Wealth Podcast Post

Opportunity Zone Investing with Ashley Tison

George Grombacher June 5, 2022

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Opportunity Zone Investing with Ashley Tison

LifeBlood: We talked about opportunity zones, how to invest in them, the tax benefits, the social good, and how to get started with Ashley Tison, entrepreneur, lawyer and opportunity zone expert.  

Listen to learn why opportunity zones are more accessible than you might think!

You can learn more about Ashley at OZPros.com and LinkedIn.

Thanks, as always for listening!  If you got some value and enjoyed the show, please leave us a review here:


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Our Guests

George Grombacher

Ashley Tison

Episode Transcript

george grombacher 0:00
Come on let’s go this is Georgie and the time is right welcome. Today’s guest is Dr. Powerful Ashley Tyson. Ashley, are you ready to do this? Let’s rock. Let’s rock. I like it. Ashley is an entrepreneur. He is an attorney. He’s the opportunity’s own Sherpa. He’s helping real estate investors reduce their tax liability. Excited, have you on Ashley, tell us a little about your personal life some more about your work? Why you do what you do?

Ashley Tison 0:36
Absolutely. So I’m a father of three boys, husband of a fantastic wife, I’ve regularly talked about the output of my coverage significantly, that Walker Hayes song is good for me, I’m trying to figure out that I’m married up and she married way down. I’m not worried about the rest of that song, thankfully. But it’s, uh, you know, I do professionally. That’s who I am. But what I do is I help people save taxes. And that’s not just real estate investors, that’s business owners, that’s people who have any kind of appreciated asset that has a capital gain, we can show them how that they can defer those taxes and then eliminate the capital gains on whatever their new investment is through opportunity zones. And the biggest part of that is we walk them through how they can have impact on the areas that have historically been under invested in throughout the United States.

george grombacher 1:30
Well, that all sounds good. I saw that on somewhere reading about you. It’s a process of education, strategy formation, and then the compliance of it. That’s a lot of steps. Is there one of those steps that that stops people from moving forward is the complexity, or once people learn about this, that they just go? Go straight? Straight ahead? Yeah, I

Ashley Tison 1:56
think that people can sometimes get a little overwhelmed by the nuances, and they can get buried into the weeds of the nuances. And if you’ve got good professionals, and you’ve got good people helping you with it, you don’t need to worry about that you can figure out the nuances on almost any kind of deal that you want to do in an opportunity zone. Now, there’s certain ones that don’t work. And so that’s one of the things that we help people with, through our strategy call process is kind of dialing it in and dial it in really quickly about okay, yeah, so this type of thing, we can make work, this type of thing, we can’t make work. So if you want to start an insurance company, and loaded up with a bunch of cash, you can’t do that in an opportunity zone. Pretty much everything else, or like a retail company like Louis Vuitton, where you need to be in like really kind of high end shopping malls, that kind of thing. That’s not going to fly either. But almost anything else, we’ve been able to figure out a way to how to do it in an opportunity zone.

george grombacher 2:54
Got it? All right. So the the, for lack of a better term, the trigger for somebody, is there a trigger? For somebody who wants to take part in an opportunity zone? Do I have to have taxes that I want to defer? Or is that not essential?

Ashley Tison 3:10
So the key is, is that you need to have a capital gain. And so that capital gain gain can be either very large, or very small. And so even if you don’t have a capital gain, we’ve actually been successful in being able to come up with some strategies to generate a capital gain for folks that want to participate in the opportunity Zone program, but that don’t necessarily have a capital gain on the front end, you know, so the opportunity zone legislation was created by the tax cut and Jobs Act. And effectively, what it allows you to do is to take any kind of capital gain long term or short term, if you invest in an opportunity fund within 180 days, you get to defer that gain until December 31 of 2026. Then, in addition to that, so if you if you hold that, if you hold that asset in investment in the qualified Opportunity Fund for 10 years, then at the end of the 10 years, you get a step up in basis to fair market value on everything that the fund owns. So it’s significant because it not only eliminates capital gains, but it also eliminates depreciation recapture. And for any of your listeners that are, you know, are really cognizant about trying to save on taxes. Depreciation, is, I’d say that it’s the sixth wonder of the world. So it’s right behind. Compound interest is the seventh wonder of the world. And right behind tax free compound interest is the eighth wonder of the world. And depreciation allows you to offset income, but without really having to spend it because you’re spending it anyhow and you get to take advantage of bonus depreciation to offset that income. The problem with that is that you typically recapture that if you sell before the time period is caught up, opportunity zones, cut that out, and so It becomes a really powerful tool for anybody that is thinking that whatever they’re investing in is going to increase in value. So that’s the secret sauce here is that it’s not how much gain you have, right now, that’s really powerful, right? Investing the government’s money for the next five years is really powerful, right? But the really powerful play is on the back end of whatever you’re investing into. So if you’re going to grow the next Facebook, why not do it in an opportunity zone, because you can start with 100 bucks worth of capital gains, actually, 100 bucks probably doesn’t work. But you can start with $5,000 worth of capital gain, that we can usually generate by some kind of NFT transaction. And then you can use that as a seed money, and then literally all of that growth over the next 10 years, or all the way to 2047, that’s going to come to you without any taxes. So that’s the power of opportunity zones. And then the real power of it is the impact and the positive impact that you get to have inside of these areas that really need it.

george grombacher 6:03
Nice. What is the significance of 2026?

Ashley Tison 6:08
You know, so they, whenever they do a tax program, they usually have to tie it out to some kind of end date. So when they did the tax cut, and Jobs Act, its sunsets in December 31 2026. So they basically tied everything to the sunset of the tax cuts and Jobs Act. And so you got to defer your gain all the way till the sunset of that. They, they had this provision in there where you got to 15% step up in basis if you were invested for seven years. And then you got to 10% step up in basis if you were invested for five years. So in doing that, and they tied that as well to December 31 2026. So you had to be invested by December 31st 2019, to get the 15, December 31 2021, in order to get to 10. So they created these kind of arbitrary deadlines that really moved the needle, it was unbelievable how it got capital off the sidelines. So that’s a really interesting thing and three pages of legislation. Number one, they were able to get the attention of private capital, number two, they were able to get it off the sidelines. And then number three, they’re able to make it patient, which has no other government program ever has done those three things. And so I gotta hand it to the drafters of the legislation, they did a great job within that. And there’s currently pending legislation that’s bipartisan, to extend the program. And so you’d actually get back that 10 and 15%. If you get into the deal, you know, going forward, right now that’s off the table. But that could be back on the table based upon what happens with that legislation.

george grombacher 7:40
So theoretically, speaking up until December 30, or even the 31st of 2026, I could still get into this program and and create an opportunity zone investment.

Ashley Tison 7:53
That’s right. So it’s actually a capital gain that’s generated prior to December 31 2026. So you actually have until September 11 of 2027, in some cases, to invest that money. So you’ve got effectively 180 days past December 31 2026, in order to get your cash in. And if it comes through a partnership or an S corp, that 180 days starts on March 15 of the following year, which bunch you do September 11. So you’ve basically got till December of 2027 right now, and then they’re talking about extending the program, which would then probably make it to, I think they’re going to extend it out two years. And so that could then give you another two years of being able to get in. The key is is that 10 year window, right? And so the you know, people are like, well, I don’t know what I’m going to do. Well, that doesn’t matter. You’ve got tons of time once you dump your money into a fund to figure out what it is that you want to do. And that’s what we’ve done it Ozy pros, we have democratized access to opportunity zones through the creation of a captive opportunity’s own funds as part of that education strategy call and then compliance process. And so we help people create their own funds, so they can park the money, and then they can figure out what their game plan is going to be. And we can usually give them about a three year window to put the money to work. And so, um, I tell people all the time, get your money into the fund right now, because that starts your tenure clock. Let’s get it going.

george grombacher 9:22
Okay, got it. So, you the name of your company, again, is what

Ashley Tison 9:29
Mozi proz.com.

george grombacher 9:30
So Ozy pros helps me. So let’s just say I have $100,000 capital gain, and I say this, this, this sounds good. I’m going to I come to you, you helped me create the fund, this opportunity’s own fund, and we do not and then the clock starts my my tenure window starts the day that the fund is created.

Ashley Tison 9:54
The day that you put the money into the fund, which is like hey, let’s not wait let’s get it in

george grombacher 9:57
there. So I put the $100,000 in To the fund. And then from there we have, you’ve mentioned maybe three years, but it’s 10 years. And then we look at all the available opportunity zones across the country and make decisions based on that.

Ashley Tison 10:15
Correct. So once your money is in a fund, right, that starts your tenure clock on being able to get to step up and basis to fair market value. And you can either do deals yourself, or you can make investments into other opportunities owned businesses. So you’ve got your fund at the top. And then we typically set up a qualified opportunity’s own business underneath that as part of our package. And what that’s going to allow you to do think of the fund is basically just like a holding company, and then the opportunity’s own business is actually going to do the work. And so you can then go and look at the 8700 opportunity zones that are out there, and say, oh, I want to do single family rentals, or oh, I want to actually start a business and an opportunity zone, I’m going to do a tech startup or I want to buy a business and move it into an opportunity zone. There’s a litany of different things that you can do. And so we help people kind of explore those strategize about them, and put together a plan for how they’re going to do that. And then ultimately, if they’re not able to successfully implement that plan in time, we can show them how they can invest into other opportunity’s own businesses, they’re out there. And we’ve got, you know, a listing of over 1500 of those on our database. And we, you know, we can kind of say, okay, what are you interested in, what’s your risk tolerance, and maybe how to talk to these guys, if you ultimately decide that you don’t want to do your own deal. But what a captive fund allows people to do is to number one, it buys them time. Number two, they could come up with their own allocation structure, and allows them creativity, well, I want to do my own deal with this amount. So of your $100,000, I want to put 50 grand into a single family rental, and I’m gonna bring in debt right relative to that, which is totally okay. And then oh, I want to put $50,000, with the guys that are developing hotels down in Puerto Rico, because I really liked those assets. And I think the return structure down there is fantastic. And so that’s what a captive Opportunity Fund allows people to do.

george grombacher 12:15
Got it. Okay. And so let’s just go through a fictitious example, we’ll keep using me, I put in 100,000, I put the $100,000 in. And so the gain is that that’s not necessarily relevant, or how does that work.

Ashley Tison 12:34
So normally, you would pay $20,000 in capital gains the next year, right? If you’re over $500,000, you’re gonna pay 23.8%. And that’s just federally, then you have your state taxes as well. And so unless you’re in California, New York, Mississippi, North Carolina, you get to defer the state taxes as well when you put it into the fund. And so instead of paying the $20,000, next year, you get to invest that in your own fund, put that to work making money for the next five years. And then what you’re going to do, as it’s in the fund, the fund has to have 90% of its assets inside of these two testing deadlines. And so what we do is we meet that 90% test by dropping the cash down into your opportunity’s own business. And so then once it’s in the opportunity’s own business, you now have 31 months to deploy the money. And so you’ve effectively bought between, you know, 37 months to 42 months, based upon like, it’d be 43 months, 37 plus six is 43. Right, based upon when you put your money in, during the time of year, because the testing kind of works out on a six month rolling basis, and then it stops at your end. So there’s some nuances to that. And I could explain that in detail. It’s probably a little bit more deep than we want to go today. But effectively, you’re able to buy up to 43 months by dropping it into the fund and then down into the qf Zb. So then you go look for a deal. If you can’t find a deal, we can make an investment back into somebody else’s, you know, fund or qualified opportunity’s own business that they’re actually doing in an opportunity zone.

george grombacher 14:14
Got it? Well, let’s just carry that. That hotel in Puerto Rico example. I might say, okay, that that’s what we’re doing. I put the $100,000 into the fund. Within the within a year, there’s there’s there’s something that I see. So I build a hotel in Puerto Rico with $100,000 is probably not necessarily a realistic thing, but whatever. It’s actually surprisingly

Ashley Tison 14:34
realistic. and Puerto Rico, you could do an air b&b with $100,000 of equity. No problem.

george grombacher 14:40
Okay, perfect. So I do the Airbnb. And then 10 years later, it’s worth a million dollars. Yep. And I sell it and I owe no tax because by step up and basis, there’s now a million dollars.

Ashley Tison 14:51
That’s exactly right. And so meanwhile, you’ve depreciated that million dollar, right, so all of the money that you put into that area Airbnb property, you’ve depreciated that down to offset against your income taxes. In Puerto Rico, there’s actually a 40% tax credit available for hospitality assets that are coming online. And so you’ve effectively been able to make unbelievable amounts of tax free income over those 10 years. And then when you sell it, you’re also not going to pay any taxes. So it becomes a really powerful way to leverage your investment. Because it’s not about what you make. It’s all about what you keep. And if you’re paying the tax man, that’s, you know, that’s our number one vendor that we’re going to pay throughout the course of our lifetime is the tax man. And I am passionate about helping people minimize that amount they’re going to pay,

george grombacher 15:44
all while helping people in the opportunity zone. Sounds like one of those win wins, actually,

Ashley Tison 15:51
you know, and in surprisingly, the government created it. When’s the last time you heard about the government make it a win win, right?

george grombacher 16:01
On a three page piece of legislation as well, so

Ashley Tison 16:06
fascinating. It’s fascinating. And I know one of our core values that Ozy pros is essentialism right to keep it super simple. And God bless him. They kept it super simple in the legislation. Now, the regs that came out, those are 500 pages. And that gets a little bit more complicated. But when they originally started this thing, they were in the line of keep it super simple.

george grombacher 16:30
I like it. We like simple, beautiful, sir. But actually, people are ready for that difference making tip, what do you have for them?

Ashley Tison 16:37
So where else can you take? And where else can you utilize a government initiated program, to not only generate more generational wealth, but save taxes in the process, and then also have significant impact on people that really need it. And I get to have that conversation with people on a daily basis, is to talk about their impact story, talk about what they’re going to do and how they’re doing it. And then the unbelievable, you know, fantastic social impact that they’re able to have with the different projects that they have. And so, you know, that’s my difference making tip, right? So when I wake up in the morning, I put on my opportunity’s own superhero cape, and we go about the work of making a difference in people’s lives, not just making money. So when somebody comes to me with an idea, I’m like, Alright, let’s talk about that. How’s that really going to impact somebody positively. And if they can’t tell me that, or if they don’t have a really good story around that, then we go back to the drawing board until they do. And so I love seeing the smiles on the faces of the people that come to me to save taxes, and then they come out the back end. And they’re actually really, really feeling good about themselves, because they’ve actually been able to help a fellow human being. And that’s what, that’s what, that’s why I get up every day.

george grombacher 18:09
Well, I think that that is great stuff that definitely gets a column. Ashley, thank you so much for coming on. Where can people learn more about you? And how can they start having that conversation,

Ashley Tison 18:17
if they go to OC proz.com, we’ve got a specific, you know, we’ve got specific ways of interacting. As you can imagine, in order to democratize access, we’ve got to have a fairly regimented process associated with that. And so we’ve got strategy calls that people can book, we’ve got an oz works group community that people can join, to fellow to join fellow people that are operating in opportunity zones, we’ve got a weekly office hours that I do, it’s called the compliance bootcamp that actually starts in a little bit here on Tuesdays. And we do every weekday. And then we’ve got, we’ve got our educational product as well that people can pull down off the website. And I believe that we’ve got a special, you know, a special landing page Ozy proz.com/podcast, where people can get a discount on the strategy calls and on all those services that we have.

george grombacher 19:11
Excellent. Well, if you enjoyed this as much as I did show Ashley appreciation and share today’s show with a friend who also appreciates good ideas, go to o z proz.com. And check out the great resources, pop into one of those office hours that Ashley is talking about. Check out all the great resources and the community. And then you can find the discount at oC proz.com/podcast as well. Thanks again, Ashley.

Ashley Tison 19:38
Thank you, George. Appreciate it.

george grombacher 19:40
And until next time, keep fighting the good fight as we’re all in this together.

Transcribed by https://otter.ai

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