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, 2012

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

For the transition period from

Commission File Number 0-24650

INDEPENDENCE TAX CREDIT PLUS L.P. III

(Exact name of registrant as specified in its charter)

Delaware		13-3746339
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

100 Church Street, New York, New York		10007
(Address of principal executive offices)		(Zip Code)

(212) 317-5700

Registrant’s telephone number, including area code

(Former name, former address and former fiscal year, if changed since last report)

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 Yes o 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). þ 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 o
Non-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. III
AND SUBSIDIARIES
Consolidated Balance Sheets



		June 30,		March 31,
		2012		2012
ASSETS			(Unaudited)		(Audited)

Operating assets
	Property and equipment at cost, net of accumulated depreciation of $9,240,667 and $14,497,051, respectively	$	5,872,590	$	5,943,626
	Cash and cash equivalents		1,370,230		1,489,623
	Cash held in escrow		3,073,350		3,993,172
	Deferred costs, net of accumulated amortization of $318,380 and $367,019, respectively		175,673		224,695
	Other assets		455,317		457,933

Total operating assets			10,947,160		12,109,049

Assets from discontinued operations (Note 6)
	Property and equipment held for sale, net of accumulated depreciation of $1,541,395 and $1,541,394, respectively		1,285,678		1,285,678
	Net assets held for sale		356,230		411,857
Total assets from discontinued operations			1,641,908		1,697,535

Total assets		$	12,589,068	$	13,806,584

LIABILITIES AND PARTNERS’ CAPITAL (DEFICIT)

Liabilities
	Mortgage notes payable	$	15,587,964	$	19,963,691
	Accounts payable		242,278		327,110
	Accrued interest payable		1,766,024		4,602,247
	Security deposit payable		154,790		205,617
	Due to local general partners and affiliates		621,519		1,118,738
	Due to general partners and affiliates		4,232,448		4,246,100

Total operating liabilities			22,605,023		30,463,503

Liabilities from discontinued operations (Note 6)
	Mortgage notes payable of assets held for sale		546,207		562,445
	Net liabilities held for sale		291,756		298,669
Total liabilities from discontinued operations			837,963		861,114

Total liabilities			23,442,986		31,324,617

Commitments and contingencies (Note 7)

Partners’ capital (deficit)
	Limited partners (43,440 BACs issued and outstanding)		(12,576,347)		(19,124,560)
	General partners		1,598,855		1,519,586

	Independence Tax Credit Plus L.P. III total		(10,977,492)		(17,604,974)

Noncontrolling interests			123,574		86,941

Total partners’ capital (deficit)			(10,853,918)		(17,518,033)

Total liabilities and partners’ capital (deficit)		$	12,589,068	$	13,806,584


	See accompanying notes to consolidated financial statements.

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INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)

	Three Months Ended
	June 30,
	2012		2011*

Revenues
Rental income	$	723,416	$	699,216
Other income		20,775		27,190

Total revenues		744,191		726,406

Expenses
General and administrative		309,071		273,956
General and administrative-related parties (Note 2)		84,298		138,716
Repairs and maintenance		94,198		115,641
Operating		131,365		120,127
Taxes		23,650		23,660
Insurance		39,205		38,106
Financial, principally interest		92,062		90,317
Depreciation and amortization		76,761		77,003

Total expenses from operations		850,610		877,526

Loss from operations		(106,419)		(151,120)
Income (loss) from discontinued operations		6,837,459		(171,829)

Net income (loss)		6,731,040		(322,949)

Net loss attributable to noncontrolling interests from operations		(229)		(178)
Net (income) loss attributable to noncontrolling interests from discontinued operations		(116,454)		76,562

Net (income) loss attributable to noncontrolling interests		(116,683)		76,384

Net income (loss) attributable to Independence Tax Credit Plus L.P. III	$	6,614,357	$	(246,565)

Loss from operations – limited partners		(105,582)		(149,785)
Income (loss) from discontinued operations – limited partners		6,653,795		(94,314)
Net income (loss) – limited partners	$	6,548,213	$	(244,099)

Number of BACs outstanding		43,440		43,440

Loss from operations per BAC	$	(2.43)	$	(3.45)
Income (loss) from discontinued operations per BAC		153.17		(2.17)

Net income (loss) per BAC	$	150.74	$	(5.62)


* Reclassified for comparative purposes.

See accompanying notes to consolidated financial statements.

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INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
Consolidated Statement of Changes in Partners’ (Deficit) Capital
(Unaudited)





			Limited		General		Noncontrolling
	Total		Partners		Partner		Interests

Partners’ (deficit) capital– April 1, 2012	$	(17,518,033)	$	(19,124,560)	$	1,519,586	$	86,941

Net income – three months ended June 30, 2012		6,731,040		6,548,213		66,144		116,683

Contributions – write-off of related party debt		13,125		-		13,125		-

Distributions		(80,050)		-		-		(80,050)

Partners’ (deficit) capital – June 30, 2012	$	(10,853,918)	$	(12,576,347)	$	1,598,855	$	123,574


See accompanying notes to consolidated financial statements.

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INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)

	Three Months Ended
	June 30,
	2012		2011

Cash flows from operating activities:
Net income (loss)	$	6,731,040	$	(322,949)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Gain on sale of properties		(6,852,961)		-
Depreciation and amortization		85,993		154,128
Changes in assets and liabilities:
(Decrease) increase in accounts payable		(102,653)		16,846
Increase in accrued interest payable		109,649		198,944
Increase in security deposit payable		11,605		18,142
Decrease (increase) in cash held in escrow		420,242		(55,298)
(Increase) decrease in other assets		(42,543)		142,447
Decrease in due to local general partners and affiliates		(446,439)		(235,898)
Increase in due to general partner and affiliates		21,473		71,408

Total adjustments		(6,795,634)		310,719

Net cash used in operating activities		(64,594)		(12,230)

Cash flows from investing activities:
Purchase of property and equipment		-		(1,885)
Proceeds from sale of properties		24,990		-
Costs related to sale of properties		(213)		-
Increase in cash held in escrow		(10,867)		(4,634)
Increase in due to local general partners and affiliates		-		4,709

Net cash provided by (used in) investing activities		13,910		(1,810)

Cash flows from financing activities:
Repayments of mortgage notes		(62,232)		(95,601)
Distributions to noncontrolling interests		(80,050)		(84,075)

Net cash used in financing activities		(142,282)		(179,676)

Net decrease in cash and cash equivalents		(192,966)		(193,716)
Cash and cash equivalents at beginning of period		1,590,135		1,854,271
Cash and cash equivalents at end of period *	$	1,397,169	$	1,660,555

Summarized below are the components of the gain on sale of properties:

Proceeds from sale of properties – net	$	(24,777)	$	-
Property and equipment, net of accumulated depreciation		(5,650)		-
Deferred costs		39,715		-
Prepaid expenses and other assets		36,716		-
Cash held in escrow		500,944		-
Accounts payable and other liabilities		20,859		-
Accrued interest payable		(2,945,874)		-
Security deposit payable		(62,212)		-
Mortgage note payable		(4,329,733)		-
Due to local general partners and affiliates		(57,949)		-
Due to General Partners and affiliates		(38,125)		-
Capital contribution – General Partners		13,125		-

* Cash and cash equivalents at end of period, includes cash and cash equivalents from discontinued operations of $26,939 and $0, respectively.


See accompanying notes to consolidated financial statements.

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INDEPENDENCE TAX CREDIT PLUS L.P. III

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2012

(Unaudited)

NOTE 1 – General

The consolidated financial statements include the accounts of Independence Tax Credit Plus L.P. III (the “Partnership”) and eleven other limited partnerships (“subsidiary partnerships”, “subsidiaries” or “Local Partnerships”) owning apartment complexes that are eligible for the federal low-income housing tax credit (“Tax Credit”). The general partner of the Partnership is Related Independence Associates III L.P., a Delaware limited partnership (the “General Partner”), which is managed by an affiliate of Centerline Holding Company (“Centerline”), the ultimate parent of the general partner of the General Partner. For information on Centerline’s audited balance sheet for the most recent fiscal year, see http://sec.gov. 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 (each a “Local General Partner”) and to approve certain major operating and financial decisions, the Partnership has a controlling financial interest in the subsidiary partnerships (“Local Partnerships”).

For financial reporting purposes, the Partnership’s fiscal quarter ends June 30, 2012. All subsidiaries have fiscal quarters ending March 31 2012. Accounts of the subsidiaries have been adjusted for intercompany transactions from April 1 through June 30 . The Partnership’s fiscal quarter ends June 30 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”), net (income) loss attributable to noncontrolling interests amounted to approximately $(117,000) and $76,000 for the three months ended June 30, 2012 and 2011, 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 financial statements should be read in conjunction with the financial statements and notes thereto included in the Partnership’s Annual Report on Form 10-K for the year ended March 31, 2012.

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 financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position of the Partnership as of June 30, 2012 and the results of operations and its cash flows for the three months ended June 30, 2012 and 2011. However, the operating results and cash flows for the three months ended June 30, 2012 may not be indicative of the results for the year.

New Accounting Pronouncements Not Yet Adopted

As of June 30, 2012, the Partnership has adopted all accounting pronouncement affecting the Partnership.

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.

NOTE 2 – Related Party Transactions

An affiliate of the General Partner has a 0.01% 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, 2012 and 2011 were as follows:

	Three Months Ended
	June 30,
	2012		2011 *

Partnership management fees (a)	$	18,325	$	64,825
Expense reimbursement (b)		38,001		49,172
Local administrative fee (c)		8,750		4,876
Total general and administrative - General Partner		65,076		118,873
Property management fees incurred to affiliates of the subsidiary partnerships’ general partners		19,222		19,843
Total general and administrative-related parties	$	84,298	$	138,716

* Reclassified for comparative purposes.

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INDEPENDENCE TAX CREDIT PLUS L.P. III

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2012

(Unaudited)

The costs incurred to related parties from discontinued operations for the three months ended June 30, 2012 and 2011 were as follows:

	Three Months Ended
	June 30,
	2012		2011 *

Local administrative fee (c)	$	1,625	$	7,562
Total general and administrative-General Partner		1,625		7,562
Property management fees incurred to affiliates of the subsidiary partnerships' general partners		28,714		42,650
Total general and administrative-related parties	$	30,339	$	50,212

* 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 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, and after the Limited Partners have received a 10% return on their capital contributions. Partnership management fees owed to the General Partner amounting to approximately $2,976,000 and $2,957,000 were accrued and unpaid as of June 30, 2012 and March 31, 2012, respectively, and are included in the line item Due to general partners and affiliates in the consolidated balance sheets. Current year partnership management fees may be paid out of operating reserves or refinancing and sales proceeds. As such the General Partner cannot demand payment of the deferred fees except as noted above. During the year ended March 31, 2012, the General Partner deemed the unpaid partnership management fees that were related to the properties sold and the transfer of the deed-in-lieu of foreclosure of one property during the year ended March 31, 2012 uncollectible and as a result, the Partnership wrote them off in the amount of approximately $757,000, resulting in a non-cash General Partner contribution of the same amount.

(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 Partners and its affiliates amounting to approximately $849,000 and $849,000 were accrued and unpaid as of June 30, 2012 and March 31, 2012, 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, if at all, from working capital reserves or future sales proceeds.

(c)

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. Local administrative fee owed to Independence SLP III L.P. amounting to $329,000 and $360,000 were accrued and unpaid as of June 30, 2012 and March 31, 2012, respectively. These fees have been deferred in certain cases and the Partnership anticipates that they will be paid, if at all, from working capital reserves or future sales proceeds.

As of June 30, 2012 and March 31, 2012, the Partnership owed Related Capital, an affiliate of the General Partner, approximately $86,000 for expenditures paid on its behalf and voluntary operating advances made by the General Partner and its affiliates to fund operations of the Partnership. Payment of these operating advances have been deferred and may be paid out of operating reserves or refinancing and sales proceeds. The General Partner does not intend to demand payment of the deferred advances beyond the Partnership’s ability pay them.

As of June 30, 2012 and March 31, 2012, the Partnership owed the affiliates of the General Partner approximately $255,000 and $259,000 (non-interest bearing), respectively, for advances made to one Local Partnership. These advances represent amounts loaned in conjunction with the initial capital contributions to the Local Partnerships. Payment of these operating advances has been deferred and may be paid out of operating reserves or refinancing and sales proceeds. The General Partner and its affiliates do not intend to demand payment of the deferred advances beyond the Partnership’s ability to pay them.

- 7 -

INDEPENDENCE TAX CREDIT PLUS L.P. III

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2012

(Unaudited)

B) Due to Local General Partners and Affiliates

Due to local general partners and affiliates from operating liabilities consists of the following:

		June 30,		March 31,
		2012		2012

	Operating advances	$	120,553	$	617,772
	Development fee payable		52,249		52,249
	Other capitalized costs		16,335		16,335
	Construction costs payable		146,487		146,487
	General Partner loan payable		198,008		198,008
	Management and other operating fees		87,887		87,887

		$	621,519	$	1,118,738


Due to local general partners and affiliates from discontinued liabilities consists of the following:

		June 30,		March 31,
		2012		2012

	Management and other operating advances	$	-	$	7,169

		$	-	$	7,169

C) Advances from Partnership to Local Partnerships

As of June 30, 2012 and March 31, 2012, the Partnership has advanced certain Local Partnership operating loans (non-interest bearing) amounting to approximately $8,000 primarily in conjunction with the Local Partnership’s contribution agreements. Such amounts are eliminated in consolidation. The following table summarizes these advances:

	June 30,		March 31,
	2012		2012

New Zion	$	2,655	$	2,655
Sumpter Commons		5,075		5,075

	$	7,730	$	7,730

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 Partnership adopted FASB ASC 820 – “Fair Value Measurements” for financial assets and liabilities. ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard does not require any new fair value measurements of reported balances.

As permitted, we chose not to elect the fair value option as prescribed by FASB ASC 825 – “Financial Instruments” – Including an Amendment of ASC 320 – “Investments – Debt and Equity Securities”, for our financial assets and liabilities that had not been previously carried at fair value. Therefore, we did not elect to fair value any additional items under ASC 825.

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INDEPENDENCE TAX CREDIT PLUS L.P. III

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2012

(Unaudited)

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, 2012				At March 31, 2012
		Carrying				Carrying
		Amount		Fair Value		Amount		Fair Value

LIABILITIES:
	Mortgage notes	$	16,134,171	$	8,052,623	$	20,526,136	$	9,428,398

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.

NOTE 4 – Sale of Properties

The Partnership is in the process of disposing of all of its investments. It is anticipated that this process will continue to take a number of years. During the three months ended June 30, 2012, the Partnership sold its limited partnership interests in two Local Partnerships. As of June 30, 2012, the Partnership has sold its limited partnership interests in eleven Local Partnerships and transferred the deed to the property and related assets and liabilities in lieu of foreclosure of one Local Partnership. In addition, as of June 30, 2012, one Local Partnership has entered into an agreement to sell its property and the related assets and liabilities (see Note 5). There can be no assurance as to when the Partnership will dispose of its remaining investments or the amount of proceeds which may be received. However, based on the historical operating results of the Local Partnerships and the current economic conditions, including changes in tax laws, it is unlikely that the proceeds from such sales received by the Partnership will be sufficient to return to the limited partners their original investment.

On June 11, 2012, the Partnership sold its limited partnership interest in Universal Court Associates (“Universal Court”) to an affiliate of the Local General Partner for a sale price of $1. The sale resulted in a gain of approximately $2,138,000, resulting from the write-off of the basis in the Local Partnership of the same amount at the date of the sale, which was recorded during the quarter ended June 30, 2012. In addition, the sale resulted in a non-cash contribution to the Local Partnership from the General Partner of approximately $13,000 as a result of the write-off of fees owed by the Local Partnership to an affiliate of the General Partner.

On May 1, 2012, the Partnership sold its limited partnership interest in West Mill Creek Associates III, L.P. (“Jameson Court”) to an affiliate of the Local General Partner for a sale price of $24,990. The Partnership received $24,990 from the sale. The sale resulted in a gain of approximately $4,690,000, resulting from the write-off of the basis in the Local Partnership of approximately $4,665,000 at the date of the sale and the $24,990 received from the sale, which was recorded during the quarter ended June 30, 2012.

On February 3, 2012, the Partnership sold its limited partnership interest in Brannon Group, L.C. (“Keys”) to an unaffiliated third party purchaser for a sale price of $4,000. The Partnership received $4,000 from the sale. The sale resulted in a gain of approximately $6,882,000, resulting from the write-off of the basis in the Local Partnership of approximately $6,878,000 at the date of the sale and the $4,000 received from the sale, which was recorded during the quarter ended March 31, 2012. An adjustment to the gain of approximately $26,000 was recorded during the quarter ended June 30, 2012, resulting in an overall gain of approximately $6,908,000. In addition, the sale resulted in a non-cash contribution to the Local Partnership from the General Partner of approximately $288,000 as a result of the write-off of fees and loans owed by the Local Partnership to an affiliate of the General Partner.

NOTE 5 – Assets Held for Sale

On August 29, 2011, New Zion Apartments (“New Zion”) entered into a purchase and sale agreement to sell the property and the related assets and liabilities to an unaffiliated third party purchaser for a sales price of $2,450,000. As of June 30, 2012, New Zion had property and equipment, at cost, of approximately $2,814,000, accumulated depreciation of approximately $1,511,000 and mortgage debt of approximately $546,000. The sale is expected to be consummated during the third quarter of 2012. There can be no assurance of when and if the sale will be consummated by this time.

- 9 -

INDEPENDENCE TAX CREDIT PLUS L.P. III

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2012

(Unaudited)

NOTE 6 – Discontinued Operations

The following table summarizes the financial position of the Local Partnerships that are classified as discontinued operations because the respective Local Partnerships were classified as assets held for sale or were sold. As of June 30, 2012 and March 31, 2012, New Zion, which was classified as asset held for sale, was classified as discontinued operations on the consolidated balance sheet.

Consolidated Balance Sheets:

		June 30,		March 31,
		2012		2012

Assets
	Property and equipment – less accumulated depreciation of $1,541,395 and $1,541,395, respectively	$	1,285,678	$	1,285,678
	Cash and cash equivalents		26,939		100,512
	Cash held in escrow		310,301		300,798
	Other assets		18,990		10,547
Total assets		$	1,641,908	$	1,697,535

Liabilities

	Mortgage notes payable	$	546,207	$	562,445
	Accounts payable		12,052		9,016
	Accrued interest payable		3,282		3,282
	Security deposit payable		13,837		13,617
	Due to local general partners and affiliates		-		7,169
	Due to general partners and affiliates		262,585		265,585
Total liabilities		$	837,963	$	861,114

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INDEPENDENCE TAX CREDIT PLUS L.P. III

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2012

(Unaudited)

The following table summarizes the results of operations of the Local Partnerships that are classified as discontinued operations. For the three months ended June 30, 2012, Jameson Court and Universal Court, which were sold during the period, Keys, which was sold during the three months ended March 31, 2012, and New Zion, which was classified as assets held for sale, were classified as discontinued operations in the consolidated financial statements. For the three months ended June 30, 2011, Lafayette Avenue, Knickerbocker Apartments, Mansion Court, Aspen-Olive, Keys and Park Terrace, which were sold during the year ended March 31, 2012, and Jameson Court, Universal Court and New Zion, in order to present comparable results to the three months ended June 30, 2012, were classified as discontinued operations in the consolidated financial statements.

Consolidated Statements of Discontinued Operations:

	Three Months Ended
	June 30,
	2012		2011 *

Revenues

Rental income	$	446,669	$	798,399
Other		13,325		13,305
Gain on sale of properties (Note 4)		6,852,961		-

Total revenue		7,312,955		811,704

Expenses
General and administrative		153,153		255,738
General and administrative-related parties (Note 2)		30,339		50,212
Repairs and maintenance		57,511		145,911
Operating and other		49,452		111,768
Insurance		27,669		55,418
Taxes		18,772		39,603
Interest		129,368		247,758
Depreciation and amortization		9,232		77,125

Total expenses		475,496		983,533

Income (loss) from discontinued operations		6,837,459		(171,829)

Noncontrolling interest in (income) loss of subsidiaries from discontinued operations		(116,454)		76,562

Income (loss) from discontinued operations – Independence Tax Credit Plus LP III	$	6,721,005	$	(95,267)

Income (loss)— limited partners from discontinued operations	$	6,653,795	$	(94,314)

Number of BACs outstanding		43,440		43,440

Income (loss) from discontinued operations per BAC	$	153.17	$	(2.17)

* Reclassified for comparative purposes.

Cash flows from Discontinued Operations:

	Three Months Ended
	June 30,
	2012		2011*

Net cash (used in) provided by operating activities	$	(107,609)	$	91,468
Net cash provided by (used in) investing activities	$	13,201	$	(8,274)
Net cash used in financing activities	$	(31,655)	$	(65,037)

* Reclassified for comparative purposes.

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INDEPENDENCE TAX CREDIT PLUS L.P. III

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2012

(Unaudited)

NOTE 7 – Commitments and Contingencies

a)	Going Concern Consideration

At June 30, 2012, the Partnership’s liabilities exceeded assets by $10,853,918 and for the three months ended June 30, 2012 the Partnership recognized net income of $6,731,040, including the gain on sale of properties of $6,852,961. These factors raise substantial doubt about the Partnership’s ability to continue as a going concern. As discussed in Note 2, partnership management fees of approximately $2,976,000 will be payable out of sales or refinancing proceeds only to the extent of available funds after payments on all other Partnership liabilities have been made and after the Limited Partners have received a 10% return on their capital contributions. As such, the General Partner cannot demand payment of these deferred fees beyond the Partnership’s ability to pay them. In addition, where the Partnership has unpaid partnership management fees related to sold properties, at fiscal year-end such management fees are written off and recorded as capital contributions. During the year ended March 31, 2012, the Partnership wrote off approximately $757,000 of such management fees.

All of the mortgage payable balance of $16,134,171 and the accrued interest payable balance of $1,769,306 is of a nonrecourse nature and secured by the respective properties. The Partnership is currently in the process of disposing all of its investments. Historically, the mortgage notes and accrued interest thereon have been assumed by the buyer in instances of sales of the Partnership’s interest or have been paid off from sales proceeds in instances of sales of the property. In most instances when the Partnership’s interest was sold and liabilities were assumed, the Partnership recognized a gain from the sale. The Partnership owns the limited partner interest in all its investments, and as such has no financial responsibility to fund operating losses incurred by the Local Partnerships. The maximum loss the Partnership would incur is its net investment in the respective Local Partnerships and the potential recapture of Tax Credits if the investment is lost before the expiration of the Compliance Period. Dispositions of any investment in a Local Partnership should not impact the future results of operations, liquidity, or financial condition of The Partnership.

The Partnership has working capital reserves of approximately $819,000 at June 30, 2012. Such amount is considered sufficient to cover the Partnership’s day to day operating expenses, excluding fees to the General Partner, for at least the next year. The Partnership’s operating expenses, excluding the Local Partnerships’ expenses and related party expenses amounted to approximately $41,000 for the three months ended June 30, 2012.

Management believes the above mitigating factors enable the Partnership to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

b)	Subsidiary Partnerships – Going Concerns and Uncertainties

Brannon Group, L.C. (“Keys”)

On February 3, 2012, the Partnership sold its limited partnership interest in Keys. The financial statements for Keys were prepared in conformity with accounting principles generally accepted in the United States of America, which contemplated continuation of Keys as a going concern. Keys had obligations that matured on January 1, 2012 in the amount of $1,199,501. However, on January 17, 2012, Keys closed on the refinancing of its mortgages.

Leases

Savannah Park Housing L.P. (“Tobias”), 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 $1,771. As of June 30, 2012, the lease agreement was current. Estimated aggregate future minimum payments due under the term of the lease were $731,423 as of March 31 2012.

d)	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 (“FDIC”).

e)	Cash Distributions

Cash distributions from the Local Partnerships to the Partnership are restricted by the provisions of the respective limited partnership agreements of the Local Partnerships and/or the U.S. Department of Housing and Urban Development (“HUD”) based on operating results and a percentage of the owner’s equity contribution. Such cash distributions are typically made from surplus cash flow.

f)	Property Management Fees

Property management fees incurred by Local Partnerships amounted to $81,662 and $106,067 for the three months ended June 30, 2012 and 2011, respectively. Of these fees, $47,936 and $62,493 were incurred to affiliates of the subsidiary partnerships’ general partners, which includes $28,714 and $42,650 of fees relating to discontinued operations.

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INDEPENDENCE TAX CREDIT PLUS L.P. III

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2012

(Unaudited)

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 was leased to qualified tenants) commenced. Because of the time required for the acquisition, completion and rent-up of Properties, the amount of Tax Credits per BAC gradually increased over the first three years of the Partnership. Tax Credits not recognized in the first three years were recognized in the 11th through 13th years. As of December 31, 2009, all the Local Partnerships had completed their Credit Periods. The Compliance Periods will continue through December 31, 2014 with respect to the Properties depending upon when the Credit Period commenced.

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 38% 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.

h)	Subsequent Events

Management has evaluated all subsequent events from the date of the balance sheet through the issuance date of this report and determined that there were no events or transactions occurring during the subsequent event reporting period which require recognition or disclosure in the financial statements.

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

Liquidity and Capital Resources

The Partnership originally invested all of its net proceeds in twenty Local Partnerships of which approximately $120,000 remains to be paid to the Local Partnerships (including approximately $115,000 being held in escrow). The Partnership is in the process of disposing of all of its investments. It is anticipated that the process will continue to take a number of years. During the three months ended June 30, 2012, the Partnership sold its limited partnership interests in two Local Partnerships. As of June 30, 2012, the Partnership has sold its limited partnership interests in eleven Local Partnerships and transferred the deed to the property and related assets and liabilities in lieu of foreclosure of one Local Partnership. In addition, as of June 30, 2012, one Local Partnership has entered into an agreement to sell its property and the related assets and liabilities (see Note 5 in Item 1). 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.

Short-term

The Partnership’s primary sources of funds include: (i) working capital reserves; (ii) interest earned on the working capital reserves; (iii) cash distributions from operations of the Local Partnerships; and (iv) sales proceeds and distributions. Such funds are available to meet the obligations of the Partnership. The Partnership does not anticipate providing cash distributions to BACs holders in circumstances other than refinancing or sales. Cash distributions received from the Local Partnerships, as well as the working capital reserves referred to above, will be used towards the future operating expenses of the Partnership. During the three months ended June 30, 2012 and 2011, the amounts received from operations of the Local Partnerships were approximately $9,000 and $12,000, respectively. Additionally, during the three months ended June 30, 2012 and 2011, the Partnership received approximately $25,000 and $0, respectively, of distributions from the sale of Local Partnerships. The Partnership does not anticipate being able to make distributions sufficient to return to BACs holders their original capital contributions.

During the three months ended June 30, 2012, cash and cash equivalents of the Partnership and its consolidated Local Partnerships decreased approximately $193,000. This decrease was due to payments of mortgage notes $(62,000), an increase in cash held in escrow relating to investing activities $(11,000) and a decrease in capitalization of consolidated subsidiaries attributable to noncontrolling interests $(80,000), which exceeded cash used in operating activities $(65,000) and proceeds from sale of properties $(25,000). Included in the adjustment to reconcile the net income to cash used in operating activities is depreciation and amortization of approximately $86,000 and gain on sale of properties of approximately $6,853,000.

Total expenses for the three months ended June 30, 2012 and 2011, respectively, excluding depreciation and amortization, interest, general and administrative – related parties, totaled $597,489 and $571,490, respectively.

Accounts payable as of June 30, 2012 and March 31, 2012 were $242,278 and $327,110, 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. Account payable from discontinued operations totaled $12,052 and $9,016 as of June 30, 2012 and March 31, 2012, respectively. Accrued interest as of June 30, 2012 and March 31, 2012 was $1,766,024 and $4,602,247, respectively. Accrued interest payable from discontinued operations totaled $3,282 and $3,282 as of June 30, 2012 and March 31, 2012, 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.

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. In addition, 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.

The Partnership has an unconsolidated working capital reserve of approximately $819,000 at June 30, 2012.

Long-term

Partnership management fees owed to the General Partner amounting to approximately $2,976,000 and $2,957,000 were accrued and unpaid as of June 30, 2012 and March 31, 2012, respectively, and are included in the line item Due to general partners and affiliates in the consolidated balance sheets. During the year ended March 31, 2012, the General Partner deemed the unpaid partnership management fees that were related to the property sold during the year ended March 31, 2012, uncollectible and as a result, the Partnership wrote them off in the amount of approximately $757,000, resulting in a non-cash General Partner contribution of the same amount. 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, and after the Limited Partners have received a 10% return on their capital contributions.

All other payables included in due to general partners and affiliates are expected to be paid, if at all, from working capital reserves. See Note 2 in Item 1 for further discussion of amounts due to the General Partner and its affiliates. The General Partner does not anticipate advancing going forward any 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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Based on the foregoing, the Partnership’s going concern consideration is mitigated by factors as discussed in Note 7a in Item 1.

Since the maximum loss the Partnership would be liable for is its net investment in the respective subsidiary partnerships, the resolution of any 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 may result in recapture of Tax Credits if the investment is lost before the expiration of the Compliance Period. Through March 31, 2012, only Mansion Court Phase II Venture (“Mansion Court”) was required to recapture $489,362 of low-income housing Tax Credits.

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, other than Mansion Court, had their Tax Credits fully in place. As of December 31, 2009, the Credit Periods have expired and the Partnership has met its objective of generating Tax Credits for qualified BACs holders. The Compliance Periods will continue through December 31, 2014 with respect to the Properties depending upon when the Credit Period commenced.

Off-Balance Sheet Arrangements

The Partnership has no off-balance sheet arrangements.

Fair Market Valuations

Cash and Cash Equivalents, Investments Available-for-Sale and Cash Held in Escrow

The carrying amount approximates fair value.

Mortgage Notes Payable

		At June 30, 2012				At March 31, 2012
		Carrying				Carrying
		Amount		Fair Value		Amount		Fair Value

LIABILITIES:
	Mortgage notes	$	16,134,171	$	8,052,623	$	20,526,136	$	9,428,398

Critical Accounting Policies and Estimates

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 7, Note 2 to the consolidated financial statements in its Annual Report on Form 10-K for the year ended March 31, 2012.

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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. The Partnership complies with ASC 360, Property, Plant and Equipment. 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 the direct capitalization method) when the property is considered to be impaired and the depreciation cost exceeds estimated fair value.

Through June 30, 2012, the Partnership has recorded approximately $30,481,000 as an aggregate loss on impairment of assets or reduction to estimated fair value.

At the time management commits to a plan to dispose of assets, said assets are adjusted to the lower of carrying amount or fair value less costs to sell. These assets are classified as property and equipment-held for sale and are not depreciated. There is one Local Partnership whose assets are classified as property and equipment as held for sale as of June 30, 2012.

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.

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.

Results of Operations

The Partnership’s results of operations for the three months ended June 30, 2012 and 2011 consisted of the results of the Partnership’s investment in Local Partnerships. The following discussion excludes the Partnership’s results of its discontinued operations which is not reflected below (see Note 6 to the financial statements in Item 1).

Rental income increased by approximately 3% for the three months ended June 30, 2012, respectively, as compared to the corresponding period in 2011, primarily due to a decrease in vacancy at one Local Partnership as well as an increase in rental rates at several Local Partnerships.

Total expenses excluding general and administrative, general and administrative –related parties and repairs and maintenance, remained consistent with an increase of approximately 4% for the three months ended June 30, 2012, respectively, as compared to the corresponding period in 2011.

General and administrative expense increased approximately $35,000 for the three months ended June 30, 2012, respectively, as compared to the corresponding period in 2011, primarily due to an increase in legal and payroll expenses at one Local Partnership and an increase in payroll expense at a second Local Partnership.

General and administrative-related parties expenses decreased approximately $54,000 for the three months ended June 30, 2012, as compared to the corresponding period in 2011, primarily due to a decrease in partnership management fees and expense reimbursements resulting from the sale of properties at the Partnership level.

Repairs and maintenance expense decreased approximately $21,000 for the three months ended June 30, 2012 as compared to the corresponding period in 2011 primarily due to a decrease in snow removal and carpet replacement costs at one Local Partnership and a decrease in security contract costs at a second Local Partnership.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Not applicable.

Item 4. Controls and Procedures.

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

- 16 -

(b) Changes in Internal Controls over Financial Reporting. During the period ended June 30, 2012, 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. – None

Item 1A.	Risk Factors. – No changes

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds. – None

Item 3.	Defaults upon Senior Securities. – None

Item 4.	Mine Safety Disclosures. – None

Item 5.	Other Information. – On April 23, 2012, the Partnership was notified that its independent registered public accounting firm, Trien Rosenberg Weinberg Ciullo & Fazzari LLP, merged its practice with that of Raich Ende Malter & Co. LLP and the combined practice operates under the name Raich Ende Malter &Co. LLP (“Raich”). The General Partner of the Partnership has determined that the Parntership will continue to engage Raich as its independent registered public accounting firm.

Item 6.	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*

	(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 Section 1350 of Title 18 of the United States Code (18 U.S.C. 1350)

	(32.2)+	Certification Pursuant to Section 1350 of Title 18 of the United States Code (18 U.S.C. 1350)

	*	Incorporated herein as an exhibit by reference to exhibits filed with Post-Effective Amendment No. 4 to the Registration Statement on Form S-11 {Registration No. 33-37704}.

	+	Filed herewith.

	**	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}.

- 18 -

SIGNATURES

Pursuant to the requirements 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:	August 3, 2012			By:	/s/ Robert A. Pace
					Robert A. Pace
					Chief Financial Officer and Principal Accounting Officer



Date:	August 3, 2012			By:	/s/ Robert L. Levy
					Robert L. Levy
					President and Chief Executive Officer

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INDEPENDENCE TAX CREDIT PLUS LP III 10-Q