UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2016

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

For the transition period from ______ to ______

Commission File Number 033-37704-03

INDEPENDENCE TAX CREDIT PLUS L.P. II

(Exact name of registrant as specified in its charter)

Delaware		13-3646846
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1225 17th Street, Denver, Colorado		80202
(Address of principal executive offices)		(Zip Code)

(303) 927-5000

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. ☑ Yes ☐ 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). ☑ Yes ☐ 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 ☐		Accelerated filer ☐

Non-accelerated filer ☐ (Do not check if a smaller reporting company)		Smaller reporting company ☑

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

Table of Contents


		Page Numbers

Part I
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statement of Changes in Partners’ (Deficit) Equity	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	16
Item 4.	Controls and Procedures	16

Part II
Item 1.	Legal Proceedings	17
Item 1A.	Risk Factors	17
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 3.	Defaults Upon Senior Securities	17
Item 4.	Mine Safety Disclosures	17
Item 5.	Other Information	17
Item 6.	Exhibits	17

Signatures		18

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PART I – Financial Information

Item 1. Financial Statements.

INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

Condensed Consolidated Balance Sheets


	September 30,		March 31,
	2016		2016
	(Unaudited)		(Audited)
ASSETS

Cash and cash equivalents (Notes 2 and 3)	$	1,771,844	$	1,943,788
Cash held in escrow		376,203		318,460
Other assets		21,360		65,719

Total assets	$	2,169,407	$	2,327,967

LIABILITIES AND PARTNERS’ (DEFICIT) EQUITY

Liabilities
Mortgage notes payable	$	6,651,457	$	6,661,104
Accounts payable		164,535		110,742
Security deposit payable		49,939		53,164
Accrued interest payable		8,439,627		8,303,028
Due to local general partners and affiliates		120,000		125,699
Due to general partner and affiliates		2,011,932		1,941,586

Total liabilities		17,437,490		17,195,323

Commitments and contingencies (Note 5)

Partners’ (deficit) equity
Limited partners (58,928 BACs issued and outstanding)		(18,279,010)		(17,884,591)
General partner		3,581,317		3,585,301

Independence Tax Credit Plus L.P. II total		(14,697,693)		(14,299,290)

Noncontrolling interests		(570,390)		(568,066)

Total partners’ (deficit) equity		(15,268,083)		(14,867,356)

Total liabilities and partners’ (deficit) equity	$	2,169,407	$	2,327,967

See accompanying notes to condensed consolidated financial statements.

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INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended				Six Months Ended
	September 30,				September 30,
	2016		2015		2016		2015

Revenues
Rental income	$	200,801	$	207,580	$	405,410	$	422,383
Other income		5,908		9,374		10,737		15,397

Total revenues		206,709		216,954		416,147		437,780

Expenses
General and administrative		120,622		108,461		317,424		189,528
General and administrative-related parties (Note 2)		56,839		60,556		95,185		99,611
Repairs and maintenance		62,299		50,873		107,804		84,042
Operating		20,313		34,881		41,351		56,167
Taxes		14,152		13,956		28,173		27,911
Insurance		8,750		8,750		17,500		17,500
Financial, principally interest		104,719		105,049		209,437		209,985

Total expenses		387,694		382,526		816,874		684,744

Net loss		(180,985)		(165,572)		(400,727)		(246,964)

Net loss attributable to noncontrolling interests		1,048		557		2,324		772

Net loss attributable to Independence Tax Credit Plus L.P. II	$	(179,937)	$	(165,014)	$	(398,403)	$	(246,192)

Net loss – limited partners	$	(178,138)	$	(163,364)	$	(394,419)	$	(243,731)

Number of BACs outstanding		58,928		58,928		58,928		58,928

Net loss per weighted average BAC	$	(3.02)	$	(2.77)	$	(6.69)	$	(4.14)

See accompanying notes to condensed consolidated financial statements.

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INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

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

(Unaudited)


			Limited		General		Noncontrolling
	Total		Partners		Partner		Interests

Partners’ (deficit) equity – April 1, 2016	$	(14,867,356)	$	(17,884,591)	$	3,585,301	$	(568,066)

Net loss		(400,727)		(394,419)		(3,984)		(2,324)

Partners’ (deficit) equity – September 30, 2016	$	(15,268,083)	$	(18,279,010)	$	3,581,317	$	(570,390)

See accompanying notes to condensed consolidated financial statements.

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INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Six Months Ended
	September 30,
	2016		2015

Cash flows from operating activities:
Net loss	$	(400,727)	$	(246,964)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Changes in operating assets and liabilities:
Increase (decrease) in accounts payable		53,793		(41,219)
Decrease in security deposit payable		(3,225)		(2,688)
Increase in accrued interest payable		136,599		108,813
Increase in cash held in escrow		(39,310)		(36,183)
Decrease in other assets		44,359		34,147
Decrease in due to local general partners and affiliates		(5,699)		(5,766)
Increase in due to general partner and affiliates		70,346		70,619

Total adjustments		256,863		127,723

Net cash used in operating activities		(143,864)		(119,241)

Cash flows from investing activities:
Increase in cash held in escrow		(18,433)		(18,432)

Net cash used in investing activities		(18,433)		(18,432)

Cash flows from financing activities:
Principal payments of mortgage notes		(9,647)		(9,053)
Distributions to noncontrolling interest		—		(31,861)

Net cash used in financing activities		(9,647)		(40,914)

Net decrease in cash and cash equivalents		(171,944)		(178,587)
Cash and cash equivalents at beginning of period		1,943,788		2,309,123
Cash and cash equivalents at end of period	$	1,771,844	$	2,130,536

See accompanying notes to condensed consolidated financial statements.

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INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2016

(Unaudited)

NOTE 1 – General

The condensed consolidated financial statements as of September 30, 2016 include the accounts of Independence Tax Credit Plus L.P. II (the “Partnership”) and one remaining (of an original fifteen) other limited partnership (“subsidiary partnership”, “subsidiary” or “Local Partnership”) owning affordable apartment complexes (“Properties”) that are eligible for the low-income housing tax credit. As of September 30, 2016, the Partnership has ownership interests in one remaining investment. The general partner of the Partnership is Related Independence Associates L.P., a Delaware limited partnership (the “General Partner”). The general partner of the General Partner is Independent Associates GP LLC, a Delaware limited liability company. Centerline Holding Company (“Centerline”) was the ultimate parent of Centerline Affordable Housing Advisors LLC (“CAHA”), the sole member of the Manager of the General Partner. On April 15, 2015, Alden Torch Financial, LLC, a newly formed Delaware limited liability company (“ATF”), became the indirect owner of 100% of the equity interests in Centerline. Since April 15, 2015, ATF has been the ultimate parent and indirect owner of 100% of the equity interests in CAHA. Through the rights of the Partnership and/or an affiliate of the General Partner, which affiliate has contractual obligation to act on behalf of the Partnership, to remove the general partner of each 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.

For financial reporting purposes, the Partnership’s fiscal quarter ends September 30. The remaining Local Partnership’s fiscal quarter ends June 30th. Accounts of the remaining Local Partnership have been adjusted for intercompany transactions from July 1 through September 30. The Partnership’s fiscal quarter ends on September 30 in order to allow adequate time for the remaining Local Partnership’s financial statements to be prepared and consolidated. All intercompany accounts and transactions with the subsidiary partnership has been eliminated in consolidation.

The net loss attributable to noncontrolling interests amounted to approximately $1,048 and $557 and $2,324 and $772 for the three and six months ended September 30, 2016 and 2015, 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, 2016.

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 financial position of the Partnership as of September 30, 2016, the results of its operations for the three and six months ended September 30, 2016 and 2015 and its cash flows for the six months ended September 30, 2016 and 2015. However, the operating results and cash flows for the six months ended September 30, 2016 may not be indicative of the results for the entire year.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

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INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2016

(Unaudited)

NOTE 2 – Related Party Transactions

An affiliate of the General Partner, Independence SLP L.P., has a 0.01% interest as a special limited partner in each of the subsidiary partnerships. An affiliate of the General Partner also has a minority interest in certain local partnerships.

A)Other Related Party Expenses

The costs incurred to related parties for the three and six months ended September 30, 2016 and 2015 were as follows:


	Three Months Ended				Six Months Ended
	September 30,				September 30,
	2016		2015		2016		2015

Partnership management fees (a)	$	16,750	$	16,750	$	33,500	$	33,500
Expense reimbursement (b)		24,968		28,255		31,288		34,319
Local administrative fee (c)		1,250		1,250		2,500		2,500
Total general and administrative - General Partner		42,968		46,255		67,288		70,319

Property management fees incurred to affiliates of the subsidiary partnerships’ general partners		13,871		14,301		27,897		29,292
Total general and administrative-related parties	$	56,839	$	60,556	$	95,185	$	99,611

(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 0.05% per annum of invested assets (as defined in the Partnership Agreement), for administering the affairs of the Partnership. Subject to the foregoing limitation, the partnership management fee will be determined by the General Partner in its sole discretion based upon its review of the Partnership’s investments. Unpaid partnership management fees for any year will be accrued without interest and will be payable from working capital reserves or to the extent of available funds after the Partnership has made distributions to the limited partners of sale or refinancing proceeds equal to their original capital contributions plus a 10% priority return thereon (to the extent not theretofore paid out of cash flow). Partnership management fees owed to the General Partner amounting to approximately $1,880,000 and $1,847,000 were accrued and unpaid as of September 30, 2016 and March 31, 2016, respectively, and are included in the line item Due to general partner and affiliates in the condensed 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.

(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 $13,000 and $0 were accrued and unpaid as of September 30, 2016 and March 31, 2016, 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 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. As of September 30, 2016 and March 31, 2016, the subsidiary partnerships owed approximately $97,500 and $95,000, respectively, of these fees to

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INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2016

(Unaudited)

Independence SLP L.P. 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 September 30, 2016 and March 31, 2016, the Partnership owed approximately $3,000 and $0, respectively, to the General Partner for expenses paid on its behalf.

B)Due to Local General Partners and Affiliates

Due to local general partners and affiliates at September 30, 2016 and March 31, 2016 consists of the following:


	September 30,		March 31,
	2016		2016

Construction costs payable	$	120,000	$	120,000
Management and other operating advances		—		5,699
	$	120,000	$	125,699

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.

Mortgage Notes Payable

The Partnership has categorized the fair value of financial assets and liabilities based upon the fair value hierarchy specified by ASC Topic 820, Fair Value Measurements (“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.

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INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2016

(Unaudited)

The estimated fair value of mortgage notes payable 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.


	At September 30, 2016				At March 31, 2016
	Carrying				Carrying
	Amount		Fair Value		Amount		Fair Value

LIABILITIES:
Mortgage notes	$	6,651,457	$	3,548,749	$	6,661,104	$	3,433,088

Fair value for the mortgage notes have 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.

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 obligations is not currently available.

NOTE 4 – Sale of Properties

The Partnership is in the process of disposing of its last remaining investment. As of September 30, 2016, the Partnership had sold its limited partnership interests in thirteen Local Partnerships and one Local Partnership sold its property and the related assets and liabilities. The Partnership is expecting to dispose of its last remaining investment within the next year; however there can be no assurance when the remaining investment will be disposed of or the amount of proceeds which may be received. However, based on the historical operating results of the remaining Local Partnership and the current economic conditions, the proceeds from such sale received by the Partnership will not be sufficient to return to the limited partners their original investments.

NOTE 5 – Commitments and Contingencies

a) Liquidity

At September 30, 2016, the Partnership’s liabilities exceeded assets by $15,268,083 and for the six months ended September 30, the Partnership had net loss of $400,727. 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 $1,880,000 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, such management fees are written off and recorded as capital contributions.

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INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2016

(Unaudited)

The mortgage payable balance of $6,651,457 and the accrued interest payable balance of $8,439,627, are of a nonrecourse nature and secured by the property. The Partnership is currently in the process of disposing of its last remaining investment. 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 its last remaining investment, and as such has no financial responsibility to fund operating losses incurred by the Local Partnership. The maximum loss the Partnership would incur is its net investment in such Local Partnership.

The Partnership has cash reserves of approximately $1,687,000 at September 30, 2016. 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 $106,000 for the six months ended September 30, 2016.

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

b) Uninsured Cash and Cash Equivalents

The Partnership maintains its cash and cash equivalents in various high quality credit institutions. The accounts at each bank are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 per entity per institution. At times, the balances exceed the FDIC insurance limit.

c) Cash Distributions

Cash distributions from the remaining Local Partnership to the Partnership are restricted by the provisions of the agreement of limited partnership of the Local Partnership and/or the U.S. Department of Housing and Urban Development.

d) Property Management Fees

Property management fees incurred by the Local Partnerships amounted to $13,871 and $14,301 and $27,897 and $29,292 for the three and six months ended September 30, 2016 and 2015, respectively and earned by an affiliate of the remaining Local General Partner.

e) Other

The Partnership is subject to the risks incidental to potential losses arising from the management and ownership of improved real estate. The Partnership can also be affected by poor economic conditions generally. There are also substantial risks associated with owning properties receiving government assistance; for example, the possibility that Congress may not appropriate funds to enable 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 remaining investment during the period that the subsidy agreement is 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.

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INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2016

(Unaudited)

f) Subsequent Events

The Partnership evaluated all subsequent events from the date of the condensed consolidated balance sheet through the issuance date of these condensed consolidated financial statements and determined that there were no events or transactions occurring during the subsequent event reporting period which require recognition or disclosure in the condensed consolidated 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 fifteen Local Partnerships. The Partnership is in the process of disposing of its last remaining investment. As of September 30, 2016, the Partnership had sold its limited partnership interests in thirteen Local Partnerships and one Local Partnership sold its property and the related assets and liabilities. The Partnership is expecting to dispose of its last remaining investment within the next year; however there can be no assurance when the remaining investment will be disposed of or the amount of proceeds which may be received. However, based on the historical operating results of the remaining Local Partnership and the current economic conditions, the proceeds from such sale received by the Partnership will not 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; and (iii) cash distributions from operations of its remaining Local Partnership. 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 Partnership, as well as the working capital reserves referred to above, will be used towards the future operating expenses of the Partnership. During the six months ended September 30, 2016 and 2015, no amounts were received from operations of its remaining Local Partnership.

During the six months ended September 30, 2016, cash and cash equivalents of the Partnership and its remaining consolidated Local Partnership decreased by approximately $172,000. This decrease was due to net cash used in operating activities of approximately $144,000, an increase in cash held in escrow relating to investing activities of approximately $18,000 and principal payments of mortgage notes of approximately $10,000.

Total expenses from operations for the three and six months ended September 30, 2016 and 2015 excluding interest and general and administrative – related parties, totaled $226,136 and $216,921 and $512,252 and $375,148, respectively.

Accounts payable from operations as of September 30, 2016 and March 31, 2016 were $164,535 and $110,742, 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 from operations as of September 30, 2016 and March 31, 2016 was $8,439,627 and $8,303,028, respectively. Such amount represents the accrued interest on mortgage loans, which include primary and secondary loans. The 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 remaining Local Partnership) will be made from future refinancing or sales proceeds of such Local Partnership. In addition, the remaining Local Partnership’s mortgage notes are collateralized by its land and buildings, and are without further recourse to the Partnership. The maximum loss the Partnership would incur is its net investment in the remaining Local Partnership.

At September 30, 2016, the Partnership’s liabilities exceeded assets by $15,268,083 and for the six months ended September 30, 2016, had a net loss of $400,727. However, because 1) the provisions of the secondary loan defer the payment of accrued interest of the remaining Local Partnership and will be made from future refinancing or sales proceeds of the remaining Local Partnership, 2) the General Partner continues to defer the payment of fees as discussed below and in Note 2 to the Condensed Consolidated Financial Statements, and 3) the Partnership has sufficient unconsolidated working capital reserves to cover the Partnership’s day to day operating expenses, the Partnership (and the remaining Local 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.

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Long-Term

Partnership management fees owed to the General Partner amounting to approximately $1,880,000 and $1,847,000 were accrued and unpaid as of September 30, 2016 and March 31, 2016, respectively and are included in Due to General Partner and affiliates on the Condensed Consolidated Balance Sheets. Unpaid partnership management fees for any year are 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 amounts included in Due to General Partner 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 making any future advances of operating funds to the remaining Local Partnership 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 such Local Partnership. The Partnership’s ability to continue its operations would not be affected.

The Partnership’s liquidity considerations are discussed in Note 5a in Item 1.

Since the maximum loss the Partnership would be liable for is its net investment in its remaining subsidiary partnership, the resolution of any contingencies is not anticipated to impact future liquidity or the financial condition of the Partnership in a material way.

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.

Results of Operations

The Partnership’s results of operations for the six months ended September 30, 2016 and 2015 consisted primarily of the results of the Partnership’s investment in the last remaining Local Partnership.

Rental income remained fairly consistent with a decrease of approximately 3% and 4% for the three and six months ended September 30, 2016, as compared to the corresponding period ended September 30, 2015, primarily due to an overall slight increase in vacancy and bad debt expense at the remaining Local Partnership.

Total expenses from operations, excluding general and administrative for non-related parties, operating expenses and repairs and maintenance, remained fairly consistent with a decrease of approximately 1% for the three and six months ended September 30, 2016, as compared to the corresponding period ended September 30, 2015.

General and administrative for non-related parties’ expenses increased approximately $12,000 and $128,000 for the three and six months ended September 30, 2016 as compared to the corresponding period ended September 30, 2015, primarily due to an increase of legal expenses at the Partnership level and at the remaining Local Partnership.

Repair and maintenance expenses increased approximately $11,000 and $24,000 for the three and six months ended September 30, 2016, as compared to the corresponding period ended September 30, 2015, the increase was primarily due to an increase in elevator repair expenses, HVAC expenses, sprinkler repairs expenses, plumbing expenses and cleaning contract expenses at the Local Partnership.

Operating expenses decreased approximately $15,000 and $15,000 for the three and six months ended September 30, 2016, as compared to the corresponding period ended September 30, 2015, due to an overall decrease in utilities’ expense at the remaining Local Partnership.

No depreciation and amortization was booked for the six months ended September 30, 2016 and 2015, respectively, primarily due to property and equipment being fully depreciated at the end of the year ended March 31, 2015.

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Off-Balance Sheet Arrangements

The Partnership has no off-balance sheet arrangements.

Fair Value Measurements

See Note 3 in Item 1 for methods and assumptions 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.

Critical Accounting Policies and Estimates

The preparation of condensed consolidated financial statements requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. The following is a summary of certain accounting estimates considered critical by the Partnership. The summary should be read in conjunction with the more complete discussion of the Partnership’s accounting policies included in Item 8, Note 2 to the consolidated financial statements in the Partnership’s Annual Report on Form 10-K for the year ended March 31, 2016.

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 (using the fair market value based on comparative sales) 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 a specific asset, said asset is 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. Property and equipment that are held for sale are included in discontinued operations. There were no assets classified as property and equipment-held for sale as of September 30, 2016.

During the six months ended September 30, 2016, the Partnership has not recorded any loss on impairment of assets. Through 2016, the Partnership has recorded approximately $31,906,000 as an aggregate loss on impairment of property.

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.

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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.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Not applicable.

Item 4. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures. The President (Principal Executive Officer) and Chief Financial Officer of Related Independence Associates, Inc., the general partner of 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) Changes in Internal Controls over Financial Reporting. During the period ended September 30, 2016, 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. - None

Item 6.	Exhibits.

	(3A)	Agreement of Limited Partnership of Independence Tax Credit Plus L.P. II as adopted on February 11, 1992*

	(3B)	Form of Amended and Restated Agreement of Limited Partnership of Independence Tax Credit Plus L.P. II, attached to the Prospectus as Exhibit A**

	(3C)	Certificate of Limited Partnership of Independence Tax Credit Plus L.P. II as filed on February 11, 1992*

	(10A)	Form of Subscription Agreement attached to the Prospectus as Exhibit B**

	(10B)	Escrow Agreement between Independence Tax Credit Plus L.P. II 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).

	101+	The following items from this Quarterly Report on Form 10-Q formatted in Extensible Business Reporting Language: (i) Consolidated Balance Sheet (unaudited), (ii) Consolidated Statement of Operations (unaudited), (iii) Consolidated Statements of Changes in Partners’ (Deficit) Capital (unaudited), (iv) Consolidated Statement of Cash Flows (unaudited), and (v) Notes to Consolidated Financial Statements (unaudited).

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

**Incorporated herein as an exhibit by reference to exhibits filed with Post-Effective Amendment No. 8 to the Registration Statement on Form S-11 (Registration No. 33-37704).

+Filed herewith.

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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. II

(Registrant)


	By:	RELATED INDEPENDENCE ASSOCIATES L.P.,
		General Partner

	By:	INDEPENDENCE ASSOCIATES GP LLC,
		General Partner

	By:	CENTERLINE MANAGER LLC,
		Manager

	By:	CENTERLINE AFFORDABLE HOUSING ADVISORS LLC,
		Sole Member

	By:	CENTERLINE CAPITAL GROUP LLC,
		Sole Member


Date:	November 14, 2016	By:	/s/ Mark B. Hattier
			Mark B. Hattier
			Chief Financial Officer



Date:	November 14, 2016	By:	/s/ Alan T. Fair
			Alan T. Fair
			President (Principal Executive Officer)

INDEPENDENCE TAX CREDIT PLUS L P II 10-Q