Takeaways from Our First 100 Opportunity Zone Strategy Calls

Ashley Tison & Jimmy Atkinson

What are the biggest Opportunity Zone lessons we’ve discovered and Qualified Opportunity Fund best practices we’ve formed after our first 100 Opportunity Strategy Calls at OZ Pros? And how can they apply to you?

Opportunity Zones Podcast host Jimmy Atkinson and OZ Consultants CEO Ashley Tison are co-founders of OZ Pros — Qualified Opportunity Fund and Qualified Opportunity Zone Business entity formation made easy.

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

Episode Highlights

  • Ashley’s biggest takeaways from his first 100 Opportunity Zone strategy calls.
  • Some unique examples of the types of transactions that different Opportunity Zone marketplace participants are dealing in.
  • Some good Opportunity Zone stories that aren’t getting reported by mainstream media.
  • How Opportunity Zones can be thought of as a Super Roth IRA.
  • The importance of leveraging impact, and how Opportunity Zones can be an impact force multiplier.
  • Answers to the most commonly asked questions about starting your own Qualified Opportunity Fund or QOZB, including:
    • What’s the minimum amount that one can put into an OZ fund and have it work?
    • Can a husband and wife form a partnership?
    • If a business moves into an Opportunity Zone, will the assets purchased prior to 12/31/17 be treated as QOZBP?
  • Best practices for forming a Qualified Opportunity Fund, including entity selection and the 50% income test.
  • The upcoming OZ Pros educational course and mastermind group.

Featured on This Episode

Industry Spotlight: OZ Pros

OZ Pros

Founded by Jimmy Atkinson and Ashley Tison, OZ Pros offers a simple document generation tool for quick and easy Opportunity Zone Fund and Opportunity Zone business creation.

Learn more about OZ Pros:

  • Visit OZPros.com
  • Listen to the podcast to learn how you can get $50 off your OZ Strategy Call.

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 back with me this week is Ashley Tison, a business attorney and Opportunity Zone consultant who co-founded OZ Pros with me toward the end of last year. Ashley joins us today from his office in Charlotte, North Carolina. Ashley, welcome back. Always good to talk with you.

Ashley: I’ll tell you what, Jimmy. It’s a pleasure to be back on the show. Thanks again for what you do with the Opportunity Zones Podcast, and I’m excited to be able to reach out to the audience again.

Jimmy: Yeah, it should be a good one here. We’ve got a lot of insightful tips for today, I think. Ashley, you really have some quite unique insights into opportunity zones from your vantage point and some really valuable lessons, I think, that you can share with our listeners today, given all of the Opportunity Zone consulting calls that you’ve done over the past four months since we started up OZ Pros together. I believe you’ve done over 100 Opportunity Zone strategy calls just since we launched. Is that right?

Ashley: Yeah, it’s been nothing short of amazing. It’s been really fun and invigorating to connect with the folks that are doing these deals across the country. And it’s been exciting to be a part of assisting them kind of take the next step and to actually make this thing a reality.

Jimmy: No, that’s great. And I’m sure you’ve talked with people from all over the country and all different types of businesses and funds that they’re setting up. I know you formed over 50 Opportunity Zone entities to date just over the last few months. That’s funds and QOZBs over that time period, which is really incredible.

And so, with all of these phone calls that you’ve been on, all the clients that you’ve worked with on starting up a number of Qualified Opportunity Funds and Qualified Opportunity Zone business like I said earlier, you have some really insightful lessons for our listeners today.

So, to start us off, Ashley, can you tell us what have been just some of the biggest takeaways from all the calls you’ve been on and the funds that you’ve set up and the businesses you’ve set up? How are people approaching different strategies? Basically, what are the biggest lessons that you can share?

Ashley: Well, I think the thing that stands out to me kind of the most is how much people know when they are making the calls in. So, how much they already have picked up about Opportunity Zones and how they’re dialed into the process, dialed into a lot of the benefits of it, and they’re really just trying to get into the weeds of, “Okay, how do we actually do this?”

And that’s been neat because it’s given us an opportunity to instead of doing kind of that 30,000-foot overview, you’re really diving into the specifics and the nuances of some of these things so that we can specifically unpack their problems, so they’re comfortable going forward. And also, you know, with communicating to their accountants and their tax folks about what they need to do, what the processes. So, I think that that’s kind of the biggest…you know, the thing that has kind of presented itself to me and has been one of the really cool things about the calls.

I think the other thing is the variety of transactions that folks are doing. It’s been, you know, really neat to be a part of that and talking through the different business plans that folks have anywhere from recycling centers, to C&D landfills, to workforce housing, to Airbnb strategies, to bitcoin ecosystems, cattle farms, bamboo farms, hemp farms, you know, actual food distribution facilities, aquaponic farms that are growing the food that they can scale into some of these areas, and just generally how excited people are about having an avenue to be able to make an investment into a specific area and actually impact.

And so, that’s what’s been, I think, probably the neatest part is actually hearing about the good stories, you know, that the news doesn’t talk about is that I’m talking with people who are boots on the ground actually doing these deals, you know, that really have the possibility of moving that needle from an impact standpoint in these communities, and it’s neat to be a part of that.

Jimmy: Yeah, that’s really neat to be able to talk with the folks that have boots on the ground, the folks that are making the impact in their communities.

A couple of things I took away from what you just said there, the fact that the vast majority of the calls that you’re on, these are people who have probably been reading and thinking about Opportunity Zones for quite a while, and, you know, you don’t need to go over the basics with them oftentimes. I mean, certainly, I’m sure you get one or two calls every once in a while where you do have to walk them through the very basics, but, by and large, you know, these are people who have been thinking about this for a long time, and they’re excited about getting started. And they just need a little bit of help figuring out, you know, all the details and the weeds and how to structure their funds or structure their businesses or actually get the organizing documents set up.

So, that’s basically where you come in is kind of take them across that bridge from basic knowledge to getting going there. So, Ashley, I want you to talk a little bit about something that I know you’re passionate about, which is impact and the concept of being an impact multiplier. Can you talk a little bit about that concept? And also, I’m curious. What types of people are you talking to during these phone calls? What types of people are you fielding calls from?

Ashley: So, the majority of our calls have been with people who have their own capital gain and want to do their own deals, right? So, they’re taking advantage of this self-directed Super Roth IRA that we’ve talked about before because it’s tax advantage going in. It gets to grow, you know, in a tax-favorable environment. You’re going to pay income taxes on it obviously as it’s throwing cash off of it, but then you also get to divest it tax-free on the back end and to be able to put that money, you know, into your account tax-free after a 10-year hold. And so, a lot of the folks are doing their own deals on that basis. And, you know, as part of that, and I beat this drum, and I continue to talk about the impact analysis that they need to really be focused on.

And so, that’s been a really cool conversation to have is say, “Okay, what are you doing to create impact? Is your deal in and of itself creating impact? And then, if it is, what can we do to leverage that impact? So, how can you work with the different organizations that are in your community? And how can we plug you in with resources that we have, you know, with respect to being able to leverage that impact, to be an impact force multiplier, if you will?”

And so, I think that that’s actually one of the cool things about these calls is that I think that we are having the opportunity to leverage this podcast that you’re doing and that you’ve put together as becoming an impact multiplier across these Opportunity Zone deals.

And as you’ve kind of picked up from me on this before, you know, the whole impact piece of this is what I’m really passionate about, and that’s one of the reasons why we’re doing these calls. So, that’s been exciting. Kind of as part of that, and this is something that has spawned out of doing these calls and the different things that we’ve been doing is that I’ve actually had the opportunity to be able to talk with a number of community development organizations.

So whether that’s an economic development group or a chamber of commerce or just a group of folks that are really interested in trying to make their community better and to attract dollars into their community, I’ve had the chance to be able to kind of walk them through one of these calls and through a number of these calls on how they can actually move the needle on that.

And then that’s actually led to me doing a presentation and doing presentations for these various groups more in the form of kind of a workshop, you know, where we actually jump into the weeds of, “Okay, what do you actually need to do?” And, you know, “What are the steps that you take in order to get this off the ground?” Whether that’s a self-directed, super Roth where you’re actually gonna be making investments yourself, or whether that’s a community that wants to establish a fund themselves, or whether that’s a college that wants to establish a fund or partner with somebody in order to take advantage of the Opportunity Zones and how they can go about utilizing and leveraging their resources to create this ecosystem that is friendly to entrepreneurial ventures and that’s friendly to Opportunity Zone investments.

And so, I think that that’s actually probably been the coolest part of the calls is, you know, being able to be that impact multiplier and seeing where that’s kind of taken their projects, but also how it’s kind of taken a new stance for us within the force of these workshops that we’re doing and that we’ll do for communities and we’ll actually come in and do those in person. And then also, you know, this concept of kind of an ongoing mastermind for how we can build a group and a network of folks that can kind of collectively get together and, you know, talk through Opportunity Zones.

Jimmy: Yeah, that’s great, Ashley. And I want to talk with you a little bit more about the mastermind concept a little bit later in the episode. But first, I want to get back to the calls that you’ve been doing and dive in there a little bit.

Actually, I really want to talk about, what are the questions that come up frequently during these consulting calls. I want to see if we can answer a few of the most frequently asked questions right here and now for our listeners just so they can learn some lessons, and maybe we can avoid you spending too much time on those FAQs at the front of these calls if enough people listen now.

Ashley: You know, I think that as I look across the calls and perhaps the one that resounds the most is, “What’s the minimum amount that I can put into a QOF and have it qualify and have it work?” And the response that I regularly give people is that it’s going to kind of depend on the factual circumstances of the deal, the specific deal, that they’re going to be doing. But just like anything else, when you’re talking about taxes, when you’re talking about trying to navigate a road of, you know, new legislation is that you want to be operating in the normal and ordinary course of stuff that’s similarly situated.

And so I think that, you know, you want to be operating kind of in the course of best practices with respect to the type of transaction that you’re doing. And so, for a startup business, you know, that could be a thousand dollars, right, because a thousand dollars gets your business off the ground and you’re off to the races. And then you have your income. You have the revenue that is coming in that then grows the business and lets the business do its thing.

For real estate deals, it’s a little bit of a different story. And typically, there’s a debt to equity ratio that’s kind of generally accepted. And so, what I’ve been talking to people about is that you don’t want to structure your deal with your own related-party debt that’s roughly 19%, you know, an 80% loan that’s out there from a third-party entity and then have 1% of equity that goes into the deal because I think that there could be an issue where that could be considered, you know, that it’s actually equity instead of a loan that you’re putting into the deal. And so, I think that the answer that I give people on that is that look to your industry and look at what’s kind of commonly accepted in the industry. And then you want to try to stick as close to that as possible.

Another common question that we get is, is a husband and a wife partnership? It’s a really kind of interesting question, and I’m actually kind of looking forward to maybe getting some additional feedback from folks on this after the podcast. But, you know, as far as the IRS goes, if there are two unique taxpayer-identification numbers that are in an LLC, then that’s a partnership. And so, you know, there’s this whole kind of conversation about community property within that.

It’s my understanding, you know, that if you want it to be considered community property that you actually have to designate that. But that if you have two individual unique employer identification numbers that that suffices for being deemed a partnership. And, you know, I kind of regularly tell people that if they’re concerned about it and they’re worried about it, put another person in there that’s not your wife. And so, that’s actually kind of been the tack that a lot of people have been pursuing when they’re concerned about that.

So, another one that continues to pop up too, Jimmy, is a question about if a business owns tangible property that was acquired prior to December 31st of 2017, and they acquired that, you know, in a business that’s outside of the zone, but then they move the business into the zone as part of a strategy, you know, within what you’re allowed to do within the Opportunity Zone incentive, will the assets that were bought prior to December 31st, 2017 be deemed qualified Opportunity Zone business property or will they have to treat them as bad assets kind of in that 30% category?

And I think that it’s actually a really good question and it’s kind of interesting how it has popped up, and it’s popped up a number of times. And, you know, if you really kind of boil that down stating in another way is do assets have to be purchased after December 31st of 2017? And I think that the answer to that is yes because if…and I think that that’s in the definition that, like literally of the definition of Qualified Opportunity Zone business property is that it’s got to be something that’s bought from an unrelated party after December 31st, 2017. And so, you know, the analysis on that is that if you have assets that were bought prior to that, then treat them as into that 30% category or take some of the other approaches that folks are doing out there with respect to that and deal with those accordingly.

Jimmy: Those are the FAQ that you get pretty commonly, so thanks for addressing those, Ashley. I wanted to talk with you next about, you know, this is a new investment vehicle, the Qualified Opportunity Fund. It’s a new incentive program. Final regs were only issued by the IRS, you know, less than three months ago back at the end of December 2019. So, you know, folks like you kind of had to blaze the trail a little bit, so to speak, in terms of establishing best practices for forming these Opportunity Zone entities, whether they be a Qualified Opportunity Fund or a Qualified Opportunity Zone business. Can you share a little bit about what you’ve learned in terms of…or what you’ve formed as best practices over the past few months?

Ashley: You know, I think that there’s a lot of those and it’s probably too many of those to bust out in our fairly limited window here today. But I think that perhaps the biggest one and the one, you know, that kind of continues to pop up is the question of entity selection. And, you know, there’s a lot of conversation, and I think that we’ve hit it on previous podcasts before, about the potential of utilizing the C corporation in order to mitigate the taxes, you know, that 39% bracket, you know, for individuals. And the best practices that I think that I’ve seen kind of as a result of these calls is that the decision to utilize a C corp is gonna depend on somebody’s ability to be able to acquire Qualified Opportunity Zone business property and to be able to do so rather easily because if they can’t do that, then they’re gonna bump up into issues associated with that 5% non-qualified financial property and what to do with the excess cash that the C corp is building.

The whole nature and the kind of the thought process on the C corp is that, you know, the Opportunity Zone program allows somebody to kind of deal with the issue of double taxation and how you get money out of a C corp if you sell all of its assets. And so, the Opportunity Zone allows you to do that and, you know, to get a step up in basis to fair market value on that and so to accordingly not have to worry about the double taxation. But that’s assuming that you have the ability to be able to acquire Qualified Opportunities Zone business property at a reasonable rate and within the time period that won’t bump you into any kind of issues associated with working capital or that won’t cause you to go in excess of that 5% non-qualified financial property.

And so, that’s been the one of the, I guess, kind of carve-outs or the best practices is that if you’ve got a question about that, go with an LLC and start it up as an LLC that’s going to be a pass-through, and pass through the losses and everything else that you can and get the benefit of the pass-through entity because you can always convert at a later date. But it’s a little bit tougher if you’re going the other way around.

I think one of the other best practices that we’ve talked about comes in the context of the 50% income test, and, you know, there’s a spectrum on that about the best practices. You know, the best practices, you know, if you’re going to belt and suspenders land would be, in order to prove that you’re complying with that 50% income test and that either 50% of your hours worked or 50% of your wages paid are being done in an Opportunity Zone, that you should be using a time tracking software system or some kind of time tracking system that actually shows where your employees are.

So, if you’re doing that digitally, you know, you would have geolocation-enabled software that would allow for that to happen so that that way, you could show that your employees are actually working in an Opportunity Zone. A reasonable kind of I guess back down off of that would be that if you’re not using, you know, software, if you’re not doing it electronically, would be an actual kind of time card situation where you’re punching time cards. So, those are best practices, but a lot of people don’t really like that in today’s work environment.

And so, we’ve had conversations about different methods and different processes and ideas and concepts that people can use in order to be able to show that and to build, you know, that crucial audit trail relative to the 50% income test about how they’re confirming that their employees are actually working 50% inside the zone. And so, those are some of the best practices, you know, that we fleshed out. And it’s been neat to see some of the other best practices that other folks are coming up with as well, you know, that both have been guests on your show and other people that I’m kind of running across in the industry as well.

Jimmy: Yeah, that’s great, Ashley. And I expect that as time goes on and the marketplace matures a little bit more, best practices will become more and more fleshed out. It’s a pretty tight-knit community. The professionals such as yourself who are working in this industry, the groups of accounting practices and law firms and consultants trying to all get on the same page and steering all of their clients in the same direction with the ultimate end goal of doing what the legislation intends, which is social impact in these economically-distressed communities all over the country. So, that’s great that so much work has already gotten done by you, the number of entities you’ve already formed, and the best practices you’ve started to establish there. That’s incredible.

So, Ashley, the next thing I want to talk about with you is the next thing that you and I together are working on developing at OZ Pros. It’s an educational course on Opportunity Zones. It’s not available yet, but we just started production on it, and it’s going to be a video course, so you guys out there listening to this today, you’ll get to see Ashley and me on camera. We haven’t really nailed down the exact format or pricing yet, but it should be available this spring.

And as you mentioned a few minutes ago, Ashley, we’re also developing a mastermind group concept or a community where, you know, we could kind of help each other out or share ideas or share strategies or some sort of continuing education program for our community or mastermind group. Ashley, I want to turn it over to you. Can you share a little more about what we’re doing there with the educational course and the mastermind group, and who might be an ideal candidate to join the group and learn from the course?

Ashley: So, Jimmy, I think that the ideal candidate for the course is anyone who wants to fast-track their learning about Opportunity Zones, and that’s either to set up their own Qualified Opportunity Fund or Qualified Opportunity Zone business or to just prove out whether the OZ incentive is for them. And, you know, like I said, that’s anybody that’s got a capital gain that they’re interested in investing, or it could also be across the board for folks who are interested in exploring how the incentive can be leveraged in order to enhance their community.

So, that’s economic development folks. That’s, you know, civic leaders. That’s folks that have a vested interest as non-profits. It’s anyone who’s got a vested interest in seeing their community positively impacted through investment. And so, along those lines, anyone who is thinking about selling a business, they should be looking at Opportunity Zones.

Anybody who is thinking about buying a business should be looking at Opportunity Zones. And most definitely, anyone who’s thinking about starting a business should be looking at how they can start their business in an Opportunity Zone and do it with capital gain dollars in order to take advantage of this incentive. And that’s who the educational product is gonna be geared towards. We’re gonna walk through all those scenarios, and we’re gonna walk through, you know, how to get it done, and we’re gonna do a deep dive into the weeds about specifically that. How to get this thing done. How to actually execute on making it happen. So, that’s who I think should be checking out the educational product.

Jimmy: Yeah, that’s great. I think a lot of different folks, a lot of different organizations out there could be an ideal candidate for what we’re starting to put together there. And you guys will be hearing more about this from me and Ashley over the coming months as we continue to develop it and launch it later this spring, as I mentioned before.

So, Ashley, before we go today, I’d just like to take a minute to tell our listeners a little bit more about OZ Pros and how we can help them get started with Opportunity Zones. So, if you’re listening to this podcast — and clearly you are — and you’re interested in working with us to form your own Opportunity Zone Fund or business…

Maybe you have a project that you need to raise capital for, so you need to start an OZ Fund. Or maybe you have capital gains of your own that you want to roll over into an Opportunity Zone, but you need to form a Qualified Opportunity Fund first. Or maybe you’re a business owner as Ashley was alluding to in his previous answer, and you’re looking to start a new business or relocate an existing business or buy an existing business in an Opportunity Zone. Whatever your individual case may be, we can help you form your own Opportunity Zone Fund or Qualified Opportunity Zone business at OZ Pros.

And your first step is to schedule a strategy call with my guest today, Ashley Tison. This Opportunity Zone strategy call is a paid one-hour consultation call where you get to talk with Ashley one-on-one, and Ashley can walk you through different entity-structuring options and really just help you brainstorm any Opportunity Zone concepts or ideas that you may have, and you may want to bounce off someone else. And for listeners of this podcast, we have a special link to share with you that will save you $50 on the price of your Opportunity Zone strategy call.

Listen to the podcast to learn about how you can access the $50 off deal that we’re offering to podcast listeners today. And once you get there, you’ll see that the $50 discount has been automatically applied. There is no coupon code to type in or anything like that, and you can go ahead and book a call directly on Ashley’s calendar.

Pick a time that’s convenient for you. And you’ll get a follow-up email that will confirm your appointment time and the phone number to dial into. It’s just that easy to get started.

So, head on over now to OZPros.com now to learn more and take your first step today. Ashley, thanks for your time today. Always good talking to you.

Ashley: Yeah, thank you, Jimmy. Once again, I always appreciate being on the show and I appreciate what you’re doing for Opportunity Zones.

Jimmy: You bet, Ashley. Thank you.