UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 ______________
 
 FORM
10-K
 
 ______________
 (Mark
One)
 
 þ
            ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For
the fiscal year ended March 31, 2009
 
 OR
 
 o
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 Commission
File Number 0-24650
 
 INDEPENDENCE
TAX CREDIT PLUS L.P. III
 (Exact
name of registrant as specified in its charter)
 
 Delaware
                  
                  13-3746339(State
      or other jurisdiction of incorporation or organization)
                  
                  (I.R.S.
      Employer Identification No.)625
      Madison Avenue, New York, New York
                  
                  10022(Address
      of principal executive offices)
                  
                  (Zip
      Code)
 
 Registrant’s
telephone number, including area code (212) 317-5700
 
 Securities
registered pursuant to Section 12(b) of the Act:
 
 None
 
 Securities
registered pursuant to Section 12(g) of the Act:
 
 Limited
Partnership Interests and Beneficial Assignment Certificates
 
 (Title of
Class)
 
 Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.  Yes  o   No  þ
 
 Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.  Yes o   No  þ
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  Yes  þ   No  o
 
 Indicate by checkmark whether the
registrant has submitted electronically and posted on its corporate Website, if
any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (§229.405 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  o  No  o
 
 Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.   þ
 
 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 definitions of “large accelerated filer”, “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.  (Check one):
 
 Large
      accelerated filer  o
            
            Accelerated
      filer  oNon-accelerated
      filer  o  (Do
      not check if a smaller reporting company)
            
            Smaller
      reporting company  þ
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).  Yes  o   No  þ
 
 The
approximate aggregate book value of the voting and non-voting common equity held
by non-affiliates of the Registrant as of September 30, 2008 was $(109,000),
based on Limited Partner equity as of such date.
 
 DOCUMENTS
INCORPORATED BY REFERENCE
 
 None
 
 
  
  PART
I
  Item
1.  Business
  General
  Independence
Tax Credit Plus L.P. III (the “Partnership”) is a limited partnership which was
formed under the laws of the State of Delaware on December 23, 1993. The general
partner of the Partnership is Related Independence Associates III L.P., a
Delaware limited partnership (the “General Partner”).  The general
partner of the General Partner is Related Independence Associates III Inc., a
Delaware corporation (“RIAI III”).  The ultimate parent of the General
Partner is Centerline Holding Company (“Centerline”).
  On June
7, 1994, the Partnership commenced a public offering (the “Offering”) of
Beneficial Assignment Certificates (“BACs”) representing assignments of limited
partnership interests in the Partnership (“Limited Partnership Interests”),
managed by Related Equities Corporation (the “Dealer Manager”), pursuant to a
prospectus dated June 7, 1994 (the “Prospectus”).
  As of the
termination of the offering on May 9, 1995, the Partnership had received
$43,440,000 of gross proceeds of the Offering (the “Gross Proceeds”) from 2,810
investors (“BACs holders”). (See Item 8, “Financial Statements and Supplementary
Data,” Note 1).
  The
Partnership’s business is to invest in other partnerships (“Local Partnerships,”
“subsidiaries” or “subsidiary partnerships”) owning leveraged apartment
complexes (“Apartment Complexes” or “Properties”) that are eligible for the
low-income housing tax credit (“Tax Credit”) enacted in the Tax Reform Act of
1986, some of which may also be eligible for the historic rehabilitation tax
credit (“Historic Tax Credit”).  The Partnership’s investment in each
Local Partnership represents from 98.99% to 99.98%, other than two Local
Partnerships.  The Partnership’s investment in New Zion represents
42.39% of the partnership interests in the Local Partnership (the other 57.59%
of limited partnership interests is owned by affiliates of the Partnership, with
the same management).  The Partnership’s investment in Brannon Group
represents 53.85% of the partnership interests in the Local Partnership (the
other 46.14% of limited partnership interests is owned by affiliates of the
Partnership, with the same management).  The Partnership had
originally acquired interests in twenty Local Partnerships.  As of
March 31, 2009, the Partnership has sold its limited partnership interest in one
Local Partnership.  As of March 31, 2009, approximately $35,051,000
(including approximately $1,890,000 classified as a loan repayable from
sale/refinancing proceeds in accordance with the contribution agreement with one
Local Partnership and including acquisition fees of approximately $2,510,000) of
the net proceeds of the Offering has been invested in Local Partnerships, of
which approximately $120,000 remains to be contributed to the Local Partnerships
for payment by them to the original sellers of the Properties (including
approximately $115,000 being held in escrow), as certain benchmarks such as
occupancy levels must be attained prior to the release of such funds. The
Partnership does not intend to acquire interests in additional Local
Partnerships.
  Investment
Objectives/General Incentives
  The
Partnership was formed to invest in low-income Apartment Complexes that are
eligible for the Tax Credit enacted in the Tax Reform Act of 1986. Some
Apartment Complexes may also be eligible for Historic Tax Credits (“Historic
Complexes” or “Properties”). The investment objectives of the Partnership are
described below.
  1.
            Entitle
      qualified BACs holders to Tax Credits over the period of the Partnership’s
      entitlement to claim Tax Credits (for each Property, generally ten years
      from the date of investment or, if later, the date the Property is leased
      to qualified tenants; referred to herein as the “Credit Period”) with
      respect to each Apartment Complex.
  2.
            Preserve
      and protect the Partnership’s
capital.
  3.
            Participate
      in any capital appreciation in the value of the Properties and provide
      distributions of sale or refinancing proceeds upon the disposition of the
      Properties.
  4.
            Allocate
      passive losses to individual BACs holders to offset passive income that
      they may realize from rental real estate investments and other passive
      activities, and allocate passive losses to corporate BACs holders to
      offset business income.
  One of
the Partnership’s objectives is to entitle qualified BACs holders to Tax Credits
over the Credit Period. Each of the Local Partnerships in which the Partnership
has acquired an interest has been allocated by the relevant state credit
agencies the authority to recognize Tax Credits during the Credit Period
provided that the Local Partnership satisfies the rent restriction, minimum
set-aside and other requirements for recognition of the Tax Credits at all times
during such period. Once a Local Partnership has become eligible to recognize
Tax Credits, it may lose such eligibility and suffer an event of “recapture” if
its Property fails to remain in compliance with the Tax Credit
requirements.  At December 31, 2008, only Mansion Court Phase II
Venture was required to recapture $489,362 of low-income housing tax
credits.
  Tax
Credits with respect to a given Apartment Complex are available for a ten-year
period that commences when the property is leased to qualified tenants. However,
the annual Tax Credits available in the year in which the Apartment Complex is
leased to qualified tenants must be prorated based upon the months remaining in
the year. The amount of the annual Tax Credits not available in the first year
will be available in the eleventh year. Internal Revenue Code Section 42
regulates the use of the Apartment Complexes as to occupancy, eligibility, and
unit gross rent, among other requirements. Each Apartment Complex must meet the
provisions of these regulations during each of fifteen consecutive years (the
“Compliance Period”) in order to remain qualified to receive the credits.
Certain Apartment Complexes have extended compliance periods of up to fifty
years. The Partnership generated $290,438 and $1,999,760 in Tax Credits during
the years ending December 31, 2008 and 2007, respectively.
  Tax
Credits are attached to a Local Partnership for the ten-year Credit Period and
are transferable with the Property during the entirety of such ten-year
period.  If trends in the real estate market warranted the sale of a
Property, the remaining Tax Credits would transfer to the new owner, thereby
adding value to the Property on the market.  However, such value
declines each year and is not included in the financial statement carrying
amount.  The Credit Periods have expired, and are scheduled to
continue to expire, at various times from December 31, 2004 through December 31,
2009 with respect to the Local Partnerships depending upon when the Credit
Period commenced.
   - 2
-
   A loss on
impairment of assets is recorded when management estimates amounts recoverable
through future operations and sale of the Property on an undiscounted basis are
below depreciated cost.  At that time the Property investments
themselves are reduced to estimated fair value (generally using the discounted
cash flow valuation method).  During the year ended March 31, 2009,
the Partnership recorded approximately $437,000 as an aggregate loss on
impairment of assets or reduction to estimated fair value.  Through
March 31, 2009, the Partnership has recorded approximately $1,840,000 as an
aggregate loss on impairment of assets or reduction to estimated fair
value.
  While the
value of the remaining Tax Credits are a factor in calculating fair value, the
expiration of the Credit Period, in and of itself, is not the only factor in
determining whether there is an impairment and generally does not have any
adverse impact on the fair value of the Local Partnerships.
  There can
be no assurance that the Partnership will achieve its investment objectives as
described above.
  The
Partnership is subject to the risks incident to potential losses arising from
the management and ownership of improved real estate. The Partnership can also
be affected by poor economic conditions generally; however, no more than 32% of
the Properties are located in any single state. There are also substantial risks
associated with owning interests in properties, as does the Partnership, which
receive government assistance, for example the possibility that Congress may not
appropriate funds to enable the Department of Housing and Urban Development
(“HUD”) to make rental assistance payments. HUD also restricts annual cash
distributions to partners based on operating results and a percentage of the
owner’s equity contribution. The Partnership cannot sell or substantially
liquidate its investments in subsidiary partnerships during the period that the
subsidy agreements are in existence without HUD’s approval. Furthermore, there
may not be market demand for apartments at full market rents when the rental
assistance contracts expire.
  Sale of Local Partnership
Interest
  The
Partnership is in the process of selling its investments.  As of March
31, 2009, the Partnership has sold its limited partnership interest in one Local
Partnership.  There can be no assurance as to when the Partnership
will dispose of its remaining investments or the amount of proceeds which may be
received.  However, based on the historical operating results of the
Local Partnerships and the current economic conditions, including changes in tax
laws, it is unlikely that the proceeds from such sales received by the
Partnership will be sufficient to return to the limited partners their original
investment.
  On
December 31, 2008, the Partnership sold its limited partnership interest in 2301
First Avenue Limited Partnership L.P. (“2301 First Avenue”) to an affiliate of
the Local General Partner for a sales price of $2,200,000.  The sale
resulted in a gain of approximately $5,140,000, resulting from the write-off of
the deficit basis in the Local Partnership of approximately $2,940,000 at the
date of the sale and the $2,200,000 cash received from the sale.  The
sale also resulted in a write-off of operating advances of approximately
$1,064,000 owed to the Partnership which eliminates in
consolidation.  In addition, the sale resulted in a non-cash
contribution to the Local Partnership from the General Partner of approximately
$5,000 as a result of the write-off of fees owed by the Local Partnership to an
affiliate of the General Partner.
 Segments
  The
Partnership operates in one segment, which is the investment in multi-family
residential property.  Financial information about this segment is set
forth in Item 8 hereto.
  Competition
  The real
estate business is highly competitive and substantially all of the Properties
acquired by the Partnership are expected to have active competition from similar
properties in their respective vicinities. In addition, various other limited
partnerships have, in the past, and may, in the future, be formed by the General
Partner and/or its affiliates to engage in businesses which may be competitive
with the Partnership.
  Employees
  The
Partnership does not have any direct employees. All services are performed for
the Partnership by the General Partner and its affiliates. The General Partner
receives compensation in connection with such activities as set forth in Items
11 and 13. In addition, the Partnership reimburses the General Partner and
certain of its affiliates for expenses incurred in connection with the
performance by their employees of services for the Partnership in accordance
with the Partnership’s Amended and Restated Agreement of Limited Partnership
(the “Partnership Agreement”).
  Item
1A.  Risk Factors
  The
Partnership’s investment as a limited partner in the Local Partnerships is
subject to the risks of potential losses arising from management and ownership
of improved real estate. The Partnership’s investments also could be adversely
affected by poor economic conditions generally, which could increase vacancy
levels and rental payment defaults, and by increased operating expenses, any or
all of which could threaten the financing viability of one or more of the Local
Partnerships.
  There
also are substantial risks associated with the operation of Apartment Complexes
receiving government assistance. These include governmental regulations
concerning tenant eligibility, which may make it more difficult to rent
apartments in the Apartment Complexes; difficulties in obtaining government
approval for rent increases; limitations on the percentage of income which low
and moderate-income tenants may pay as rent; the possibility that Congress may
not appropriate funds to enable HUD to make the rental assistance payments it
has contracted to make; and that when the rental assistance contracts expire,
there may not be market demand for apartments at full market rents in a Local
Partnership’s Apartment Complex.
    - 3
-
   Item
1B.  Unresolved Staff Comments
  None
  Item
2.  Properties
  The
Partnership is subject to the risks incidental to potential losses arising from
the management and ownership of improved real estate.  The Partnership
can also be affected by poor economic conditions.  The Partnership had
originally acquired interests in twenty Local Partnerships, all of which have
been consolidated for accounting purposes.  During the year ended
March 31, 2009, the Partnership has sold its limited partnership interest in one
Local Partnership.  There can be no assurance as to when the
Partnership will dispose of its remaining investments or the amount of proceeds
which may be received.  Except for the interest in New Zion
Apartments, L.P. (“New Zion”) and the Brannon Group, L.C. (“Brannon Group”), the
Partnership’s investment in each Local Partnership represents 98.99% or 99.98%
of the partnership interests in the Local Partnership. The Partnership’s
investment in New Zion represents 42.39% of the partnership interests in the
Local Partnership (the other 57.59% of limited partnership interests is owned by
affiliates of the Partnership, with the same management).  The
Partnership’s investment in Brannon Group represents 53.85% of the partnership
interests in the Local Partnership (the other 46.14% of limited partnership
interests is owned by affiliates of the Partnership, with the same
management).  Set forth below is a schedule of the Local Partnerships
including certain information concerning their respective Apartment Complexes
(the “Local Partnership Schedule”). Further information concerning these Local
Partnerships and their Properties, including any encumbrances affecting the
Properties, may be found in Schedule III to the financial statements which are
included herein.
  Local Partnership
Schedule
 
 %
      of Units Occupied at May 1,Name
      and Location
              (Number
      of Units)
            
            Date
      Acquired
            
            2009
            
            2008
            
            2007
            
            2006
            
            2005Edward
      Hotel Limited PartnershipLos
      Angeles, CA (47)
            
            November
      1994
            
            96
            %
            
            94
            %
            
            87
            %
            
            93
            %
            
            94
            %Pacific-East
      L.P.Brooklyn,
      NY (39)
            
            December
      1994
            
            89
            %
            
            92
            %
            
            92
            %
            
            92
            %
            
            100
            %Overtown
      Development Group, Ltd.Miami,
      FL (65)
            
            December
      1994
            
            78
            %
            
            78
            %
            
            85
            %
            
            97
            %
            
            83
            %Sumpter
      Commons Associates, L.P.Brooklyn,
      NY (21)
            
            April
      1995
            
            100
            %
            
            100
            %
            
            100
            %
            
            100
            %
            
            100
            %Park
      Housing Limited PartnershipHartford,
      CT  (30)
            
            May
      1995
            
            83
            %
            
            80
            %
            
            90
            %
            
            97
            %
            
            97
            %Livingston
      Manor Urban Renewal Associates, L.P.New
      Brunswick, NJ (50)
            
            June
      1995
            
            98
            %
            
            100
            %
            
            100
            %
            
            100
            %
            
            96
            %Jefferis
      Square Housing Partnership L.P.Chester,
      PA (36)
            
            June
      1995
            
            97
            %
            
            94
            %
            
            100
            %
            
            100
            %
            
            97
            %2301
      First Avenue Limited PartnershipNew
      York, NY (92)
            
            August
      1995
            
            (a
            )
            
            98
            %
            
            99
            %
            
            97
            %
            
            100
            %Lewis
      Street L.P.Buffalo,
      NY (32)
            
            October
      1995
            
            97
            %
            
            97
            %
            
            88
            %
            
            100
            %
            
            88
            %Savannah
      Park Housing Limited PartnershipWashington,
      DC  (64)
            
            October
      1995
            
            86
            %
            
            94
            %
            
            97
            %
            
            97
            %
            
            95
            %Brannon
      Group, L.C.Leisure
      City, FL (80)
            
            December
      1995
            
            90
            %
            
            93
            %
            
            98
            %
            
            94
            %
            
            94
            %Mansion
      Court Phase II VenturePhiladelphia,
      PA (19)
            
            December
      1995
            
            42
            %
            
            42
            %
            
            53
            %
            
            74
            %
            
            79
            %Primm
      Place Partners, L.P.St.
      Louis, MI (128)
            
            December
      1995
            
            95
            %
            
            97
            %
            
            98
            %
            
            97
            %
            
            95
            %BK-9-A
      Partners L.P.Brooklyn,
      NY (23)
            
            December
      1995
            
            100
            %
            
            96
            %
            
            100
            %
            
            96
            %
            
            100
            %BK-10K
      Partners L.P.Brooklyn,
      NY (21)
            
            December
      1995
            
            100
            %
            
            100
            %
            
            100
            %
            
            100
            %
            
            96
            %
 
 - 4
-
 
 Local Partnership
Schedule
 (continued)
 %
      of Units Occupied at May 1,Name
      and Location
                (Number
      of Units)
              
              Date
      Acquired
              
              2009
              
              2008
              
              2007
              
              2006
              
              2005
  Aspen-Olive
      AssociatesPhiladelphia,
      PA (22)
              
              October
      1996
              
              100
              %
              
              95
              %
              
              95
              %
              
              100
              %
              
              100
              %West
      Mill Creek Associates III L.P.Philadelphia,
      PA (72)
              
              January
      1997
              
              97
              %
              
              96
              %
              
              100
              %
              
              99
              %
              
              99
              %Universal
      Court AssociatesPhiladelphia,
      PA (32)
              
              April
      1997
              
              100
              %
              
              100
              %
              
              100
              %
              
              100
              %
              
              100
              %New
      Zion ApartmentsShreveport,
      LA (100)
              
              November
      1997
              
              98
              %
              
              99
              %
              
              100
              %
              
              100
              %
              
              94
              %Dreitzer
      HouseNew
      York, NY (32)
              
              December
      1997
              
              100
              %
              
              100
              %
              
              99
              %
              
              100
              %
              
              95
              %(a)  
      The Partnership’s limited partnership interest was sold during the fiscal
      year ended March 31, 2009 (see Note 10 in Item
  8).
   All
leases are generally for periods not greater than one to two years and no tenant
occupies more than 10% of the total rentable square footage in any single
Apartment Complex.
  Commercial
tenants (to which average rental per square foot applies) comprise less than 5%
of the rental revenues of the Partnership. Maximum rents for the residential
units are determined annually by HUD and reflect increases/decreases in consumer
price indices in various geographic areas. Market conditions, however, determine
the amount of rent actually charged.
  Management
continuously reviews the physical state of the Properties and suggests to the
respective general partners of the Local Partnerships (“Local General Partners”)
budget improvements which are generally funded from cash flow from operations or
release of replacement reserve escrows to the extent available.
  Management
continuously reviews the insurance coverage of the Properties and believes such
coverage is adequate.
  See Item
1, Business, above for the general competitive conditions to which the
Properties described above are subject.
  Real
estate taxes are calculated using rates and assessed valuations determined by
the township or city in which the Property is located. Such taxes have
approximated 1% of the aggregate cost of the Properties as shown in Schedule III
to the financial statements included herein.
  In
connection with investments in development-stage Apartment Complexes, the
General Partner generally required that the Local General Partners provide
completion guarantees and/or undertake to repurchase the Partnership’s interest
in the Local Partnership if construction or rehabilitation was not completed
substantially on time or on budget (“Development Deficit Guarantees”). The
Development Deficit Guarantees generally also required the Local General Partner
to provide any funds necessary to cover net operating deficits of the Local
Partnership until such time as the Apartment Complex had achieved break-even
operations. The General Partner generally required that the Local General
Partners undertake an obligation to fund operating deficits of the Local
Partnership (up to a stated maximum amount) during a limited period of time
(typically three to five years) following the achievement of break-even
operations (“Operating Deficit Guarantees”).  As of March 31, 2009,
the gross amount of the Operating Deficit Guarantees aggregate approximately
$5,487,000, all of which have expired.  In cases where the General
Partner deemed it appropriate, the obligations of a Local General Partner under
the Development Deficit, Operating Deficit and/or Rent-Up Guarantees were
secured by letters of credit and/or cash escrow deposits.
  Tax
Credits with respect to a given Apartment Complex are available for a ten-year
period that commences when the property is leased to qualified tenants. However,
the annual Tax Credits available in the year in which the Apartment Complex is
leased must be prorated based upon the number of months remaining in the year.
The amount of the annual Tax Credit not available in the first year will be
available in the eleventh year. In certain cases, the Partnership acquired its
interest in a Local Partnership after the Local Partnership had placed its
Apartment Complex in service. In these cases, the Partnership may be allocated
Tax Credits only beginning in the month following the month in which it acquired
its interest and Tax Credits allocated in any prior period are not available to
the Partnership.
  Item
3.  Legal Proceedings
  None
  Item
4.  Submission of Matters to a Vote of Security Holders
  None
   - 5
-
  PART
II
  Item
5.  Market for Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
  As of
March 31, 2009, the Partnership had issued and outstanding 43,440 Limited
Partnership Interests, each representing a $1,000 capital contribution to the
Partnership, or an aggregate capital contribution of $43,440,000.  All
of the issued and outstanding Limited Partnership Interests have been issued to
Independence Assignor Inc. (the “Assignor Limited Partner”), which has in turn
issued 43,440 BACs to the purchasers thereof for an aggregate purchase price of
$43,440,000. Each BAC represents all of the economic and virtually all of the
ownership rights attributable to a Limited Partnership Interest held by the
Assignor Limited Partner. BACs may be converted into Limited Partnership
Interests at no cost to the holder (other than the payment of transfer costs not
to exceed $100), but Limited Partnership Interests so acquired are not
thereafter convertible into BACs.
  Neither
the BACs nor the Limited Partnership Interests are traded on any established
trading market.  The Partnership does not intend to include the BACs
for quotation on NASDAQ or for listing on any national or regional stock
exchange or any other established securities market. The Revenue Act of 1987
contained provisions which have an adverse impact on investors in “publicly
traded partnerships.”  Accordingly, the General Partner has imposed
limited restrictions on the transferability of the BACs and the Limited
Partnership Interests in secondary market transactions. Implementation of the
restrictions should prevent a public trading market from developing and may
adversely affect the ability of an investor to liquidate his or her investment
quickly. It is expected that these procedures will remain in effect until such
time, if ever, as further revision of the Revenue Act of 1987 may permit the
Partnership to lessen the scope of the restrictions.
  As of May
28, 2009, the Partnership has approximately 2,547 registered holders of an
aggregate of 43,440 BACs.
  All of
the Partnership’s general partnership interests, representing an aggregate
capital contribution of $1,000, are held by the General Partner.
  There are
no material legal restrictions in the Partnership Agreement on the ability of
the Partnership to make distributions. However, the Partnership has made no
distributions to the BACs holders as of March 31, 2009.  The
Partnership does not anticipate providing cash distributions to its BACs holders
other than from net refinancing or sales proceeds.
  Transfer
Procedures
 The
Partnership from time to time receives requests by unit holders and others to
transfer BACs and/or Limited Partnership Interests.  Such requests may
occur in connection with tender offers for the Partnership’s
units.  Such requests implicate the Partnership’s policies and
procedures concerning transfers generally and tender offers in particular, which
were adopted by the Partnership pursuant to the terms of its Partnership
Agreement, to ensure compliance with applicable law, avoid adverse tax
consequences for the Partnership and its investors, and preserve the
Partnership’s advantageous tax status.
  In prior
years, the Partnership relied on the 5% safe harbor established by Internal
Revenue Service (“IRS”) regulations to avoid being characterized as a
“publicly-traded partnership” that is taxed as a corporation.  The 5%
safe harbor, however, expired and is no longer available as of December 31,
2005.  Accordingly, the Partnership now relies on a 2% safe harbor
established by another IRS regulation to avoid being characterized as a
“publicly-traded partnership” that is taxed as a corporation.
  A brief
summary of certain of the Partnership’s key policies, practices and requirements
with respect to transfers and tender offers is as follows:
  ·
            No
      transfer (whether for substitution, assignment or otherwise) is effective
      or binding on the Partnership unless and until it is approved by the
      General Partner.
  ·
            No
      transfer will be approved unless the transferor and transferee submit
      complete and properly executed forms of the Partnership’s own transfer
      documentation.  The Partnership does not accept forms of
      transfer documentation other than its own and does not accept signatures
      made by power of attorney in lieu of original signatures by each of the
      transferors and transferees.
  ·
            The
      Partnership will not approve transfers that in the cumulative aggregate
      for any tax year exceed the IRS 2% safe harbor, unless a financially
      responsible person provides the Partnership and its partners with (i) an
      indemnity (in form and substance in all ways acceptable to the General
      Partner) for all liability (including, without limitation, any adverse tax
      consequences) arising from or relating to exceeding the 2% safe harbor and
      (ii) a legal opinion (in form and substance in all ways acceptable to the
      General Partner) that there will be no adverse tax consequences to the
      Partnership and its partners from exceeding the 2% safe
      harbor.
  ·
            In
      order to avoid the undesirable situation of one or more tender offers
      consuming the entire safe harbor limitation early in the tax year and
      leaving the Partnership’s remaining investors with no liquidity
      opportunity for the rest of that tax year, the Partnership restricts the
      cumulative aggregate total of transfers made pursuant to all tender offers
      to 1.5% of its outstanding units in each tax year, unless a financially
      responsible person conducting such tender offer provides the Partnership
      with an acceptable indemnity and legal opinion of the type described
      above.  At the end of each tax year, the General Partner, in its
      discretion, may allow the cumulative total number of transfers (including
      those by tender offer) to reach the 2% safe harbor
  limit.
  ·
            The
      Partnership requires that all tender offers for its units be conducted in
      accordance with all applicable law including, without limitation, the
      federal securities laws.
  The
foregoing is solely a summary of the Partnership’s policies, requirements and
practices with respect to transfers and tender offers.  More complete
information, including a copy of the Partnership’s transfer documentation
package, may be obtained from the Partnership.
   - 6
-
  Item
7.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations
  Liquidity and Capital
Resources
  The
Partnership had originally invested approximately $35,051,000 (including
approximately $2,953,000 classified as loans repayable from sale/refinancing
proceeds in accordance with the contribution agreement with one Local
Partnership and not including acquisition fees of approximately $2,510,000) of
the net proceeds of its Offering in twenty Local Partnerships of which
approximately $120,000 remains to be contributed to the Local Partnerships for
payment by them to the original sellers of the Properties (not including
approximately $115,000 being held in escrow) as certain benchmarks, such as
occupancy level, must be attained prior to the release of the funds. The
Partnership does not intend to acquire additional Properties. During the year
ended March 31, 2009, the Partnership did not make any advances to the Local
Partnerships.  Although the Partnership will not be acquiring
additional Properties, the Partnership may be required to fund potential
purchase price adjustments based on tax credit adjustor clauses.
  The
Partnership is in the process of disposing all of its investments.  As
of March 31, 2009, the Partnership has sold its limited partnership interest in
one Local Partnership.  There can be no assurance as to when the
Partnership will dispose of its remaining investments or the amount of proceeds
which may be received.  However, based on the historical operating
results of the Local Partnerships and the current economic conditions, including
changes in tax laws, it is unlikely that the proceeds from such sales received
by the Partnership will be sufficient to return to the limited partners their
original investments.  All gains and losses on sales are included in
discontinued operations.
  Short-term
  During
the year ended March 31, 2009, the Partnership’s primary sources of funds
included:  (i) working capital reserves; (ii) interest earned on the
working capital reserves; (iii) cash distributions from operations of the Local
Partnerships; and (iv) sales proceeds and distributions.  Such funds
are available to meet the obligations of the Partnership.  The
Partnership does not anticipate providing cash distributions to BACs holders in
circumstances other than refinancing or sales.  Cash distributions
received from the Local Partnerships, as well as the working capital reserves
referred to above, will be used towards the future operating expenses of the
Partnership.  During the years ended March 31, 2009 and 2008, the
amounts received from operations of the Local Partnerships were approximately
$134,000 and $84,000, respectively.  Additionally, during the years
ended March 31, 2009 and 2008, the Partnership received approximately $2,200,000
and $0, respectively, in proceeds from the sale of Local Partnerships’ limited
partnership interest.  The Partnership does not anticipate being able
to make distributions sufficient to return to BACs holders their original
capital contributions.
  For the
year ended March 31, 2009, cash and cash equivalents of the Partnership and its
consolidated Local Partnerships increased approximately
$1,791,000.  This increase was due to net cash provided by operating
activities ($823,000), proceeds from sale of property ($2,200,000), proceeds
from mortgage notes ($6,775,000) and an increase in cash held in escrow relating
to investing activities ($207,000), which exceeded a net decrease in due to
local general partners and affiliates relating to investing and financing
activities ($25,000), purchases of property and equipment ($348,000), costs
related to sale of property ($211,000), an increase in deferred cost ($321,000)
and a decrease in capitalization of consolidated subsidiaries attributable to
minority interest ($2,498,000).  Included in the adjustment to
reconcile the net loss to cash provided by operating activities is depreciation
and amortization of approximately $(2,754,000), gain on sale of property of
approximately ($5,140,000) and loss on impairment of property of approximately
$(437,000).
  Total
expenses for the year ended March 31, 2009 and 2008, respectively, excluding
depreciation and amortization, interest, general and administrative – related
parties and loss on impairment of fixed assets, totaled $5,561,410 and
$5,345,115, respectively.
  Accounts
payable as of March 31, 2009 and 2008 were $902,181 and $894,007,
respectively.  Accounts payable are short term liabilities which are
expected to be paid from operating cash flows, working capital balances at the
Local Partnership level, Local General Partner advances and in certain
circumstances advances from the Partnership.  Because the provisions
of the secondary loans defer the payment of accrued interest of the respective
Local Partnerships, the Partnership believes it (and the applicable Local
Partnerships) has sufficient liquidity and ability to generate cash and to meet
existing and known or reasonably likely future cash requirements over both the
short and long term.
  Accrued
interest as of March 31, 2009 and 2008 was $10,702,346 and $9,665,774,
respectively.  Such amount represents the accrued interest on all
mortgage loans, which include primary and secondary loans. Certain secondary
loans have provisions such that interest is accrued but not payable until a
future date.  The Partnership anticipates the payment of accrued
interest on the secondary loans (which make up the majority of the accrued
interest payable amount and which have been accumulating since the Partnership’s
investment in the respective Local Partnership) will be made from future
refinancings or sales proceeds of the respective Local Partnerships. In
addition, each Local Partnership’s mortgage notes are collateralized by the land
and buildings of the respective Local Partnership, and are without further
recourse to the Partnership.
  The
Partnership has an unconsolidated working capital reserve of approximately
$2,019,000 at March 31, 2009.
  Partnership
management fees owed to the General Partner amounting to approximately
$3,636,000 and $3,586,000 were accrued and unpaid as of March 31, 2009 and 2008,
respectively.  During the year ended March 31, 2009, management deemed
the unpaid partnership management fees that were related to the property sold
during the year ended March 31, 2009, uncollectible and as a result, wrote them
off in the amount of approximately $286,000, resulting in a non-cash General
Partner contribution of the same amount.  Without the General
Partner’s continued accrual without payment of certain fees and expense
reimbursements, the Partnership will not be in a position to meet its
obligations. The General Partner has continued allowing the accrual without
payment of these amounts but is under no obligation to continue to do
so.
  Long-term
  For
discussion of contingencies affecting certain subsidiary partnerships, see
Results of Operations of Certain Local Partnerships, below. Since the maximum
loss the Partnership would be liable for is its net investment in the respective
subsidiary partnerships, the resolution of the existing contingencies is not
anticipated to impact future results of operations, liquidity or financial
condition in a material way. However, the Partnership’s loss of its investment
in a Local Partnership will eliminate the ability to generate future Tax Credits
from such Local Partnership and may also result in recapture of Tax Credits if
the investment is lost before the expiration of the Compliance
Period.  At December 31, 2008, only Mansion Court Phase II Venture was
required to recapture $489,362 of low-income housing tax credits.
    - 7
-
   Except as
described above, management is not aware of any trends or events, commitments or
uncertainties, which have not otherwise been disclosed that will or are likely
to impact liquidity in a material way. Management believes the only impact would
be for laws that have not yet been adopted. The portfolio is diversified by the
location of the Properties around the United States so that if one area of the
country is experiencing downturns in the economy, the remaining Properties in
the portfolio may be experiencing upswings. However, the geographic
diversification of the portfolio may not protect against a general downturn in
the national economy. The Partnership has invested the proceeds of its Offering
in twenty Local Partnerships, all of which have their Tax Credits fully in
place.  Tax Credits are attached to a Property for a period of ten
years, and are transferable with the Property during the remainder of the
ten-year period. If trends in the real estate market warranted the sale of a
Property, the remaining Tax Credits would transfer to the new owner, thereby
adding value to the Property on the market. However, such value declines each
year and is not included in the financial statement carrying
amount.  The Credit Periods have expired with respect to certain Local
Partnerships, and, with respect to the others, are scheduled to expire at
various times through December 31, 2009 depending upon when the Credit Period
commenced.  The Compliance Periods will continue through December 31,
2014 with respect to the Properties depending upon when the Credit Period
commenced.
  Tabular Disclosure of
Contractual Obligations
  The
following table summarizes the Partnership’s commitments from operations as of
March 31, 2009 to make future payments under its debt agreements and other
contractual obligations.
  Total
              
              Less
      than
                1
      Year
              
              1 –
      3
                Years
              
              3
      -5
                Years
              
              More
      than
                5
      YearsMortgage
      notes payable (a)
              
              $
              38,658,408
              
              $
              418,052
              
              $
              4,878,763
              
              $
              3,497,344
              
              $
              29,864,249Land
      lease obligations (b)
              
              
              800,492
              
              
              21,252
              
              
              42,504
              
              
              42,504
              
              
              694,232Total
              
              $
              39,458,900
              
              $
              439,304
              
              $
              4,921,267
              
              $
              3,539,848
              
              $
              30,558,481(a)   
      The mortgage and construction notes, which are collateralized by land and
      buildings, are payable in aggregate monthly installments of approximately
      $75,000 including principal and interest at rates varying from 0% to 10%
      per annum, through the year 2046. Each subsidiary partnership’s mortgage
      note payable is collateralized by the land and buildings of the respective
      subsidiary partnership, the assignment of each certain subsidiary
      partnership’s rents and leases, and is without further
      recourse.
                (b)  
      One of the subsidiary partnerships is leasing the land on which its
      apartment complex is located for a term of 50 years, which commenced in
      August 1996, with monthly rent payments of $1,449.  Additional
      rent of $322 per month, up to $100,000, will be paid during the final term
      to reimburse the District of Columbia Department of Housing and Community
      Development for site improvement costs.  See Item 8, “Financial
      Statements and Supplementary Data”, Note 12b.
 Off Balance Sheet
Arrangements
  The
Partnership has no off-balance sheet arrangements.
  Critical Accounting
Policies
  In
preparing the consolidated financial statements, management has made estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods.  Actual results could differ
from those estimates. Set forth below is a summary of the accounting policies
that management believes are critical to the preparation of the consolidated
financial statements. The summary should be read in conjunction with the more
complete discussion of the Partnership’s accounting policies included in Item 8,
Note 2 to the consolidated financial statements in this annual report on Form
10-K.
  Property and
Equipment
  Property
and equipment to be held and used are carried at cost which includes the
purchase price, acquisition fees and expenses, construction period interest and
any other costs incurred in acquiring the properties. The cost of property and
equipment is depreciated over their estimated useful lives using accelerated and
straight-line methods. Expenditures for repairs and maintenance are charged to
expense as incurred; major renewals and betterments are capitalized. At the time
property and equipment are retired or otherwise disposed of, the cost and
accumulated depreciation are eliminated from the assets and accumulated
depreciation accounts and the profit or loss on such disposition is reflected in
earnings. A loss on impairment of assets is recorded when management estimates
amounts recoverable through future operations and sale of the property on an
undiscounted basis are below depreciated cost. At that time, property
investments themselves are reduced to estimated fair value (generally using
discounted cash flows).
  During
the year ended March 31, 2009, the Partnership recorded approximately $437,000
as an aggregate loss on impairment of assets or reduction to estimated fair
value.  Through March 31, 2009, the Partnership has recorded
approximately $1,840,000 as an aggregate loss on impairment of assets or
reduction to estimated fair value.
  At the
time management commits to a plan to dispose of assets, said assets are adjusted
to the lower of carrying amount or fair value less costs to sell. These assets
are classified as property and equipment-held for sale and are not
depreciated.  There are no Local Partnerships whose assets are
classified as property and equipment as held for sale as of March 31,
2009.
    - 8
-
   Revenue
Recognition
  Rental
income is earned primarily under standard residential operating leases and is
typically due the first day of each month, but can vary by property due to the
terms of the tenant leases. Rental income is recognized when earned and charged
to tenants’ accounts receivable if not received by the due date. Rental payments
received in advance of the due date are deferred until earned. Rental subsidies
are recognized as rental income during the month in which it is
earned.
  Other
revenues are recorded when earned and consist of the following
items:  Interest income earned on cash and cash equivalent balances
and cash held in escrow balances, income from forfeited security deposits, late
charges, laundry and vending income and other rental related items.
  Other
revenues from operations include the following amounts at both the Partnership
and Local Partnership level:
  Years
      Ended March 31,2009
                  
                  2008*Interest
                  
                  $
                  165,083
                  
                  $
                  176,366Other
                  
                  
                  148,320
                  
                  
                  210,839Total
      other revenue
                  
                  $
                  313,403
                  
                  $
                  387,205
 
  Other
revenues from discontinued operation include the following amounts at both the
Partnership and Local Partnership level:
  Years
      Ended March 31,2009
                  
                  2008*Interest
                  
                  $
                  4,045
                  
                  $
                  3,381Other
                  
                  
                  16,204
                  
                  
                  8,659Total
      other revenue
                  
                  $
                  20,249
                  
                  $
                  12,040* 
      Reclassified for comparative purposes.
 
  Income
Taxes
  The
Partnership is not required to provide for, or pay, any federal income taxes.
Net income or loss generated by the Partnership is passed through to the
partners and is required to be reported by them. The Partnership may be subject
to state and local taxes in jurisdictions in which it operates. For income tax
purposes, the Partnership has a fiscal year ending December 31.
  Recent Accounting
Pronouncements
  In April
2009, the Financial Accounting Standards Board (“FASB”) issued FSP No. FAS 107-1
and APB 28-1, “Interim Disclosures about Fair Value of Financial
Instruments”.  This FSP amends FASB Statement No. 107 to require
disclosures about fair values of financial instruments for interim reporting
periods as well as in annual financial statements.  The FSP also
amends APB Opinion No. 28 to require those disclosures in summarized financial
information at interim reporting periods.  This FSP becomes effective
for interim reporting periods ending after June 15, 2009, with early adoption
permitted for periods ending after March 15, 2009.  The adoption of
this FSP is not expected to have a material impact on the Partnership’s
consolidated financial statements.
  In April
2009, the FASB issued FSP NO. FAS 157-4, “Determining Fair Value When the Volume
and Level of Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly”.  This FSP provides
additional guidance on determining fair value when the volume and level of
activity for the asset or liability have significantly decreased when compared
with normal market activity for the asset or liability.  A significant
decrease in the volume or level of activity for the asset of liability is an
indication that transactions or quoted prices may not be determinative of fair
value because transactions may not be orderly.  In that circumstance,
further analysis of transactions or quoted prices is needed, and an adjustment
to the transactions or quoted prices may be necessary to estimate fair
value.  This FSP becomes effective for interim reporting periods
ending after June 15, 2009, with early adoption permitted for periods ending
after March 15, 2009.  The adoption of this FSP is not expected to
have a material impact on the Partnership’s consolidated financial
statements.
 In
December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements.”  This statement was issued with
the intent to improve the relevance, comparability, and transparency of the
financial information that a reporting entity provides in its consolidated
financial statements for those entities that have outstanding non-controlling
interest in one or more subsidiaries.  The effective date for this
provision is for fiscal years beginning after December 15, 2008.  The
Partnership is currently evaluating the impact of the provisions of this
statement on the consolidated financial statements.
  Results of
Operations
  The
following is a summary of the results of operations of the Partnership for the
years ended March 31, 2009 and 2008 (the 2008 and 2007 Fiscal Years) excluding
the results of its discontinued operation which are not reflected in the
following discussion (see Item 8, Note 13).
  The net
loss for the 2008 and 2007 Fiscal Years aggregated $1,807,634 and $3,119,963,
respectively.
 - 9
-
 The
Partnership and BACs holders began recognizing Tax Credits with respect to a
Property when the Credit Period for such Property commenced. Because of the time
required for the acquisition, completion and rent-up of Properties, the amount
of Tax Credits per BAC gradually increased over the first three years of the
Partnership.  Tax Credits not recognized in the first three years will
be recognized in the 11th through 13th years.  The Partnership
generated $290,438 and $1,999,760 Tax Credits during the 2008 and 2007, tax
years, respectively.
  2008 vs.
2007
  Rental
income decreased by approximately 1% for the 2008 Fiscal Year as compared to the
2007 Fiscal Year, primarily due to an adjustment in the prior year for the
underaccrual of subsidiary receivable at one Local Partnership, decreases in
occupancy due to the current economic downturn at a second and third Local
Partnership, offset by an increase in tenant assistance payments and rental
rates at several other Local Partnerships.
  Other
income decreased approximately $74,000 for the 2008 Fiscal Year as compared to
the 2007 Fiscal Year, primarily due to an insurance refund received in the prior
year at one Local Partnership, a real estate tax refund received in the prior
year at a second Local Partnership and a decrease in interest income at a third
Local Partnership, partially offset by an increase due to insurance proceeds
received resulting from fire damage in the current year at a fourth Local
Partnership.
  Total
expenses, excluding operating and other and loss on impairment of fixed assets,
remained fairly consistent with an increase of less than 1% for the 2008 Fiscal
Year as compared to the 2007 Fiscal Year.
  Operating
and other expense increased approximately $177,000 for the 2008 Fiscal Year as
compared to the 2007 Fiscal Year, primarily due to an imposed water bill by the
City of New York for the prior years of 2002 to 2008 at one Local Partnership as
well as an increase in overall utility costs at several other Local
Partnerships.
  Results of Operations of
Certain Local Partnerships
  Subsidiary Partnerships –
Going Concerns and Uncertainties
  Mansion Court Phase II
Venture (“Mansion Court”)
 The
financial statements for Mansion Court have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplates continuation of Mansion Court as a going concern.  In
prior years and in 2008, the Mansion Court has sustained operating losses and
has not generated sufficient cash flow from operations to meet its obligations,
particularly related party payables.  The Local General Partner has
provided funding in the past years; however, there is no obligation to do
so.  Mansion Court also has experienced a high number of vacancies due
to deteriorating conditions in the area.  Management of Mansion Court
continues to explore options to mitigate increased crime and deteriorating
neighborhood conditions.  These options include assistance from local
government housing agencies and could include transfer of
ownership.
  The
Partnership’s investment in Mansion Court at March 31, 2009 and 2008 was reduced
to zero as a result of prior years’ losses and the minority interest balance was
$0 at each date.  Mansion Court’s net loss after minority interest
amounted to approximately $521,000 and $83,000 for the 2008 and 2007 Fiscal
Years.  The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
  During
the year ended March 31, 2009, in accordance with SFAS No. 144, the Partnership
deemed the building of Mansion Court further impaired and wrote it down to its
new reduced fair value of approximately $207,000, which resulted in a further
loss on impairment of approximately $437,000.  Fair value was obtained
from an assessment made by management after indications that the carrying value
of the assets were not recoverable, evidenced by a history of net operating
losses over the past few years.
 Other
 The
Partnership’s investment as a limited partner in the Local Partnerships is
subject to the risks of potential losses arising from management and ownership
of improved real estate. The Partnership’s investments also could be adversely
affected by poor economic conditions generally, which could increase vacancy
levels and rental payment defaults, and increase operating expenses, any or all
of which could threaten the financing viability of one or more of the Local
Partnerships.
  There
also are substantial risks associated with the operation of Apartment Complexes
receiving government assistance. These include governmental regulations
concerning tenant eligibility, which may make it more difficult to rent
apartments in the Apartment Complexes; difficulties in obtaining government
approval for rent increases; limitations on the percentage of income which low
and moderate-income tenants may pay as rent; the possibility that Congress may
not appropriate funds to enable HUD to make the rental assistance payments it
has contracted to make; and that when the rental assistance contracts expire
there may not be market demand for apartments at full market rents in a Local
Partnership’s Apartment Complex.
  The Local
Partnerships are impacted by inflation in several ways. Inflation allows for
increases in rental rates generally to reflect the impact of higher operating
and replacement costs. Inflation also affects the Local Partnerships adversely
by increasing operating costs, for example, for such items as fuel, utilities
and labor.
  Item
7A.  Quantitative and Qualitative Disclosures about Market
Risk
  Mortgage
notes are payable in aggregate monthly installments including principal and
interest at rates varying from 0% to 10% per annum.  The Partnership
does not believe there is a material risk associated with the various interest
rates associated with the mortgage notes as the majority of the Local
Partnership mortgage notes have fixed rates.  The Partnership
currently discloses in Item 8, Note 3 of the Notes to Consolidated Financial
Statements, the fair value of the mortgage notes payable.  The
Partnership does not have any other market risk sensitive
instruments.
   - 10
-
    Item
      8.
            Financial
      Statements and Supplementary DataSequential
              PageConsolidated
      Financial StatementsReport
      of Independent Registered Public Accounting Firm
            
            12Consolidated
      Balance Sheets at March 31, 2009 and 2008
            
            41Consolidated
      Statements of Operations for the Years Ended March 31, 2009 and
      2008
            
            42Consolidated
      Statements of Changes in Partners’ Capital (Deficit) for the Years Ended
      March 31, 2009 and 2008
            
            43Consolidated
      Statements of Cash Flows for the Years Ended March 31, 2009 and
      2008
            
            44Notes
      to Consolidated Financial Statements
            
            45
 
 
  - 11
-
  
 REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
   To the
Partners of
 Independence
Tax Credit Plus L.P. III and Subsidiaries
 (a
Delaware limited partnership)
  We have
audited the consolidated balance sheets of Independence Tax Credit Plus L.P. III
and Subsidiaries (a Delaware limited partnership) as of March 31, 2009 and 2008,
and the related consolidated statements of operations, changes in partners'
capital (deficit), and cash flows for the years ended March 31, 2009 and 2008
(the 2008 and 2007 Fiscal Years, respectively).  These financial
statements are the responsibility of the Partnership's
management.  Our responsibility is to express an opinion on these
financial statements based on our audits.  We did not audit the
financial statements for eighteen (2008 Fiscal Year) and seventeen (2007 Fiscal
Year) subsidiary partnerships whose losses aggregated $3,006,866 and $2,069,413
for the years ended March 31, 2009 and 2008, respectively, and whose assets
constituted 84% and 80% of the Partnership's assets at March 31, 2009 and 2008,
presented in the accompanying consolidated financial statements.  The
financial statements for these subsidiary partnerships were audited by other
auditors whose reports thereon have been furnished to us and our opinion
expressed herein, insofar as it relates to the amounts included for these
subsidiary partnerships, is based solely upon the reports of the other
auditors.  The financial statement for one of these subsidiary
partnerships is unaudited.
  We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.
  In our
opinion, based upon our audits, and the reports of the other auditors referred
to above, the consolidated financial statements referred to in the first
paragraph present fairly, in all material respects, the financial position of
Independence Tax Credit Plus L.P. III and Subsidiaries at March 31, 2009 and
2008, and the results of their operations and their cash flows for the years
ended March 31, 2009 and 2008, in conformity with U.S. generally accepted
accounting principles.
  /s/TRIEN
ROSENBERG ROSENBERG
 WEINBERG
CIULLO & FAZZARI LLP
  New York,
New York
 June 22,
2009
  
   - 12
-
  
 [HOLTHOUSE
CARLIN & VAN TRIGT LLP LETTERHEAD]
 
 Independent
Auditors' Report
 
 To the
Partners of the
 Edward
Hotel Limited Partnership:
 
 We have
audited the accompanying balance sheets of Edward Hotel Limited Partnership (a
California limited partnership) as of December 31, 2008 and 2007, and the
related statements of operations, changes in partners' deficit and cash flows
for the years then ended.  These financial statements are the
responsibility of the Partnership's management.  Our responsibility is
to express an opinion on these financial statements based on our
audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Partnership has determined that it is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We
believe that our audits provide a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Edward Hotel Limited Partnership as
of December 31, 2008 and 2007, and the results of its operations and its cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
 
 
 /s/
Holthouse Carlin & Van Trigt LLP
 Santa
Monica, California
 February
25, 2009
  - 13
-
  
 [REZNICK
GROUP, P.C. LETTERHEAD]
 
 INDEPENDENT
AUDITORS’ REPORT
 
 To the
Partners
 Pacific-East
L.P.
 
 We have
audited the accompanying balance sheet of Pacific-East L.P., as of December 31,
2008, and the related statements of operations, partners' equity (deficit) and
cash flows for the year then ended.  These financial statements are
the responsibility of the Partnership's management.  Our
responsibility is to express an opinion on these financial statements based on
our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Partnership has determined that it is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audit provides a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Pacific-East L.P. as of December
31, 2008, and the results of its operations, and its cash flows for the year
then ended, in conformity with accounting principles generally accepted in the
United States of America.
 
 /s/
Reznick Group, P.C.
 Birmingham,
Alabama
 April 7,
2009
 
 
  - 14
-
  [REZNICK
GROUP, P.C. LETTERHEAD]
 
 INDEPENDENT
AUDITORS’ REPORT
 
 To the
Partners
 Pacific-East
L.P.
 
 We have
audited the accompanying balance sheet of Pacific-East L.P. for the year ended
December 31, 2007, and the related statements of operations, partners' deficit
and cash flows for the year then ended.  These financial statements
are the responsibility of the Partnership's management.  Our
responsibility is to express an opinion on these financial statements based on
our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Partnership has determined that it is not required to have, nor we were engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audit provides a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Pacific-East L.P. as of December
31, 2007, and the results of its operations, and its cash flows for the year
then ended, in conformity with accounting principles generally accepted in the
United States of America.
 
 /s/
Reznick Group, P.C.
 Atlanta,
Georgia
 March 28,
2008
  - 15
-
  
 [SMITH,
ORTIZ, GOMEZ AND BUZZI, P.A.  LETTERHEAD]
 
 INDEPENDENT AUDITORS'
REPORT
 
 The
Partners
 Overtown
Development Group, Ltd.
 (A
Limited Partnership):
 
 We have
audited the accompanying balance sheets of Overtown Development Group, Ltd. (A
Limited Partnership) as of December 31, 2008 and 2007, and the related statement
of operations, changes in partners' capital, and cash flows for the years then
ended.  These financial statements are the responsibility of Overtown
Development Group, Ltd. management.  Our responsibility is to express
an opinion on these financial statements based on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Partnership has determined that it is not required to have, nor we were engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audits provide a reasonable basis for our opinion.
 
 In our
opinion, based on our audits, the financial statements referred to above present
fairly, in all material respects, the financial position of Overtown Development
Group, Ltd. as of December 31, 2008 and 2007, and the results of its operations
changes in partners’ equity and its cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.
 
 /s/
Smith, Ortiz, Gomez and Buzzi, P.A.
 Miami,
Florida
 January
29, 2009
 
 
  - 16
-
  
 [LAWLOR
& O'BRIEN, CERTIFIED PUBLIC ACCOUNTANTS LETTERHEAD]
 
 INDEPENDENT AUDITORS'
REPORT
 
 To the
Partners
 Sumpter
Commons Associates, L.P.
 
 We have
audited the accompanying balance sheet of Sumpter Commons Associates, L.P. as of
December 31, 2008, and the related statements of operations, changes in
partners' (deficit), and cash flows for the year then ended.  These
financial statements are the responsibility of the Partnership's
management.  Our responsibility is to express an opinion on these
financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Partnership has determined that it is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audits provide a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Sumpter Commons Associates, L.P. as
of December 31, 2008, and the results of its operations, changes in partners'
(deficit), and cash flows for the year then ended in conformity with generally
accepted accounting principles in the United States of America.
 
 
 /s/
Lawlor & O’Brien, Certified Public Accountants
 Totowa,
New Jersey
 February
15, 2009
  - 17
-
  [LAWLOR
& O'BRIEN, CERTIFIED PUBLIC ACCOUNTANTS LETTERHEAD]
 
 INDEPENDENT AUDITORS'
REPORT
 
 To the
Partners
 Sumpter
Commons Associates, L.P.
 
 We have
audited the accompanying balance sheet of Sumpter Commons Associates, L.P. as of
December 31, 2007, and the related statements of operations, changes in
partners' (deficit), and cash flows for the year then ended.  These
financial statements are the responsibility of the Partnership's
management.  Our responsibility is to express an opinion on these
financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Partnership has determined that it is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audits provide a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Sumpter Commons Associates, L.P. as
of December 31, 2007, and the results of its operations, changes in partners'
(deficit), and cash flows for the year then ended in conformity with generally
accepted accounting principles in the United States of America.
 
 
 /s/
Lawlor & O’Brien, Certified Public Accountants
 Totowa,
New Jersey
 February
27, 2008
  - 18
-
  
 [REZNICK
GROUP, P.C. LETTERHEAD]
 
 REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Partners
 Livingston
Manor Urban Renewal Associates, L.P.
 
 We have
audited the accompanying balance sheet of Livingston Manor Urban Renewal
Associates, L.P. as of December 31, 2008, and the related statements of
operations, changes in partners' equity (deficit) and cash flows for the year
then ended.  These financial statements are the responsibility of the
partnership's management.  Our responsibility is to express an opinion
on these financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Partnership has determined that it is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We
believe that our audit provides a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Livingston Manor Urban Renewal
Associates, L.P. as of December 31, 2008, and the results of its operations,
changes in partners' equity (deficit) and its cash flows for the year then
ended, in conformity with accounting principles generally accepted in the United
States of America.
 
 
 /s/
Reznick Group, P.C.
 Baltimore,
Maryland
 March 19,
2009
  - 19
-
  [REZNICK
GROUP, P.C. LETTERHEAD]
 
 REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Partners
 Livingston
Manor Urban Renewal Associates, L.P.
 
 We have
audited the accompanying balance sheet of Livingston Manor Urban Renewal
Associates, L.P. as of December 31, 2007, and the related statements of
operations, changes in partners' equity (deficit) and cash flows for the year
then ended.  These financial statements are the responsibility of the
partnership's management.  Our responsibility is to express an opinion
on these financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Partnership has determined that it is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We
believe that our audit provides a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Livingston Manor Urban Renewal
Associates, L.P. as of December 31, 2007, and the results of its operations,
changes in partners' equity (deficit) and its cash flows for the year then
ended, in conformity with accounting principles generally accepted in the United
States of America.
 
 
 /s/
Reznick Group, P.C.
 Baltimore,
Maryland
 March 25,
2008
  - 20
-
  
 [REZNICK
GROUP, P.C. LETTERHEAD]
 
 REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Partners
 Jefferis
Square Housing Partnership, L.P.
 
 We have
audited the accompanying balance sheet of Jefferis Square Housing Partnership,
L.P. as of December 31, 2008, and the related statements of operations, changes
in partners' equity (deficit) and cash flows for the year then
ended.  These financial statements are the responsibility of the
partnership's management.  Our responsibility is to express an opinion
on these financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Partnership has determined that it is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We
believe that our audit provide a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Jefferis Square Housing
Partnership, L.P. as of December 31, 2008, and the results of its operations,
the changes in partners' equity (deficit) and its cash flows for the year then
ended, in conformity with accounting principles generally accepted in the United
States of America.
 
 Our audit
was conducted for the purpose of forming an opinion on the basic financial
statements taken as a whole.  The 2008 supplemental information on
pages 17 and 18 is presented for purposes of additional analysis and is not a
required part of the basic financial statements.  Such information has
been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a
whole.
 
 /s/
Reznick Group, P.C.
 Baltimore,
Maryland
 March 19,
2009
  - 21
-
  [REZNICK
GROUP, P.C. LETTERHEAD]
 
 REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Partners
 Jefferis
Square Housing Partnership, L.P.
 
 We have
audited the accompanying balance sheet of Jefferis Square Housing Partnership,
L.P. as of December 31, 2007, and the related statements of operations, changes
in partners' equity (deficit) and cash flows for the year then
ended.  These financial statements are the responsibility of the
partnership's management.  Our responsibility is to express an opinion
on these financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Partnership has determined that it is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We
believe that our audit provide a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Jefferis Square Housing
Partnership, L.P. as of December 31, 2007, and the results of its operations,
the changes in partners' equity (deficit) and its cash flows for the year then
ended, in conformity with accounting principles generally accepted in the United
States of America.
 
 /s/
Reznick Group, P.C.
 Baltimore,
Maryland
 March 21,
2008
  - 22
-
  
 [REZNICK
GROUP, P.C. LETTERHEAD]
 
 INDEPENDENT
AUDITORS’ REPORT
 
 To the
Partners
 2301
First Avenue Limited Partnership
 
 We have
audited the accompanying balance sheet of 2301 First Avenue Limited Partnership,
as of December 31, 2008, and the related statements of operations, partners'
equity (deficit) and cash flows for the year then ended.  These
financial statements are the responsibility of the Partnership's
management.  Our responsibility is to express an opinion on these
financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Partnership has determined that it is not required to have, nor we were engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audit provides a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of 2301 First Avenue Limited
Partnership, as of December 31, 2008, and the results of its operations and its
cash flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.
 
 
 /s/
Reznick Group, P.C.
 Birmingham,
Alabama
 April 17,
2009
  - 23
-
  [REZNICK
GROUP, P.C. LETTERHEAD]
 
 INDEPENDENT
AUDITORS’ REPORT
 
 To the
Partners
 2301
First Avenue Limited Partnership
 
 We have
audited the accompanying balance sheet of 2301 First Avenue Limited Partnership,
for the year ended December 31, 2007, and the related statements of operations,
changes in partners' equity (deficit) and cash flows for the year then
ended.  These financial statements are the responsibility of the
Partnership's management.  Our responsibility is to express an opinion
on these financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Partnership has determined that it is not required to have, nor we were engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audit provides a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of 2301 First Avenue Limited
Partnership, as of December 31, 2007, and the results of its operations and its
cash flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.
 
 
 /s/
Reznick Group, P.C.
 Atlanta,
Georgia
 March 20,
2008
  - 24
-
  
 [TOSKI,
SCHAEFER & CO., P.C.  LETTERHEAD]
 
 INDEPENDENT AUDITOR'S
REPORT
 
 The
Partners
 Lewis
Street Limited Partnership:
 
 We have
audited the accompanying balance sheets of Lewis Street Limited Partnership as
of December 31, 2008 and 2007 and the related statements of operations,
partners' equity and cash flows for the years then ended.  These
financial statements are the responsibility of the Partnership's
management.  Our responsibility is to express an opinion on these
financial statements based on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Partnership has determined that it is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audits provide a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Lewis Street Limited Partnership as
of December 31, 2008 and 2007 and the results of its operations, changes in
partners' equity and cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of
America.
 
 Our
audits were made for the purpose of forming an opinion on the basic financial
statements taken as a whole.  The accompanying supplemental
information is presented for purposes of additional analysis and is not a
required part of the basic financial statements.  Such information has
been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a
whole.
 
 /s/
Toski, Schaefer & Co., P.C.
 Williamsville,
New York
 January
30, 2009
  - 25
-
  
 [ROMANO
& MITCHELL, CHARTERED CERTIFIED PUBLIC ACCOUNTANTS/MANAGEMENT CONSULTANTS
LETTERHEAD]
 
 INDEPENDENT AUDITORS'
REPORT
 
 To the
Partners
 Savannah
Park Housing Limited Partnership
 Washington,
D.C.
 
 We have
audited the accompanying balance sheets of Savannah Park Housing Limited
Partnership as of December 31, 2008 and 2007, and the related statements of
operations, partners' capital and cash flows for the years then
ended.  We also have audited Savannah Park Housing Limited
Partnership’s internal control over financial reporting as of December 31, 2008
and 2007, based on criteria established in Internal Control-IntegratedFramework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).  The Partnership’s management is
responsible for these financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of
internal control over financial reporting, included in management’s report on
internal control over financial reporting dated February 19,
2009.  Our responsibility is to express an opinion of these financial
statements and an opinion on the Partnership’s internal control over financial
reporting based on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement and whether effective
internal control over financial reporting was maintained in all material
respects.  Our audits of the financial statements included examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement
presentation.  Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exits, and testing and
evaluating the design and operating effectiveness of internal control based on
the assessed risk.  Our audits also include performing other
procedures as we considered necessary in the circumstances.  We
believe that our audits provide a reasonable basis for our
opinions.
 
 An
organization’s internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.  An organization’s
internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of
the organization; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the organization are being made only in accordance with
authorizations of management and owners of the organization; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the organization’s assets that could have a
material effect on the financial statements.
 
 Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Savannah Park Housing Limited
Partnership as of December 31, 2008 and 2007, and the results of its and its
cash flows for the year then ended, in conformity with U.S. generally accepted
accounting principles.  Also in our opinion, Savannah Park Housing
Limited Partnership maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2008 and 2007, based on
criteria established in Internal Control-Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).
 
 /s/
Romano & Mitchell, Chartered Certified Public Accountants
 Bethesda,
Maryland
 February
19, 2009
  - 26
-
  [NOVOGRADAC
& COMPANY LLP CERTIFIED PUBLIC ACCOUNTANTS LETTERHEAD]
 
 INDEPENDENT
AUDITORS' REPORT
 
 To the
Members of
 Brannon
Group, L.C.
 
 We have
audited the accompanying balance sheets of Brannon Group, L.C., a Florida
limited liability company, as of December 31, 2008 and 2007 and the related
statements of operations, members’ equity (deficit) and cash flows for the year
then ended.  These financial statements are the responsibility of the
Company’s management.  Our responsibility is to express an opinion on
these financial statements based on our audits.
 
 We
conducted our audits in accordance with generally accepted auditing standards as
established by the Auditing Standards Board (United States) and in accordance
with the standards of the Public Company Accounting Oversight Board (United
States).  Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free
of material misstatement.  The Company is not required to have, nor
were we engaged to perform, an audit of its internal control over financial
reporting.  Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting.  Accordingly, we express no such opinion.  An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Brannon Group, L.C. at December 31,
2008 and 2007 and the results of its operations and its cash flows for the years
then ended in conformity with accounting principles generally accepted in the
United States of America.
 
 Our
audits were made for the purpose of forming an opinion on the basic financial
statements taken as a whole.  The accompanying supplemental schedules
are presented for purposes of additional analysis and are not a required part of
the financial statements of Brannon Group, L.C.  Such information has
been subjected to the auditing procedures applied in the audit of the financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the financial statements taken as a whole.
 
 /s/
Novogradac & Company LLP
 San
Francisco, California
 March 18,
2009
  - 27
-
  
 [REZNICK
GROUP, P.C. LETTERHEAD]
 
 REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Partners
 Mansion
Court Phase II Venture
 
 We have
audited the accompanying balance sheet of Mansion Court Phase II Venture as of
December 31, 2008, and the related statement of operations, changes in partners'
equity (deficit) and cash flows for the year then ended.  These
financial statements are the responsibility of the Partnership's
management.  Our responsibility is to express an opinion on these
financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
partnership has determined that it is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by Partnership’s management, as
well as evaluating the overall financial statement presentation.  We
believe that our audit provides a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Mansion Court Phase II Venture as
of December 31, 2008 and the results of its operations, the changes in partner’
equity (deficit) and its cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of
America.
 
 The
accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern.  The project has
sustained operating losses over the years and has not generated sufficient cash
flow from operations to meet its obligations.  Furthermore, the
Partnership has a net deficiency in partners’ equity.  Those
conditions raise substantial doubt about its ability to continue as a going
concern.  Management’s plans in regard to these matters are also
described in note 11.  The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
 
 Our audit
was made for the purpose of forming an opinion on the basic financial statements
taken as a whole.  The supplemental information on pages 18 through 19
is presented for purposes of additional analysis and is not a required part of
the basic financial statements.  Such information has been subjected
to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
 
 
 /s/
Reznick Group, P.C.
 Baltimore,
Maryland
 April 6,
2009
  - 28
-
  [REZNICK
GROUP, P.C. LETTERHEAD]
 
 REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Partners
 Mansion
Court Phase II Venture
 
 We have
audited the accompanying balance sheet of Mansion Court Phase II Venture as of
December 31, 2007, and the related statement of operations, changes in partners'
equity (deficit) and cash flows for the year then ended.  These
financial statements are the responsibility of the Partnership's
management.  Our responsibility is to express an opinion on these
financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
partnership has determined that it is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by Partnership’s management, as
well as evaluating the overall financial statement presentation.  We
believe that our audit provides a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Mansion Court Phase II Venture as
of December 31, 2007 and the results of its operations, the changes in partner’
equity (deficit) and its cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of
America.
 
 The
accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern.  The project has
sustained operating losses over the years and has not generated sufficient cash
flow from operations to meet its obligations.  Furthermore, the
Partnership has a net deficiency in partners’ equity.  Those
conditions raise substantial doubt about its ability to continue as a going
concern.  Management’s plans in regard to these matters are also
described in note 11.  The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
 
 Our audit
was made for the purpose of forming an opinion on the basic financial statements
taken as a whole.  The supplemental information on pages 18 through 19
is presented for purposes of additional analysis and is not a required part of
the basic financial statements.  Such information has been subjected
to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
 
 
 /s/
Reznick Group, P.C.
 Baltimore,
Maryland
 March 29,
2008
  - 29
-
  
 [RAINES
AND FISCHER LLP CERTIFIED PUBLIC ACCOUNTANTS LETTERHEAD]
 
 INDEPENDENT AUDITORS'
REPORT
 
 To the
Partners of BK-9-A Partners, L.P.:
 
 We have
audited the accompanying balance sheet of BK-9-A Partners, L.P. (A New York
Limited Partnership) as of December 31, 2008, and the related statements of
operations, changes in partners' capital (deficit), and cash flows for the year
then ended.  These financial statements are the responsibility of the
Partnership's management.  Our responsibility is to express an opinion
on these financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  We were
not engaged to perform an audit of the Partnership’s internal control over
financial reporting.  An audit includes consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We
believe that our audit provides a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of BK-9-A Partners, L.P. (A New York
Limited Partnership) as of December 31, 2008, and the results of its operations
and its cash flows for the year then ended, in conformity with accounting
principles generally accepted in the United States of America.
 
 
 /s/
Raines & Fischer LLP
 New York,
New York
 May 7,
2009
  - 30
-
  [RAINES
AND FISCHER LLP CERTIFIED PUBLIC ACCOUNTANTS LETTERHEAD]
 
 INDEPENDENT AUDITORS'
REPORT
 
 To the
Partners of BK-9-A Partners, L.P.:
 
 We have
audited the accompanying balance sheet of BK-9-A Partners, L.P. (A New York
Limited Partnership) as of December 31, 2007, and the related statements of
operations, changes in partners' capital (deficit), and cash flows for the year
then ended.  These financial statements are the responsibility of the
Partnership's management.  Our responsibility is to express an opinion
on these financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  We were
not engaged to perform an audit of the Partnership’s internal control over
financial reporting.  An audit includes consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We
believe that our audit provides a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of BK-9-A Partners, L.P. (A New York
Limited Partnership) as of December 31, 2007, and the results of its operations
and its cash flows for the year then ended, in conformity with accounting
principles generally accepted in the United States of America.
 
 
 /s/
Raines & Fischer LLP
 New York,
New York
 May 1,
2008
  - 31
-
  
 [RAINES
AND FISCHER LLP LETTERHEAD]
 
 INDEPENDENT AUDITORS'
REPORT
 
 To the
Partners of BK-10K Partners, L.P.:
 
 We have
audited the accompanying balance sheet of BK-10K Partners, L.P. (A New York
Limited Partnership) as of December 31, 2008, and the related statements of
operations, changes in partners' capital (deficit), and cash flows for the year
then ended.  These financial statements are the responsibility of the
Partnership's management.  Our responsibility is to express an opinion
on these financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  We were
not engaged to perform an audit of the Partnership’s internal control over
financial reporting.  An audit includes consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We
believe that our audit provides a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of BK-10K Partners, L.P. (A New York
Limited Partnership) as of December 31, 2008, and the results of its operations
and its cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States of America.
 
 /s/
Raines & Fischer LLP
 New York,
New York
 May 7,
2009
  - 32
-
  [RAINES
AND FISCHER LLP LETTERHEAD]
 
 INDEPENDENT AUDITORS'
REPORT
 
 To the
Partners of BK-10K Partners, L.P.:
 
 We have
audited the accompanying balance sheet of BK-10K Partners, L.P. (A New York
Limited Partnership) as of December 31, 2007, and the related statements of
operations, changes in partners' capital (deficit), and cash flows for the year
then ended.  These financial statements are the responsibility of the
Partnership's management.  Our responsibility is to express an opinion
on these financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  We were
not engaged to perform an audit of the Partnership’s internal control over
financial reporting.  An audit includes consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We
believe that our audit provides a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of BK-10K Partners, L.P. (A New York
Limited Partnership) as of December 31, 2007, and the results of its operations
and its cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States of America.
 
 /s/
Raines & Fischer LLP
 New York,
New York
 May 1,
2008
  - 33
-
  
 [REZNICK
GROUP, P.C. LETTERHEAD]
 
 REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Partners
 Aspen-Olive
Associates
 
 We have
audited the accompanying balance sheet of Aspen-Olive Associates as of December
31, 2008, and the related statements of operations, changes in partners' equity
(deficit) and cash flows for the year then ended.  These financial
statements are the responsibility of the Partnership's
management.  Our responsibility is to express an opinion on these
financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
partnership is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting.  Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the
Partnership’s internal control over financial reporting.  Accordingly,
we express no such opinion.  An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.  We believe that our audit provides a reasonable basis
for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Aspen-Olive Associates as of
December 31, 2008 and the results of its operations, the changes in partner’
equity (deficit) and cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of
America.
 
 Our
audits were made for the purpose of forming an opinion on the basic financial
statements taken as a whole.  The 2008 supplemental information on
pages 17 through 18 is presented for purposes of additional analysis and is not
a required part of the basic financial statements.  Such information
has been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a
whole.
 
 
 /s/
Reznick Group, P.C.
 Baltimore,
Maryland
 March 19,
2009
  - 34
-
  [REZNICK
GROUP, P.C. LETTERHEAD]
 
 REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Partners
 Aspen-Olive
Associates
 
 We have
audited the accompanying balance sheet of Aspen-Olive Associates as of December
31, 2007, and the related statements of operations, changes in partners' equity
(deficit) and cash flows for the year then ended.  These financial
statements are the responsibility of the Partnership's
management.  Our responsibility is to express an opinion on these
financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
partnership is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting.  Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the
Partnership’s internal control over financial reporting.  Accordingly,
we express no such opinion.  An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.  We believe that our audit provide a reasonable basis
for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Aspen-Olive Associates as of
December 31, 2007 and the results of its operations, the changes in partner’
equity (deficit) and cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of
America.
 
 Our
audits were made for the purpose of forming an opinion on the basic financial
statements taken as a whole.  The 2007 supplemental information on
pages 18 through 19 is presented for purposes of additional analysis and is not
a required part of the basic financial statements.  Such information
has been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a
whole.
 
 
 /s/
Reznick Group, P.C.
 Baltimore,
Maryland
 March 25,
2008
  - 35
-
  
 [REZNICK
GROUP, P.C. LETTERHEAD]
 
 REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Partners
 Universal
Court Associates
 
 We have
audited the accompanying balance sheet of Universal Court Associates as of
December 31, 2008, and the related statements of operations, changes in
partners' equity (deficit) and cash flows for the year then
ended.  These financial statements are the responsibility of the
Partnership's management.  Our responsibility is to express an opinion
on these financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
partnership has determined that it is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We
believe that our audit provide a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Universal Court Associates as of
December 31, 2008, and the results of its operations, the changes in partner’
equity (deficit) and its cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of
America.
 
 Our audit
was made for the purpose of forming an opinion on the basic financial statements
taken as a whole.  The 2008 supplemental information on pages 18 and
19 is presented for purposes of additional analysis and is not a required part
of the basic financial statements.  Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basis financial statements taken as a whole.
 
 
 /s/
Reznick Group, P.C.
 Baltimore,
Maryland
 March 19,
2009
  - 36
-
  [REZNICK
GROUP, P.C. LETTERHEAD]
 
 REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Partners
 Universal
Court Associates
 
 We have
audited the accompanying balance sheet of Universal Court Associates as of
December 31, 2007, and the related statements of operations, changes in
partners' equity (deficit) and cash flows for the year then
ended.  These financial statements are the responsibility of the
Partnership's management.  Our responsibility is to express an opinion
on these financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
partnership has determined that it is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We
believe that our audit provide a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Universal Court Associates as of
December 31, 2007, and the results of its operations, the changes in partner’
equity (deficit) and its cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of
America.
 
 Our audit
was made for the purpose of forming an opinion on the basic financial statements
taken as a whole.  The 2007 supplemental information on pages 19 and
20 is presented for purposes of additional analysis and is not a required part
of the basic financial statements.  Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basis financial statements taken as a whole.
 
 
 /s/
Reznick Group, P.C.
 Baltimore,
Maryland
 March 21,
2008
  - 37
-
  
 [REZNICK
GROUP, P.C. LETTERHEAD]
 
 INDEPENDENT
AUDITORS’ REPORT
 
 To the
Partners
 New Zion
Apartments Limited Partnership
 Shreveport,
Louisiana
 
 We have
audited the accompanying balance sheet of New Zion Apartments Limited
Partnership, HUD Project No. LA48E000011, as of December 31, 2008, and the
related statements of income, partners' equity (deficit) and cash flows for the
year then ended.  These financial statements are the responsibility of
the Partnership's management.  Our responsibility is to express an
opinion on these financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States) and the standards applicable to
financial audits contained in Government Auditing Standards issued by
the Comptroller General of the United States.  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
partnership is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting.  Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the
Partnership’s internal control over financial reporting.  Accordingly,
we express no such opinion.  An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.  We believe that our audit provides a reasonable basis
for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of New Zion Apartments Limited
Partnership as of December 31, 2008, and the results of its operations, changes
in equity (deficit), and its cash flows for the year then ended, in conformity
with accounting principles generally accepted in the United States of
America.
 
 In
accordance with Government Auditing Standards, we have
also issued a report, dated March 23, 2009 on our consideration of New Zion
Apartments Limited Partnership’s internal control over financial
reporting.  The purpose of that report is to describe the scope of our
testing of internal control over financial reporting and the results of that
testing and not to provide an opinion on the internal control over financial
reporting.  In accordance with Government Auditing Standards, we have
also issued an opinion dated March 23, 2009 on New Zion Apartments Limited
Partnership’s compliance with certain provisions of laws, regulations,
contracts, and grant agreements, and other matters that could have a direct and
material effect on a major HUD-assisted program.  Those reports are an
integral part of an audit performed in accordance with Government Auditing Standards and should
be considered in assessing the results of our audit.
 
 Our audit
was conducted for the purpose of forming an opinion on the basic financial
statements taken as a whole.  The accompanying supplemental
information on pages 21 through 34 is presented for purposes of additional
analysis and is not a required part of the basic financial statements of the
Partnership.  Such information has been subjected to the audit
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
 
 /s/
Reznick Group, P.C.
 Taxpayer
Identification Number:
 52-1088612
 Baltimore,
Maryland
 March 23,
2009
 Lead
Auditor:  Scott H. Szeliga, CPA
  - 38
-
  [REZNICK
GROUP, P.C. LETTERHEAD]
 
 INDEPENDENT
AUDITORS’ REPORT
 
 To the
Partners
 New Zion
Apartments Limited Partnership
 Shreveport,
Louisiana
 
 We have
audited the accompanying balance sheet of New Zion Apartments Limited
Partnership, HUD Project No. LA48E000011, as of December 31, 2007, and the
related statements of income, partners' equity (deficit) and cash flows for the
year then ended.  These financial statements are the responsibility of
the Partnership's management.  Our responsibility is to express an
opinion on these financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States) and the standards applicable to
financial audits contained in Government Auditing Standards issued by
the Comptroller General of the United States.  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
partnership is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting.  Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the
Partnership’s internal control over financial reporting.  Accordingly,
we express no such opinion.  An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.  We believe that our audit provides a reasonable basis
for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of New Zion Apartments Limited
Partnership as of December 31, 2007, and the results of its operations, changes
in equity (deficit), and its cash flows for the year then ended in conformity
with accounting principles generally accepted in the United States of
America.
 
 In
accordance with Government Auditing Standards, we have
also issued a report, dated April 10, 2008 on our consideration of New Zion
Apartments Limited Partnership’s internal control over financial
reporting.  The purpose of that report is to describe the scope of our
testing of internal control over financial reporting and the results of that
testing and not to provide an opinion on the internal control over financial
reporting.  In accordance with Government Auditing Standards, we have
also issued an opinion dated April 10, 2008 on New Zion Apartments Limited
Partnership’s compliance with certain provisions of laws, regulations,
contracts, and grant agreements, and other matters that could have a direct and
material effect on a major HUD-assisted program.  Those reports are an
integral part of an audit performed in accordance with Government Auditing Standards and should
be considered in assessing the results of our audit.
 
 Our audit
was conducted for the purpose of forming an opinion on the basic financial
statements taken as a whole.  The accompanying supplemental
information on pages 22 through 35 is presented for purposes of additional
analysis and is not a required part of the basic financial statements of the
Partnership.  Such information has been subjected to the audit
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
 
 /s/
Reznick Group, P.C.
 Taxpayer
Identification Number:
 52-1088612
 Baltimore,
Maryland
 April 10,
2008
 Lead
Auditor:  Mary E. Norwood, CPA
  - 39
-
  
 [O’CONNOR
DAVIES MUNNS & DOBBINS, LLP ACCOUNTANTS AND CONSULTANTS
LETTERHEAD]
 
 INDEPENDENT
AUDITORS’ REPORT
 
 To the
Partners of
 Dreitzer
Limited Partnership
 
 We have
audited the accompanying balance sheet of Dreitzer Limited Partnership as of
December 31, 2008 and 2007, and the related statements of operations, partners'
equity (deficit) and cash flows for the years then ended.  These
financial statements are the responsibility of the Partnership's
management.  Our responsibility is to express an opinion on these
financial statements based on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An audit
includes consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Dreitzer Limited Partnership’s internal control over financial
reporting.  Accordingly, we express no such opinion.  An
audit also includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation.  We believe that our audits
provide a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Dreitzer Limited Partnership as of
December 31, 2008 and 2007, and the results of its operations, and its cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
 
 
 /s/
O’Connor Davies Munn & Dobbins, LLP
 New York,
New York
 February
15, 2009
 
  - 40
-
  
 
 INDEPENDENCE
TAX CREDIT PLUS L.P. III
 AND
SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS
 
 
 
 
 ASSETS
 
 
 March
      31,2009
            
            2008Property
      and equipment - at cost, less accumulated depreciation (Notes 2 and
      4)
            
            $
            49,495,584
            
            $
            55,068,077Cash
      and cash equivalents (Notes 2 and 12)
            
            
            2,920,187
            
            
            1,129,466Cash
      held in escrow (Note 5)
            
            
            5,154,827
            
            
            5,684,885Deferred
      costs, less accumulated amortization (Notes 2 and 6)
            
            
            503,291
            
            
            687,005Other
      assets
            
            
            1,192,915
            
            
            939,926Total
      assets
            
            $
            59,266,804
            
            $
            63,509,359LIABILITIES
      AND PARTNERS’ CAPITAL (DEFICIT)Liabilities:Mortgage
      notes payable (Note 7)
            
            $
            38,658,408
            
            $
            43,468,564Accounts
      payable
            
            
            902,181
            
            
            894,007Accrued
      interest payable
            
            
            10,702,346
            
            
            9,665,774Security
      deposits payable
            
            
            424,241
            
            
            517,574Due
      to local general partners and affiliates (Note 8)
            
            
            2,309,783
            
            
            1,657,112Due
      to general partner and affiliates (Note 8)
            
            
            6,348,322
            
            
            6,102,814Total
      liabilities
            
            
            59,345,281
            
            
            62,305,845Minority
      interest (Note 2)
            
            
            406,997
            
            
            172,601Commitments
      and contingencies (Notes 7, 8 and 12)Partners’
      capital (deficit):Limited
      partners (43,440 BACs issued and outstanding) (Note 1)
            
            
            (382,825
            )
            
            1,406,733General
      Partner
            
            
            (102,649
            )
            
            (375,820
            )Total
      partners’ capital (deficit)
            
            
            (485,474
            )
            
            1,030,913Total
      liabilities and partners’ capital (deficit)
            
            $
            59,266,804
            
            $
            63,509,359See
      accompanying notes to consolidated financial
  statements.
 
  - 41
-
   INDEPENDENCE
TAX CREDIT PLUS L.P. III
 AND
SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 
 
 
 
 Years
      Ended March 31,2009
                                                                  
                                                                  
                                                                  2008*Operations:RevenuesRental
      income
                                                                  
                                                                  $
                                                                  6,554,634
                                                                  
                                                                  
                                                                  $
                                                                  6,646,013Other
                                                                  
                                                                  
                                                                  313,403
                                                                  
                                                                  
                                                                  
                                                                  387,205Total
      revenues
                                                                  
                                                                  
                                                                  6,868,037
                                                                  
                                                                  
                                                                  
                                                                  7,033,218ExpensesGeneral
      and administrative
                                                                  
                                                                  
                                                                  2,005,907
                                                                  
                                                                  
                                                                  
                                                                  1,917,419General
      and administrative-related parties (Note 8)
                                                                  
                                                                  
                                                                  856,339
                                                                  
                                                                  
                                                                  
                                                                  924,344Repairs
      and maintenance
                                                                  
                                                                  
                                                                  1,636,910
                                                                  
                                                                  
                                                                  
                                                                  1,687,096Operating
      and other
                                                                  
                                                                  
                                                                  1,059,026
                                                                  
                                                                  
                                                                  
                                                                  882,246Real
      estate taxes
                                                                  
                                                                  
                                                                  361,104
                                                                  
                                                                  
                                                                  
                                                                  347,953Insurance
                                                                  
                                                                  
                                                                  498,463
                                                                  
                                                                  
                                                                  
                                                                  510,401Financial,
      primarily interest
                                                                  
                                                                  
                                                                  1,765,837
                                                                  
                                                                  
                                                                  
                                                                  1,776,709Depreciation
      and amortization
                                                                  
                                                                  
                                                                  2,406,794
                                                                  
                                                                  
                                                                  
                                                                  2,369,820Loss
      on impairment of property (Note 4)
                                                                  
                                                                  
                                                                  436,836
                                                                  
                                                                  
                                                                  
                                                                  0Total
      expenses
                                                                  
                                                                  
                                                                  11,027,216
                                                                  
                                                                  
                                                                  
                                                                  10,415,988Loss
      from operations before minority interest
                                                                  
                                                                  
                                                                  (4,159,179
                                                                  )
                                                                  
                                                                  
                                                                  (3,382,770
                                                                  )Minority
      interest in loss of subsidiaries from operations
                                                                  
                                                                  
                                                                  241,116
                                                                  
                                                                  
                                                                  
                                                                  212,262Loss
      from operations
                                                                  
                                                                  
                                                                  (3,918,063
                                                                  )
                                                                  
                                                                  
                                                                  (3,170,508
                                                                  )Discontinued
      operation (Note 13):Income
      from discontinued operation (including minority interest and gain on sale
      of property)
                                                                  
                                                                  
                                                                  2,110,429
                                                                  
                                                                  
                                                                  
                                                                  50,545Net
      loss
                                                                  
                                                                  $
                                                                  (1,807,634
                                                                  )
                                                                  
                                                                  $
                                                                  (3,119,963
                                                                  )Loss
      from operations – limited partners
                                                                  
                                                                  $
                                                                  (3,878,882
                                                                  )
                                                                  
                                                                  $
                                                                  (3,138,803
                                                                  )Income
      from discontinued operation (including minority interest and gain on sale
      of property) – limited partners
                                                                  
                                                                  
                                                                  2,089,324
                                                                  
                                                                  
                                                                  
                                                                  50,040Net
      loss – limited partners
                                                                  
                                                                  $
                                                                  (1,789,558
                                                                  )
                                                                  
                                                                  $
                                                                  (3,088,763
                                                                  )Number
      of BACs outstanding
                                                                  
                                                                  
                                                                  43,440
                                                                  
                                                                  
                                                                  
                                                                  43,440Loss
      from operations per BAC
                                                                  
                                                                  $
                                                                  (89.29
                                                                  )
                                                                  
                                                                  $
                                                                  (72.25
                                                                  )Income
      from discontinued operation (including minority interest and gain on sale
      of property) per BAC
                                                                  
                                                                  
                                                                  48.09
                                                                  
                                                                  
                                                                  
                                                                  1.15Loss
      per BAC
                                                                  
                                                                  $
                                                                  (41.20
                                                                  )
                                                                  
                                                                  $
                                                                  (71.10
                                                                  )*
       Reclassified for comparative purposes.
                                                                    
                                                                    See
      accompanying notes to consolidated financial statements.
 
  - 42
-
  INDEPENDENCE
TAX CREDIT PLUS L.P. III
 AND
SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL (DEFICIT)
 
 
 
 
 Total
            
            
            Limited
              Partners
            
            
            General
              PartnerPartners’
      capital (deficit) – April 1, 2006
            
            $
            8,831,833
            
            
            $
            9,129,643
            
            
            $
            (297,810
            )Net
      loss
            
            
            (4,680,957
            )
            
            
            (4,634,147
            )
            
            
            (46,810
            )Partners’
      capital (deficit) – March 31, 2007
            
            
            4,150,876
            
            
            
            4,495,496
            
            
            
            (344,620
            )Net
      loss
            
            
            (3,119,963
            )
            
            
            (3,088,763
            )
            
            
            (31,200
            )Partners’
      capital (deficit) – March 31, 2008
            
            
            1,030,913
            
            
            
            1,406,733
            
            
            
            (375,820
            )Net
      loss
            
            
            (1,807,634
            )
            
            
            (1,789,558
            )
            
            
            (18,076
            )Contributions
      – write-off of partnership management fees related to the sold property
      (Note 8)
            
            
            286,247
            
            
            
            0
            
            
            
            286,247Contributions
      – write-off of related party debt (Note 10)
            
            
            5,000
            
            
            
            0
            
            
            
            5,000Partners’
      capital (deficit) – March 31, 2009
            
            $
            (485,474
            )
            
            $
            (382,825
            )
            
            $
            (102,649
            )See
      accompanying notes to consolidated financial
  statements.
 
  - 43
-
  INDEPENDENCE
TAX CREDIT PLUS L.P. III
 AND
SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
     Years
      Ended March 31,2009
                  
                  2008Cash
      flows from operating activities:Net
      loss
                  
                  $
                  (1,807,634
                  )
                  $
                  (3,119,963
                  )Adjustments
      to reconcile net loss to net cash provided by operating
      activities:Gain
      on sale of property
                  
                  
                  (5,139,562
                  )
                  
                  0Depreciation
      and amortization
                  
                  
                  2,753,922
                  
                  
                  2,610,459Loss
      on impairment of property
                  
                  
                  436,836
                  
                  
                  0Minority
      interest in income (loss) of subsidiary partnerships
                  
                  
                  2,732,534
                  
                  
                  (211,726
                  )(Increase)
      decrease in assets:Cash
      held in escrow
                  
                  
                  186,829
                  
                  
                  (176,965
                  )Other
      assets
                  
                  
                  (331,433
                  )
                  
                  (144,879
                  )Increase
      (decrease) in liabilities:Accounts
      payable
                  
                  
                  77,111
                  
                  
                  287,889Accrued
      interest
                  
                  
                  1,036,572
                  
                  
                  1,073,597Security
      deposit payable
                  
                  
                  (12,171
                  )
                  
                  21,634Due
      to local general partners and affiliates
                  
                  
                  353,208
                  
                  
                  39,796Due
      to general partners and affiliates
                  
                  
                  536,755
                  
                  
                  672,229Total
      adjustments
                  
                  
                  2,630,601
                  
                  
                  4,172,034Net
      cash provided by operating activities
                  
                  
                  822,967
                  
                  
                  1,052,071Cash
      flows from investing activities:Acquisition
      of property and equipment
                  
                  
                  (348,187
                  )
                  
                  (132,392
                  )Proceeds
      from sale of property
                  
                  
                  2,200,000
                  
                  
                  0Costs
      related to sale of property
                  
                  
                  (211,014
                  )
                  
                  0Decrease
      (increase) in cash held in escrow
                  
                  
                  206,682
                  
                  
                  (11,306
                  )Decrease
      in due to local general partners and affiliates
                  
                  
                  (20,445
                  )
                  
                  (116,207
                  )Net
      cash provided by (used in) investing activities
                  
                  
                  1,827,036
                  
                  
                  (259,905
                  )Cash
      flows from financing activities:Principal
      payments of mortgage notes
                  
                  
                  (4,810,156
                  )
                  
                  (610,936
                  )Proceeds
      from mortgage notes
                  
                  
                  6,775,000
                  
                  
                  550,000Decrease
      in due to local general partners and affiliates
                  
                  
                  (4,926
                  )
                  
                  (243,242
                  )Increase
      in deferred costs
                  
                  
                  (321,062
                  )
                  
                  0Decrease
      in capitalization of consolidated subsidiaries attributable to minority
      interest
                  
                  
                  (2,498,138
                  )
                  
                  (44,875
                  )Net
      cash used in financing activities
                  
                  
                  (859,282
                  )
                  
                  (349,053
                  )Net
      increase in cash and cash equivalents
                  
                  
                  1,790,721
                  
                  
                  443,113Cash
      and cash equivalents at beginning of year
                  
                  
                  1,129,466
                  
                  
                  686,353Cash
      and cash equivalents at end of year
                  
                  $
                  2,920,187
                  
                  $
                  1,129,466Supplemental
      disclosure of cash flows information:Cash
      paid during the year for interest
                  
                  $
                  721,400
                  
                  $
                  818,878Summarized
      below are the components of the gain on sale of property:Proceeds
      from sale of property – net
                  
                  $
                  (1,988,986
                  )
                  $
                  0Decrease
      in property and equipment, net of accumulated depreciation
                  
                  
                  2,913,634
                  
                  
                  0Decrease
      in deferred costs
                  
                  
                  321,064
                  
                  
                  0Decrease
      in cash held in escrow
                  
                  
                  136,547
                  
                  
                  0Decrease
      in other assets
                  
                  
                  78,444
                  
                  
                  0Decrease
      in accounts payable and other liabilities
                  
                  
                  (68,937
                  )
                  
                  0Decrease
      in security deposit payable
                  
                  
                  (81,162
                  )
                  
                  0Decrease
      in mortgage note payable
                  
                  
                  (6,775,000
                  )
                  
                  0Increase
      in due to Local General Partners and affiliates
                  
                  
                  324,834
                  
                  
                  0Decrease
      in due to General Partners and affiliates
                  
                  
                  (5,000
                  )
                  
                  0Capital
      contribution – General Partners
                  
                  
                  5,000
                  
                  
                  0Supplemental
      disclosures of non-cash investing and financing
activities:Contribution
      from write-off of partnership management fees related to sold
      properties
                  
                  $
                  286,247
                  
                  $
                  0
 
 
 See
      accompanying notes to consolidated financial
  statements.
  - 44
-
   INDEPENDENCE
TAX CREDIT PLUS L.P. III
 AND
SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31,
2009
   NOTE 1 –
General
  Independence
Tax Credit Plus L.P. III (the “Partnership”) is a limited partnership which was
formed under the laws of the State of Delaware on December 23, 1993. The general
partner of the Partnership is Related Independence Associates III L.P., a
Delaware limited partnership (the “General Partner”). The general partner of the
General Partner is Related Independence Associates III Inc., a Delaware
corporation (“RIAI III”).  The ultimate parent of the General Partner
is Centerline Holding Company (“Centerline).
  The
Partnership’s business is to invest in other partnerships (“Local Partnerships,”
“subsidiaries” or “subsidiary partnerships”) owning leveraged apartment
complexes (“Apartment Complexes” or “Properties”) that are eligible for the
low-income housing tax credit (“Tax Credit”) under Section 42 of the Internal
Revenue Code, some of which may also be eligible for the historic rehabilitation
tax credit.
  The
Partnership had originally acquired interests in twenty subsidiary
partnerships.  During the year ended March 31, 2009, the Partnership
has sold its limited partnership interest in one Local
Partnership.  There can be no assurance as to when the Partnership
will dispose of its remaining investments or the amount of proceeds which may be
received.
  The
Partnership was authorized to issue a total of 100,000 ($100,000,000) Beneficial
Assignment Certificates (“BACs”) which were registered with the Securities and
Exchange Commission for sale to the public. Each BAC represents all of the
economic and virtually all of the ownership rights attributable to a limited
partnership interest in the Partnership. As of the termination of the offering
on May 9, 1995, the Partnership had received $43,440,000 of gross proceeds of
its offering (the “Gross Proceeds”) from 2,810 investors (“BACs
holders”).
  The terms
of the Partnership’s Amended and Restated Agreement of Limited Partnership (the
“Partnership Agreement”) provide, among other things, that net profits or losses
and distributions of cash flow are, in general, allocated 99% to the limited
partners and BACs holders and 1% to the general partner.
   NOTE 2 –
Summary of Significant Accounting Policies
  a) Basis
of Accounting
  For
financial reporting purposes the Partnership’s fiscal year ends on March 31. All
subsidiaries have fiscal years ending December 31. Accounts of the subsidiaries
have been adjusted for intercompany transactions from January 1 through March
31. The Partnership’s fiscal year ends March 31 in order to allow adequate time
for the subsidiaries’ financial statements to be prepared and consolidated. The
books and records of the Partnership are maintained on the accrual basis of
accounting, in accordance with accounting principles generally accepted in the
United States of America (“GAAP”).
  b) Basis
of Consolidation
  The
consolidated financial statements include the accounts of the Partnership and
twenty subsidiary partnerships in which the Partnership is a limited partner for
the years ended March 31, 2009 and 2008, respectively, (the 2008 and 2007 Fiscal
Years). Through the rights of the Partnership and/or an affiliate of the General
Partner, which affiliate has a contractual obligation to act on behalf of the
Partnership, to remove the general partners of the subsidiary local partnerships
(“Local General Partners”) and to approve certain major operating and financial
decisions, the Partnership has a controlling financial interest in the
subsidiary partnerships. All intercompany accounts and transactions with the
subsidiary partnerships have been eliminated in consolidation.
  Increases
(decreases) in the capitalization of consolidated subsidiaries attributable to
minority interest arise from cash contributions and cash distributions to the
minority interest partners.
  Losses
attributable to minority interest which exceed the minority interests’
investment in a subsidiary have been charged to the Partnership. Such losses
aggregated approximately $2,975,000 and $6,000 for the years ended March 31,
2009 and 2008, respectively. The Partnership’s investment in each subsidiary is
equal to the respective subsidiary’s partners’ equity less minority interest
capital, if any. In consolidation, all subsidiary partnership losses are
included in the Partnership’s capital account except for losses allocated to
minority interest capital.
  c) Cash
and Cash Equivalents
  Cash and
cash equivalents include cash on hand, cash in banks, and investments in
short-term highly liquid investments purchased with original maturities of three
months or less.
  d)
Property and Equipment
  Property
and equipment to be held and used are carried at cost which includes the
purchase price, acquisition fees and expenses, construction period interest and
any other costs incurred in acquiring the properties. The cost of property and
equipment is depreciated over their estimated useful lives using accelerated and
straight-line methods. Expenditures for repairs and maintenance are charged to
expense as incurred; major renewals and betterments are capitalized. At the time
property and equipment are retired or otherwise disposed of, the cost and
accumulated depreciation are eliminated from the assets and accumulated
depreciation accounts and the profit or loss on such disposition is reflected in
earnings. A loss on impairment of assets is recorded when management estimates
amounts recoverable through future operations and sale of the property on an
undiscounted basis are below depreciated cost. At that time, property
investments themselves are reduced to estimated fair value (generally using
discounted cash flows).
    - 45
-
 INDEPENDENCE
TAX CREDIT PLUS L.P. III
 AND
SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31,
2009
   During
the year ended March 31, 2009, the Partnership recorded approximately $437,000
as an aggregate loss on impairment of assets or reduction to estimated fair
value.  Through March 31, 2009, the Partnership recorded approximately
$1,840,000 as an aggregate loss on impairment of assets or reduction to
estimated fair value for one Local Partnership.
  At the
time management commits to a plan to dispose of assets, said assets are adjusted
to the lower of carrying amount or fair value less costs to sell. These assets
are classified as property and equipment-held for sale and are not
depreciated.  There are no Local Partnerships whose assets are
classified as property and equipment as held for sale as of March 31,
2009.
  e)
Revenue Recognition
  Rental
income is earned primarily under standard residential operating leases and is
typically due the first day of each month, but can vary by property due to the
terms of the tenant leases. Rental income is recognized when earned and charged
to tenants’ accounts receivable if not received by the due date. Rental payments
received in advance of the due date are deferred until earned. Rental subsidies
are recognized as rental income during the month in which it is
earned.
  Other
revenues are recorded when earned and consist of the following
items:  Interest income earned on cash and cash equivalent balances
and cash held in escrow balances, income from forfeited security deposits, late
charges, laundry and vending income and other rental related items.
  Other
revenues from operations include the following amounts at both the Partnership
and Local Partnership level:
  Years
      Ended March 31,2009
                  
                  2008*Interest
                  
                  $
                  165,083
                  
                  $
                  176,366Other
                  
                  
                  148,320
                  
                  
                  210,839Total
      other revenue
                  
                  $
                  313,403
                  
                  $
                  387,205
 
  Other
revenues from discontinued operation include the following amounts at both the
Partnership and Local Partnership level:
  Years
      Ended March 31,2009
                  
                  2008*Interest
                  
                  $
                  4,045
                  
                  $
                  3,381Other
                  
                  
                  16,204
                  
                  
                  8,659Total
      other revenue
                  
                  $
                  20,249
                  
                  $
                  12,040* 
      Reclassified for comparative purposes.
 
  f) Income
Taxes
  The
Partnership is not required to provide for, or pay, any federal income taxes.
Net income or loss generated by the Partnership is passed through to the
partners and is required to be reported by them. The Partnership may be subject
to state and local taxes in jurisdictions in which it operates. For income tax
purposes, the Partnership has a fiscal year ending December 31 (Note
9).
  g) Loss
Contingencies
  The
Partnership records loss contingencies as a charge to income when information
becomes available which indicates that it is probable that an asset has been
impaired or a liability has been incurred as of the date of the financial
statements and the amount of loss can be reasonably estimated.
  h) Use of
Estimates
  The
preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those
estimates.
   - 46
-
 INDEPENDENCE
TAX CREDIT PLUS L.P. III
 AND
SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31,
2009
 i) Recent
Accounting Pronouncements
  In April
2009, the Financial Accounting Standards Board (“FASB”) issued FSP No. FAS 107-1
and APB 28-1, “Interim Disclosures about Fair Value of Financial
Instruments”.  This FSP amends FASB Statement No. 107 to require
disclosures about fair values of financial instruments for interim reporting
periods as well as in annual financial statements.  The FSP also
amends APB Opinion No. 28 to require those disclosures in summarized financial
information at interim reporting periods.  This FSP becomes effective
for interim reporting periods ending after June 15, 2009, with early adoption
permitted for periods ending after March 15, 2009.  The adoption of
this FSP is not expected to have a material impact on the Partnership’s
consolidated financial statements.
  In April
2009, the FASB issued FSP NO. FAS 157-4, “Determining Fair Value When the Volume
and Level of Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly”.  This FSP provides
additional guidance on determining fair value when the volume and level of
activity for the asset or liability have significantly decreased when compared
with normal market activity for the asset or liability.  A significant
decrease in the volume or level of activity for the asset of liability is an
indication that transactions or quoted prices may not be determinative of fair
value because transactions may not be orderly.  In that circumstance,
further analysis of transactions or quoted prices is needed, and an adjustment
to the transactions or quoted prices may be necessary to estimate fair
value.  This FSP becomes effective for interim reporting periods
ending after June 15, 2009, with early adoption permitted for periods ending
after March 15, 2009.  The adoption of this FSP is not expected to
have a material impact on the Partnership’s consolidated financial
statements.
 In
December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements”.  This statement was issued with
the intent to improve the relevance, comparability, and transparency of the
financial information that a reporting entity provides in its consolidated
financial statements for those entities that have outstanding non-controlling
interest in one or more subsidiaries.  The effective date for this
provision is for fiscal years beginning after December 15, 2008.  The
Partnership is currently evaluating the impact of the provisions of this
statement on the consolidated financial statements.
   NOTE 3 –
Fair Value of Financial Instruments
  The
following methods and assumptions were used to estimate the fair value of each
class of financial instruments (all of which are held for nontrading purposes)
for which it is practicable to estimate that value:
  Cash and Cash Equivalents,
Investments Available-for-Sale and Cash Held in Escrow
 The
carrying amount approximates fair value.
  Mortgage Notes
Payable
 During
the first quarter of 2008, we adopted the provisions required by SFAS No. 157
relating to financial assets and liabilities.  SFAS No. 157 defines
fair value, establishes a framework for measuring fair value, and expands
disclosures about fair value measurements.  SFAS No. 157 applies to
reported balances that are required or permitted to be measured at fair value
under existing accounting pronouncements; accordingly, the standard does not
require any new fair value measurements of reported balances.
  As
permitted, we chose not to elect the fair value option as prescribed by FASB
SFAS No. 159, “The Fair Value
Option for Financial Assets and Financial Liabilities” – Including an
Amendment of FASB Statement No. 115, for our financial assets and liabilities
that had not been previously carried at fair value.  Therefore, we did
not elect to fair value any additional items under SFAS No. 159.
  The
estimated fair value of financial instruments has been determined using
available market information or other appropriate valuation
methodologies.  However, considerable judgment is required in
interpreting market data to develop estimates of fair
value.  Consequently, the estimates are not necessarily indicative of
the amounts that could be realized or would be paid in a current market
exchange.  The following are financial instruments for which the
Partnership’s estimate of fair value differs from the carrying
amounts:
  At
      March 31, 2009
                
                At
      March 31, 2008Carrying
                  Amount
                
                Fair
      Estimated
                  Value
                
                Carrying
                  Amount
                
                Fair
      Estimated
                  ValueLIABILITIES:Mortgage
      notes
                
                $
                38,658,408
                
                $
                37,957,356
                
                $
                43,468,564
                
                $
                42,700,335
  
 - 47
-
   INDEPENDENCE
TAX CREDIT PLUS L.P. III
 AND
SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31,
2009
    NOTE 4 –
Property and Equipment
  The
components of property and equipment and their estimated useful lives from
operations are as follows:
  March
      31,
                      
                      Estimated
                        Useful
      Lives
                        (Years)2009
                      
                      2008Land
                      
                      $
                      1,099,060
                      
                      $
                      1,166,583
                      
                      -Building
      and improvements
                      
                      
                      75,616,485
                      
                      
                      81,802,719
                      
                      20-40Furniture
      and fixtures
                      
                      
                      1,610,768
                      
                      
                      1,490,968
                      
                      5-1278,326,313
                      
                      
                      84,460,270Less:
      Accumulated depreciation
                      
                      
                      (28,830,729
                      )
                      
                      (29,392,193
                      )$
                      49,495,584
                      
                      $
                      55,068,077
 
   Depreciation
expense for the years ended March 31, 2009 and 2008 amounted to $2,341,322 and
$2,302,500, respectively.
  During
the 2008 Fiscal Year, there was a decrease in accumulated depreciation in the
amount of $3,079,926 which related to discontinued assets.
  Depreciation
expenses for the discontinued property and equipment for the years ended March
31, 2009 and 2008 amounted to $228,888 and $232,384, respectively.
  During
the year ended March 31, 2009, in accordance with Statement of Financial
Accounting Standards No. 144 (“SFAS No. 144”) “Accounting for the Impairment of
Disposal of Long-Lived Assets”, the Partnership deemed the building of Mansion
Court Phase II Venture further impaired and wrote it down to its fair value
which resulted in an additional loss on impairment of approximately $437,000
(consisting of approximately $486,000 of fixed assets and approximately $49,000
of accumulated depreciation).  In addition to an earlier writedown of
approximately $1,403,000, the property was further written down to its fair
value of approximately $207,000.  Fair value was obtained from an
assessment made by the management after indications that the carrying value of
the assets was not recoverable evidenced by a history of negative net operating
income over the past few years.
   NOTE 5 –
Cash Held in Escrow
  Cash held
in escrow consists of the following:
  March
      31,2009
                
                2008Purchase
      price payments*
                
                $
                115,345
                
                $
                115,345Real
      estate taxes, insurance and other
                
                
                3,143,379
                
                
                3,359,417Reserve
      for replacements
                
                
                1,582,860
                
                
                1,789,542Tenant
      security deposits
                
                
                313,243
                
                
                420,581$
                5,154,827
                
                $
                5,684,885*  
      Represents amounts to be paid to seller upon meeting specified rental
      achievement criteria.
 
 
 - 48
-
 INDEPENDENCE
TAX CREDIT PLUS L.P. III
 AND
SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31,
2009
 NOTE 6 –
Deferred Costs
  The
components of deferred costs and their periods of amortization are as
follows:
  March
      31,
                  
                  Period2009
                  
                  2008Financing
      costs
                  
                  $
                  1,107,801
                  
                  $
                  1,335,101
                  
                  *Less:
      Accumulated amortization
                  
                  
                  (604,510
                  )
                  
                  (648,096
                  )$
                  503,291
                  
                  $
                  687,005*   Over
      the life of the related mortgages.
 
  Amortization
expense for the years ended March 31, 2009 and 2008 amounted to $65,472 and
$67,320, respectively.
  Amortization
expense from discontinued operations for the years ended March 31, 2009 and 2008
amounted to $118,240 and $8,255, respectively.
   NOTE 7 –
Mortgage Notes Payable
  The
mortgage notes, which are collateralized by land and buildings, are payable in
aggregate monthly installments of approximately $75,000 including principal and
interest at rates varying from 0% to 10% per annum, through the year 2046. Each
subsidiary partnership’s mortgage note payable is collateralized by the land and
buildings of the respective subsidiary partnership, the assignment of each
certain subsidiary partnership’s rents and leases, and is without further
recourse.
  Annual
principal payment requirements by the subsidiary partnerships for each of the
next five years and thereafter, are as follows:
  December
      31,
                  
                  Amount2009
                  
                  $
                  418,0522010
                  
                  
                  2,178,9662011
                  
                  
                  2,699,7972012
                  
                  
                  1,788,6932013
                  
                  
                  1,708,651Thereafter
                  
                  
                  29,864,249$
                  38,658,408
 
  Accrued
interest payable as of March 31, 2009 and 2008 was approximately $10,702,000 and
$9,666,000, respectively.  Interest accrues on all mortgage loans,
which include primary and secondary loans.  Certain secondary loans
have provisions such that interest is accrued but not payable until a future
date.  The Partnership anticipates the payment of accrued interest on
the secondary loans (which make up the majority of the accrued interest payable
amount and which have been accumulating since the Partnership’s investment in
the respective Local Partnership) will be made from future refinancings or sales
proceeds from the respective Local Partnerships.
  The
mortgage agreements require monthly deposits to replacement reserves of
approximately $17,000 and monthly deposits to escrow accounts for real estate
taxes, hazard and mortgage insurance and other (Note 5).
   NOTE 8 –
Related Party Transactions
  An
affiliate of the General Partner has a .01% interest as a special limited
partner in each of the Local Partnerships.
  Pursuant
to the Partnership Agreement and the partnership agreements of the Local
Partnerships (“Local Partnership Agreements”), the General Partner and its
affiliates receive their pro rata shares of profits, losses and tax
credits.
  A)
Guarantees
  In
connection with investments in development-stage Apartment Complexes, the
General Partner generally required that the Local General Partners provide
completion guarantees and/or undertake to repurchase the Partnership’s interest
in the Local Partnership if construction or rehabilitation was not completed
substantially on time or on budget (“Development Deficit Guarantees”). The
Development Deficit Guarantees generally also required the Local General Partner
to provide any funds necessary to cover net operating deficits of the Local
Partnership until such time as the Apartment Complex had achieved break-even
operations. The General Partner generally required that the Local General
Partners undertake an obligation to fund operating deficits of the Local
Partnership (up to a stated maximum amount) during a limited period of time
(typically three to five years) following the achievement of break-even
operations (“Operating Deficit Guarantees”).  As of March 31, 2009,
the gross amount of the Operating Deficit Guarantees aggregate approximately
$5,487,000, all of which have expired.  In cases where the General
Partner deemed it appropriate, the obligations of a Local General Partner under
the Development Deficit, Operating Deficit and/or Rent-Up Guarantees were
secured by letters of credit and/or cash escrow deposits.
   - 49
-
   INDEPENDENCE
TAX CREDIT PLUS L.P. III
 AND
SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31,
2009
    B) Other
Related Party Expenses
  The
General Partner and its affiliates perform services for the Partnership. The
costs incurred to the General Partner and other related parties from operations
for the years ended March 31, 2009 and 2008 were as follows:
  Years
      Ended March 31,2009
              
              2008*Partnership
      management fees (a)
              
              $
              335,722
              
              $
              353,261Expense
      reimbursement (b)
              
              
              175,041
              
              
              224,923Local
      administrative fees (d)
              
              
              71,611
              
              
              74,656Total
      general and administrative-General Partner
              
              
              582,374
              
              
              652,840Property
      management fees incurred to affiliates of the subsidiary partnerships’
      general partners (c)
              
              
              273,965
              
              
              271,504Total
      general and administrative-related parties
              
              $
              856,339
              
              $
              924,344
 
  Expenses
incurred to related parties from discontinued operation for the years ended
March 31, 2009 and 2008 were as follows:
  Years
      Ended March 31,2009
              
              2008Local
      administrative fees (d)
              
              $
              5,000
              
              $
              5,000Total
      general and administrative - General Partner
              
              
              5,000
              
              
              5,000Property
      management fees incurred to affiliates of the subsidiary partnerships’
      general partners (c)
              
              
              58,640
              
              
              54,032Total
      general and administrative-related parties
              
              $
              63,640
              
              $
              59,032*  Reclassified
      for comparative purposes.
 
  (a)
            The
      General Partner is entitled to receive a partnership management fee, after
      payment of all Partnership expenses, which together with the annual local
      administrative fees will not exceed a maximum of 0.5% per annum of
      invested assets (as defined in the Partnership Agreement), for
      administering the affairs of the Partnership. Subject to the foregoing
      limitation, the partnership management fee will be determined by the
      General Partner in its sole discretion based upon its review of the
      Partnership’s investments. Unpaid partnership management fees for any year
      will be accrued without interest and will be payable only to the extent of
      available funds after the Partnership has made distributions to the
      limited partners of sale or refinancing proceeds equal to their original
      capital contributions plus a 10% priority return thereon (to the extent
      not theretofore paid out of cash flow). Partnership management fees owed
      to the General Partner amounting to approximately $3,636,000 and
      $3,586,000 were accrued and unpaid as of March 31, 2009 and 2008,
      respectively.  During the year ended March 31, 2009, management
      deemed the unpaid partnership management fees that were related to the
      property sold during the year ended March 31, 2009 uncollectible and as a
      result, wrote them off in the amount of approximately $286,000, resulting
      in a non-cash General Partner contribution of the same
      amount.  Without the General Partner’s continued accrual without
      payment the Partnership will not be in a position to meet its
      obligations.  The General Partner has continued allowing the
      accrual without payment of these amounts but is under no obligation to
      continue to do so.
  (b)
            The
      Partnership reimburses the General Partner and its affiliates for actual
      Partnership operating expenses incurred by the General Partner and its
      affiliates on the Partnership’s behalf. The amount of reimbursement from
      the Partnership is limited by the provisions of the Partnership Agreement.
      Another affiliate of the General Partner performs asset monitoring for the
      Partnership. These services include site visits and evaluations of the
      subsidiary partnerships’
performance.
    - 50
-
   INDEPENDENCE
TAX CREDIT PLUS L.P. III
 AND
SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31,
2009
    (c)
            Property
      management fees incurred by Local Partnerships amounted to $515,438 and
      $507,998 for the years ended March 31, 2009 and 2008,
      respectively.  Of these fees, $332,605 and $325,536 were
      incurred to affiliates of the subsidiary partnerships’ general partners,
      which includes $58,640 and $54,032 of fees relating to discontinued
      operations.
  (d)
            Independence
      SLP III L.P., a limited partner of the subsidiary partnerships, is
      entitled to receive a local administrative fee of up to $5,000 per year
      from each subsidiary partnership.
  C) Due to
Local General Partners and Affiliates
  Due to
local general partners and affiliates from operating liabilities consists of the
following:
  March
      31,2009
              
              
              2008Operating
      advances
              
              $
              579,057
              
              
              $
              103,064Development
      fee payable
              
              
              1,125,638
              
              
              
              1,146,083Other
      capitalized costs
              
              
              16,335
              
              
              
              16,335Construction
      costs payable
              
              
              146,487
              
              
              
              146,487General
      Partner loan payable
              
              
              222,008
              
              
              
              3,292Management
      and other operating fees
              
              
              220,258
              
              
              
              241,851$
              2,309,783
              
              
              $
              1,657,112
 
  D)
Advances from Partnership to Local Partnerships
  As of
March 31, 2009, the Partnership has advanced certain Local Partnership operating
loans (non-interest bearing) amounting to approximately
$1,895,000.  Such advances are eliminated in
consolidation.  The following table summarizes these
advances:
  March
      31,2009
              
              
              2008New
      Zion
              
              $
              2,655
              
              
              $
              2,655Knickerbocker
      Avenue
              
              
              454,441
              
              
              
              454,441Lafayette
      Avenue
              
              
              416,094
              
              
              
              416,094Eastern
      Parkway
              
              
              1,016,321
              
              
              
              1,016,321Sumpter
      Commons
              
              
              5,075
              
              
              
              5,5752301
      First Avenue
              
              
              0
              
              
              
              1,080,628$
              1,894,586
              
              
              $
              2,975,714
 
  On
December 31, 2008, the Partnership sold its limited partnership interest in 2301
First Avenue (see Note 10).  The sale resulted in a write-off of
operating advances owed to the Partnership.
   NOTE 9 –
Taxable Net Loss
  Our
adoption of FASB interpretation (“FIN”) No. 48 did not have a material impact on
the consolidated financial statements and does not impact our financial position
at March 31, 2009.
  A
reconciliation of the financial statement net loss to the taxable net loss for
the Partnership and its consolidated subsidiaries follows:
   - 51
-
 INDEPENDENCE
TAX CREDIT PLUS L.P. III
 AND
SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31,
2009
 Years
      Ended March 31,2008
                      
                      
                      2007Financial
      statement net loss
                      
                      $
                      (1,807,634
                      )
                      
                      $
                      (3,119,963
                      )Differences
      between depreciation and amortization expense records for financial
      reporting purposes and the accelerated costs recovery system utilized for
      income tax purposes
                      
                      
                      (308,517
                      )
                      
                      
                      (513,901
                      )Differences
      resulting from parent company having a different fiscal year for income
      tax and financial reporting purposes
                      
                      
                      22,882
                      
                      
                      
                      (2,498
                      )Difference
      between gain on sale of property recorded for financial statement and
      income tax reporting purposes
                      
                      
                      (2,540,098
                      )
                      
                      
                      0Loss
      on impairment of property for financial reporting purposes not deductible
      for tax purposes
                      
                      
                      436,836
                      
                      
                      
                      0Other,
      including accruals for financial reporting not deductible for tax purposes
      until paid and losses allocated to minority interests for tax
      purposes
                      
                      
                      4,107,030
                      
                      
                      
                      979,408Net
      loss as shown on the income tax return for the calendar year
      ended
                      
                      $
                      (89,501
                      )
                      
                      $
                      (2,656,954
                      )
    NOTE 10 –
Sale of Property
  The
Partnership is in the process of disposing of all of its
investments.  During the fiscal year ended March 31, 2009, the
Partnership sold its limited partnership interest in one Local
Partnership.  There can be no assurance as to when the Partnership
will dispose of its remaining investments or the amount of proceeds which may be
received.  However, based on the historical operating results of the
Local Partnerships and the current economic conditions, including changes in tax
laws, it is unlikely that the proceeds from such sales received by the
Partnership will be sufficient to return to the limited partners their original
investments.  All gains and losses on sales are included in
discontinued operations.
  On
December 31, 2008, the Partnership sold its limited partnership interest in 2301
First Avenue Limited Partnership L.P. (“2301 First Avenue”) to an affiliate of
the Local General Partner for a sales price of $2,200,000.  The sale
resulted in a gain of approximately $5,140,000, resulting from the write-off of
the deficit basis in the Local Partnership of approximately $2,940,000 at the
date of the sale and the $2,200,000 cash received from the sale.  The
sale also resulted in a write-off of operating advances of approximately
$1,064,000 owed to the Partnership which eliminates in
consolidation.  In addition, the sale resulted in a non-cash
contribution to the Local Partnership from the General Partner of approximately
$5,000 as a result of the write-off of fees owed by the Local Partnership to an
affiliate of the General Partner.
  - 52
-
 INDEPENDENCE
TAX CREDIT PLUS L.P. III
 AND
SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31,
2009
 NOTE 11 –
Selected Quarterly Financial Data (Unaudited)
  The
following table summarizes the Partnership’s quarterly results of operations for
the years ended March 31, 2009 and 2008.
  Quarter
      EndedOPERATIONS
                                                                                                                                
                                                                                                                                June
      30,
                                                                                                                                  2008
                                                                                                                                
                                                                                                                                
                                                                                                                                September
      30,
                                                                                                                                  2008
                                                                                                                                
                                                                                                                                
                                                                                                                                December
      31,
                                                                                                                                  2008
                                                                                                                                
                                                                                                                                
                                                                                                                                March
      31,
                                                                                                                                  2009Revenues
                                                                                                                                
                                                                                                                                $
                                                                                                                                1,708,999
                                                                                                                                
                                                                                                                                
                                                                                                                                $
                                                                                                                                1,748,910
                                                                                                                                
                                                                                                                                
                                                                                                                                $
                                                                                                                                1,752,035
                                                                                                                                
                                                                                                                                
                                                                                                                                $
                                                                                                                                1,658,093Operating
      expenses
                                                                                                                                
                                                                                                                                
                                                                                                                                (2,537,524
                                                                                                                                )
                                                                                                                                
                                                                                                                                
                                                                                                                                (2,622,596
                                                                                                                                )
                                                                                                                                
                                                                                                                                
                                                                                                                                (2,469,983
                                                                                                                                )
                                                                                                                                
                                                                                                                                
                                                                                                                                (3,397,113
                                                                                                                                )Loss
      from operations before minority interest
                                                                                                                                
                                                                                                                                
                                                                                                                                (828,525
                                                                                                                                )
                                                                                                                                
                                                                                                                                
                                                                                                                                (873,686
                                                                                                                                )
                                                                                                                                
                                                                                                                                
                                                                                                                                (717,948
                                                                                                                                )
                                                                                                                                
                                                                                                                                
                                                                                                                                (1,739,020
                                                                                                                                )Minority
      interest in loss (income) of subsidiaries from operations
                                                                                                                                
                                                                                                                                
                                                                                                                                75,360
                                                                                                                                
                                                                                                                                
                                                                                                                                
                                                                                                                                55,198
                                                                                                                                
                                                                                                                                
                                                                                                                                
                                                                                                                                (615,329
                                                                                                                                )
                                                                                                                                
                                                                                                                                
                                                                                                                                725,887Loss
      from operations
                                                                                                                                
                                                                                                                                
                                                                                                                                (753,165
                                                                                                                                )
                                                                                                                                
                                                                                                                                
                                                                                                                                (818,488
                                                                                                                                )
                                                                                                                                
                                                                                                                                
                                                                                                                                (1,333,277
                                                                                                                                )
                                                                                                                                
                                                                                                                                
                                                                                                                                (1,013,133
                                                                                                                                )Income
      from discontinued operation (including minority interest and gain on sale
      of property)
                                                                                                                                
                                                                                                                                
                                                                                                                                17,816
                                                                                                                                
                                                                                                                                
                                                                                                                                
                                                                                                                                22,479
                                                                                                                                
                                                                                                                                
                                                                                                                                
                                                                                                                                737,325
                                                                                                                                
                                                                                                                                
                                                                                                                                
                                                                                                                                1,332,809Net
      loss (income)
                                                                                                                                
                                                                                                                                $
                                                                                                                                (735,349
                                                                                                                                )
                                                                                                                                
                                                                                                                                $
                                                                                                                                (796,009
                                                                                                                                )
                                                                                                                                
                                                                                                                                $
                                                                                                                                (595,952
                                                                                                                                )
                                                                                                                                
                                                                                                                                $
                                                                                                                                319,676Net
      loss (income) – limited partnership
                                                                                                                                
                                                                                                                                $
                                                                                                                                (727,996
                                                                                                                                )
                                                                                                                                
                                                                                                                                $
                                                                                                                                (788,049
                                                                                                                                )
                                                                                                                                
                                                                                                                                $
                                                                                                                                (589,992
                                                                                                                                )
                                                                                                                                
                                                                                                                                $
                                                                                                                                316,479Loss
      per weighted average BAC from operations
                                                                                                                                
                                                                                                                                $
                                                                                                                                (17.16
                                                                                                                                )
                                                                                                                                
                                                                                                                                $
                                                                                                                                (18.65
                                                                                                                                )
                                                                                                                                
                                                                                                                                $
                                                                                                                                (30.38
                                                                                                                                )
                                                                                                                                
                                                                                                                                $
                                                                                                                                (23.10
                                                                                                                                )Income
      per weighted average BAC from discontinued operation
                                                                                                                                
                                                                                                                                
                                                                                                                                0.40
                                                                                                                                
                                                                                                                                
                                                                                                                                
                                                                                                                                0.51
                                                                                                                                
                                                                                                                                
                                                                                                                                
                                                                                                                                16.80
                                                                                                                                
                                                                                                                                
                                                                                                                                
                                                                                                                                30.38Net
      loss (income) per weighted average BAC
                                                                                                                                
                                                                                                                                $
                                                                                                                                (16.76
                                                                                                                                )
                                                                                                                                
                                                                                                                                $
                                                                                                                                (18.14
                                                                                                                                )
                                                                                                                                
                                                                                                                                $
                                                                                                                                (13.58
                                                                                                                                )
                                                                                                                                
                                                                                                                                $
                                                                                                                                7.28Quarter
      EndedOPERATIONS
                                                                                                                                
                                                                                                                                June
      30,
                                                                                                                                  2007
                                                                                                                                
                                                                                                                                
                                                                                                                                September
      30,
                                                                                                                                  2007*
                                                                                                                                
                                                                                                                                
                                                                                                                                December
      31,
                                                                                                                                  2007*
                                                                                                                                
                                                                                                                                
                                                                                                                                March
      31,
                                                                                                                                  2008*Revenues
                                                                                                                                
                                                                                                                                $
                                                                                                                                1,690,145
                                                                                                                                
                                                                                                                                
                                                                                                                                $
                                                                                                                                1,724,041
                                                                                                                                
                                                                                                                                
                                                                                                                                $
                                                                                                                                1,767,071
                                                                                                                                
                                                                                                                                
                                                                                                                                $
                                                                                                                                1,851,961Operating
      expenses
                                                                                                                                
                                                                                                                                
                                                                                                                                (2,463,376
                                                                                                                                )
                                                                                                                                
                                                                                                                                
                                                                                                                                (2,622,985
                                                                                                                                )
                                                                                                                                
                                                                                                                                
                                                                                                                                (2,561,945
                                                                                                                                )
                                                                                                                                
                                                                                                                                
                                                                                                                                (2,767,681
                                                                                                                                )Loss
      from operations before minority interest
                                                                                                                                
                                                                                                                                
                                                                                                                                (773,231
                                                                                                                                )
                                                                                                                                
                                                                                                                                
                                                                                                                                (898,945
                                                                                                                                )
                                                                                                                                
                                                                                                                                
                                                                                                                                (794,874
                                                                                                                                )
                                                                                                                                
                                                                                                                                
                                                                                                                                (915,720
                                                                                                                                )Minority
      interest in loss (income) of subsidiaries from operations
                                                                                                                                
                                                                                                                                
                                                                                                                                226,101
                                                                                                                                
                                                                                                                                
                                                                                                                                
                                                                                                                                (108,957
                                                                                                                                )
                                                                                                                                
                                                                                                                                
                                                                                                                                37,155
                                                                                                                                
                                                                                                                                
                                                                                                                                
                                                                                                                                57,963Loss
      from continuing operations
                                                                                                                                
                                                                                                                                
                                                                                                                                (547,130
                                                                                                                                )
                                                                                                                                
                                                                                                                                
                                                                                                                                (1,007,901
                                                                                                                                )
                                                                                                                                
                                                                                                                                
                                                                                                                                (757,719
                                                                                                                                )
                                                                                                                                
                                                                                                                                
                                                                                                                                (857,757
                                                                                                                                )Income
      (loss) from discontinued operation (including minority
      interest)
                                                                                                                                
                                                                                                                                
                                                                                                                                72,085
                                                                                                                                
                                                                                                                                
                                                                                                                                
                                                                                                                                33,259
                                                                                                                                
                                                                                                                                
                                                                                                                                
                                                                                                                                67,080
                                                                                                                                
                                                                                                                                
                                                                                                                                
                                                                                                                                (121,880
                                                                                                                                )Net
      loss
                                                                                                                                
                                                                                                                                $
                                                                                                                                (475,045
                                                                                                                                )
                                                                                                                                
                                                                                                                                $
                                                                                                                                (974,642
                                                                                                                                )
                                                                                                                                
                                                                                                                                $
                                                                                                                                (690,639
                                                                                                                                )
                                                                                                                                
                                                                                                                                $
                                                                                                                                (979,637
                                                                                                                                )Net
      loss – limited partnership
                                                                                                                                
                                                                                                                                $
                                                                                                                                (470,294
                                                                                                                                )
                                                                                                                                
                                                                                                                                $
                                                                                                                                (964,896
                                                                                                                                )
                                                                                                                                
                                                                                                                                $
                                                                                                                                (683,733
                                                                                                                                )
                                                                                                                                
                                                                                                                                $
                                                                                                                                (969,841
                                                                                                                                )Loss
      per weighted average BAC from operation
                                                                                                                                
                                                                                                                                $
                                                                                                                                (12.47
                                                                                                                                )
                                                                                                                                
                                                                                                                                $
                                                                                                                                (22.97
                                                                                                                                )
                                                                                                                                
                                                                                                                                $
                                                                                                                                (17.26
                                                                                                                                )
                                                                                                                                
                                                                                                                                $
                                                                                                                                (19.55
                                                                                                                                )Income
      (loss) per weighted average BAC from discontinued
operation
                                                                                                                                
                                                                                                                                
                                                                                                                                1.64
                                                                                                                                
                                                                                                                                
                                                                                                                                
                                                                                                                                0.76
                                                                                                                                
                                                                                                                                
                                                                                                                                
                                                                                                                                1.52
                                                                                                                                
                                                                                                                                
                                                                                                                                
                                                                                                                                (2.77
                                                                                                                                )Net
      loss per weighted average BAC
                                                                                                                                
                                                                                                                                $
                                                                                                                                (10.83
                                                                                                                                )
                                                                                                                                
                                                                                                                                $
                                                                                                                                (22.21
                                                                                                                                )
                                                                                                                                
                                                                                                                                $
                                                                                                                                (15.74
                                                                                                                                )
                                                                                                                                
                                                                                                                                $
                                                                                                                                (22.32
                                                                                                                                )* Reclassified
      for comparative
purposes.
   
 - 53
-
 INDEPENDENCE
TAX CREDIT PLUS L.P. III
 AND
SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31,
2009
 NOTE 12 –
Commitments and Contingencies
  a)  Subsidiary
Partnerships – Going Concerns and Uncertainties
  Mansion Court Phase II
Venture (“Mansion Court”)
 The
financial statements for Mansion Court have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplates continuation of Mansion Court as a going concern.  In
prior years and in 2008, the Mansion Court has sustained operating losses and
has not generated sufficient cash flow from operations to meet its obligations,
particularly related party payables.  The Local General Partner has
provided funding in the past years; however, there is no obligation to do
so.  Mansion Court also has experienced a high number of vacancies due
to deteriorating conditions in the area.  Management of Mansion Court
continues to explore options to mitigate increased crime and deteriorating
neighborhood conditions.  These options include assistance from local
government housing agencies and could include transfer of
ownership.
  The
Partnership’s investment in Mansion Court at March 31, 2009 and 2008 was reduced
to zero as a result of prior years’ losses and the minority interest balance was
$0 at each date.  Mansion Court’s net loss after minority interest
amounted to approximately $521,000 and $83,000 for the 2008 and 2007 Fiscal
Years.  The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
  During
the year ended March 31, 2009, in accordance with SFAS No. 144, the Partnership
deemed the building of Mansion Court further impaired and wrote it down to its
new reduced fair value of approximately $207,000, which resulted in a further
loss on impairment of approximately $437,000.  Fair value was obtained
from an assessment made by management after indications that the carrying value
of the assets were not recoverable, evidenced by a history of net operating
losses over the past few years.
 b)  Leases
  Savanah
Park Housing Limited Partnership is leasing the land on which its apartment
complex is located for a term of 50 years, which commenced in August 1996, with
monthly rent payments of $1,449. Estimated future minimum payments due under the
terms of the lease are as follows:
  December
      31,
                      
                      Amount2009
                      
                      $
                      21,2522010
                      
                      
                      21,2522011
                      
                      
                      21,2522012
                      
                      
                      21,2522013
                      
                      
                      21,252Thereafter
                      
                      
                      694,232$
                      800,492
 
  As of
December 31, 2008, the lease agreement was current.  For the years
ended December 31, 2008 and 2007, $21,252 and $21,252, respectively, have been
paid under the terms of the lease and $0 and $0, respectively, remained
payable.
  c)  Uninsured
Cash and Cash Equivalents
  The
Partnership maintains its cash and cash equivalents in various
banks.  The accounts at each bank are guaranteed by the Federal
Deposit Insurance Corporation up to $250,000. Uninsured cash and cash
equivalents approximated $1,568,000 at March 31, 2009.
  d)  Cash
Distributions
  Cash
distributions from the Local Partnerships to the Partnership are restricted by
the provisions of the respective Local Partnership Agreements and/or HUD based
on operating results and a percentage of the owner’s equity
contribution.  Such cash distributions are typically made from surplus
cash flow.
  e)  Other
  The
Partnership and BACs holders began to recognize Tax Credits with respect to a
property when the credit period for such Property (generally ten years from the
date of investment or, if later, the date the property is leased to qualified
tenants) commenced. Because of the time required for the acquisition, completion
and rent-up of Properties, the amount of Tax Credits per BAC gradually increased
over the first three years of the Partnership.  Tax Credits not
recognized in the first three years will be recognized in the 11th through 13th
years.  The Partnership generated $290,438 and $1,999,760 Tax Credits
during the 2008 and 2007 tax years, respectively.  At December 31,
2008, only Mansion Court Phase II Venture was required to recapture $489,362 of
low-income housing tax credits.
   - 54
-
 INDEPENDENCE
TAX CREDIT PLUS L.P. III
 AND
SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31,
2009
 The
Partnership is subject to the risks incident to potential losses arising from
the management and ownership of improved real estate. The Partnership can also
be affected by poor economic conditions generally; however, no more than 32% of
the Properties are located in any single state. There are also substantial risks
associated with owning interests in properties, as does the Partnership, which
receive government assistance, for example the possibility that Congress may not
appropriate funds to enable the Department of Housing and Urban Development
(“HUD”) to make rental assistance payments. HUD also restricts annual cash
distributions to partners based on operating results and a percentage of the
owner’s equity contribution. The Partnership cannot sell or substantially
liquidate its investments in subsidiary partnerships during the period that the
subsidy agreements are in existence without HUD’s
approval.  Furthermore, there may not be market demand for apartments
at full market rents when the rental assistance contracts expire.
  NOTE 13 –
Discontinued Operations
  The
following table summarizes the results of operation of the Local Partnership
that is classified as discontinued operation.  For the year ended
March 31, 2009, 2301 First Avenue, which was sold during the year, was
classified as a discontinued operation in the consolidated statements of
operations.  For the year ended March 31, 2008, 2301 First Avenue, in
order to present comparable results to the year ended March 31, 2009, was
classified as a discontinued operation in the consolidated statements of
operations.
  Consolidated Statement of
Discontinued Operation:
  Years
      Ended March 31,2009
                    
                    2008*RevenuesRental
      income
                    
                    $
                    920,282
                    
                    $
                    913,410Other
      (Note 2)
                    
                    
                    20,249
                    
                    
                    12,040Gain
      on sale of properties (Note 10)
                    
                    
                    5,139,562
                    
                    
                    0Total
      revenues
                    
                    
                    6,080,093
                    
                    
                    925,450ExpensesGeneral
      and administrative
                    
                    
                    142,066
                    
                    
                    108,296General
      and administrative-related parties (Note 8)
                    
                    
                    63,640
                    
                    
                    59,032Repairs
      and maintenance
                    
                    
                    80,165
                    
                    
                    89,734Operating
      and other
                    
                    
                    250,328
                    
                    
                    243,763Insurance
                    
                    
                    49,629
                    
                    
                    56,669Financial,
      primarily interest
                    
                    
                    63,058
                    
                    
                    76,236Depreciation
      and amortization
                    
                    
                    347,128
                    
                    
                    240,639Total
      expenses
                    
                    
                    996,014
                    
                    
                    874,369Income
      before minority interest
                    
                    
                    5,084,079
                    
                    
                    51,081Minority
      interest in income of subsidiaries from discontinued
    operation
                    
                    
                    (2,973,650
                    )
                    
                    (536
                    )Total
      income from discontinued operation (including gain on sale of property and
      minority interest)
                    
                    $
                    2,110,429
                    
                    $
                    50,545Income
      – limited partners from discontinued operation (including gain on sale of
      property and minority interest)
                    
                    $
                    2,089,324
                    
                    $
                    50,040Number
      of BACs outstanding
                    
                    
                    43,440
                    
                    
                    43,440Income
      from discontinued operation (including gain on sale of property and
      minority interest) per BAC
                    
                    $
                    48.09
                    
                    $
                    1.15
 
 *
            Reclassified
      for comparative purposes.
  Years
      Ended March 31,2009
            
            2008*Cash
      flows from discontinued operationNet
      cash (used in) provided by operating activities
            
            $
            (698,799
            )
            $
            187,402Net
      cash provided by investing activities
            
            $
            2,239,461
            
            $
            25,114Net
      cash used in financing activities
            
            $
            (544,706
            )
            $
            (172,388
            )
 
 *
            Reclassified
      for comparative purposes.
   - 55
-
   Item
9.  Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
  None
  Item
9A(T).  Controls and Procedures
  (a)Evaluation of Disclosure
Controls and Procedures.The Chief Executive Officer and Chief
Financial Officer of Related Independence Associates III, L.P., the general
partner of the Partnership, have evaluated the effectiveness of the
Partnership’s disclosure controls and procedures (as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (“Exchange Act”) as of the end of the period covered by this
report.  Based on such evaluation, such officers have concluded that,
as of the end of such period, the Partnership’s disclosure controls and
procedures are effective.
  (b)  Management’s Report on
Internal Control over Financial Reporting.Our management is
responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act
Rules 13a-15(f) and 15d-15(f).  In evaluating the Partnership’s
internal control over financial reporting, management has adopted the framework
in Internal Control-Integrated Framework issued by the Committee of Sponsoring
organizations of the Treadway Commission (the “COSO
Framework”).  Under the supervision and with the participation of our
management, including the Chief Executive Officer and Chief Financial Officer of
the General Partner, the Partnership conducted an evaluation of the
effectiveness of its internal control over financial reporting as of March 31,
2009.  The Partnership’s internal control over financial reporting is
a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
reporting purposes in accordance with generally accepted accounting
principles.  Internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the  Partnership; (2) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the Partnership are
being made only in accordance with authorizations of management and directors of
the Partnership; and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the
Partnership’s assets that could have a material effect on the financial
statements.  However, because of inherent limitations, internal
control over financial reporting may not prevent or detect
misstatements.  Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
 Based on
management’s evaluation under the COSO Framework, it has concluded that the
Partnership’s internal control over financial reporting, was, as of the end of
the period covered by this report, (1) effective at the Partnership level, in
that they provide reasonable assurance that information required to be disclosed
by the Partnership in the reports it files or submits under the Securities
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms and (2) ineffective at the
subsidiary level due to certain deficiencies noted in the audit reports for such
subsidiaries.  Management will attempt to cause the Local General
Partner’s to remedy such deficiencies; however, the General Partner does not
have control over the internal controls at the subsidiary
level.  Management believes they have sufficient controls at the
Partnership level to mitigate these deficiencies, and such deficiencies do not
have a material impact on the consolidated financial statements.
  This
annual report does not include an attestation report of the Partnership’s
registered public accounting firm regarding internal control over financial
reporting. The Partnership’s of internal control over financial reporting was
not subject to attestation by the Partnership’s registered public accounting
firm pursuant to temporary rules of the Securities and Exchange Commission that
permit the Partnership to provide only this report.
  (c)  Changes in Internal Controls over Financial
Reporting.Except as noted in (b) above, during the year ended
March 31, 2009, there were no changes in the Partnership’s internal control over
financial reporting that have materially affected, or are reasonably likely to
materially affect, the Partnership’s internal control over financial
reporting.
  Item
9B.  Other Information
  Not
applicable.
   - 56
-
  
 PART
III
  Item
10.  Directors, Executive Officers and Corporate
Governance
  The
Partnership has no directors or executive officers. The general partner of the
Partnership is Related Independence Associates III L.P., a Delaware limited
partnership (the “General Partner”). The general partner of the General Partner
is Related Independence Associates III Inc., a Delaware corporation (“RIAI
III”).  The Partnership’s affairs are managed and controlled by the
General Partner.  The Partnership has not adopted a separate code of
ethics because the Partnership has no directors or executive
officers.  The ultimate parent of the General Partner, Centerline
Holding Company (“Centerline”), has adopted a code of ethics (see http://www.centerline.com).
  Certain
information concerning the directors and executive officers of RIAI III is set
forth below.
  Name
                
                PositionRobert
      L. Levy
                
                Chief
      Financial OfficerAndrew
      J. Weil
                
                President
      and Chief Executive OfficerMarc
      D. Schnitzer
                
                Senior
      Vice President
 
  ROBERT L.
LEVY, 43, is the Chief Financial Officer of Centerline.  Mr. Levy is
also the Chief Financial Officer of American Mortgage Acceptance Company
(“AMAC”), a publicly traded real estate investment trust managed by an affiliate
of Centerline.  Mr. Levy is responsible for overseeing the Corporate
Finance, Capital Markets, Accounting, Budgeting, Tax and Treasury
departments.  Mr. Levy joined Centerline’s predecessor in November of
2001 as the Director of Capital Markets.  From 1998 through 2001, Mr.
Levy was a Vice President in the Real Estate Equity Research and Investment
Banking Departments at Robertson Stephens, an investment banking firm in San
Francisco.  Prior to 1998, Mr. Levy was employed by Prudential
Securities in the Real Estate Equity Research Group and at Prudential Realty
Group, the real estate investment arm of the Prudential Insurance
Company.  He received his Masters in Business Administration from the
Leonard N. Stern School of Business at New York University and his Bachelor of
Arts from Northwestern University.
  ANDREW J.
WEIL, 38, is an Executive Managing Director of Centerline, and is the Head of
the Affordable Housing Group.  Mr. Weil is responsible for overseeing
the day to day operations of the Affordable Housing Group, including the
acquisition of properties with Low-Income Housing Tax Credits and the
origination and structuring of institutional funds.  Prior to joining
Centerline’s predecessor in January 1994, Mr. Weil was a Financial Analyst for
the Heights Management Company, where he specialized in the analysis of
potential investments and property management.  Mr. Weil received a
Bachelor of Science degree in Economics with a concentration in Finance from the
Wharton School of the University of Pennsylvania.
  MARC D.
SCHNITZER, 48, is the Executive Officer of Centerline.  He is
responsible both for financial restructurings of real estate properties and
directing Centerline’s acquisitions of properties generating Tax Credits.
Mr. Schnitzer received a Masters of Business Administration from The
Wharton School of the University of Pennsylvania in December 1987 before joining
Centerline in January 1988.  From 1983 to January 1986, he was a
financial analyst for the First Boston Corporation in New York.
Mr. Schnitzer graduated summa cum laude with a Bachelor of Science in
Business Administration from the School of Management at Boston University in
May 1983.  Mr. Schnitzer also serves on the Board of Trustees of
Centerline and AMAC.
  Item
11.  Executive Compensation
  The
Partnership has no officers or directors. The Partnership does not pay or accrue
any fees, salaries or other forms of compensation to directors or officers of
the General Partner for their services.  However, under the terms of
the Partnership Agreement, the Partnership has entered into certain arrangements
with the General Partner and its affiliates, which provide for compensation to
be paid to the General Partner and its affiliates. Such arrangements include
(but are not limited to) agreements to pay nonrecurring acquisition fees, a
nonaccountable acquisition expense allowance, an accountable expense
reimbursement and subordinated disposition fees to the General Partner and/or
its affiliates. In addition, the General Partner is entitled to a subordinated
interest in cash from sales or refinancings and a 1% interest in net income, net
loss, distributions of adjusted cash from operations and cash from sales or
refinancings. Certain directors and officers of the General Partner receive
compensation from the General Partner and its affiliates for services performed
for various affiliated entities which may include services performed for the
Partnership. The maximum annual partnership management fee paid to the General
Partner is 0.5% of invested assets.  See Note 8 in Item 8 above, which
is incorporated herein by reference.
  Tabular
information concerning salaries, bonuses and other types of compensation payable
to executive officers has not been included in this annual report. As noted
above, the Partnership has no executive officers. The levels of compensation
payable to the General Partner and/or its affiliates is limited by the terms of
the Partnership Agreement and may not be increased therefrom on a discretionary
basis.
   - 57
-
   Item
12.  Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
  Title
      of Class
              
              Name
      and Address of
                Beneficial
      Ownership
              
              Amount
      and Nature of
                Beneficial
      Ownership
              
              Percentage
                of
      ClassGeneral
      Partnership Interest in the Partnership
              
              Related
      Independence Associates III L.P.
                625
      Madison Avenue
                New
      York, NY 10022
              
              $1,000
      capital contribution – directly owned
              
              100%
 
  Independence
SLP III L.P., a limited partnership whose general partner is the general partner
of the General Partner of the Partnership and which acts as the special limited
partner of each Local Partnership, holds a .01% limited partnership interest in
each Local Partnership. See Note 8 to the Financial Statements in Item 8 above,
which information is incorporated herein by reference thereto. The following
table sets forth the number of BACs beneficially owned, as of May 28, 2009, by
(i) each BACs holder known to the Partnership to be a beneficial owner of more
than 5% of the BACs, (ii) each executive officer of the general partner of the
General Partner and (iii) the executive officers of the general partner of the
General Partner as a group. Unless otherwise noted, all BACs are owned directly
with sole voting and dispositive powers.
  Except as
set forth below, no person is known by the Partnership to be the beneficial
owner of more than five percent of the Limited Partnership Interests in the
Partnership and/or BACs, and neither the General Partner nor any officer of the
General Partner beneficially owns any Limited Partnership Interests in the
Partnership or BACs.
  Name
      of Beneficial Owner (1)
                
                Amount
      and Nature of
                  Beneficial
      Ownership
                
                Percentage
      of ClassLehigh
      Tax Credit Partners, Inc.
                
                3,242.94
                (2)
      (3)
                
                7.5
                %J.
      Michael Fried
                
                3,242.94
                (2)
      (3)
                
                7.5
                %Alan
      P. Hirmes
                
                3,242.94
                (2)
      (3)
                
                7.5
                %Stuart
      J. Boesky
                
                3,242.94
                (2)
      (3)
                
                7.5
                %Stephen
      M. Ross
                
                3,242.94
                (2)
      (3)
                
                7.5Marc
      D. Schnitzer
                
                3,242.94
                (2)
      (3)
                
                7.5
                %Denise
      L. Kiley
                
                3,242.94
                (2)
      (3)
                
                7.5
                %Robert
      L. Levy
                
                -
                
                
                -Andrew
      J. Weil
                
                -
                
                
                -All
      directors and executive officers of the general partner of the Related
      General Partner as a group (nine persons)
                
                3,242.94
                (2)
      (3)
                
                7.5
                %
 (1)
            The
      address for each of the persons in the table is 625 Madison Avenue, New
      York, New York 10022.
  (2)
            As
      set forth in Schedule 13D filed by Lehigh Tax Credit Partners III L.L.C.
      (“Lehigh III”) and Lehigh Tax Credit Partners, Inc. (the “Managing
      Member”) on January 25, 1999 with the Securities and Exchange Commission
      (the “Commission”).
  (3)
            Each
      of Messrs. Ross and Schnitzer serves as a executive officer of the
      Managing Member and owns an equity interest therein.  J. Michael
      Fried, Alan P. Hirmes, Denise L. Kiley and Stuart J. Boesky each own only
      an economic interest.
  Item
13.  Certain Relationships and Related Transactions, and Director
Independence
  The
Partnership has and will continue to have certain relationships with the General
Partner and its affiliates, as discussed in Item 11 and also Note 8 in Item 8
above, which are incorporated herein by reference thereto. However, there have
been no direct financial transactions between the Partnership and the officers
of the General Partner.
  Item 14.
Principal Accountant Fees and Services
  Audit
Fees
 The
aggregate fees billed by Trien Rosenberg Rosenberg Weinberg Ciullo and Fazzari
LLP and its affiliates for professional services rendered for the audit of the
Partnership’s annual financial statements for the years ended March 31, 2009 and
2008 and for the reviews of the financial statements included in the
Partnership’s quarterly reports on Form 10-Q for those years were $56,000 and
$54,700, respectively.
  Audit Related
Fees
 None
   - 58
-
   Tax Fees
 The
aggregate fees billed by Weiser LLP and its affiliates for professional services
rendered for the preparation of the Partnership’s annual tax returns were $9,400
for each of the years ended December 31, 2008 and 2007.
  All Other
Fees
 None
  The
Partnership is not required to have, and does not have, a standalone audit
committee.
   - 59
-
  PART
IV
 
 
 Item
      15.
                  Exhibits
      and Financial Statement SchedulesSequential
                    Page(a)
      1.
                  Financial StatementsReport
      of Independent Registered Public Accounting Firm
                  
                  13Consolidated
      Balance Sheets at March 31, 2009 and 2008
                  
                  41Consolidated
      Statements of Operations for the Years Ended March 31, 2009 and
      2008
                  
                  42Consolidated
      Statements of Changes in Partners’ Capital (Deficit) for the Years Ended
      March 31, 2009 and 2008
                  
                  43Consolidated
      Statements of Cash Flows for the Years Ended March 31, 2009 and
      2008
                  
                  44Notes
      to Consolidated Financial Statements
                  
                  45(a)
      2.
                  Consolidated Financial Statement
      SchedulesReport
      of Independent Registered Public Accounting Firm
                  
                  64Schedule
      I - Condensed Financial Information of Registrant
                  
                  65Schedule
      III - Real Estate and Accumulated Depreciation
                  
                  68All
      other schedules have been omitted because they are not required or because
      the required information is contained in the financial statements or notes
      thereto.(a)
      3.
                  Exhibits(3A)
                  Agreement
      of Limited Partnership of Independence Tax Credit Plus L.P. III as adopted
      on December 23, 1993*(3B)
                  Form
      of Amended and Restated Agreement of Limited Partnership of Independence
      Tax Credit Plus L.P. III, attached to the Prospectus as Exhibit
      A**(3C)
                  Certificate
      of Limited Partnership of Independence Tax Credit Plus L.P. III as filed
      on December 23, 1993*(10A)
                  Form
      of Subscription Agreement attached to the Prospectus as Exhibit
      B**(10B)
                  Escrow
      Agreement between Independence Tax Credit Plus L.P. III and Bankers Trust
      Company*(10C)
                  Form
      of Purchase and Sales Agreement pertaining to the Partnership’s
      acquisition of Local Partnership Interests*(10D)
                  Form
      of Amended and Restated Agreement of Limited Partnership of Local
      Partnerships*(21)
                  Subsidiaries
      of the Registrant
                  
                  61(31.1)
                  Certification Pursuant to Rule 13a-14(a) or Rule
      15d-14(a)(31.2)
                  Certification Pursuant to Rule 13a-14(a) or Rule
      15d-14(a)(32.1)
                  Certification Pursuant to Rule 13a-14(b) or Rule
      15d-14(b) and Section 1350 of Title 18 of the United States Code (18
      U.S.C. 1350).*   
      Incorporated herein as an exhibit by reference to exhibits filed with
      Post-Effective Amendment No. 4 to the Registration Statement on Form S-11
      {Registration No. 33-37704}** 
      Incorporated herein as an exhibit by reference to exhibits filed with
      Post-Effective Amendment No. 8 to the Registration Statement on Form S-11
      {Registration No. 33-37704}
 
  - 60
-
    Item
      15.
            Exhibits
      and Financial Statement Schedules (continued)
  Subsidiaries of the
      Registrant (Exhibit 21)
              
              Jurisdiction
                of
      OrganizationEdward
      Hotel Limited Partnership
              
              CAPacific-East
      L.P.
              
              NYOvertown
      Development Group, Ltd.
              
              FLSumpter
      Commons Associates, L.P.
              
              NYPark
      Housing Limited Partnership
              
              CTLivingston
      Manor Urban Renewal Associates, L.P.
              
              NJJefferis
      Square Housing Partnership, L.P.
              
              PALewis
      Street Limited Partnership
              
              NYSavannah
      Park Housing Limited Partnership
              
              DCBrannon
      Group, L.C.
              
              FLMansion
      Court Phase II Venture
              
              PAPrimm
      Place Partners, L.P.
              
              MIBK-9-A
      Partners L.P.
              
              NYBK-10K
      Partners L.P.
              
              NYAspen-Olive
      Associates
              
              PAWest
      Mill Creek Associates, III L.P.
              
              PAUniversal
      Court Associates
              
              PANew
      Zion Apartments
              
              LADreitzer
      House
              
              NY
 
 
  - 61
-
   SIGNATURES
 
 
 
 Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
 
 
 
 INDEPENDENCE TAX CREDIT PLUS
L.P. III
 (Registrant)
 
 
 
 By:
            RELATED
      INDEPENDENCE ASSOCIATES III L.P.,General
      PartnerBy:
            RELATED
      INDEPENDENCE ASSOCIATES III INC.,General
      PartnerDate:
            June 23, 2009
            
            
            
            By:
            /s/ Robert L. LevyRobert
      L. LevyChief
      Financial Officer, Principal Accounting Officer and
    DirectorDate:
            June 23, 2009
            
            
            
            By:
            /s/ Andrew J. WeilAndrew
      J. WeilPresident
      and Chief Executive Officer
 
  - 62
-
  Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated:
 
 
 
 Signature
                
                Title
                
                Date/s/ Robert L. Levy
                  Robert
      L. Levy
                
                Chief
      Financial Officer, Principal Accounting Officer and Director of Related
      Independence Associates III Inc.
                
                June 23, 2009/s/ Andrew J. Weil
                  Andrew
      J. Weil
                
                President
      (Chief Executive Officer) of Related Independence Associates III
      Inc.
                
                June 23, 2009
 
 
  - 63
-
  
 REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 
 To the
Partners of
 Independence
Tax Credit Plus L.P. III and Subsidiaries
 (A
Delaware Limited Partnership)
 
 
 In
connection with our audits of the consolidated financial statements of
Independence Tax Credit Plus L.P. III and Subsidiaries (A Delaware Limited
Partnership) included in the Form 10-K as presented in our opinion dated June
22, 2009 on page 12, and based on the reports of other auditors, we have also
audited supporting Schedule I for the 2008 and 2007 Fiscal Years and Schedule
III as of March 31, 2009.  In our opinion, and based on the reports of
the other auditors, these consolidated schedules present fairly, when read in
conjunction with the related consolidated financial statements, the financial
data required to be set forth therein.
 
 
 /s/TRIEN
ROSENBERG ROSENBERG
 WEINBERG
CIULLO & FAZZARI LLP
 
 New York,
New York
 June 22,
2009
  - 64
-
  INDEPENDENCE
TAX CREDIT PLUS L.P. III
 SCHEDULE
I
 CONDENSED
FINANCIAL INFORMATION OF REGISTRANT
 (Not
Including Consolidated Subsidiary Partnerships)
 
 
 CONDENSED
BALANCE SHEETS
 
 
 
 
 ASSETS
 
 
 March
      31,2009
                
                
                2008Cash
      and cash equivalents
                
                $
                2,024,463
                
                
                $
                47,821Investment
      in subsidiary partnerships
                
                
                9,200,215
                
                
                
                10,520,517Cash
      held in escrow
                
                
                115,345
                
                
                
                115,345Other
      assets
                
                
                1,244
                
                
                
                281Total
      assets
                
                $
                11,341,267
                
                
                $
                10,683,964LIABILITIES
      AND PARTNERS’ CAPITALDue
      to general partner and affiliates
                
                $
                5,412,826
                
                
                $
                5,224,613Other
      liabilities
                
                
                0
                
                
                
                4,549Total
      liabilities
                
                
                5,412,826
                
                
                
                5,229,162Partners’
      capital
                
                
                5,928,441
                
                
                
                5,454,802Total
      liabilities and partners’ capital
                
                $
                11,341,267
                
                
                $
                10,683,964
 
 
 Investment
in subsidiary partnerships is recorded in accordance with the equity method of
accounting, wherein the investments are not reduced below zero. Accordingly,
partners’ capital on the consolidated balance sheets will differ from partners’
capital shown above.
 
  - 65
-
  INDEPENDENCE
TAX CREDIT PLUS L.P. III
 SCHEDULE
I
 CONDENSED
FINANCIAL INFORMATION OF REGISTRANT
 (Not
Including Consolidated Subsidiary Partnerships)
 
 
 CONDENSED
STATEMENTS OF OPERATIONS
 
 
 
 
 Years
      Ended March 31,2009
                
                2008RevenuesOther
      income
                
                $
                4,565
                
                $
                1,121Total
      revenues
                
                
                4,565
                
                
                1,121ExpensesAdministrative
      and management
                
                
                131,028
                
                
                90,189Administrative
      and management - related parties
                
                
                510,763
                
                
                578,184Total
      expenses
                
                
                641,791
                
                
                668,373Losses
      from operations
                
                
                (637,226
                )
                
                (667,252
                )Equity
      in loss of subsidiary partnerships*
                
                
                (4,329,830
                )
                
                (1,568,842
                )Gain
      on sale of investment in subsidiary partnership
                
                
                5,139,562
                
                
                0Distribution
      income of subsidiary partnerships in excess of investments
                
                
                14,886
                
                
                0Net
      income (loss)
                
                $
                187,392
                
                $
                (2,236,094
                )*  
      Includes suspended prior year losses in excess of investment in accordance
      with the equity method of accounting amounting to $(3,090,495) and $0 for
      2009 and 2008,
respectively.
 
  - 66
-
 
 INDEPENDENCE
TAX CREDIT PLUS L.P. III
 SCHEDULE
I
 CONDENSED
FINANCIAL INFORMATION OF REGISTRANT
 INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
 
 
 CONDENSED
STATEMENTS OF CASH FLOWS
 
 
 
 
 Years
      Ended March 31,2009
            
            2008Cash
      flows from operating activities:Net
      income (loss)
            
            $
            187,392
            
            $
            (2,236,094
            )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Gain
      on sale of investment in subsidiary partnership
            
            
            (5,139,562
            )
            
            0Distribution
      income from subsidiary partnerships in excess of
    investments
            
            
            (14,886
            )
            
            0Equity
      in loss of subsidiary partnerships
            
            
            4,379,830
            
            
            1,568,842Increase
      in other assets
            
            
            (963
            )
            
            (281
            )Increase
      (decrease) in liabilities:Due
      to general partners and affiliates
            
            
            217,996
            
            
            625,440Other
      liabilities
            
            
            (4,549
            )
            
            (8,336
            )Total
      adjustments
            
            
            (562,134
            )
            
            2,185,665Net
      cash (used in) provided by operating activities
            
            
            (374,742
            )
            
            (50,429
            )Cash
      flows from investing activities:Proceeds
      from sale of investment in subsidiary partnership
            
            
            2,200,000
            
            
            0Proceeds
      due from subsidiary partnerships
            
            
            17,500
            
            
            0Investment
      in subsidiary partnerships
            
            
            0
            
            
            (15,073
            )Distributions
      from subsidiary partnerships
            
            
            133,884
            
            
            83,790Decrease
      in cash held in escrow
            
            
            0
            
            
            15,073Net
      cash provided by investing activities
            
            
            2,351,384
            
            
            83,790Net
      increase in cash and cash equivalents
            
            
            1,976,642
            
            
            33,361Cash
      and cash equivalents, beginning of year
            
            
            47,821
            
            
            14,460Cash
      and cash equivalents, end of year
            
            $
            2,024,463
            
            $
            47,821
 
  - 67
-
  INDEPENDENCE
TAX CREDIT PLUS L.P. III
 AND
SUBSIDIARIES
 SCHEDULE
III
 REAL
ESTATE AND ACCUMULATED DEPRECIATION
 Partnership
Property Pledged as Collateral
 MARCH 31,
2009
 
 
 
 Description
              
              Encumbrances
              
              Initial
      Cost to Partnership
              
              Cost
      Capitalized
                Subsequent
      to
                Acquisition:
                Improvements
              
              Gross
      Amount at which Carried at Close of Period
              
              Accumulated
                Depreciation
              
              Year
      of
                Construction/
                Renovation
              
              Date
                Acquired
              
              Life
      on which
                Depreciation
      in
                Latest
      Income
                Statements
      are
                Computed(a)(b)Land
              
              Buildings
      and
                Improvements
              Land
              
              Buildings
      asnd
                Improvements
              
              TotalApartment
      ComplexesEdward
      Hotel Limited PartnershipLos
      Angeles, CA
              
              $
              (2,399,459
              )
              $
              275,000
              
              $
              591,240
              
              $
              2,583,269
              
              $
              281,123
              
              $
              3,168,386
              
              $
              3,449,509
              
              $
              1,450,384
              
              1994-95
              
              Nov.
      1994
              
              27.5
              yearsPacific
      East, L.P.Brooklyn,
      NY
              
              
              
              
              
              1,950
              
              
              3,125,584
              
              
              202,815
              
              
              8,075
              
              
              3,322,274
              
              
              3,330,349
              
              
              1,813,438
              
              1994-95
              
              Dec.
      1994
              
              27.5
              yearsOvertown
      Development Group, Ltd.
              
              
              (1,917,206
              )Miami,
      FL
              
              
              (1,368,587
              )
              
              52,284
              
              
              2,627,099
              
              
              238,315
              
              
              58,408
              
              
              2,859,290
              
              
              2,917,698
              
              
              1,021,159
              
              1994-95
              
              Dec.
      1994
              
              40
              yearsSumpter
      Commons Associates, L.P.
              
              
              (1,173,146
              )
              
              500
              
              
              1,862,916
              
              
              53,767
              
              
              3,673
              
              
              1,913,510
              
              
              1,917,183
              
              
              926,120
              
              1995-96
              
              Apr.
      1995
              
              27.5
              yearsPark
      Housing Limited Partnership
              
              
              (809,210
              )
              
              5,000
              
              
              2,343,351
              
              
              80,949
              
              
              8,173
              
              
              2,421,127
              
              
              2,429,300
              
              
              1,083,995
              
              1995-96
              
              May
      1995
              
              27.5
              yearsLivingston
      Manor Urban Renewal Associates, L.P.
              
              
              (3,080,000
              )
              
              119,988
              
              
              7,047,532
              
              
              706,142
              
              
              123,161
              
              
              7,750,501
              
              
              7,873,662
              
              
              2,576,706
              
              1995-96
              
              June
      1995
              
              15-40
              yearsJefferis
      Square Housing Partnership, L.P.
              
              
              (1,900,000
              )
              
              55,158
              
              
              0
              
              
              4,553,296
              
              
              39,347
              
              
              4,569,107
              
              
              4,608,454
              
              
              1,554,118
              
              1995-96
              
              June
      1995
              
              20 -
      40
              years2301
      First Avenue Limited Partnership(c)
              
              
              0
              
              
              64,350
              
              
              5,818,269
              
              
              (5,819,155
              )
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              1995-96
              
              Aug.
      1995
              
              27.5
              yearsLewis
      Street Limited Partnership
              
              
              (1,600,000
              )
              
              7,000
              
              
              0
              
              
              2,891,180
              
              
              10,173
              
              
              2,888,007
              
              
              2,898,180
              
              
              1,314,778
              
              1995-96
              
              Oct.
      1995
              
              27.5
              yearsSavannah
      Park Housing Limited Partnership
              
              
              (623,920
              )
              
              0
              
              
              2,049,888
              
              
              2,170,532
              
              
              3,173
              
              
              4,217,247
              
              
              4,220,420
              
              
              1,523,644
              
              1995-96
              
              Oct.
      1995
              
              27.5
              yearsBrannon
      Group, L.C.
              
              
              (4,301,346
              )
              
              380,000
              
              
              2,598,402
              
              
              5,517,662
              
              
              383,173
              
              
              8,112,891
              
              
              8,496,064
              
              
              2,375,261
              
              1995-96
              
              Dec.
      1995
              
              40
              yearsIndependence
      Tax Credit Fund L.P.
                (Mansion
      Court Phase II Venture and Aspen Olive Associates
      Consolidated)
              
              
              (2,510,527
              )
              
              1,732
              
              
              339,661
              
              
              3,811,428
              
              
              5,123
              
              
              4,155,107
              
              
              4,160,230
              
              
              1,367,073
              
              1995-96
              
              Dec.
      1995
              
              20 -
      40
              yearsPrimm
      Place Partners, L.P.
              
              
              (4,625,758
              )
              
              168,258
              
              
              0
              
              
              6,990,956
              
              
              67,577
              
              
              7,091,437
              
              
              7,159,014
              
              
              2,135,294
              
              1995-96
              
              Dec.
      1995
              
              10 -
      40
              yearsBK-9-A
      Partners L.P.
              
              
              (1,957,992
              )
              
              0
              
              
              1,517,313
              
              
              56,847
              
              
              3,173
              
              
              1,570,987
              
              
              1,574,160
              
              
              548,986
              
              1995-96
              
              Dec.
      1995
              
              40
              yearsBK-10K
      Partners L.P.
              
              
              (909,937
              )
              
              11,000
              
              
              1,637,762
              
              
              97,915
              
              
              14,176
              
              
              1,732,501
              
              
              1,746,677
              
              
              600,101
              
              1995-96
              
              Dec.
      1995
              
              40
              yearsWestmill
      Creek Associates III L.P.
              
              
              (2,802,579
              )
              
              37,031
              
              
              6,922,563
              
              
              65,224
              
              
              37,649
              
              
              6,987,169
              
              
              7,024,818
              
              
              3,488,683
              
              1997-98
              
              Dec.
      1996
              
              27.5
              yearsUniversal
      Court Associates
              
              
              (1,650,000
              )
              
              31,024
              
              
              279,220
              
              
              4,543,919
              
              
              31,642
              
              
              4,822,521
              
              
              4,854,163
              
              
              1,352,875
              
              1997-98
              
              Apr.
      1997
              
              20-40
              yearsNew
      Zion Apartments
              
              
              (753,741
              )
              
              20,000
              
              
              2,688,770
              
              
              72,598
              
              
              20,618
              
              
              2,760,750
              
              
              2,781,368
              
              
              1,221,822
              
              1997-98
              
              Nov.
      1997
              
              15 -
      27.5
              yearsDreitzer
      House
              
              
              (4,275,000
              )
              
              5
              
              
              0
              
              
              6,885,059
              
              
              623
              
              
              6,884,441
              
              
              6,885,064
              
              
              2,476,292
              
              1997-99
              
              Dec.
      1997
              
              27.5
              yearsLess
      discontinued operation and dispositions
              
              
              0
              
              
              (64,350
              )
              
              (5,818,269
              )
              
              5,819,155
              
              
              0
              
              
              0
              
              
              0
              
              
              0$
              (38,658,408
              )
              $
              1,165,930
              
              $
              35,631,301
              
              $
              41,521,873
              
              $
              1,099,060
              
              $
              77,227,253
              
              $
              78,326,313
              
              $
              28,830,729
  (a)  
      Depreciation is computed using primarily the straight-line method over the
      estimated useful lives determined by the Partnership date of
      acquisition.
              (b)  
      Personal property is depreciated primarily by the straight-line method
      over the estimated useful lives of 5 – 12 years.
              (c)  
      The Partnership’s limited partnership interest was sold during the fiscal
      year ended March 31, 2009.
 
 
 
  - 68
-
 INDEPENDENCE
TAX CREDIT PLUS L.P. III
 AND
SUBSIDIARIES
 SCHEDULE
III
 REAL
ESTATE AND ACCUMULATED DEPRECIATION
 Partnership
Property Pledged as Collateral
 MARCH 31,
2009
 (continued)
  Cost
      of Property and Equipment
            
            Accumulated
      DepreciationYear
      Ended March 31,2009
            
            2008
            
            2009
            
            2008Balance
      at beginning of period
            
            $
            84,460,270
            
            $
            84,418,262
            
            $
            29,392,193
            
            $
            26,947,693Additions
      during period:Improvements
            
            
            348,187
            
            
            140,557Depreciation
      expense
            
            
            
            
            
            
            
            
            2,570,210
            
            
            2,534,884Reductions
      during period:Discontinued
      operation, dispositions and impairment loss
            
            
            (6,482,144
            )
            
            (98,549
            )
            
            (3,131,674
            )
            
            (90,384
            )Balance
      at close of period
            
            $
            78,326,313
            
            $
            84,460,270
            
            $
            28,830,729
            
            $
            29,392,193At
      the time the local partnerships were acquired by Independence Tax Credit
      Plus III Limited Partnership, the entire purchase price paid by
      Independence Tax Credit Plus III Limited Partnership was pushed down to
      the local partnerships as property and equipment with an offsetting credit
      to capital. Since the projects were in the construction phase at the time
      of acquisition, the capital accounts were insignificant at the time of
      purchase. Therefore, there are no material differences between the
      original cost basis for tax and GAAP.
 
  - 69
-