Fintech Entrepreneurship And Opportunity Zones With Ashley Tison Of OZ Pros | Soar Payments LLC

Fintech Entrepreneurship And Opportunity Zones With Ashley Tison Of OZ Pros

Opportunity Zones offer investors and founders one of the most compelling tax advantages in history…

Listen along as Ashley Tison, Co-founder of OZPros joins the podcast to break down what Opportunity Zones are, and explore how Fintech entrepreneurs are locating (or relocating) their businesses in Opportunity Zones to take advantage of the capital gains benefits and more.

Payments & Fintech Insights In This Episode

  • What an Opportunity Zone is, and why it matters.
  • How fintechs and other businesses looking for investors can attract interest by locating their venture in an Opportunity Zone.
  • The story behind and how Ashley and his team help their customers navigate the QOZ landscape.
  • Ashley’s thoughts on the future of Opportunity Zone legislation, fintech, and beyond.
  • With so much more!

Episode Transcript

Scott: Hey, “PayPod” listeners, Scott here again. And get ready because we have a fantastic show on tap for you today, where we’re gonna be taking an updated look at Opportunity Zones and how they are changing the game for so many businesses, including fintechs and investors in those businesses. As a refresher, consider you’re an entrepreneur with maybe a new fintech idea, or you’re looking to start some other kind of business, it can be challenging to attract investors and cut through the noise even if you’ve got a fantastic idea and business plan. On the other side, if you’re an investor, it can be challenging to deal with tax bills when your investments do pay off, capital gains tax liabilities are no joke. But what if there was a vehicle to help investors save money on their tax bills, help entrepreneurs attract more investors, and incentivize economic development in areas that need it?

What if the next great fintech could be a better investment opportunity than anyone could imagine? That’s where Opportunity Zones come in, and joining me to tell us more about these and how Opportunity Zones present an interesting prospect for fintech or payments investors and owners, and possibly even merchants themselves is Ashley Tison. And Ashley is the co-founder of OZPros, which helps folks navigate the Opportunity Zone fund and business creation process, and is a true expert on OZ’s, so, really, the perfect person to walk us through this. And he had mentioned to me that their goal is really democratizing the Opportunity Zones process, which I think is so powerful. We talk about democratization on this show a lot. Ashley, welcome to the show.

Ashley: Thanks, Scott. I really appreciate being on today.

Scott: Well, thank you for being here. I always like to start off with a big question, and I think the perfect way to really make sure we’re all on the same page would be to ask you to break it down for us. What exactly is an Opportunity Zone? I kind of hinted at it, but what’s the real breakdown there?

Ashley: So, Opportunity Zones were created by the Tax Cut and Jobs Act, and effectively, it’s a way to incentivize investment to get out of stuff that has pent-up capital gains and to get into places that are historically under-invested in. And so, if you have any kind of capital gain, long-term, short-term, you can roll it into an opportunity fund within 180 days of that gain, and you get to defer those taxes until December 31st, 2026. And if you’re invested for five years prior to that date, which means that you’ve got your money in by December 31st, 2021, which is right around the corner, then you get a 10% reduction when you go to pay those taxes. And then if that weren’t great enough, when you have held your investment for 10 years, after those 10 years, you get a step-up in basis to fair market value on that new investment, which is really cool because it not only eliminates capital gains taxes, but it also eliminates depreciation recapture.

Scott: Boom. So, pretty huge. To, kind of, put a finer point on it, why are Opportunity Zones then and OZ funds such a great thing for investors and entrepreneurs, and particularly, those who might be starting the next great fintech or interested in investing in one or being a part of it in some way?

Ashley: Yeah. The really cool thing about Opportunity Zones is that it’s not just limited to real estate. And so, you can actually invest in operating businesses that are in Opportunity Zones. And so, effectively, if you’ve got anything that’s not location-specific, like a fintech company, or a software company, or something where you can pretty much put it wherever you want to, by locating it in an Opportunity Zone, you can position that company so that it can exit after that 10-year hold by your investors and there to be no capital gains on that exit. And it’s really powerful because of the limitations on 1202, so you can get some similar stuff with a section 1202, qualified small business stock exemption. But, you know, they’re talking about limiting that and cutting it in half, and then as well as it, you know, you’re limited to $10 million or greater of 10X or $10 million on a 1202 exemption. Well, within the Opportunity Zones, you’re not limited at all.

Scott: That’s huge. And I would think too, from the flip side, we talk a lot about all the exciting software companies out there, exciting new fintechs and payments businesses. There’s a lot of competition for just attracting investors, and why would I invest in this business versus this one? Ashley, do you think that when you consider it from that angle that it being located in an Opportunity Zone and the implications of that can kind of be an edge?

Ashley: Yeah, absolutely. I mean, one of the biggest challenges that anybody faces when seeking investors is cutting through the traffic and having some kind of differentiator that says, “Okay. Hey, listen, I’m this unicorn that’s out there.” And there’s very few operating companies that are out there raising capital in the Opportunity Zone land right now. So, it is an absolute difference-maker, and it allows you to able to take this tax-deferred money that’s out there, and it allows your investors to be able to put that into your company effectively by deferring their taxes. And so, it goes in tax-free, and then it’s gonna come out tax-free. And so, I think it’s a substantial differentiator for folks, you know, relative to them being willing to raise their hand and say, “Hey, I’m willing to jump through the Opportunity Zone, kind of, hurdles and compliance chain and, you know, I’ve got it dialed in, and yeah, let me be able to take your capital Mr. Qualified Opportunity Fund that’s got capital sitting on the sidelines that needs to get deployed.”

Scott: Absolutely. Are there existing businesses, possibly even fintechs that have relocated operations into Opportunity Zones? So, they’re already there, they’re not just starting something brand new, but they’re like, “You know what, let’s relocate into an Opportunity Zone.” And what benefits might that relocation bring and how’s that function?

Ashley: Yeah. So, I actually worked with a gentleman, Tobin from AngelMD, and they specifically…and they’re a bit of a fintech company themselves. So, you know, they plug in doctors and startup companies with…they basically bring the three of those together. And they specifically, you know, moved their operations and their headquarters into an Opportunity Zone so that they made themselves a Qualified Opportunity Zone business. And then namely, part of the reason was too so that they could walk, you know, their clients and the folks that they’re helping raise money for, you know, through the process themselves. And so, that’s one example of folks that have moved into the Opportunity Zone specifically in order to attract opportunity fund capital. There’s another group of operating companies, it’s less fintech and more, kind of, along the lines of traditional manufacturing and some other innovation type stuff, but they actually set up a full campus and an innovation campus out in Provo, Utah to haul labs guys. And they are probably gonna be one of the first public IPOs, you know, companies to go public with an electric vehicle manufacturer. And it’s been really cool to see the level of interest in, you know, folks that were really fired up about getting involved in that deal.

Scott: Right. Well, if you think about it too, I mean, you know, everybody’s out there, certainly investors, they love to find those unicorns. I mean, can you imagine if you were, you know, an early-stage investor in whatever, Stripe, or something like that, and it happened to be in an Opportunity Zone, like, wow.

Ashley: Yeah, exactly. So, think about all of that upside that comes out tax-free. When you’re looking at that, and you’re either a fintech or a venture capital firm or private equity, and you’re looking at the potential upside of that, and paying zero taxes on it, I mean, it’s like, why would I not do that? If I don’t have any restrictions relative to my location, why would I not try to go down the road of the Opportunity Zones?

Scott: Right. So, okay, we’ve talked, and I think we’ve really outlined, hey, this is a huge thing. It’s a big deal, there’s a lot of excitement, but then there’s this question of, yeah, you do have to navigate some of this in order to set up an Opportunity Zone fund, do things the right way. You co-founded OZPros, which helps folks out with this. Can you tell us a bit more about what you do, who your customers are, kind of, where you fit into the ecosystem?

Ashley: Yeah, absolutely. So, we actually originally set up this software to do M&A transactions for Main Street America, to be able to have a flat fee price to where folks could get their merger, their acquisition, or whatever it was, done. And we repurposed that software so that we could create opportunity funds and Opportunity Zone businesses. And we were originally doing it, kind of, on a legal Zoom model where you could do it yourself. And the challenge was, is that there’s so many, kind of, nuances to the ins and outs of it that we put together an educational product, and we put together lots of videos and that kind of thing, but there’s just something about being able to talk to somebody and to get your questions answered.

So, that’s where our firms evolved into is this strategy call and informational process to where people can call us and they can get to the bottom of Opportunity Zones really quick. And we can get them up and running, if we’re doing it bespoke, it’s about 10 days and it’s for a bargain rate where, you know…so we charge $6,000 bucks whereas if you go to a white-shoe firm, you’re gonna probably spend close to $50,000. And so, we’ve really kind of differentiated ourselves in creating these things so that, that way, you know, folks that are doing startups and the folks that are the backbone of America’s economy can take advantage of this program too. That’s what we were passionate about. Let’s put this into the hands of everybody out there so that everybody can take advantage of this and be on equal playing field.

Scott: I love that. And also, if you think about it, what’s the nightmare scenario if someone were to set it up and they didn’t get the right form in, or something was a little screwy and then they miss out on that, or there’s a problem, you want to avoid that. And so, I think going to folks like yourselves who have that expertise and can say, “Hey, here’s how it is. This is what it’s all about, and here’s the pitfalls to watch out for,” that makes sense to me. Why wouldn’t you wanna try to do something like that, right?

Ashley: Yeah. And particularly with how accessible the cost is. So, that’s what we wanted to do. We wanted to give people really good professional advice, walk them through how to do it, walk them through where the sleeping dragons and crouching tigers are, and then give them some ongoing assistance as well, so that, that way, they can get their questions answered.

Scott: Absolutely. We were talking a bit about location, and one of the nice things with so many of these fintechs and payments businesses is, it’s online. They don’t need to have necessarily a location in a specific area to run their businesses. But then I think there’s also this, anytime you’re talking about tech startups and things like that, they wanna be near some level of action. They wanna have some potential attracting of talent and things like this. They wanna be, maybe, near a financial center or something like that. Are there Opportunity Zones near these types of places, even if they’re not right there in Manhattan, so to speak?

Ashley: Yeah, absolutely. And it’s funny is that there’s actually a number of Opportunity Zones in Manhattan, and Brooklyn.

Scott: So, there you go.

Ashley: And Queens, right? I mean, they’re all over the place. And it’s kind of a misnomer that people think, “Wow, well, Opportunity Zones are…you know, they’re just in, you know, out in the middle of nowhere,” that is definitely not the case. There’s fantastic Opportunity Zones that have great real estate, and they’re just in areas where for whatever reason, they have shown on the census tract as being low income. And so, I think that there’s certainly a place in almost every major city to where it’s fairly close to right near the financial center to be able to do this stuff. So, I live in Charlotte and it’s a major financial center, and there’s an Opportunity Zone that’s, like, two minutes from downtown, and I know that there are a number of fintech guys that are doing work there, you know, working in conjunction with the big banks here.

Scott: Right. And then there’s the other side too, that there’s lots of real estate activity, right, with Opportunity Zones. And if you think about whether it’s a multifamily building or something like that, where investors are really interested in, “Hey, how can we get a class A property, you know, up here,” and have something where now you’ve got a great new tech firm or a fintech, you’ve got some attractive housing options for the workforce, I mean, you’ve got a lot of interesting things happening, right?

Ashley: Absolutely. And that’s a great part about this is that it twines the two, right? It twines real estate with operating companies, and it allows you to go back and forth and to get really flexible with how you combine those or separate them out. There’s lots of flexibility there.

Scott: So, and I think we’ve been touching on this, but I really wanna underscore this because many folks in payments in fintech are really interested in the exit potential. For payments companies specifically, they may wanna build a portfolio and then get acquired. For the fintech, they may want to develop that next great app and then have, I don’t know, Bank of America pull up with a briefcase there and say, “Hey, we’ll take that.” Is there a window where you really need to hold to see the benefit for Opportunity Zones? Can you speak a bit more to the timeline, in general, for folks hoping to take advantage of this kind of thing that they should be aware of?

Ashley: Yeah. So, 10 years is just the magic date. So, it’s 10 years from the date that the cash comes into the fund. You don’t actually have to hold the asset for 10 years, but 10 years from the date that the money comes into the fund is when you actually get all of the beauty of this thing. And so, inside of that, it might be a little bit of a longer hold for folks that are, I guess, more used to a shorter timeframe than that. And so, one of the things that we do in order to mitigate the length of that is that we couple in Opportunity Zones with the 1202. And so, your QOF can hold interest in an LLC or a C corporation. And so, we typically set up the QOZB as an LLC, that we can then convert to a C corporation later on when it starts making money. And then what that allows them to do is it gives them a bit of a mitigator on that 10-year hold to where even if you exit under the 5 years for the 1202, you can roll that into another 1202 company within 60 days, and then you can effectively continue to 1031 that until you get past the 10-year hold, and then be able to exit. So, by marrying a couple of provisions of the tax code, we’re able to really position companies to give them the maximum amount of flexibility.

Scott: Right. And how attractive is that? That’s awesome.

Ashley: Yeah.

Scott: So, I’m curious because we’re a show, we talk about tech and things like that. If someone wants to learn more about Opportunity Zones, find out where they are, look into the process, are there apps, online services, both including and outside of OZPros, of course..?

Ashley: I was gonna say,, baby.

Scott: That’s it. Yeah. I’m just curious about what’s the tech side of Opportunity Zones and just kind of figuring all of this out and, “Hey, this can help me out. I know that there’s one here. I can look this up.”

Ashley: Interestingly enough, there was one group that…and I think they’ve turned their map and they’ve gotten it back up and running on the Apple phone. I’m an Android guy, and so I bought it originally, and then it went out literally, like, I had the app that had the map on it and that kind of thing. And then it just literally stopped working.

Scott: Ah.

Ashley: So, then I guess somebody bought it and then they re-upped it. And so, they got it back going for Apple, but it’s still not back up for Android, which is actually really frustrating because when I’m looking for a space, I have to go online in, that’s That’s got an excellent big picture map that you could pull up on your desktop or even pull up on your mobile, but it doesn’t have the location on it. And so, I really miss having that ability to be able to pull up where I am specifically, to say, “Okay, am I in a zone right now?” And that would actually be really cool to see somebody get back into that and to maybe roll one of those out. And I think that part of the reason why there hasn’t been as much app development, if you will, is because of the perceived limited window of time that was out there relative to the program because it times out in 2026 that people said, “Well, I don’t know. I don’t think there’s enough time for us to fool with.” And then by the time it really started getting going, everybody was like, “Well, I’m gonna wait and see,” right? So, for whatever reason, I don’t think that we’ve seen the level of app development in that kind of thing inside of the space, specifically for the players in the space that you see in some other things. So, I’d love to see some other folks dip their toe into the water because we could use some app development.

Scott: Absolutely. There’s a good idea there, so if you’re listening here and you’re looking for a good idea, there you go. Just let us know, we want a piece of it now.

Ashley: Exactly. Well, they tell you, “Well, I’ll charge you 10% for that,” right?

Scott: Yeah, exactly. Yeah. So, I think this is actually a really great segue, because I always like to look to the future as we kind of wind down our discussions here, when you peer into the crystal ball, Ashley, what do you see in the future for Opportunity Zones themselves, the program, and for OZPros?

Ashley: Well, I think that we’re gonna see some legislation. I think we’ll actually see some bipartisan legislation probably after the midterms that is going to try to extend the program. So, the different folks who are, kind of, inside of the Opportunity Zone space that I work with, like, our wishlist, is that we would get it extended out for another four years. And so, it would make it so that anybody that’s in by 2021 would get the full 15% step-up in basis, not just the 10%. And then you’d get an extra four years on the deferral of your taxes all the way until 2030, instead of 2026. And then we’d also like to see that permanent step-up in basis to be permanent as opposed to it going away in December 31st, 2047. So, I think that we’re likely to see some of that. I also think that we could see as part of that legislation, removing any non-low-income census tracks, which I think would actually be good for the program.

And then as it relates to OZPros, we are really focused on trying to help people continue to do deals and specifically to continue to expand into the operating businesses and to help the folks that are looking to do fintech and startups and that kind of thing to take advantage of the program. So, we’re actually probably gonna end up doing, like, a nationwide tour where we do some different informational workshops and get-togethers, that kind of thing. We’re really bringing a bunch of people together to really blow this thing out of the water. We’re bringing investors, stakeholders, government officials, and that kind of thing together, and taking advantage of the community that we’ve built between OpportunityDb, and Jimmy Atkinson, and the OZworks Group, and some of the other fantastic players in the Opportunity Zone space.

Scott: It’s gonna be exciting to see. And I do hope that some of these extensions happen and there’s lots of these considerations because it’s just so obvious what, sort of, win-win this whole program has created across so many different areas.

Ashley: Yeah, absolutely.

Scott: All right, Ashley, we have a segment we like to end with on each and every show. It’s five questions, they’re coming rapid-fire. Are you ready?

Ashley: I’m ready.

Scott: Make a prediction about the future of Opportunity Zones that you expect will happen in the next 12 to 24 months, so, real soon.

Ashley: I think it’s gonna get extended.

Scott: What’s one cool piece of payment or finance-related technology you’ve come across recently that impressed you?

Ashley: It’s actually called HEXACO, and it’s an app that allows you to get to HEX a lot faster.

Scott: In the next five years, most people around the U.S. will make a purchase with either Bitcoin, Apple Pay, Google Pay, some other thing, which one, and why?

Ashley: I actually think that it’s probably gonna be something like HEXACO or something or, like, along those lines, that will be some type of rewards type cryptocurrency, that you’re gonna be using that all the time because you’re gonna get so many massive crypto rewards.

Scott: What’s one piece of advice you would have for someone who’s considering an entrepreneurial career, maybe, starting that next great fintech.

Ashley: I think that the best thing to do is to really count the cost and to talk to as many people as possible about your idea, and to get them to assist you in flushing it out about what your market is, what the scalability of it is, how difficult is it gonna be, how much buy-in are you gonna have to have from different people. All of those different factors can be things that can really, really, really, you know, sideswipe you. And so, getting some sage wisdom from people that have been there before is invaluable in being able to short circuit some of those pain points.

Scott: Last question here. What’s the best business advice you’ve ever received and from whom?

Ashley: Man, that’s a tough one on that one.

Scott: I always end with the heater.

Ashley: You know what? It’s actually probably from my wife, she said, you be the kite and I’ll be the string. And so, every time I’m thinking about doing a deal or every time I’m thinking about getting crazy with one of my business ideas, or exploding something, or that kind of thing, I go to talk to her about it. And if she’s like, “Okay,” then I’m like, “All right. Let’s run with that.” And I know that there’s gonna be that perfect tension between kite and string, and then I’m not gonna fly off into the ether and she’s not gonna drag me into the dirt. So, it actually ends up working out really well.

Scott: I love that analogy. I think that is something to consider. Ashley, thank you so much for joining me on the show today, sharing your insights, your knowledge about Opportunity Zones, and the exciting things you guys are doing over at OZPros. And once again, if folks wanna find out more, maybe see how you guys could help them, where can they do that? Where should they go?

Ashley: Yeah, And we’ve got videos. We’ve got information. We’ve got the Opportunity Zone cheat sheet that’s there, that they can download, and we’ve got all kinds of other resources, and we’d love to help you out.

Scott: Awesome. Thanks again, Ashley.

Ashley: Thank you.

Industry Spotlight

OZPros was started to streamline the Opportunity Zone education, strategy, formation and ongoing compliance process. With over 600 strategy calls and over 500 Opportunity Zone entities formed, OZPros is a national leader in helping people with capital gains harness the generational wealth creation opportunity of one of the best tax incentive programs ever created. Set your strategy call today with one of our OZPros and let us help you launch your Opportunity Zone dreams!