BOSTON CAPITAL TAX CREDIT FUND V LP - 10-K - 20061020 - PART_I
Item 1. Business
Boston Capital Tax Credit Fund V L.P. (the Fund) is a limited partnership formed under the
Delaware Revised Uniform Limited Partnership Act as of October 15, 2003. The General Partner of
the Fund is Boston Capital Associates V LLC, a Delaware limited liability company. The members of
the General Partner are Boston Capital Companion Limited Partnership, a Massachusetts limited
partnership, and John P. Manning, who is the managing member. Additional members of the General
Partner are Jeffrey H. Goldstein and Marc N. Teal. The general partner of Boston Capital Companion
Limited Partnership is Boston Capital Partners II Corporation whose sole shareholder is John P.
Manning. John P. Manning is the principal of Boston Capital Partners, Inc.
The Assignor Limited Partner is BCTC V Assignor Corp., a Delaware corporation which is wholly-owned
by John P. Manning. The Assignor Limited Partner was formed for the purpose of serving in that
capacity for the Fund and will not engage in any other business. Units of beneficial interest in
the Limited Partnership Interest of the Assignor Limited Partner are assigned by the Assignor
Limited Partner by means of beneficial assignee certificates (BACs) to investors and investors
are entitled to all the rights and economic benefits of a Limited Partner of the Fund including
rights to a percentage of the income, gains, losses, deductions, credits and distributions of the
A Registration Statement on Form S-11 and the related prospectus, as supplemented (the
Prospectus) were filed with the Securities and Exchange Commission and became effective January
2, 2004, in connection with a public offering (Offering) in one or more series of a minimum of
250,000 BACs and a maximum of 7,000,000 BACs at $10 per BAC. On August 10, 2004 an amendment to
Form S-11, which registered an additional 8,500,000 BACs for sale to the public in one or more
series became effective. As of March 31, 2006, subscriptions had been received and accepted by the
Fund for 11,777,706 BACs representing capital contributions of $117,777,060 in the aggregate.
The Offering, including information regarding the issuance of BACs in series, is described on pages
161 to 167 of the Prospectus, as supplemented, under the caption The Offering, which is
incorporated herein by reference.
Description of Business
The Funds principal business is to invest as a limited partner in other limited partnerships (the
Operating Partnerships) each of which will own or lease and will operate an apartment complex
exclusively or partially for low- and moderate-income tenants. Each Operating Partnership in which
the Fund invests owns Apartment Complexes which are completed, newly-constructed, under
construction or rehabilitation, or to-be constructed or rehabilitated, and which are expected to
receive Government Assistance. Each apartment complex is expected to qualify for the low-income
housing tax credit under Section 42 of the Code (the Federal Housing Tax Credit), providing tax
benefits over a period of ten to twelve years in the form of tax credits which investors
may use to offset income, subject to certain strict limitations, from other sources. Some
apartment complexes may also qualify for the historic rehabilitation tax credit under Section 47 of
the Code (the Rehabilitation Tax Credit). The Federal Housing Tax Credit and the Government
Assistance programs are described on pages 72 to 93 of the Prospectus, as supplemented, under the
captions Tax Credit Programs and Government Assistance Programs, which is incorporated herein
by reference. Section 236(f)(ii) of the National Housing Act, as amended, and Section 101 of the
Housing and Urban Development Act of 1965, as amended, each provide for the making by HUD of rent
supplement payments to low income tenants in properties which receive other forms of federal
assistance such as Tax Credits. The payments for each tenant, which are made directly to the owner
of their property, generally are in such amounts as to enable the tenant to pay rent equal to 30%
of the adjusted family income. Some of the apartment complexes in which the Fund has invested are
receiving their rent supplements from HUD. HUD has been in the process of converting rent
supplement assistance to assistance paid not to the owner of the Apartment Complex, but directly to
the individuals. At this time, the Fund is unable to predict whether Congress will continue rent
supplement programs payable directly to owners of apartment complexes.
As of March 31, 2006 the Fund had invested in 15 Operating Partnerships on behalf of Series 47; 10
Operating Partnerships on behalf of Series 48; and 21 Operating Partnerships on behalf of Series
49. A description of these Operating Partnerships is set forth in Item 2 herein.
The business objectives of the Fund are to:
provide current tax benefits to Investors in the
form of Federal Housing Tax Credits and in limited
instances, a small amount of Rehabilitation Tax
Credits, which an investor may apply, subject to
strict limitations, against the Investors federal
income tax liability from active, portfolio and
preserve and protect the Funds capital and provide
capital appreciation and cash distributions to
limited partners through increases in value of the
Funds investments and, to the extent applicable,
increase in equity through periodic payments on the
mortgage indebtedness with respect to the apartment
provide tax benefits in the form of passive losses
which an investor may apply to offset his passive
income (if any); and
provide cash distributions (except with respect to
the Funds investment in some Non-Profit Operating
Partnerships) from Capital Transaction proceeds.
The Operating Partnerships intend to hold the
Apartment Complexes for appreciation in value. The
Operating Partnerships may sell the Apartment
Complexes after a period of time if financial
conditions in the future make such sales desirable
and if such sales are permitted by government
The business objectives and investment policies of the Fund are described more
fully on pages 55 to 70 of the Prospectus, as supplemented, under the caption Investment
Objectives and Acquisition Policies, which is incorporated herein by reference.
The Fund does not have any employees. Services are performed by the General Partner and its
affiliates and agents retained by them.
As used in this Item 1A, references to we, us and our mean the Fund.
An investment in our Units and our investments in Local Limited Partnerships and their Operating
Partnerships are subject to risks. These risks may impact the tax benefits of an investment in our
Units, and the amount of proceeds available for distribution to our Limited Partners, if any, on
liquidation of our investments.
In addition to the other information set forth in this report, you should carefully consider the
following factors which could materially affect our business, financial condition or results of
operations. The risks described below are not the only risks we face. Additional factors not
presently known to us or that we currently deem to be immaterial also may materially adversely
affect our business operations.
The ability of Limited Partners to claim tax losses from their investment in us is limited.
The IRS may audit us or a Local Limited Partnership and challenge the tax treatment of tax items.
The amount of Low Income Housing Tax Credits and tax losses allocable to the investors could be
reduced if the IRS were successful in such a challenge. The alternative minimum tax could reduce
tax benefits from an investment in our Units. Changes in tax laws could also impact the tax
benefits from an investment in our Units and/or the value of the Operating Partnerships. Until the
Local Limited Partnerships have completed a mandatory fifteen year Low Income Housing Tax Credit
compliance period, investors are at risk for potential recapture of Low Income Housing Tax Credits
that have already been claimed.
The Low Income Housing Tax Credits rules are extremely complicated and noncompliance with these
rules may have adverse consequences for Unit holders.
Noncompliance with applicable tax regulations may result in the loss of future Low Income Housing
Tax Credits and the fractional recapture of Low Income Housing Tax Credits already taken. In most
cases the annual amount of Low Income Housing Tax Credits that an individual can use is limited to
the tax liability due on the persons last $25,000 of taxable income. The Local Limited
Partnerships may be unable to sell the Operating Partnerships at a price which would result in our
realizing cash distributions or proceeds from the transaction. Accordingly, we may be unable to
distribute any cash to its investors. Low Income Housing Tax Credits may be the only benefit from
an investment in our Units.
Poor performance of one Housing Complex, or the real estate market generally, could impair our
ability to satisfy our investment objectives.
Each Housing Complex is subject to mortgage indebtedness. If a Local Limited Partnership failed to
pay its mortgage, it could lose its Housing Complex in foreclosure. If foreclosure were to occur
during the first 15 years of the existence of the Fund, the loss of any remaining future Low Income
Housing Tax Credits, a fractional recapture of previously claimed Low Income Housing Tax
Credits, and a loss of our investment in the Housing Complex would occur. To the extent the
Operating Partnerships receive government financing or operating subsidies, they may be subject to
one or more of the following risks:
difficulties in obtaining rent increases; limitations on cash distributions;
limitations on sales or refinancing of Operating Partnerships;
limitations on transfers of interests in Local Limited Partnerships;
limitations on removal of Local General Partners;
limitations on subsidy programs; and
possible changes in applicable regulations.
The value of real estate is subject to risks from fluctuating economic conditions, including
employment rates, inflation, tax, environmental, land use and zoning policies, supply and demand of
similar properties, and neighborhood conditions, among others.
No trading market for the Units exists or is expected to develop.
There is currently no active trading market for the Units. Accordingly, Limited Partners may be
unable to sell their Units or may have to sell Units at a discount. Limited Partners should
consider their Units to be a long-term investment.
Investors may realize taxable gain on sale or disposition of certificates.
Upon the sales or other taxable disposition of certificates, investors will realize taxable
income to the extent that their allocable share of the non-recourse mortgage indebtedness on the
apartment complexes, together with the money they receive from the sale of the certificates, is
greater than the original cost of their certificates. This realized taxable income is reduced to
the extent that investors have suspended passive losses or credits. It is possible that the sale
of certificates may not generate enough cash to pay the tax obligations arising from the sale.
Investors may have tax liability in excess of cash.
Investors eventually may be allocated profits for tax purposes which exceed any cash Boston
Capital distributes to them. Under these circumstances, unless an investor has passive losses or
credits to reduce such tax liability, the investor will have to pay federal income tax without a
corresponding cash distribution from Boston Capital. Similarly, in the event of a sale or
foreclosure of an apartment complex or a sale of certificates, an investor may be allocated taxable
income, resulting in tax liability, in excess of any cash distributed to him or her as a result of
Investors may not receive cash if apartment complexes are sold
There is no assurance that investors will receive any cash distributions from the sale or
refinancing of an apartment complex. The price at which an apartment complex is sold may not be
large enough to pay the mortgage and
other expenses which must be paid at such time. Even if there are net cash proceeds from a sale
distributed to Boston Capital, expenses such as accrued Fund Management Fees and unpaid loans to
Boston Associates will be deducted pursuant to Section 4.02(a) of the Fund Agreement included in
Exhibit A. If any of these events happen, investors will not get all of their investment back, and
the only benefit from an investment in Boston Capital will the tax credits received.
The sale or refinancing of the apartment complexes is dependent upon the following material
The necessity of obtaining the consent of the operating general partners;
The necessity of obtaining the approval of any governmental agency(ies)
providing government assistance to the apartment complex; and
The uncertainty of the market.
Any sale may occur well after the fifteen-year federal housing tax credit compliance period.
We have insufficient sources of cash to pay its existing liabilities.
We currently do not have sufficient cash resources to satisfy its financial liabilities.
Furthermore, we do not anticipate that we will have sufficient available cash to pay our future
financial liabilities. Substantially all of our existing liabilities are payable to our General
Partner and its affiliates. Though the amounts payable to the General Partner and its affiliates
are contractually currently payable, we do not believe that the General Partner or its affiliates
will demand immediate payment of these contractual obligations in the near term, however there can
be no assurance that this will be the case. We would be materially adversely affected if the
General Partner or its affiliates demanded payment in the near term of our existing contractual
liabilities or suspended the provision of services to us because of its inability to satisfy these
obligations. All monies currently deposited, or that will be deposited in the future, into the
Partnerships working capital reserves are intended to be utilized to pay our existing and future
Item 1B. Unresolved Staff Comments
Item 2. Properties
The Fund has acquired a Limited Partnership interest in 46 Operating Partnerships in three series,
identified in the table set forth below. The Apartment Complexes owned by the Operating
Partnerships are eligible for the Federal Housing Tax Credit. Initial occupancy of a unit in each
Apartment Complex which initially complied with the Minimum Set-Aside Test (i.e.,
initial occupancy by tenants with incomes equal to no more than a disignated percentage of area
median income) and the Rent Restriction Test (i.e., gross rent charged tenants does not exceed 30%
of the applicable income standards) is referred as Qualified Occupancy. The Operating Partnership
and the respective Apartment Complexes are described more fully in the Prospectus. The General
Partner believes that there is adequate casualty insurance on the properties.