Takeaways from the Proposed Opportunity Zone Regulations, with Tony Nitti

Tony Nitti

The long-awaited second tranche of IRS regulatory guidance on Qualified Opportunity Funds has finally arrived. What are the biggest takeaways?

Tony Nitti is an Aspen-based real estate tax law expert, CPA, and tax services partner at RubinBrown. Additionally, he serves on the editorial advisory board for The Tax Adviser. And he’s also a regular contributor at Forbes.com, where his latest article addresses the 10 biggest questions that this second tranche of OZ guidance answers.

Click the play button below to listen to my conversation with Tony.

Episode Highlights

  • How the interest level in Opportunity Zones has changed since Tony and I last spoke in November.
  • Biggest takeaways and surprises from the second tranche of IRS regulations.
  • The 10 big questions that the second tranche answered: 1) business eligibility; 2) the definition of “substantially all;” 3) exit structuring; 4) the definition of “active trade or business;” 5) Section 1231 net calculation in regards to the 180-day rule; 6) how unimproved land is treated; 7) how leased property is treated; 8) QOF churn-thru; 9) inclusion events; and 10) the definition of “original use.”
  • The biggest issues still outstanding after the first two rounds of regulatory guidance.

Featured on This Episode

Industry Spotlight: RubinBrown


An independent member of Baker Tilly International, RubinBrown is one of the nation’s leading accounting and professional consulting firms with particular expertise in New Markets Tax Credits, Low Income Housing Tax Credits, and Opportunity Zones.

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About the Opportunity Zones Podcast

Hosted by OpportunityDb.com founder Jimmy Atkinson, the Opportunity Zones Podcast features guest interviews from fund managers, advisors, policymakers, tax professionals, and other foremost experts in opportunity zones.

Show Transcript

Jimmy: Welcome to the “Opportunity Zones Podcast.” I’m your host, Jimmy Atkinson, and today, I welcome back Tony Nitti to the show. He was actually the very first guest on this podcast. Back in November of 2018, he and I discussed the basics of the opportunity zones program and some unintended consequences of the first round of regulations. If you’re looking for a deep dive into the basics of the OZ tax benefit, go back and listen to episode number one right now, we’ll wait for you.

But anyway, Tony is a CPA and Tax Services Partner at RubinBrown. Additionally, he serves on the Editorial Advisory Board for “The Tax Advisor,” and he’s also a regular contributor at Forbes.com where he has a new article out today that addresses the 10 biggest questions that this second tranche of guidelines addresses. He joins us today from his office in Aspen, Colorado. Tony Nitti, thanks for coming on the show once again.

Tony: Thanks for having me. I can’t believe it’s already been, what, a whole tax season in between when we last talked and this time. And it was nice of the IRS to wait until the day after the deadline to give us 169 pages of new opportunity zone proposed rates, so, no rest for the weary, I guess.

Jimmy: That’s the way it goes sometimes, right?

Tony: Yes, exactly.

Jimmy: But anyways, yeah, I’m glad to have you back on again, this is great. And so, today, yeah, I do want to discuss the new regs, of course. That’s the whole purpose of this episode, but I also want to discuss with you how things have changed in the months since we last spoke, how the interest level in opportunity zones has changed at all, at least with your clients. But, at first, Tony, I want to catch up with you. So, last time you were on the podcast, I know you were at WithumSmith+Brown but you recently made move to RubinBrown, is that correct?

Tony: I did, yeah. I mean, I was with Withum for, you know, almost 15 years, but, you know, it was kind of a unique situation because I grew up a Jersey kid and moved out to Colorado when I was 22, and then briefly moved back to New Jersey, and that’s how I ended up at WithumSmith+Brown, that’s an East Coast firm. But then, a year after, is we’re talking like 2006, I packed up and moved back out to the mountains of Colorado. So, I had been working remotely for Withum for, you know, 12, 13 years and it’s a 1,000-person firm and I was the one person in Colorado, and I was continuously, kind of, showing back and forth to the East Coast. And, on top of all the travel I already do for speaking engagements and client work and the like, you know, I was just spending far too much time in Newark Airport. And so, then I started to, kind of, look around, you know, even though I, again, had a great career at Withum, I was a partner there, I just wanted to simplify my life a little bit, and it’s interesting because I met with RubinBrown, a couple of other firms, but met with RubinBrown, and one of the things that really attracted me to them is how seriously they were taking opportunity zones. And, you know, we’ve got five, six people on staff that just kind of know the law inside and out and who work… I guess they had a long history in, you know, the New Markets Tax Credit and Low-Income Housing Tax Credit, so it was a natural transition into opportunity zone. So, I jumped over to RubinBrown in the end of January. I’ve just finished my first tax season there, and so far, everything is great. And yeah, the opportunity zone expertise is significant there and it’s a good thing because as you alluded to, the interest in O-Zones is certainly not tapered off, right? I mean, it just keeps building, and building, and building. And, what’s been frustrating since we last talked in November is, you know, I’m sure you’ve experienced this, so many well thought out questions that come your way, the only honest answer you can give in return is, “We don’t know yet. We don’t know yet. We don’t know yet.” And, now, after last week, we know a lot more, right? So, it’s all evolving, right? My job is evolving, you know, just kind of familiarity with RubinBrown and expertise evolving, opportunity zones are evolving. Eventually, it’s all just going to come together.

Jimmy: Yeah, I hope so, and you’re right. I mean, the answer to a lot of questions these past few months has been, “I don’t know, and nobody knows.” So, we’re getting a lot of answers now. Now that this second tranche of IRS guidelines has finally been released. Then well, what else have you been up to since we last talked in November, Tony, and what types of clients are you advising nowadays?

Tony: Sure. Well, again, we just went through a heart of tax season. My role in a tax season is always, kind of, a little bit unique. I don’t do much in the way of compliance, cranking out tax returns, I do a lot of, you know, you and I do, talking about the law, teaching about the law, making sure my firm’s clients have the new law implemented. And, this was a challenging year, obviously for tax season in addition to opportunity zones, right? opportunity zones were 8 pages out of 500 pages of tax reform. So, we had new 20% pass-through deductions, new interest limitations, and everyone was trying to get their arms around, and then, what I bring to the table is, you know, I devote my whole career and far too much in my personal life to knowing tax reform in the new law. And so, that was, kind of, my role at my firm. It’s just like I said, make sure that we as the best of our ability, because opportunity zones are certainly not the only area of the new law where we were waiting for guidance, but to the best of our ability, we just had all of our client’s big-picture situations handled. And then, on top of that normal, kind of, workload, you know, I’m still always doing a lot of speaking and teaching about the new law, or tax policy, or whatever it may be. And then, I would say, I don’t know, 8 to 10 times a week, I’m on the phone with somebody talking about Opportunities Zones. Whether it’s investors looking for a project or a developer is looking for an investor, the interest has just been nonstop.

Jimmy: And, when we last spoke, you told me that you were seeing a mixed reaction among your clients regarding the opportunity zones benefit. You know, so some of them just weren’t so keen in investing in low-income areas, and maybe that’s still the case, but, you know, now that some months have passed and we’ve made it through a full tax season, has anything changed there regarding the interest level, do you have any feeling on how often this benefit is being used? And, are you seeing any deals actually getting done now, or have you had any clients go through the process from start to finish?

Tony: Yeah, I have seen some change. I think what happened is, around the start of the new year, you know, everybody that would need to consider opportunity zones had probably at least been familiarized with it at a high level. And so, some of those conversations where you’re pitching the idea and then people are saying, “Nah, that’s just not for me.” You didn’t have to have them anymore. You know, they’d already been had, so most of the people I’m talking to now, right, they’ve already looked at O-Zones and said, “Yeah, this is something I want to be involved with.” And so, you know, it’s really at this point more of just, “How do we move forward?” And, to your point on that? Yeah, I mean, there have been some trepidation, certainly. I mean, I think in the last week I’ve got four clients that were just waiting, like, breathlessly for these new regs to drop so they could figure out if it was all systems go, or if there was something that was going to pose a problem. And we have, you know, certainly in my firm, you know, taking well over a dozen through to completion, and then, again, I’ve got a number that, now that the regs are out, there’s just nothing that’s going to stop us from moving forward here. But, you know, every one of these is laden with its own challenges, and hurdles, and kind of quirks. And so, there’s no one-size-fits-all, but, last week, I think is, kind of, going to be, like I said, the all-systems-go where I think we have enough now for both real estate projects and just general operating businesses to, kind of, move forward with a framework that everyone can feel pretty comfortable with.

Jimmy: Yeah, I agree. This tranche that’s out now should give investors full confidence to move forward. It’s answered almost every question that we have had. And, it’s great to hear that…you know, when we last spoke, you hadn’t actually had a client go through the process, and now firm-wide, you’re saying you’ve had about a dozen or so go through. So, that’s great to hear that you have some experience under your belt now, so to speak, with getting some investors through this program. So, Tony, I want to… Now, let’s go ahead and dive into the opportunity zones regulations.

Tony: Sure.

Jimmy: So, the long-awaited second tranche was released by the IRS just last week. And first, I want to recap how we got to this point for those of you who have…may have been missing out here for the past year or so. The opportunity zones tax policy was passed as part of the Tax Cuts and Jobs Act back…way back in December of 2017. The zones themselves, the census tracts were designated as opportunity zones on the map last July 2018. The first tranche of regulatory guidance wasn’t issued by the IRS until last October 2018. Then, in February of this year, following a lengthy government shutdown, the IRS hosted a public hearing on the regulations, and now they’ve finally issued the second tranche of guidance. So, we had about six to eight-page of OZ statute from the Tax Cuts and Jobs Act, which have now led to 243 pages of IRS regulatory guidance. And, at this point, as I said, we pretty much have all the rules for this thing, it’s not finalized yet, but we’re currently in a public comment period that will lead to a second hearing in July, and then probably a third tranche of guidance coming out later this year. But I think those will just address some follow-ups and some bad act or provisions. What do you think, Tony? Did I get that all right, what did I miss?

Tony: No, you did. And, I would say this as well about the two tranches of regulations, right? These are not for the faint of heart, and what I mean by that is, particularly, the second tranche that came out last week, what they were doing in some sections, in some scenarios, they created brand new sections of the reg, so you can, kind of, read them in isolation. But, other areas, they simply added onto or amended the October regulations. So, you can’t just pick up… I can’t stress this enough, right? You can’t just pick up last week’s regs, read them if you’ve never read the first tranche of regulations and think you’re going to get the full picture. That’s not how these regs work, right? The second tranche was not a replacement of the first, it was more of a compliment, you know, to the first. And so, you, kind of, have to be able to piece it together. And, it can be very tricky. I mean, I read regulations for a living, and when I read these most recent regs, I had to have the statute in front of me, and then the proposed regs from October in front of me so that I could constantly reference back and understand, “Okay, where is this fitting into the whole picture?” So yeah, don’t make that mistake. Don’t think you can pick up last week’s 169 pages and get the full picture, you have to read it in conjunction with the 74 pages from October.

Jimmy: And the statute itself?

Tony: And the statute. And statute is a mess, but yeah, you’ll still need to have it because it references constantly back to certain elections and calculations.

Jimmy: It sounds like you’ve had a fun weekend. But so, tell me, what are the biggest takeaways from the new regs, and what have they accomplished?

Tony: Well, the proposed regs right from October certainly were helpful because as I just, kind of, made a joke about the eight pages of statute. I mean, you know, they were hastily written, they were poorly crafted, no one knew what to make of them. So, the 74 pages were helpful, but they really…for every question they answered, they probably created two bigger ones. And so, we’ve all been kind of sitting back after taking in those first tranche of proposed regs and saying, “What about this? What about that?” And, if I were to look at these most recent regs and kind of evaluate them, I would say they did a very good job, very good job of addressing most of the big questions that came out of the first contract rights. I think that, you know, if I were to rank in terms of importance, the first thing that got answered that the… You know, you and I had said so many questions that came from people, the answer we had to give them was, “We don’t know yet. We don’t know yet.” Most of that was around maybe investors who said, “Look, I know Opportunities Zones are going to work for real estate projects, building affordable housing or hotel, that’s not what I’m in it for. You know, I want to start a software company in an O-Zone or whatever. You know, I had a guy call me wanting to start a ski boot company that was going to ship ski boots all over the world, “How does that work?” And, the reason they said how does it work is, you know, there’s just, kind of, there’s one clause when you conduct a business through a subsidiary of a qualified opportunity fund, right, where it said, “Look, if you’re going to qualify as, you know, what we call a qualified opportunity zone business, then more than 50% of your income has to be generated inside an opportunity zone.

And so, if you think about a software company, you say, “Well wait a minute. Like, we might be located in the zone, but we might ship software digitally all over the world. How are we supposed to comply with this 50% test, right? Like how can we prove 50% of our income was generated from inside the zone?” And so, basically, I don’t know, your experience has been, but from my perspective and my firm’s perspective, anybody that wanted to set up a non-real estate operating business in an O-Zone has been on hold waiting to see how this 50% test is going to be applied. And, what last week’s regs did is give us, you know, some very, very friendly answer. I mean, what they basically did was say, “Look, we’re going to give you three safe harbors. You pass any of the safe harbors, then you pass the 50% test.” Right?

And then, there’s also a generic facts and circumstances, but it’s really the first two safe harbors I think people are going to lean on most. And the first one just says, “Keep it simple,” right? If you look at all your employees and independent contractors that provide services for you, if more than half of the total hours spent by those employees and independent contractors are inside the opportunity zone, we don’t care where you sell your goods to or sell your software to. If all the services from an hour perspective or not all, but, you know, just half…more than half are being provided in the zone, then fine, you satisfy the more than 50% test. So, go ahead, set up your software business inside the zone, deliver software all over the world, and since all your employees and independent contractors are here, you’re going to qualify. And then, you could have a unique situation, and that’s where the second safe harbor would come in where, okay, maybe you have some employees inside the zone and then maybe you’ve got, I don’t know, a warehouse or something that’s outside the zone, and maybe more than half of the hours are spent outside the zone, but maybe you’re more valuable employees and independent contractors are the ones performing services inside the zone. And so, they give you a second safe harbor that says, “Hey, even if more than half your hours are outside the zone, as long as you’re paying more than half of your compensation to employees and independent contractors who are performing your services inside the zone, then that’s good enough for us, you pass the safe harbor.”

And so, those two safe harbors… And then, there’s also a third one based on where your tangible property and your management or operational functions are located. I think it’s going to be used a little more sparsely, but those two safe harbors are going to be able to put a lot of businesses that were super concerned about meeting this 50% test into a situation where they say, “Oh, we have no qualms about this now, we’re 100% comfortable.” And then, even better, we already had this 31-month working capital safe harbor where, you know, if you were going to build affordable housing, it takes a while to convert cash into bricks and mortar. And so, there was a question about, how could you pass some of these standards for holding a qualified opportunity zone business property if it’s all sitting in a cash account. We had a 31-months safe harbor that applied for the development of real property, and now, they’ve expanded that to the development of even an operating business. So, if you’ve just got a written plan that you’re going to spend your cash over the next 31 months in R&D, or developing a workforce, or whatever it may be, that cash will, you know, count towards the different 90% or… I guess it’s really the 70% tests since it’s operated through a subsidiary. And so, this was huge, right? For non-real estate operating businesses, because we went from having no idea to now, not only knowing how to measure whether we comply with the 50% tests, but also realizing, probably not going to be that hard to do.

Jimmy: Right. Yeah, that was… Basically, the biggest question was, “Hey, how does a business qualify?” To date, almost exclusively, the qualified Opportunity Funds that had been established were real estate focused, there were only a handful that were interested in doing any business investment, and those that were set up to do business investment weren’t really taking any capital yet, I don’t think, because they were, kind of, in wait and see mode, waiting for what these rules were going to end up saying. So, that was huge, getting a lot of clarity there. And, I think we’re going to…actually, Tony, we’re going to go through your 10 big questions that are from your Forbes article, and I think you just went over one of them there, which was the business issue. But before we go through the other nine, I got a couple other preliminary questions for you. Were there any surprises from the second tranche? Anything that caught your eye?

Tony: Well, I can tell you what surprised me, I don’t know if it’ll be the same as what surprises a lot of other people. You know, I still struggle to understand why there would be so many differences if you conduct a business directly through a QOF versus a subsidiary of a QOF, I just don’t understand the policy reasons. You know, and there’s a lot of differences. I mean, a QOF, you know, 90% of the assets have to be in an opportunity zone, but you drop that same business into a sub and now you’re down to a 70% threshold, right? A QOF… I’m sorry, a subsidiary can operate a sin business, but apparently, there’s no prohibition on a QOF operating a sin business directly. The best I can tell, reading the language over and over again, the working capital exception we just discussed, the 31 months, is still the domain strictly of a subsidiary QOZB, not a QOF. And, that means any type of, you know, business development or real estate project would still be best served being in a subsidiary, because you buy yourself 31 months and that’s fine, right? We have plenty of areas of the tax law where it doesn’t make a whole lot of sense, but I thought maybe these regs would seek to equalize treatment, because again, for the life of me, I cannot figure out the policy reasons for the differences, but they’re still here. I mean, I’ve gone through these regs plenty of times, the only thing I saw that equated operating as a QOF and a QOZB, and we’ll get into these in some more detail, is, in the initial regs, only a QOZB subsidiary could lease property, a QOF had to purchase it, and it…you know, here they expanded the lease option, which we’ll talk about, to both QOZBs and QOFs, but it just still seems like there’s so many differences between the two, and that surprised me a little bit.

Jimmy: Right. Yeah, well one consequence of the…from the first tranche of guidance that you pointed out on that first podcast episode we did was that it appeared that if you were to operate a QOF through a subsidiary, you could actually combine the 90% and 70% tests, so that, as little as 63% of the assets needed to be held in an opportunity zone. Is that still the case or has that gotten better or worse?

Tony: Well, it’s actually gotten better. And at the risk of, you know, losing everybody on the podcast now, the reason you said, you know, 70% is… Right, if you operated through a subsidiary… If you operated directly in the QOF, 90% of your assets had to be opportunity zone business prop, but you drop it into a subsidiary, and substantially all of the property had to be in an opportunity zone, and, those first tranche of regs define that as 70%. And so, yeah, you do the math, 90% of 70%, right? You could have as little 63% of your property inside a zone. Well, there’s other places where their regs use the term, “Substantially all.” For example, if we’re talking about property being held through a subsidiary, it says that, “For substantially all of the subsidiaries holding period of the property, substantially all of the use of the property has to be in the zone.” We had no idea what those two substantially all’s meant before, but last week’s reg said, “All right, the first one is 90%.” So, from 90% of the subsidiary’s holding period of the property, substantially all of the property has to be used in a zone, and that second substantially all was then defined as 70%.

So, like I said, I know, you know, if you don’t make your living with tax law, you just shake your head, but what they’re saying is, 70% of the subsidiary’s property has to be qualified opportunity zone business property, but to be qualified opportunity zone business property for 90% of the subsidiary’s holding period of the property, it has to be used inside the zone for 70% of the time. And so, then, the QOF, right? For the subsidiary to even meet the definition of a qualified opportunity zone business, for 90% of the QOFs holding period of the subsidiary, it has to meet the definition of a QOZB. So, I’ll spare you the algorithm, but if you were to do all that math out, 90% of the holding period of a sub which holds 70% of its assets in a zone, and of those assets, for 90% of the subs holding period, 70% of the time the property is used in a zone. Long story short, Jimmy, you could effectively qualify for the opportunity zone incentives while having property used inside a zone as little as 40% of the time.

Jimmy: And, that may not be what the regulators or the legislators had intended, but according to your reading at least, that seems to be the case at the moment, that’s interesting.

Tony: Yeah. And, you know, I don’t know that it took them by surprise because they actually do the math in the preamble. They actually, you know, do the math as well, to check out that 40%. So, you know, they felt like the holding periods needed to be higher at 90% because you have more control over holding periods, you know, you can kind of gauge how much you hold a property more than necessarily where the property is used, but, you know, I mean, it’s… What we know now is, all these numbers, 90%, 70%, what we don’t know is how any of that is measured. I mean, how do we measure whether an asset is used 70% inside the zone, right? If it’s a truck, is it based on mileage? You know, I don’t know. I mean, if it’s personal property that you can’t just have like an odometer on it, how do you know, right? So, if it’s…look, for example, what if it’s landscaping equipment that you use in your business, how do you know if 70% of it is in the zone? So, we’ve got numbers now, I don’t know that we still have a lot of clarity, but look, just, you know, don’t risk it, right? Just get your property, use it in the zone as much as possible and don’t run a foul of any of these numbers.

Jimmy: All right, try to drive the ball straight down the middle of the fairway, so to speak.

Tony: Yeah, exactly.

Jimmy: Were there any changes from the first tranche? Is there anything that the IRS came back and said, “Well, hang on, never mind what we said the first time?”

Tony: Let me think about that. So, as far as, “Never mind,” the biggest never mind I would guess would be, and it is a very big one, right? What is the ultimate carrot that’s being dangled in front of opportunity zone investors, right? It’s not the deferral of gain in year one, it’s not even a basis increasing years five and seven, it’s the ability to dispose of your QOF interest after 10 years and have all the gain be completely tax-free. But the statute and the first tranche of regulations certainly left you with the feeling that you had to sell your investment in the QOF after 10 years, right? And, that’s not really all that practical, buyers typically want to purchase assets, not equity interests. And so, this was something we were definitely worried about, but what they did here in these latest regs, is they dipped into the committee reports, and the committee reports had a little bit more flexible language than saying, you know, “After 10 years you have to sell your interest.” It, kind of, had, again, some more vague language that allowed these regs to say, “Here’s what we’re going to let you do.” If your QOF is set up as an S corp or a partnership, then sure, if you sell the equity stake after 10 years, you can elect to exclude all the gain, but if instead the S corp or partnership sells all the assets, or maybe one of the subsidiaries sells the assets and allocates to the QOF, then when that QOF kicks out a K-1 to you, as an investor, you can elect to exclude all the capital gain resulting from the sale of qualified opportunity zone business property.

So, that was a big relief to a lot of people that didn’t want to have to sweat out an equity sale in 10 years, but there are some downsides to that. Remember what I’m saying here, if you sell your equity stake after 10 years, all the gain just disappears. But what they’re saying is, if the QOF is an S corp or partnership, one, you can only exclude capital gain allocated to you. So, if the partnership or S corp sells, you know, appreciated inventory or cash basis receivables, or ordinary income depreciation recapture, you can exclude that type of ordinary income. And then two, right, we just spent a bunch of time doing the math, you and I, saying we can have a lot of assets that aren’t QOZBP. Well, any gain from the sale of non-qualified opportunity zone business property would not be eligible for this election. So, it certainly appears to me like if you sell assets, depending on the mix of the business, you may end up, you know, with significantly more income on an asset sale even with this election to exclude than if you could find a buyer for your equity and just do it all in one fell swoop.

Jimmy: Right. It may makes the exit a little bit messy, a little bit more flexible, I suppose, giving you the option to be able to sell off the assets one by one, but you’re going to…you could be subject to some additional tax liability that way. That makes sense to me.

Tony: Yeah. And then, don’t forget like it’s only for QRFs that are S corps or partnerships, so I don’t think there’s many QRFs out there being set up as C corporations, but if there were, maybe somebody is trying to double-dip with opportunity zones and probably two benefits or something like that. If there were C corps, you’re not eligible to make this election. So, the C corp sells its assets, you’re just stuck with it.

Jimmy: Right. So, I wanted to dig into this new article on Forbes.com that you have out on the new regulations. You dive into 10 big opportunity zones questions that were answered by the second tranche. I think you’ve already gone through a couple of them. You went through the business 50% gross asset test. How do we…and the safe harbors around that. And, you talked a little bit about exit structuring and selling off of assets as well, but could you walk me through each of the 10 points that you haven’t gone through yet?

Tony: Sure. Yeah. And, I want to start with, kind of, one that sounds the most simple to people, but definitely had tax people scared. If you read the statute or the first tranche of regulations, right, whenever they define like opportunities and businesses or business property, it always makes reference to assets being used in a trade or business. And, that always kind of perks up the ears of, you know, a tax geek because trade or business is really an important term in the tax law, and it’s troublesome because there’s no…I know it sounds crazy, but like, you know, there’s no definition of a trade or business, and the reason there’s no standard definition is because different provisions of internal revenue code use the term “trade or business” differently. For some it’s a very simple standard to reach, for others it’s a very high standard, and the high standard is what we call Section 162 trade or business.

And basically the supreme court in a case called Groetzinger just came out and said, “Look, to be a 162 trade or business, you know, this can’t be just some sporadic amusement you’re entered into, it’s got to be entered into for profit and it’s gotta be conducted with continuity and regularity.” And, that always becomes a little concerning with rentals, right? When is a rental merely, kind of, a not for profit, you know, amusement versus an activity entered into for profit that’s conducted with continuity and regularity? I mean, if you’re only collecting a check once a month, is that being conducted with continuity and regularity? And, it’s a dance we do a lot with tax law, are rentals trades or businesses? And, as we already joked about, right? I mean, most of these opportunity zone incentives are going to be, kind of, rental activities.

And so, if they were going to say this was a Section 162 standard to be a trade or business, that could be a bit of a concern. Well, they did come out in these new regs and answer that question and say, “Yeah, we are talking about a 162 trade or business standard here.” But, right, they kind of threw us a caveat. They said, you know, “Ownership and operation including leasing of real property is going to rise to the active conduct of a trade or business.” So, that sounds great, right? But, then what they did, and they’ve been doing this lately in the law in different aspects, they said, if you merely enter into a triple net lease with respect to real property that you own, that is not the act of conduct for trade or business. So, what is a triple net lease? They’re pretty aren’t common, but it’s a lease where the tenant is on the hook for maintenance, real estate taxes, and insurance. And what happens there is because the tenant is on the hook for so much of this stuff, the courts over the years have said, “You don’t really have any skin in the game.” Like, “Yeah, you own the building, but the tenant bears all the burden, and so, this is less of a business and much more of an investment. It’s akin to like holding shares of stock.” And so, they’ve just kind of doubled down on that theory here by saying, “You enter into a triple net lease with your real property, you’re not going to meet this trade or business standard.”

And so, I don’t know, I had heard some rumblings that, yeah, some opportunity zones are planning to build a big, you know, store and rent it out to Walmart or whatever it may be. And, if they were planning to do that on a triple net basis, I can assure you, those plans just changed.

Jimmy: Right. Well, let’s keep going down your list there. I think we’ve got a few other big questions that are…

Tony: Yeah, we do.

Jimmy: …have been answered.

Tony: This one is more for, kind of, the tax geeks out there, but it’s an important one, right? We know that you can only defer what we call “eligible gain” by investing that gain into an opportunity zone, and eligible gain has to be gain taxed as capital. And if you sell, for example, a rental building, you know, rental property is not actually capital asset, it’s this unique type of asset under the tax law called a Section 1231 asset. And what makes it unique is, you have to net all your 1231 gains and losses together for a year, and if the net result is a gain, yes, it’s taxed as capital, but if it’s a loss, it’s taxed as ordinary. And, so we found out in the originally proposed regs, sure, you can, you know, defer 1231 capital gain into an opportunity fund, but then when you actually sit there and think about it from a tax perspective, you say, “Wait a minute, what if I sell a building on January 5th and generate $1 million of capital gain, right?” Well, I’m sorry, not capital gain, $1 million of 1231 gain, right? I can’t figure out if that’s going to be capital until the end of the year when I net it with any losses that might arise, but yet I have this 180-day window that presumably started on the date of sale, January 5th. So, what am I to do? Well, these latest regs really, kind of, resolved that for us. They just said, “Look.” Right, “You have a sale on January 5th, sorry.” Right, “You can’t know whether that gain is going to be capital or not until you net all your 1231 gains and losses for the year together, and so, you’ve got to sit back and wait, and only if you end up with a net 1231 gain for the year can you reinvest it. And so, what we’ll do is we’ll pause the start of the 180-day reinvestment period until the very last day of the year since that’s the first day you can possibly know if you can contribute those amounts.”

And so, that was guidance that sounds a little, again, in the weed but really has very important implications, and we needed an answer and now we have. So…

Jimmy: Yeah, I think that’s a good one because I mean, in effect, it gives you up to an extra 364 days before you have to invest your capital gains into an OZ fund, but at the same time, you know, it’s really the…I think it’s the least that they could have done to extend it like that because you need to be able to figure out what your net is.

Tony: Yeah, but it’s going to be hugely advantageous to someone that sells an asset, you know, early in the year and knows darn well they’re not going to have any other sales that could possibly net it out. It doesn’t matter, it’s going to extend their, you know, reinvestment period so much longer than otherwise would have. You know, again, it could go as much as an extra full year, right?

Jimmy: Right.

Tony: If you sell on January 1st, normally your period would end on June 30th, but now on until June 30th the next year.

Jimmy: Right, right. Well, what’s number three, number three big question?

Tony: This was a big one. We’re all in, right? We’re all in. We found out in the proposed regs, “Hey, great,” right? We got not only the proposed regs, but we got a Revenue Ruling 2018-29 that said, “If you buy raw land with a structure on it, you just need to substantially improve the structure.” And so, that was all well and good, you didn’t have to substantially improve the land, but what if you just bought raw land and then did like a vertical build on it, right? Do we have to substantially improve the land, because, by definition land can never pass the original use test, and so what could you do with raw land? And obviously, people were clamoring to say all raw land substantially improved or not should qualify as QOZBP, but there’s abuse potential there because, you know, what would prevent you from buying raw land and don’t do anything to it, and let it just sit there for 10 years, and you engage in land speculation and take advantage of this whole program, but you haven’t added any value, put any capital into this low-income area?

And so, we didn’t know where they were going to come out on this, and what they did in the most recent proposed regs, they said, “Look, we want people to be able to build, and develop, and improve these areas, and so we have to be flexible with land. And so, what we’re going to do is say, you go out and buy raw vacant land, right, it qualifies as QOZB. It does not need to be substantially improved even though it doesn’t meet the original use test.” And then, people would say, “Well, I don’t get it then, how are you going to prevent people from engaging in abusive land speculation?” Well, don’t forget what we just talked about, right, a QOF, a QOZB has to be engaged in a trade or business. And, as vague as the trade or business standard may be, I can assure you, simply sitting there holding raw land would never rise to the level of a trade or business. So, that’s great, but where is the threshold, right? I mean, what if I see some land that I think is really undervalued in the opportunity zone, and I don’t really want to invest in the zone, I don’t really care if the zone improves, but I want to get 10 years of growth out of this land value tax-free? What prevents me now from buying that land, putting a little hot dog stand on it, running the hot dog stand on the land for 10 years, watching the underlying land double in value? Technically, I conducted a trade or business during those full 10 years, and then 10 years later, I sell the land for a tax-free gain and the only thing I’ve added to this low-income community over the last decade was some hot dogs. So, it’s going to be pretty interesting to see how that plays out, but obviously, it’s welcome relief because we’d be pretty stuck if, you know, land was going to be not treated as QOZB, and we had to either substantially improve it or not count it towards these 90% or 70% tests.

Jimmy: I love the hot dog stand example, and yeah, those better be some pretty darn good hot dogs if that’s all you’re doing there. You could buy a 50 or 100-acre piece of land and just put a little hot dog stand on it for 10 years.

Tony: You know…

Jimmy: That’s…

Tony: …and to that point, they do have in these new regulations, just in very broad anti-abuse rule, you know, and that anti-abuse rule, if I’m remembering it correctly, really just kind of says, “Look, if the significant purpose of your particular O-Zone transaction is to achieve a result that’s inconsistent with the very underlying purpose of the O-Zone incentive, right, then we can basically come in and, you know, unwind everything we’ve done. And so, you know, I don’t know how broad they can be with that, but the whole point is, look, we’re trying to accomplish something here, right? We’re trying to spur investment into low-income communities in a way that leaves these communities for the better, and so, again, I don’t know how broad that could be, but it’s, kind of, interesting to think that the IRS has the discretion to say, “Even though you follow the letter of the law, you’re not really adding any value to this zone, so maybe we unwind what you’ve done.”

Jimmy: Yeah, so to be clear, Tony is not advising to anyone to buy a 100-acre parcel of land and put simply a hot dog stand on it. Don’t…

Tony: Yeah…

Jimmy: …don’t get us wrong…

Tony: …exactly.

Jimmy: …here.

Tony: Yes.

Jimmy: How many of your 10 big questions have we gone through? I think we’ve gone through…

Tony: At least…

Jimmy: …the first four?

Tony: …I think…

Jimmy: Is that right?

Tony: …at least half.

Jimmy: At least half, yeah. Oh, because we already got…I think we covered exit structure in a…

Tony: And, substantially all, yeah.

Jimmy: …a business already.

Tony: Substantially all. The next one though is a big one as well, right? There’s been lots of talk about leasing property. You’re seeing this a lot, I think, when somebody already owned property inside a zone before zones came to be, and they didn’t want to sell the property to a QOF because all they could take back would be a 20% stake in that QOF, and they don’t want to give up all that top end. And so, what you’re seeing is maybe potentially people leasing a property to a QOF, again, having QOF lease the property and then do what they’re going do to it, and then they still, kind of, hold the underlying deed interest in the property. But we didn’t really understand how leases work from a QOF or QOZB perspective, right? Because, if you’re leasing, for example, a building, I don’t see how you’re going to satisfy the original use test because, you know, that property would have already been used in a zone. And so, there was some real concern there.

And what they’ve done here, is give us kind of two different tranches of guidance. The first is, if you’re leasing property from an unrelated party, the rules are going to be very friendly, right? I mean, there’s this number one overall anti-abuse rule that just says, “You can’t enter into an agreement with the other party of the lessor,” that basically says, you know, “You’re going to buy the property or have the option to purchase the property at some time in the future based on anything other than the fair market value at the time of purchase.” Right? If you have some kind of plan that says you can buy it at this price or that price, even though it might be eight, nine years in the future, that property is not going to be QOZB.

Other than that, if you’re leasing property from an unrelated party, it’s all great news, right? You don’t have to satisfy the original lease requirement, and you do not have to substantially improve the lease. And, that makes sense, because if you’re a startup business, and you need space… Well, if you’re going to lease office space and it doesn’t count, that could certainly hurt you from a testing perspective, but should that mean that it changes your decision so fundamentally that you go out and leverage yourself to the hilt and buy a building? And so, they’re given a lot of flexibility here to lease property and have it count as QOZBP. But obviously, abuses could take place if you lease property from related parties.

So, we’ve got two additional safeguards there. Number one, if you lease from the related party, you cannot basically prepay a period of rent that exceeds 12 months. And then, number two, this is the one that’s going to catch a lot of people off guard. If you lease from a related part, right, then yeah, you’re not going to satisfy the original use test and now we are going to apply the original use test to you. And so, if you’re not going to satisfy that original use test, what has to happen is within a 30-month period, beginning with the lease, you’ve got to go out and buy QOZBP with a value at least equal to the value of the lease. And, that obviously begs another question which is, how the heck do we value the lease? And the new regs give you two options, number one, if you have GAAP financial statements, you can use the value of the GAAP financial statements. But if you don’t or if you don’t want to use that, you have to present value all the payments of the lease back. And, let’s say you present value it all back, and again, the value of that lease is $1 million in the year you enter into the lease, if you’re leasing from a related party, you’ve got to go out and within 30 months spend another $1 million on other opportunity zone business property. It doesn’t have to be related to the lease, it doesn’t have to be a lease improvement, they’re just saying, “We want to make sure you make a significant investment in the zone.” And so, if you have a lease worth 1 million bucks, you’d better go spend 1 million bucks on other property.

And so, a lot of moving parts here with leases and there’s going to be some thought that has to go into what option you use to value the lease, because this present value thing, the real crux is, you’ve got to determine the value in the year you enter into the lease, and then live with it throughout the duration of the lease. And so, it’s not going to fully capture, you know, if there’s a decline in value or if, you know, the real estate market starts to tank again, you’re still going to be using this higher value. So, leases are now in play, but if you have related parties, you know, something that you’re going to have to deal with these other safeguards.

Jimmy: Yeah, so it’s a little tricky there, but at least leased property is in play, as you say, it’s an option.

Tony: Yup.

Jimmy: Whereas, we didn’t know if it was going to be at all or not…

Tony: You got it.

Jimmy: …prior to this.

Tony: Yup.

Jimmy: So, I think we got two or three more big questions I want you to run through.

Tony: Yeah. This next one is the big one. I had a lot of prospects with questions about this. Hey, If I set up a fund, and a fund buys an asset, does the fund have to hold that asset for the full 10 years or can I churn through properties, can I flip properties over and over again? And, number one, right? If I do flip through properties, how soon do I have to reinvest the proceeds in order to pass these different 90% and 70% tests? And number two, what is the tax treatment of the gain? Is it sheltered or does it trigger my deferred gain or whatever it might be? And, what we’re told here in these new regulations is that look, QOF can certainly go out and churn property, and what they’re going to do is touch your break. If you sell property, you’re going to have 12-months inside the QOF to reinvest that cash.

And, as long as you hold that cash as cash, cash equivalents, or get instruments with a life of 18 months or less, those assets that cash will count towards these tests. And so, that’s going to be extremely helpful to us that plan to churn assets, but there’s some bad news, right? The regs tried but they said, “Look, there’s nothing in these, the statute or the conference committee reports that give us the authority to say that gain recognized by QOF on an interim sale of its assets should be in any way excluded from taxable income.” And so, if your QOF goes out there and flips a house and sells it in year three, it’s not going to trigger your deferred gain, but you are going to have gain allocated to you on the sale just like any other investment. So, there’s good news, bad news situation there.

The next one is, you know, is people are going to be kind of parsing through for years to really figure out how it all works, but we know that look, if you’re investing in QOF, you hold it for 10 years, that’s a good thing, but we also know that the deferred gain eventually comes home to roost by the end of 2026. What we didn’t know is what sorts of transactions between now and 2026 might prematurely trigger that deferred gain? Well, now we know, right? We got a laundry list of events in these regs, and they basically come down to two types of transaction. Number one, if an investor in a QOF either directly or indirectly is, kind of, reducing their equity investment, it makes sense that that should trigger some of their deferred gain. And then, number two, there could be situations where you don’t actually reduce your investment at all in terms of your equity stake but you do effectively cash out some of the value of your investment by, for example, taking a distribution from a C corp, or a partnership, or an S corp, where the fair market value of that distribution is in excess of your basis in the QOF. And so, the regulations give us all sorts of rules where, yeah, if you sell an interest, or if you gift an interest, or if you take a distribution in excess of basis, it is going to trigger some of your deferred gain.

And so, we’ve got a list of, I don’t know, eight or nine transactions that trigger deferred gain. We’ve got a list of eight or nine transactions that don’t trigger deferred gain. Probably, the most important would be, you know, upon death, it’s not going to trigger the deferred gain, but again, it’s just going to take some time for everyone to, kind of, dig in, because first, you have to identify which transactions do or do not trigger deferred gain, then you have to dance through the rules for figuring out how much gain is triggered. And again, I’ll be publishing a Forbes article here shortly that actually goes through the math and does the calculations, and stuff like that. So…

Jimmy: Those are the inclusion events? Right, those…

Tony: Yeah, inclusion events, and…

Jimmy: Yeah.

Tony: …again, those regs, as I said at the outset here, they are not for the faint of heart, you know.

Jimmy: Definitely not for the faint of heart, that’s why we pay you the big bucks, Tony. You can come on and interpret them for us. I think there was one more big question related to… Did we talk about original use yet?

Tony: Yes, you’ve got it, man. I don’t know how you keep track of that, but yeah, that’s my last big one is, we’ve got this concept, right? If you acquire property other than the exceptions we’ve talked about, like raw land, or leased property from an unrelated party, you acquire property, for it to be qualified opportunity zone business property, either one, it needs to satisfy the original use test, or two, it needs to be substantially improved, but what we didn’t know is, what is original use? Let’s say I buy in a QOF a hotel that’s 98% constructed but never been finished. If I just put the finishing touches on the last 2% and open it up for business, is that the original use? Or what if I buy a building that was previously used for 50 years but it sat empty for the last 7 years, right, if I get it up and running again, can that be original use?

And what these new regs do is just say, “Look, original use happens inside a zone when somebody puts this thing into service for depreciation purposes for the first time.” And so, if you think about that, if someone else built 98% of the hotel but never placed it in service, and I buy it and finish it off and put it into service, I satisfy the original use requirement, right, so that’s good. But if somebody else depreciated it or could have been depreciating it if they had been the owners, or somebody that, for example, leases property inside a zone, if someone else did that, then you’re not going to satisfy the original use test if you acquire it. But if you’re the first one to place it in service for depreciation, you’re good to go.

And then, they carve out a big exception that I really think may have broader use and we fully appreciate, but somebody, there’s some building that may have sat vacant for five years, if it’s been sitting there for five years, even if it was previously depreciating placed in service, you can buy it, you know, just slap some paint on the walls, put some carpeting down, and you’ll satisfy the original use test when you put it back into service for depreciation. So, that is a way to acquire not only land, but a structure with minimal investment and have it meet the terms of a qualified opportunity zone business if it’s been vacant for five years. And, it’s kind of an interesting thing. They said in the regs, you know, we were thinking about making the vacancy period as little as one year, but then smart business owners or building owners I should say, would take their buildings out of service for a year, have them sit vacant because all of a sudden what would happen to the value in price to that building for a potential buyer in an opportunity zone, it would skyrocket because they’re like, “Hey, this building is in perfect shape. It’s only been vacant for a year, that satisfies the test. I could go out and buy it, satisfied the original use test, this is great.” And so, they said, “Yeah, we’re going to make a big a building owner earn it if they want to increase the value of the building for a potential buyer. So, we’re going to make it sit vacant for five years instead of one.”

Jimmy: Yeah, one year would have opened it up to a lot of potential abuse, I think so.

Tony: Yeah, exactly right.

Jimmy: So those are the 10 big questions, and I want to recap them really quick. So, trade or business definition was number one, and then we had a Section 1231 net calculation when that plays into the 180-day timeline. We discussed the definition of “Substantially all” and how it relates to how often business needs to be in the zone. We discussed raw land or unimproved land, leased property, inclusion events, exit structuring or, and selling off assets versus selling off equity interests in the…

Tony: You got it.

Jimmy: …QOF. We discussed QOF churning through assets, how that gets treated, and you just finished up with original use. And, the biggest one I think is the business eligibility requirements and how we satisfy the 50% gross income test, and some safe harbors around that. So, those are the 10 big questions that got answered by this second tranche of regulations. Because yeah, that first tranche left a lot of unanswered question, so it’s nice to get this level of clarity now with the second tranche. But, Tony, at this point, is there anything that we still don’t know? Are there any big unanswered questions still outstanding? What are you still waiting on, if anything?

Tony: Here’s one for you that I think is going to bother a lot of people. Maybe not so much a big question, but we have an idea of where it stands now, but the IRS has said, “We’ll take a second look at it.” This substantial improvement concept if you don’t satisfy the original use test, right? The IRS is still holding a hard line and saying that that needs to apply on an asset-by-asset basis. And that’s administratively difficult, it’s really, kind of, a pain in the butt. And so, they said in the preamble, you know, that they’ve contemplated other types of situations like, “Hey, maybe, you know, we’ll allow you to aggregate assets together and do it that way.” Right? Just substantially improve, kind of, a bulk asset. Or maybe you don’t even have to necessarily improve an asset, maybe we’ll let you satisfy this substantial improvement test if you buy certain original use property along with the non-original use property. And so, that is something I think readers of these regs are going to be pretty frustrated about is, this notion that we still have to track each and every asset for substantial improvement where you might have all sorts of, you know, assets together in one fund and can be administratively difficult to track that basis improvements to each and every one, but, you know, that’s just kind of where we stand right now. So, I think that’s one of the bigger questions still out there.

Jimmy: Yeah, that is a big question, or at least, I guess, somewhat of a burden that we didn’t necessarily want to see, but I could, kind of, see from the IRS point of view that, you know, opening it up to a different method of calculating, maybe an aggregate calculation, could lead to some abuses. You could buy one asset that you do a lot of improvement to, and then several others that you don’t do anything to that you just, kind of, sit on and you could still get up to that substantial improvement that way through aggregating. Am I wrong in thinking that? Maybe that’s what they were thinking?

Tony: Yeah, I think that’s exactly what they were, you know, contemplating to potentially going with it, but again, they just, kind of, threw their hands up here and said, “You know, we’re going to solicit comments and see what everybody thinks.” What I…

Jimmy: Right.

Tony: …feel like, kind of, caught my attention… And again, you know, the way sometimes these are written, one word can make a huge difference, and I’m not positive I read it this way, I’m actually looking through it right now to see if I notice it, but, you know, you and I talked about churning, right? through a QOF and selling assets and getting 12 months to reinvest that comply with the 90% tests…

Jimmy: Right.

Tony: …but you didn’t see that flexibility. I saw the language is being specific to a QOF, and so, I didn’t see it expanded to QOZB. Now, maybe they didn’t feel like they needed to expand it to a QOZB because the standard is lower, it’s a 70% test instead of a 90% test. But think about what we’ve been saying here today, right? We’ve been saying that with a 31 months safe harbor, with a 70% standard, I think practically, most people, just to play it safe, are going to conduct their businesses not through a QOF, but through a subsidiary of a QOF, and a QOZB, and so, if a QOZB is the one that’s churning through these assets rather than a QOF, did they get protected by this 12-month rule that we learned about? And again, I may have just missed it, but I…you know, I’ve read through these a bunch and I swore the language for rolling over the gain in that period is going to be limited to a QOF. So, that’s something to keep our eye on as well.

Jimmy: Right. Well, I’ll have to take your word for it, but if you read otherwise, let me know. Well, Tony, what’s next for you? Do you have plans to submit a comment letter or possibly testify at the next hearing in Washington this summer?

Tony: You know, I’d like to do both, actually. Yeah, I think it’s…again, you know, RubinBrown, my firm, they take opportunity zones very seriously. They’ve, kind of, put up their flag as being the leaders in the public accounting space. Obviously, it’s… What we do is a little bit different, certainly with the tax attorneys in the light that are getting behind opportunity zones, but I’m a big proponent in a lot of different areas of the law of submitting public comments, and then being there for the hearing. I just think it’s a really great way to learn how others view the way the law is progressing, what’s happening in practice. I can tell you, maybe this is more of a sad testimony of the state of affairs in my life these days, but in my articles that I’ve written in the past few months, you know, I read every single comment letter for the first tranche of the proposed regulations, and it is really interesting to see other people’s perspective of what comes up, and how it can be industry-specific or whatever it may be, or geographically specific. So, yeah, I would love to, again, parse through these regs in greater detail, submit a comment letter and be there in July to be there for the public testimony.

Jimmy: That was a lot of reading you did. I think there were over 150 or so comment letters that came in on the first tranche…

Tony: Yeah, but you know what?

Jimmy: …and I would expect they might break that record this time around.

Tony: Well, I did the same thing for Section 199A at a 20% passive deduction, and I assure you, that was a lot more reading.

Jimmy: I believe in, I believe it. All right, well, yeah. Tony, if you’re in D.C. in July, and I may be there as well to attend that hearing, we should meet up. I’d love to meet you in person and get your thoughts on the testimony there, couple of months away here still, but…

Tony: Yeah, but it’s going to come up…

Jimmy: …we’ll see if we can figure something out.

Tony: It’s going to come up fast, and I think it’s going to be a very well attended public hearing, I can promise you that. But, you know, this is fascinating, what you’re doing is fascinating. It was kinda funny, I’ll be honest, right, when we met a few months ago and you said you were launching an O-zone podcast. I just thought, how many listeners can there be for an O-Zone podcasts? And, this is legitimately the hottest topic in tax law, and has been since you and I spoke in November. I mean, it’s just, you know, it’s a one life cycle at least for now, one life cycle shot at this thing with potentially huge benefits, but obviously you’ve got to jump through all the hoops. And so, interest is just, you know, sky high, and I think what you’re doing is a great service for people that are trying to make sense of it all.

Jimmy: Yeah. Thank you. It’s my pleasure and I’m having fun doing the podcast every week. Well, Tony, thanks for chatting with me. I appreciate your time, once again, coming on the show and talking us through these regs. Can you tell our listeners now where they can go to learn more about you and RubinBrown?

Tony: Oh, yeah, that’d be great. So, you know, I do a lot of writing about tax law, specifically about opportunity zones as well. Probably, about the same time Jimmy launches his podcast tomorrow, I’ll be publishing probably about 11,000 words on opportunity zones, a lot of, kind of, what we talked about today, but in much greater detail. I will be updating an article I wrote for “The Tax Advisor” in another month or so. Everything I write about opportunity zone or otherwise, I promote on Twitter. That is @nittiaj, N-I-T-T-I-A-J. If you have specific questions, you can email me @rubinbrown, that’s [email protected]. Always happy to talk O-Zones through that email address as well. And then again, just on Forbes.com if you punch in Anthony Nitti, you know, you’ll come to my contributor page and I’ve got volumes of tax geeky stuff just like O-Zones, but if you’re O-Zone specific, there’s plenty there to keep you busy, too.

Jimmy: Excellent. Well, for my listeners out there, I’ll have the show notes for today’s episode on the Opportunity Zones database website. You can find those show notes at opportunitydb.com/podcast. You’ll find links to all of the resources that Tony and I discussed on today’s show. I’ll have links to the full text of both the first and second tranche of IRS regulatory guidance on qualified opportunity funds, as well as Tony’s newest article on Forbes.com that recaps the second tranche. And I’ll also have links to his email address and his Twitter account, which he referenced. Tony, again, thanks a lot for joining me. It’s been a fun weekend for both of us, I think so. I’m excited about getting this podcast live, and I’ll hope to talk to you again soon.

Tony: I’m sure we will, Jimmy. This is just starting, not finishing, so…

Jimmy: Absolutely. Thanks, Tony.

Tony: Take care.


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