UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-K

(Mark One)

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

For the fiscal year ended March 31, 2006

                                       OR

[ ]  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                             (I.R.S. Employer
  incorporation or organization)                             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 [ ] No [X]

     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 [ ] No [X]

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K (ss.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. [X]

     Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large  accelerated  filer" in Rule 12b-2 of the Exchange  Act.  (Check
one):

Large accelerated filer [ ]    Accelerated filer [ ]   Non-accelerated filer [X]

     Indicate  by check mark  whether  the  registrant  is a shell  company  (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]

     The  approximate  aggregate book value of the voting and non-voting  common
equity held by  non-affiliates  of the  Registrant  as of September 30, 2005 was
$10,936,000, based on Limited Partner equity as of such date.


                       DOCUMENTS INCORPORATED BY REFERENCE

     None


<PAGE>

                                     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") and is an  affiliate of  CharterMac
Capital LLC  ("CharterMac  Capital")  (formerly known as Related Capital Company
LLC).

On November 17,  2003,  CharterMac  acquired  CharterMac  Capital,  which is the
parent of RCC Manager LLC,  the sole  shareholder  of RIAI III.  Pursuant to the
acquisition,  CharterMac acquired controlling  interests in the General Partner.
This acquisition did not affect the Partnership or its day-to-day operations, as
the majority of the General Partner's management team remained unchanged.

On November 8, 2005,  CharterMac announced that Stuart J. Boesky would step down
as Chief  Executive  Officer and trustee of CharterMac.  Upon his stepping down,
which was  effective on November 15, 2005, he also resigned from his position as
Senior Vice  President of RIAI III. Mr.  Boesky will stay on as a consultant  to
CharterMac  for the next year in order to ensure a smooth  transition.  On March
14,  2006,  CharterMac's  Board of Trustees  named Marc D.  Schnitzer  the Chief
Executive  Officer,  effective  immediately.  Mr. Schnitzer  replaced Stephen M.
Ross, who had served as interim Chief  Executive  Officer since Stuart J. Boesky
resigned in November of 2005.  Mr.  Schnitzer also replaced Mr. Boesky as Senior
Vice President of RIAI III.

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  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  are 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  are owned by
affiliates of the Partnership,  with the same management). As of March 31, 2006,
the Partnership had acquired interests in twenty Local Partnerships. As of March
31,  2006,   approximately   $35,051,000  (including   approximately  $2,953,000
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  $135,000 remains to be
contributed  to the  Local  Partnerships  for  payment  by them to the  original
sellers  of the  Properties  (including  approximately  $130,000  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 Rehabilitation Tax Credits
("Historic  Complexes").  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.
None of the Local Partnerships in which the Partnership has acquired an interest
has suffered an event of recapture.

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


                                       2
<PAGE>



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  $4,614,216,  $5,580,448 and $5,683,281 in Tax
Credits during the years ending December 31, 2005, 2004 and 2003, respectively.

Tax Credits are attached to a Local  Partnership  for the 10 year Credit  Period
and are  transferable  with the  Property  during the  entirety  of such 10 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 are
scheduled 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.

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).  Through March 31, 2006, the Partnership
has not recorded any 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 35%
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.

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.

Item 1B.  Unresolved Staff Comments

Not applicable


                                       3
<PAGE>



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.  As of  March  31,  2006,  the
Partnership had acquired an interest in twenty Local Partnerships,  all of which
have been consolidated for accounting  purposes.  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 are 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 are 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.


                                       4
<PAGE>



                           Local Partnership Schedule
                           --------------------------

<TABLE>
<CAPTION>

                                                                      % of Units Occupied at May 1,
                Name and Location                      -----------------------------------------------------------
                (Number of Units)                      Date Acquired     2006     2005     2004     2003     2002
---------------------------------------------------    -------------    ------   ------   ------   ------   ------
<S>                                                    <C>               <C>      <C>      <C>      <C>      <C>
Edward Hotel Limited Partnership
 Los Angeles, CA (47)                                  November 1994      93%      94%      96%      91%      91%

Pacific-East L.P.
 Brooklyn, NY (39)                                     December 1994      92%     100%     100%      98%     100%

Overtown Development Group, Ltd.
 Miami, FL (65)                                        December 1994      97%      83%      72%      82%      91%

Sumpter Commons Associates, L.P.                          April 1995     100%     100%     100%     100%     100%
 Brooklyn, NY (21)

Park Housing Limited Partnership                            May 1995      97%      97%      97%      93%     100%
 Hartford, CT (30)

Livingston  Manor  Urban  Renewal  Associates, L.P.        June 1995     100%      96%     100%      98%     100%
 New Brunswick, NJ (50)

Jefferis Square Housing Partnership L.P.                   June 1995     100%      97%     100%     100%      97%
 Chester, PA (36)

2301 First Avenue Limited Partnership                    August 1995      97%     100%      98%      99%     100%
 New York, NY (92)

Lewis Street L.P.                                       October 1995     100%      88%      84%     100%      91%
 Buffalo, NY (32)

Savannah Park Housing Limited Partnership               October 1995      97%      95%      89%      75%      86%
 Washington, DC (64)

Brannon Group, L.C                                     December 1995      94%      94%      96%      96%      98%
 Leisure City, FL (80)

Mansion Court Phase II Venture                         December 1995      74%      79%     100%      95%     100%
 Philadelphia, PA (19)

Primm Place Partners, L.P.                             December 1995      97%      95%      99%      96%      94%
 St. Louis, MI (128)

BK-9-A Partners L.P.                                   December 1995      96%     100%     100%      96%      91%
 Brooklyn, NY (23)

BK-10K Partners L.P.                                   December 1995     100%      96%     100%      95%      90%
 Brooklyn, NY (21)

Aspen-Olive Associates
 Philadelphia, PA (22)                                  October 1996     100%     100%     100%     100%     100%

West Mill Creek Associates III L.P.
 Philadelphia, PA (72)                                  January 1997      99%      99%      99%      99%      99%

Universal Court Associates
 Philadelphia, PA (32)                                    April 1997     100%     100%      88%      97%     100%

New Zion Apartments
 Shreveport, LA (100)                                  November 1997     100%      94%      96%      95%      88%

Dreitzer House
 New York, NY (32)                                     December 1997     100%      95%     100%     100%     100%

</TABLE>

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.


                                       5
<PAGE>



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, 2006, the gross
amount of the Operating Deficit Guarantees aggregate  approximately  $5,487,000,
of which  $3,273,000 had expired.  Management does not expect that expiration to
have a material  impact on liquidity,  based on prior years'  fundings.  Amounts
funded under such  agreements  are treated as noninterest  bearing loans,  which
will be paid only out of 50% of available cash flow or out of available net sale
or refinancing proceeds. In some instances, the Local General Partners have been
required to undertake an obligation to comply with a Rent-Up Guaranty Agreement,
whereby  the Local  General  Partner  has  agreed to pay  liquidated  damages if
predetermined occupancy rates are not achieved.  These payments are made without
right  of  repayment.   In  cases  where  the  General  Partner  has  deemed  it
appropriate,  the  obligations of a Local General  Partner under the Development
Deficit,  Operating  Deficit  and/or  Rent-Up  Guarantees  have been  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


                                       6
<PAGE>



                                     PART II



Item 5. Market for Registrant's  Common Equity,  Related Security Holder Matters
and Issuer Purchases of Equity Securities

As of March 31, 2006, 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 18, 2006, the Partnership has approximately  2,549 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, 2006. 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:

o    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.

o    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.

o    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.

o    It 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.

o    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.


                                       7
<PAGE>

Item 6.  Selected Financial Data

The  information  set  forth  below  presents  selected  financial  data  of the
Partnership.  Additional  financial  information  is set  forth  in the  audited
financial statements in Item 8 hereof.
<TABLE>
<CAPTION>
                                                                 Years Ended March 31,
                                      ---------------------------------------------------------------------------
            OPERATIONS                    2006            2005            2004           2003            2002
-----------------------------------   ------------    ------------   -------------   ------------   -------------
<S>                                   <C>             <C>            <C>             <C>            <C>
 Revenues                             $  7,238,487    $  7,021,653   $   6,719,811   $  6,408,871   $   6,452,014

 Operating expenses                    (11,004,640)    (10,353,250)    (10,014,054)    (9,886,082)    (10,465,208)
                                      ------------    ------------   -------------   ------------    ------------


 Net loss before minority interest      (3,766,153)     (3,331,597)     (3,294,243)    (3,477,211)     (4,013,194)

 Minority interest in loss of
  subsidiary partnerships                  294,378          92,458         281,138        293,278         670,493
                                      ------------    ------------   -------------   ------------    ------------

 Net loss                             $ (3,471,775)   $ (3,239,139)  $  (3,013,105)  $ (3,183,933)  $  (3,342,701)
                                      ============    ============   =============   ============    ============
 Net loss per weighted average BAC    $     (79.12)   $     (73.82)  $      (68.67)  $     (72.56)  $      (76.18)
                                      ============    ============   =============   ============    ============

<CAPTION>

                                                                 Years Ended March 31,
                                      ---------------------------------------------------------------------------
        FINANCIAL POSITION                2006            2005            2004           2003            2002
-----------------------------------   ------------    ------------   -------------   ------------   -------------
<S>                                   <C>             <C>            <C>             <C>            <C>

 Total assets                         $ 69,137,318    $ 71,114,696   $  73,610,412   $ 76,223,243   $  78,982,075
                                      ============    ============   =============   ============    ============

 Total liabilities                    $ 59,556,355    $ 56,498,597   $  55,499,430   $ 54,524,974   $  53,786,549
                                      ============    ============   =============   ============    ============

 Minority interest                    $    749,130    $  2,312,491   $   2,568,235   $  3,142,417   $   3,455,741
                                      ============    ============   =============   ============    ============

 Total partners' capital              $  8,831,833    $ 12,303,608   $  15,542,747   $ 18,555,852   $  21,739,785
                                      ============    ============   =============   ============    ============
</TABLE>

During the years ended March 31, 2006, 2005, 2004, 2003 and 2002,  respectively,
total assets  decreased  primarily  due to  depreciation.  During the year ended
March 31, 2006, total liabilities  increased primarily due to the refinancing of
mortgage loans at two Local Partnerships.

Cash Distributions
------------------

The  Partnership has made no  distributions  to the BACs holders as of March 31,
2006.


                                       8
<PAGE>



Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

Liquidity and Capital Resources
-------------------------------

The Partnership  received $43,440,000 in gross proceeds for BACs pursuant to the
Offering  resulting in net proceeds  available for  investment of  approximately
$35,000,000 after volume discounts,  payment of sales  commissions,  acquisition
fees and expenses,  organization  and offering  expenses and  establishment of a
working capital reserve.

As of March 31, 2006, the  Partnership  has 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 $135,000 remains to be contributed to the Local Partnerships
for payment by them to the original  sellers of the  Properties  (not  including
approximately  $130,000  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, 2006, the Partnership made advances of approximately $189,000 to
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.

Short-term
----------

The  Partnership's  primary source of funds is rental revenues,  which are fully
utilized at the Property level.

For the year ended March 31, 2006, cash and cash  equivalents of the Partnership
and its twenty consolidated Local Partnerships increased approximately $110,000.
This increase was due to net cash provided by operating activities of ($49,000),
net proceeds from mortgage notes ($1,668,000) and a net increase in due to local
general partners and affiliates  relating to investing and financing  activities
($55,000)  which  exceeded  purchases of property and equipment  ($138,000),  an
increase in cash held in escrow relating to investing activities  ($15,000),  an
increase  in  deferred  cost  ($238,000)  and a decrease  in  capitalization  of
consolidated   subsidiaries  attributable  to  minority  interest  ($1,269,000).
Included  in the  adjustments  to  reconcile  the net loss to cash  provided  by
operating   activities  is  depreciation  and  amortization  in  the  amount  of
approximately $2,683,000.

During the year ended March 31, 2006,  the  Partnership  received  approximately
$470,000 in  distributions  from  operations  of the Local  Partnerships,  which
includes   approximately   $451,000  from  a  debt   refinancing  at  one  Local
Partnership.  Management anticipates receiving  distributions from operations in
the  future,  although  not to a  level  sufficient  to  permit  providing  cash
distributions  to the BACs  holders.  These  distributions  will be set aside as
working  capital  reserves  and  although  likely  not  sufficient  to cover all
Partnership  expenses,  will  be  used to meet  the  operating  expenses  of the
Partnership.

A working capital reserve had previously been established from the Partnership's
funds available for investment, which includes amounts which may be required for
potential  purchase price adjustments  based on tax credit adjustor clauses.  At
March 31, 2006, all funds were used.

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, 2006, the gross
amount of the Operating Deficit Guarantees aggregate  approximately  $5,487,000,
of which  $3,273,000 had expired.  Management does not expect that expiration to
have a material  impact on liquidity,  based on prior years'  fundings.  Amounts
funded under such  agreements  are treated as noninterest  bearing loans,  which
will be paid only out of 50% of available cash flow or out of available net sale
or refinancing proceeds. In some instances, the Local General Partners have been
required to undertake an obligation to comply with a Rent-Up Guaranty Agreement,
whereby  the Local  General  Partner  has  agreed to pay  liquidated  damages if
predetermined occupancy rates are not achieved.  These payments are made without
right  of  repayment.   In  cases  where  the  General  Partner  has  deemed  it
appropriate,  the  obligations of a Local General  Partner under the Development
Deficit,  Operating  Deficit  and/or  Rent-Up  Guarantees  have been  secured by
letters of credit and/or cash escrow deposits.

The  Operating  Deficit  Guaranty  Agreements  were  negotiated  to protect  the
Partnership's interest in the Local Partnerships and to provide incentive to the
Local General Partners to generate positive cash flow.

Total expenses for the year ended March 31, 2006,  2005 and 2004,  respectively,
excluding depreciation and amortization, interest and general and administrative
- related parties, totaled $5,567,576, $5,105,929 and $4,751,804.

Accounts  payable  as of March  31,  2006 and 2005 was  $645,217  and  $629,626,
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, 2006 and 2005 was $7,585,653  and  $6,586,148,
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.


                                       9
<PAGE>

Partnership   management  fees  owed  to  the  General   Partner   amounting  to
approximately  $2,891,000 and $2,540,000 were accrued and unpaid as of March 31,
2006 and 2005,  respectively.  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 Credit Period.

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 are  scheduled 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.

Tabular Disclosure of Contractual Obligations
---------------------------------------------

The following  table  summarizes the  Partnership's  commitments as of March 31,
2006 to make future  payments under its debt  agreements  and other  contractual
obligations.

<TABLE>
<CAPTION>

                                            Less than       1 - 3         3 -5        More than
                                Total         1 Year        Years         Years        5 Years
                             -----------   -----------   -----------   -----------   -----------
<S>                          <C>           <C>           <C>           <C>           <C>
Mortgage notes payable (a)   $44,008,776   $   573,100   $ 1,018,448   $ 1,083,502   $41,333,726
Land lease obligations (b)       889,032        38,952        42,504        42,504       765,072
                             -----------   -----------   -----------   -----------   -----------

   Total                     $44,897,808   $   612,052   $ 1,060,952   $ 1,126,006   $42,098,798
                             ===========   ===========   ===========   ===========   ===========

</TABLE>

(a)  The mortgage and construction  notes,  which are collateralized by land and
     buildings,  are payable in aggregate monthly  installments of approximately
     $103,000  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.

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, 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.
The  Partnership  complies  with  Statement  of Financial  Accounting  Standards
("SFAS")  No. 144  "Accounting  for the  Impairment  or Disposal  of  Long-Lived
Assets".  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).


                                       10
<PAGE>

Through March 31, 2006, the  Partnership has not recorded any 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.  Through  March 31,  2006,  the  Partnership  has not  recorded  or
classified any property and equipment as held for sale.

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  include the following  amounts at both the Partnership and Local
Partnership level:

<TABLE>
<CAPTION>

                                                  Years Ended March 31,
                                          --------------------------------------
                                            2006           2005           2004
                                          --------       --------       --------
<S>                                       <C>            <C>            <C>
Interest                                  $118,270       $ 96,706       $111,481
Other                                      170,101        321,043        234,956
                                          --------       --------       --------

   Total other revenue                    $288,371       $417,749       $346,437
                                          ========       ========       ========

</TABLE>

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.

New Accounting Pronouncements
-----------------------------

In June 2005, the Financial  Accounting Standards Board ("FASB") issued SFAS No.
154,  "Accounting  Changes and Error  Corrections" ("FAS 154"). FAS 154 replaces
Accounting  Principles Board Opinion No. 20,  "Accounting  Changes and Financial
Accounting  Standard No. 3, Reporting  Accounting  Changes in Interim  Financial
Statements". FAS 154 requires that a voluntary change in accounting principle be
applied  retrospectively with all prior period financial statements presented on
the new accounting  principle.  FAS 154 also requires that a change in method of
depreciating  or  amortizing a long-lived  nonfinancial  asset be accounted  for
prospectively  as a change in estimate,  and  correction of errors in previously
issued financial statements should be termed a restatement. FAS 154 is effective
for accounting  changes and correction of errors made in fiscal years  beginning
after December 15, 2005. The implementation of FAS 154 is not expected to have a
material impact on the Partnership's consolidated financial statements.

In June 2005, the FASB issued Emerging Issues Task Force No. 04-5,  "Determining
Whether a General  Partner,  or the  General  Partners  as a Group,  Controls  a
Limited  Partnership  or Similar  Entity When the Limited  Partners Have Certain
Rights" ("EITF No. 04-5").  EITF No. 04-5 replaces  counterpart  requirements in
the  Statement of Position  78-9,  which  provides  guidance on  accounting  for
investments in  real-estate  ventures and limited  partnerships.  Under EITF No.
04-5, the general  partner's  control would be overcome if the limited  partners
have  either (i)  "kick-out  rights"-  the right to dissolve  or  liquidate  the
partnership  or otherwise  remove the general  partner  "without  cause" or (ii)
"participating  rights" - the right to  effectively  participate  in significant
decisions  made  in the  ordinary  course  of the  partnership's  business.  The
kick-out  rights and the  participating  rights must be  substantive in order to
overcome the general partner's  control.  EITF No. 04-5 is now effective.  Since
the Partnership's  financial  statements are presented on a consolidated  basis,
the adoption of EITF No. 04-5 has not had a material effect on the Partnership's
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,  2006,  2005 and 2004 (the 2005,  2004 and 2003 Fiscal
Years).

The net loss for the 2005,  2004 and 2003 Fiscal  Years  aggregated  $3,471,775,
$3,239,139 and $3,013,105, respectively.

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 $4,614,216,
$5,580,448 and $5,683,281 Tax Credits during the 2005, 2004 and 2003, tax years,
respectively.

2005 vs. 2004
-------------

Rental income  increased  approximately  5% for the 2005 Fiscal Year compared to
the 2004 Fiscal Year,  primarily due to increases in  occupancies at three Local
Partnerships and rental rate increases at the other Local Partnerships.


                                       11
<PAGE>



Other income decreased  approximately $129,000 for the 2005 Fiscal Year compared
to the 2004 Fiscal Year,  primarily due to a gain on the disposal of property at
one Local  Partnership  in 2004, a gain on the sale of  investments  at a second
Local Partnership in 2004 and an insurance proceed received for fire damage at a
third Local Partnership also in 2004 offset by insurance and tax refunds in 2005
at a fourth Local Partnership.

Total expenses,  excluding  operating and real estate taxes remained  consistent
with an increase of approximately 5% for the 2005 Fiscal Year as compared to the
2004 Fiscal Year.

Operating  expense  increased  approximately  $122,000  for the 2005 Fiscal Year
compared to the 2004 Fiscal Year,  primarily due to increases in fuel, water and
sewer  charges at three Local  Partnerships  and  increases in fuel charges at a
fourth and fifth Local Partnership.

Real estate tax expense increased approximately $57,000 for the 2005 Fiscal Year
compared to the 2004 Fiscal Year,  primarily due to an  underaccrual  in 2004 at
one Local  Partnership,  an increase  in the  assessed  value at a second  Local
Partnership  and  a  readjustment  of  prior  years'  taxes  at  a  third  Local
Partnership.

2004 vs. 2003
-------------

Rental income  increased  approximately  4% for the 2004 Fiscal Year compared to
the 2003 Fiscal Year, primarily due to rental rate increases.

Other income increased  approximately  $71,000 for the 2004 Fiscal Year compared
to the 2003 Fiscal Year,  primarily due to a gain on the disposal of property at
one Local  Partnership  and a gain on the sale of  investments at a second Local
Partnership.

General and  administrative  - related party  expenses  increased  approximately
$81,000 for the 2004 Fiscal Year compared to the 2003 Fiscal Year, primarily due
to a supervisory and incentive property  management fee incurred to an affiliate
at one Local  Partnership and an increase in partnership  management fees at the
Partnership level.

Operating  expenses  increased  approximately  $108,000 for the 2004 Fiscal Year
compared  to the 2003  Fiscal  Year,  primarily  due to an increase in water and
sewer charges at two of the Local Partnerships.

Results of Operations of Other Local Partnerships
-------------------------------------------------

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. The Credit Periods are scheduled 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.

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.


                                       12
<PAGE>



<TABLE>
<CAPTION>

Item 8.    Financial Statements and Supplementary Data
                                                                                                         Sequential
                                                                                                            Page
                                                                                                         ----------
<S>        <C>                                                                                               <C>
           Consolidated Financial Statements

           Report of Independent Registered Public Accounting Firm                                           14

           Consolidated Balance Sheets at March 31, 2006 and 2005                                            35

           Consolidated Statements of Operations for the Years Ended March 31, 2006, 2005 and 2004           36

           Consolidated Statements of Changes in Partners' Capital (Deficit) for the Years Ended
             March 31, 2006, 2005 and 2004                                                                   37

           Consolidated Statements of Cash Flows for the Years Ended March 31, 2006, 2005 and 2004           38

           Notes to Consolidated Financial Statements                                                        39

</TABLE>


                                       13
<PAGE>



             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, 2006
and 2005,  and the related  consolidated  statements of  operations,  changes in
partners' capital (deficit),  and cash flows for the years ended March 31, 2006,
2005 and 2004  (the  2005,  2004 and 2003  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 four (2005 and 2004
Fiscal  Years) and sixteen  (2003 Fiscal  Year)  subsidiary  partnerships  whose
losses  aggregated  $750,146,  $490,848 and $2,103,161 for the years ended March
31, 2006, 2005 and 2004, respectively,  and whose assets constituted 25% and 24%
of the  Partnership's  assets  at March  31,  2006 and  2005,  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.

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, 2006 and
2005,  and the  results of their  operations  and their cash flows for the years
ended March 31, 2006, 2005 and 2004, in conformity with U.S.  generally accepted
accounting principles.

/s/TRIEN ROSENBERG ROSENBERG
WEINBERG CIULLO & FAZZARI LLP

New York, New York
June 20, 2006


                                       14
<PAGE>



[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, 2003 and 2002,
and the related statements of operations, changes in partners' capital (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 auditing standards generally accepted
in the  United  States of  America.  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 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  Edward  Hotel  Limited
Partnership  as of December 31, 2003 and 2002, 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  conducted  for the  purpose of forming an opinion on the basic
financial  statements  taken  as  a  whole.  The  information  included  in  the
accompanying  Schedule I 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/ Holthouse Carlin & Van Trigt LLP
Santa Monica, California
January 30, 2004


                                       15
<PAGE>



[REZNICK FEDDER & SILVERMAN LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
Pacific-East L.P.

We have  audited the  accompanying  balance  sheets of  Pacific-East  L.P. as of
December 31, 2003 and 2002, 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 audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  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 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  Pacific-East  L.P. as of
December 31, 2003 and 2002, 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/ Reznick Fedder & Silverman
Atlanta, Georgia
January 22, 2004


                                       16
<PAGE>



[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, 2005 and 2004, 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, 2005 and 2004, 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
February 1st, 2006


                                       17
<PAGE>



[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, 2003 and 2002, 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 auditing standards generally accepted
in the  United  States of  America.  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  audit  provides  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, 2003 and 2002, 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/ Smith, Ortiz, Gomez and Buzzi, P.A.
Miami, Florida
February 4, 2004


                                       18
<PAGE>



[LAWLOR, O'BRIEN & CHERVENAK, LLC 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, 2003, 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 generally  accepted auditing standards
in the United States of America and 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.  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 Sumpter Commons  Associates,
L.P. as of December  31,  2003,  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 & Chervenak, LLC
Totowa, New Jersey
February 16, 2004


                                       19
<PAGE>



[KOSTIN, RUFFKESS & COMPANY, LLC LETTERHEAD]

To The Partners
Park Housing Limited Partnership

INDEPENDENT AUDITORS' REPORT
----------------------------

We  have  audited  the  accompanying  balance  sheet  of  Park  Housing  Limited
Partnership  as of December 31, 2003,  and the related  statements of operations
and changes in partners' capital,  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 auditing standards  generally accepted
in the  United  States of  America.  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 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  Park  Housing  Limited
Partnership  as of December 31, 2003, and the results of its operations and cash
flows  for the  year  then  ended,  in  accordance  with  accounting  principles
generally accepted in the United States of America.

/s/ Kostin, Ruffkess & Company, LLC
Farmington, Connecticut
January 20, 2004


                                       20
<PAGE>



[REZNICK FEDDER & SILVERMAN LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
Jefferis Square Housing Partnership, L.P.

We have  audited the  accompanying  balance  sheets of Jefferis  Square  Housing
Partnership,  L.P. as of December 31, 2003 and 2002, and the related  statements
of  operations,  changes in 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 auditing standards generally accepted
in the  United  States of  America.  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 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 Jefferis  Square  Housing
Partnership,  L.P.  as of  December  31,  2003 and 2002,  and the results of its
operations,  changes in partners'  equity  (deficit)  and its cash flows for the
years then ended, in conformity with accounting principles generally accepted in
the United States of America.

/s/ Reznick Fedder & Silverman
Baltimore, Maryland
February 13, 2004


                                       21
<PAGE>



[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, 2005 and 2004 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, 2005 and 2004 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 audit was 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 25, 2006


                                       22
<PAGE>



[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, 2003 and 2002 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 auditing standards generally accepted
in the United States of America and 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.  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, 2003 and 2002 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.

In accordance with Government Auditing  Standards,  we have also issued a report
dated  January  16,  2004 on our  consideration  of the  Partnership's  internal
control  and on its  compliance  with  laws and  regulations  applicable  to the
financial  statements.  That report is an integral part of an audit performed in
accordance with Government  Auditing Standards and should be read in conjunction
with this report in considering the results of our audit.

/s/ Toski, Schaefer & Co., P.C.
Williamsville, New York
January 16, 2004


                                       23
<PAGE>



[REZNICK FEDDER & SILVERMAN LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
Savannah Park Housing
Limited Partnership

We have audited the accompanying balance sheets of Savannah Park Housing Limited
Partnership  as of December  31, 2003 and 2002,  and the related  statements  of
operations,  partners'  capital 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 auditing standards generally accepted
in the  United  States of  America.  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 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 Savannah Park Housing Limited
Partnership as of December 31, 2003 and 2002, and the results of its operations,
the changes in  partners'  capital  and cash flows for the years then ended,  in
conformity with accounting principles generally accepted in the United States of
America.

/s/ Reznick Fedder & Silverman
Bethesda, Maryland
February 24, 2004


                                       24
<PAGE>



[Goldstein Schechter Price Lucas Horwitz & Co., PA LETTERHEAD]

Independent Auditor's Report

To the Members of Brannon Group, L.C.

We have  audited  the  accompanying  balance  sheets of Brannon  Group,  L.C. (a
Limited  Liability  Company) as of December  31, 2005 and 2004,  and the related
statements  of  operations,  members'  equity  and cash flows for the years 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  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 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 Company'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 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 the Company at December 31,
2005 and 2004, and the results of its  operations,  changes in members'  deficit
and its cash flows for the years  then  ended,  in  conformity  with  accounting
principles generally accepted in the United States of America.


/s/ Goldstein Schechter Price Lucas Horwitz & Co., P.A.
Coral Gables, FL
March 18, 2006


                                       25
<PAGE>



[BDO Seidman, LLP LETTERHEAD]

Independent Auditors' Report

Brannon Group, L.C.
(A Limited Liability Company)
Coral Gables, Florida

We have audited the accompanying balance sheet of Brannon Group, L.C. (A Limited
Liability Company) as of December 31, 2003, and the related statements of profit
and loss,  changes in members' capital,  and cash flows for the year then ended.
These  financial  statements  are the  responsibility  of the  management of the
Company.  Our  responsibility  is to  express  an  opinion  on  these  financial
statements based on our audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  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 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 Brannon Group, L.C. at December
31, 2003, 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.

Our audit was made for the purpose of forming an opinion on the basic  financial
statements for the year ended December 31, 2003 taken as whole. The supplemental
information  presented on pages 16 to 17 is presented for purposes of additional
analysis  and is not a required  part of the basic  financial  statements.  This
information has been subjected to the auditing  procedures  applied in our 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/ BDO Seidman, LLP
Certified Public Accountants
Miami, Florida
February 19, 2004


                                       26
<PAGE>



[REZNICK FEDDER & SILVERMAN LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
Mansion Court Phase II Venture
Philadelphia, Pennsylvania

We have  audited  the  accompanying  balance  sheets of Mansion  Court  Phase II
Venture  as of  December  31,  2003 and  2002,  and the  related  statements  of
operations,  changes in 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 auditing standards generally accepted
in the  United  States of  America.  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  the  Partnership's   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 Mansion Court Phase II Venture
at December  31, 2003 and 2002,  and the results of its  operations,  changes in
partners'  equity  (deficit)  and its cash  flows for the years then  ended,  in
conformity with accounting principles generally accepted in the United States of
America.

/s/ Reznick Fedder & Silverman
Baltimore, Maryland
February 6, 2004


                                       27
<PAGE>



[RUBINBROWN LLP LETTERHEAD]

Report of Independent Registered Public Accounting Firm

To the Partners
Primm Place Partners, L.P.
St. Louis, Missouri

We have audited the  accompanying  balance sheet of Primm Place Partners,  L.P.,
Project No. MT95-650, a limited  partnership,  as of December 31, 2005 and 2004,
and the related  statements of profit and loss,  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 audit 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,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Primm Place Partners,  L.P. as
of December  31, 2005 and 2004,  and the  results of its  operation,  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.

Our audit was  conducted  for the  purpose  of  forming  an opinion on the basic
financial   statements  taken  as  a  whole.   The  accompanying   supplementary
information  shown on pages 18 to 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  financial  statements  and,  in our  opinion,  is  fairly  stated in all
material respects in relation to the financial statements taken as a whole.

/s/ Rubin, Brown, Gornstein & Co.  LLP
St. Louis, Missouri
February 7, 2006


                                       28
<PAGE>



[RUBIN BROWN GORNSTEIN & CO. LLP]
[RBG & CO. LETTERHEAD]

Independent Auditors' Report

To the Partners
Primm Place Partners, L.P.
St. Louis, Missouri

We have audited the  accompanying  balance sheet of Primm Place Partners,  L.P.,
Project No. MT95-650,  a limited  partnership,  as of December 31, 2003, and the
related  statements of profit and loss,  partners' equity 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 auditing standards  generally accepted
in the  United  States of  America.  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 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 Primm Place Partners,  L.P., as
of December 31, 2003,  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.

Our audit was  conducted  for the  purpose  of  forming  an opinion on the basic
financial   statements  taken  as  a  whole.   The  accompanying   supplementary
information  (shown on pages 15 to 17) 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  financial  statements  and,  in our  opinion,  is  fairly  stated in all
material respects in relation to the financial statements taken as a whole.

/s/ Rubin, Brown, Gornstein & Co.  LLP
St. Louis, Missouri
February 6, 2004


                                       29
<PAGE>



[RAINES AND FISCHER 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, 2003 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 auditing standards  generally accepted
in the  United  States of  America.  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 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 BK-9-A Partners,  L.P. (A New
York  Limited  Partnership)  as of  December  31,  2003,  and the results of its
operations,  changes in its  partners'  capital  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
New York, New York
February 10, 2004


                                       30
<PAGE>



[RAINES AND FISCHER 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, 2003 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 auditing standards  generally accepted
in the  United  States of  America.  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 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 BK-10K Partners,  L.P. (A New
York  Limited  Partnership)  as of  December  31,  2003,  and the results of its
operations,  changes in its  partners'  capital  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
New York, New York
February 19, 2004


                                       31
<PAGE>



[REZNICK FEDDER & SILVERMAN LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
Aspen-Olive Associates

We have audited the accompanying balance sheets of Aspen-Olive  Associates as of
December 31, 2003 and 2002, and the related statements of operations, changes in
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 auditing standards generally accepted
in the  United  States of  America.  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 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 the 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 Aspen-Olive  Associates as of
December 31, 2003 and 2002,  and the results of its  operations,  the changes in
partners'  equity  (deficit)  and its cash  flows for the years then  ended,  in
conformity with accounting principles generally accepted in the United States of
America.

/s/ Reznick Fedder & Silverman
Baltimore, Maryland
January 30, 2004


                                       32
<PAGE>



[ASHER & COMPANY, LTD. LETTERHEAD]

Independent Auditors' Report

The Partners
West Mill Creek Associates III
T/A Jameson Court
Marlton, New Jersey

We have audited the  accompanying  balance sheets of West Mill Creek  Associates
III T/A Jameson Court (A Limited  Partnership),  PHFA Project No. 0-0476,  as of
December 31, 2003 and 2002 and the related statements of loss, Partners' capital
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 auditing standards generally accepted
in the United States of America 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.  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 West Mill Creek Associates III
T/A  Jameson  Court (A Limited  Partnership),  PHFA  Project No.  0-0476,  as of
December 31, 2003 and 2002,  and the results of its  operations,  changes in its
Partners' capital 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   supplementary
information  is  presented  for  purposes of  additional  analysis  and is not a
required part of the basic  financial  statements of West Mill Creek  Associates
III T/A Jameson Court (A Limited  Partnership),  PHFA Project No.  0-0476.  Such
information has been subjected to the auditing  procedures applied in the audits
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.

In accordance with Government Auditing  Standards,  we have also issued a report
dated January 22, 2004 on our  consideration of West Mill Creek Associates III's
T/A Jameson Court (A Limited  Partnership),  PHFA Project No.  0-0476,  internal
control over financial  reporting and our tests of its  compliance  with certain
provisions  of laws,  regulations,  contracts  and  grants.  That  report  is an
integral  part of an audit  performed in  accordance  with  Government  Auditing
Standards and should be read in conjunction  with this report in considering the
results of our audit.

/s/ ASHER & COMPANY, Ltd.
Philadelphia, Pennsylvania
January 22, 2004


                                       33
<PAGE>



[COLE, EVANS & PETERSON LETTERHEAD]

INDEPENDENT AUDITORS' REPORT ON THE BASIC FINANCIAL
STATEMENTS AND SUPPLEMENTAL INFORMATION

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, at December 31, 2003, and the related
statements of income,  partners' capital 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 U.S.  generally  accepted  auditing
standards and 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. 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 in the first  paragraph
above present fairly, in all material  respects,  the financial  position of New
Zion Apartments Limited  Partnership,  HUD Project No. LA48E000011,  at December
31, 2003 and the results of its operations,  changes in capital,  and cash flows
for the year then ended in conformity with U.S.  generally  accepted  accounting
principles.

Our audit was made  primarily for the purpose of forming an opinion on the basic
financial  statements for the year ended December 31, 2003 taken as a whole. The
supplementary  Schedules 1, 2 and 3 are  presented  for  purposes of  additional
analysis and are not a required  part of the basic  financial  statements.  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.

In accordance with Government  Auditing  Standards,  we have also issued reports
dated  February 10, 2004 on our  consideration  of New Zion  Apartments  Limited
Partnership's  internal control, and on our tests on its compliance with certain
provisions of laws,  regulations,  contracts,  and grants.  Those reports are an
integral  part of an audit  performed in  accordance  with  Government  Auditing
Standards and should be read in conjunction  with this report in considering the
results of our audit.

/s/ Cole, Evans & Peterson
Lead Auditor: Steven W. Hedgepeth
Shreveport, Louisiana
Federal ID No. 72-0506596
February 10, 2004


                                       34
<PAGE>



                      INDEPENDENCE TAX CREDIT PLUS L.P. III
                                AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS




                                     ASSETS

<TABLE>
<CAPTION>

                                                                                             March 31,
                                                                                   ----------------------------
                                                                                       2006            2005
                                                                                   ------------    ------------
<S>                                                                                <C>             <C>
 Property and equipment - at cost, less accumulated depreciation (Notes 2 and 4)   $ 61,307,171    $ 63,743,994
 Cash and cash equivalents (Notes 2 and 10)                                             619,313         508,848
 Cash held in escrow (Note 5)                                                         5,740,963       5,453,667
 Deferred costs, less accumulated amortization (Notes 2 and 6)                          839,093         708,234
 Other assets                                                                           630,778         699,953
                                                                                   ------------    ------------

 Total assets                                                                      $ 69,137,318    $ 71,114,696
                                                                                   ============    ============


                   LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)


Liabilities:
  Mortgage notes payable (Note 7)                                                  $ 44,008,776    $ 42,341,110
  Accounts payable                                                                      645,217         629,626
  Accrued interest payable                                                            7,585,653       6,586,148
  Security deposits payable                                                             465,526         425,550
  Due to local general partners and affiliates (Note 8)                               2,024,031       1,960,416
  Due to general partner and affiliates (Note 8)                                      4,827,152       4,555,747
                                                                                   ------------    ------------

Total liabilities                                                                    59,556,355      56,498,597
                                                                                   ------------    ------------

Minority interest (Note 2)                                                              749,130       2,312,491
                                                                                   ------------    ------------

Commitments and contingencies (Notes 7, 8 and 10)

Partners' capital (deficit):
  Limited partners (43,440 BACs issued and outstanding) (Note 1)                      9,129,643      12,566,700
  General Partner                                                                      (297,810)       (263,092)
                                                                                   ------------    ------------

Total partners' capital (deficit)                                                     8,831,833      12,303,608
                                                                                   ------------    ------------

Total liabilities and partners' capital (deficit)                                  $ 69,137,318    $ 71,114,696
                                                                                   ============    ============

</TABLE>

          See accompanying notes to consolidated financial statements.


                                       35
<PAGE>



                      INDEPENDENCE TAX CREDIT PLUS L.P. III
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                   Years Ended March 31,
                                                       ---------------------------------------------
                                                           2006            2005*           2004
                                                       ------------    ------------    ------------
<S>                                                    <C>             <C>             <C>
Revenues
Rental income                                          $  6,950,116    $  6,603,904    $  6,373,374
Other income                                                288,371         417,749         346,437
                                                       ------------    ------------    ------------

                                                          7,238,487       7,021,653       6,719,811
                                                       ------------    ------------    ------------

Expenses
General and administrative                                2,007,050       1,846,438       1,675,423
General and administrative-related parties (Note 8)         928,579         852,485         800,267
Repairs and maintenance                                   1,670,321       1,555,575       1,510,158
Operating                                                 1,020,552         898,314         790,045
Real estate taxes                                           336,201         278,986         293,958
Insurance                                                   533,452         526,616         482,220
Financial, principally interest                           1,825,894       1,686,818       1,721,883
Depreciation and amortization                             2,682,591       2,708,018       2,740,100
                                                       ------------    ------------    ------------


Total expenses                                           11,004,640      10,353,250      10,014,054
                                                       ------------    ------------    ------------

Net loss before minority interest                        (3,766,153)     (3,331,597)     (3,294,243)

Minority interest in loss of subsidiary partnerships        294,378          92,458         281,138
                                                       ------------    ------------    ------------

Net loss                                               $ (3,471,775)   $ (3,239,139)   $ (3,013,105)
                                                       ============    ============    ============

Net loss - Limited Partners                            $ (3,437,057)   $ (3,206,747)   $ (2,982,974)
                                                       ============    ============    ============

Number of BACs outstanding                                   43,440          43,440          43,440
                                                       ============    ============    ============

Net loss per BAC                                       $     (79.12)   $     (73.82)   $     (68.67)
                                                       ============    ============    ============

</TABLE>

* Reclassified for comparative purposes.


          See accompanying notes to consolidated financial statements.


                                       36
<PAGE>



                      INDEPENDENCE TAX CREDIT PLUS L.P. III
                                AND SUBSIDIARIES
        CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)

<TABLE>
<CAPTION>

                                                                 Limited         General
                                                   Total         Partners        Partner
                                               ------------    ------------    ------------
<S>                                            <C>             <C>             <C>
Partners' capital (deficit) - April 1, 2003    $ 18,555,852    $ 18,756,421    $   (200,569)

Net loss                                         (3,013,105)     (2,982,974)        (30,131)
                                               ------------    ------------    ------------

Partners' capital (deficit) - March 31, 2004     15,542,747      15,773,447        (230,700)

Net loss                                         (3,239,139)     (3,206,747)        (32,392)
                                               ------------    ------------    ------------

Partners' capital (deficit) - March 31, 2005     12,303,608      12,566,700        (263,092)

Net loss                                         (3,471,775)     (3,437,057)        (34,718)
                                               ------------    ------------    ------------

Partners' capital (deficit) - March 31, 2006   $  8,831,833    $  9,129,643    $   (297,810)
                                               ============    ============    ============

</TABLE>

          See accompanying notes to consolidated financial statements.


                                       37
<PAGE>



                      INDEPENDENCE TAX CREDIT PLUS L.P. III
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

<TABLE>
<CAPTION>

                                                                       Years Ended March 31,
                                                             -----------------------------------------
                                                                 2006           2005           2004
                                                             -----------    -----------    -----------
<S>                                                          <C>            <C>            <C>
Cash flows from operating activities:
Net loss                                                     $(3,471,775)   $(3,239,139)   $(3,013,105)
                                                             -----------    -----------    -----------
Adjustments to reconcile net loss to net cash provided by
 operating activities:
Depreciation and amortization                                  2,682,591      2,708,018      2,740,100
Minority interest in loss of subsidiary partnerships            (294,378)       (92,458)      (281,138)
(Increase) decrease in assets:
Cash held in escrow                                             (272,282)        14,897         62,085
Other assets                                                      69,175        (29,186)       (16,258)
Increase (decrease) in liabilities:
Accounts payable                                                  15,591     (1,667,440)       262,433
Accrued interest                                                 999,505      2,567,416        645,743
Security deposit payable                                          39,976         36,840        (12,907)
Due to local general partners and affiliates                       8,874         56,135          5,627
Due to general partners and affiliates                           271,405        569,238        515,941
                                                             -----------    -----------    -----------
Total adjustments                                              3,520,457      4,163,460      3,921,626
                                                             -----------    -----------    -----------

Net cash provided by operating activities                         48,682        924,321        908,521
                                                             -----------    -----------    -----------

Cash flows from investing activities:
Acquisition of property and equipment                           (138,170)      (121,592)      (422,598)
(Increase) decrease in cash held in escrow                       (15,014)       (94,218)       257,286
Increase (decrease) in due to local general partners and
 affiliates                                                       52,741        (56,210)       (44,967)
                                                             -----------    -----------    -----------

Net cash used in investing activities                           (100,443)      (272,020)      (210,279)
                                                             -----------    -----------    -----------

Cash flows from financing activities:
Principal payments of mortgage notes                          (3,452,420)      (506,751)      (466,263)
Proceeds from mortgage notes                                   5,120,086              0              0
Increase (decrease) in due to local general partners and
 affiliates                                                        2,000            (61)        68,849
Increase in deferred costs                                      (238,457)             0        (37,398)
Decrease in capitalization of consolidated subsidiaries
 attributable to minority interest                            (1,268,983)      (163,286)      (293,044)
                                                             -----------    -----------    -----------

Net cash provided by (used in) financing activities              162,226       (670,098)      (727,856)
                                                             -----------    -----------    -----------

Net increase (decrease) in cash and cash equivalents             110,465        (17,797)       (29,614)

Cash and cash equivalents at beginning of year                   508,848        526,645        556,259
                                                             -----------    -----------    -----------

Cash and cash equivalents at end of year                     $   619,313    $   508,848    $   526,645
                                                             ===========    ===========    ===========

Supplemental disclosure of cash flows information:

Cash paid during the year for interest                       $   658,864    $   721,421    $   758,563
                                                             ===========    ===========    ===========

Supplemental disclosure of noncash investing and financing
 activities:

Mortgage notes payable converted from construction notes
 payable                                                     $         0    $         0    $   600,000
                                                             ===========    ===========    ===========

</TABLE>


                                       38
<PAGE>



                      INDEPENDENCE TAX CREDIT PLUS L.P. III
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2006



NOTE 1 - General

Independence  Tax Credit Plus L.P.  III (a Delaware  limited  partnership)  (the
"Partnership")  was  organized  on December  23, 1993 and  commenced  the public
offering on June 7, 1994.  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") and is an affiliate of
CharterMac Capital LLC ("CharterMac Capital") (formerly known as Related Capital
Company LLC).

On November 17,  2003,  CharterMac  acquired  CharterMac  Capital,  which is the
parent of RCC Manager LLC,  the sole  shareholder  of RIAI III.  Pursuant to the
acquisition,  CharterMac acquired controlling  interests in the General Partner.
This acquisition did not affect the Partnership or its day-to-day operations, as
the majority of the General Partner's management team remained unchanged.

On November 8, 2005,  CharterMac announced that Stuart J. Boesky would step down
as Chief  Executive  Officer and trustee of CharterMac.  Upon his stepping down,
which was  effective on November 15, 2005, he also resigned from his position as
Senior Vice  President of RIAI III. Mr.  Boesky will stay on as a consultant  to
CharterMac  for the next year in order to ensure a smooth  transition.  On March
14,  2006,  CharterMac's  Board of Trustees  named Marc D.  Schnitzer  the Chief
Executive  Officer,  effective  immediately.  Mr. Schnitzer  replaced Stephen M.
Ross, who had served as interim Chief  Executive  Officer since Stuart J. Boesky
resigned in November of 2005.  Mr.  Schnitzer also replaced Mr. Boesky as Senior
Vice President of RIAI III.

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").

As of March 31,  2006,  the  Partnership  had  acquired  a  limited  partnership
interest in twenty subsidiary partnerships.

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, 2006, 2005 and 2004, respectively, (the 2005, 2004
and 2003  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 $21,000, $20,000 and $18,000 for the years ended March
31, 2006,  2005 and 2004,  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.


                                       39
<PAGE>



                      INDEPENDENCE TAX CREDIT PLUS L.P. III
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2006



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).

Through March 31, 2006, the  Partnership has not recorded any 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.  Through  March 31,  2006,  the  Partnership  has not  recorded  or
classified any property and equipment as held for sale.

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  include the following  amounts at both the Partnership and Local
Partnership level:

<TABLE>
<CAPTION>

                                                   Years Ended March 31,
                                          --------------------------------------
                                            2006           2005           2004
                                          --------       --------       --------
<S>                                       <C>            <C>            <C>
Interest                                  $118,270       $ 96,706       $111,481
Other                                      170,101        321,043        234,956
                                          --------       --------       --------

   Total other revenue                    $288,371       $417,749       $346,437
                                          ========       ========       ========

</TABLE>

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.

i) New Accounting Pronouncements

In June 2005, the Financial Accounting Standards Board ("FASB") issued Statement
of  Financial  Accounting  Standards  No.  154,  "Accounting  Changes  and Error
Corrections" ("FAS 154"). FAS 154 replaces  Accounting  Principles Board Opinion
No. 20, "Accounting  Changes and Financial  Accounting Standard No. 3, Reporting
Accounting  Changes in Interim  Financial  Statements".  FAS 154 requires that a
voluntary  change in accounting  principle be applied  retrospectively  with all
prior period financial statements presented on the new accounting principle. FAS


                                       40
<PAGE>



                      INDEPENDENCE TAX CREDIT PLUS L.P. III
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2006



154 also  requires  that a change in  method of  depreciating  or  amortizing  a
long-lived  nonfinancial  asset be accounted  for  prospectively  as a change in
estimate,  and correction of errors in previously  issued  financial  statements
should be termed a restatement.  FAS 154 is effective for accounting changes and
correction of errors made in fiscal years beginning after December 15, 2005. The
implementation  of FAS 154 is not  expected  to have a  material  impact  on the
Partnership's consolidated financial statements.

In June 2005, the FASB issued Emerging Issues Task Force No. 04-5,  "Determining
Whether a General  Partner,  or the  General  Partners  as a Group,  Controls  a
Limited  Partnership  or Similar  Entity When the Limited  Partners Have Certain
Rights" ("EITF No. 04-5").  EITF No. 04-5 replaces  counterpart  requirements in
the  Statement of Position  78-9,  which  provides  guidance on  accounting  for
investments in  real-estate  ventures and limited  partnerships.  Under EITF No.
04-5, the general  partner's  control would be overcome if the limited  partners
have  either (i)  "kick-out  rights"-  the right to dissolve  or  liquidate  the
partnership  or otherwise  remove the general  partner  "without  cause" or (ii)
"participating  rights" - the right to  effectively  participate  in significant
decisions  made  in the  ordinary  course  of the  partnership's  business.  The
kick-out  rights and the  participating  rights must be  substantive in order to
overcome the general partner's  control.  EITF No. 04-5 is now effective.  Since
the Partnership's  financial  statements are presented on a consolidated  basis,
the adoption of EITF No. 04-5 has not had a material effect on the Partnership's
consolidated results of operations.


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
----------------------
The fair value of mortgage notes payable is estimated, where practicable,  based
on the borrowing rate currently available for similar loans.

The  estimated  fair  values of the  Partnership's  mortgage  notes  payable and
construction loans payable are as follows:

<TABLE>
<CAPTION>

                                                 March 31, 2006                  March 31, 2005
                                         -----------------------------    ----------------------------
                                           Carrying                         Carrying
                                            Amount         Fair Value        Amount        Fair Value
                                         -------------    ------------    ------------    ------------
<S>                                      <C>              <C>             <C>             <C>
Mortgage notes payable for which it is:

Practicable to estimate fair value       $  13,403,675    $ 12,385,902    $ 10,147,314    $  9,073,620
Not practicable                             30,605,101               *      32,193,796               *

</TABLE>

*  Management  believes it is not  practical  to estimate  the fair value of the
   mortgage notes payable because mortgage programs with similar characteristics
   are not currently available to the Local Partnerships.


Management  believes it is not  practical  to estimate  the fair value of due to
local and general  partners and affiliates  because  market  information on such
unique loans are not currently available to the Local Partnerships.

The carrying amount of other financial  instruments that require such disclosure
approximates fair value.


NOTE 4 - Property and Equipment

The components of property and equipment and their estimated useful lives are as
follows:

<TABLE>
<CAPTION>

                                                         March 31,                 Estimated
                                              ------------------------------      Useful Lives
                                                  2006              2005            (Years)
                                              ------------      ------------      ------------
<S>                                           <C>               <C>                  <C>
Land                                          $  1,166,583      $  1,166,583            -
Building and improvements                       83,788,184        83,662,760         20-40
Furniture and fixtures                           1,259,853         1,247,107          5-12
                                              ------------      ------------
                                                86,214,620        86,076,450

Less: Accumulated depreciation                 (24,907,449)      (22,332,456)
                                              ------------      ------------

                                              $ 61,307,171      $ 63,743,994
                                              ============      ============

</TABLE>


                                       41
<PAGE>



                      INDEPENDENCE TAX CREDIT PLUS L.P. III
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2006



Included in property and equipment is $2,509,717 of acquisition fees paid to the
General Partner and $1,178,468 of acquisition  expenses as of March 31, 2006 and
2005,  respectively.  In addition,  as of March 31, 2006 and 2005,  building and
improvements include $1,106,837 of capitalized interest.

In  connection  with  the  rehabilitation  of  the  properties,  the  subsidiary
partnerships  have incurred  developer's fees of $8,980,181 to the Local General
Partners and their affiliates as of March 31, 2006 and 2005. Such fees have been
included in the cost of property and equipment.

Depreciation  expense for the years ended March 31, 2006, 2005 and 2004 amounted
to $2,574,993, $2,650,522 and, $2,683,851, respectively.

During the year ended March 31, 2005,  $20,000 of fully depreciated fixed assets
were written-off.


NOTE 5 - Cash Held in Escrow

Cash held in escrow consists of the following:

<TABLE>
<CAPTION>

                                                               March 31,
                                                      --------------------------
                                                         2006            2005
                                                      ----------      ----------
<S>                                                   <C>             <C>
Purchase price payments*                              $  130,418      $  130,418
Real estate taxes, insurance and other                 3,367,132       3,138,968
Reserve for replacements                               1,846,797       1,831,783
Tenant security deposits                                 396,616         352,498
                                                      ----------      ----------

                                                      $5,740,963      $5,453,667
                                                      ==========      ==========

</TABLE>

*    Represents  amounts  to be paid to seller  upon  meeting  specified  rental
     achievement criteria.


NOTE 6 - Deferred Costs

The  components  of  deferred  costs and their  periods of  amortization  are as
follows:

<TABLE>
<CAPTION>

                                                                      March 31,
                                                           -----------------------------
                                                               2006             2005           Period
                                                           ------------     ------------      --------
<S>                                                        <C>              <C>                   <C>
Financing costs                                            $  1,335,101     $  1,265,159          *
Less: Accumulated amortization                                 (496,008)        (556,925)
                                                           ------------     ------------

                                                           $    839,093     $    708,234
                                                           ============     ============

</TABLE>

*    Over the life of the related mortgages.


Amortization  expense for the years ended March 31, 2006, 2005 and 2004 amounted
to $107,598, $57,496 and $56,249, respectively.  During the year ended March 31,
2006, $229,514 off deferred costs and $168,515 of accumulated  amortization were
written off.


NOTE 7 - Mortgage Notes Payable

The mortgage notes, which are collateralized by land and buildings,  are payable
in aggregate monthly installments of approximately  $103,000 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.


BK-9-A Partners L.P. ("Lafayette")
----------------------------------
On August 22, 2005, Lafayette  refinanced its existing mortgage  indebtedness in
the amount of $885,701.  The new mortgage in the amount of $1,975,000 matures on
August 31, 2015 and bears interest at the rate of 5.625% per annum for the first
five years of the loan. Effective September 1, 2010 and on the first day of each
September thereafter, the interest rate will be adjusted to 2.5% above the Prime
Rate. Financing costs of approximately $100,000 were incurred, and a partnership
reserve  account  in the  amount  of  $105,000  was  established  by  the  Local
Partnership.   The  refinancing  resulted  in  a  distribution  from  the  Local
Partnership to the Partnership of approximately $451,000.


                                       42
<PAGE>



                      INDEPENDENCE TAX CREDIT PLUS L.P. III
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2006



Primm Place Partners, L.P. ("Primm Place")
------------------------------------------
In November 2005, Primm Place  refinanced an existing  mortgage in the amount of
$2,150,000  by acquiring a first  mortgage  loan  provided by U.S.  Bank,  N.A.,
through the issuance of Multifamily  Housing  Refunding  Revenue  Bonds,  Series
2005, of $2,150,000. The loan, secured by a first deed of trust on the property,
bears interest at an annual rate of 5.32%,  payable monthly beginning January 1,
2006.  Principal  payments are not required  until maturity on November 1, 2015.
Additionally,  in November 2005,  Primm Place entered into a loan with U.S. Bank
N.A.  The loan,  in the amount of  $995,086,  is also secured by a first deed of
trust on the  property.  Approximately  $771,000 of these  proceeds were used to
reimburse  certain  advances owed to the Local General  Partner.  The loan bears
interest  at an annual  rate of  7.07%.  Commencing  January  1,  2006,  monthly
principal  and  interest  payments  are  required  to be made until  maturity on
November 1, 2015.

Annual principal payment requirements by the subsidiary partnerships for each of
the next five years and thereafter, are as follows:

<TABLE>
<CAPTION>

   December 31,                                Amount
------------------                         -------------
<S>                                        <C>
2006                                       $    573,100
2007                                            523,854
2008                                            494,594
2009                                            531,671
2010                                            551,831
Thereafter                                   41,333,726
                                           ------------

                                           $ 44,008,776
                                           ============

</TABLE>

Accrued  interest  payable  as of March  31,  2006  and  2005 was  approximately
$7,586,000 and $6,586,000, 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, 2006, the gross
amount of the Operating Deficit Guarantees aggregate  approximately  $5,487,000,
of which  $3,273,000 had expired.  Management does not expect that expiration to
have a material  impact on liquidity,  based on prior years'  fundings.  Amounts
funded under such  agreements  are treated as noninterest  bearing loans,  which
will be paid only out of 50% of available cash flow or out of available net sale
or refinancing proceeds. In some instances, the Local General Partners have been
required to undertake an obligation to comply with a Rent-Up Guaranty Agreement,
whereby  the Local  General  Partner  has  agreed to pay  liquidated  damages if
predetermined occupancy rates are not achieved.  These payments are made without
right  of  repayment.   In  cases  where  the  General  Partner  has  deemed  it
appropriate,  the  obligations of a Local General  Partner under the Development
Deficit,  Operating  Deficit  and/or  Rent-Up  Guarantees  have been  secured by
letters of credit and/or cash escrow deposits.


                                       43
<PAGE>



                      INDEPENDENCE TAX CREDIT PLUS L.P. III
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2006



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 for the years
ended March 31, 2006, 2005 and 2004 were as follows:

<TABLE>
<CAPTION>

                                                          Years Ended March 31,
                                                     ------------------------------
                                                       2006       2005*      2004
                                                     --------   --------   --------
<S>                                                  <C>        <C>        <C>
Partnership management fees (a)                      $351,400   $334,141   $313,389
Expense reimbursement (b)                             233,499    152,857    144,110
Local administrative fees (d)                          60,250     60,250     62,750
                                                     --------   --------   --------

Total general and administrative-General Partner      645,149    547,248    520,249
                                                     --------   --------   --------

Property management fees incurred to affiliates of
 the subsidiary partnerships' general partners (c)    283,430    305,237    280,018
                                                     --------   --------   --------

Total general and administrative-related parties     $928,579   $852,485   $800,267
                                                     ========   ========   ========

</TABLE>

*    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 $2,891,000 and $2,540,000 were
accrued  and unpaid as of March 31,  2006 and 2005,  respectively.  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.

(c)  Property  management  fees  incurred  by  Local  Partnerships  amounted  to
$498,034,  $512,072 and  $477,876  for the years ended March 31, 2006,  2005 and
2004, respectively. Of these fees, $283,430, $305,237 and $280,018 were incurred
to affiliates of the subsidiary partnerships' general partners.

(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 consists of the following:

<TABLE>
<CAPTION>

                                                               March 31,
                                                     ---------------------------
                                                        2006             2005
                                                     ----------       ----------
<S>                                                  <C>              <C>
Operating advances                                   $   80,406       $   32,753
Development fee payable                               1,497,232        1,444,491
Other capitalized costs                                  16,335           16,335
Construction costs payable                              154,543          154,543
General Partner loan payable                            220,008          218,008
Management and other operating fees                      55,507           94,286
                                                     ----------       ----------

                                                     $2,024,031       $1,960,416
                                                     ==========       ==========

</TABLE>


                                       44
<PAGE>

                      INDEPENDENCE TAX CREDIT PLUS L.P. III
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2006


D) Advances from Partnership to Local Partnerships

As of March 31, 2006, the  Partnership  has advanced  certain Local  Partnership
operating loans  (non-interest  bearing) amounting to approximately  $2,978,000.
Such advances are eliminated in  consolidation.  The following table  summarizes
these advances:
<TABLE>
<CAPTION>
                                                             March 31,
                                                  ------------------------------
                                                     2006                2005
                                                  ----------          ----------
<S>                                               <C>                 <C>
New Zion                                          $    2,655          $  191,070
Knickerbocker Avenue                                 454,441             454,441
Lafayette Avenue                                     416,094             416,094
Eastern Parkway                                    1,016,321           1,016,321
2301 First Avenue                                  1,080,628           1,080,628
Sumpter Commons                                        7,876              10,126
                                                  ----------          ----------

                                                  $2,978,015          $3,168,680
                                                  ==========          ==========
</TABLE>


NOTE 9 - Taxable Net Loss

A reconciliation of the financial statement net loss to the taxable net loss for
the Partnership and its consolidated subsidiaries follows:
<TABLE>
<CAPTION>
                                                                                  Years Ended December 31,
                                                                         -----------------------------------------
                                                                             2005           2004           2003
                                                                         -----------    -----------    -----------
<S>                                                                      <C>            <C>            <C>
Financial statement net loss                                             $(3,471,775)   $(3,239,139)   $(3,013,105)

Differences between  depreciation and amortization expense records
  for financial reporting purposes and the accelerated costs recovery
  system utilized for income tax purposes                                   (169,991)      (199,664)      (414,282)

Differences resulting from parent company having a different fiscal
  year for income tax and financial reporting purposes                        27,039         67,422        (22,792)

Other, including accruals for financial reporting not deductible for
  tax purposes until paid                                                   (227,594)        46,799        (96,387)
                                                                         -----------    -----------    -----------
Net loss as shown on the income tax return for the calendar year ended   $(3,842,321)   $(3,324,582)   $(3,546,566)
                                                                         ===========    ===========    ===========
</TABLE>


                                       45
<PAGE>



                      INDEPENDENCE TAX CREDIT PLUS L.P. III
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2006



NOTE 10 - Selected Quarterly Financial Data (Unaudited)

The following table summarizes the Partnership's quarterly results of operations
for the years ended March 31, 2006 and 2005.

<TABLE>
<CAPTION>

                                                                 Quarter Ended
                                            --------------------------------------------------------
                                              June 30,    September 30,   December 31,     March 31,
                OPERATIONS                      2005          2005           2005            2006
-----------------------------------------   -----------   -------------   -----------    -----------
<S>                                         <C>            <C>            <C>            <C>
Revenues                                    $ 1,740,672    $ 1,756,367    $ 1,761,014    $ 1,980,434

Operating expenses                           (2,726,742)    (2,499,360)    (2,622,895)    (3,155,643)
                                            -----------    -----------    -----------    -----------

Loss before minority interest                  (986,070)      (742,993)      (861,881)    (1,175,209)

Minority interest in loss of subsidiaries        69,567         12,520          8,941        203,350
                                            -----------    -----------    -----------    -----------

Net loss                                    $  (916,503)   $  (730,473)   $  (852,940)   $  (971,859)
                                            ===========    ===========    ===========    ===========

Net loss per weighted average BAC           $    (20.89)   $    (16.65)   $    (19.43)   $    (22.15)
                                            ===========    ===========    ===========    ===========

</TABLE>
<TABLE>
<CAPTION>

                                                                 Quarter Ended
                                            --------------------------------------------------------
                                              June 30,    September 30,   December 31,     March 31,
                OPERATIONS                      2004          2004           2004            2005
-----------------------------------------   -----------   -------------   -----------    -----------
<S>                                         <C>            <C>            <C>            <C>
Revenues                                    $ 1,671,775    $ 1,678,727    $ 1,716,121    $ 1,955,030

Operating expenses                           (2,550,959)    (2,515,819)    (2,403,770)    (2,882,702)
                                            -----------    -----------    -----------    -----------

Loss before minority interest                  (879,184)      (837,092)      (687,649)      (927,672)

Minority interest in loss of subsidiaries        65,243          8,033          5,551         13,631
                                            -----------    -----------    -----------    -----------

Net loss                                    $  (813,941)   $  (829,059)   $  (682,098)   $  (914,041)
                                            ===========    ===========    ===========    ===========

Net loss per weighted average BAC           $    (18.55)   $    (18.89)   $    (15.55)   $    (20.83)
                                            ===========    ===========    ===========    ===========

</TABLE>


                                       46
<PAGE>



                      INDEPENDENCE TAX CREDIT PLUS L.P. III
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2006



NOTE 11 - Commitments and Contingencies

a) 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:

<TABLE>
<CAPTION>

December 31,                                        Amount
-------------                                     -----------
<C>                                               <C>
2006                                              $   38,952
2007                                                  21,252
2008                                                  21,252
2009                                                  21,252
2010                                                  21,252
Thereafter                                           765,072
                                                  ----------

                                                  $  889,032
                                                  ==========

</TABLE>

As of December 31, 2005, the subsidiary  partnership was in default on the lease
agreement.  For the years ended December 31, 2005 and 2004, $26,242 and $18,836,
respectively,  have been paid  under  the  terms of the  lease and  $14,489  and
$13,199, respectively, remained payable.

b) 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 $100,000.  Uninsured cash and cash  equivalents  approximated
$232,000 at March 31, 2006.

c) 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.

d) 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 has
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 $4,614,216,  $5,580,448 and $5,683,281 Tax
Credits during the 2005, 2004 and 2003 tax years, respectively.


                                       47
<PAGE>



Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure

None

Item 9A.  Controls and Procedures

(a) EVALUATION OF DISCLOSURE  CONTROLS AND PROCEDURES.  The Principal  Executive
Officer and Principal Financial Officer of Related  Independence  Associates III
L.P., the general partner of the Partnership,  and its general partner,  Related
Independence  Associates  III  Inc.,  has  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 officer has concluded that, as of the end of such
period, the Partnership's disclosure controls and procedures are effective.

(b) INTERNAL CONTROL OVER FINANCIAL  REPORTING.  There have not been any changes
in  Partnership's  internal  control over financial  reporting during the fiscal
year to  which  this  report  relates  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.


                                    PART III

Item 10. Directors and Executive Officers of the Registrant.

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")
and is an affiliate of CharterMac Capital LLC ("CharterMac  Capital")  (formerly
known as Related Capital Company LLC). 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.
However,  the parent company of CharterMac  Capital,  which controls the General
Partner, has adopted a code of ethics (see http://www.chartermac.com).

On November 17, 2003,  CharterMac,  acquired  CharterMac  Capital,  which is the
parent of RCC Manager  LLC, the sole  shareholder  of RIAI III, the sole general
partner of the General Partner. Pursuant to the acquisition, CharterMac acquired
controlling  interests in the General  Partner.  This acquisition did not affect
the  Partnership  or its day-to-day  operations,  as the majority of the General
Partner's management team remained unchanged.

On November 8, 2005,  CharterMac announced that Stuart J. Boesky would step down
as Chief  Executive  Officer and trustee of CharterMac.  Upon his stepping down,
which was  effective on November 15, 2005, he also resigned from his position as
Senior Vice  President of RIAI III. Mr.  Boesky will stay on as a consultant  to
CharterMac  for the next year in order to ensure a smooth  transition.  On March
14,  2006,  CharterMac's  Board of Trustees  named Marc D.  Schnitzer  the Chief
Executive  Officer,  effective  immediately.  Mr. Schnitzer  replaced Stephen M.
Ross, who had served as interim Chief  Executive  Officer since Stuart J. Boesky
resigned in November of 2005.  Mr.  Schnitzer also replaced Mr. Boesky as Senior
Vice President of RIAI III.

Certain information  concerning the directors and executive officers of RIAI III
is set forth below.

Name                                 Position
--------------------                 -------------------

Alan P. Hirmes                       Director and President

Marc D. Schnitzer                    Senior Vice President

Glenn F. Hopps                       Treasurer

ALAN P. HIRMES,  51, has been a Certified  Public  Accountant  in New York since
1978.  Prior to  joining  CharterMac  Capital in October  1983,  Mr.  Hirmes was
employed by Weiner & Co.,  Certified  Public  Accountants.  Mr. Hirmes is also a
Vice  President  of  CharterMac  Capital.  Mr.  Hirmes  graduated  from  Hofstra
University  with a Bachelor of Arts degree.  Mr. Hirmes also serves on the Board
of Trustees of CharterMac and American Mortgage Acceptance Company ("AMAC").

MARC D. SCHNITZER,  45, is responsible both for financial  restructuring of real
estate properties and directing CharterMac Capital's  acquisitions of properties
generating  Housing Tax Credits.  Mr.  Schnitzer  received a Masters of Business
Administration  from The Wharton  School of the  University of  Pennsylvania  in
December 1987 before joining  CharterMac  Capital 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. In March 2006, Mr. Schnitzer was appointed Chief Executive  Officer of
CharterMac. Mr. Schnitzer also serves on the Board of Trustees of CharterMac.

GLENN F. HOPPS,  43, joined  CharterMac  Capital in December  1990, and prior to
that date was  employed  by Marks  Shron & Company  and  Weissbarth,  Altman and
Michaelson,  certified  public  accountants.  Mr. Hopps  graduated from New York
State University at Albany with a Bachelor of Science Degree in Accounting.


                                       48
<PAGE>

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.

Item 12.  Security  Ownership of Certain  Beneficial  Owners and  Management and
Related Security Holder Matters
<TABLE>
<CAPTION>
                                        Name and Address of                       Amount and Nature of         Percentage
Title of Class                         Beneficial Ownership                       Beneficial Ownership          of Class
-----------------------------    ----------------------------------------    -----------------------------     ----------
<S>                              <C>                                         <C>                                  <C>
                                 Related Independence Associates III L.P.
General Partnership Interest     625 Madison Avenue                          $1,000 capital contribution -
 in the Partnership              New York, NY 10022                          directly owned                       100%

</TABLE>

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 18,  2006,  by (i) each BACs holder known to the
Partnership  to be a  beneficial  owner of more than 5% of the  BACs,  (ii) each
director and executive officer of the general partner of the General Partner and
(iii) the directors and 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 director
or officer of the General  Partner  beneficially  owns any  Limited  Partnership
Interests in the Partnership or BACs.

<TABLE>
<CAPTION>

                                       Amount and Nature of
Name of Beneficial Owner (1)           Beneficial Ownership     Percent of Class
------------------------               --------------------     ----------------
<S>                                    <C>                            <C>
Lehigh 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)               7.5%

Marc D. Schnitzer                      3,242.94 (2) (3)               7.5%

Denise L. Kiley                        3,242.94 (2) (3)               7.5%

Glenn F. Hopps                         -                              -

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%

</TABLE>

(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")
and pursuant to a letter  agreement dated October 6, 1998 among the Partnership,
Lehigh III and the General  Partner  (the  "Standstill  Agreement"),  Lehigh III
agreed that, prior to October 6, 2008 (the  "Standstill  Expiration  Date"),  it
will not and it will  cause  certain  affiliates  not to (i) seek to  propose to
enter  into,  directly  or  indirectly,  any  merger,  consolidation,   business
combination,  sale or acquisition of assets,  liquidation,  dissolution or other
similar  transaction  involving the  Partnership,  (ii) form,  join or otherwise
participate  in a "group"  (within  the meaning of Section 13 (d)(3) of the Act)
with  respect to any voting  securities  of the  Partnership,  except that those
affiliates bound by the Standstill Agreement will not be deemed to have violated


                                       49
<PAGE>

it and  formed a "group"  solely by acting  in  accordance  with the  Standstill
Agreement,  (iii)  disclose  in writing to any third  party  intention,  plan or
arrangement  inconsistent  with the terms of the Standstill  Agreement,  or (iv)
loan money to,  advise,  assist or encourage any person in  connection  with any
action inconsistent with the terms of the Standstill Agreement.  Lehigh III also
agreed to vote its BACs in the same  manner as a  majority  of all  voting  BACs
holders;  provided,  however,  Lehigh  III is  entitled  to vote  its BACs as it
determines  with regard to any proposal  (i) to remove the General  Partner as a
general partner of the Partnership or (ii) concerning the reduction of any fees,
profits,  distributions or allocations for the benefit of the General Partner or
its  affiliates.  The  address  of each of the  Partnership,  Lehigh III and the
General Partner is 625 Madison Avenue, New York, New York 10022.

(3) Each such party serves as a director and  executive  officer of the Managing
Member and owns an equity  interest  therein except J. Michael Fried,  Denise L.
Kiley and Stuart J. Boesky who own only an economic interest.

Item 13. Certain Relationships and Related Transactions

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
directors and 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,
2006 and 2005 and for the reviews of the  financial  statements  included in the
Partnership's  quarterly  reports on Form 10-Q for those years were  $52,700 for
both years.

Audit Related Fees
------------------
None

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 $8,700 for both the years ended December 31, 2005 and 2004.

All Other Fees
--------------
None

The  Partnership is not required to have, and does not have, a stand alone audit
committee.


                                       50
<PAGE>

                                     PART IV


Item 15.  Exhibits and Financial Statement Schedules
<TABLE>
<CAPTION>
                                                                                     Sequential
                                                                                        Page
                                                                                     ----------
<S>       <C>                                                                            <C>
(a) 1.    Financial Statements

          Report of Independent Registered Public Accounting Firm                        14

          Consolidated Balance Sheets at March 31, 2006 and 2005                         35

          Consolidated  Statements of  Operations  for the Years Ended March 31,
           2006, 2005 and 2004                                                           36

          Consolidated  Statements of Changes in Partners' Capital (Deficit) for
           the Years Ended March 31, 2006, 2005 and 2004                                 37

          Consolidated  Statements  of Cash Flows for the Years  Ended March 31,
           2006, 2005 and 2004                                                           38

          Notes to Consolidated Financial Statements                                     39

(a) 2.    Consolidated Financial Statement Schedules
          ------------------------------------------

          Report of Independent Registered Public Accounting Firm                        57

          Schedule I - Condensed Financial Information of Registrant                     58

          Schedule III - Real Estate and Accumulated Depreciation                        61

          All 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                                                 52

(31.1)    Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a).                    55

(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).         56

          *    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}
</TABLE>


                                       51
<PAGE>

Item 15.  Exhibits and Financial Statement Schedules (continued)
<TABLE>
<CAPTION>

                                                                   Jurisdiction
Subsidiaries of the Registrant (Exhibit 21)                      of Organization
------------------------------                                   ---------------
<S>                                                                    <C>
Edward Hotel Limited Partnership                                       CA
Pacific-East L.P.                                                      NY
Overtown Development Group, Ltd.                                       FL
Sumpter Commons Associates, L.P.                                       NY
Park Housing Limited Partnership                                       CT
Livingston Manor Urban Renewal Associates, L.P.                        NJ
Jefferis Square Housing Partnership, L.P.                              PA
2301 First Avenue Limited Partnership                                  NY
Lewis Street Limited Partnership                                       NY
Savannah Park Housing Limited Partnership                              DC
Brannon Group, L.C.                                                    FL
Mansion Court Phase II Venture                                         PA
Primm Place Partners, L.P.                                             MI
BK-9-A Partners L.P.                                                   NY
BK-10K Partners L.P.                                                   NY
Aspen-Olive Associates                                                 PA
West Mill Creek Associates, III L.P.                                   PA
Universal Court Associates                                             PA
New Zion Apartments                                                    LA
Dreitzer House                                                         NY

</TABLE>


                                       52
<PAGE>



                                   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 Partner



                                  By:  RELATED INDEPENDENCE ASSOCIATES III INC.,
                                       General Partner



Date:  June 21, 2006              By:  /s/ Alan P. Hirmes
       -------------                   ------------------
                                       Alan P. Hirmes
                                       President
                                       (Principal Executive Officer
                                        and Principal Financial Officer)


                                       53
<PAGE>



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:

<TABLE>
<CAPTION>

      Signature                                           Title                                         Date
------------------------    --------------------------------------------------------------------    --------------
<S>                         <C>                                                                     <C>
/s/ Alan P. Hirmes
------------------          President and Director (principal executive officer and principal
Alan P. Hirmes              financial officer) of Related Independence Associates III Inc.          June 21, 2006
                                                                                                    -------------

/s/ Glenn F. Hopps
------------------          Treasurer (principal accounting officer) of Related Independence
Glenn F. Hopps              Associates III Inc.                                                     June 21, 2006
                                                                                                    -------------

</TABLE>


                                       54
<PAGE>



                                                                    Exhibit 31.1

                         CERTIFICATION PURSUANT TO RULE
                           13A-14(A) OR RULE 15D-14(A)


I, Alan P. Hirmes,  Principal  Executive Officer and Principal Financial Officer
of Related  Independence  Associates III Inc.  ("RIAI"),  the general partner of
Related Independence  Associates III L.P. (the "General Partner"),  which is the
general  partner of Independence  Tax Credit Plus L.P. III (the  "Partnership"),
certify that:

     1.  I have  reviewed  this report on Form 10-K for the period  ending March
         31, 2006 of the Partnership;

     2.  Based  on my  knowledge,  this  report  does  not  contain  any  untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances  under which
         such  statements  were made, not misleading  with respect to the period
         covered by this report;

     3.  Based on my knowledge,  the financial  statements,  and other financial
         information  included in this  report,  fairly  present in all material
         respects the financial condition,  results of operations and cash flows
         of the  Partnership  as of,  and for,  the  periods  presented  in this
         report;

     4.  I am responsible for establishing and maintaining  disclosure  controls
         and  procedures  (as  defined  in  Exchange  Act  Rules  13a-15(e)  and
         15d-15(e) and internal control over financial  reporting (as defined in
         Exchange Act Rules  13a-15(f)  and 15d-15(f)  for the  Partnership  and
         have:

         a) designed such  disclosure  controls and  procedures,  or caused such
         disclosure controls and procedures to be designed under my supervision,
         to  ensure  that  material  information  relating  to the  Partnership,
         including its consolidated subsidiaries,  is made known to me by others
         within  those  entities,  particularly  during the period in which this
         report is being prepared;

         b) designed such internal control over financial  reporting,  or caused
         such internal control over financial  reporting to be designed under my
         supervision,  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;

         c) evaluated the effectiveness of the Partnership's disclosure controls
         and procedures  and presented in this report my  conclusions  about the
         effectiveness of the disclosure controls and procedures,  as of the end
         of the period covered by this report based on such evaluation; and

         d)  disclosed in this report any change in the  Partnership's  internal
         control over financial reporting that occurred during the Partnership's
         fourth fiscal  quarter that has materially  affected,  or is reasonably
         likely to materially  affect,  the Partnership's  internal control over
         financial reporting; and

     5.  I have  disclosed,  based  on my most  recent  evaluation  of  internal
         control over financial reporting,  to the Partnership's auditors and to
         the controlling entities of the General Partner:

         a) all significant  deficiencies and material  weaknesses in the design
         or operation of internal  control over  financial  reporting  which are
         reasonably  likely to  adversely  affect the  Partnership's  ability to
         record, process, summarize and report financial information; and

         b) any fraud,  whether or not  material,  that  involves  management or
         other  employees  who  have a  significant  role  in the  Partnership's
         internal control over financial reporting.


         Date:  June 21, 2006               By:  /s/ Alan P. Hirmes
                -------------                    ------------------
                                                 Alan P. Hirmes
                                                 Principal Executive Officer and
                                                 Principal Financial Officer


                                       55
<PAGE>



                                                                    Exhibit 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)


In connection  with the Annual Report of  Independence  Tax Credit Plus L.P. III
(the "Partnership") on Form 10-K for the year ended March 31, 2006 as filed with
the  Securities  and  Exchange  Commission  ("SEC")  on  the  date  hereof  (the
"Report"),  I,  Alan  P.  Hirmes,  Principal  Executive  Officer  and  Principal
Financial Officer of Related Independence  Associates III Inc. a general partner
of  Related  Independence  Associates  III  L.P.,  the  general  partner  of the
Partnership, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss.
906 of the Sarbanes-Oxley Act of 2002, that:


       (1) The Report fully complies with the  requirements  of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and


       (2) The  information  contained  in the Report  fairly  presents,  in all
material  respects,  the  financial  condition  and result of  operations of the
Partnership.

A signed  original of this  written  statement  required by Section 906 has been
provided  to the  Partnership  and  will  be  retained  by the  Partnership  and
furnished to the SEC or its staff upon request.



By:  /s/ Alan P. Hirmes
     ------------------
     Alan P. Hirmes
     Principal Executive Officer and Principal Financial Officer
     June 21, 2006


                                       56
<PAGE>



             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
20,  2005 on page 14, and based on the reports of other  auditors,  we have also
audited  supporting  Schedule  I for the 2005,  2004 and 2003  Fiscal  Years and
Schedule III as of March 31, 2006.  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 20, 2006


                                       57
<PAGE>



                      INDEPENDENCE TAX CREDIT PLUS L.P. III
                                   SCHEDULE I
                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
              (Not Including Consolidated Subsidiary Partnerships)


                            CONDENSED BALANCE SHEETS




                                     ASSETS

<TABLE>
<CAPTION>

                                                                    March 31,
                                                            -------------------------
                                                                2006          2005
                                                            -----------   -----------
<S>                                                         <C>           <C>
Cash and cash equivalents                                   $    36,194   $    25,745
Investment in subsidiary partnerships                        15,057,064    17,782,444
Cash held in escrow                                             130,418       130,418
Other assets                                                         44             0
                                                            -----------   -----------

Total assets                                                $15,223,720   $17,938,607
                                                            ===========   ===========


                        LIABILITIES AND PARTNERS' CAPITAL


Due to general partner and affiliates                       $ 4,071,802   $ 3,848,855
Other liabilities                                                16,394         9,244
                                                            -----------   -----------

Total liabilities                                             4,088,196     3,858,099

Partners' capital                                            11,135,524    14,080,508
                                                            -----------   -----------

Total liabilities and partners' capital                     $15,223,720   $17,938,607
                                                            ===========   ===========

</TABLE>

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.


                                       58
<PAGE>



                      INDEPENDENCE TAX CREDIT PLUS L.P. III
                                   SCHEDULE I
                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
              (Not Including Consolidated Subsidiary Partnerships)


                       CONDENSED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                             Years Ended March 31,
                                                   -----------------------------------------
                                                       2006           2005           2004
                                                   -----------    -----------    -----------
<S>                                                <C>            <C>            <C>
Revenues

Other income                                       $     2,024    $       550    $       550
                                                   -----------    -----------    -----------

Expenses

Administrative and management                          107,043         88,148         84,466
Administrative and management - related parties        584,899        486,998        457,499
                                                   -----------    -----------    -----------

Total expenses                                         691,942        575,146        541,965
                                                   -----------    -----------    -----------

Losses from operations                                (689,918)      (574,596)      (541,415)

Equity in losses of subsidiary partnerships         (2,262,425)    (2,116,207)    (2,188,649)

Distribution income from subsidiary partnerships         7,359              0              0
                                                   -----------    -----------    -----------

Net loss                                           $(2,944,984)   $(2,690,803)   $(2,730,064)
                                                   ===========    ===========    ===========

</TABLE>


                                       59
<PAGE>



                      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

<TABLE>
<CAPTION>

                                                                   Years Ended March 31,
                                                        -----------------------------------------
                                                            2006           2005           2004
                                                        ------------   -----------    -----------
<S>                                                     <C>            <C>            <C>
Cash flows from operating activities:

Net loss                                                $(2,944,984)   $(2,690,803)   $(2,730,064)

Adjustments to reconcile net loss to net cash used in
 operating activities:

Equity in loss of subsidiary partnerships                 2,262,425      2,116,207      2,188,649
Distribution income from subsidiary partnerships             (7,359)             0              0
Increase in other assets                                        (44)             0              0
Increase (decrease) in liabilities:
Due to general partners and affiliates                      222,947        535,728        492,887
Other liabilities                                             7,150         (5,034)         4,722
                                                        -----------    -----------    -----------

Total adjustments                                         2,485,119      2,646,901      2,686,258
                                                        -----------    -----------    -----------

Net cash used in operating activities                      (459,865)       (43,902)       (43,806)
                                                        -----------    -----------    -----------

Cash flows from investing activities:

Investment in subsidiary partnerships                             0         (6,832)      (170,020)
Distributions from subsidiary partnerships                  470,314         41,421         46,892
Decrease in cash held in escrow                                   0          1,757        164,967
                                                        -----------    -----------    -----------

Net cash provided by investing activities                   470,314         36,346         41,839
                                                        -----------    -----------    -----------

Net increase (decrease) in cash and cash equivalents         10,449         (7,556)        (1,967)

Cash and cash equivalents, beginning of year                 25,745         33,301         35,268
                                                        -----------    -----------    -----------

Cash and cash equivalents, end of year                  $    36,194    $    25,745    $    33,301
                                                        ===========    ===========    ===========

</TABLE>


                                       60
<PAGE>



                      INDEPENDENCE TAX CREDIT PLUS L.P. III
                                AND SUBSIDIARIES
                                  SCHEDULE III
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                   Partnership Property Pledged as Collateral
                                 MARCH 31, 2006
<TABLE>
<CAPTION>
                                                                  Initial Cost to Partnership
                                                                  ----------------------------

                                                                                                 Cost Capitalized
                                                                                                  Subsequent to
                                                                                 Buildings and     Acquisition:
                  Description                     Encumbrances        Land       Improvements      Improvements
-----------------------------------------------   -------------   ------------   -------------   ----------------
<S>                                               <C>             <C>            <C>               <C>
Apartment Complexes
Edward Hotel Limited Partnership
  Los Angeles, CA                                 $ (2,399,459)   $    275,000   $    591,240      $  2,580,054
Pacific East, L.P.
  Brooklyn, NY                                      (2,008,133)          1,950      3,125,584           192,537
Overtown Development Group, Ltd.
  Miami, FL                                         (1,088,340)         52,284      2,627,099           164,076
Sumpter Commons Associates, L.P.                    (1,200,094)            500      1,862,916            50,963
Park Housing Limited Partnership                      (827,097)          5,000      2,343,351            64,880
Livingston Manor Urban Renewal Associates, L.P.     (3,080,000)        119,988      7,047,532           632,130
Jefferis Square Housing Partnership, L.P.           (1,900,000)         55,158              0         4,613,413
2301 First Avenue Limited Partnership               (4,809,226)         64,350      5,818,269           208,586
Lewis Street Limited Partnership                    (1,600,000)          7,000              0         2,780,800
Savannah Park Housing Limited Partnership             (726,199)              0      2,049,888         2,112,642
Brannon Group, L.C                                  (4,415,108)        380,000      2,598,402         5,520,776
Independence Tax Credit Fund L.P.
 (Mansion Court Phase II Venture
  and Aspen Olive Associates
  Consolidated)                                     (2,510,527)          1,732        339,661         6,277,660
Primm Place Partners, L.P.                          (4,745,086)        168,258              0         6,798,748
BK-9-A Partners L.P.                                (1,975,000)              0      1,517,313            56,847
BK-10K Partners L.P.                                (1,025,189)         11,000      1,637,762            52,949
Westmill Creek Associates III L.P.                  (2,865,269)         37,031      6,922,563            29,651
Universal Court Associates                          (1,650,000)         31,024        279,220         4,663,433
New Zion Apartments                                   (909,049)         20,000      2,688,770            12,362
Dreitzer House                                      (4,275,000)              5              0         6,722,063
                                                  ------------    ------------   ------------      ------------
                                                  $(44,008,776)   $  1,230,280   $ 41,449,570      $ 43,534,770
                                                  ============    ============   ============      ============


<CAPTION>

                                                  Gross Amount at which Carried at Close of Period
                                                  ------------------------------------------------



                                                                   Buildings and                       Accumulated
                  Description                         Land         Improvements           Total        Depreciation
-----------------------------------------------   ------------     -------------      -------------    ------------
<S>                                               <C>              <C>                <C>             <C>
Apartment Complexes
Edward Hotel Limited Partnership
  Los Angeles, CA                                 $    281,123     $  3,165,171       $  3,446,294    $  1,139,772
Pacific East, L.P.
  Brooklyn, NY                                           8,075        3,311,996          3,320,071       1,414,306
Overtown Development Group, Ltd.
  Miami, FL                                             58,408        2,785,051          2,843,459         816,817
Sumpter Commons Associates, L.P.                         3,673        1,910,706          1,914,379         717,658
Park Housing Limited Partnership                         8,173        2,405,058          2,413,231         847,216
Livingston Manor Urban Renewal Associates, L.P.        123,161        7,676,489          7,799,650       1,977,078
Jefferis Square Housing Partnership, L.P.               39,347        4,629,224          4,668,571       1,195,759
2301 First Avenue Limited Partnership                   67,523        6,023,882          6,091,205       2,478,751
Lewis Street Limited Partnership                        10,173        2,777,627          2,787,800       1,001,416
Savannah Park Housing Limited Partnership                3,173        4,159,357          4,162,530       1,178,905
Brannon Group, L.C                                     383,173        8,116,005          8,499,178       1,741,892
Independence Tax Credit Fund L.P.
 (Mansion Court Phase II Venture
  and Aspen Olive Associates
  Consolidated)                                          5,123        6,613,930          6,619,053       1,556,165
Primm Place Partners, L.P.                              67,577        6,899,429          6,967,206       1,613,986
BK-9-A Partners L.P.                                     3,173        1,570,987          1,574,160         426,179
BK-10K Partners L.P.                                    14,176        1,687,535          1,701,711         465,362
Westmill Creek Associates III L.P.                      37,649        6,951,596          6,989,245       2,717,824
Universal Court Associates                              31,642        4,942,035          4,973,677         966,857
New Zion Apartments                                     20,618        2,700,514          2,721,132         916,078
Dreitzer House                                             623        6,721,445          6,722,068       1,735,428
                                                  ------------     ------------       ------------    ------------
                                                  $  1,166,583     $ 85,048,037       $ 86,214,620    $ 24,907,449
                                                  ============     ============       ============    ============

<CAPTION>


                                                                                 Life on which
                                                                                Depreciation in
                                                     Year of                     Latest Income
                                                  Construction/      Date       Statements are
                  Description                      Renovation      Acquired     Computed(a)(b)
-----------------------------------------------   -------------    ---------    ---------------
<S>                                                  <C>           <C>           <C>
Apartment Complexes
Edward Hotel Limited Partnership
  Los Angeles, CA                                    1994-95       Nov. 1994        27.5 years
Pacific East, L.P.
  Brooklyn, NY                                       1994-95       Dec. 1994        27.5 years
Overtown Development Group, Ltd.
  Miami, FL                                          1994-95       Dec. 1994          40 years
Sumpter Commons Associates, L.P.                     1995-96       Apr. 1995        27.5 years
Park Housing Limited Partnership                     1995-96        May 1995        27.5 years
Livingston Manor Urban Renewal Associates, L.P.      1995-96       June 1995       15-40 years
Jefferis Square Housing Partnership, L.P.            1995-96       June 1995       20-40 years
2301 First Avenue Limited Partnership                1995-96       Aug. 1995        27.5 years
Lewis Street Limited Partnership                     1995-96       Oct. 1995        27.5 years
Savannah Park Housing Limited Partnership            1995-96       Oct. 1995        27.5 years
Brannon Group, L.C                                   1995-96       Dec. 1995          40 years
Independence Tax Credit Fund L.P.
 (Mansion Court Phase II Venture
  and Aspen Olive Associates
  Consolidated)                                      1995-96       Dec. 1995       20-40 years
Primm Place Partners, L.P.                           1995-96       Dec. 1995       10-40 years
BK-9-A Partners L.P.                                 1995-96       Dec. 1995          40 years
BK-10K Partners L.P.                                 1995-96       Dec. 1995          40 years
Westmill Creek Associates III L.P.                   1997-98       Dec. 1996        27.5 years
Universal Court Associates                           1997-98       Apr. 1997       20-40 years
New Zion Apartments                                  1997-98       Nov. 1997     15-27.5 years
Dreitzer House                                       1997-99       Dec. 1997        27.5 years
</TABLE>

(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.


                                       61
<PAGE>



                      INDEPENDENCE TAX CREDIT PLUS L.P. III
                                AND SUBSIDIARIES
                                  SCHEDULE III
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                   Partnership Property Pledged as Collateral
                                 MARCH 31, 2006
                                   (continued)

<TABLE>
<CAPTION>

                                         Cost of Property and Equipment                  Accumulated Depreciation
                                 -------------------------------------------    ------------------------------------------
                                                                    Year Ended March 31,
                                 -----------------------------------------------------------------------------------------
                                     2006            2005           2004            2006           2005           2004
                                 ------------    ------------   ------------    ------------   ------------   ------------
<S>                              <C>             <C>            <C>             <C>            <C>            <C>
Balance at beginning of period   $ 86,076,450    $ 85,974,858   $ 85,552,260    $ 22,332,456   $ 19,701,934   $ 17,018,083
Additions during period:
  Improvements                        138,170         121,592        422,598
  Depreciation expense                                                             2,574,993      2,650,522      2,683,851
Reductions during period:
  Dispositions                                        (20,000)             0                        (20,000)             0
                                 ------------    ------------   ------------    ------------   ------------   ------------

Balance at close of period       $ 86,214,620    $ 86,076,450   $ 85,974,858    $ 24,907,449   $ 22,332,456   $ 19,701,934
                                 ============    ============   ============    ============   ============   ============

</TABLE>

At 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.


                                       62