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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2019

The “Partnership,” as used herein, includes America First Multifamily Investors, L.P., its consolidated subsidiaries and consolidated variable interest entities (Note 5). All intercompany transactions are eliminated. As of June 30, 2019, the consolidated subsidiaries of the Partnership consist of:

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ATAX TEBS I, LLC, a special purpose entity owned and controlled by the Partnership, created to hold MRBs to facilitate the M24 Tax Exempt Bond Securitization (“TEBS”) Financing with the Federal Home Loan Mortgage Corporation (“Freddie Mac”).

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ATAX TEBS II, LLC, a special purpose entity owned and controlled by the Partnership, created to hold MRBs to facilitate the M31 TEBS Financing with Freddie Mac.

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ATAX TEBS III, LLC, a special purpose entity owned and controlled by the Partnership, created to hold MRBs to facilitate the M33 TEBS Financing with Freddie Mac.

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ATAX TEBS IV, LLC, a special purpose entity owned and controlled by the Partnership, created to hold MRBs to facilitate the M45 TEBS Financing with Freddie Mac.

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ATAX Capital Fund I, LLC, a wholly-owned subsidiary of the Partnership, created to hold beneficial interests in Tender Option Bond (“TOB”) Trusts related to the Public Housing Capital Trusts Fund Trust (“PHC”) Certificates.

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ATAX Vantage Holdings, LLC, a wholly-owned subsidiary of the Partnership, which is committed to loan money or provide equity for the development of multifamily properties.

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One wholly-owned corporation (“the Greens Hold Co”). The Greens Hold Co owns 100% of The 50/50 MF Property and certain property loans.

The Partnership also consolidates variable interest entities (“VIEs”) for which it is deemed to be the primary beneficiary. See Note 5 for information regarding the Partnership’s consolidated VIEs.

Lease Accounting

On January 1, 2019, the Partnership adopted the lease guidance in Accounting Standards Codification (“ASC”) 842. The Partnership adopted ASC 842 at the required adoption date of January 1, 2019, using the transition method that allowed the Partnership to initially apply ASC 842 as of January 1, 2019 and recognize a cumulative-effect adjustment to the opening balance of partners’ capital in the period of adoption. No changes have been made to the condensed consolidated financial statements dated prior to the effective date related to the adoption of ASC 842.

Lessee Operating Leases

The Partnership’s only material lessee lease is a ground lease at The 50/50 MF Property. Upon adoption of ASC 842, the Partnership elected the package of practical expedients in Accounting Standards Update (“ASU”) 2016-11, elected to not to apply ASC 842 to short-term leases and elected to combine lease and non-lease components when accounting for these lease arrangements. On the date of adoption of ASC 842, the Partnership recognized operating lease right-of-use (“ROU”) assets of $1.7 million, operating lease liabilities of $2.2 million, and an immaterial cumulative adjustment to partners’ capital. The Partnership used a discount rate of 6.6% to calculate the ROU asset and lease liability related to the ground lease. The discount rate is based on the Partnership’s estimated incremental borrowing rate to borrow, on a fully collateralized basis, over a similar term for the amount of contractual lease payments. The incremental borrowing rate was estimated using market transactions adjusted for differences in the term and security.

The Partnership’s lessee ROU assets are reflected in other assets on the Partnership’s condensed consolidated balance sheet (see Note 12). The Partnership’s lessee operating lease liabilities are reflected in accounts payable, accrued expenses and other liabilities on the Partnership’s condensed consolidated balance sheet (see Note 13). See Note 13 for additional information on the Partnership’s ground lease.

Lessor Operating Leases

The Partnership’s lessor leases consist of tenant leases related to real estate assets, specifically at the MF Properties. Tenant leases also contain terms for non-lease revenues related to operations at the MF Properties, such as parking and food service revenues. The Partnership has elected to combine the lease and non-lease components when accounting for lessor leases. The unit lease component of the tenant lease is considered the predominant component, so all components of the tenant lease are accounted for under ASC 842. Tenant leases are typically for terms of 12 months or less and do not include extension options. Lease revenue is recognized monthly and is reported within property revenues on the Partnership’s condensed consolidated statements of operations. ASC 842 did not have a material impact on the Partnership’s accounting for its lessor arrangements with tenants at the MF Properties.

PHC Certificate Impairment

The Partnership periodically reviews the PHC Certificates for impairment. The Partnership evaluates whether declines in the fair value of the investments below amortized cost are other-than temporary. Factors considered include:

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The duration and severity of the decline in fair value,

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The Partnership’s intent to hold and the likelihood of it being required to sell the security before its value recovers,

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Downgrade in the security’s rating by Standard & Poor’s, and

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Volatility of the fair value of the security.

Reclassification

Certain prior year amounts have been reclassified for consistency with the current period presentation.

In the three and six months ended June 30, 2019, the Partnership reported amortization of deferred financing costs within interest expense in the Partnership’s condensed consolidated statements of operations. Previously, “Amortization of deferred financing costs expense” had been reported as a separate line item in the Partnership’s condensed consolidated statement of operations. Accordingly, for the three and six months ended June 30, 2018, the Partnership has included amortization of deferred financing costs expense within interest expense in conformity with the current reporting period presented herein. This reclassification has no effect on the Partnership’s reported net income or partners’ capital in the Partnership’s condensed consolidated financial statements for the periods presented.

Estimates and Assumptions

Estimates and assumptions

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with such SEC rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading.

The 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 December 31, 2018. These condensed consolidated financial statements and notes have been prepared consistently with the 2018 Form 10-K, with the exception of new accounting standards that were adopted and reclassifications that are discussed herein. In the opinion of management, all adjustments (consisting of normal and recurring accruals) necessary to present fairly the Partnership’s financial position as of June 30, 2019, and the results of operations for the interim periods presented have been made. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. The accompanying condensed consolidated balance sheet as of December 31, 2018 was derived from the audited annual consolidated financial statements, but does not contain all the footnote disclosures from the annual consolidated financial statements.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326).” The ASU enhances the methodology of measuring expected credit losses for financial assets, to include the use of reasonable and supportable forward-looking information to better estimate credit losses. The ASU is effective for the Partnership’s annual and interim periods beginning after December 15, 2019 and is to be applied using a modified-retrospective approach. The Partnership has completed its assessment of its items that are within the scope of the new ASU. The Partnership’s items within the scope of the ASU are property loans, receivables reported within other assets, financial guarantees and commitments. Also within the scope of the ASU are changes to the impairment model for available-for-sale debt securities, which includes the Partnership’s MRBs, PHC Certificates, and taxable MRBs. The Partnership is currently evaluating the impact of the ASU to such items in the Partnership’s condensed consolidated financial statements.

- Definition

Disclosure of accounting policy for investments in financial assets, including marketable securities (debt and equity securities with readily determinable fair values), investments accounted for under the equity method and cost method, securities borrowed and loaned, and repurchase and resale agreements. For marketable securities, the disclosure may include the entity's accounting treatment for transfers between investment categories and how the fair values for such securities are determined. Also, for all investments, an entity may describe its policy for assessing, recognizing and measuring impairment of the investment.

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