10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

Form 10-Q

(Mark One)

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the quarterly period ended March 31, 2012

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.)

80 International Drive, 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

PART I - FINANCIAL INFORMATION

Item 1.     Financial Statements

NATIONAL TAX CREDIT INVESTORS II

BALANCE SHEETS

(Unaudited)

(In thousands)

	March 31,	December 31,
	2012	2011
ASSETS
Investments in and advances to Local Partnerships	$    --	$    --
Cash and cash equivalents	2,062	2,144
Mortgage note receivable	3,619	3,674
Total assets	$ 5,681	$ 5,818
LIABILITIES AND PARTNERS' (DEFICIENCY) CAPITAL
Liabilities:
Accounts payable and accrued expenses	$   104	$    82
Deferred revenue	102	145
Total liabilities	206	227
Contingencies	--	--
Partners' (deficiency) capital:
General partner	(574)	(573)
Limited partners	6,049	6,164
Total partners’ (deficiency) capital	5,475	5,591
Total liabilities and partners' (deficiency) capital	$ 5,681	$ 5,818

See Accompanying Notes to Financial Statements

NATIONAL TAX CREDIT INVESTORS II

STATEMENTS OF OPERATIONS

(In thousands, except per interest data)

(Unaudited)

	Three Months Ended
	March 31,
	2012	2011
Revenues:	$    --	$    --
Operating expenses:
Management fees - General Partner	27	46
General and administrative	10	11
Tax expense	4	35
Legal and accounting	20	16
Total operating expenses	61	108
Loss from partnership operations	(61)	(108)
Gain from sale of limited partnership interest in Local
Partnership	--	1,000
Equity in loss of Local Partnerships and amortization of
acquisition costs	(55)	(59)
Net income (loss)	$  (116)	$   833
Net income (loss) allocated to general partner (1%)	$    (1)	$     8
Net income (loss) allocated to limited partners (99%)	$  (115)	$   825
Net income (loss) per limited partnership interest	$ (1.59)	$ 11.42

See Accompanying Notes to Financial Statements

NATIONAL TAX CREDIT INVESTORS II

STATEMENT OF CHANGES IN PARTNERS' (DEFICIENCY) CAPITAL

(Unaudited)

(In thousands)

	General	Limited
	Partner	Partners	Total
Partners' (deficiency) capital,	$ (573)	$ 6,164	$ 5,591
December 31, 2011
Net loss for the three months
ended March 31, 2012	(1)	(115)	(116)
Partners' (deficiency) capital,
March 31, 2012	$ (574)	$ 6,049	$ 5,475

See Accompanying Notes to Financial Statements

NATIONAL TAX CREDIT INVESTORS II

STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Three Months Ended
	March 31,
	2012	2011
Cash flows from operating activities:
Net income (loss)	$  (116)	$   833
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Gain from sale of limited partnership interest in Local
Partnership	--	(1,000)
Equity in loss of Local Partnerships and amortization
of acquisition costs	55	59
Change in accounts:
Accounts payable and accrued expenses	(21)	14
Net cash used in operating activities	(82)	(94)
Cash flows provided by investing activities:
Proceeds from sale of limited partnership interest in
Local Partnership	--	1,000
Net increase (decrease) in cash and cash equivalents	(82)	906
Cash and cash equivalents, beginning of period	2,144	1,368
Cash and cash equivalents, end of period	$ 2,062	$ 2,274

See Accompanying Notes to Financial Statements

NATIONAL TAX CREDIT INVESTORS II

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

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, 2011 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 March 31, 2012 and the results of operations and changes in cash flows for the three months ended March 31, 2012 and 2011. The balance sheet at December 31, 2011 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.

On January 31, 2012, an affiliate of the General Partner entered into a management agreement with a third party management services company for the management of a portfolio of approximately 147 properties with 10,184 units held by entities, including the Partnership, in which Aimco and its affiliates have minority limited and general partner interests. On January 31, 2012, an affiliate of the General Partner also entered into an option agreement with the management services company pursuant to which it granted the company the exclusive option, for a period ending on December 27, 2013, to purchase the minority interests in the portfolio held by Aimco and its affiliates. Aimco expects the sale of such interests to be completed later this year, pending the satisfaction of certain closing conditions.

At March 31, 2012 and December 31, 2011, the Partnership had outstanding 72,205 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 2011 balances to conform to the 2012 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 March 31, 2012 and December 31, 2011 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 impairment was recognized during the three months ended March 31, 2012 or 2011.  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 three months ended March 31, 2012 and 2011.

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 partnership interests used was 72,205 and 72,270 for the three month periods ended March 31, 2012 and 2011, 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 March 31, 2012 and December 31, 2011, the Partnership holds variable interests in five VIEs 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 March 31, 2012 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 $3,619,000 and $3,674,000 at March 31, 2012 and December 31, 2011, respectively. The Partnership may be subject to additional losses to the extent of any financial support that the Partnership voluntarily provides in the future.

Revenue Recognition – Deposit Method

Profit on the sale of limited partnership interests shall not be recognized under the full accrual method until all of the following criteria are met:  a sale is consummated, the buyer’s initial and continuing investments are adequate, the seller’s receivable is not subject to future subordination and the risks of ownership have transferred to the buyer.  The Partnership recognizes gains on sale of limited partnership interests using the deposit method when all of the criteria for the full accrual method are not met. Under the deposit method no gain is recognized, no receivable from the buyer is recorded at the closing date and any cash received from the buyer is reported as a deposit liability on the balance sheet. The Partnership continues to carry the investment on its financial statements.

Note 2 – Investments In and Advances to Local Partnerships

As of March 31, 2012 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 March 31, 2012 and December 31, 2011, the Local Partnerships own residential projects consisting of 674 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 had 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.

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 March 31, 2012 and December 31, 2011, the investment balance in four of the five 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 in order to preserve the ability to receive applicable tax credits. 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 three months ended March 31, 2012 and 2011.

The following are estimated unaudited condensed combined statements of operations for the three months ended March 31, 2012 and 2011 for the Local Partnerships in which the Partnership has investments (in thousands). The 2012 and 2011 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, and Countryside Place which is classified as held for sale at March 31, 2012.

	Three Months Ended
	March 31,
	2012	2011
Revenues:
Rental and other income	$   911	$   898
Expenses:
Operating expenses	668	727
Interest	231	230
Depreciation and amortization	209	212
Total expenses	1,108	1,169
Loss from continuing operations	$  (197)	$  (271)

An affiliate of the General Partner is currently the Local Operating General Partner in one of the Partnership’s four Local Partnerships included above, and another affiliate receives property management fees of approximately 5 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 net proceeds of $1,000,000, which was recognized as gain from sale of limited partnership interest in Local Partnership during the three months ended March 31, 2011. The Partnership’s investment balance in Pineview Terrace was zero at March 31, 2012 and December 31, 2011.

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 second quarter of 2011. The Partnership’s investment balance in both Sitka III Associates and Soldotna Associates was zero at March 31, 2012 and December 31, 2011.

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 second quarter of 2011. The Partnership’s investment balance in Torres del Plata II was zero at March 31, 2012 and December 31, 2011.

During November 2011, the Partnership entered into an assignment and assumption agreement with a third party affiliated with the operating general partner of Countryside North American Partners, L.P. (“Countryside”). The agreement provided for an assignment of the Partnership’s 99% limited partnership interest in Countryside for $3,700,000. The assignment was subject to the consent of the Executive Director of New Jersey Housing and Mortgage Finance Agency which was received during December 2011. Upon receipt of approval from the Executive Director of New Jersey Housing and Mortgage Finance Agency, the assignment of the Partnership’s 99% limited partnership interest in Countryside became effective on December 30, 2011. Pursuant to the terms of the assignment agreement, the Partnership received a deposit of $150,000 in cash and a promissory note in the principal amount of $3,550,000 in December 2011. The promissory note had a maturity date of June 30, 2012 and bore interest at the annual rate of two percent if paid on or before March 31, 2012 and seven percent if paid after March 31, 2012. At March 31, 2012 and December 31, 2011, this sale was accounted for under the deposit method, as it lacked adequate initial investment by the buyer to qualify as a sale transaction. Accordingly, the Partnership recorded deferred revenues of $145,000 (cash portion of the sales price received less $5,000 of expenses incurred in connection with the assignment) and excluded the promissory note from its assets at March 31, 2012 and December 31, 2011. During the first quarter of 2012, the Partnership accrued approximately $43,000 of New Jersey taxes associated with the sale which reduced the deferred revenue balance at March 31, 2012. Upon collection of the promissory note the Partnership will recognize a gain from sale of limited partnership interest and interest income upon receipt of any interest collected. The Partnership has no investment balance remaining in this Local Partnership at March 31, 2012 and December 31, 2011 and has accounted for the investment as asset held for sale at March 31, 2012 and December 31, 2011. Subsequent to March 31, 2012, the Partnership received approximately $3,563,000 in payment of the note receivable and accrued interest. The Partnership expects to recognize a gain from sale of limited partnership interest of approximately $3,652,000 during the second quarter of 2012.

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 at the time of the 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 of 2008. There have been no payments made on the loan. Michigan Beach generated surplus cash for the year ended December 31, 2011. The accrued interest balance at March 31, 2012 was approximately $2,887,000. The Partnership recognized approximately $55,000 and $59,000 in equity in loss from Michigan Beach during the three months ended March 31, 2012 and 2011, respectively, and reduced the carrying value of the mortgage note receivable. In addition, the Partnership recognized an impairment charge of $50,000 during the year ended December 31, 2011 to reduce the mortgage note receivable to its estimated value. The Partnership currently expects to receive payment in full on the second mortgage from Michigan Beach upon ultimate sale of the property, however, the Partnership has fully reserved any additional accrued interest.

The following is a summary of the mortgage note receivable activity for the three months ended March 31, 2012 (in thousands):

Mortgage note receivable balance, beginning of period	$ 3,674
Equity in losses of Local Partnership	(55)
Mortgage note receivable balance, end of period	$ 3,619

Note 4 – Transactions 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 three months ended March 31, 2012 and 2011, partnership management fees in the amount of approximately $27,000 and $46,000, 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 $7,000 and $10,000 for the three months ended March 31, 2012 and 2011, 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 March 31, 2012. 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 three months ended March 31, 2012 and 2011.  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 $26,000 for both the three months ended March 31, 2012 and 2011.

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 three months ended March 31, 2012 and 2011. 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.

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 three months ended March 31, 2012 and 2011 the expense related to this tax is reflected in tax expense in the accompanying statements of operations. At December 31, 2011, the Partnership’s estimate of the balance of the tax due for 2011 to the state of New Jersey was approximately $44,000 and this amount was included in accounts payable and accrued expenses on the accompanying balance sheet as of December 31, 2011. The actual balance of the tax due for 2011 was approximately $87,000 and was paid subsequent to March 31, 2012. The additional tax owed for 2011 taxes is attributable to the sale of interest in Countryside as discussed above. The Partnership’s estimate of the tax due for 2012 is approximately $12,000 of which approximately $3,000 has been accrued at March 31, 2012 and is included in accounts payable and accrued expenses on the accompanying balance sheet. The Partnership accrued the additional $43,000 owed for 2011 taxes during the three months ended March 31, 2012 and this amount is reflected as a reduction in deferred revenue on the accompanying balance sheet as it will ultimately reduce the gain on sale.

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 March 31, 2012, 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.

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.

Item 2.     Management's Discussion And Analysis Of Financial Condition and Results Of Operations

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements in certain circumstances. Certain information included in this Quarterly Report contains or may contain information that is forward-looking within the meaning of the federal securities laws. Actual results may differ materially from those described in these forward-looking statements and, in addition, will be affected by a variety of risks and factors, some of which are beyond the Partnership’s control, including, without limitation: financing risks, including the availability and cost of financing and the risk that the Partnership’s cash flows from operations may be insufficient to meet required payments of principal and interest; national and local economic conditions, including the pace of job growth and the level of unemployment; the terms of governmental regulations that affect the Partnership and its investment in limited partnerships and interpretations of those regulations; the competitive environment in which the Partnership operates; real estate risks, including fluctuations in real estate values and the general economic climate in local markets and competition for residents in such markets; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by the limited partnerships in which the Partnership has invested.   Readers should carefully review the Partnership’s financial statements and the notes thereto, as well as the other documents the Partnership files from time to time with the Securities and Exchange Commission.

The General Partner monitors developments in the area of legal and regulatory compliance.

Liquidity and Capital Resources

Some of the properties in which the Partnership has invested, through its investment in other limited partnerships (“Local Partnerships”), receive one or more forms of assistance from the Federal Government.  As a result, the Local Partnership’s ability to transfer funds either to the Partnership or among themselves in the form of cash distributions, loans or advances may be restricted by these government assistance programs.  These restrictions, however, are not expected to impact the Partnership’s ability to meet its cash obligations.

As of March 31, 2012 and December 31, 2011, the Partnership had cash and cash equivalents of approximately $2,062,000 and $2,144,000, respectively.  The decrease in cash and cash equivalents of approximately $82,000 is due to approximately $82,000 of cash used in operating activities.

The Partnership’s primary source of funds is the receipt of distributions from Local Partnerships in which the Partnership has invested. It is not expected that any of the Local Partnerships in which the Partnership invests will generate cash from operations sufficient to provide distributions to the Limited Partners in any material amount.  Such cash from operations, if any, would first be used to meet operating expenses of the Partnership.  The Partnership's investments are not readily marketable and may be affected by adverse general economic conditions which, in turn, could substantially increase the risk of operating losses for the projects, the Local Partnerships and the Partnership.  These problems may result from a number of factors, many of which cannot be controlled by the General Partner.

An infrequent source of funds for the Partnership would be from proceeds received as a result of a sale of Local Partnership’s investment property or from the sale of the Partnership’s interest in a Local Partnership. In this regard, on February 4, 2011 the Partnership sold its limited partnership interest in Pineview Terrace for $1,000,000. The Partnership’s investment balance in Pineview Terrace was zero at March 31, 2012 and December 31, 2011.

During November 2011, the Partnership entered into an assignment and assumption agreement with a third party affiliated with the operating general partner of Countryside North American Partners, L.P. (“Countryside”). The agreement provided for an assignment of the Partnership’s 99% limited partnership interest in Countryside for $3,700,000. The assignment was subject to the consent of the Executive Director of New Jersey Housing and Mortgage Finance Agency which was received during December 2011. Upon receipt of approval from the Executive Director of New Jersey Housing and Mortgage Finance Agency, the assignment of the Partnership’s 99% limited partnership interest in Countryside became effective on December 30, 2011. Pursuant to the terms of the assignment agreement, the Partnership received a deposit of $150,000 in cash and a promissory note in the principal amount of $3,550,000 in December 2011. The promissory note had a maturity date of June 30, 2012 and bore interest at the annual rate of two percent if paid on or before March 31, 2012 and seven percent if paid after March 31, 2012. At March 31, 2012 and December 31, 2011, this sale was accounted for under the deposit method, as it lacked adequate initial investment by the buyer to qualify as a sale transaction. Accordingly, the Partnership recorded deferred revenues of $145,000 (cash portion of the sales price received less $5,000 of expenses incurred in connection with the assignment) and excluded the promissory note from its assets at March 31, 2012 and December 31, 2011. During the first quarter of 2012, the Partnership accrued approximately $43,000 of New Jersey taxes associated with the sale which reduced the deferred revenue balance at March 31, 2012. Upon collection of the promissory note the Partnership will recognize a gain from sale of limited partnership interest and interest income upon receipt of any interest collected. The Partnership has no investment balance remaining in this Local Partnership at March 31, 2012 and December 31, 2011 and has accounted for the investment as asset held for sale at March 31, 2012 and December 31, 2011. Subsequent to March 31, 2012, the Partnership received approximately $3,563,000 in payment of the note receivable and accrued interest. The Partnership expects to recognize a gain from sale of limited partnership interest of approximately $3,652,000 during the second quarter of 2012.

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 three months ended March 31, 2012 and 2011. 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.

The General Partner has the right to cause distributions received by the Partnership from the Local Partnerships (that would otherwise be available for distributions as cash flow) to be dedicated to the increase or replenishment of reserves at the Partnership level.  The reserves will generally be available to satisfy working capital or operating expense needs of the Partnership (including payment of partnership management fees) and will also be available to pay any excess third-party costs or expenses incurred by the Partnership in connection with the administration of the Partnership, the preparation of reports to the Limited Partners and other investor servicing obligations of the Partnership.  At the discretion of the General Partner, reserves may be available for advances to the Local Partnerships.

The Partnership does not have the ability to assess Limited Partners for additional capital contributions to provide capital if needed by the Partnership or Local Partnerships.  Accordingly, if circumstances arise that cause the Local Partnerships to require capital in addition to that contributed by the Partnership and any equity of the local general partners, the only sources from which such capital needs will be able to be satisfied (other than the limited reserves available at the Partnership level) will be (i) third-party debt financing (which may not be available if, as expected, the projects owned by the Local Partnerships are already substantially leveraged), (ii) other equity sources (which could adversely affect the Partnership's interest in operating cash flow and/or proceeds of sale or refinancing of the projects which would result in adverse tax consequences to the Limited Partners), or (iii) the sale or disposition of projects.  There can be no assurance that any of such sources would be readily available in sufficient proportions to fund the capital requirements of the Local Partnerships.  If such sources are not available, the Local Partnerships would risk foreclosure on their projects if they were unable to renegotiate the terms of their first mortgages and any other debt secured by the projects, which would have significant adverse tax consequences to the Limited Partners.

Results of Operations

The Partnership was formed to provide various benefits to its Limited Partners. It is not expected that any of the Local Partnerships in which the Partnership has invested will generate cash flow sufficient to provide for distributions to Limited Partners in any material amount. The Partnership accounts for its investments in the Local Partnerships on the equity method, thereby adjusting its investment balance by its proportionate share of the income or loss of the Local Partnerships. The investments in four of the five Local Partnerships have been reduced to zero as of March 31, 2012, however, as discussed in Note 3 included in the financial statements in “Item 1. Financial Statements”, during 2006 the Partnership acquired the mortgage note receivable with respect to a Local Partnership that is obligated under the mortgage note.

Because of (i) the nature of the apartment complexes, (ii) the difficulty of predicting the resale market for low-income housing in the future, and (iii) the inability of the Partnership to directly cause the sale of apartment complexes by local general partners, but generally only to require such local general partners to use their respective best efforts to find a purchaser for the apartment complexes, it is not possible at this time to predict whether the liquidation of substantially all of the Partnership’s assets and the disposition of the proceeds, if any, in accordance with the Partnership Agreement will occur. If a Local Partnership is unable to sell an apartment complex, it is anticipated that the local general partner will either continue to operate such apartment complex or take such other actions as the local general partner believes to be in the best interest of the Local Partnership.

The Partnership, as a Limited Partner in the Local Partnerships in which it has invested, is subject to the risks incident to the management and ownership of improved real estate.  The Partnership investments are also subject to adverse general economic conditions, and accordingly, the status of the national economy, including substantial unemployment and concurrent inflation, could increase vacancy levels, rental payment defaults, and operating expenses, which in turn, could substantially increase the risk of operating losses for the projects.

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 investment in the Local Partnerships using the equity method.  Thus 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.  However, since the Partnership is not legally liable for the obligations of the Local Partnerships, or is not otherwise committed to provide additional support to them, 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.  Subsequent distributions received are recognized as income in the statements of operations.  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.  During the three months ended March 31, 2012 and 2011, the Partnership recognized equity in loss and amortization of acquisition costs of approximately $55,000 and $59,000, respectively, from one Local Partnership, Michigan Beach, that reduced the carrying amount of the mortgage note receivable due from the Local Partnership.

At times, advances are made to Local Partnerships in order to preserve the ability to receive applicable tax credits.  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 three months ended March 31, 2012 and 2011.

At March 31, 2012, the investment balance in four of the five Local Partnerships had been reduced to zero.

The Partnership’s net loss for the three months ended March 31, 2012 was approximately $116,000 compared to net income of approximately $833,000 for the three months ended March 31, 2011. The decrease in net income is due to a decrease in gain from sale of limited partnership interest in Local Partnership, partially offset by decreases in loss from partnership operations and equity in loss of Local Partnerships and amortization of acquisition costs.

A recurring Partnership expense is the annual partnership management fee.  The fee, as defined in the Partnership Agreement, is payable to the General Partner and is calculated at 0.5% of the Partnership’s invested assets as of the beginning of the year.  The management fee represents the annual recurring fee which will be paid to the General Partner for its continuing management of Partnership affairs. During the three months ended March 31, 2012 and 2011, management fees were approximately $27,000 and $46,000, respectively. The decrease in management fees is due to the loss of investment in five Local Partnerships during 2011.

Operating expenses, exclusive of the management fee, consist of legal and accounting expenses for services rendered to the Partnership, tax expense and general and administrative expenses. Legal and accounting expenses were approximately $20,000 and $16,000 for the three months ended March 31, 2012 and 2011, respectively. General and administrative expenses were approximately $10,000 and $11,000 for the three months ended March 31, 2012 and 2011, respectively. The Partnership is subject to a New Jersey partner tax. For the three months ended March 31, 2012 and 2011, the expense was approximately $4,000 and $35,000, respectively. Legal and accounting expense increased due to legal costs incurred in connection with the sale of partnership interests which fluctuate based on when the sales occur. The decrease in tax expense is due to a decrease in the portion of the New Jersey tax that is based on the apportionment of income related to the Partnership’s investment in certain Local Partnerships.

During November 2011, the Partnership entered into an assignment and assumption agreement with a third party affiliated with the operating general partner of Countryside North American Partners, L.P. (“Countryside”). The agreement provided for an assignment of the Partnership’s 99% limited partnership interest in Countryside for $3,700,000. The assignment was subject to the consent of the Executive Director of New Jersey Housing and Mortgage Finance Agency which was received during December 2011. Upon receipt of approval from the Executive Director of New Jersey Housing and Mortgage Finance Agency, the assignment of the Partnership’s 99% limited partnership interest in Countryside became effective on December 30, 2011. Pursuant to the terms of the assignment agreement, the Partnership received a deposit of $150,000 in cash and a promissory note in the principal amount of $3,550,000 in December 2011. The promissory note had a maturity date of June 30, 2012 and bore interest at the annual rate of two percent if paid on or before March 31, 2012 and seven percent if paid after March 31, 2012. At March 31, 2012 and December 31, 2011, this sale was accounted for under the deposit method, as it lacked adequate initial investment by the buyer to qualify as a sale transaction. Accordingly, the Partnership recorded deferred revenues of $145,000 (cash portion of the sales price received less $5,000 of expenses incurred in connection with the assignment) and excluded the promissory note from its assets at March 31, 2012 and December 31, 2011. During the first quarter of 2012, the Partnership accrued approximately $43,000 of New Jersey taxes associated with the sale which reduced the deferred revenue balance at March 31, 2012. Upon collection of the promissory note the Partnership will recognize a gain from sale of limited partnership interest and interest income upon receipt of any interest collected. The Partnership has no investment balance remaining in this Local Partnership at March 31, 2012 and December 31, 2011 and has accounted for the investment as asset held for sale at March 31, 2012 and December 31, 2011. Subsequent to March 31, 2012, the Partnership received approximately $3,563,000 in payment of the note receivable and accrued interest. The Partnership expects to recognize a gain from sale of limited partnership interest of approximately $3,652,000 during the second quarter of 2012.

Off-Balance Sheet Arrangements

The Partnership owns limited partnership interests in unconsolidated Local Limited Partnerships, in which the Partnership’s ownership percentage ranges from 98.90% to 99%.  However, based on the provisions of the relevant partnership agreements, the Partnership, as a limited partner, does not have control or a contractual relationship with the Local Limited Partnerships that would require or allow for consolidation under accounting principles generally accepted in the United States (see “Note 1 – Organization and Summary of Significant Accounting Policies” of the financial statements in “Item 1. Financial Statements”).  There are no lines of credit, side agreements or any other derivative financial instruments between the Local Limited Partnerships and the Partnership.  Accordingly the Partnership’s maximum risk of loss related to these unconsolidated Local Limited Partnerships is limited to the recorded investments in and receivables from the Local Limited Partnerships.  See “Note 2 – Investments In and Advances to Local Limited Partnerships” of the financial statements in “Item 1. Financial Statements” for additional information about the Partnership’s investments in unconsolidated Local Limited Partnerships.

Other

In addition to its indirect ownership of the general partner interest in the Partnership, Aimco and its affiliates owned 397.0 limited partnership interests (the "Units") in the Partnership representing 0.55% of the outstanding Units at March 31, 2012. It is possible that Aimco or its affiliates will acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of Aimco. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. Although the General Partner owes fiduciary duties to the limited partners of the Partnership, the General Partner also owes fiduciary duties to Aimco as its sole stockholder. As a result, the duties of the General Partner, as General Partner, to the Partnership and its limited partners may come into conflict with the duties of the General Partner to Aimco its sole stockholder.

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 March 31, 2012 and December 31, 2011, the Partnership holds variable interests in five VIEs 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 March 31, 2012 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 $3,619,000 and $3,674,000 at March 31, 2012 and December 31, 2011, respectively. The Partnership may be subject to additional losses to the extent of any financial support that the Partnership voluntarily provides in the future.

Critical Accounting Policies and Estimates

The financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require the Partnership to make estimates and assumptions. The Partnership believes that of its significant accounting policies, the following may involve a higher degree of judgment and complexity.

Method of Accounting for Investments in Limited Partnerships

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 of 98.90% to 99%. Distributions of surplus cash from operations from four of the Local Partnerships are restricted by the Local Partnerships’ Regulatory Agreements with the United States Department of Housing and Urban Development (“HUD”). These restrictions limit the distribution to a percentage, generally less than 10%, of the initial invested capital. The excess surplus cash is deposited into a residual receipts reserve, of which the ultimate realization by the Partnership is uncertain as HUD frequently retains it upon sale or dissolution of the Local Partnership. For the other Local Partnership, distributions of surplus cash are not restricted. 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. 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 statements of operations. 

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.

Revenue Recognition – Deposit Method

Profit on the sale of limited partnership interests shall not be recognized under the full accrual method until all of the following criteria are met:  a sale is consummated, the buyer’s initial and continuing investments are adequate, the seller’s receivable is not subject to future subordination and the risks of ownership have transferred to the buyer.  The Partnership recognizes gains on sale of limited partnership interests using the deposit method when all of the criteria for the full accrual method are not met. Under the deposit method no gain is recognized, no receivable from the buyer is recorded at the closing date and any cash received from the buyer is reported as a deposit liability on the balance sheet. The Partnership continues to carry the investment on its financial statements.

Item 3.     Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4.     Controls And Procedures

(a)   Disclosure Controls and Procedures.

The Partnership’s management, with the participation of the principal executive officer and principal financial officer of the General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the principal executive officer and principal financial officer of the General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, have concluded that, as of the end of such period, the Partnership’s disclosure controls and procedures are effective.

(b)   Changes in Internal Control Over Financial Reporting.

There has been no change in the Partnership’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 6.     Exhibits

See Exhibit Index Attached.

The agreements included as exhibits to this Form 10-Q 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 not misleading. Additional information about the Partnership may be found elsewhere in this Form 10-Q 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: May 11, 2012	By:   /s/John Bezzant
	John Bezzant
	Executive Vice President
Date: May 11, 2012	By:   /s/Stephen B. Waters
	Stephen B. Waters
	Senior Director of Partnership Accounting

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.

10.11       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.

10.15       Assignment and Assumption Agreement by and between National Tax Credit Investors II, a California limited partnership; National Tax Credit, Inc. II, a California corporation; HCI Properties LLC, a New Jersey limited liability company; Howell Countryside, Inc., a New Jersey corporation and A.A.H. Management Company, Inc., a New Jersey corporation, dated November 28, 2011. Incorporated by reference to the Partnership’s Current Report on Form 8-K dated November 28, 2011.

10.16       First Amendment to Amended and Restated Certificate and Agreement of Limited Partnership of Countryside North American Partners, L.P., dated December 23, 2011. Incorporated by reference to the Partnership’s Current Report on Form 8-K dated December 30, 2011.

10.17       Secured Promissory Note between Howell Countryside Inc., a New Jersey corporation, HCI Properties LLC, a New Jersey limited liability company, A.A.H. Management Company, Inc., a New Jersey corporation, National Tax Credit Investors II, a California limited partnership; and National Tax Credit, Inc. II, a California corporation, dated December 23, 2011. Incorporated by reference to the Partnership’s Current Report on Form 8-K dated December 30, 2011.

10.18       Pledge and Security Agreement between Howell Countryside Inc., a New Jersey corporation, HCI Properties LLC, a New Jersey limited liability company, A.A.H. Management Company, Inc., a New Jersey corporation, National Tax Credit Investors II, a California limited partnership; and National Tax Credit, Inc. II, a California corporation, dated December 23, 2011. Incorporated by reference to the Partnership’s Current Report on Form 8-K dated December 30, 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 the equivalent of the 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.

101XBRL (Extensible Business Reporting Language). The following materials from National Tax Credit Investors II’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2012, formatted in XBRL: (i) balance sheets, (ii) statements of operations, (iii) statement of changes in partners’ (deficiency) capital, (iv) statements of cash flows, and (v) notes to financial statements (1)

(1)         As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.

EX-31.1

Exhibit 31.1

CERTIFICATION

I, John Bezzant, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of National Tax Credit Investors II;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an quarterly report) that has materially affected or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.    The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 11, 2012

/s/John Bezzant

John Bezzant

Executive Vice President of National Partnership Investments Corp., equivalent of the chief executive officer of the Partnership

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Stephen B. Waters, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of National Tax Credit Investors II;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an quarterly report) that has materially affected or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.    The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 11, 2012

/s/Stephen B. Waters

Stephen B. Waters

Senior Director of Partnership Accounting of National Partnership Investments Corp., equivalent of the chief financial officer of the Partnership

EX-32.1

Exhibit 32.1

Certification of CEO and CFO

Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of National Tax Credit Investors II (the "Partnership"), for the quarterly period ended March 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), John Bezzant, as the equivalent of the chief executive officer of the Partnership, and Stephen B. Waters, as the equivalent of the chief financial officer of the Partnership, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1)   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.

      /s/John Bezzant

Name: John Bezzant

Date: May 11, 2012

      /s/Stephen B. Waters

Name: Stephen B. Waters

Date: May 11, 2012

This certification is furnished with this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Partnership for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

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Commitment and Contingencies

3 Months Ended

Mar. 31, 2012

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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Investments, Equity Method and Joint Ventures

3 Months Ended

Mar. 31, 2012

Investments, Equity Method and Joint Ventures

Equity Method Investments Disclosure [Text Block]

Note 2 – Investments In and Advances to Local Partnerships

As of March 31, 2012 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 March 31, 2012 and December 31, 2011, the Local Partnerships own residential projects consisting of 674 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 had 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.

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 March 31, 2012 and December 31, 2011, the investment balance in four of the five 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 in order to preserve the ability to receive applicable tax credits. 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 three months ended March 31, 2012 and 2011.

The following are estimated unaudited condensed combined statements of operations for the three months ended March 31, 2012 and 2011 for the Local Partnerships in which the Partnership has investments (in thousands). The 2012 and 2011 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, and Countryside Place which is classified as held for sale at March 31, 2012.

	Three Months Ended
	March 31,
	2012	2011
Revenues:
Rental and other income	$   911	$   898
Expenses:
Operating expenses	668	727
Interest	231	230
Depreciation and amortization	209	212
Total expenses	1,108	1,169
Loss from continuing operations	$  (197)	$  (271)

An affiliate of the General Partner is currently the Local Operating General Partner in one of the Partnership’s four Local Partnerships included above, and another affiliate receives property management fees of approximately 5 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 net proceeds of $1,000,000, which was recognized as gain from sale of limited partnership interest in Local Partnership during the three months ended March 31, 2011. The Partnership’s investment balance in Pineview Terrace was zero at March 31, 2012 and December 31, 2011.

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 second quarter of 2011. The Partnership’s investment balance in both Sitka III Associates and Soldotna Associates was zero at March 31, 2012 and December 31, 2011.

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 second quarter of 2011. The Partnership’s investment balance in Torres del Plata II was zero at March 31, 2012 and December 31, 2011.

During November 2011, the Partnership entered into an assignment and assumption agreement with a third party affiliated with the operating general partner of Countryside North American Partners, L.P. (“Countryside”). The agreement provided for an assignment of the Partnership’s 99% limited partnership interest in Countryside for $3,700,000. The assignment was subject to the consent of the Executive Director of New Jersey Housing and Mortgage Finance Agency which was received during December 2011. Upon receipt of approval from the Executive Director of New Jersey Housing and Mortgage Finance Agency, the assignment of the Partnership’s 99% limited partnership interest in Countryside became effective on December 30, 2011. Pursuant to the terms of the assignment agreement, the Partnership received a deposit of $150,000 in cash and a promissory note in the principal amount of $3,550,000 in December 2011. The promissory note had a maturity date of June 30, 2012 and bore interest at the annual rate of two percent if paid on or before March 31, 2012 and seven percent if paid after March 31, 2012. At March 31, 2012 and December 31, 2011, this sale was accounted for under the deposit method, as it lacked adequate initial investment by the buyer to qualify as a sale transaction. Accordingly, the Partnership recorded deferred revenues of $145,000 (cash portion of the sales price received less $5,000 of expenses incurred in connection with the assignment) and excluded the promissory note from its assets at March 31, 2012 and December 31, 2011. During the first quarter of 2012, the Partnership accrued approximately $43,000 of New Jersey taxes associated with the sale which reduced the deferred revenue balance at March 31, 2012. Upon collection of the promissory note the Partnership will recognize a gain from sale of limited partnership interest and interest income upon receipt of any interest collected. The Partnership has no investment balance remaining in this Local Partnership at March 31, 2012 and December 31, 2011 and has accounted for the investment as asset held for sale at March 31, 2012 and December 31, 2011. Subsequent to March 31, 2012, the Partnership received approximately $3,563,000 in payment of the note receivable and accrued interest. The Partnership expects to recognize a gain from sale of limited partnership interest of approximately $3,652,000 during the second quarter of 2012.

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Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Assets
Investments in and advances to Local Partnerships	$ 0	$ 0
Cash and cash equivalents	2,062	2,144
Mortgage note receivable	3,619	3,674
Total assets	5,681	5,818
Liabilities:
Accounts payable and accrued expenses	104	82
Deferred revenue	102	145
Total liabilities	206	227
Contingencies	0	0
Partners' (deficiency) capital:
General partner	(574)	(573)
Limited partners	6,049	6,164
Total partners' (deficiency) capital	5,475	5,591
Total liabilities and partners' (deficiency) capital	$ 5,681	$ 5,818

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Organization, Consolidation and Presentation of Financial Statements

3 Months Ended

Mar. 31, 2012

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, 2011 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 March 31, 2012 and the results of operations and changes in cash flows for the three months ended March 31, 2012 and 2011. The balance sheet at December 31, 2011 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.

On January 31, 2012, an affiliate of the General Partner entered into a management agreement with a third party management services company for the management of a portfolio of approximately 147 properties with 10,184 units held by entities, including the Partnership, in which Aimco and its affiliates have minority limited and general partner interests. On January 31, 2012, an affiliate of the General Partner also entered into an option agreement with the management services company pursuant to which it granted the company the exclusive option, for a period ending on December 27, 2013, to purchase the minority interests in the portfolio held by Aimco and its affiliates. Aimco expects the sale of such interests to be completed later this year, pending the satisfaction of certain closing conditions.

At March 31, 2012 and December 31, 2011, the Partnership had outstanding 72,205 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 2011 balances to conform to the 2012 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 March 31, 2012 and December 31, 2011 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 impairment was recognized during the three months ended March 31, 2012 or 2011.  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 three months ended March 31, 2012 and 2011.

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 partnership interests used was 72,205 and 72,270 for the three month periods ended March 31, 2012 and 2011, 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 March 31, 2012 and December 31, 2011, the Partnership holds variable interests in five VIEs 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 March 31, 2012 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 $3,619,000 and $3,674,000 at March 31, 2012 and December 31, 2011, respectively. The Partnership may be subject to additional losses to the extent of any financial support that the Partnership voluntarily provides in the future.

Revenue Recognition – Deposit Method

Profit on the sale of limited partnership interests shall not be recognized under the full accrual method until all of the following criteria are met:  a sale is consummated, the buyer’s initial and continuing investments are adequate, the seller’s receivable is not subject to future subordination and the risks of ownership have transferred to the buyer.  The Partnership recognizes gains on sale of limited partnership interests using the deposit method when all of the criteria for the full accrual method are not met. Under the deposit method no gain is recognized, no receivable from the buyer is recorded at the closing date and any cash received from the buyer is reported as a deposit liability on the balance sheet. The Partnership continues to carry the investment on its financial statements.

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Receivables, Loans, Notes Receivable, and Others

3 Months Ended

Mar. 31, 2012

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 at the time of the 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 of 2008. There have been no payments made on the loan. Michigan Beach generated surplus cash for the year ended December 31, 2011. The accrued interest balance at March 31, 2012 was approximately $2,887,000. The Partnership recognized approximately $55,000 and $59,000 in equity in loss from Michigan Beach during the three months ended March 31, 2012 and 2011, respectively, and reduced the carrying value of the mortgage note receivable. In addition, the Partnership recognized an impairment charge of $50,000 during the year ended December 31, 2011 to reduce the mortgage note receivable to its estimated value. The Partnership currently expects to receive payment in full on the second mortgage from Michigan Beach upon ultimate sale of the property, however, the Partnership has fully reserved any additional accrued interest.

The following is a summary of the mortgage note receivable activity for the three months ended March 31, 2012 (in thousands):

Mortgage note receivable balance, beginning of period	$ 3,674
Equity in losses of Local Partnership	(55)
Mortgage note receivable balance, end of period	$ 3,619

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Statements of Operations (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Revenues:	$ 0	$ 0
Operating Expenses:
Management fees - General Partner	27	46
General and administrative	10	11
Tax expense	4	35
Legal and accounting	20	16
Total operating expenses	61	108
Loss from partnership operations	(61)	(108)
Gain from sale of limited partnership interest in Local Partnership	0	1,000
Equity in loss of Local Partnerships and amortization of acquisition costs	(55)	(59)
Net income (loss)	(116)	833
Net income (loss) allocated to general partner (1%)	(1)	8
Net income (loss) allocated to limited partners (99%)	$ (115)	$ 825
Net income (loss) per limited partnership interest	$ (1.59)	$ 11.42

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Document and Entity Information	3 Months Ended
	Mar. 31, 2012
Document and Entity Information
Entity Registrant Name	NATIONAL TAX CREDIT INVESTORS II
Document Type	10-Q
Document Period End Date	Mar. 31, 2012
Amendment Flag	false
Entity Central Index Key	0000859921
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding	72,205
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	2012
Document Fiscal Period Focus	Q1

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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, 2011	$ 5,591	$ (573)	$ 6,164
Net loss	(116)	(1)	(115)
Partners' (deficiency) capital, ending balance at Mar. 31, 2012	$ 5,475	$ (574)	$ 6,049

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Related Party Disclosures

3 Months Ended

Mar. 31, 2012

Related Party Disclosures

Related Party Transactions Disclosure [Text Block]

Note 4 – Transactions 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 three months ended March 31, 2012 and 2011, partnership management fees in the amount of approximately $27,000 and $46,000, 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 $7,000 and $10,000 for the three months ended March 31, 2012 and 2011, 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 March 31, 2012. 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 three months ended March 31, 2012 and 2011.  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 $26,000 for both the three months ended March 31, 2012 and 2011.

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 three months ended March 31, 2012 and 2011. 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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Fair Value Measures and Disclosures

3 Months Ended

Mar. 31, 2012

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 March 31, 2012, 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, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Cash flows from operating activities:
Net income (loss)	$ (116)	$ 833
Adjustments to reconcile net income (loss) to net cash used in operating activities
Gain from sale of limited partnership interest in Local Partnership	0	(1,000)
Equity in loss of Local Partnerships and amortization of acquisition costs	55	59
Change in accounts:
Accounts payable and accrued expenses	(21)	14
Net cash used in operating activities	(82)	(94)
Cash flows provided by investing activities:
Proceeds from sale of limited partnership interest in Local Partnership	0	1,000
Net increase (decrease) in cash and cash equivalents	(82)	906
Cash and cash equivalents, beginning of period	2,144	1,368
Cash and cash equivalents, end of period	$ 2,062	$ 2,274

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Income Taxes

3 Months Ended

Mar. 31, 2012

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 three months ended March 31, 2012 and 2011 the expense related to this tax is reflected in tax expense in the accompanying statements of operations. At December 31, 2011, the Partnership’s estimate of the balance of the tax due for 2011 to the state of New Jersey was approximately $44,000 and this amount was included in accounts payable and accrued expenses on the accompanying balance sheet as of December 31, 2011. The actual balance of the tax due for 2011 was approximately $87,000 and was paid subsequent to March 31, 2012. The additional tax owed for 2011 taxes is attributable to the sale of interest in Countryside as discussed above. The Partnership’s estimate of the tax due for 2012 is approximately $12,000 of which approximately $3,000 has been accrued at March 31, 2012 and is included in accounts payable and accrued expenses on the accompanying balance sheet. The Partnership accrued the additional $43,000 owed for 2011 taxes during the three months ended March 31, 2012 and this amount is reflected as a reduction in deferred revenue on the accompanying balance sheet as it will ultimately reduce the gain on sale.