UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C.  20549




______________




FORM 10-Q




______________


(Mark One)





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





For the quarterly period ended June 30, 2010





OR





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








Commission File Number 0-17015








INDEPENDENCE TAX CREDIT PLUS L.P. IV


(Exact name of registrant as specified in its charter)








Delaware

13-3809869(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)625 Madison Avenue, New York, New York

10022(Address of principal executive offices)

(Zip Code)








Registrant’s telephone number, including area code (212) 317-5700








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.  þ Yeso No








Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  o Yes    o No








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








Large accelerated filer  o

Accelerated filer  oNon-accelerated filer  o  (Do not check if a smaller reporting company)

Smaller reporting company  þ








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













PART I – FINANCIAL INFORMATION





Item 1.  Financial Statements.





INDEPENDENCE TAX CREDIT PLUS L.P. IV


AND SUBSIDIARIES


Condensed Consolidated Balance Sheets














June 30,

2010


March 31,

2010(Unaudited)ASSETSOperating assetsProperty and equipment - (at cost, net of accumulated depreciation of $23,223,594 and $22,949,541, respectively)

$
18,669,456


$
18,938,097Cash and cash equivalents


1,046,040



1,176,371Cash held in escrow


2,048,130



2,053,883Deferred costs (net of accumulated amortization of $729,783 and $723,892, respectively)


308,629



314,520Due from local general partners and affiliates (Note 2)


420,985



415,917Other assets


403,448



368,261Total operating assets

$
22,896,688


$
23,267,049LIABILITIES AND PARTNERS’ CAPITAL (DEFICIT)Operating liabilitiesMortgage notes payable

$
24,622,040


$
24,703,113Accounts payable and other liabilities


621,873



554,586Accrued interest payable


6,602,001



6,474,837Security deposit payable


307,550



308,937Due to local general partners and affiliates (Note 2)


1,709,732



1,760,553Due to general partners and affiliates (Note 2)


2,504,933



2,470,084Total operating liabilities


36,368,129



36,272,110Commitments and contingencies (Note 6)Partners’ capital (deficit):Limited partners – 45,844 Beneficial Assignment Certificates (“BACs”) issued and outstanding


(14,174,974
)


(13,728,173
)General partners


(549,833
)


(545,320
)Independence Tax Credit Plus L.P. IV total


(14,724,807
)


(14,273,493
)Noncontrolling interests


1,253,366



1,268,432Total partners’ capital


(13,471,441
)


(13,005,061
)Total liabilities and partners’ capital

$
22,896,688


$
23,267,049The accompanying notes are an integral part of these condensed consolidated financial statements.














- 2 -








INDEPENDENCE TAX CREDIT PLUS L.P. IV


AND SUBSIDIARIES


Condensed Consolidated Statements of Operations


(Unaudited)














Three Months Ended

June 30,2010


2009*Operations:RevenuesRental income

$
1,231,864


$
1,250,919Other


19,691



66,028Total revenues


1,251,555



1,316,947ExpensesGeneral and administrative


375,798



393,109General and administrative-related parties (Note 2)


172,505



159,134Repairs and maintenance


233,903



224,485Operating and other


202,692



221,346Real estate taxes


34,879



33,532Insurance


58,046



62,821Interest


336,168



344,926Depreciation and amortization


279,944



426,460Total expenses


1,693,935



1,865,813Net loss


(442,380
)


(548,866
)Net income attributable to noncontrolling interests


(8,934
)


(5,644
)Net loss attributable to Independence Tax Credit Plus L.P. IV

$
(451,314
)

$
(554,510
)Net loss – limited partners

$
(446,801
)

$
(548,965
)Number of BACs outstanding


45,844



45,844Net loss per weighted average BAC

$
(9.75
)

$
(11.97
)*Reclassified for comparative purposes.



The accompanying notes are an integral part of these condensed consolidated financial statements.

















- 3 -








INDEPENDENCE TAX CREDIT PLUS L.P. IV


AND SUBSIDIARIES


Condensed Consolidated Statement of Changes in Partners’ Capital (Deficit)


(Unaudited)














Independence Tax Credit Plus L.P. IVTotal

Limited

Partners

General

Partner

Noncontrolling InterestsPartners’ capital (deficit) – April 1, 2010

$
(13,005,061
)
$
(13,728,173
)
$
(545,320
)
$
1,268,432Net loss (income)


(442,380
)

(446,801
)

(4,513
)

8,934Distributions


(24,000
)

0


0


(24,000
)Partners’ capital (deficit) – June 30, 2010

$
(13,471,441
)
$
(14,174,974
)
$
(549,833
)
$
1,253,366The accompanying notes are an integral part of these condensed consolidated financial statements.












- 4 -







INDEPENDENCE TAX CREDIT PLUS L.P. IV


AND SUBSIDIARIES


Condensed Consolidated Statements of Cash Flows


(Unaudited)














Three Months Ended

June 30,2010


2009Cash flows from operating activities:Net loss

$
(442,380
)

$
(548,866
)Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation and amortization


279,944



426,460Decrease (increase) in cash held in escrow


27,106



(75,642
)Increase in other assets


(35,187
)


(42,793
)Increase in accounts payable


67,287



35,225Increase in accrued interest payable


127,164



150,636Decrease in security deposit payable


(1,387
)


(1,150
)Increase in due from general partner and affiliates


(5,068
)


(3,913
)Decrease in due to local general partners and affiliates


(49,596
)


(17,812
)Increase in due to general partner and affiliates


34,849



80,888Total adjustments


445,112



551,899Net cash provided by operating activities


2,732



3,033Cash flows from investing activities:(Increase) decrease in cash held in escrow


(21,353
)


112,153Acquisition of property and equipment


(5,412
)


0Net payments from local general partners and affiliates


(1,225
)


0Net cash (used in) provided by investing activities


(27,990
)


112,153Cash flows from financing activities:Repayments of mortgage notes


(81,073
)


(129,748
)Distributions from noncontrolling interests


(24,000
)


(62,000
)Net cash used in financing activities


(105,073
)


(191,748
)Net decrease in cash and cash equivalents


(130,331
)


(76,562
)Cash and cash equivalents at beginning of period


1,176,371



1,221,135Cash and cash equivalents at end of period

$
1,046,040


$
1,144,573The accompanying notes are an integral part of these condensed consolidated financial statements.














- 5 -






INDEPENDENCE TAX CREDIT PLUS L.P. IV
 AND SUBSIDIARIES
 Notes to Condensed Consolidated Financial Statements
 June 30, 2010
 (Unaudited)


NOTE 1 – General




The condensed consolidated financial statements, as of June 30, 2010, include the accounts of Independence Tax Credit Plus L.P. IV (the “Partnership”) and twelve other limited partnerships (“subsidiary partnerships”, “subsidiaries” or “Local Partnerships”) owning affordable apartment complexes (“Properties”) that are eligible for the low-income housing tax credits.  Some of the Properties may also be eligible for the historic rehabilitation tax credits.  The general partner of the Partnership is Related Independence L.L.C., a Delaware limited liability company (the “General Partner”).  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 partner of the subsidiary partnerships (“Local General Partners”) and to approve certain major operating and financial decisions, the Partnership has a controlling financial interest in the subsidiary partnerships.  The Partnership is currently in the process of developing a plan to dispose of all its investments.




For financial reporting purposes, the Partnership’s first fiscal quarter ends June 30.  The first quarter for all subsidiaries ends March 31.  Accounts of the subsidiaries have been adjusted for intercompany transactions from April 1 through June 30.  The Partnership’s fiscal quarter ends three months after the subsidiaries in order to allow adequate time for the subsidiaries’ financial statements to be prepared and consolidated.




All intercompany accounts and transactions with the subsidiary partnerships have been eliminated in consolidation.




In accordance with FASB Accounting Standards Codification (“ASC”) Topic 810, Noncontrolling Interests in Consolidated Financial Statements (“ASC 810”), income attributable to noncontrolling interests amounted to approximately $9,000 and $6,000 for the three months ended June 30, 2010 and 2009, respectively.  The Partnership’s investment in each subsidiary is equal to the respective subsidiary’s partners’ equity less noncontrolling interest capital, if any.




Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted or condensed. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Partnership’s Annual Report on Form 10-K for the year ended March 31, 2010.




The books and records of the Partnership are maintained on the accrual basis of accounting in accordance with GAAP.  In the opinion of the General Partner of the Partnership, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the consolidated financial position of the Partnership as of June 30, 2010, the results of its operations and its cash flows for the three months June 30, 2010 and 2009.  However, the operating results and cash flows for the three months ended June 30, 2010 may not be indicative of the results for the entire year.




Property and Equipment/Valuation of Long-Lived Assets




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.  The determination of asset impairment is a two-step process.  First, management estimates amounts recoverable through future operations and sale of the property on an undiscounted basis.  If such estimates are below depreciated cost, property investments are reduced to estimated fair value (using estimated future discounted net cash flows) when the property is considered to be impaired and the depreciated cost exceeds estimated fair value.




At the time management commits to a plan to dispose of assets, said assets are adjusted to the lower of carrying amount or fair value less costs to sell. These assets are classified as property and equipment-held for sale and are not depreciated. There are no assets classified as property and equipment-held for sale at June 30, 2010.






NOTE 2 – Related Party Transactions




Pursuant to the Partnership Agreement and the Local Partnership Agreements, the General Partner, the Local General Partners and their respective affiliates receive their pro-rata share of profits, losses and tax credits.




A)
Guarantees




The Partnership had negotiated Operating Deficit Guaranty Agreements with the Local Partnerships whereby the Local General Partners of such Local Partnerships and/or their affiliates agreed to fund operating deficits for a specified period of time. The terms of the Operating Deficit Guaranty Agreements vary for each of these Local Partnerships, with maximum dollar amounts to be funded for a specified period of time, generally three years, commencing on the break-even date. As of June 30, 2010 and 2009, Operating Deficit Guarantees aggregate approximately $123,000 and $123,000, respectively.  Amounts funded under such agreements will be treated as non-interest bearing loans, which will be paid only out of 50% of available cash flow or out of available net sale or refinancing proceeds.  As of June 30, 2010 and 2009, there has been no funding under the Operating Deficit Guaranty Agreements.














- 6 -


INDEPENDENCE TAX CREDIT PLUS L.P. IV
 AND SUBSIDIARIES
 Notes to Condensed Consolidated Financial Statements
 June 30, 2010
 (Unaudited)


B)
Related Party Expenses




An affiliate of the General Partner has a .01% interest as a special limited partner in each of the Local Partnerships.




The costs incurred to related parties from operations for the three months ended June 30, 2010 and 2009 were as follows:




Three Months Ended

June 30,2010


2009Partnership management fees (a)

$
76,000


$
74,750Expense reimbursement (b)


38,775



37,093Local administrative fee (c)


9,750



9,500Total general and administrative-General Partners


124,525



121,343Property management fees incurred to affiliates of the subsidiary partnerships’ general partners


47,980



37,791Total general and administrative-related parties

$
172,505


$
159,134







(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 are accrued without interest and will be payable out of sales or refinancing proceeds only to the extent of available funds after payments on all Partnership liabilities have been made other than those owed to the General Partner and its affiliates.  Partnership management fees owed to the General Partner amounting to approximately $1,923,000 and $1,847,000 were accrued and unpaid as of June 30, 2010 and March 31, 2010, respectively.  Current year partnership management fees may be paid out of operating reserves or refinancing and sales proceeds.  However, the General Partner cannot demand payment of the deferred fees beyond the Partnership’s ability to pay them.




(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.  Expense reimbursements and asset monitoring fees owed to the General Partner and its affiliates amounting to approximately $124,000 and $86,000 were accrued and unpaid as of June 30, 2010 and March 31, 2010, respectively.  The General Partner does not intend to demand payment of the deferred payables beyond the Partnership’s ability to pay them.  The Partnership anticipates that these will be paid from working capital reserves or future sales proceeds.




(c)
Independence SLP IV L.P., a special 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.  Local administrative fees owed to Independence SLP IV L.P. amounting to $199,000 and $279,000 were accrued and unpaid as of June 30, 2010 and March 31, 2010, respectively.  These fees have been deferred in certain cases and the Partnership anticipates that they will be paid from working capital reserves or future sales proceeds.




B)
Due to/from Local General Partners and Affiliates




The amounts due to Local General Partners and affiliates from operating liabilities consist of the following:




June 30,

2010


March 31,

2010Development fee payable

$
1,552,470


$
1,586,284Construction costs payable


50,000



50,000Operating advances


104,036



71,447Management and other fees


3,226



52,822$
1,709,732


$
1,760,553













- 7 -


INDEPENDENCE TAX CREDIT PLUS L.P. IV
 AND SUBSIDIARIES
 Notes to Condensed Consolidated Financial Statements
 June 30, 2010
 (Unaudited)


Due from Local General Partners and affiliates from operating liabilities consists of the following:




June 30,

2010


March 31,

2010Local general partner loan receivable

$
420,985


$
415,917







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 and Cash Held in Escrow


The carrying amount approximates fair value.




Accounts Payable and Other Liabilities


The carrying amount approximates fair value.




Mortgage Notes Payable


The Partnership has categorized its financial assets and liabilities based upon the fair value hierarchy specified by ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”). This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures.  This standard does not require any new fair value measurements, but discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost).  This standard provides for a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels.  The following is a brief description of those three levels:




Level 1:
Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.




Level 2:
Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.  These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.




Level 3:
Unobservable inputs that reflect the Partnership’s own assumptions.




The estimated fair value of financial instruments has been determined using available market information or other appropriate valuation methodologies.  However, considerable judgment is required in interpreting market data to develop estimates of fair value.  Consequently, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange.  The following are financial instruments for which the Partnership’s estimate of fair value differs from the carrying amounts:




At June 30, 2010

At March 31, 2010Carrying 
Amount

Fair Value

Carrying 
Amount

Fair ValueLIABILITIES:Mortgage notes and accrued interest

$
31,224,041

$
12,775,917

$
31,177,950

$
12,763,485







Fair value has been estimated using Level 3 inputs.




For the mortgage notes, fair value is calculated using present value cash flow models based on a discount rate.  It was determined that the Tender Option Bond market, through which these bonds have been securitized in the past, continued to see a dramatic slowdown with limited liquidity and significantly reduced transaction levels.  To assist in valuing these notes, the Partnership held separate discussions with various third party investment banks who are leaders in the municipal bond business.  The discussions produced assumptions that were based on market conditions as well as the credit quality of the underlying property partnerships, which held the mortgage notes, to determine what discount rates to utilize.












- 8 -






INDEPENDENCE TAX CREDIT PLUS L.P. IV
 AND SUBSIDIARIES
 Notes to Condensed Consolidated Financial Statements
 June 30, 2010
 (Unaudited)


Due to General Partner and Affiliates and Due to/from Local General Partners and Affiliates


Management believes it is not practical to estimate the fair value of due to General Partner and affiliates and due to/from Local General Partners and affiliates because market information on such unique obligations are not currently available.






NOTE 4 – Sale of Properties




The Partnership is currently in the process of developing a plan to dispose of all its investments.  It is anticipated that this process will continue to take a number of years.  As of June 30, 2010, the Partnership’s limited partnership interest in one Local Partnership and the property and the related assets and liabilities of one Local Partnership have been sold.  There can be no assurance as to when the Partnership will dispose of its remaining investments or the amount of proceeds which may be received.  However, based on the historical operating results of the Local Partnerships and the current economic conditions, including changes in tax laws, it is unlikely that the proceeds from such sales received by the Partnership will be sufficient to return to the BACs holders their original investments.  All gains and losses on sales are included in discontinued operations.






NOTE 5 – Commitments and Contingencies




There have been no material changes and/or additions to the disclosures regarding the subsidiary partnerships which were included in the Partnership’s Annual Report on Form 10-K for the fiscal year ended March 31, 2010.




Property Management Fees




The Local Partnerships have entered into management agreements with ten managing agents to manage the Partnership's twelve properties.  Of these, six managing agents are affiliates of the Local General Partner for six properties.  The base management fee percentage ranges between 5% and 10% of all rents collected, and the management agreement for one of the properties (GP Kaneohe Limited Partnership) provides for a monthly payment of $2,024. Property management fees incurred by the Local Partnerships amounted to $80,134 and $76,959 for the three months ended June 30, 2010 and 2009, respectively.  Of these fees, $47,980 and $37,791 were incurred to affiliates of the subsidiary partnerships’ general partners (“Local General Partners”) for the three months ended June 30, 2010 and 2009, respectively.




Other




The Partnership is subject to risks incident to potential losses arising from the management and ownership of real estate. The Partnership can also be affected by poor economic conditions generally; however no more than 25% of the properties are located in any single state. The properties are concentrated in New Jersey (25%), Kentucky (17%) and California (17%). There are also substantial risks associated with owning properties receiving government assistance, for example the possibility that Congress may not appropriate funds to enable the U.S. 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 owners’ equity contribution.  As of June 30, 2010, there were three Local Partnerships subsidized by HUD.  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 contract expires.




The Partnership and BACs holders began to recognize Tax Credits with respect to a Property when the Credit Period for such Property commenced.  As of December 31, 2009, all the Local Partnerships had completed their Credit Periods.  However, each Local Partnership must continue to comply with the Tax Credit requirements until the end of the fifteen year compliance period (“Compliance Period”) in order to avoid recapture of the Tax Credits.  The Compliance Periods will continue through December 31, 2014 with respect to the Properties depending upon when the Compliance Period commenced.




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 from 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 not be affected. However, the geographic diversification of the portfolio may not protect against a general downturn in the national economy.












- 9 -






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




Liquidity and Capital Resources




The Partnership originally invested approximately $37,555,000 (not including acquisition fees of approximately $1,771,000) of net proceeds in fourteen Local Partnerships of which, as of June 30, 2010, approximately $796,000 remains to be paid to the Local Partnerships (including approximately $341,000 being held in escrow) as certain benchmarks, such as occupancy level, must be attained prior to the release of the funds.  During the three months ended June 30, 2010, the Partnership did not make any payments to the Local Partnerships.  The Partnership does not anticipate acquiring additional properties, but the Partnership may be required to fund potential purchase price adjustments based on tax credit adjustor clauses.  There were no such adjustments made during the three months ended June 30, 2010.




Short-Term




The Partnership’s primary sources of funds include:  (i) working capital reserves, exclusive of Local Partnerships’ working capital; (ii) interest earned on the working capital reserves; (iii) cash distributions from operations of the Local Partnerships; and (iv) sales proceeds and distributions.  Such funds, although minimal (other than possible sales proceeds and sales distributions), are available to meet the obligations of the Partnership.  The Partnership does not anticipate providing cash distributions to BACs holders in circumstances other than refinancing or sales.  During the three months ended June 30, 2010 and 2009, there were no distributions from operations of the Local Partnerships.




For the three months ended June 30, 2010, cash and cash equivalents of the Partnership and its consolidated Local Partnerships decreased approximately $130,000 due to acquisitions of property and equipment of approximately $5,000, an increase in cash held in escrow of approximately $21,000, repayments of mortgage notes of approximately $81,000, a distribution from noncontrolling interests of approximately $24,000 and net payments from local general partner and affiliates of approximately $1,000, which exceeded net cash provided by operating activities of approximately $3,000.  Included in the adjustments to reconcile the net loss to net cash provided by operating activities is depreciation and amortization of approximately $280,000.




Total expenses for the three months ended June 30, 2010 and 2009, excluding depreciation and amortization, interest and general and administrative-related parties, totaled $905,318 and $935,293, respectively.




Accounts payable totaled $621,873 and $554,586 as of June 30, 2010 and March 31, 2010, 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.  Accrued interest payable as of June 30, 2010 and March 31, 2010 was $6,602,001 and $6,474,837, respectively.  Accrued interest payable 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 has 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.  Furthermore, each Local Partnership’s mortgage notes are collateralized by the land and buildings of the respective Local Partnership, and are without further recourse to the Partnership.




The Partnership 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 not including fees owed to the General Partner.  Assuming the General Partner continues to defer the payment of fees as discussed below and in Note 2 to the Financial Statements, the Partnership believes it 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.




Security deposits payable are offset by cash held in security deposits, which are included in “Cash held in escrow” on the financial statements.




At June 30, 2010, there is approximately $93,000 in working capital reserves.  The General Partner believes that these reserves, plus any cash distributions received from the operations of the Local Partnerships, will be sufficient to fund the Partnership’s ongoing operations for the foreseeable future not including fees owed to the General Partner.




The Partnership had negotiated Operating Deficit Guaranty Agreements with the Local Partnerships by which the general partners of such Local Partnerships and/or their affiliates agreed to fund operating deficits for a specified period of time. The terms of the Operating Deficit Guaranty Agreements vary for each of these Local Partnerships, with maximum dollar amounts to be funded for a specified period of time, generally three years, commencing on the break-even date.  As of both June 30, 2010 and 2009, the gross amount of the Operating Deficit Guarantees aggregate approximately $123,000 and $123,000, respectively.  As of both June 30, 2010 and 2009, no amounts have been funded under the Operating Deficit Guaranty Agreements.  Amounts funded under such agreements will be treated as non-interest bearing loans, which will be paid only out of 50% of available cash flow or out of available net sale or refinancing proceeds.




Long-Term




Partnership management fees owed to the General Partner amounting to approximately $1,923,000 and $1,847,000 were accrued and unpaid as of June 30, 2010 and March 31, 2010, respectively, and are included in the line item Due to general partners and affiliates in the consolidated balance sheets.  Unpaid partnership management fees for any year are to be deferred without interest and will be payable out of sales or refinancing proceeds only to the extent of available funds after payments on all Partnership liabilities have been made other than to those owed to the General Partner and its affiliates.




All other payables are expected to be paid, if at all, from working capital reserves.  The General Partner does not anticipate making any future advances of operating funds to any of the Local Partnerships in which the Partnership has invested.  Even if a situation arose where the General Partner and its affiliates needed to but were not able to make operating advances in the future due to lack of funds, the only impact on the Partnership would be that it would lose its investment in that particular Local Partnership.  The Partnership’s ability to continue its operations would not be affected.














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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. Furthermore, inflation generally does not impact the fixed long-term financing under which real property investments were purchased. Inflation also affects the Local Partnerships adversely by increasing operating costs, such as fuel, utilities, and labor.  Since revenues from sales of assets are driven by market conditions, inflation has little impact on sales.




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 from 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.  As of December 31, 2009, the Credit Periods have expired.  However, each Local Partnership must continue to comply with the Tax Credit requirements until the end of the Compliance Period in order to avoid recapture of the Tax Credits.  The Compliance Periods expired with respect to the two Properties that have been sold but will continue through December 31, 2014 with respect to the remaining Properties depending upon when the Compliance Period commenced.




Off-Balance Sheet Arrangements




The Partnership has no off-balance sheet arrangements.




Tabular Disclosure of Contractual Obligations


The Partnership disclosed in Item 7 of the Partnership’s Annual Report on Form 10-K for the year ended March 31, 2010, the Partnership’s commitments to make future payments under its debt agreements and other contractual obligations.  There are no material changes to such disclosure or amounts as of June 30, 2010.




Critical Accounting Policies and Estimates




In preparing the condensed 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 condensed 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 which are included in the Partnership’s Annual Report on Form 10-K for the year ended March 31, 2010.




Results of Operations




The results of operations for the three months ended June 30, 2010 and 2009 continued to be primarily in the form of rental income with corresponding expenses divided among operations, depreciation and mortgage interest.




Rental income decreased approximately 2% for the three months ended June 30, 2010, as compared to the corresponding period in 2009, primarily due to increases in vacancies at several Local Partnerships partially offset by an increase in rental rates and occupancy at two Local Partnerships.




Other income decreased approximately $46,000 for the three months ended June 30, 2010 as compared to the corresponding period in 2009, primarily due to a loss recognized relating to a write-off of late charges and damages at one Local Partnership and a decrease in internal operating advances at a second Local Partnership.




Total expenses, excluding depreciation and amortization remained fairly consistent, with a decrease of approximately 2% for the three months ended June 30, 2010 as compared to the corresponding period in 2009.




Depreciation and amortization decreased approximately $147,000 for the three months ended June 30, 2010 as compared to the corresponding period in 2009, primarily due to the reduction in carrying amounts relating to impairment of assets recorded during the year ended March 31, 2010 at four Local Partnerships.




Item 3.  Quantitative and Qualitative Disclosures about Market Risk.




The Partnership has mortgage notes that are payable in aggregate monthly installments including principal and interest at rates varying from 0% to 8.46% 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 disclosed in Item 8, Note 3 to the consolidated financial statements in the Partnership’s Annual Report on Form 10-K for the year ended March 31, 2010, as well as in Item 2, the fair value of the mortgage notes payable.  There are no material changes to such disclosure amounts as of June 30, 2010.




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 financial 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.












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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. Furthermore, inflation generally does not impact the fixed long-term financing under which real property investments were purchased.  Inflation also affects the Local Partnerships adversely by increasing operating costs, for example, for such items as fuel, utilities and labor.  However, continued inflation may result in appreciated values of the Local Partnership’s apartment complexes over a period of time as rental revenues and replacement costs continue to increase.




The Partnership does not have any other market risk sensitive instruments.




Item 4T.  Controls and Procedures.




(a)           Evaluation of Disclosure Controls and Procedures.The Chief Executive Officer and Chief Financial Officer of Related Independence L.L.C, the general partner of the Partnership, have evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”) as of the end of the period covered by this report.  Based on such evaluation, such officers have concluded that, as of the end of such period, the Partnership’s disclosure controls and procedures are effective.




(b)           Management’s Annual Report on Internal Control over Financial Reporting.Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f).  In evaluating the Partnership’s internal control over financial reporting, management has adopted the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring organizations of the Treadway Commission (the “COSO Framework”).  Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer of the General Partner, the Partnership conducted an evaluation of the effectiveness of its internal control over financial reporting as of March 31, 2010.  The Partnership’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles.  Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Partnership; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Partnership are being made only in accordance with authorizations of management and directors of the Partnership; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Partnership’s assets that could have a material effect on the financial statements.  However, because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.




Based on management’s evaluation under the COSO Framework, it has concluded that the Partnership’s internal control over financial reporting, was, as of March 31, 2010, (1) effective at the Partnership level, in that they provide reasonable assurance that information required to be disclosed by the Partnership in the reports it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (2) ineffective at the subsidiary level due to certain control deficiencies noted in the audit reports for such subsidiaries.  The General Partner does not have control over the internal controls at the subsidiary level.  Management believes they have sufficient controls at the Partnership level to mitigate these deficiencies, and such deficiencies do not have a material impact on the consolidated financial statements.




(c)           Changes in Internal Controls over Financial Reporting.Except as noted in (b) above, during the period ended June 30, 2010, there were no changes in the Partnership’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

















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PART II. OTHER INFORMATION











Item 1.
Legal Proceedings. – NoneItem 1A.
Risk Factors. – No changesItem 2.
Unregistered Sales of Equity Securities and Use of Proceeds. – NoneItem 3.
Defaults upon Senior Securities. – NoneItem 4.
(Removed and Reserved)Item 5.
Other Information. – NoneItem 6.
Exhibits.(4)
Form of Amended and Restated Agreement of Limited Partnership of the Partnership (attached to the Prospectus as Exhibit A)*(10A)
Form of Subscription Agreement (attached to the Prospectus as Exhibit B)*(10B)
Form of Escrow Agreement between the Partnership and the Escrow Agent**(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**(31.1)
Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a).(31.2)
Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a).(32.1)
Certification Pursuant to Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Title 18 of the United States Code (18 U.S.C. 1350).*
Incorporated herein by reference to the final Prospectus as filed pursuant to Rule 424 under the Securities Act of 1933.**
Filed as an exhibit to the Registration Statement on Form S-11 of the Partnership (File No. 33-89968) and incorporated herein by reference thereto.











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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. IV


(Registrant)











By:
RELATED INDEPENDENCE L.L.C.,a General PartnerDate:
August 12, 2010



By:
/s/ Robert A. PaceRobert A. PaceChief Financial Officer and Principal Accounting OfficerDate:
August 12, 2010



By:
/s/ Andrew J. WeilAndrew J. WeilPresident and Chief Executive Officer











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