10QSB 1 qh4q107.txt QH4Q10710QSB August 14 , 2007 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Re: Boston Financial Qualified Housing Tax Credits L.P. IV Report on Form 10-QSB for the Quarter Ended June 30, 2007 File Number 0-19765 Dear Sir/Madam: Pursuant to the requirements of section 15(d) of the Securities Exchange Act of 1934, filed herewith a copy of subject report. Very truly yours, /s/Patricia Olsen-Goldberg Patricia Olsen-Goldberg Controller QH4-10Q1.DOC UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2007 OR [ ] 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 0-19765 Boston Financial Qualified Housing Tax Credits L.P. IV (Exact name of registrant as specified in its charter) Massachusetts 04-3044617 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 101 Arch Street, Boston, Massachusetts 02110-1106 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (617) 439-3911 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page No. Item 1. Financial Statements Balance Sheet (Unaudited) - June 30, 2007 1 Statements of Operations (Unaudited) - For the Three Months Ended June 30, 2007 and 2006 2 Statement of Changes in Partners' Equity (Unaudited) - For the Three Months Ended June 30, 2007 3 Statements of Cash Flows (Unaudited) - For the Three Months Ended June 30, 2007 and 2006 4 Notes to the Financial Statements (Unaudited) 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Item 3. Controls and Procedures 13 PART II - OTHER INFORMATION Items 1-6 14 SIGNATURE 15 CERTIFICATIONS 16
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partner) BALANCE SHEET June 30, 2007 (Unaudited)
Assets Cash and cash equivalents $ 16,474,540 Investments in Local Limited Partnerships (Note 1) 3,264,951 Accounts receivable (Note 1) 1,100,000 Total Assets $ 20,839,491 Liabilities and Partners' Equity Due to affiliate $ 41,186 Accrued expenses 76,521 Total Liabilities 117,707 General, Initial and Investor Limited Partners' Equity 20,721,784 Total Liabilities and Partners' Equity $ 20,839,491
The accompanying notes are an integral part of these financial statements. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) STATEMENTS OF OPERATIONS For the Three Months Ended June 30, 2007 and 2006 (Unaudited)
2007 2006 Revenue: Investment $ 18,376 $ 50,467 Other - 35,000 Total Revenue 18,376 85,467 Expense: Asset management fees, affiliate 20,593 26,785 Provision for valuation allowance on advances to Local Limited Partnerships (Note 1) 13,291 50,006 General and administrative (includes reimbursements to an affiliate in the amount of $21,430 and $31,432 in 2007 and 2006, respectively) 71,225 745,183 Amortization 6,834 6,834 Total Expense 111,943 828,808 Loss before equity in losses of Local Limited Partnerships and gain on sale of investments in Local Limited Partnerships (93,567) (743,341) Equity in losses of Local Limited Partnerships (Note 1) (97,060) (79,726) Gain on sale of investments in Local Limited Partnerships 75,000 - Net Loss $ (115,627) $ (823,067) Net Loss allocated: General Partners $ (1,154) $ (8,231) Limited Partners (114,473) (814,836) $ (115,627) $ (823,067) Net Loss per Limited Partner Unit (68,043 Units) $ (1.68) $ (11.98)
The accompanying notes are an integral part of these financial statements. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) STATEMENT OF CHANGES IN PARTNERS' EQUITY For the Three Months Ended June 30, 2007 (Unaudited)
Initial Investor Net General Limited Limited Unrealized Partners Partner Partners Losses Total Balance at March 31, 2007 $ 208,371 $ 5,000 $ 20,624,040 $ (248) $20,837,163 Comprehensive Income (Loss): Change in net unrealized losses on investment securities available for sale - - - 248 248 Net Loss (1,154) - (114,473) - (115,627) Comprehensive Income (Loss) (1,154) - (114,473) 248 115,379) Balance at June 30, 2007 $ 207,217 $ 5,000 $ 20,509,567 $ - $ 20,721,784
The accompanying notes are an integral part of these financial statements. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) STATEMENTS OF CASH FLOWS For the Three Months Ended June 30, 2007 and 2006 (Unaudited)
2007 2006 Net cash used for operating activities $ (46,958) $ (32,003) Net cash provided by investing activities 652,260 498,994 Net increase in cash and cash equivalents 605,302 466,991 Cash and cash equivalents, beginning 15,869,238 1,884,202 Cash and cash equivalents, ending $ 16,474,540 $ 2,351,193
The accompanying notes are an integral part of these financial statements BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) NOTES TO THE FINANCIAL STATEMENTS (Unaudited) The unaudited financial statements presented herein have been prepared in accordance with the instructions to Form 10-QSB and do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America. These statements should be read in conjunction with the financial statements and notes thereto included with the Partnership's Form 10-KSB for the year ended March 31, 2007. In the opinion of the Managing General Partner, these financial statements include all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Partnership's financial position and results of operations. The results of operations for the periods may not be indicative of the results to be expected for the year. The Managing General Partner of the Partnership has elected to report results of the Local Limited Partnerships in which the Partnership has a limited partnership interest on a 90 day lag basis because the Local Limited Partnerships report their results on a calendar year basis. Accordingly, the financial information of the Local Limited Partnerships that is included in the accompanying financial statements is as of March 31, 2007 and 2006. Generally, profits, losses, tax credits and cash flows from operations are allocated 99% to the Limited Partners and 1% to the General Partners. Net proceeds from a sale or refinancing will be allocated 95% to the Limited Partners and 5% to the General Partners, after certain priority payments. The General Partners may have an obligation to fund deficits in their capital accounts,subject to limits set forth in the Partnership Agreement. However, to the extent that the General Partner's capital accounts are in a deficit position certain items of net income may be allocated to the General Partners in accordance with the Partnership Agreement. 1. Investments in Local Limited Partnerships The Partnership has limited partnership interests in eight Local Limited Partnerships which were organized for the purpose of owningand operating multi-family housing complexes, all of which are government-assisted. The Partnership's ownership interest in each Local Limited Partnership is 99%, except for Leawood Manor where the Partnership's ownership interest is 89%. The Partnership may have negotiated or may negotiate options with the Local General Partners to purchase or sell the Partnership's interests in the Local Limited Partnerships at the end of the Compliance Period at nominal prices. In the event that Properties are sold to a third party or upon dissolution of the Local Limited Partnerships, proceeds will be distributed according to the terms of each Local Limited Partnership agreement. The following is a summary of investments in Local Limited Partnerships at June 30, 2007:
Capital contributions and advances paid to Local Limited Partnerships and purchase price paid to withdrawing partners of Local Limited Partnerships $ 23,116,426 Cumulative equity in losses of Local Limited Partnerships (excluding cumulative unrecognized losses of $7,225,927) (14,457,344) Cumulative cash distributions received from Local Limited Partnerships (2,438,270) Investments in Local Limited Partnerships before adjustments 6,220,812 Excess investment costs over the underlying assets acquired: Acquisition fees and expenses 2,042,689 Cumulative amortization of acquisition fees and expenses (776,406) Investments in Local Limited Partnerships before valuation allowance 7,487,095 Valuation allowance on investments in Local Limited Partnerships (4,222,144) Investments in Local Limited Partnerships $ 3,264,951
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) NOTES TO THE FINANCIAL STATEMENTS (continued) (Unaudited) 1. Investments in Local Limited Partnerships (continued) For the three months ended June 30, 2007, the Partnership advanced $13,291 to one of the Local Limited Partnerships, all of which was reserved. The Partnership has recorded a valuation allowance for its investments in certain Local Limited Partnerships in order to appropriately reflect the estimated net realizable value of these investments. The Partnership's share of the net losses of the Local Limited Partnerships for the three months ended June 30, 2007 is $336,688. For the three months ended June 30, 2007, the Partnership has not recognized $239,628 of equity in losses relating to certain Local Limited Partnerships in which cumulative equity in losses and cumulative distributions exceeded its total investments in these Local Limited Partnerships. As of June 30, 2007, $1,100,000 is receivable related to the sale of two Local Limited Partnerships in the year ended March 31, 2007. 2. Significant Subsidiaries The following Local Limited Partnerships invested in by the Partnership represent more than 20% of the Partnership's total assets or equity as of June 30, 2007 or 2006 or net losses for the three months ended either June 30, 2007 or 2006. The following financial information represents the performance of these Local Limited Partnerships for the three months ended March 31, 2007 and 2006:
Leawood Associates, L.P. A Limited Partnership 2007 2006 Revenue $ 516,463 $ 508,658 Net Loss $ (71,093) $ (73,776) Allentown Towne House, L.P. Revenue $ 354,325 $ 347,696 Net Loss $ (23,585) $ (28,633) Prince Street Towers, L.P. A Limited Partnership Revenue $ 456,959 $ 457,945 Net Loss $ (27,698) $ (17,392) Sencit Towne House, L.P. Revenue $ 497,797 $ 493,598 Net Income $ 17,155 $ 31,818
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain matters discussed herein constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Partnership intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements and is including this statement for purposes of complying with these safe harbor provisions. Although the Partnership believes the forward-looking statements are based on reasonable assumptions, the Partnership can give no assurance that its expectations will be attained. Actual results and timing of certain events could differ materially from those projected in or contemplated by the forward-looking statements due to a number of factors, including, without limitation, general economic and real estate conditions and interest rates. Critical Accounting Policies The Partnership's accounting policies include those that relate to its recognition of investments in Local Limited Partnerships using the equity method of accounting. The Partnership's policy is as follows: The Local Limited Partnerships in which the Partnership invests are Variable Interest Entities ("VIE"s). The Partnership is involved with the VIEs as a non-controlling limited partner equity holder. Because the Partnership is not the primary beneficiary of these VIEs, it accounts for its investments in the Local Limited Partnerships using the equity method of accounting. As a result of its involvement with the VIEs, the Partnership's exposure to economic and financial statement losses is limited to its investments in the VIEs ($3,264,951 at June 30, 2007). The Partnership may be subject to additional losses to the extent of any financial support that the Partnership voluntarily provides in the future. Under the equity method, the investment is carried at cost, adjusted for the Partnership's share of net income or loss and for cash distributions from the Local Limited Partnerships; equity in income or loss of the Local Limited Partnerships is included currently in the Partnership's operations. Under the equity method, a Local Limited Partnership investment will not be carried below zero. To the extent that equity in losses are incurred when the Partnership's carrying value of the respective Local Limited Partnership has been reduced to a zero balance, the losses will be suspended and offset against future income. Income from Local Limited Partnerships, where cumulative equity in losses plus cumulative distributions have exceeded the total investment in Local Limited Partnerships, will not be recorded until all of the related unrecorded losses have been offset. To the extent that a Local Limited Partnership with a carrying value of zero distributes cash to the Partnership, that distribution is recorded as income on the books of the Partnership and is included in "other revenue"in the accompanying financial statements. The Partnership has implemented policies and practices for assessing other-than-temporary declines in values of its investments in Local Limited Partnerships. Periodically, the carrying values of the investments are compared to their respective fair values. If an other-than-temporary decline in carrying value exists, a provision to reduce the asset to fair value, as calculated based primarily on remaining tax benefits, will be recorded in the Partnership's financial statements. Generally, the carrying values of most Local Limited Partnerships will decline through losses and distributions in amounts sufficient to prevent other-than-temporary impairments. However, the Partnership may record similar impairment losses in the future if the expiration of tax credits outpaces losses and distributions from any of the Local Limited Partnerships. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Liquidity and Capital Resources The Partnership had an increase in cash and cash equivalents of $605,302 from $15,869,238 at March 31, 2007 to $16,474,540 at June 30, 2007. The increase is primarily attributable to the maturity of investments securities, proceeds received from the sale of investments in Local Limited Partnerships and cash distributions from Local Limited Partnerships, partially offset by cash used for operating activities and advances to Local Limited Partnerships. The Managing General Partner originally designated 4% of the Gross Proceeds as Reserves, as defined in the Partnership Agreement. The Reserves were established to be used for working capital of the Partnership and contingencies related to the ownership of Local Limited Partnership interests. The Managing General Partner may increase or decrease such Reserves from time to time, as it deems appropriate. At June 30, 2007, $16,474,540 of cash and cash equivalents has been designated as Reserves. To date, professional fees relating to various Property issues totaling approximately $1,985,000 have been paid from Reserves. To date, Reserve funds in the amount of approximately $304,000 also have been used to make additional capital contributions to one Local Limited Partnership. In the event a Local Limited Partnership encounters operating difficulties requiring additional funds, the Managing General Partner might deem it in its best interest to voluntarily provide such funds in order to protect its investment. As of June 30, 2007, the Partnership has advanced approximately $1,467,000 to Local Limited Partnerships to fund operating deficits. The Managing General Partner believes that the investment income earned on the Reserves, along with cash distributions received from Local Limited Partnerships, to the extent available, will be sufficient to fund the Partnership's ongoing operations. Reserves may be used to fund Partnership operating deficits, if the Managing General Partner deems funding appropriate. If Reserves are not adequate to cover the Partnership's operations, the Partnership will seek other financing sources including, but not limited to, the deferral of Asset Management Fees paid to an affiliate of the Managing General Partner or working with Local Limited Partnerships to increase cash distributions. To date, the Partnership has used approximately $17,510,000 of operating funds to replenish Reserves. Since the Partnership invests as a limited partner, the Partnership has no contractual obligation to provide additional funds to Local Limited Partnerships beyond its specified investment. Thus, at June 30, 2007, the Partnership had no contractual or other obligation to any Local Limited Partnership which had not been paid or provided for. Cash Distributions No cash distributions were made during the three months ended June 30, 2007. Results of Operations The Partnership's results of operations for three months ended June 30, 2007 resulted in a net loss of $115,627 as compared to a net loss of $823,067 for the same period in 2006. The decrease in net loss is primarily attributable to a decrease in general and administrative expenses, an increase in gain on sale of investments in Local Limited Partnerships and a decrease in provision for valuation allowance on advances to Local Limited Partnerships partially offset by a decrease in other income and a decrease in investment income. General and administrative expenses decreased primarily due to a decrease in legal expenses, associated with litigation in which the Partnership was involved. The increase in gain on sale of investments in Local Limited Partnerships is due to additional proceeds from the February 28, 2007 sale of Oakview Square. The decrease in provision for valuation allowance on advances to Local Limited Partners is the result of a decrease in advances made to Local Limited Partnerships during the three months ended June 30, 2007. The decrease in other income is due to a decrease in distributions from Local Limited Partnerships with carrying values of zero. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Portfolio Update The Partnership was formed on March 30, 1989 under the laws of the Commonwealth of Massachusetts for the primary purpose of investing, as a limited partner, in Local Limited Partnerships which own and operate apartment complexes, most of which benefit from some form of federal, state or local assistance program and each of which qualifies for low-income housing tax credits. The Partnership's objectives are to: (i) provide current tax benefits in the form of tax credits which qualified investors may use to offset their federal income tax liability; (ii) preserve and protect the Partnership's capital; (iii) provide limited cash distributions which are not expected to constitute taxable income during Partnership operations; and iv) provide cash distributions from sale or refinancing transactions. The General Partners of the Partnership are Arch Street VIII, Inc., which serves as the Managing General Partner, and Arch Street IV L.P., which also serves as the Initial Limited Partner. Both of the General Partners are affiliates of MMA. The fiscal year of the Partnership ends on March 31. As of June 30, 2007, the Partnership's investment portfolio consisted of limited partnership interests in eight Local Limited Partnerships, each of which owns and operates a multi-family apartment complex and each of which has generated Tax Credits. Since inception, the Partnership has generated Tax Credits, net of recapture, of approximately $1,287 per Limited Partner Unit. The aggregate amount of Tax Credits generated by the Partnership was consistent with the objective specified in the Partnership's prospectus. Properties that receive low income housing Tax Credits must remain in compliance with rent restriction and set-aside requirements for at least 15 calendar years from the date the property is placed in service. Failure to do so would result in recapture of a portion of the property's Tax Credits. The Compliance Periods of the eight remaining Properties in which the Partnership has an interest all expired on or before December 31, 2006. The Managing General Partner has negotiated an agreement that will ultimately allow the Partnership to dispose of its interest in all of the Local Limited Partnerships. The Partnership did not dispose of any Local Limited Partnership interests during the three months ended June 30, 2007. The Managing General Partner will continue to closely monitor the operations of the Properties and will formulate disposition strategies with respect to the Partnership's remaining Local Limited Partnership interests. The Partnership shall dissolve and its affairs shall be wound up upon the disposition of the final Local Limited Partnership interest and other assets of the Partnership. Investors will continue to be Limited Partners, receiving K-1s and quarterly and annual reports, until the Partnership is dissolved. As previously reported, for the past several years the following three litigation proceedings had been pending between certain investors and various affiliates of the General Partners, including the Partnership, concerning, among other things, those investors' requests to inspect certain alleged "books and records" of the Partnership and the affiliates: Park G.P., Inc. ("Park") brought a lawsuit against the Partnership and various affiliates of the General Partners and their purported general partners (collectively, the "Fund Parties") in state court in Missouri (the "Missouri Lawsuit"); the Fund Parties brought a declaratory judgment lawsuit against Everest Housing Investors 2, LLC and several other Everest-related entities (collectively, the "Everest Entities") in Massachusetts state court (the "Everest Massachusetts Lawsuit"); and the Partnership and its General Partners brought a lawsuit against Park and its affiliate Bond Purchase, L.L.C. ("Bond") in Massachusetts state court (the "Park and Bond Massachusetts Lawsuit"). As of April 21, 2007, the Fund Parties and the Partnership reached an agreement with Park, Bond and the Everest Entities to resolve these lawsuits (the "Settlement Agreement"). Under the terms of the Settlement Agreement, the claims and counterclaims asserted in the Everest Massachusetts Lawsuit have been dismissed with prejudice and the claims in the Missouri Lawsuit and the Park and Bond Massachusetts Lawsuit have been dismissed without prejudice, all in exchange for options, subject to various conditions, to purchase certain Local Limited Partnership interests held by the Partnership, Boston Financial Qualified Housing Tax Credits L.P. III, Boston Financial Qualified Housing Tax Credits L.P. V and Boston Financial Tax Credit Fund VII, A Limited Partnership at specified prices. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Portfolio Update (continued) With respect to the Partnership, the Settlement Agreement provides options, subject to various conditions, to purchase the Partnership's interests in Prince Street Towers, L.P., located in Lancaster, PA, Sencit Towne House L.P., located in Shillington, PA, Allentown Towne House, L.P., located in Allentown, PA, Brookscrossing Apartments, L.P., located in Atlanta, GA, and Leawood Associates, L.P., located in Leawood, KS, for specified prices aggregating to $13,300,000. Except as noted above, the Partnership is not a party to any other pending legal or administrative proceeding, and to the best of its knowledge, no legal or administrative proceeding is threatened or contemplated against it. Property Discussions A majority of the Properties in which the Partnership has an interest had stabilized operations and operated above breakeven as of March 31, 2007. Some Properties generate cash flow deficits that the Local General Partners of those Properties fund through project expense loans, subordinated loans or operating escrows. However, a few Properties have had persistent operating difficulties that could either: (i) have an adverse impact on the Partnership's liquidity; (ii) result in their foreclosure; or (iii) result in the Managing General Partner deeming it appropriate for the Partnership to dispose of its interest in the Local Limited Partnership. Also, the Managing General Partner, in the normal course of the Partnership's business, may arrange for the future disposition of its interest in certain Local Limited Partnerships. The following Property discussions focus only on such Properties. As previously reported, an IRS audit of 1993 tax return for Bentley Court II Limited Partnership questioned the treatment of certain items and had findings of non-compliance in 1993. The IRS then expanded the scope of the audit to include the 1994 and 1995 tax returns. As a result, the IRS disallowed the Property's Tax Credits for each of these years (the disallowance of the 1993, 1994 and 1995 Tax Credits applies only to the Limited Partners of the Partnership that claimed Tax Credits for those years and the recapture applies to all current Limited Partners of the Partnership). On behalf of the Partnership, the Managing General Partner retained counsel to appeal the IRS's findings in order to minimize the loss of Tax Credits. This administrative appeal has been unsuccessful, and the IRS has not retracted its position of disallowing Tax Credits for 1993, 1994 and 1995, a total of $2,562,173, plus accrued interest of approximately $3,000,000, or approximately $80 per Unit. Based on of advice of tax counsel, the Managing General Partner determined to concede the disallowance of Tax Credits for those three years. In addition, the Local General Partner received notification that the IRS was expanding its claims to recapturing $502,472 of Tax Credits taken in 1990, 1991 and 1992, plus accrued interest of approximately $800,000, or approximately $20 per Unit. Based on advice of tax counsel, the Managing General Partner determined to challenge the IRS's findings with respect to this $502,472 of recapture, and a trial was held on this issue in November 2005. Last year, the Tax Court ruled against the Partnership. Upon advice of counsel, this decision was not appealed by the Managing General Partner. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Property Discussions (continued) It is possible that the IRS will further expand its claims for additional amounts with respect to other years. However, counsel has advised that the statute of limitations has expired for the tax years 1996, 1997 and 1998. At this point, there appears to be no possibility of a settlement with the IRS, and the Managing General Partner anticipates that the IRS will forward the assessments for disallowance and recapture directly to the affected Limited Partners and that this could occur in 2007. The accrued interest calculations above respecting the disallowance and recapture of Tax Credits are estimates only based upon a rate of 8% simple interest from the dates that the taxes were deemed to be owed. The Managing General Partner has not included estimates for penalties because it is not expecting them. However, it is possible that the IRS will attempt to claim penalties. Tax counsel has advised that Limited Partners that acquired Units after 1998 will not be affected by these assessments. The Managing General Partner strongly recommends that Limited Partners consult with their tax advisors regarding the appropriate treatment of any disallowance or recapture assessments. As previously reported, the Partnership's interest in the Local Limited Partnership that owns Mayfair Mansions, located in Washington, DC, was terminated upon the July 2006 sale of the Property to an unaffiliated entity. The Partnership received net sales proceeds of $12,794,835, or $188.04 per Unit, resulting in taxable income of $17,236,598, or $253.32 per Unit. The Managing General Partner believed that the Partnership had a claim of up to an additional $1,500,000 of sale proceeds under the terms of the partnership agreement and investment documents for this Local Limited Partnership. The Local General Partners disputed that at least a portion of this amount is due. On behalf of the Partnership, the Managing General Partner retained counsel and filed suit in the Superior Court of the District of Columbia (Civil Action No. 0006755-06) seeking a declaratory judgment and damages. The Local General Partners filed counter-claims and disputed the Partnership's claims. On January 10, 2007, representatives of the Managing General Partner and the Local General Partners reached a settlement during court-ordered mediation with regard to all of the above referenced legal claims. The settlement requires an additional distribution to the Partnership in the amount of approximately $1,050,000, or $15.23 per Unit. This payment, originally expected to be received in the first quarter of the fiscal year ending March 31, 2008, is now expected to be received in the second quarter of the fiscal year ending March 31, 2008, upon the receipt by the Local Limited Partnership of all outstanding amounts due from the sale of the Property including lender held escrows and reserves. All pending legal matters were subsequently dismissed with prejudice. The Partnership no longer has an interest in this Local Limited Partnership. As previously reported, the Managing General Partner anticipated the termination of the Partnership's interest in the Local Limited Partnership that owned Oakview Square, located in Chesterfield, Michigan, upon the sale of the Property. The sale of this Property, presently resulting in net proceeds to the Partnership of $100,000, or $1.47 per Unit, occurred on February 28, 2007, effectively terminating the Partnership's interest in this Local Limited Partnership. The Managing General Partner expects the Partnership to receive additional proceeds of approximately $50,000, or $0.73 per Unit, upon a reconciliation of issues related to tax and utility payments. This sale will result in 2007 taxable income projected to be approximately $824,000, or $12.11 per Unit. The Partnership will no longer have an interest in this Local Limited Partnership upon receipt of all sale proceeds. As previously reported, the Managing General Partner negotiated an agreement to transfer the Local General Partner interest in West Pine, located in Findlay, Pennsylvania, to an affiliate of the Allegheny County Housing Authority ("ACHA"), contingent upon receiving approval from the U.S. Department of Housing and Urban Development ("HUD"). HUD approval was received, and the Local General Partner interest was transferred on October 17, 2003. In addition, the ACHA had informed the Managing General Partner of its interest in acquiring the Partnership's interest in the Local Limited Partnership, pending their assumption of the Local General Partner interest. Concurrent with the replacement of the Local General Partner, another ACHA affiliate acquired 30% of the Partnership's limited partner interest in the Local Limited Partnership. As part of this transaction, the Partnership acquired a put option BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Property Discussions (continued) for the remaining 70% exercisable for $1 anytime after the expiration of the Compliance Period on December 31, 2006. West Pine generated its final year of Tax Credits in 2001. The Managing General continues to pursue an exit strategy that may result in a 2007 disposal of the Partnership's interest in the Local Limited Partnership. As previously reported, although occupancy levels at 46th and Vincennes, located in Chicago, Illinois, improved to acceptable levels throughout the three-month period ending December 31, 2006, increases in utility costs and bad debt expense have resulted in unfavorable debt service coverage while working capital levels remain well below appropriate levels as of March 31, 2007. A site visit by the Managing General Partner in October 2006 found the Property in need of some capital improvements. Although advances from the Local General Partner have enabled the Property to remain current on its loan obligations, the Managing General Partner believes that the Local General Partner and its affiliated management company are not adequately performing their responsibilities with respect to the Property. The Managing General Partner has expressed these concerns to the Local General Partner and will continue to closely monitor the Property's operations. Based on the results of a fairly recent market valuation, the Managing General Partner will most likely enter into a put agreement, pending the HUD's approval of a Transfer of Physical Assets Application, and subsequently transfer the Partnership's interest in the Local Limited Partnership during 2007. The Property's Compliance Period ended on December 31, 2005. In connection with the Settlement Agreement described in the "Portfolio Update" section above, the Partnership has granted options, subject to various conditions, to sell its interests in Prince Street Towers, L.P., located in Lancaster, PA, Sencit Towne House L.P., located in Shillington, PA, Allentown Towne House, L.P., located in Allentown, PA, Brookscrossing Apartments, L.P., located in Atlanta, GA, and Leawood Associates, L.P., located in Leawood, KS, for a price of $13,300,000 specified in the Settlement Agreement. In accordance with the terms of the previously mentioned Settlement Agreement, the Managing General Partner anticipates that the Partnership's interest in the Local Limited Partnership that owns Leawood Manor, located in Leawood, Kansas, will be terminated upon the sale of the Local Limited Partnership interest. At present, no closing date has been scheduled for the sale of this interest. . BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) Controls and Procedures (a) Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this report, with the participation of the Partnership's management, the Partnership's principal executive officer and principal financial officer conducted an evaluation of the Partnership's disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act). Based on this evaluation, our PEO and PFO concluded that our disclosure controls and procedures were effective as of June 30, 2007, to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) Changes in Internal Control over Financial Reporting. There have been no significant changes in the Partnership's internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during the Partnership's last fiscal quarter that has materially affected, or is reasonably likely to affect, the Partnership's internal control over financial reporting. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) PART II OTHER INFORMATION Items 1-5 Not applicable Item 6 Exhibits and reports on Form 8-K (b) Exhibits 31.1 Certification of Principal Executive Officer and Principal Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of Principal Executive Officer and Principal Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (c) Reports on Form 8-K were filed during the quarter ended June 30, 2007: BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) SIGNATURE 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. DATED: August 14, 2007 BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV By: Arch Street VIII, Inc., its Managing General Partner /s/Gary Mentesana Gary Mentesana President Arch Street VIII, Inc.