L.P. (the “Registrant”)
experienced a significant change in financial condition as compared to March 30,
2010 primarily as a result of proceeds received in connection with the sale of
its limited partner interest (the “Local Partnership Interest”) in NP-89 Limited
Dividend Housing Association Limited Partnership (“NP-89”) in August 2010 (see
discussion below under Results of Operations
and Local Partnership
Matters), partially offset by the payment of deferred administration and
management fees.  Principal changes in assets are comprised of
periodic transactions and adjustments and equity in income (loss) from
operations of the local partnerships (the “Local Partnerships”), which own
low-income multifamily residential complexes (the “Properties”) that qualified
for the low-income tax credit in accordance with Section 42 of the Internal
Revenue Code (the “Low-income Tax Credit”).  During the nine months
ended December 30, 2010, Registrant received cash from interest revenue,
distributions from Local Partnerships and proceeds in connection with the sale
of its Local Partnership Interest in NP-89 and utilized cash for operating
expenses and investments in a mutual fund and a bond.  Cash and cash
equivalents, investment in mutual fund and investment in bond increased, in the
aggregate, by approximately $291,000 during the nine months ended December 30,
2010 (which includes unrealized gains on investment in mutual fund and
investment in bond in the aggregate of approximately
$7,000).  Registrant intends to hold the bond until its call date
(September 2013) and therefore does not expect to realize significant gains or
losses on its investment in bond, if any.  During the nine months
ended December 30, 2010, the investment in local partnerships decreased as a
result of Registrant’s sale of its Local Partnership Interest in NP-89, the only
Local Partnership in which Registrant continued to have an investment balance
(see discussion below under Results of Operations
and Local Partnership
Matters).  As a result of the sale, Registrant’s investment in
local partnerships has a zero balance as of December 30,
2010.  Accounts payable and accrued expenses includes deferred
administration fees of $300,673 and payable to general partner and affiliates
represents deferred management and administration fees in the accompanying
unaudited balance sheet as of December 30, 2010.





Results of
Operations





Registrant’s
operating results are dependent, in part, upon the operating results of the
Local Partnerships and are impacted by the Local Partnerships’
policies.  In addition, the operating results herein are not
necessarily the same for tax reporting.  Registrant accounts for its
investment in local partnerships in accordance with the equity method of
accounting.  Accordingly, the investment is carried at cost and is
adjusted for Registrant’s share of each Local Partnership’s results of
operations and by cash distributions received.  In the event the
operations of a Local Partnership result in a loss, equity in loss of each
investment in Local Partnership allocated to Registrant is recognized to the
extent of Registrant’s investment balance in each Local
Partnership.  Equity in loss in excess of Registrant’s investment
balance in a Local Partnership is allocated to other partners’ capital in any
such Local Partnership.  As a result of Registrant’s sale of its Local
Partnership Interest in NP-89, the only Local Partnership in which Registrant
continued to have an investment balance (see discussion below under Local Partnership
Matters), Registrant’s investment in local partnerships has a zero
balance as of December 30, 2010.





Cumulative
losses and cash distributions in excess of investment in local partnerships may
result from a variety of circumstances, including a Local Partnership's
accounting policies, subsidy structure, debt structure and operating deficits,
among other things.  Accordingly, cumulative losses and cash
distributions in excess of the investment are not necessarily indicative of
adverse operating results of a Local Partnership.





Registrant’s
operations for the three months ended December 30, 2010 and 2009 resulted in net
losses of $174,326 and $61,079, respectively.  The increase in net
loss from fiscal 2009 to fiscal 2010 is primarily attributable to (i) an
increase in administration fees and management fees in the cumulative amount of
approximately $93,000 resulting, in part, from an under accrual as of March 30,
2010 and (ii) a reduction in the gain on the sale of Registrant’s Local
Partnership Interest in NP-89 in the amount of approximately
$15,000.  The gain on sale of approximately $49,000 reported by
Registrant for the quarter ended September 29, 2010 was reduced after the final
reconciliation of NP-89’s accounts, resulting in an offsetting increase in
equity in income of investment in local partnerships for the three months ended
December 30, 2010.  Other comprehensive income (loss) for the three
months ended December 30, 2010 resulted from unrealized gains (losses) on
investment in mutual fund and investment in bond of $(517) and $1,752,
respectively.
  9


AMERICAN
TAX CREDIT PROPERTIES III L.P.





Item
      2.
              Management’s
      Discussion and Analysis of Financial Condition and Results of Operations
      (Continued).





Registrant’s
operations for the nine months ended December 30, 2010 and 2009 resulted in net
losses of $243,768 and $284,876, respectively.  The decrease in net
loss from fiscal 2009 to fiscal 2010 is primarily attributable to (i) an
increase in equity in income of investment in local partnerships of
approximately $62,000, which is attributable to an increase in the net operating
income of the Local Partnership in which Registrant continued to have an
investment balance and (ii) gain on the sale of Registrant’s Local Partnership
Interest in NP-89 of approximately $34,000, all partially offset by an increase
in administration fees and management fees in the cumulative amount of
approximately $61,000 resulting, in part, from an under accrual as of March 30,
2010.  Other comprehensive income for the nine months ended December
30, 2010 resulted from unrealized gains on investment in mutual fund and
investment in bond of $3,090 and $3,481,
respectively.


Local Partnership
Matters





Registrant's
primary objective, to provide Low-income Tax Credits to its limited partners
(the “Limited Partners”), has been completed.  The relevant state tax
credit agency allocated each of the Local Partnerships an amount of Low-income
Tax Credits, which are generally available for a ten year period from the year
the Property is placed in service (the “Ten Year Credit Period”).  The
Ten Year Credit Period was fully exhausted with respect to all of the Properties
as of December 31, 2003.  The required holding period of each
Property, in order to avoid Low-income Tax Credit recapture, is fifteen years
from the year in which the Low-income Tax Credits commence on the last building
of the Property (the "Compliance Period").  The Compliance Period of
all of the Local Partnerships had expired as of December 31, 2007.  In
addition, certain of the Local Partnerships entered into agreements with the
relevant state tax credit agencies whereby the Local Partnerships must maintain
the low-income nature of the Properties for a period which exceeds the
Compliance Period (in certain circumstances, up to 50 years from when the
Property is placed in service, but commonly 30 years from the date any such
Property is placed in service), regardless of a sale of the Properties by the
Local Partnerships after the Compliance Period (the “Extended Use
Provisions”).  Although the Extended Use Provisions do not extend the
Compliance Period of the respective Local Partnerships, such provisions limit
the number and availability of potential purchasers of the
Properties.  Accordingly, a sale of a Property may happen well after
the expiration of the Compliance Period and/or may be significantly
discounted.  Registrant is in the process of disposing of its Local
Partnership Interests.  As of December 30, 2010, Registrant owns
thirty-six of the forty-three Local Partnership Interests originally
acquired.  See discussion below regarding the sale of the Property
owned by Christian Street Commons Associates (“Christian Street”) subsequent to
December 30, 2010.  Registrant has served a demand on the local
general partners (the “Local General Partners”) of all remaining Local
Partnerships to commence a sale process to dispose of the
Properties.  In the event a sale cannot be consummated, it is the
General Partner’s intention to sell or assign Registrant’s Local Partnership
Interests.  Following the final disposition of its Local Partnership
Interests, Registrant intends to dissolve.  It is uncertain as to the
amount, if any, that Registrant will receive with respect to each specific
Property from such sales or assignments.  There can be no assurance as
to when Registrant will dispose of its remaining Local Partnership
Interests.





The
Properties are principally comprised of subsidized and leveraged low-income
multifamily residential complexes located throughout the United States and
Puerto Rico.  Many of the Local Partnerships receive rental subsidy
payments.  The subsidy agreements expire at various
times.  Registrant cannot reasonably predict legislative initiatives
and governmental budget negotiations, the outcome of which could result in a
reduction in funds available for the various federal and state administered
housing programs.





The Local
Partnerships have various financing structures which include (i) required debt
service payments ("Mandatory Debt Service") and (ii) debt service payments which
are payable only from available cash flow subject to the terms and conditions of
the notes, which may be subject to specific laws, regulations and agreements
with appropriate federal and state agencies ("Non-Mandatory Debt Service or
Interest").  Registrant has no legal obligation to fund any operating
deficits of the Local Partnerships.





In August
2010, Registrant sold its Local Partnership Interest in NP-89 to an affiliate of
the Local General Partner of NP-89 for $649,628.  In connection with
the sale, Registrant recognized a gain of $33,871; such amount is reflected as
gain on sale of limited partner interests/local partnership properties in the
accompanying unaudited statement of operations for the nine months ended
December 30, 2010.  As a result of the sale, Registrant’s investment
in local partnerships has a zero balance as of December 30, 2010.





In
November 2010, Registrant sold its Local Partnership Interest in Orange City
Plaza, Limited Partnership (“Orange City”) to an unaffiliated third party; no
proceeds were received in connection with the sale.  Registrant’s
investment balance in Orange City, after cumulative equity losses, became zero
during the year ended March 30, 2002.


10


AMERICAN
TAX CREDIT PROPERTIES III L.P.





Item
      2.
            Management’s
      Discussion and Analysis of Financial Condition and Results of Operations
      (Continued).





In
December 2010, Registrant withdrew from Chestnut Park Associates, L.P.
(“Chestnut Park”), thereby transferring its Local Partnership Interest to the
Local General Partners of Chestnut Park; no proceeds were received in connection
with the withdrawal.  The Partnership’s investment balance in Chestnut
Park, after cumulative equity losses, became zero during the year ended March
30, 2000.





In
January 2011, Christian Street sold its underlying Property, in connection with
which Registrant received $404,317.  Such amount includes $63,229 of
distributions that were due to Registrant under the terms of Christian Street’s
partnership agreement.  There may be additional proceeds after further
resolution of Christian Street’s accounts.  Registrant’s investment
balance in Christian Street, after cumulative equity losses, became zero during
the year ended March 30, 1998.





The Local
General Partner of Queen Lane Investors (“Queen Lane”) represents that, as a
result of a dispute between the local housing agency (the “Agency”) and the
Local General Partner of Queen Lane regarding the adequacy of certain unit
repairs mandated by the Agency, the Local General Partner of Queen Lane
requested that the Agency cancel the voucher contract in connection with the
Property that provided rent subsidies to tenants under Section 8 of Title II of
the Housing and Community Development Act of 1974.  As a result, the
Property has been vacant since October 2007.  Two of Queen Lane’s
mortgages matured in 2007 but have not been repaid or formally extended,
representing principal and accrued interest of approximately $2,086,000 as of
January 2011.  The Local General Partner of Queen Lane further
represents that the lender has not issued a notice of default and that real
estate taxes are in arrears approximately $22,000 as of January
2011.  The Local General Partner of Queen Lane is attempting to
refinance the mortgages and make the necessary repairs to the
Property.  Registrant’s investment balance in Queen Lane, after
cumulative equity losses, became zero during the year ended March 30,
2001.





Critical Accounting Policies
and Estimates





The
accompanying unaudited financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America
(“GAAP”), which requires Registrant to make certain estimates and
assumptions.  The following section is a summary of certain aspects of
those accounting policies that may require subjective or complex judgments and
are most important to the portrayal of Registrant’s financial condition and
results of operations.  Registrant believes that there is a low
probability that the use of different estimates or assumptions in making these
judgments would result in materially different amounts being reported in the
accompanying unaudited financial statements.





·
            Registrant
      accounts for its investment in local partnerships in accordance with the
      equity method of accounting.





·
            Registrant
      does not consolidate the accounts and activities of the Local
      Partnerships, which are considered Variable Interest Entities as defined
      by Financial Accounting Standards Board (“FASB”) Accounting Standards
      Codification (“ASC”) Topic 810; Subtopic 10, because Registrant is not
      considered the primary beneficiary.  Registrant’s balance in
      investment in local partnerships represents the maximum exposure to loss
      in connection with such investments.  Registrant’s exposure to
      loss on the Local Partnerships is mitigated by the condition and financial
      performance of the underlying Properties as well as the financial strength
      of the Local General Partners.  In addition, the Local
      Partnerships’ partnership agreements grant the Local General Partners the
      power to direct the activities that most significantly impact the Local
      Partnerships’ economic success.  As a result of Registrant’s
      sale of its local Partnership Interest in NP-89, Registrant’s investment
      in local partnerships has a zero balance as of December 30,
      2010.





Forward-Looking
Information





As a
cautionary note, with the exception of historical facts, the matters discussed
in this quarterly report on Form 10-Q are “forward-looking” statements within
the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform
Act”).  Forward-looking statements may relate to, among other things,
current expectations, forecasts of future events, future actions, future
performance generally, business development activities, capital expenditures,
strategies, the outcome of contingencies, future financial results, financing
sources and availability and the effects of regulation and
competition.  Words such as “anticipate,” “expect,” “intend,” “plan,”
“seek,” “estimate” and other words and terms of similar meaning in connection
with discussions of future operating or financial performance signify
forward-looking statements.  Registrant may also provide written
forward-looking statements in other materials released to the
public.  Such statements are made in good faith by Registrant pursuant
to the “Safe Harbor” provisions of the Reform Act.  Registrant
undertakes no obligation to update publicly or revise any forward-looking
statement, whether as a result of new information, future events or
otherwise.  Such forward-looking statements involve known risks,
uncertainties and other factors that may cause Registrant’s actual results of
operations or actions to be materially different from future results of
operations or actions expressed or implied by the forward-looking
statements.


11


AMERICAN
TAX CREDIT PROPERTIES III L.P.





Item
      3.
            Quantitative and
      Qualitative Disclosure About Market
Risk.





Registrant’s
investment in mutual fund (the “Fund”) is subject to certain
risk.  The fixed income securities in which the Fund invests are
subject to interest rate risk, credit risk, prepayment risk, counterparty risk,
municipal securities risk, liquidity risk, management risk, government security
risk and valuation risk.  Typically, when interest rates rise, the
market prices of fixed income securities go down.  The Fund is
classified as “non-diversified,” and thus may invest most of its assets in
securities issued by or representing a small number of issuers.  As a
result, the Fund may be more susceptible to the risks associated with these
particular issuers, or to a single economic, political or regulatory occurrence
affecting these issuers.  These risks could adversely affect the
Fund’s net asset value (“NAV”), yield and total return.





The
market value of Registrant’s investment in bond is subject to fluctuation based
upon changes in interest rates relative to the investment’s maturity date and
the associated bond rating.  Since Registrant’s investment in bond is
callable in 2013, the value of such investment may be adversely impacted in an
environment of rising interest rates in the event Registrant decides to
liquidate the investment prior to its call date.  Although Registrant
may utilize the investment to pay for its operating expenses and/or for certain
Local Partnership matters, it otherwise intends to hold such investment to its
call date.  Therefore, Registrant does not anticipate any material
adverse impact in connection with such investment.





Item
      4.
            Controls and
      Procedures.





Disclosure
controls and procedures are controls and procedures that are designed to ensure
that information required to be disclosed by Registrant in reports that
Registrant files or submits under the Exchange Act is recorded, processed,
summarized and timely reported as provided in SEC rules and
forms.  Registrant periodically reviews the design and effectiveness
of its disclosure controls and procedures, including compliance with various
laws and regulations that apply to its operations.  Registrant makes
modifications to improve the design and effectiveness of its disclosure controls
and procedures, and may take other corrective action, if its reviews identify a
need for such modifications or actions.  In designing and evaluating
the disclosure controls and procedures, Registrant recognizes that any controls
and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives.




Registrant
has carried out an evaluation, under the supervision and the participation of
its management, including the Chief Executive Officer and Chief Financial
Officer of the general partner of the General Partner, of the effectiveness of
the design and operation of its disclosure controls and procedures (as defined
in Rule 13a-15(e) and 15d-15(e) under the Exchange Act), as of
the three months ended December 30, 2010.  Based upon that evaluation,
the Chief Executive Officer and Chief Financial Officer of the general partner
of the General Partner concluded that Registrant’s disclosure controls and
procedures were effective as of December 30, 2010.





Item
      4T.
            Internal Control Over
      Financial Reporting.





There
were no changes in Registrant’s internal control over financial reporting during
the three months ended December 30, 2010 that have materially affected, or
are reasonably likely to materially affect, Registrant’s internal control over
financial reporting.


12


AMERICAN
TAX CREDIT PROPERTIES III L.P.





Part
II - OTHER
INFORMATION





Item
      1.
            Legal
      Proceedings.





None.





Item
      1A.
            Risk
      Factors.





There
have been no material changes from the risk factors previously disclosed in Item
1A of Registrant’s Annual Report on Form 10-K for the year ended March 30,
2010.





Item
      2.
            Unregistered Sales of
      Equity Securities and Use of
Proceeds.





None.





Item
      3.
            Defaults Upon Senior
      Securities.





None; see
Item 2 of Part I regarding the mortgage default of a certain Local
Partnership.





Item
      4.
            Removed and
      Reserved.





Item
      5.
            Other
      Information.





None.





Item
      6.
            Exhibits.





Exhibit
31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive
Officer.


Exhibit
31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial
Officer.


Exhibit
32.1 Section 1350 Certification of Chief Executive Officer.


Exhibit
32.2 Section 1350 Certification of Chief Financial Officer.


13


SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.





AMERICAN
      TAX CREDIT PROPERTIES III L.P.(a
      Delaware limited partnership)By:
                  Richman
      Tax Credit Properties III L.P.,General
      PartnerBy:
                  Richman
      Housing Credits Inc.,general
      partnerDated:
      February 11, 2011
                  /s/David
      SalzmanBy:
                  David
      SalzmanChief
      Executive OfficerDated:
      February 11, 2011
                  /s/James
      HusseyBy:
                  James
      HusseyChief
      Financial OfficerDated:
      February 11, 2011
                  /s/Richard
      Paul RichmanBy:
                  Richard
      Paul RichmanDirector




14