Opportunity Zones Office Hours – October 2024

Join Jimmy Atkinson at OpportunityZones.com the first Monday of every month at 3:00 PM Eastern Time, to get your Opportunity Zones questions answered live.

On this month’s episode, Jimmy answered questions about the possibility of an OZ extension, OZ capital stacks, how to find OZ investors, and more.

Featured OZ Questions On This Episode

  • How Opportunity Zones may or may not get extended.
  • How OZ investors are treated.
  • What percent of capital stack in a project does OZ funding account for?
  • Whether a family office could be considered a compliant QOZB.
  • How to fix a potentially blown QOF.
  • How to find OZ investors.
  • What documentation may be needed to demonstrate a decrease in fair market value of an OZ investment on 12/31/2026.

Featured On This Episode

About The Opportunity Zones Podcast

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

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Show Transcript

Welcome to Opportunity Zones Office Hours. I’m Jimmy Atkinson. I’m the founder of OpportunityZones.com and host of OZ Insiders, my new mastermind group, which I’ll tell you about in just a moment. You can join me live on Mondays at 3 p.m. Eastern time right here on our YouTube channel. I’m going to be taking your Opportunity Zones questions live in just a moment.

And if you have any OZ questions that you’re just dying to know the answer to, I’ll help guide you through them. You can submit any OZ questions you have by using the chat. Just submit it into the chat.

Now, are you looking to take your Opportunity Zone strategy to the next level? Maybe you’re not sure where to go. OZ Insiders is my Opportunity Zones mastermind group that offers comprehensive premium content and networking to help you get started. Our monthly masterclass meetings cover a wide range of topics from fundamentals to advanced, ensuring you have everything that you need to thrive.

Our masterclass instructor this month coming up next Monday is Chris Loeffler from Caliber. He’s going to be instructing a masterclass on distressed Opportunity Zone assets. As a member of OZ Insiders, you’ll get access to those masterclasses as well as to our exclusive online community, our monthly group masterclass calls, providing you with valuable OZ networking opportunities and guidance from the very best OZ professionals in the industry.

Whether you’re a beginner, maybe you’re new to Opportunity Zones, or maybe you’ve been around the industry for a while, but you’re looking to get to the next level, we have what you need. Visit OZInsiders.com to learn more. That’s OZInsiders.com.

Welcome again, everyone, to this next episode. It’s episode number two of Opportunity Zones Office Hours. You can join me the first Monday of every month at 3 p.m. Eastern time to get your OZ questions answered live. So whatever questions you have about OZs, I’m here to answer them for the next thirty or so minutes. Just type your questions into the chat.

But first, I’ll regale you with a tale from earlier this month. Actually, check that—it was last month, back in September. I forgot we’re in October already. I took a trip to Denver, Colorado. I was invited out by the Family Office Real Estate Institute, headquartered at the University of Denver. Their director, DJ Van Keuren, invited me out to speak to an audience of family office employees, executives, and members of ultra-wealthy families all about Opportunity Zones.

The event was a day and a half jam-packed full of great content. There were talks on cap rates, talks on how to structure a family office, how to structure an estate. And my talk—my forty-five-minute talk—was just about Opportunity Zones. And I was amazed at the reception that my Opportunity Zones talk received from the audience that day. A lot of people really enjoyed it.

A lot of people knew a little bit about Opportunity Zones, but even these very sophisticated families, these family office executives, who do investing for a living on the behalf of these different wealthy families, they were asking me questions about Opportunity Zones afterwards because they don’t know, right? Opportunity Zones are still relatively new. They’re an industry that hopefully will be around for many years to come, but might be expiring here within the next couple of years without any legislation that comes through.

But it was really nice to be able to speak to that group. And it just always strikes me as how new this investing program still is, that even ultra-wealthy, sophisticated investors still have questions about it. So don’t be shy about asking me questions here today.

I did want to also talk to you about some events that are coming up in the next few weeks here. So OZInsiders.com, I told you a little bit about already. This is actually the new OpportunityZones.com. But here’s OZInsiders, which is my premier private mastermind group. We did rebrand as OpportunityZones.com just a few weeks ago. So we used to be OpportunityDb. We’re now OpportunityZones.com. So thank you to everyone who’s expressed support in our new domain name.

A few events that are coming up on the horizon over the next few weeks. We do have OZ Pitch Day. We do this three times a year. It’s our showcase of Opportunity Zone funds and deals, as well as our educational panels about Opportunity Zone investing. So if you’re interested in learning more about OZs, or maybe you want some insight, some transparency into the marketplace to see which Opportunity Zone deals are available for investing in, head on over to OZPitchDay.com to learn more about that event. It’s free to attend.

We also do have some sponsorship slots left. We’re still about five weeks out from this event. We have some gaps in the agenda that we’re looking to fill over the next few weeks. So if you’re a sponsor and you’re looking to present in front of the room of high-net-worth investors who are specifically interested in Opportunity Zone investing, send us an email at [email protected]. We’ll get you squared away.

We also have an in-person conference coming up with our partner, Novogradac. Novogradac is hosting their annual OZ Summit on November 6th in Washington, D.C. You can see I’m a sponsor here. OpportunityZones.com is one of their sponsors. I think I’m also going to be speaking at the event as well. I’m going to be presenting the data behind the Opportunity Zone investing survey that I’ve been running for the past few weeks. I’ll be releasing it at that event.

And then finally, along the same lines of that event in Washington, D.C., the night before that Novogradac event, the OZ Insiders are getting together for a private dinner from the hotel. We have a private dining room reserved for us. There’s going to be twenty of us there, all talking OZs, very friendly. So if you’re a member of my OZ Insiders mastermind group, make sure you RSVP for that or shoot me an email making sure you RSVP. And if you’re not, please do join our group at OZInsiders.com. You can learn more about joining the group at that website there.

Boy, we got a lot of questions, so let’s get to the questions here. Thank you so much everybody for joining me today. I also got a lot of questions via email. I’m going to try to get to a couple of those email questions at least before the end of this segment here. But if I don’t get to your email questions, maybe I can kick them back to you. It’s always best to try to get your questions answered live here, so join me live, attend live—you have a better shot at getting your Opportunity Zone question answered.

Let me just kind of look through these here for a second, pick a good one. Here’s this one from Paula. We’ll start off with Paula’s question here. Paula asks, Do you see the OZ Act being extended no matter who wins the election?

So this is one of the most common questions that I’ve been getting over the past, really over the past couple of years: Hey, what’s happening with OZ legislation? Is it going to get extended? Is it not going to get extended?

If you had watched our OZ NewsHour episode that I did with Andy Hagans last week, we always end every episode with a few minutes of talk about politics, the election, and what might happen with Opportunity Zones after 2026. As currently written in the statute, these are set to expire or sunset after December 31, 2026. So Paula is asking, Hey, are we going to get this thing extended?

The most important pending legislation that has not been enacted yet that pertains to Opportunity Zones is the Opportunity Zone Transparency, Extension, and Improvement Act, which was introduced into the House a couple of years ago now, actually. I think it was—I don’t remember. It’s been a while, anyway. It’s been introduced a few times under a couple of different sessions of Congress, but it would extend the Opportunity Zone extended out two years.

Short answer to your question, Paula, is no. I do not see OZs being extended no matter who wins. I think there’s a very good chance that it gets extended no matter who wins. But I would say that a Republican sweep is probably going to result in OZs getting extended or it’s the most favorable environment for Opportunity Zones to get extended.

So Trump wins the White House and Republicans win the House and Senate—that’s probably the most favorable outcome for Opportunity Zones getting extended. A Democrat sweep—there’s a lot of Democrats, and the White House in particular, Biden currently, and Kamala Harris, their new nominee, have really not talked about Opportunity Zones at all in the past four years. And really, it hasn’t been a talking point for Democrats at all over the past four years, for better or worse.

The program has been labeled as a Trump program, and so it’s been a bit of a hot potato for Democrats to talk about. Republicans have been very vocal about it. National Republican leaders, President Donald Trump himself, has been very vocal about it. Senator Tim Scott has been very vocal about it. Representative Mike Kelly has been very vocal about it. And a handful of other representatives and senators have been very vocal about Opportunity Zones on the Republican side of the aisle.

However, unfortunately, it’s become too politicized. It’s become labeled as Trump’s program, and so the Democrats really don’t want to have anything to do with it right now. I do think if the Democrats sweep, however, there might come a time at the end of next year—a Kamala Harris White House, a Democratic House, and a Democratic Senate—they’re going to push through some sort of tax legislation, I would have to imagine. And I do think there’s a decent chance, at least, that Opportunity Zones get packaged into that. It won’t be as political to include Opportunity Zones.

There are a few champions of the Opportunity Zones program on the Democratic side of the aisle. Senator Cory Booker probably being the most prominent member of the Senate, the most senior representative of the Democratic side of the aisle that really supports Opportunity Zones. It was passed in bipartisan fashion—I should say it was supported in broad bipartisan fashion from 2015 up through 2017. That was passed as part of Trump’s big tax cuts program, so it’s been labeled as a Trump program.

It was passed along party lines as part of that TCJA, and it’s become quite political, of course. Now, where we get into a tricky situation, I think, is if there’s a split in the balance of power. Let’s say Trump wins the White House but Democrats win one or both chambers of Congress. Or maybe Harris wins the White House but Republicans win one or both chambers of Congress. If there’s any sort of split like that, I think you could see some real gridlock in Washington, which many of us might be rooting for in most cases. But we do want this Opportunity Zone extension passed at some point.

I don’t know how likely it is that some huge tax, long-term tax legislation will get passed amid a lot of bitter politics with a split balance of power. So that’s one where I’m not quite sure if OZs would get extended or not.

So Republican sweep, I think there’s a really good chance OZs get extended. Democrat sweep, they’re going to pass through some tax legislation. Hopefully, OZs get packaged in there. A split? I don’t know. All bets are off. I think there’s a very real chance that OZs do not get extended though. But hopefully—and I kind of think it’s really a coin flip at the moment—50/50. Ask me again in one month, one month from today. Hopefully, we’ll know who won the election, although sometimes it takes a few days. But hopefully by the time I’m going on air with this program in a month, I’ll have a better idea of what’s going on.

Rob just says, Great resource. Thanks, Rob, for being a frequent listener and viewer of the show.

Roger says, Trump will save the day. Time will tell. Let’s see what happens with that.

Let’s see, Arness asked, I have a potential funder that wants to invest with me to jumpstart a QOZ. And then our follow-up question is, how will his investment be treated in terms of the 10-year basis?

So a little bit of a split up comment thread here. But so the first part is, a potential funder wants to invest with me to jumpstart a QOZ. How will his investment be treated? So I want to—let’s go to the board, right? So let’s call your investor up here this green circle with the dollar, right? So that investor, Arness, is going to help kickstart your QOZ. So let’s say you’ve got a QOZ where I’m going to call it a QOZB for Qualified Opportunity Zone Business. This is the actual asset that you want this investor to drop these dollars into, right? So he can’t directly fund this QOZB here.

What has to happen is—I’ll get out one more color here—his dollars need to flow into an entity called a QOF, a Qualified Opportunity Fund. So QOZB, and it’s at this fund level that the 10-year clock starts ticking for this investor right here. Capital gains dollars put into this QOF. Now, the QOF then deploys capital into the QOZB.

So how will his investment be treated? That’s kind of an open-ended question there, but typically his investment is treated as Qualified Opportunity Zone equity in the Qualified Opportunity Fund, which complies with the Opportunity Zone statute by deploying capital into Qualified Opportunity Zone business and Qualified Opportunity Zone property and Qualified Opportunity Zone business property—that alphabet soup—QOZBP, QOZB, and QOZP, of course.

A lot of alphabet soup here, but hopefully that answers your question.

Let’s see, Arness, you asked another question here: What percent of capital stack in a project does OZ funding account for?

So that really depends, honestly. Like sometimes this right here, this arrow right here accounts for 100%. Sometimes it’s all equity coming into a fund that then deploys capital into a business. Other times you might have a loan come in, right? You might have a construction loan or other type of loan come in with—maybe I’m just making up numbers here—maybe 50% will come in through a loan. And so then this is down to just 50% over here of your capital stack.

Sometimes also, by the way, the QOF is just one of several equity sources. You could also have some other sort of separate non-OZ fund over here. Maybe it’s just people with regular dollars coming in through some other sort of LLC structure. Maybe they’re kicking in some money also. That’s not too common, but it can happen.

You could also have—maybe you’ve got some tax credits, maybe you’ve also got some PACE financing if you have renewable coming in. So there’s a whole bunch of different sources of capital that can come into the capital stack for any type of OZ project.

So I’ll erase that for now, and maybe we’ll get going with the dry erase board a little bit later on in the show. That was pretty fun, right? That’s the first time I’ve done the dry erase board.

So Arness, hopefully that answers that question about that, but let’s get to somebody else here. Let’s say, give me a second to read all this stuff here. Let’s see, Rob chimes in: Arness, love that quick, on-target OZ percent in a capital stack. Yeah, thanks for that.

Let’s see. Let’s get to—it’s hard to read all these, I’ve got a whole bunch of stuff here coming in. Thanks for all the questions, everybody.

Andy says, Love the new whiteboard, Jimmy. Thanks for the idea, Andy.

Let’s see, Salim asks, Can we catch up about Las Vegas OZ action before we meet in Washington, D.C., next month? So much happening on the ground here since we last spoke in 2020.

Absolutely. So, you know, I’d love to talk about Las Vegas Opportunity Zone action. I know that there’s a lot going on in Las Vegas and the surrounding areas—like quite a bit of Las Vegas and surrounding areas have been designated as Opportunity Zones. Nothing new right on the strip, but just adjacent to the airport on the very southern end of the strip is an Opportunity Zone. And there’s—I mean, it’s one of the fastest growing communities in the country. So I’m sure there’s a lot going on there in Las Vegas and the surrounding area.

So yeah, please do. If you want to catch up with me, please send me an email at [email protected]. We can set up a call and talk more about that.

Let’s see this question from Alicia. Alicia asks, We have a mixed-use chips manufacturing facility with workforce housing and training centers and ecosystem. How can we optimize Opportunity Zone funding?

So Alicia, this is great. I love this type of play where you have workforce housing coming into a location where demand is high and supply is low, and demand is growing. Demand’s growing faster than the supply can keep up. So I think this is a really good place to put some type of new workforce housing and training center.

The way that you would structure that—I’ll just go back to my dry erase board here—is, you know, you’ve got all of these different houses that you’re building, right? You’ve got these workforce housing. Maybe you’ve got a portfolio of several different—I’m going to make some more up here too, kind of in the background. There we go. You can kind of see that a little bit better.

So here’s your portfolio of housing in wherever this chips manufacturing facility is, or in proximity to wherever that chips manufacturing center is, right? So you want dollars to come into that from OZ investors. So OZ investors are really like any other investor, right? But the difference is they have capital gains, and they’re incentivized to invest into Opportunity Zone locations.

So as long as you structure this properly, as long as you are basically holding this portfolio of workforce housing in a QOZB—and all a QOZB is, is an LLC, right? That’s your holdco right there, that Qualified Opportunity Zone Business. It’s just an LLC. You don’t have to file any additional tax paperwork or anything. In your operating agreement, I would suggest there’s a line in there about how you are structured as a QOZB, but there’s really not much to it. All this is, is an LLC, okay?

Now, the money can’t flow into there. For your investors, you really need the money to flow into a QOF. I’m going to make a triangle this time. Now, the QOF funds the QOZB, so that this dollar here, your investor, invests into the QOZB—I’m sorry, into the QOF. The QOF then drops, deploys capital into the QOZB, and then the QOZB operates the underlying assets—which are this portfolio of workforce housing adjacent to this chip center.

Now, how do you optimize OZ funding? I think you’ve got to tell the story, right? You have to tell the story about how this is a great investment opportunity because look, we’re building this chip center, right? We’re building this computer manufacturing center. It’s going to be a hub. It’s going to be the center of this new community, and it’s going to be one of the largest employers in the area.

Maybe I’m making some stuff up here, right? But you can fill in the blanks, right? You need to convey the story about how this is going to increase demand for workforce housing. And look at us, we’re coming in and we’re supplying it right away. And look, by the way, not only are we supplying this asset that is woefully undersupplied and in huge demand, but also it’s located in an Opportunity Zone. We’ve structured it in this way so that you can qualify as an Opportunity Zone investor.

So that’s what I would recommend there.

Chris chimes in with, I’m working Las Vegas West Side. Hey, Chris, we got a lot of Vegas people in the audience today. Really appreciate it.

Jeremy’s watching us on LinkedIn. Solid info, Jimmy. Thank you. Thank you, Jeremy, for listening in today.

Let me kind of scroll through some of these other questions here. Let’s see, Andy chimes in: Let’s hope a president gets elected who understands the value of the OZ program. He was responding to Roger’s earlier comment about Trump saving the day. So thanks, Andy and Roger, for the comments there.

All right, let me see this question here from Andrew. Andrew asks, With starting a family office as a QOZB inside a QOF, inside an OZF—he terms it with the same thing, Opportunity Zone Fund—be considered a business in the eyes of the IRS?

So Andrew, you’re getting to a really important provision in the Opportunity Zone regulations. In order to qualify as a proper Opportunity Zone investment, the activity has to rise to the level of an active trade or business.

So is a QOZB an active trade or business? I’m sorry, is a family office, is that essentially functioning as an active trade or business? I think it depends on what the operations of the family office are. I think it depends if they’re running some sort of incubator, if they’re running some sort of business, like an actual operating business. I think absolutely that could qualify in the eyes of the IRS.

By the way, huge caveat here, I’m not a tax attorney. Clear this—I would highly recommend before you do this, consult with a very qualified tax attorney to get off you some additional defensible guidance on this and possibly an opinion letter as well. If it is doing triple net leasing, that probably would not qualify as an active trade or business. The IRS has actually even said that for the purposes of Opportunity Zone investing, triple net leasing does not qualify. If they’re doing active management of real estate properties, that would qualify.

So I think, like the answer to a lot of these types of questions, it depends, but talk to an attorney. So sorry, I couldn’t be more helpful there, but hopefully that was at least kind of puts you on the right path there.

Let’s see. Let’s see what else we’ve got next here.

All right. I’ve got one here from Seth Rosenberg. I’ll read this one. Seth—and Seth’s great. Seth is an Opportunity Zone investor I’ve known for a few years, and he was on OZ Pitch Day panel with me a year ago. So great to see you in here, Seth. Thanks for joining.

The conversations that I have had with policy teams suggest that the OZ statute will be used as a framework for how to deliver the incentives for new housing build.

I mean, I love that, right? I love that, you know, these new housing builds—and by the way, affordable housing has been a big component of Kamala Harris’s policy, although she hasn’t outlined exactly what her policy is and how we’re going to accomplish it. But I know that she’s a huge proponent of building more affordable housing. Trump obviously loves Opportunity Zones, and I do think one of the great things about Opportunity Zones is that it does a couple of things.

It does—and I’m going to use really simplistic terminology here and broad sweeping generalizations, so forgive me—but Republicans really like tax breaks. Democrats really like projects that build up low-income communities and kind of distribute wealth across less fortunate areas or less fortunate people. And the Opportunity Zone incentive really accomplishes both. It provides a carrot or an incentive for high-net-worth investors, for very wealthy individuals to take some of their private capital and invest it into communities that oftentimes would not otherwise receive it. And then those communities experience economic revitalization.

That’s it. That’s really Opportunity Zones in a nutshell. Again, broad sweeping generalizations. I think you understand kind of the point I’m trying to make though. You can’t really have one without the other. It’s very difficult to accomplish one without the other, unless it’s some just pure tax credit program, like the low-income housing tax credits or affordable housing or HUD Section 8, stuff like that. This is kind of a new breed of tax program that brings in private capital.

So Seth, I like hearing that, that they’re using it as a framework for how to deliver new incentives for new housing build, because we have a huge housing shortage in this country. By some measures, four million, five million, six million units on that scale is how underhoused we are, or how undersupplied we are of housing in this country.

Okay, let’s see. Michael didn’t even read this one, so I’m reading it live here the first time. I inherited a client that set up a fund in 2019. COVID relief pushed the initial test date to 12/31/21. They invested funds in the market and erroneously claimed it qualified QOZP on the 8996. How to fix?

Michael, I don’t know. And I don’t think hardly anyone in the country knows. So I’m going to give you my best piece of advice, which is I think you really need to call somebody at the IRS. And they have contacts—I have contacts at the IRS who specialize in answering the phone and answering these questions.

So if you want to get with me separately, send me an email, [email protected]. I’ll give you one contact that I know at the IRS. I’ll give you the phone number or email address—I’ve got one of them for this individual. And I would highly recommend that you just reach out and just say, Hey, what do I do here? Because the fact of the matter is, there’s no case law on Opportunity Zones, and there’s very little history to go off of.

So I think you’re probably best served just by calling the IRS and saying, Hey, here’s what happened. How do I fix this? And they should be able to walk you through from there.

So hopefully that’s helpful. Because really, it’s just a lot of these types of problems that happen with Opportunity Zone investing. There’s no bright line test. There’s no bright line test or surefire solution for some of these problems because they’ve never happened before. There hasn’t been enough history of them happening for the industry to really coalesce around best practices.

So I would recommend actually just reaching out to the IRS in that case.

Okay, let’s see. John asks, I have a question about using debt for an OZ opportunity. If you have a one-million-dollar long-term capital gain, can you use one million dollars in commercial debt in perhaps a 70/30 funding split to do the purchase? Can you elaborate?

I can elaborate. Sure. Let me get the whiteboard out again.

This one. Really, the long-term capital gain really shouldn’t have any impact at all from a tax deferral perspective on how you can use Opportunity Zone funding.

I’m going to put this in green just to be consistent with how I’ve been doing it in the past. You’ve got your one-million-dollar long-term cap gain up here, right? This is your investable amount. And then you want to do a 70/30 funding split to do the purchase.

So I think you mean 70% debt. If you mean 70% equity, just flip the numbers, obviously. But so—and then hang on a second. Can you use one million dollars in commercial debt in perhaps… So if you’ve got one million dollars in commercial debt, that would be—let’s just say that’s over here, okay? So you got one million-dollar loan that you’re bringing in to the QOF, which is down here, okay? You can do both, right? And then you’ve got it funded with two million dollars.

Now, I think what you’re saying though is you want a 70/30 funding split. So if you’ve got one million dollars of—or maybe you want this, I guess this total amount, the total amount you want in here—I’m just going to assume is one million dollars, okay? So you can change this to 700k, right? And then change this green one, let’s call it 300k. That’s totally fine.

Now, what you should understand though, is from—I’m going to bring this down here now—you’ve got 300k is going to be OZ equity, right? But then what’s with the balance, 700k balance? This is going to be taxable in 2024 because you didn’t put that to work in an Opportunity Zone fund. And that’s perfectly fine to do. You have a long-term capital gain—you don’t need to invest all of it. It’s not an all-or-nothing thing for the purpose of Opportunity Zone investing. You can take some off the table. You can invest as much or as little of that gain as you want, but only the portion that you invest is subject to all the tax advantages of Opportunity Zone investing.

So that’s why I’m saying you’re going to have 700k that’s taxable in 2024. Hopefully, that answers your question there, John.

Let’s go back to the questions here. We got one from Roger. Roger asks: Can I start an Opportunity Zone fund to invest into my own movie company that will be located in an OZ and produces movies that benefit locals and others in other OZs around the country?

Yes, absolutely you can. So a movie studio company—and I actually have seen a few different movie studio projects attempt to raise capital with Opportunity Zone funding—it’s totally valid. It’s a perfectly acceptable business. There’s nothing wrong with it. The vast majority of businesses qualify as long as they comply with the OZ regulations and are physically located in an Opportunity Zone.

So a movie studio is perfectly fine. And it really doesn’t matter if it benefits locals and others in other Opportunity Zones around the country. It just has to exist in an Opportunity Zone, and it has to employ people or hold inventory or equipment in that Opportunity Zone. There are a lot of different hoops that businesses have to jump through to make sure that they comply. There are numerous tests based on income, headcount, hours worked, or where the equipment is located, essentially.

So one of the things with a movie studio is: are you shooting everything inside of this Opportunity Zone location? Are you sometimes going to take the equipment outside? Maybe you have some sound equipment, some videography equipment that you’re taking outside of the zone and you’re filming on site in areas that aren’t Opportunity Zones. As long as that equipment all makes its way back to the movie studio and is headquartered at the movie studio and is typically used at the movie studio, and the vast majority of your employees’ hours are worked at the movie studio, it’s perfectly fine.

There are some devils in the details. I would recommend that you consult with an Opportunity Zone tax attorney or Opportunity Zone CPA to guide you through all of the different requirements that an Opportunity Zone operating business has to comply with. But that’s the gist of it right there, Roger, so hopefully that helps.

I did want to get to some of the questions that I got earlier via email here. One of them came from Vicki, I think just earlier today, actually. She says: I have a vacant lot listed in Sanford, Florida, that is located in an Opportunity Zone. Is there a website that I can advertise my listing to appropriate investors?

And I always recommend there are two big commercial property listing websites, Crexi and LoopNet. You should definitely get listed there. By the way, on one or both of them, at least at one point, there was a way to flag your property as an Opportunity Zone, as being located in an Opportunity Zone. There’s a way to filter by Opportunity Zone as well.

So that would be my recommendation to you, Vicki—basically, just like any other type of property, but just make sure you’re able to mark if it’s available on LoopNet and Crexi as an Opportunity Zone property if you can.

Let’s see. All right, John. John says: Thanks, Jimmy. You nailed it correctly. Sorry so cryptic in my question, but you answered it right.

Okay, thank you, John. I’m glad I got the gist of it right there.

Let me see. I had another—by the way, I think I got eight different emails replying to my announcement of this Opportunity Zones office hour with different questions. So I wanted to get to at least a couple of them here. I’m just scrolling through them right now. I’m going to get to this second one here from Bruce, actually.

So Bruce asked: We have our own small private Opportunity Zone fund and business. We build single-family homes for rent. We started the fund and business in 2020. We had additional gains in 2022. Does the addition of gain funds change the 10-year hold period for the houses we built in 2020 and 2021? In other words, does the addition of the gains reset the original 10-year clock? We are able to track the additional funds to particular houses, and I feel that the 10-year hold would start on those houses when the gains were put in the fund, but not affect the prior gain contribution timeline.

So this one’s a little bit messy, Bruce. But I think there’s a couple of different options for you. I’m going to get the whiteboard out so we can kind of properly lay this out.

So Bruce here—and sorry, I don’t have the question built in or up on screen, but Bruce essentially is generating these different gains. He generated a gain in 2020, and then he skipped 2021, but we got 2022. And he’s got different gains in these different years, okay? And he’s invested these different gains into presumably one Qualified Opportunity Fund. And then that Qualified Opportunity Fund has then distributed that capital down into a variety of different assets. I’ll do my best job drawing little houses here now—you get the idea.

I gotta get magnets or something.

So he’s asking, when this money comes in, what happens to the clock on this? So the clock relates to each individual investor. So this investor’s clock started ticking—or this, I guess you’re the same investor in all of these—but this tranche of capital, the clock started ticking on that when it came in. What you have here is, it’s not ideal.

What I would have done differently—and perhaps you and your tax attorney or your CPA might be able to somehow figure this out—is ideally you would have possibly multiple different QOFs. You could have different vintage year QOFs, is how I’ve seen some funds do it. So you would have a QOF-XX, a QOF-XXII, a QOF-XXIII, and a QOF-XXIV. And especially if you’re able to tie different capital deployments or different gains into different capital deployments, there might be some way to achieve something like this.

You could also do it at the QOZB level. I’m missing a layer here, but typically you don’t go straight from a QOF deploying into the actual project—you have a second-tier holdco here, a QOZB. You might have—for instance, all of these QOFs could contribute into one QOZB, and then that kicks out into different houses.

But there’s a few different ways to skin this cat, Bruce, and thank you for the question. I would recommend getting on the phone with a competent OZ tax attorney or a CPA to kind of help you figure this out.

And by the way, it kind of reminds me of—let me see if I can bring it up here—kind of reminds me of a masterclass that we’re running at OZ Insiders in a couple of months here. Blake Christian, who is one of the most prominent Opportunity Zone CPAs in the country, he is helping me teach a masterclass on salvaging blown QOFs and QOZBs.

And I don’t know if yours is blown totally, Bruce, but there are some issues with it, with the different 10-year timeframes. I think Blake or somebody like Blake can definitely help you clean this up. And, you know, if you want some more instruction on that, I would encourage you to come to this OZ Insiders masterclass we’re doing on December 9th. It’s in a couple of months still. We do these the second Monday of every month at OZInsiders.com, and you can join at OZInsiders.com to learn more about that.

We are pushing up against 40 minutes here, so let me see if I can just answer maybe one or two more questions and then wrap it up because I’ve got to get going in a minute.

But let’s see. Alicia asks: 100% of it is in the OZ.

Okay, so she was referring to—what was your question before? You were the chips—you were the individual who asked the question about the chips manufacturer and you’re building that workforce housing. So your follow-up question, 100% of it is in the OZ.

So how do we find investors?

Common question I get from operators who have a great Opportunity Zone opportunity, a great Opportunity Zone investment opportunity. They’ve got a great project. They might have it structured just right. They know it’s an asset class that is in the line of progress, but where do they find investors?

So that’s one of the things that we do at OpportunityZones.com—we help connect operators of Opportunity Zone projects with high-net-worth investors. Traditionally, we do that primarily through our OZ Pitch Day event. And I’ll just share a little bit about that right now. I talked about it briefly at the beginning of the episode, but in case anybody missed it, we do these OZ Pitch Day events three times a year.

Our next one’s coming up on November 14th. It’s free for investors to attend. The investors that do attend are high-net-worth individual investors who have capital gains. They’re looking for more education about OZs, and they’re looking for deal flow. They want to invest in OZ deals. In some cases, they want to invest in multi-asset Opportunity Zone funds. And it’s been a great way over the years. We’ve done twelve or thirteen of these so far. We started doing these in 2020. I think we’ve helped raise over one hundred million dollars in capital for different Opportunity Zone operators all over the country across all of these different events that we’ve done and everything else we do at OZ Insiders and at OpportunityZones.com over the past four-plus years or so.

So Alicia, if you’re interested in maybe presenting your deal, or if there are any other operators out there who are interested in presenting their deal at OZ Pitch Day, let me know. Just send me an email at [email protected], and I can send over some additional information about that.

Let’s see what else we have here now. We have a lot more questions—I don’t think I’m going to be able to get to them all. I know for a fact I’m not going to be able to get to them all. Let’s see—Jose says here… We’ll try to get to Jose’s question here, and then I think we’ll call it a day.

So Jose—Jose has pitched his Puerto Rico Opportunity Zone Fund at OZ Pitch Day on a couple of different occasions. So, Jose, it’s great to see you here at OZ Office Hours, thanks for the question.

As we approach December 31, 2026—that’s the deferral date for Opportunity Zone investments, that’s essentially the date when OZ sunsets—for the purposes of calculating taxes due on the deferred capital gains tax for investors in a QOF whose NAV has decreased due to a write-down of an investment by the QOF… Here’s part two, …and the QOF is taxed as a corporation for federal tax purposes, what documentation or information is necessary for the investor to calculate its payment of the deferred tax liability?

Great question. So, I’ll display the first part of it. This will be the last question I get to, and then I’m going to cut everybody loose and we’ll do another episode next month—first Monday of every month at 3 p.m. Eastern time.

So Jose’s getting at the tax liability that is due on the recognized gain. So an investor has a gain, right? Let me go to the whiteboard just one more time. I love this whiteboard. Let me know what you guys think of the whiteboard—do you hate it? Do you love it? Is it great? Is it the best thing ever? I’d love to hear any thoughts you have on it, I’m just kind of getting used to doing it here for the first time. I literally bought this whiteboard about two hours ago.

So an investor, right, has a capital gain and invests it into a QOF, okay? So when that investor does that, it allows them to defer the recognition of that gain until 2026. Okay, so this capital gain—let’s say it’s one million dollars. Capital gain—by the way, it doesn’t matter if it’s long-term or short-term, you can do either one. One-million-dollar capital gain that gets deferred until 2026.

So your bill, basically—the tax due on this one million dollars is typically April, right, of the following year. In this case, April 2027. That’s when the tax on this is due. At current rates, that would be federal. I’m assuming it’s a long-term capital gain getting taxed at capital gains tax rate plus the 3.8% net income investment tax—or is it net investment income tax? Whatever it is. Obamacare, essentially, is what that means. So it’s 23.8% aggregate is on most long-term capital gains. That rate can vary.

By the way, you should note that it’s the rate in 2026 that’s going to apply, and we don’t know what the rate might be in 2026. If Kamala Harris gets elected, the rate in 2026 might be much higher than it is now, which would make this whole thing a lot more valuable, right? Because that 10-year benefit becomes way more valuable the more that capital gains rates come up. Anyways, I digress.

What is the amount of gain that you recognize on December 31, 2026, that you pay taxes on? Well, it’s actually the lesser of two different items. It’s the lesser of this one million dollars or—I’m going to use NAV for shorthand—the fair market value of your QOF investment on that date. So in Jose’s example, he’s saying, Look, the NAV has actually gone down. And so then on December 31, this one-million-dollar investment is actually only worth, let’s say, $750,000. So that investor… Fair market value, okay?

So the fair market value of this investor’s one-million-dollar QOF investment is $750,000 on December 31, 2026. This is the amount of gain that that investor recognizes on 12/31/2026. So he would pay tax on that amount, not on the one million dollars, because this number is less than this one.

But Jose is asking, Okay, well, what kind of documentation do I need? How do I prove that? And I don’t know that anybody really knows. I don’t think there’s any bright-line test. I don’t think it’s written in the regs at all. I don’t think it’s written in the statute at all. But I would say, again, as a non-tax attorney—consult with an attorney for additional information—you want some sort of third-party validation that backs up your valuation, okay? Whether that’s something from the bank or something from some sort of property valuation company, you want to have some sort of contemporaneous memorialization of that fair market value on that date.

That isn’t just you picking some random number from the sky, let’s say, to put it politely. You want some sort of third-party valuation—a reputable, authoritative firm doing that fair market valuation on that date. And if you’re an investor and you have questions about that, call or email your QOF fund manager.

So that’s my answer to that question right there. But I don’t think—correct me if I’m wrong, if anybody knows—I don’t think there’s any sort of requirement that you have to submit any evidence with your tax return. I think it’s just something that you need to have on hand as the QOF, just in case the QOF gets audited or if the investors get audited. Some sort of contemporaneous documentation needs to be on file, in the hopefully unlikely event that some audit transpires at some point in the future. Somebody comes and looks at your tax return. One of those 80,000-plus new IRS agents knocks on your door in 2029 and says, Hey, wait a second. Why did you only pay this in 2027? You should have been paying on this.

Call up the fund and say, Hey, where’s—why was this? Why was my NAV down this time around?

And I’ll just say one final word about OZ Insiders before I end the call today. I know we have a lot more questions, and we are out of time. I gotta go—it’s been—we’re going to be going for 45 minutes here.

We still have a lot more questions. I’ll try to get to them next month. But if you enjoyed today’s episode, please give me a thumbs up. If you’re on LinkedIn, give me a thumbs up. Or if you’re on YouTube, go ahead and click that thumbs-up button. If I wasn’t able to answer your question, please feel free to email it to me at [email protected].

Are you looking to take your Opportunity Zone strategy to the next level but you’re not sure where to go? OZ Insiders offers comprehensive premium content and networking to help you get started. Our monthly masterclass meetings, which I’ve discussed already a couple of times throughout the course of today’s episode, cover a wide range of topics from fundamentals to advanced. We’ve got that masterclass with Blake Christian coming up in December about salvaging blown QOFs and QOZBs, so it’ll help you just get what you need to thrive as an OZ operator or OZ investor.

And as a member of OZ Insiders, you’ll get access to our exclusive online community and those monthly group masterclass calls, providing you with valuable OZ networking opportunities and guidance from the best Opportunity Zone professionals in the industry. So whether you’re a beginner or you’re looking to get to the next level, we have what you need at OZ Insiders. You can visit OZInsiders.com to learn more. That’s OZInsiders.com.

And thanks, everybody, for joining me today. We’ll be back. Join us Mondays at 3 p.m. Eastern time on the OpportunityZones.com YouTube channel. Thanks so much.