Jessica:I lived for two years in a country in west Africa, in Burkina Faso and lived in a little village. Um, I mean, I had no running water. I had no electricity. It was, I was out there. The people who lived in my village, who all can, I took care of me and adopted me. They, they, they had so little and yet they shared it all. 
Announcer:You've never run into a tax attorney like Jessica Millet. Her experience as a Peace Corps volunteer in west Africa was an unlikely stop in her career path. Yet it's informed her choices in life and in work. That's one reason why she's such a passionate and skillful advocate for the Opportunity Zone program. And why she's so dedicated to seeing it succeed? Jessica Millet is our guest on this episode of the OZExpo Podcast, 
Announcer:Welcome to the OZExpo Podcast where we talk with the people who really know the Opportunity Zone market. From investors, fund managers and developers to tax experts, politicians and attorneys. The most influential voices in the Opportunity Zone industry are here on the OZExpo Podcast. 
Jack:Welcome back everybody. To the OZExpo Podcast. I'm Jack Heald your host. And joining me today is Jessica Millett who is a tax attorney and a partner with the firm of Duval & Stachenfeld. Jessica, welcome to the OZExpo Podcast. 
Jessica:Thanks. I'm glad to be here. 
Jack:It's good to have yet. You are in New York, Manhattan, I guess. 
Jessica:Yeah, Yup. Our office right here in midtown. 
Jack:All right, very good. So, I always like to find a little bit more about the person that I'm talking to. So, tell us about Jessica Millet. Who are you, where'd you come from and how'd you get here? 
Jessica:Okay, sure. Um, so, uh, as you mentioned, I'm a partner here at Duval & Stachenfeld I'm cochair of the tax group. Um, I, I didn't grow up too far away. I grew up in New Jersey. Jersey girl, um, and kind of went to school down in Baltimore at Johns Hopkins. Um, took a little bit of time off before going to law school at Duke University down in North Carolina. Um, I actually started my, my tax law career, um, with Linklaters magic circle firms based in London. And, um, I moved over to Duval & Stachenfeld, um, I guess about seven years ago with my partner Steven Land to start the tax practice here at Duval & Stachenfeld, and it's a Duval & Stachenfeld is a real estate firm through and through and before we showed up, they actually didn't have any tax flourish. Uh, they just outsourced everything. Um, so I think it was, it was really helpful to the firm to sort of have an in house tax team, uh, cause real estate of course, is so, so tax sensitive in certain respects. Um, and it was, it was fun for me to come here and really just start, start the tax practice from the ground up. Um, and when the Opportunity Zone legislation came along, it was, it was kind of a slam dunk. Right? 
Jessica:It's a, it's true tax, it's a tax program and um, at least the initial wave of all the investments for sure. Ours have been so real estate focused that, um, I mean the firm right now we're just, we're swimming in Opportunity Zone and work, which is, it’s great, yeah, 
Jack:I can imagine. I want to know about your BA at Johns Hopkins. What did you study? 
Jessica:I majored in international relations. 
Jack:You know my daughter did that. My oldest daughter got an international relations degree. I have no earthly idea what that actually means. Now she lives in Switzerland. So maybe that's what it means. It was how to live in another country. 
Jessica:The cross or the international stuff always seemed so fascinating to me. You know it's great I do a fair amount of cross border, the international relations degree and what that translates to. 
Jack:I don't know what it translates to either. Then you ended up in London where London did you live? 
Jessica:Well, uh, I was actually based here in New York. like there's has an office here in New York, but I did spend a fair amount of time in London and going back and forth and I had a couple stints there where I was living in London for three, four or five months at a time. Um, and I think my favorite area was Essington, um, it was, you know, it was a little bit, a little bit further out, a little bit more interesting than the center of London. Yeah, Europe is, Europe is a lot of fun. I don't know what's going to happen with Brexit, but I guess that's a topic for another discussion. 
Jack:Yeah, that's another discussion. I lived in London for about 15 months. It's strange. I've lived in a lot of places. I'm an American through and through Oklahoma, lived in Texas and London felt like home. It was the strangest thing. 
Jessica:Oh wow. 
Jack:So, from, from Johns Hopkins, you ended up, you did something interesting in between. Tell us about that. 
Jessica:Yeah. I graduated from Hopkins, uh, not really sure what I was going to do with my life. I didn't know what I wanted to be when I grew up yet. I actually joined the Peace Corps. I was a Peace Corps volunteer. I lived in a country in west Africa called Burkina Faso. Which a lot of people haven't heard of. It's in west Africa. Just north of Guiana, [Inaudible] Completely landlocked. So, we like to say there is a lot of beach but no ocean. 
Jack:Yeah, I have that here. I'm in Phoenix. We've got all the beach you want. 
Jessica:Yeah, exactly. Um, yeah. So I was there for two years, which was just a transformative experience. 
Jack:Okay. Yeah, I can imagine. So, what did you do there? 
Jessica:My, my primary role there was to be an English teacher in the school, in my, in my village. I lived in a little village. My village was the, on the main road. It was. If you kind of think about middle of nowhere, um, when you see those pictures about Africa, um, I mean, I had no running water. I had no electricity. It was, I was out there. Um, but you know the people, In my village, they just, you know, they adopted me. They took care of me. Um, I, I lived in a little house that was sort of in a little compound with a family and they took care of me.  
They were very protective of me. If anybody tried to come and see me and they didn't know who the person was, they stopped them at the gate of the compound and kind of ran them through the inquisition trying to find out who they were and why they wanted to see me. Um, but um, yeah, and I was the only, um, I mean, forget about the only America I was the only, I was the only white person around for miles. So it was very, I was under a microscope all the time. If I left my little house to go to the market, all these people would be following me. What's, what's she doing? Oh, she's going to the market. Okay. Everybody knew where I was. 
Jessica:So they speak French. French is be, I'm sort of a, the, the, the, the official language. There's a bunch of different dialects. And in my village we spoke something called [inaudible], which I used to know enough to get by. But at this point it's been, um, many, many years since I've had to use it. So I'm, I'm, I'm a little rusty, say the least. 
Jack:All right. I've got to drill down deeper into this, because this is really interesting. How did that experience change you? I know it was transformative. Just give us some tastes. What, what kinds of things did it affect in your life? How you live today? 
Jessica:It gives you a lot of perspective. Very, very easy to get caught up in the day to day and to get annoyed about something or mad about something. But if you think about, you know, in this country, you know, even in some areas of this country that are, that are less well off and more in need of Opportunity Zone investments, um, you know, we still, we have so many opportunities in this country. Um, we, you know, I was living with a family. There were no toys, forget about toys, not toys.  
Um, you know, and so the okay, we take for granted so much. Um, and you, you, you, the thing that is probably the most impressive is that, um, you know, the, the people who lived in my village who all kind of took care of me and adopted me, they, they, they had so little and yet they shared it all. Um, you know, they would invite, if you were walking past somebody's house, they would stop and they would invite you to come and sit and eat with them. 
You know, they just were so genuine, um, and so and so warm. And you know, if you take away a lot of that material materiality, um, you just find it, you know the people, right? It's just people. It's about being nice to people and getting to know people and look, and obviously that's a little bit of rose colored glasses, but, um, just the, the attitude over, um, and just the warmth and friendliness people, you know, in a sense, that's all you have, right? All you have is your family and your friends. Then you have to take care of them. Um, and, and they do. They really do. 
Jack:It reminds me, in an oblique way, I guess. I lived in Texas for 18 years. There are few places on the planet that are less hospitable to human life than the environment of Texas. I've written about every, every Earth Day I publish my article about what life is like in Texas, because mother nature is not your friend in Texas. Mother Nature wants to kill you seriously. But on the other side and literally everything, the air, the dirt, bugs, the plants, the animals, the, whether it's utterly inhospitable to human life. But on the flip side, the just in general, the nicest people I've ever met are Texans.  
And I think it's related, I think privation and difficulty, um, on a, on a broad scale somehow promotes, you know, trying to make life easy for each other and for ourselves by, by that kind of human interaction. I'm not, I could be wrong hardly a sociologist, but, fascinating. Okay. So, and, and, and jump forward here a dozen or 15 years and now you're a tax attorney in Manhattan, I guess you could hardly make a bigger. . . 
Jessica:Yea. It's been a kind went from one extreme to the other I suppose. Okay. When I came back from the Peace Corps, I sort of, I had a focus on international law and I knew I wanted to drill down and study that. And someone said to me, well, if you're going to study international law, you should go to law school. That's a great idea. Why don't I go to Law School?  
When I was in law school, that, that's when I really found my love of Taxa. Um, from the time I took my first class, I was, I was mmm. So interesting and everyone gave me like a sideways look. But, um, you know, I find tax law. It's very analytical. It's problem solving. It's puzzles, you know, I need to get from here to there. You know, what, can I move right it well, can I change the facts? Okay, well those facts, we can't move. Those are the actual. That already happened. What can I change going forward? Or how can I, how can I look at this in a different way? 
Jessica:Or, you know, it's, it's making, um, figuring out how to get from, from, from here to there. Um, and it's, it's a process and it's something that I find fascinating. So, um, you know, the statute in the regs and we can talk about all the technical stuff and it drives some people crazy and including me some days. But, um, I, it's fascinating to me. I'm like, this is so interesting, right? Because if the rule is this and what about that? And you have to look about that. Oh, and don't forget, there's another rule over here. And you know, tax law at this point, it's just so massive and complicated, you know, quite a brain teaser. 
Jack:I haven't thought of it this way, but the picture that comes to mind. You are the kind of person I say, "Can I do X". You say "Yes". And then I say "How?", and you say, "Let me figure that out". A positive and interesting and exciting approach. That's the flavor you're giving me here. So now I'm going to a technical question or technicalityBecause this is not really me but pretending here. So, I want to, I want to form a Qualified Opportunity Fund. What have I got to do? 
Jessica:To form a Qualified Opportunity Fund? You mean to form the legal entity or the requirements for it to be good QOF? 
Jack:I come to you I say, "Jessica I think I want to do this, guide me." 
Jessica:So, I would start fact gathering. I would say, okay, well who are, who are you? Are you doing this yourself or are you having other people invest with you? Um, do you have the right Jane's? What was the timing of this gains? What are you going to do with the money? Do you have a project that you're looking for a project. 
Jack:Yeah. Let's, let's consider the two different, the two different big categories on a completely different direction. I've got kind of a blind fund that I know eventually I want to get into different projects, but so talk about those two things and then guide me as a, as a complete bozo who doesn't know what I'm doing. I'm not asking you to give away work. 
Jessica:Let's talk about the project specific son first because those are the ones that, um, even though there's still some fair number of questions about certain aspects of the rules, that's one that I can get you from here to there. So if you are setting up a project specific QOF, the first thing we have to, there's the two sides of the equation, right? It's like, well, what about the money, right? What kind of games do you have? Do you have the right kind of eligible games to invest in a QOF?  
And to focus on that for just a second. Um, you know, there's one of the reasons why I think the Opportunity Zone rules are so vexing, um, for some people. Is that right? There's different rules and different timing requirements, every level of the structure. So to start up at the top with a, with an investor, right? If you want to be an investor in a QOZs, um, I like to save it. Everyone needs an entry ticket, right? And your entry ticket to the Opportunity Zone program is having the right kind of eligible gain. Um, you can come in if you don't have the right kind of game, but you know, you don't get any of the benefits right. But we, we don't say you can't come in but you're not really going to have so much fun. 
Jack:Let me ask you question real quick. Cause I've had a, I've had several people asking me this question when I've told them about it and I simply don't know the answer. Suppose I get into a fund but I'm not putting in a capital gain. I know I'm not eligible for the step up in basis. Um, after the five and the seven-year thresholds. But what about the 10 year? Uh, uh, 
Jessica:Nope. The tax benefits, they come in a bundle. If you invest the right kind of eligible game, then you are, you are eligible for the full suite of tax benefits. It's a regular investment. They're all or nothing essentially. 
Jack:I didn't realize that. Good. Okay. 
Jessica:So, yeah. Yeah. Um, and you know, we can get into some of the nuances about the different 180 day periods. There's some new rules in the most recent regs that apply to 1231 gains, which the tax community is kind of getting all in a flutter about. Um, but if we assume that you have the right, 
Jack:I'm sorry, I've got to stop you. The tax community getting all in a flutter about. I have this image that triggered this image in my mind, 
Jessica:Of these tax attorneys running around wringing their hands. 
Jack:Yea. Yea I'm sorry. That one's kind of amusing. Carry on. 
Jessica:I can go into the substance of, I'll just leave you leave you with that image it will probably amuse you later. If we assume that you know, you have the right kind of gains in your, have the right timing, you know, you have to invest your gains into a pop had Opportunity Fund and it's your last can be either a partnership or corporation for tax purposes cannot be a wholly owned LLC. So you could, I essentially have a QOF of one if you want it to do that. If you had a bunch of money and you didn't want anybody else to come in, but you need to do some structuring to make sure the QOF was still a partnership for tax purposes. 
Jessica:Now, once you have your money in the QOF, the, there's to be two basic structures that were kind of outlined in the code. First one is a single tier structure or the QOF owns the property directly. 
That's not a very user-friendly structure because the asset test at the QOF level, it's a strict 90% asset test and that test has to be met every six months and no wiggle room, right. And cash is a bad asset. Um, there's a little bit of flexibility. They threw it in with the most recent round of regs.  
You have a little bit more time for the QOF to invest recently contributed cash before it really becomes a problem. Um, and can jeopardize the 90% asset test, but it's still a 90% asset test. You don't have any, any other flexibility there? The better structure, the one that I think everybody is using a is what we call the two tiered structure and under the two tier structure, the QOF invest in a lower tier partnership or corporation. But mostly we're seeing partnerships. Um, and then you have that lowered to your partnership, that joint venture, JV entity owning the property. 
Um, and in a typical real estate JV, you know, you've got a money partner developer. So here basically QOF would be no money partner. Um, and that, that's really how we're seeing those deals, um, being structured at this point. Um, and the, I mean, that's a single asset QOF. Um, to talk for just a second about the, you know, the, the commingled funds, the blind pools, um, I don't like those. Um, and I don't like them for a couple of, or a couple of reasons. The first one is, you know, I think it's pretty difficult to get all of the pieces lined up with respect to the percentage asset tested every level and the timing requirements at each level. It's hard enough to do that with a single asset. Um, but now all of a sudden you got multiple assets, you've got things being developed at different times. 
You've got a bunch of investors. I mean it's, I mean, yeah, it's a ton of work for the lawyers and the accountants that needs to figure it all out. I just think in practice it's going to be very difficult to do. Okay. That being said, you know, I do have clients who want to accomplish something like a commingled fund structure. Um, and there there's a couple different ways you can get there.  
The first one is to, to really have a true commingle fund. You need to in that instance, have the Qualified Opportunity Fund be set up as a REIT Real Estate Investment Trust to facilitate some of the issues that happen at exit when you're trying to, to sell and get out after 10 years. And we can talk about those. Um, but the other structure that we're seeing that commingled fund structure is people have different names for it, but we're calling it, you know, a master subscription facility. 
And the way that works is that you, you know, you go out, you find the investors, investors find subscription agreements and say, okay, I promise I'm going to give you 10 million, 50 million, $100 million, whatever it is, you tell me when you need it. And then if you're the sponsor, you go out, you look for deals and if you find a deal, you call capital from your investors and you invest, you put them into essentially put them in single asset QOF. 
Jack:That makes sense yea. 
Jessica:You have these sort of siloed QOF and you, but you have the same investors in each deal. Um, and that, that's kind of the way right now to accomplish that using partnerships. Um, it's a little bit tricky because you know, cross promotes don't really work so well in that structure because you really want to have the separateness of each structure and be respected. Um, but you know, people are trying to come up with ways to, to, to accomplish the same results. And um, you know, again, complicated, but you know that's what we're here for. 
Jack:That's why your there. 
Jessica:You tell me where you want to get to, and I'll get you there. 
Jack:I really liked that. Real estate obviously has got the bulk of the attention with the OZ program, but there's another side of it that frankly I think is key to the ongoing success. And that's the operating business side of things. Um, talk a little bit about that. What do you see in there? 
Jessica:Yea, so we were all left in the dark for quite a while, until a couple weeks ago with the release of second rounds of regulations about how operating businesses could really take advantage of these rules. You know, we knew the rules were coming, we knew that the government wanted this to work for both real estate as well as non real estate. Nobody really knew how that was going to happen.  
The regs that came out a couple of weeks ago, shed a lot of light. Are now giving people the pieces that they need to move forward on operating business type investments. And um, on paper the rules look really good. Um, you know, we're just now starting to try and apply those rules to real facts and help people move forward on those. Cause we've only had the rules for a couple of weeks. And as that happens, you know, I'm more of the, the, the issues and the questions are going to bubble to the surface. But on paper the rules look pretty good. Um, and more important than kind of facilitating these types of structures and investments for clients. 
I am, I'm really, really happy that they came out with some, some workable rules for operating businesses. And this is why, you know, you're right that the real estate side of this guy a lot of attention out of the gate. Um, and that's great. Most of most of my clients happened to be real estate clients that everybody's very happy. But you know, this is a political program. There's no way around it.  
People feel strongly about it one way or the other typically. Um, and while there's been a lot of support, um, on, on the right side, right from the Republicans, um, you know, a lot of Democrats are and people are more left leaning, have been attacking the program as just a, it's a tax break for people who don't need a tax break and it's gentrification and you're going to do all this new development, you're going to push people out. 
Um, and I think personally, the key to really winning the hearts and minds essentially of, uh, of all of the skeptics out there is the operating business side of this. Because if you think about that, the policy of this program, it's to encourage investment in these designated Opportunity Zones and well, the real estate, you know, yes, the real estate is good. You know, you can't, it's, it's helpful to have actual buildings and things there for people to live in and people to work in and all the rest of it. That is really what's been fueling a lot of each gentrification concerns.  
Um, but if you think about an operating business, if you started a new operating business in the zone and you meet all the requirements, you're now bringing new economic activity into these zones, right? People who come and work in that business, in that new office that you set up, they're going to need to go out to lunch. They're going to go get coffee, they're going to stop on the way home and buy something like that is really what's going to drive. I think all of economic activity that is supposed to happen with this program. And so, I think that is really the key to making the program really thrive and succeed on a long-term basis. 
Jack:Difficult social engineering I guess is probably the right phrase for it. It's kind of like pushing on a rope and yet it's about the only tool that we have at the policy level. And honestly, you know, in 35 years of watching public policy, this is one of the, one of the better ideas I've seen come along. It's still gotta, it's still got to deliver, no question about it, but mmm. It seems like it's, you know, it's, it's pointing in the right general direction. 
Jessica:I certainly hope so. 
Jack:Well, let's talk about, let's talk about Jessica Millet the person. Um, so with, with this kind of puzzle solving mind, uh, what do you do for fun? How do you relax? 
Jessica:Let's see, I have two little kids at home. 
Jack:I asked how you relaxed. 
Jessica:I spend a lot of time building Legos, I'm excited that summer is coming. Cause in the summer we spend a lot of time at the beach. We drive out to long island and we, um, you can get a permit to actually drive on the beach if you have a four wheel drive car. Um, it's technically the permits for fishing and other things. Um, and it's, it's just, it's so beautiful up there, just like drive around the beach for a little bit, hang out. Um, so I'm excited for summer. Summer is great. Um, but um, yeah, it was not, you know, I, I like hanging out with, we've got a dog, two kids, me and my husband, we like to like to cook. We like to hang out go to the beach in the summer. So we're, uh, whenever I can get, uh, get home and get out of the office, you know, I've got a fun little family waiting for me 
Jack:Are you a problem solver in the kitchen. Are you good at cooking? 
Jessica:Yeah, I love to cook. Um, you know, at this point I just wish I had more time for it. But whenever I have time, like on the weekends, usually I'll take a day, I'll kind of pick, I'll have like one cooking project for the weekend. 
Jack:Oh yea? 
Jessica:And I'll cook something and then not, you know, kind of, which was helpful during the week when you get home, you're like, what's for dinner? I don't know. 
Jack:What's your favorite thing to cook? 
Jessica:Yeah, well I started cooking by doing a lot of baking. Um, and so I still, especially now with kids, that part's easy. Right? They're always happy to help you to help you. My husband's favorite thing, he always asked me to make it as those, those peanut butter cookies that have the Hershey kiss in the middle. Um, so whenever I, they're kind of a pain though. I care a lot of, there are a lot of work.  
There's a lot of steps and you've got to stick to Hershey kiss in and all that. And whatever, it's not that hard. But um, you know, whenever I make a batch of those, they do not last long between my husband and the kids, you know, cookies tend to disappear pretty quickly. Um, but you know, non baking aside, um, you know, unfortunately I'm not too adventurous with different ethnics food tried. I has not been very successful with it. Um, but I tend to do, um, yeah, that's nothing, that's nothing too complicated. Um, so I probably, I guess I have most success with the cookies and things like that. 
Jack:Are you a cast iron aficionado?`` 
Jessica:We have two cast iron pans. Um, so we, we, we, we have some, some gear that we tend to, to bust out and use every now and again. Um, but some of the stuff that I was like, I'm going to buy this, I'm going to use it all the time. I'm sure I have like a gazillion appliances that are just collecting dust. 
Jack:Oh, my daughter in law loves being in the kitchen but she also likes buying gadgets. She's got more gadgets. I don't know how to shake a stick at. I basically, if I found a chef's knife, a cutting board in a skillet, I'm good cast iron skillet. Um, all right. So, it's time for me to ask my favorite question. This is, this is the one everybody enjoys answering. It reveals far more about you than you may. You may suspect, put on your imagination hat you get to be queen of the world for a day. All right? You get to solve one problem and one problem only during your one-day rein. What's that problem you're going to solve? 
Jessica:Oh boy. Does this get to be like a huge global problem? 
Jack:Hey your queen of the world, you get to pick. 
Jessica:I would really like to try fix some of the inequality. I think that a lot of times things are stacked against people in an unfair way. Um, you know, right now there's a written article at some point in your, a couple of weeks ago about the rungs of the social ladder. A lot of people have been able to climb up historically. You know, they're getting further and further apart. It's really hard now for people to climb that, that social ladder of mobility. Um, I mean, I grew up in a family. I am solidly in the middle class. Um, and you know, I was able to go to Johns Hopkins for Undergrad. I would be able to go to Duke for law school. I was able to, to, to do those things and to set myself up for a successful career. Um, and I'm just worried that that's harder today for kids that are growing up. Um, I'm worried that they, the opportunities are harder to come by. Um, so that's disappointing to me because I think that's what I truly think, you know, going back, no, I think that America, people who live here so many opportunities, right. Um, and they're, they're getting harder to access and that's what making this country, um, a little bit fragmented right now I think. Um, and so if I could fix one thing, I would, I would love to just put people on more of an even ground if I could. 
Jack:Good answer. We'll Jessica. It has been a delightful conversation. I appreciate your time today. Any last words for our listeners before I let you go? 
Jessica:Um, I guess I would just say, look, I think that the Opportunity Zone program is most fascinating. I mean, from a technical tax side, for the tax speak. Yes. Um, but also just the, you know, you're right. It's just a social, um, I don't know that experiment is quite the right word, but you know, as, as a program that really is intended to drive economic development, um, I think it's an amazing program. It has a ton of potential. Um, and I'm really excited to be part of it. Um, and you know, really excited to see what happens over the next couple of years. 
Jack:All right, well if folks want to get ahold of a hold of your firm, what's the best way for them to do that? 
Jessica:Sure. So, um, our firm is called Duval & Stachenfeld over in New York City. Um, and you can, you can just sort of Google us and look us up. Um, I'm pretty easy to find. We're a small firms. If you look at the tax group out of there aren't too many of us, you'll find me. 
Jack:All right, very good. And we'll provide that contact information on the podcast website as well. Well for Jessica Millet, I am Jack Heald of OZExpo Podcast. I appreciate you taking the time to listen to us today. Be sure to hit that subscribe button so you get all of the episodes on the OZExpo Podcast. We'll talk to you next time. 
Announcer:This podcast is for informational purposes only and does not constitute legal tax or investment advice or specific recommendations. Please consult with your financial, legal, or tax professional. 
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