10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

Form 10-Q/A

 Amendment No. 1

(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, 2011

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 0-20610

NATIONAL TAX CREDIT INVESTORS II

(Exact name of registrant as specified in its charter)

California	93-1017959
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

55 Beattie Place, PO Box 1089

Greenville, South Carolina  29602

(Address of principal executive offices)

(864) 239-1000

(Registrant’s telephone number, including area code)

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. 

[X] 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). [X] 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 [X]

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

Explanatory Note

This Form 10-Q/A amends the Quarterly Report on Form 10-Q of National Tax Credit Investors II for the quarter ended June 30, 2011 filed on August 12, 2011 (the “Form 10-Q”) for the sole purpose of furnishing the Interactive Data File as Exhibit 101 in accordance with Rule 405(a)(2) of Regulation S-T.

No other changes have been made to the Form 10-Q. This Form 10-Q/A speaks as of the original filing date of the Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures made in the Form 10-Q.

Users of this data are advised that pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those Sections.

ITEM 6.     EXHIBITS

See Exhibit Index.

The agreements included as exhibits to this Form 10-Q/A contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:

• should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

• have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

• may apply standards of materiality in a way that is different from what may be viewed as material to an investor; and

• were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. The Partnership acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this Form 10-Q/A not misleading. Additional information about the Partnership may be found elsewhere in this Form 10-Q/A and the Partnership’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.

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.

	NATIONAL TAX CREDIT INVESTORS II
	(a California limited partnership)
	By:   National Partnership Investments Corp.
	General Partner
Date: September 7, 2011	By:   /s/John McGrath
	John McGrath
	Senior Vice President, equivalent of the
	chief executive officer of the Partnership
Date: September 7, 2011	By:   /s/Stephen B. Waters
	Stephen B. Waters
	Senior Director of Partnership Accounting,
	equivalent of the chief financial officer of the Partnership

NATIONAL TAX CREDIT INVESTORS II

EXHIBIT INDEX

Exhibit     Description of Exhibit

3           Partnership Agreement (herein incorporated by reference to the Partnership's Form S-11 Registration No. 33-27658)

10          Loan Sale Agreement between Pami Midatlantic LLC, a Delaware limited liability company and National Tax Credit Investors II, a California limited partnership dated May 30, 2006. Incorporated by reference to the Partnership’s Current Report on Form 8-K dated May 30, 2006.

10.5        Assignment and Assumption Agreement by and among Investment Concepts, Inc., a California corporation, National Tax Credit, Inc. II, a California corporation, and National Tax Credit Investors II, a California limited partnership, and GAC Realty Advisors, LP, a Nevada limited partnership, dated September 8, 2009. Incorporated by reference to the Partnership’s Current Report on Form 8-K dated September 8, 2009.

10.6        Contract for Purchase and Sale of Partnership Interests by and between National Tax Credit, Inc. II, a California corporation, National Tax Credit Investors II, a California limited partnership, and Oswald Investments, L.C., an Iowa limited liability company, or its assign and Ted Oswald, individually or his assigns, dated November 17, 2009. Incorporated by reference to the Partnership’s Current Report on Form 8-K dated November 17, 2009. 

10.7        Contract for Purchase and Sale of Partnership Interests by and between National Tax Credit, Inc. II, a California corporation, National Tax Credit Investors II, a California limited partnership, and Oswald Investments, L.C., an Iowa limited liability company, or its assign and Ted Oswald, individually or his assigns, dated November 17, 2009.  Incorporated by reference to the Partnership’s Current Report on Form 8-K dated November 17, 2009. 

10.8        Contract for Purchase and Sale of Partnership Interests by and between National Tax Credit, Inc. II, a California corporation, National Tax Credit Investors II, a California limited partnership, and Oswald Investments, L.C., an Iowa limited liability company, or its assign and Ted Oswald, individually or his assigns, dated November 17, 2009.  Incorporated by reference to the Partnership’s Current Report on Form 8-K dated November 17, 2009. 

10.9        First Amendment to Assignment and Assumption Agreement by and among Investment Concepts, Inc., a California corporation, National Tax Credit, Inc. II, a California corporation, National Tax Credit Investors II, a California limited partnership, and GAC Realty Advisors, LP, a Nevada limited partnership, effective January 31, 2010.  Incorporated by reference to the Partnership’s Current Report on Form 8-K dated January 31, 2010. 

10.10       Second Amendment to Assignment and Assumption Agreement by and among Investment Concepts, Inc., a California corporation, National Tax Credit, Inc. II, a California corporation, National Tax Credit Investors II, a California limited partnership, and GAC Realty Advisors, LP, a Nevada limited partnership, effective March 1, 2010.  Incorporated by reference to the Partnership’s Current Report on Form 8-K dated March 1, 2010. 

10.11       Assignment and Assumption Agreement by and between National Tax Credit Investors II, a California limited partnership and National Tax Credit, Inc. II, a California corporation, Munson Pineview Associates, a Texas general partnership and RCC Pineview Associates, L.P., a Delaware limited partnership, effective February 1, 2011. Incorporated by reference to the Partnership’s Current Report on Form 8-K dated February 3, 2011.

10.12       Assignment and Assumption Agreement by and between National Tax Credit Investors II, a California limited partnership; National Tax Credit, Inc. II, a California corporation; Tailored Management Services, LLC, an Idaho limited liability company and Marty D. Frantz, an individual, effective June 7, 2011. Incorporated by reference to the Partnership’s Current Report on Form 8-K dated June 7, 2011.

10.13       Assignment and Assumption Agreement by and between National Tax Credit Investors II, a California limited partnership; National Tax Credit, Inc. II, a California corporation; Tailored Management Services, LLC, an Idaho limited liability company and Marty D. Frantz, an individual, effective June 7, 2011. Incorporated by reference to the Partnership’s Current Report on Form 8-K dated June 7, 2011.

10.14       First Amendment to Amended and Restated Certificate and Agreement of Limited Partnership by and between National Tax Credit Investors II, a California limited partnership; National Tax Credit, Inc. II, a California corporation; Futura Development of Puerto Rico, Inc. a Puerto Rico corporation and Alta Helena Investment, Inc., a Puerto Rico corporation, effective June 15, 2011. Incorporated by reference to the Partnership’s Current Report on Form 8-K dated June 15, 2011.

31.1*       Certification of equivalent of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*       Certification of equivalent of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*       Certification of equivalent of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS**   XBRL Instance Document

101.SCH**   XBRL Taxonomy Extension Schema Document

101.CAL**   XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB**   XBRL Taxonomy Extension Labels Linkbase Document

101.PRE**   XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF**   XBRL Taxonomy Extension Definition Linkbase Document

* Previously filed or furnished with National Tax Credit Investors II’s Form 10-Q filed on August 12, 2011.

** In accordance with Regulation S-T, the XBRL-formatted interactive data files that comprise Exhibit 101 to this Quarterly Report on Form 10-Q/A shall be deemed “furnished” and not “filed”.

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Statements of Operations (Unaudited) (USD $) In Thousands, except Per Share data	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Operating Expenses:
Management fees - general partner	$ 47	$ 62	$ 93	$ 123
General and administrative	19	22	30	44
Tax expense	22	19	57	44
Legal and accounting	21	23	37	61
Total operating expenses	109	126	217	272
Loss from partnership operations	(109)	(126)	(217)	(272)
Gain from sales of limited partnership interests in Local Partnerships	31	200	1,031	223
Distributions from Local Partnerships recognized as income	10	12	10	17
Recovery of advances to Local Partnerships previously recognized as expense				19
Equity in loss of Local Partnerships and amortization of acquisition costs	(7)	(135)	(66)	(270)
Net income (loss)	(75)	(49)	758	(283)
Net income (loss) allocated to general partner (1%)	(1)	(1)	8	(3)
Net income (loss) allocated to limited partners (99%)	$ (74)	$ (48)	$ 750	$ (280)
Net income (loss) per limited partnership interest	$ (1.02)	$ (0.66)	$ 10.38	$ (3.87)

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Statement of Shareholders Equity (Deficit) (Unaudited) (USD $) In Thousands	Total	General Partner	Limited Partners
Partners' (deficiency) capital, beginning balance at Dec. 31, 2010	$ 5,055	$ (578)	$ 5,633
Net income (loss)	758	8	750
Partners' (deficiency) capital, ending balance at Jun. 30, 2011	$ 5,813	$ (570)	$ 6,383

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Document and Entity Information	6 Months Ended
	Jun. 30, 2011
Document and Entity Information
Entity Registrant Name	NATIONAL TAX CREDIT INVESTORS II
Document Type	10-Q
Document Period End Date	Jun. 30, 2011
Amendment Flag	false
Entity Central Index Key	0000859921
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding	72,270
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2

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Related Party Disclosures

6 Months Ended

Jun. 30, 2011

Related Party Disclosures

Related Party Transactions Disclosure [Text Block]

Note 4 – Transaction with Affiliated Parties

Under the terms of its Partnership Agreement, the Partnership is obligated to the General Partner for the following fees:

(a)   An annual Partnership management fee in an amount equal to 0.5 percent of invested assets (as defined in the Partnership Agreement) at the beginning of the year is payable to the General Partner. For the six months ended June 30, 2011 and 2010, partnership management fees in the amount of approximately $93,000 and $123,000, respectively, were recorded as an expense.

(b)   A property disposition fee is payable to the General Partner in an amount equal to the lesser of (i) one-half of the competitive real estate commission that would have been charged by unaffiliated third parties providing comparable services in the area where the apartment complex is located, or (ii) 3 percent of the sale price received in connection with the sale or disposition of the apartment complex or local partnership interest, but in no event will the property disposition fee and all amounts payable to unaffiliated real estate brokers in connection with any such sale exceed in the aggregate, the lesser of the competitive rate (as described above) or 6 percent of such sale price. Receipt of the property disposition fee will be subordinated to the distribution of sale or refinancing proceeds by the Partnership until the limited partners have received distributions of sale or refinancing proceeds in an aggregate amount equal to (i) their 6 percent priority return for any year not theretofore satisfied (as defined in the Partnership Agreement) and (ii) an amount equal to the aggregate adjusted investment (as defined in the Partnership Agreement) of the limited partners.  No disposition fees have been paid or accrued.

(c)   The Partnership reimburses NAPICO for certain expenses. The reimbursement to NAPICO was approximately $20,000 and $36,000 for the six months ended June 30, 2011 and 2010, respectively, and is included in general and administrative expenses.

NTC-II or another affiliate of the General Partner is the Local Operating General Partner in one of the Partnership's five Local Partnerships at June 30, 2011. In addition, NTC-II is typically either a special limited partner or an administrative general partner in each Local Partnership, in which the Partnership has an investment.

An affiliate of the General Partner managed one property owned by a Local Partnership during the six months ended June 30, 2011 and 2010.  The Local Partnership pays the affiliate property management fees in the amount of five percent of its gross rental revenues and data processing fees. The amounts paid were approximately $53,000 and $52,000 for the six months ended June 30, 2011 and 2010, respectively.

The General Partner is not obligated to advance funds to the Partnership for operations or to fund Partnership advances to Local Partnerships, but may voluntarily do so from time to time. There were no advances received by the Partnership during the six months ended June 30, 2011 and 2010. The Partnership may receive future advances of funds from AIMCO Properties, L.P., although AIMCO Properties, L.P. is not obligated to provide such advances. For more information on AIMCO Properties, L.P., including copies of its audited balance sheet, please see its reports filed with the Securities and Exchange Commission.

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Investments, Equity Method and Joint Ventures

6 Months Ended

Jun. 30, 2011

Investments, Equity Method and Joint Ventures

Equity Method Investments Disclosure [Text Block]

Note 2 - Investments In and Advances to Local Partnerships

As of June 30, 2011 the Partnership holds limited partnership interests in five Local Partnerships, located in five states. As a limited partner of the Local Partnerships, the Partnership does not have authority over day-to-day management of the Local Partnerships or their properties (the "Apartment Complexes"). The general partners responsible for management of the Local Partnerships (the "Local Operating General Partners") are not affiliated with the General Partner of the Partnership, except as discussed below.

At June 30, 2011 and December 31, 2010, respectively, the Local Partnerships own residential projects consisting of 674 and 911 apartment units, respectively. During the six months ended June 30, 2011, the Partnership sold its limited partnership interests in four of the Local Partnerships owning residential projects consisting of 237 apartment units.

The projects owned by the Local Partnerships in which NTCI-II has invested were developed by the Local Operating General Partners who acquired the sites and applied for applicable mortgages and subsidies, if any. NTCI-II became the principal limited partner in these Local Partnerships pursuant to arm's-length negotiations with the Local Operating General Partners.  As a limited partner, NTCI-II's liability for obligations of the Local Partnerships is limited to its investment. The Local Operating General Partner of the Local Partnerships retains responsibility for developing, constructing, maintaining, operating and managing the Projects.  Under certain circumstances, an affiliate of NAPICO or NTCI-II may act as the Local Operating General Partner.  An affiliate, National Tax Credit Inc. II ("NTC-II") is acting either as a special limited partner or non-managing administrative general partner (the “Administrative General Partner”) of each Local Partnership in which the Partnership has an investment.

The Partnership, as a limited partner, does not have a contractual relationship with the Local Partnerships or exercise control over the activities and operations, including refinancing or selling decisions, of the Local Partnerships that would require or allow for consolidation. Accordingly, the Partnership accounts for its investments in the Local Partnerships using the equity method. The Partnership is allocated profits and losses of the Local Partnerships based upon its respective ownership percentage (between 98.90% and 99%). The Partnership is allocated profits and losses and receives distributions from refinancings and sales in accordance with the Local Partnerships’ partnership agreements. These agreements usually limit the Partnership’s distributions to an amount substantially less than its ownership percentage in the Local Partnership. 

The individual investments are carried at cost plus the Partnership’s share of the Local Partnership’s profits less the Partnership’s share of the Local Partnership’s losses, distributions and impairment charges. See “Note 1 – Organization and Summary of Significant Accounting Policies” for a description of the impairment policy. The Partnership is not legally liable for the obligations of the Local Partnerships and is not otherwise committed to provide additional support to them. Therefore, it does not recognize losses once its investment in each of the Local Partnerships reaches zero.  Distributions from the Local Partnerships are accounted for as a reduction of the investment balance until the investment balance is reduced to zero. When the investment balance has been reduced to zero, subsequent distributions received are recognized as income in the accompanying statements of operations.  During the six months ended June 30, 2011 and 2010, the Partnership received approximately $10,000 and $85,000, respectively, in operating distributions from three Local Partnerships in which it does not have an investment balance, of which approximately $10,000 and $17,000, respectively, was recognized as income in the statements of operations for the six months ended June 30, 2011 and 2010, respectively, as these distributions were received from Local Partnerships in which the Partnership’s investment balance had previously been reduced to zero.

For those investments where the Partnership has determined that the carrying value of its investments approximates the estimated fair value of those investments, the Partnership’s policy is to recognize equity in income of the Local Partnerships only to the extent of distributions received and amortization of acquisition costs from those Local Partnerships.  Therefore, the Partnership limits its recognition of equity earnings to the amount it expects to ultimately realize.

As of June 30, 2011, the investment balance in four of the five Local Partnerships had been reduced to zero. As of December 31, 2010, the investment balance in 8 of the 9 Local Partnerships had been reduced to zero. The Partnership’s remaining investment balance relates to the mortgage note receivable, which is discussed in “Note 3 – Mortgage Note Receivable”.

At times, advances are made to Local Partnerships. Advances made by the Partnership to the individual Local Partnerships are considered part of the Partnership’s investment in limited partnerships.  Advances made to Local Partnerships in which the investment balance has been reduced to zero are charged to expense.  The Partnership did not make any advances during the six months ended June 30, 2011 and 2010. During the six months ended June 30, 2010, the Partnership received approximately $19,000 as repayment of advances from Quivira Place Associates, LP and recognized this amount as a recovery of advances previously expensed in the statement of operations for the six months ended June 30, 2010. The Partnership did not receive any advance repayments during the six months ended June 30, 2011.

The following are estimated unaudited condensed combined statements of operations for the three and six months ended June 30, 2011 and 2010 for the Local Partnerships in which the Partnership has investments (in thousands). The 2011 and 2010 amounts exclude Pineview Terrace, for which the Partnership sold its limited partnership interest in February 2011; Sitka III, Soldotna Apartments, and Torres del Plata II for which the Partnership sold its limited partnership interests in June 2011; Columbus Junction Park, Grimes Park Apartments and Norwalk Park Apartments, for which the Partnership sold its limited partnership interests in January 2010; Palm Springs View for which the Partnership sold its limited partnership interest in April 2010 and Fourth Street and Northwestern Partners due to the sale of the Local Partnership’s investment property in August and September 2010, respectively.

	Three Months Ended June 30, 2011	Three Months Ended June 30, 2010	Six Months Ended June 30, 2011	Six Months Ended June 30, 2010
Revenues:
Rental and other income	$ 1,271	$ 1,241	$ 2,559	$ 2,526
Expenses
Operating expenses	894	816	1,829	1,702
Interest	315	321	630	640
Depreciation and amortization	308	301	615	601
Total expenses	1,517	1,438	3,074	2,943
Loss from continuing operations	$  (246)	$  (197)	$  (515)	$  (417)

An affiliate of the General Partner is currently the Local Operating General Partner in one of the Partnership’s five Local Partnerships included above, and another affiliate receives property management fees of approximately five percent of gross revenues from the same Local Partnership (See “Note 4 – Transactions with Affiliated Parties”).

On February 4, 2011, the Partnership assigned its limited partnership interest in Pineview Terrace to a third party and received proceeds of $1,000,000, which was recognized as gain from sales of limited partnership interests in Local Partnerships during the six months ended June 30, 2011. The Partnership’s investment balance in Pineview Terrace was zero at June 30, 2011 and December 31, 2010.

On June 7, 2011, the Partnership assigned its limited partnership interest in both Sitka III Associates and Soldotna Associates to a third party and received net proceeds of $3,000 for each interest, which was recognized as gain from sales of limited partnership interests in Local Partnerships during the three and six months ended June 30, 2011. The Partnership’s investment balance in both Sitka III Associates and Soldotna Associates was zero at June 30, 2011 and December 31, 2010.

On June 15, 2011, the Partnership sold its limited partnership interest in Torres del Plata II Limited Partnership to a third party and received net proceeds of approximately $25,000, which was recognized as gain from sales of limited partnership interests in Local Partnerships during the three and six months ended June 30, 2011. The Partnership’s investment balance in Torres del Plata II was zero at June 30, 2011 and December 31, 2010.

On January 22, 2010, the Partnership sold its limited partnership interests in Norwalk, Columbus Junction Park and Grimes Park to a third party and received net proceeds of approximately $23,000, which was recognized as gain from sales of limited partnership interests in Local Partnerships during the six months ended June 30, 2010. The Partnership’s investment balances in Norwalk, Columbus Junction Park and Grimes Park were zero at June 30, 2011 and December 31, 2010.

During September 2009, the Partnership entered into an assignment and assumption agreement with a third party affiliated with the local general partner of Palm Springs View Apartments, Ltd. The agreement provided for an assignment of the Partnership’s 50.49% limited partnership interest in Palm Springs View Apartments, Ltd. for $200,000. The assignment was subject to HUD approval which was received during the six months ended June 30, 2010. Upon receipt of HUD approval the Partnership was able to complete the assignment of its 50.49% limited partnership interest in Palm Springs View Apartments, Ltd. and received $200,000 for the assignment in April 2010, which was recognized as gain from sales of limited partnership interests in Local Partnerships during the three and six months ended June 30, 2010. The Partnership has no investment balance remaining in this Local Partnership at June 30, 2011 and December 31, 2010.

On August 27, 2010, a Local Partnership, Fourth Street Investors, LP sold its investment property to a third party for a gross sale price of $3,375,000. The Partnership received approximately $1,421,000 in distributable proceeds from the sale during the nine months ended September 30, 2010, of which approximately $1,112,000 was recognized as income. The Partnership’s investment balance in Fourth Street Investors, LP was zero at June 30, 2011 and December 31, 2010. On September 17, 2010, a Local Partnership, Northwestern Partners, Ltd sold its investment property to a third party for a gross sale price of $1,000,000. The Partnership received approximately $336,000 in distributable proceeds from the sale during the nine months ended September 30, 2010. The Partnership had no remaining investment balance in Northwestern Partners at June 30, 2011 and December 31, 2010.

During 2002, a Local Partnership, Michigan Beach, reached a settlement with the City of Chicago to complete necessary repairs to the exterior façade of the building.  As of December 31, 2008, the Partnership had advanced Michigan Beach approximately $1,347,000 to complete these repairs and an additional approximately $1,138,000 for other operational items. During the year ended December 31, 2009, the Partnership advanced Michigan Beach approximately $245,000 for operating expenses. These advances bear interest at prime plus 2% (approximately 5.25% at June 30, 2011) and interest earned by the Partnership was approximately $65,000 for both the six months ended June 30, 2011 and 2010. The Partnership has charged to expense all of the advances to Michigan Beach and has not recognized the interest earned on the advances due to the uncertainty of collection of these amounts.

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Organization, Consolidation and Presentation of Financial Statements

6 Months Ended

Jun. 30, 2011

Organization, Consolidation and Presentation of Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block]

Note 1 - Organization And Summary Of Significant Accounting Policies

General

The information contained in the following notes to the unaudited financial statements is condensed from that which would appear in the annual audited financial statements; accordingly, the financial statements included herein should be reviewed in conjunction with the financial statements and related notes thereto contained in the annual report for the fiscal year ended December 31, 2010 filed by National Tax Credit Investors II (the “Partnership” or “NTCI-II”). Accounting measurements at interim dates inherently involve greater reliance on estimates than at year end.  The results of operations for the interim periods presented are not necessarily indicative of the results for the entire year.

In the opinion of the Partnership, the accompanying unaudited financial statements contain all adjustments (consisting primarily of normal recurring items) necessary to present fairly the financial position as of June 30, 2011 and the results of operations and changes in cash flows for the six months ended June 30, 2011 and 2010. The balance sheet at December 31, 2010 has been derived from the audited financial statements at that date but does not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements.

Organization

NTCI-II is a limited partnership formed under the California Revised Local Partnership Act as of January 12, 1990. The Partnership was formed to invest primarily in other limited partnerships (“Local Partnerships”) which own and operate multifamily housing complexes that are eligible for low income housing federal income tax credits (the “Housing Tax Credit”). The general partner of the Partnership is National Partnership Investments Corp. (the “General Partner” or “NAPICO”), a California corporation. The Partnership shall continue in full force and effect until December 31, 2030 unless terminated earlier pursuant to the Partnership Agreement or law.

The General Partner has a one percent interest in the operating profits and losses of the Partnership. The limited partners will be allocated the remaining 99 percent interest in proportion to their respective investments. The General Partner is an affiliate of Apartment Investment and Management Company ("Aimco"), a publicly traded real estate investment trust.

At June 30, 2011 and December 31, 2010, the Partnership had outstanding 72,270 limited partnership interests.

Upon total or partial liquidation of the Partnership or the disposition or partial disposition of a project or project interest and distribution of the proceeds, the General Partner will be entitled to a property disposition fee as mentioned in the partnership agreement.  The limited partners will have a priority item equal to their invested capital plus 6 percent priority return as defined in the partnership agreement.  This property disposition fee may accrue but shall not be paid until the limited partners have received distributions equal to 100 percent of their capital contributions plus the 6 percent priority return. No disposition fees have been paid or accrued.

Basis of Presentation

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States. 

The Partnership’s management evaluated subsequent events through the time this Quarterly Report on Form 10-Q was filed.

Certain reclassifications have been made to the 2010 balances to conform to the 2011 presentation.

Method of Accounting for Investment in Local Partnerships

The investments in Local Partnerships are accounted for on the equity method. Acquisition fees, selection fees and other costs related to the acquisition of the projects have been capitalized as part of the investment account and are being amortized by the straight line method over the estimated lives of the underlying assets, which is generally 30 years.

Mortgage Note Receivable

The Partnership reviews its mortgage note receivable whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.  The Partnership has recorded its mortgage note receivable at June 30, 2011 and December 31, 2010 at the amount at which the Partnership acquired the mortgage note receivable during 2006 less equity in loss recognized with respect to the Local Partnership that is obligated under the mortgage note.  No reserve was recognized during the six months ended June 30, 2011 or 2010.  See “Note 3 – Mortgage Note Receivable” for further information.

Impairment of Long-Lived Assets

The Partnership reviews long-lived assets to determine if there has been any impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.  If the sum of the expected future cash flows is less than the carrying amount of the assets, the Partnership recognizes an impairment loss. No impairment loss was recognized during the six months ended June 30, 2011 and 2010.

Net Income (Loss) Per Limited Partnership Interest

Net income (loss) per limited partnership interest was computed by dividing the limited partners’ share of net income (loss) by the number of limited partnership interests outstanding at the beginning of the year. The number of limited partner interests used was 72,270 and 72,288 for the three and six month periods ended June 30, 2011 and 2010, respectively.

Variable Interest Entities

The Partnership consolidates any variable interest entities in which the Partnership holds a variable interest and is the primary beneficiary. Generally, a variable interest entity, or VIE, is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) as a group the holders of the equity investment at risk lack (i) the ability to make decisions about an entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The primary beneficiary of a VIE is generally the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

In determining whether it is the primary beneficiary of a VIE, the Partnership considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of the Partnership’s investment; the obligation or likelihood for the Partnership or other investors to provide financial support; and the similarity with and significance to the business activities of the Partnership and the other investors.  Significant judgments related to these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions.

At June 30, 2011 and December 31, 2010, the Partnership holds variable interests in five and six VIEs, respectively, for which the Partnership is not the primary beneficiary.  The Partnership has concluded, based on its qualitative consideration of the partnership agreement, the partnership structure and the role of the general partner in each of the Local Partnerships, that the general partner of each of the Local Partnerships is the primary beneficiary of the respective Local Partnership.  In making this determination, the Partnership considered the following factors:

·the general partners conduct and manage the business of the Local Partnerships;

·the general partners have the responsibility for and sole discretion over selecting a property management agent for the Local Partnerships’ underlying real estate properties;

·the general partners are responsible for approving operating and capital budgets for the properties owned by the Local Partnerships;

·the general partners are obligated to fund any recourse obligations of the Local Partnerships;

·the general partners are authorized to borrow funds on behalf of the Local Partnerships; and

·the Partnership, as a limited partner in each of the Local Partnerships, does not have the ability to direct or otherwise significantly influence the activities of the Local Partnerships that most significantly impact such entities’ economic performance.

The five VIEs at June 30, 2011 consist of Local Partnerships that are directly engaged in the ownership and management of five apartment properties with a total of 674 units. The Partnership is involved with those VIEs as a non-controlling limited partner equity holder. The Partnership’s maximum exposure to loss as a result of its involvement with the unconsolidated VIEs is limited to the Partnership’s recorded investments in and receivables from these VIEs, which was approximately $3,695,000 and $3,761,000 at June 30, 2011 and December 31, 2010, respectively. The Partnership may be subject to additional losses to the extent of any financial support that the Partnership voluntarily provides in the future.

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Commitment and Contingencies

6 Months Ended

Jun. 30, 2011

Commitment and Contingencies

Commitments and Contingencies Disclosure [Text Block]

Note 7 - Contingencies

The General Partner is involved in various lawsuits arising from transactions in the ordinary course of business. In the opinion of management and the General Partner, the claims will not result in any material liability to the Partnership.

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Income Taxes

6 Months Ended

Jun. 30, 2011

Income Taxes

Income Tax Disclosure [Text Block]

Note 5 – Partnership Income Taxes

The Partnership is subject to a New Jersey tax based upon the number of resident and non-resident limited partners and apportionment of income related to the Partnership’s investment in certain Local Partnerships.  For the six months ended June 30, 2011 and 2010, the expense related to this tax is reflected in tax expense in the accompanying statements of operations.  At December 31, 2010, the Partnership’s estimate of the balance of the tax due for 2010 to the state of New Jersey was approximately $37,000 and this amount was included in accounts payable and accrued expenses on the accompanying balance sheet as of December 31, 2010. The actual balance of the tax due for 2010 was approximately $50,000 and was paid during April 2011. The Partnership recorded the additional $13,000 owed for 2010 taxes during the six months ended June 30, 2011 and this amount is reflected in tax expense in the accompanying statement of operations. The Partnership’s estimate of the tax due for 2011 is approximately $88,000, of which approximately $44,000 was paid and expensed during the six months ended June 30, 2011.

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Fair Value Measures and Disclosures

6 Months Ended

Jun. 30, 2011

Fair Value Measures and Disclosures

Fair Value Disclosures [Text Block]

Note 6 – Fair Value of Financial Instruments

Financial Accounting Standards Board Accounting Standards Codification Topic 825, “Financial Instruments”, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Fair value is defined as the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. At June 30, 2011, the Partnership believes that the carrying amount of other assets and liabilities reported on the balance sheet that require such disclosure approximated their fair value due to the short-term maturity of these instruments.

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Statements of Cash Flows (Unaudited) (USD $) In Thousands	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Cash flows from operating activities:
Net income (loss)	$ 758	$ (283)
Adjustments to reconcile net income (loss) to net cash used in operating activities
Gain from sales of limited partnership interests in Local Partnerships	(1,031)	(223)
Distributions from Local Partnerships recognized as a return on investment		68
Recovery of advances made to Local Partnerships previously recognized as expense		(19)
Equity in loss of Local Partnerships and amortization of acquisition costs	66	270
Change in accounts:
Accounts payable and accrued expenses	(44)	(67)
Net cash used in operating activities	(251)	(254)
Cash flows from investing activities:
Recovery of advances to Local Partnerships		19
Proceeds from sales of limited partnership interests in Local Partnerships	1,031	223
Net cash provided by investing activities	1,031	242
Net increase (decrease) in cash and cash equivalents	780	(12)
Cash and cash equivalents, beginning of period	1,368	1,471
Cash and cash equivalents, end of period	$ 2,148	$ 1,459

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Receivables, Loans, Notes Receivable, and Others

6 Months Ended

Jun. 30, 2011

Receivables, Loans, Notes Receivable, and Others

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note 3 – Mortgage Note Receivable

On May 30, 2006, the Partnership purchased the second mortgage for a Local Partnership, Michigan Beach, from the second mortgage holder, PAMI Midatlantic, LLC (“PAMI”) for a purchase price of $4,320,000. The second mortgage had a principal balance of approximately $3,596,000 and accrued interest outstanding of approximately $1,605,000 at the time of purchase. PAMI had filed an action for foreclosure and the appointment of a receivor for the alleged failure to make surplus cash payments and provide required financial reporting. As a result of the purchase, the Partnership was substituted in place of PAMI in the foreclosure action and then the Partnership dismissed the foreclosure action with prejudice on June 9, 2006. The Partnership is the sole limited partner in Michigan Beach.  The Partnership borrowed $4,320,000 from an affiliate of NAPICO in order to purchase the second mortgage at Michigan Beach.  This advance was repaid during the year ended December 31, 2007.

The second mortgage accrues interest at a fixed rate of 6.11%.  Semiannual payments from 50% of surplus cash are required and the note matures in July of 2031.  There is an option to the noteholder to accelerate maturity of the second mortgage after October 2008. There have been no payments made on the loan and Michigan Beach did not generate any surplus cash for the years ended December 31, 2010 and 2009. The accrued interest balance at June 30, 2011 was approximately $2,722,000. The Partnership recognized approximately $66,000 and $271,000 in equity in loss from Michigan Beach during the six months ended June 30, 2011 and 2010, respectively, and reduced the carrying value of the mortgage note receivable. The Partnership currently expects to receive payment in full on the second mortgage from Michigan Beach upon the ultimate sale of the property and accordingly no reserve has been established against the carrying value of the mortgage note receivable at June 30, 2011, however, the Partnership has fully reserved any additional accrued interest.

The following is a summary of the mortgage note receivable activity for the six months ended June 30, 2011 (in thousands):

Mortgage note receivable balance, beginning of period	$ 3,761
Equity in losses of Local Partnership	(66)
Mortgage note receivable balance, end of period	$ 3,695

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Balance Sheets (Unaudited) (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
Assets
Cash and cash equivalents	$ 2,148	$ 1,368
Mortgage note receivable	3,695	3,761
Total assets	5,843	5,129
Liabilities
Accounts payable and accrued expenses	30	74
Contingencies
Partners' (deficiency) capital:
General partner	(570)	(578)
Limited partners	6,383	5,633
Total partners' (deficiency) capital	5,813	5,055
Total liabilities and partners' (deficiency) capital	$ 5,843	$ 5,129