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, 2008





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 is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.  See definition of “accelerated filer, large 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





There are
35,883 units of limited partnership interest outstanding.








AMERICAN
TAX CREDIT PROPERTIES III L.P.





PART
I - FINANCIAL
INFORMATION





Item
1. Financial
Statements





Table of Contents
                    
                    PageBalance
      Sheets
                    
                    3Statements
      of Operations
                    
                    4Statements
      of Cash Flows
                    
                    5Notes
      to Financial Statements
                    
                    7




2





AMERICAN
TAX CREDIT PROPERTIES III L.P.


BALANCE
SHEETS


(UNAUDITED)





December 30,
                
                
                March 30,Notes
                
                
                2008
                
                
                2008ASSETSCash
      and cash equivalents
                
                
                
                
                $
                1,044,270
                
                
                $
                380,660Investments
      in bonds
                
                
                
                
                
                
                
                
                
                870,596Investment
      in local partnerships
                
                
                2
                
                
                
                542,227
                
                
                
                504,607$
                1,586,497
                
                
                $
                1,755,863LIABILITIES
      AND PARTNERS’ DEFICITLiabilitiesAccounts
      payable and accrued expenses
                
                
                
                
                
                $
                493,509
                
                
                $
                538,625Payable
      to general partner and affiliates
                
                
                
                
                
                
                2,941,967
                
                
                
                2,721,2953,435,476
                
                
                
                3,259,920Commitments
      and contingencies
                
                
                2,3Partners’
      deficitGeneral
      partner
                
                
                
                
                
                
                (1,848,979
                )
                
                
                (1,507,483
                )Limited
      partners (35,883 units of limited partnership interest
      outstanding)
                
                
                
                
                
                
                —
                
                
                
                —Accumulated
      other comprehensive income, net
                
                
                
                
                
                
                —
                
                
                
                3,426(1,848,979
                )
                
                
                (1,504,057
                )$
                1,586,497
                
                
                $
                1,755,863





See Notes
to Financial Statements.


3





AMERICAN
TAX CREDIT PROPERTIES III L.P.


STATEMENTS
OF OPERATIONS


(UNAUDITED)





Three Months
                  Ended
                  December 30,
                
                
                Nine Months
                  Ended
                  December 30,
                
                
                Three Months
                  Ended
                  December 30,
                
                
                Nine Months
                  Ended
                  December 30,Notes
                
                
                2008
                
                
                2008
                
                
                2007
                
                
                2007REVENUEInterest
                
                
                
                
                $
                1,629
                
                
                $
                14,441
                
                
                $
                13,351
                
                
                $
                44,570Other
      income from local partnerships
                
                
                2
                
                
                
                1,580
                
                
                
                25,690
                
                
                
                2,993
                
                
                
                15,745TOTAL
      REVENUE
                
                
                
                
                
                
                3,209
                
                
                
                40,131
                
                
                
                16,344
                
                
                
                60,315EXPENSESAdministration
      fees
                
                
                
                
                
                
                55,385
                
                
                
                166,155
                
                
                
                55,385
                
                
                
                166,155Management
      fees
                
                
                
                
                
                
                55,385
                
                
                
                166,155
                
                
                
                55,385
                
                
                
                166,155Professional
      fees
                
                
                
                
                
                
                22,625
                
                
                
                66,467
                
                
                
                18,428
                
                
                
                55,913State
      of New Jersey filing fee
                
                
                
                
                
                
                5,160
                
                
                
                16,037
                
                
                
                9,734
                
                
                
                20,526Printing,
      postage and other
                
                
                
                
                
                
                (577
                )
                
                
                4,433
                
                
                
                4,582
                
                
                
                10,699TOTAL
      EXPENSES
                
                
                
                
                
                
                137,978
                
                
                
                419,247
                
                
                
                143,514
                
                
                
                419,448(134,769
                )
                
                
                (379,116
                )
                
                
                (127,170
                )
                
                
                (359,133
                )Equity
      in income of investment in local partnerships
                
                
                2
                
                
                
                52,895
                
                
                
                37,620
                
                
                
                5,841
                
                
                
                31,190NET
      LOSS
                
                
                
                
                
                
                (81,874
                )
                
                
                (341,496
                )
                
                
                (121,329
                )
                
                
                (327,943
                )Other
      comprehensive income (loss), net
                
                
                
                
                
                
                
                
                
                
                (3,426
                )
                
                
                1,520
                
                
                
                6,033COMPREHENSIVE
      LOSS
                
                
                
                
                
                $
                (81,874
                )
                
                $
                (344,922
                )
                
                $
                (119,809
                )
                
                $
                (321,910
                )NET
      LOSS ATTRIBUTABLE TOGeneral
      partner
                
                
                
                
                
                $
                (81,874
                )
                
                $
                (341,496
                )
                
                $
                (121,329
                )
                
                $
                (327,943
                )Limited
      partners
                
                
                
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —$
                (81,874
                )
                
                $
                (341,496
                )
                
                $
                (121,329
                )
                
                $
                (327,943
                )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, 2008 AND 2007


(UNAUDITED)





2008
                        
                        
                        2007CASH
      FLOWS FROM OPERATING ACTIVITIESInterest
      received
                        
                        $
                        9,611
                        
                        
                        $
                        5,918Cash
      paid foradministration
      fees
                        
                        
                        (11,638
                        )
                        
                        
                        (11,638
                        )management
      fees
                        
                        
                        (100,000
                        )
                        
                        
                        (100,000
                        )professional
      fees
                        
                        
                        (88,552
                        )
                        
                        
                        (67,959
                        )State
      of New Jersey filing fee
                        
                        
                        (20,412
                        )
                        
                        
                        (22,369
                        )printing,
      postage and other expenses
                        
                        
                        (23,089
                        )
                        
                        
                        (3,199
                        )Net
      cash used in operating activities
                        
                        
                        (234,080
                        )
                        
                        
                        (199,247
                        )CASH
      FLOWS FROM INVESTING ACTIVITIESProceeds
      from maturities/redemptions and sales of bonds
                        
                        
                        872,000
                        
                        
                        
                        409,061Voluntary
      advances to local partnerships
                        
                        
                        
                        
                        
                        
                        (15,070
                        )Distributions
      received from local partnerships
                        
                        
                        25,690
                        
                        
                        
                        35,745Net
      cash provided by investing activities
                        
                        
                        897,690
                        
                        
                        
                        429,736Net
      increase in cash and cash equivalents
                        
                        
                        663,610
                        
                        
                        
                        230,489Cash
      and cash equivalents at beginning of period
                        
                        
                        380,660
                        
                        
                        
                        164,013CASH
      AND CASH EQUIVALENTS AT END OF PERIOD
                        
                        $
                        1,044,270
                        
                        
                        $
                        394,502SIGNIFICANT
      NON-CASH INVESTING ACTIVITIESUnrealized
      gain (loss) on investments in bonds, net
                        
                        $
                        (3,426
                        )
                        
                        $
                        6,033











See Notes
to Financial Statements.


5





AMERICAN
TAX CREDIT PROPERTIES III L.P.


STATEMENTS
OF CASH FLOWS - (Continued)


NINE
MONTHS ENDED DECEMBER 30, 2008 AND 2007


(UNAUDITED)





2008
              
              
              2007RECONCILIATION
      OF NET LOSS TO NET CASH USED IN OPERATING ACTIVITIESNet
      loss
              
              $
              (341,496
              )
              
              $
              (327,943
              )Adjustments
      to reconcile net loss to net cash used in operating
    activitiesEquity
      in income of investment in local partnerships
              
              
              (37,620
              )
              
              
              (31,190
              )Distributions
      from local partnerships classified as other income
              
              
              (25,690
              )
              
              
              (15,745
              )Accretion
      of zero coupon bonds
              
              
              (4,830
              )
              
              
              (38,652
              )Decrease
      in accounts payable and accrued expenses
              
              
              (45,116
              )
              
              
              (6,389
              )Increase
      in payable to general partner and affiliates
              
              
              220,672
              
              
              
              220,672NET
      CASH USED IN OPERATING ACTIVITIES
              
              $
              (234,080
              )
              
              $
              (199,247
              )





See Notes
to Financial Statements.


6





AMERICAN
TAX CREDIT PROPERTIES III L.P.


NOTES
TO FINANCIAL STATEMENTS


DECEMBER
30, 2008


(UNAUDITED)





1.
            Basis
      of Presentation





The
accompanying unaudited financial statements 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 significantly 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 financial statements are
dependent on such unaudited information.  In the opinion of the
General Partner, the financial statements include all adjustments necessary to
present fairly the financial position as of December 30, 2008 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, 2008 are not necessarily
indicative of the results that may be expected for the entire year.





In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standard (“SFAS”) No. 157, “Fair Value
Measurements,” (“SFAS 157”).  SFAS 157 defines fair value, establishes
a framework for measuring fair value in accordance with GAAP and expands
disclosures about fair value measurements.  SFAS 157 applies to other
accounting pronouncements that require or permit fair value
measurements.  Accordingly, SFAS 157 does not require any new fair
value measurements.  SFAS 157 is effective for fiscal years beginning
after November 15, 2007.  The Partnership adopted SFAS 157
effective March 31, 2008.  On February 6, 2008 the FASB approved the
Financial Staff Position (“FSP”) that will defer the effective date of SFAS 157
by one year for nonfinancial assets and liabilities that are recognized or
disclosed at fair value in the financial statements on a nonrecurring
basis.  The partial adoption of SFAS 157 for financial assets and
liabilities did not have a material impact on the Partnership’s financial
position, results of operations or cash flows.


The
Partnership adopted SFAS 157 as of March 31, 2008, with the exception of the
application of the statement to nonrecurring nonfinancial assets and
nonfinancial liabilities.  Nonrecurring nonfinancial assets and
liabilities for which the Partnership has not applied the provisions of SFAS 157
include investment in local partnerships, which is accounted for under the
equity method of accounting.





SFAS 157
establishes a three-tier fair value hierarchy, which prioritizes the inputs used
in measuring fair value.  These tiers include: Level 1, defined as
observable inputs such as quoted prices in active markets for identical assets
or liabilities; Level 2, defined as inputs other than quoted prices for similar
assets or liabilities in active markets that are either directly or
indirectly observable; and Level 3, defined as unobservable inputs in which
little or no market data exists, therefore requiring an entity to develop its
own assumptions.





Financial
assets accounted for at fair value on a recurring basis as of December 30, 2008
include cash and cash equivalents of $1,044,270 as reflected in the accompanying
balance sheet.  These assets are carried at fair value based on quoted
market prices for identical securities (Level 1
inputs).




In
December 2008, the FASB issued FSP FAS 140-4 and FIN 46(R)-8, “Disclosures by
Public Entities (Enterprises) about Transfers of Financial Assets and Interests
in Variable Interest Entities.”  The FSP amends SFAS No. 140 to
require public entities to provide additional disclosures about transferors’
continuing involvements with transferred financial assets.  It also
amends FIN 46(R) to require public enterprises, including sponsors that have a
variable interest in a variable interest entity, to provide additional
disclosures about their involvement with variable interest
entities.  The FSP also requires disclosures by a public enterprise
that is (a) a sponsor of a qualifying special-purpose entity (“SPE”) that holds
a variable interest in the qualifying SPE but was not the transferor of
financial assets to the qualifying SPE and (b) a servicer of a qualifying SPE
that holds a significant variable interest in the qualifying SPE but was not the
transferor of financial assets to the qualifying SPE.  The FSP is
effective for public entities in their first reporting period (interim or
annual) that ends after December 15, 2008. The
Partnership does not believe that the adoption of the FSP will have a material
impact on its financial statements.


7





AMERICAN
TAX CREDIT PROPERTIES III L.P.


NOTES
TO FINANCIAL STATEMENTS - (Continued)


DECEMBER
30, 2008


(UNAUDITED)





2.
            Investment
      in Local Partnerships





The
Partnership owns limited partner interests in forty-two Local Partnerships
representing capital contributions in the aggregate amount of $29,384,966, which
includes voluntary advances made to a certain Local Partnership and all of which
has been paid. As of September 30, 2008, the Local Partnerships have outstanding
mortgage loans payable totaling approximately $76,200,000 and accrued interest
payable on such loans totaling approximately $5,955,000, which are secured by
security interests and liens common to mortgage loans on the Local Partnerships’
real property and other assets.





For the
nine months ended December 30, 2008, the investment in local partnerships
activity consists of the following:





Investment
      in local partnerships as of March 30, 2008
                      
                      $
                      504,607Equity
      in income of investment in local partnerships
                      
                      
                      37,620
                      *Cash
      distributions received from Local Partnerships
                      
                      
                      (25,690
                      )Cash
      distributions from Local Partnerships classified as other
      income
                      
                      
                      25,690Investment
      in local partnerships as of December 30, 2008
                      
                      $
                      542,227





*Equity
      in loss of investment in local partnerships is limited to the
      Partnership's investment balance in each Local Partnership; any excess is
      applied to other partners' capital in any such Local
      Partnership.  The amount of such excess losses applied to other
      partners' capital was $1,647,628 for the nine months ended September 30,
      2008 as reflected in the combined statement of operations of the Local
      Partnerships reflected herein Note
2.





Westminster
Apartments Limited Partnership (“Westminster”) has, for several years, been in
default under the terms of its first mortgage; delinquent payments of principal
and interest, replacement reserve deposits and certain fees represent a
cumulative arrearage of approximately $832,000 as of December
2008.  The lender has indicated a willingness to restructure the debt,
whereby payments will be required only to the extent that Westminster generates
available annual cash flow; in addition, the lender would receive all residual
proceeds upon the sale of Westminster.  There can be no assurance that
the issues will be resolved and the mortgage remains in default without a formal
forbearance as of February 2009.  The Partnership’s investment balance
in Westminster, after cumulative equity losses, became zero during the year
ended March 30, 1999.





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 Section 8 voucher contract in connection
with the Property.  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 in excess of $1,837,000 as of December 2008.  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
$17,000 as of December 2008.  The Local General Partner of Queen Lane
is examining the potential to sell the Property.  The Partnership’s
investment balance in Queen Lane, after cumulative equity losses, became zero
during the year ended March 30, 2001.





The Local
General Partner of Ashland Park Apartments, L.P. (“Ashland Park”) and the
Partnership have reached an agreement to be dated in February 2009 whereby the
Partnership will withdraw from Ashland Park; the Partnership will receive $3,500
in connection with the withdrawal.  The Partnership’s investment
balance in Ashland Park, after cumulative equity losses, became zero during the
year ended March 30, 1999.





The
combined unaudited balance sheets of the Local Partnerships as of September 30,
2008 and December 31, 2007 and the combined unaudited statements of operations
of the Local Partnerships for the three and nine month periods ended September
30, 2008 and 2007 are reflected on pages 9 and 10,
respectively.


8


AMERICAN
TAX CREDIT PROPERTIES III L.P.


NOTES
TO FINANCIAL STATEMENTS - (Continued)


DECEMBER
30, 2008


(UNAUDITED)





2.
            Investment in Local
      Partnerships (continued)





The
combined unaudited balance sheets of the Local Partnerships as of September 30,
2008 and December 31, 2007 are as follows:





September 30,
                  
                  
                  December 31,2008
                  
                  
                  2007ASSETSCash
      and cash equivalents
                  
                  $
                  1,470,386
                  
                  
                  $
                  1,432,375Rents
      receivable
                  
                  
                  568,259
                  
                  
                  
                  570,510Escrow
      deposits and reserves
                  
                  
                  5,343,558
                  
                  
                  
                  4,735,459Land
                  
                  
                  3,710,215
                  
                  
                  
                  3,710,215Buildings
      and improvements (net of accumulated depreciation of $65,850,570 and
      $62,997,117)
                  
                  
                  45,867,332
                  
                  
                  
                  48,507,023Intangible
      assets (net of accumulated amortization of $603,023 and
      $575,345)
                  
                  
                  269,460
                  
                  
                  
                  289,390Other
      assets
                  
                  
                  1,689,918
                  
                  
                  
                  1,292,657$
                  58,919,128
                  
                  
                  $
                  60,537,629LIABILITIES
      AND PARTNERS' EQUITY (DEFICIT)LiabilitiesAccounts
      payable and accrued expenses
                  
                  $
                  1,594,305
                  
                  
                  $
                  1,497,839Due
      to related parties
                  
                  
                  5,136,445
                  
                  
                  
                  4,792,214Mortgage
      loans
                  
                  
                  76,200,233
                  
                  
                  
                  76,602,199Accrued
      interest
                  
                  
                  5,954,983
                  
                  
                  
                  5,833,343Other
      liabilities
                  
                  
                  756,772
                  
                  
                  
                  807,71389,642,738
                  
                  
                  
                  89,533,308Partners'
      equity (deficit)American
      Tax Credit Properties III L.P.Capital
      contributions, net of distributions
                  
                  
                  26,588,807
                  
                  
                  
                  26,588,807Cumulative
      loss
                  
                  
                  (24,736,435
                  )
                  
                  
                  (24,774,055
                  )1,852,372
                  
                  
                  
                  1,814,752General
      partners and other limited partnersCapital
      contributions, net of distributions
                  
                  
                  (1,411,672
                  )
                  
                  
                  (1,402,781
                  )Cumulative
      loss
                  
                  
                  (31,164,310
                  )
                  
                  
                  (29,407,650
                  )(32,575,982
                  )
                  
                  
                  (30,810,431
                  )(30,723,610
                  )
                  
                  
                  (28,995,679
                  )$
                  58,919,128
                  
                  
                  $
                  60,537,629


9





AMERICAN
TAX CREDIT PROPERTIES III L.P.


NOTES
TO FINANCIAL STATEMENTS - (Continued)


DECEMBER
30, 2008


(UNAUDITED)





2.
            Investment in Local
      Partnerships (continued)





The
combined unaudited statements of operations of the Local Partnerships for the
three and nine month periods ended September 30, 2008 and 2007 are as
follows:





Three Months
                    Ended
                    September 30,
                  
                  
                  Nine Months
                    Ended
                    September 30,
                  
                  
                  Three Months
                    Ended
                    September 30,
                  
                  
                  Nine Months
                    Ended
                    September 30,2008
                  
                  
                  2008
                  
                  
                  2007
                  
                  
                  2007REVENUERental
                  
                  $
                  3,124,159
                  
                  
                  $
                  9,308,521
                  
                  
                  $
                  3,009,683
                  
                  
                  $
                  9,006,287Interest
      and other
                  
                  
                  67,534
                  
                  
                  
                  181,110
                  
                  
                  
                  79,020
                  
                  
                  
                  303,215TOTAL
      REVENUE
                  
                  
                  3,191,693
                  
                  
                  
                  9,489,631
                  
                  
                  
                  3,088,703
                  
                  
                  
                  9,309,502EXPENSESAdministrative
                  
                  
                  745,181
                  
                  
                  
                  2,122,614
                  
                  
                  
                  602,174
                  
                  
                  
                  2,112,466Utilities
                  
                  
                  335,483
                  
                  
                  
                  1,268,545
                  
                  
                  
                  300,437
                  
                  
                  
                  1,218,440Operating
      and maintenance
                  
                  
                  836,488
                  
                  
                  
                  2,365,569
                  
                  
                  
                  885,035
                  
                  
                  
                  2,387,484Taxes
      and insurance
                  
                  
                  289,714
                  
                  
                  
                  896,131
                  
                  
                  
                  341,734
                  
                  
                  
                  982,124Financial
                  
                  
                  534,928
                  
                  
                  
                  1,673,054
                  
                  
                  
                  570,283
                  
                  
                  
                  1,702,812Depreciation
      and amortization
                  
                  
                  961,295
                  
                  
                  
                  2,882,758
                  
                  
                  
                  968,648
                  
                  
                  
                  2,903,796TOTAL
      EXPENSES
                  
                  
                  3,703,089
                  
                  
                  
                  11,208,671
                  
                  
                  
                  3,668,311
                  
                  
                  
                  11,307,122NET
      LOSS
                  
                  $
                  (511,396
                  )
                  
                  $
                  (1,719,040
                  )
                  
                  $
                  (579,608
                  )
                  
                  $
                  (1,997,620
                  )NET
      INCOME (LOSS) ATTRIBUTABLE TOAmerican
      Tax Credit Properties III L.P.
                  
                  $
                  52,895
                  
                  
                  $
                  37,620
                  
                  
                  $
                  5,841
                  
                  
                  $
                  31,190General
      partners and other limited partners (includes $513,726, $1,647,628,
      $516,405 and $1,884,700 of Partnership loss in excess of
      investment)
                  
                  
                  (564,291
                  )
                  
                  
                  (1,756,660
                  )
                  
                  
                  (585,449
                  )
                  
                  
                  (2,028,810
                  )$
                  (511,396
                  )
                  
                  $
                  (1,719,040
                  )
                  
                  $
                  (579,608
                  )
                  
                  $
                  (1,997,620
                  )





The
combined results of operations of the Local Partnerships for the nine months
ended September 30, 2008 are not necessarily indicative of the results that may
be expected for an entire operating period.





3.
            Additional
      Information





Additional
information, including the audited March 30, 2008 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, 2008 on file with the Securities and Exchange
Commission.


10




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, 2008, American Tax Credit Properties III L.P. (the “Registrant”)
has not experienced a significant change in financial condition as compared to
March 30, 2008.  Principal changes in assets are comprised of periodic
transactions and adjustments and equity in 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,
2008, Registrant received cash from interest revenue, maturities/redemptions and
sales of bonds and distributions from Local Partnerships and utilized cash for
operating expenses.  Cash and cash equivalents and investments in
bonds decreased, in the aggregate, by approximately $207,000 during the nine
months ended December 30, 2008 (which includes a net unrealized loss on
investments in bonds of approximately $3,000 and accretion of zero coupon bonds
of approximately $5,000).  Registrant’s investments in bonds as
reflected in the accompanying balance sheet as of March 30, 2008 matured in May
2008.  During the nine months ended December 30, 2008, the investment
in local partnerships increased as a result of equity in the Local Partnerships’
net income for the nine months ended September 30, 2008 of
$37,620.  Accounts payable and accrued expenses includes deferred
administration fees of $440,673 and payable to general partner and affiliates
represents deferred management and administration fees in the accompanying
balance sheet as of December 30, 2008.





Results of
Operations





Registrant’s
operating results are dependent upon the operating results of the Local
Partnerships and are significantly 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.  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, the reported equity in loss of
investment in local partnerships is expected to decrease as Registrant's
investment balances in the respective Local Partnerships become
zero.  The combined statements of operations of the Local Partnerships
reflected in Note 2 to Registrant’s financial statements include the operating
results of all Local Partnerships, irrespective of Registrant’s investment
balances.





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.  In addition, the book value of Registrant’s
investment in each Local Partnership (the “Local Partnership Carrying Value”)
may be reduced if the Local Partnership Carrying Value is considered to exceed
the estimated value derived by management.  Accordingly, cumulative
losses and cash distributions in excess of the investment or an adjustment to a
Local Partnership’s Carrying Value are not necessarily indicative of adverse
operating results of a Local Partnership.  See discussion below under
Local Partnership
Matters regarding certain Local Partnerships currently operating below
economic break even levels.





Registrant’s
operations for the three months ended December 30, 2008 and 2007 resulted in net
losses of $81,874 and $121,329, respectively.  The decrease in net
loss is primarily attributable to an increase in equity in income of investment
in local partnerships of approximately $47,000, which increase is the result of
an increase in net operating income of a certain Local Partnership in which
Registrant continues to have an investment balance.  Other
comprehensive income for the three months ended December 30, 2007 resulted from
a net unrealized gain on investments in bonds of $1,520.  Registrant’s
investments in bonds as reflected in the accompanying balance sheet as of March
30, 2008 matured in May 2008.





The Local
Partnerships’ net loss of approximately $511,000 for the three months ended
September 30, 2008 was attributable to rental and other revenue of approximately
$3,192,000, exceeded by operating and interest expense (including interest on
non-mandatory debt) of approximately $2,742,000 and approximately $961,000 of
depreciation and amortization expense. The Local Partnerships’ net loss of
approximately $580,000 for the three months ended September 30, 2007 was
attributable to rental and other revenue of approximately $3,089,000, exceeded
by operating and interest expense (including interest on non-mandatory debt) of
approximately $2,700,000 and approximately $969,000 of depreciation and
amortization expense. The results of operations of the Local Partnerships for
the three months ended September 30, 2008 are not necessarily indicative of the
results that may be expected in future periods.


11





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, 2008 and 2007 have not varied
significantly, as reflected by the net losses of $341,496 and $327,943,
respectively.  Other comprehensive income (loss) for the nine months
ended December 30, 2008 and 2007 resulted from a net unrealized gain (loss) on
investments in bonds of $(3,426) and $6,033,
respectively.  Registrant’s investments in bonds as reflected in the
accompanying balance sheet as of March 30, 2008 matured in May
2008.





The Local
Partnerships’ net loss of approximately $1,719,000 for the nine months ended
September 30, 2008 was attributable to rental and other revenue of approximately
$9,490,000, exceeded by operating and interest expense (including interest on
non-mandatory debt) of approximately $8,326,000 and approximately $2,883,000 of
depreciation and amortization expense.  The Local Partnerships’ net
loss of approximately $1,998,000 for the nine months ended September 30, 2007
was attributable to rental and other revenue of approximately $9,309,000,
exceeded by operating and interest expense (including interest on non-mandatory
debt) of approximately $8,403,000 and approximately $2,904,000 of depreciation
and amortization expense.  The results of operations of the Local
Partnerships for the nine months ended September 30, 2008 are not necessarily
indicative of the results that may be expected in future periods.





Local Partnership
Matters





Registrant's
primary objective has been to provide Low-income Tax Credits to limited partners
generally over a ten year period.  The relevant state tax credit
agency has allocated each of Registrant’s 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 substantially fully
exhausted by the Local Partnerships 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").  In addition, certain of the Local Partnerships have 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, regardless of any sale of the Properties by
the Local Partnerships after the Compliance Period.  The Properties
must satisfy various requirements including rent restrictions and tenant income
limitations (the "Low-income Tax Credit Requirements") in order to maintain
eligibility for the recognition of the Low-income Tax Credit at all times during
the Compliance Period.  Once a Local Partnership has become eligible
for the Low-income Tax Credit, it may lose such eligibility and suffer an event
of recapture if its Property fails to remain in compliance with the Low-income
Tax Credit Requirements.  The Compliance Period of all of the Local
Partnerships expired as of December 31, 2007.  It is the General
Partner’s intention to sell or assign Registrant’s interests in the Local
Partnerships since the Compliance Periods have expired.  It is
uncertain as to the amount, if any, that Registrant will receive with respect to
each specific Property from such sales and assignments.





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, including payments under Section 8 of Title II of the Housing and
Community Development Act of 1974 ("Section 8").  The subsidy
agreements expire at various times.  Since October 1997, the United
States Department of Housing and Urban Development (“HUD”) has issued a series
of directives related to project based Section 8 contracts that define owners’
notification responsibilities, advise owners of project based Section 8
properties of what their options are regarding the renewal of Section 8
contracts, provide guidance and procedures to owners, management agents,
contract administrators and HUD staff concerning renewal of Section 8 contracts,
provide policies and procedures on setting renewal rents and handling renewal
rent adjustments and provide the requirements and procedures for opting-out of a
Section 8 project based contract.   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 including the Section 8
program.  Such changes could adversely affect the future net operating
income (“NOI”) before debt service and debt structure of any or all Local
Partnerships currently receiving such subsidy or similar
subsidies.  Three Local Partnerships’ Section 8 contracts are
currently subject to renewal under applicable HUD guidelines.


12





AMERICAN
TAX CREDIT PROPERTIES III L.P.




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





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").  During the nine months ended September 30, 2008, revenue
from operations of the Local Partnerships was generally sufficient to cover
operating expenses and Mandatory Debt Service.  Substantially all of
the Local Partnerships are effectively operating at or above break even levels,
although certain Local Partnerships' operating information reflects operating
deficits that do not represent cash deficits due to their mortgage and financing
structure and the required deferral of property management
fees.  However, as discussed below, certain Local Partnerships’
operating information indicates an operating deficit after taking into account
their mortgage and financing structure and any required deferral of property
management fees.





The terms
of the partnership agreement of Westminster require the Local General Partner of
Westminster to advance funds to cover operating deficits through the Compliance
Period.  Westminster has, for several years, been in default under the
terms of its first mortgage; delinquent payments of principal and interest,
replacement reserve deposits and certain fees represent a cumulative arrearage
of approximately $832,000 as of December 2008.  The lender has
indicated a willingness to restructure the debt, whereby payments will be
required only to the extent that Westminster generates available annual cash
flow; in addition, the lender would receive all residual proceeds upon the sale
of Westminster.  There can be no assurance that the issues will be
resolved and the mortgage remains in default without a formal forbearance as of
February 2009.  Westminster reported an operating deficit of
approximately $79,000 for the nine months ended September 30, 2008, which amount
includes a provision for replacement reserve deposits of $1,184 per month and
debt service payments of $6,245 per month.  Registrant’s investment
balance in Westminster, after cumulative equity losses, became zero during the
year ended March 30, 1999.





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 Section 8 voucher contract in connection
with the Property.  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 in excess of $1,837,000 as of December 2008.  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
$17,000 as of December 2008.  The Local General Partner of Queen Lane
is examining the potential to sell the Property.  Registrant’s
investment balance in Queen Lane, after cumulative equity losses, became zero
during the year ended March 30, 2001.





The terms
of the partnership agreement of Justin Associates (“Justin”) require the Local
General Partners of Justin to cause the management agent to defer property
management fees in order to avoid a default under the
mortgage.  Justin reported an operating deficit of approximately
$27,000 for the nine months ended September 30, 2008, which includes property
management fees of approximately $14,000.  The Local General Partners
of Justin represent that payments on the mortgage and real estate taxes are
current.  Registrant’s investment balance in Justin, after cumulative
equity losses, became zero during the year ended March 30, 2002.





The terms
of the partnership agreement of Christian Street Commons Associates (“Christian
Street”) require the Local General Partners of Christian Street to advance funds
to cover operating deficits up to $150,000 through 2008 and to cause the
management agent to defer property management fees in order to avoid a default
under the mortgage.  Christian Street reported an operating deficit of
approximately $31,000 for the nine months ended September 30, 2008, which
includes property management fees of approximately $3,000.  The Local
General Partners of Christian Street represent that payments on the mortgage and
real estate taxes are current.  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 Ashland Park Apartments, L.P. (“Ashland Park”) and Registrant
have reached an agreement to be dated in February 2009 whereby Registrant will
withdraw from Ashland Park; Registrant will receive $3,500 in connection with
the withdrawal.  Registrant’s investment balance in Ashland Park,
after cumulative equity losses, became zero during the year ended March 30,
1999.


13




AMERICAN
TAX CREDIT PROPERTIES III L.P.




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





Orange
City Plaza Limited Partnership (“Orange City”) reported an operating deficit of
approximately $8,000 for the nine months ended September 30,
2008.  The Local General Partner of Orange City represents that
payments on the mortgage and real estate taxes are
current.  Registrant has made voluntary advances to Orange City of
$120,490 as of December 30, 2008 to fund operating deficits, none of which were
made during the nine months then ended.  Registrant’s investment
balance in Orange City, after cumulative equity losses, became zero during the
year ended March 30, 2002 and voluntary advances made by Registrant have been
offset by additional equity in loss of investment in local
partnerships.





Critical Accounting Policies
and Estimates





The
financial statements are prepared in accordance with accounting principles
generally accepted in the United States of America (“GAAP”) for interim
financial reporting, 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
financial statements.





·
            Registrant
      accounts for its investment in local partnerships in accordance with the
      equity method of accounting since Registrant does not control the
      operations of a Local Partnership.





·
            If
      the book value of Registrant’s investment in a Local Partnership exceeds
      the estimated value derived by management, Registrant reduces its
      investment in any such Local Partnership and includes such reduction in
      equity in loss of investment in local partnerships.  Registrant
      makes such assessment at least annually in the fourth quarter of its
      fiscal year or whenever there are indications that a permanent impairment
      may have occurred.  A loss in value of an investment in a Local
      Partnership other than a temporary decline would be recorded as an
      impairment loss.  Impairment is measured by comparing the
      investment carrying amount to the estimated residual value of the
      investment.





·
            Registrant
      does not consolidate the accounts and activities of the Local
      Partnerships, which are considered Variable Interest Entities under
      Financial Accounting Standards Board (“FASB”) Interpretation No. 46 -
      Revised, “Consolidation of Variable Interest Entities,” 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 strength
      of the Local General Partners.





New Accounting
Pronouncements





In
September 2006, the FASB issued Statement of Financial Accounting Standard
(“SFAS”) No. 157, “Fair Value Measurements,” (“SFAS 157”).  SFAS 157
defines fair value, establishes a framework for measuring fair value in
accordance with GAAP and expands disclosures about fair value
measurements.  SFAS 157 applies to other accounting pronouncements
that require or permit fair value measurements.  Accordingly, SFAS 157
does not require any new fair value measurements.  SFAS 157 is
effective for fiscal years beginning after November 15,
2007.  Registrant adopted SFAS 157 effective March 31,
2008.  On February 6, 2008 the FASB approved the Financial Staff
Position (“FSP”)that will defer the effective date of SFAS 157 by one year for
nonfinancial assets and liabilities that are recognized or disclosed at fair
value in the financial statements on a nonrecurring basis.  The
partial adoption of SFAS 157 for financial assets and liabilities did not
have a material impact on Registrant’s financial position, results of operations
or cash flows.





Registrant
adopted SFAS 157 as of March 31, 2008, with the exception of the application of
the statement to nonrecurring nonfinancial assets and nonfinancial
liabilities.  Nonrecurring nonfinancial assets and liabilities for
which Registrant has not applied the provisions of SFAS 157 include investment
in local partnerships, which is accounted for under the equity method of
accounting.


14





AMERICAN
TAX CREDIT PROPERTIES III L.P.




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





SFAS 157
establishes a three-tier fair value hierarchy, which prioritizes the inputs used
in measuring fair value.  These tiers include: Level 1, defined as
observable inputs such as quoted prices in active markets for identical assets
or liabilities; Level 2, defined as inputs other than quoted prices for similar
assets or liabilities in active markets that are either directly or
indirectly observable; and Level 3, defined as unobservable inputs in which
little or no market data exists, therefore requiring an entity to develop its
own assumptions.





Financial
assets accounted for at fair value on a recurring basis as of December 30, 2008
include cash and cash equivalents of $1,044,270 as reflected in the accompanying
balance sheet.  These assets are carried at fair value based on quoted
market prices for identical securities (Level 1
inputs).




In
December 2008, the FASB issued FSP FAS 140-4 and FIN 46(R)-8, “Disclosures by
Public Entities (Enterprises) about Transfers of Financial Assets and Interests
in Variable Interest Entities.”  The FSP amends SFAS No. 140 to
require public entities to provide additional disclosures about transferors’
continuing involvements with transferred financial assets.  It also
amends FIN 46(R) to require public enterprises, including sponsors that have a
variable interest in a variable interest entity, to provide additional
disclosures about their involvement with variable interest
entities.  The FSP also requires disclosures by a public enterprise
that is (a) a sponsor of a qualifying special-purpose entity (“SPE”) that holds
a variable interest in the qualifying SPE but was not the transferor of
financial assets to the qualifying SPE and (b) a servicer of a qualifying SPE
that holds a significant variable interest in the qualifying SPE but was not the
transferor of financial assets to the qualifying SPE.  The FSP is
effective for public entities in their first reporting period (interim or
annual) that ends after December 15, 2008. Registrant
does not believe that the adoption of the FSP will have a material impact on its
financial statements.




Item
3.  Quantitative and Qualitative
Disclosure About Market Risk





None




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 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 nine months ended December 30,
2008.  Based upon that evaluation, the Chief Executive Officer and
Chief Financial Officer concluded that Registrant’s disclosure controls and
procedures were effective as of December 30, 2008.





There
were no changes in Registrant’s internal control over financial reporting during
the three months ended December 30, 2008 that have materially affected, or
are reasonably likely to materially affect, Registrant’s internal control over
financial reporting.




15





AMERICAN
TAX CREDIT PROPERTIES III L.P.





Part
II - OTHER
INFORMATION




Item 1. Legal
Proceedings





Registrant
is not aware of any material legal proceedings.





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,
2008.





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 certain Local
Partnerships.





Item
4. Submission of Matters to a
Vote of Security Holders





None





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




16





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 13, 2009
                          /s/David
      Salzmanby:David
      SalzmanChief Executive OfficerDated:
      February 13, 2009
                          /s/James
      HusseyBy:James
      HusseyChief Financial OfficerDated:
      February 13, 2009
                          /s/Richard
      Paul RichmanBy:Richard
      Paul RichmanDirector


17