In this tax-advantaged episode, Ashley Tison, Founder and President of OZPros, shares how he discovered the most significant economic development incentive offered by Congress and how you can use it to dramatically reduce your tax impact. If you are thinking about selling your business, buying or starting a business, or looking for an efficient way to put your money to work for you, you won’t want to miss this episode.
You will discover:
– How do you structure a Qualified Opportunity Fund and Qualified Opportunity Zone Business for maximum tax impact?
– Why don’t you need to be an accredited investor to take advantage of these great opportunities?
– What is an Opportunity Zone, and how can you use it to defer and even dramatically reduce your capital gains taxes?
Episode Transcript
Scott Ritzheimer
Hello, hello and welcome. Welcome once again to the secrets of the high demand coach podcast. And here with us today is the one and only Ashley Tison, who is an attorney, a professional speaker and the founder of Oz pros, a full service opportunity zone advisory firm. Ashley has worked in real estate, mergers, acquisitions and business growth and management. He brings his breadth of experience in these areas to educate and guide investors to navigate opportunity zones. He has built a team uniquely positioned to handle the acquisition and securities, real estate and tax nuances inherent in opportunity zone deals, and he’s here with us today, Ashley, I have bumped into opportunity zones a couple of times. There’s actually one near us, so we might talk about here in a little bit. But I’m wondering just out of the gate. First off, welcome to the show. But out of the gate here, what are opportunity zones? Because that means something very specific. And why do they matter for the folks listening here today?
Ashley Tison
Yeah, and it’s, it’s interesting because, you know, I’ve been having a lot of conversations about them recently, kind of, as we’re coming into the election, and there’s this misconception out there that they’re that they’re expired, that they’re dead, that, you know, that they’re no longer in effect. And that is absolutely not the the case. Opportunity zones were created by the tax cut and Jobs Act of 2017 and by very definition, that legislation expires in 2025 at the end of 2025 an opportunity Zone program itself sunsets in December of 2026 which is all the more reason why people need to get on the stick right now. They need to know about this. They need to get a fund set up, and they need to, you know, do at least one project so that, that way, they have this opportunity zone Fund, which an opportunity zone fund is literally just an LLC that’s taxed as a partnership that was specifically set up for investing in opportunity zones. And what an opportunity zone is, is it’s a specially designated census tract. So any of the low income census tracts that are out there let Congress allowed each governor to designate up to 25% of their low income census tracts. Puerto Rico got special dispensation because of the hurricane, and so literally, almost the whole island of Puerto Rico as an opportunity zone, and it was based off of the 2010 census. And so a lot of these tracks are not low income anymore, but they’re areas in which the governors wanted to see development. They wanted to see investment. They wanted to see things happening. And so if you set up an opportunity zone fund and with the goal of investing either in real estate or in operating businesses in these zones, then you get to defer capital gains tax. So that’s one of the kind of the caveats and kind of the unfortunate pieces, is they do have capital gains. You need capital gains in order to start your fund. And if you take that capital gain, you put it into a fund, you get to defer those taxes till December, 31 2026, but then whatever you invest in after your fund investment turns 10 years old, that investment gets a step up in basis to fair market value when you go to sell it. And that’s really significant, because it not only eliminates capital gains tax, but it also eliminates depreciation recapture. So we’re pretty sure that capital gains are going to go up sometime in the future, or they’re going to do something with it. Opportunity zones are the quintessential hedge to mitigating that your growth on an asset, and it’s real easy to locate a business in an opportunity zone. You could have a coaching business, you could have a software development business. You’d have a staffing business. You just have to have your headquarters in the zone. Your people and your products can go outside of the zone, but you need your set your you know, whoever’s managing those people need to be located in the zone. And bam, now all of a sudden, you’ve got, effectively, a super Roth IRA that your business is owned in, without all of the crazy, you know, requirements of a Roth IRA. So I think it’s the greatest tax incentive that Congress ever created, and that’s our mission, is to let people know about it and to to put it in the hands of Main Street America.
Scott Ritzheimer
Wow. So who then can take advantage of this. So for I think some of the easy ones are folks are starting new businesses. It’s something to think about. Folks that have capital gains and are looking to invest in other businesses. There’s plenty for them to think about. What about that space between? What about the entrepreneur has been working for for 10 years? They have an office somewhere. Is there anything that they can do to qualify for for these benefits?
Ashley Tison
Absolutely. You know, most entrepreneurs that are churning in a business, myself included, we want, instead of having to trade time for dollars, we want to have some kind of residual revenue. And one of the best ways to do that is cash flow in real estate. And if you’re going to be buying cash flow. Real Estate, why would you not buy it in an area where you’re going to automatically make at least 25% more by mitigating the taxes that you have to pay to Uncle Sam. And so we help people all the time, set up funds in order to do just that. Now, for some people, we actually have to get creative about how we engineer a capital gain, right? Because they, if they’re working every day, and that kind of thing, we, you know, sometimes have to go to their stock portfolio, sell their stock portfolio at nine, buy it back at 901, now they’ve got a paper gain, and then they can take cash and use that cash to line up with that paper gain. We’ve got other creative things that we’ve done for people. And then the, you know, the real folks that you know, where this is really powerful for are the people that are anticipating an exit. So they built that business, and they’re looking at potentially selling it down the road. You know, we’ve got a big wave of businesses being handed over right now, you know, through the baby boomer generation. And so whether you’re one of those that’s selling, or whether you’re one of those that’s buying, we can use opportunity zones to help both of those folks, and we’ve done that on a regular basis. And so it is. It’s not just for somebody that has exited a, you know, a multi million dollar hotel and wants to go into another one. It is for Main Street America. Now, not everything’s going to be able to be done in an opportunity zone. So if you’ve got, you know, swanky retail center where you need to be like in, you know, a really nice neighborhood at the premier retail spot, that might not be the best, you know, utilization, but almost we’ve, we’ve been able to make almost every business that we’ve encountered work.
Scott Ritzheimer
Wow. So just help us out with what’s the difference between an operating opportunity zone fund and opportunity zone business?
Ashley Tison
How do Yeah, it’s kind of a it’s kind of a weird distinction, and it was so because Congress wanted to be able to allow people to not just do real estate, they wanted to allow people to do businesses as well. When Treasury gave us the regs, they created this kind of fiction called a qualified opportunity zone business and and it was kind of in the context of Congress as well, but it wasn’t really flushed out. Treasury really fleshed it out. So think about a qualified Opportunity Fund is literally just like a holding company, and then you set up a qualified opportunity zone business underneath it. You flow your money into the fund, and then it drops down to the business, and usually we use that double stack structure on almost every transaction, unless you’re buying something that’s newly constructed, that’s right before its certificate of occupancy. We will do at that case, we just have you buy it in your fund, because you don’t need the benefits of having an opportunity zone business. But that’s quite essentially. The difference is that you’ve got a fund, and literally, once again, it’s just an LLC, taxed as a partnership that you call a qualified Opportunity Fund, and then you got a qualified opportunity zone business that, once again, can be a LLC, taxed as a partnership, or a C Corp, or an S corp, or whatever you want. We typically don’t do S corps there because of some complexity, but we, we will, we come up with the most tax efficient way for you to be able to deal with the income, because opportunity zones don’t help you with income along the way. They help you with exit on the backside, as your enterprise value grows. And so we’ve got some tricks that we use in order to most effectively deal with that income. And it’s been fascinating, you know, I I dabbled in tax Right? Like everything’s got a tax component to it, but I wouldn’t have called myself a tax attorney until I started doing opportunity zones, and I’ve quickly had to become a tax attorney because there’s so much tax code tied up inside of it. And through that, I’ve really gotten into some kind of creative ways to mitigate taxes on the income side. And then ultimately, everybody who does a fund is going to defer those taxes until 2026, and then you’re gonna have to pay them. Then we have come up with some really great solutions to minimize those taxes on December, 31 2026, and so what o Z’s present is the ability for us to be able to get a deferral till then we can then implement some of our reduction strategies, and then we position you to be eliminated tax free on whatever your new investment is. So that’s a really powerful trifecta that opportunity zones have uniquely presented themselves as an answer for.
Scott Ritzheimer
That’s fascinating. It’s very, very cool. Now I know with a lot of instruments like this, there is accreditation requirements for investors. Do you have to be an accredited investor to take part in an opportunity fund, or to create one yourself,
Ashley Tison
So not to create one yourself. Now, if you’re investing into a professionally managed fund, and we’ve got a bunch of those, and we got some great ones, we’re helping Jonathan tower at Arcturus with. Stuff that he’s working on that’s in operating businesses. We help the guys at caliber, and we’ve helped a bunch of different kind of professionally managed funds. And if somebody wants to go into that, where they don’t want it, they want to be hands off, then they’re probably going to need to be an accredited investor. I don’t know of any. Well, there’s one that’s that’s traded on the New York Stock Exchange that you could buy called Bell point that you don’t have to be an accredited investor for that, but all the other ones you do in order to set up your own, you absolutely do not, because it’s literally just a business, and all you got to do is just call us, we talk about your strategy, we talk about the best way to do that, and then we can literally have it set up in two weeks.
Scott Ritzheimer
Fantastic, fantastic. Fantastic. So I want to, I want to shift gears a little bit, because we’ve talked a lot of kind of tactics around this, but I’m wondering if we can kind of pull it all together. There’s a question that I ask all my guests, I’m going to ask of you as well, and that is, what would you say is the biggest secret that you wish wasn’t a secret at all. What’s that one thing you wish everybody watching or listening today knew?
Ashley Tison
It’s interesting, because I was thinking about this, and my first answer was that opportunity zones aren’t dead, right? But we just kind of blew that one out of the water. And so hopefully that’s not a secret anymore. I think that the one that really resonates with me, and it literally took me, well, you know, I guess I kind of knew it, but I didn’t really apply it until recently, is that it’s all about posterity, and when I say posterity, I’m talking about your kids. I’m talking about your kids kids, I’m talking about your family legacy, and I’m talking about your impact on the community, and that those are the most important things in life, and that we get so busy, and we get so focused on and we’re so intentional about how we run our businesses, but a lot of times we neglect our posterity. And I think that that’s the biggest secret that I wish that people knew, is that man, it’s all about posterity, and there are some great vehicles to allow you to save money in taxes and be able to have a massive impact upon your posterity. Opportunity zones are just one of those tools. We have a whole arsenal of those. And that’s kind of as we transition through right as we’ve kind of gone through this opportunity zone life cycle, and we still help people with them, and we’re still excited about and we think the program is going to get extended, but there’s so much more, and there’s so many more tools out there, and as we’ve investigated those, we’ve really come across ones that help people to focus into, to execute on doing that, on really being intentional about how they are dealing with their estate plan, how they’re dealing with their kids right now, talking about money, how they’re inculcating values and important things into subsequent generations and into their community with their with their treasure right now, with their money, but more importantly, with their time and their energy, is they go about just doing life. And so I yeah, I think that that’s the biggest one that I would love for people to just embrace.
Scott Ritzheimer
I love that. I love that there’s a shift I think you’re speaking to that. You know, every successful founder makes where it’s not about what you make anymore. It’s about what you keep, right? That’s right, and that’s what sets you up for what you leave behind. And so I love that. It’s such a powerful way to think about strategy and business. And I might have to steal that one. That was a great line. Yeah, it’s, I can’t claim it. It’s from a friend of mine, Kyle Bucha here in Atlanta. But, yeah, it’s great. So there’s a couple things here. One is, there’s really, really compelling reason to jump in on these opportunity zones. Maybe they’ll be extended, but maybe they won’t, so this is the time to start. Where can they find out more about how to get started and whether or not an opportunity zone strategy would be a good fit for them?
Ashley Tison
So they go to ozpros.com/podcast we’ve got some specials for your listeners, once again, that’s ozpros.com/podcast if they want to find out where the opportunity zones are, they can go to ozpros.com/map basically, you can find everything you need on our website. We’ve got a master class that that is there, and it’s free, and you can run through kind of that master class as well to see if it’s if it makes sense for you. And then, you know, the easiest way is to jump on a strategy call. We’ve also got a mastermind that’s that we call ascent. And if you kind of go through that first mastermind process, you’re like, hey, wow, I’d really like to learn more. We’ve got a free 30 day offer for folks where they can jump into that ascent they can. And I think that a sin is the quickest way to at least a master’s level. Some of the folks in there have a PhD at this point, education in opportunity zones. We want to, we want to equip people with the knowledge that they could get comfortable in doing these things. And because, once again, to your point, it’s not about what you make. It’s. About what you keep. And the great thing about opportunity zones is that you don’t have to ask for permission. You don’t have to get, you know, you don’t have to go to the IRS and get them to check off on it, but you do have to have a really good audit trail, because you have to prove the position that you’ve taken. That’s what we help people do.
Scott Ritzheimer
Got it? Ashley, thank you so much for being on the show. Just a privilege having you on today, fascinating, fascinating topic and conversation. For those of you watching and listening today, you know your time and attention mean the world to us. I hope you get as much out of this conversation as I know I did, and I cannot wait to see you next time. Take care.
Contact Ashley Tison
Today’s guest, Ashley Tison, is an attorney, professional speaker, and the Founder of OZPros – A full-service Opportunity Zone advisory firm. Ashley has worked in real estate, mergers & acquisitions, business growth and management. He brings his breadth of experience in these areas to help educate and guide investors to navigate Opportunity Zones. He has built a team uniquely positioned to handle the acquisition and securities, real estate, and tax nuances inherent in Opportunity Zone deals.
Want to learn more about Ashley Tison’s work at OZPros? Check out his website at https://ozpros.com/
Podcast Booking Status: Open
We are looking for podcast guests, and we want to share your story.
Are you a coach, consultant, or advisor for entrepreneurial organizations? If so, let’s do a great show together – and we can promote you to our audience on all our social media channels, website, and email list.