In this episode, host Kristin Hayes is joined by Andy Rankin and Dave McGimpsey—both partners at Dentons, a global law firm—to explore how an overlooked tax policy in the One Big Beautiful Bill Act can spur clean energy development, to the benefit of both local communities and companies. Despite recent rollbacks of solar and wind energy tax credits, Rankin and McGimpsey insist that newly expanded Qualified Opportunity Zones (QOZs) provide ample opportunity for energy developers to gain a solid footing in project financing and equity growth. Unlike the original 2017 iteration of the QOZ program, new adjustments ensure that QOZ tax benefits have no sunset date in sight, hinting at a new dawn for renewable energy build-out.
Listen to the Podcast
Audio edited by Rosario Añon Suarez
Notable Quotes:
- While one tax credit ends, another tax credit opens: “Losing those tax credits is bad news. There’s no two ways about it, but the point of our article is maybe there’s a silver lining—maybe there is something new … When these targeted tax credits go away, look for something else. This Opportunity Zone program is that something else.” —Andy Rankin (13:01)
- Incentives go to the people doing the work: “The good thing about this law is that it wants to focus the benefit on the people who are operating the business and making it go every day, be it a manufacturing business, be it a distribution business, or be it an energy business. If you are the tenant under a lease, but you’re on the ground in this zone, and it’s your project that’s operating, the law says you get the benefit. That’s what’s great.” —Andy Rankin (15:02)
- Moving on and looking ahead for long-term benefits: “Right now, everyone has their head down trying to make a mad dash to get into the safe harbor so that they can qualify for those existing tax credits. But if they look up and see what’s coming and the opportunities available in the Opportunity Zone program, they will be able to set their own development and clean energy companies up for success in the long term by seeking out these new sources of capital.” —Dave McGimpsey (21:41)
Top of the Stack
- “The Qualified Opportunity Zone Program and Clean Energy: A New Era for Natural Gas, Solar, Wind, Energy Storage and Nuclear Projects” from Dentons
- George F. Will op-ed writings
- “The Water Values Podcast” with Dave McGimpsey
The Full Transcript
Kristin Hayes: Hello and welcome to Resources Radio, a weekly podcast from Resources for the Future (RFF). I’m your host, Kristin Hayes. The idea for today’s episode started at an RFF board meeting, as we were talking about changes in energy-related tax incentives that have come about over the past year. Jim Connaughton, a member of RFF’s board, flagged what he considers to be an overlooked tax policy that can help incentivize multiple types of energy development, and that’s the refined and expanded Qualified Opportunity Zone, or QOZ, program. As Jim shared where he sees more about the underappreciated benefits, at least in his mind, of the QOZ program, it struck me that this would make a great subject for a conversation here on Resources Radio. Joining me today to discuss the QOZ program are Andy Rankin and Dave McGimpsey, both partners in the Indianapolis office of Dentons, a global law firm.
Andy is the author of a brief report entitled “The Qualified Opportunity Zone Program and Clean Energy: A New Era for Natural Gas, Solar, Wind, Energy Storage and Nuclear Projects,” and Dave co-leads the Dentons US-region energy practice. The three of us will talk about how and where they see the QOZ program playing a role in supporting energy development in the United States, how it compares to previous investment and production tax credits, and more, so stay with us.
Hi, Andy and Dave. Welcome to the show. It is really great to talk with you.
Dave McGimpsey: Well, thanks so much, Kristin. It’s great to be here, and thanks so much for the invitation.
Kristin Hayes: Yeah, of course.
Andy Rankin: Thank you, and thanks to Resources for the Future. We’re happy to be here.
Kristin Hayes: That is great. Well, again, it’s a pleasure to speak with both of you. I know you have some complementary expertise. Let me start by asking you, in turn, to just say a little bit about who you are and maybe your area of professional focus. Andy, let me start with you.
Andy Rankin: Great. Again, my name is Andy Rankin. I’ve been practicing law for 25 years, first with a large law firm, as I’m with now, but not with Dentons, and then I did about 15 years in-house. The most noteworthy of that was the last five years were in-house for a large construction equipment lessor where I conceived of, implemented, and operated their Opportunity Zone program. That’s carried over to my time with Dentons. I’ve been here for about three years.
Kristin Hayes: Great. Dave, what about you?
Dave McGimpsey: I’m an energy, water, and utility lawyer. I’ve been practicing in that sphere for about 27 years, and really, that practice has three legs of the stool. The first leg is clean energy development—so a lot of wind, solar, battery energy storage, combined-cycle gas, turbine, that type of thing. The second leg of the stool is regulated and unregulated water and wastewater utilities, doing rates, service-territory disputes, project certifications, things of that nature. The third leg of the stool is just a catch-all category with things like electric vehicle charging policy before the Indiana Utility Regulatory Commission, representing public utility holding companies and acquisitions of other public utility holding companies at a state level. That’s the thumbnail on how my practice is.
Kristin Hayes: Amazing, okay. Very complementary expertise for this particular topic. I just want to ask too, out of curiosity, are you both Indiana natives?
Dave McGimpsey: No, I am a native of Seattle, Washington. I moved to the Midwest when I was about 11 years old.
Kristin Hayes: Okay, all right. Andy, what about you?
Andy Rankin: I’m a geographic mutt. I have been all over, but I do consider Indiana home. I went to school here—undergrad and then law school. But yeah, I consider the Indianapolis area my first home.
Kristin Hayes: Awesome. Well, I am also from the Midwest, as is our producer, Elizabeth (or at least very close ties to the Midwest). Great representation for the Midwest today. Love it.
Dave, let me start with you. I wanted to ask you to start by refreshing our collective memory on how the One Big Beautiful Bill Act, or OBBBA, actually changed tax credits that were designed to support the expansion of wind and solar in the United States. Can you just talk us through some of those changes?
Dave McGimpsey: The OB3 (that’s what I’ll call it rather than the OBBBA) sunsetted the investment tax credits and the production tax credits for wind and solar earlier than they were initially scheduled to sunset. What that has caused is a lot of upheaval in the wind and solar areas, because what was once a regulatory certainty is now … there is a certain end to it, and it’s coming sooner than anticipated.
Kristin Hayes: Okay. Andy, the OB3—I like that, definitely going to use it—also made changes to, as I referred to earlier, something called the Qualified Opportunity Zones program, which obviously you’re very familiar with. Can you tell us just a little bit more about the QOZ program, what it is, and maybe, particularly, how OB3 changed it from its original 2017 version?
Andy Rankin: Sure. As you mentioned, this came about during the first Trump administration’s Tax Cuts and Jobs Act, which was in 2017. Now, these were implemented by that law, but the rulemaking took time and then the designation of the zones took time, so really, this came into effect in early 2019, but it was scheduled to expire on December 31, 2026, so there was an end date.
Now, to fully take advantage of this law, you have a five-year holding period, so 2026 minus five years becomes 2021. It means the law became less applicable, less exciting, less beneficial starting in 2021/2022. We’re now multiple years past that, and with each year, it became less relevant. What OB3 did is it made it a permanent part of the tax code. This now exists in the tax code forever, so there’s no expiration and there’s no sunset.
The five-year period lasts forever. There are important five-year, 10-year, and 30-year holding periods, and now those are measured from now until they expire. In the Tax Cuts and Jobs Act version, which a lot of us like to call Opportunity Zone 1.0, you had these fixed dates. Now it’s five years from your act, 10 years from your act, 30 years from your act, and it doesn’t matter when that act … There’s no expiration date.
There are two huge benefits to this, and they just roll on forever or until repeal. That’s a big one. And it changed a couple of other things, which are important. One, it created the Rural Opportunity Zones. The original zones still exist. The rural zones are new. Unfortunately, from a legal and accounting perspective, it made the legal and accounting requirements just a little bit tougher, and they weren’t exceptionally easy to begin with.
So, call your lawyer and call your accountant if you want to take advantage of this. That’s the bad news.
The good news is, to put it simply, the benefits of this law are awesome. The threshold is you have to have capital gains and you have to have realized them in the last 180 days when you plan to do this, but 180 days is a long time, and then you do have a long time to spend those dollars, but you have to be legally compliant to do so, so have capital gain. Going into the future, you can look at this Opportunity Zone program to take a huge benefit, and I’d be happy to go into the benefits now, if that would be useful, or I can save that for later.
Kristin Hayes: Yeah. Well, let me ask you, too: When I hear “zones,” I think of geography. I definitely think, “These are place based. These are things that exist in a specific place in the United States.” What defines a zone, either under the original version or, ideally, under this version that we have now? How do you even know if you’re a QOZ to begin with?
Andy Rankin: Well, here’s the good news. You type in “HUD Opportunity Zones” in Google or your favorite browser. (Some government websites are really hard to use.) This will bring up a map, and it’s a map that shows the map of the United States. Some areas are in white, some areas are yellow. Yellow areas are the zones. It has an address search bar. If you type in the address, it’ll drop a pin. If it’s in yellow—your project, your anticipated project, your current project—it’s in a zone. If it’s in white, it’s not. It’s really easy to use.
Kristin Hayes: Yeah. What are the criteria that define those zones? What makes something a QOZ?
Andy Rankin: Yeah, they’re census tracts and they are, essentially, lower-income, challenged areas.
For example, I’m in Indianapolis. The entirety of downtown Indianapolis is an Opportunity Zone, but it’s beneficial for commercial development, so that’s the good news. College campuses, a little bit lower income, are frequently in Opportunity Zones. Downtowns, college campuses, industrial areas, and commercial areas, are often lower income from a residential point of view, but are more desirable from a development and commercial point of view.
It’s been great for commercial developers, and what we think, from an energy perspective, is that these rural zones may be … The reason I say “may be” is because they are not yet designated, but they will be designated in 2026. Some of the existing zones from 2018 and 2019 have already been flipped over from original zones to rural zones, but more will be designated in 2026, and they could be highly beneficial to the energy industry.
Kristin Hayes: Fascinating, okay. I definitely want to come back to that, because I know there are some unique characteristics of these rural Opportunity Zones, too. But before that, I do want to go back to Dave.
Dave, I want to reflect on something you hinted at right at the beginning. After OB3’s passage, I think it’s fair to say that most commentary seemed to reinforce this idea that OB3 was … I’m actually going to quote here for a second: It was “very ugly for wind and solar.” That was the headline from a fellow law firm. But the brief that we’re talking about here—the research that you guys have done and put together—my sense is that it seems to be arguing for a more nuanced take. Again, I’m going to quote, in this case, from the particular writing that you guys did, where you noted that all parties involved in clean energy projects should consider whether the Opportunity Zone program may replace or augment existing, but expiring, tax credits.
That, to me, is quite a different story from, “very ugly for wind and solar.” Dave, I just wanted to ask you to respond … Any response to my reasoning there, and just any thoughts in general about the top-line reasoning behind that takeaway in your brief?
Dave McGimpsey: Well, sure. When you hear that the production tax credit and the investment tax credit for wind and solar are sunsetting earlier than anticipated, you’re losing certainty, so I think that’s where the “very ugly for wind and solar” comes from. A well-established program to offer financing for clean energy development is being sunsetted, so I get that sentiment.
What I think, though, is that the Opportunity Zones, with all the benefits that Andy has identified—especially with the rural focus, because that’s where a lot of these wind and solar facilities are located, in rural areas—this is a huge area that can help provide another source of capital for these clean energy projects.
Kristin Hayes: It sounds like we went from very targeted tax credits that were designed specifically for wind and solar, at least historically. I think the Inflation Reduction Act made them actually a little bit broader than that. But for a long time, we had production tax credits, investment tax credits just for wind and solar.
Again, if I’m interpreting correctly, maybe Andy, I’ll just turn this back to you. The Opportunity Zone program is a much more broad-based tax credit designed to spur investment overall. It doesn’t specify what investment, but in that sense, it’s actually quite flexible. Particularly, as you pointed out, these qualified rural opportunity funds may actually provide some opportunities (no pun intended) to clean energy development, which, as Dave just noted, often happens in rural communities. Do I have that right? There’s still quite a bit of flexibility here?
Andy Rankin: That’s correct, and you’re right that the Opportunity Zone tax credits are more broad-based. They’re not as targeted to energy and clean energy projects as the tax credits which are being sunsetted. What we are saying is: The other law firm’s headline says, “It’s very ugly for wind and solar.” Losing those tax credits is bad news. There’s no two ways about it, but the point of our article is maybe there’s a silver lining—maybe there is something new.
In a period which we are in right now, when you could perhaps take advantage of both, look to do so, and when these targeted tax credits go away, look for something else. This Opportunity Zone program is that something else. And you’re right; I don’t know. It could be worse; that seems very possible. But for particular projects in particular zones, it could be better. Take a look: this is going away, but think about what’s new.
Kristin Hayes: Interesting, okay. Andy, let me stay with you for just a second, because I think we’re going to get into some leasing terminology that I know so little about, so I’m going to ask you to talk us through some terms here.
Specifically looking at clean energy projects, I do know that they often involve leasing land rather than owning it outright. For example, a wind installer might actually lease the land from a farm owner, as opposed to buying the land from that person, I think. Can you just talk us through how these leasehold interests work under the new Opportunity Zone rules, and maybe just why it matters for solar, wind, and renewables in general?
Andy Rankin: Yeah. Having been around from the start, when the law was first passed in 2017, it seemed, just from the language of the statute, that maybe this was only going to apply to people who owned land, and that was a concern for businesses that leased property or had other real property or ownership interest in this.
Well, when the initial rules came out in 2018, along with guidance from the Treasury and the IRS, that’s what it did.
I’ll back up and give the overarching sentiment of the legislation and the rulemaking. It doesn’t want to reward somebody who buys a piece of property and then leases it out and then slaps their hands together and says, “I’m out. Go operate your business. I’m going to take the tax credit.” The good thing about this law is that it wants to focus the benefit on the people who are operating the business and making it go every day, be it a manufacturing business, be it a distribution business, or be it an energy business. If you are the tenant under a lease, but you’re on the ground in this zone and it’s your project that’s operating, the law says you get the benefit. That’s what’s great.
Kristin Hayes: Okay, all right. Great. Yeah, that’s really helpful to know.
Dave, I wanted to ask you about something else that comes up in the article, which is about nuclear energy. I’ve been asking you guys to reflect on wind and solar in particular, but certainly, lots of types of energy are available in this country and lots of new investment is happening in them. One that you call out in particular is nuclear and small modular reactors. Dave, why would you say that Opportunity Zones are especially well-suited for those types of projects? Is there something about the rural focus that matters there, too?
Dave McGimpsey: Absolutely, because you’re not typically going to site a nuclear facility in the midst of a large metropolitan area. Typically, these SMRs [small modular reactors], or nuclear plants, are going to be sited probably in a rural area, and they are compact enough that you’re not going to have to worry about a sprawling development that may cross the boundary of a census tract, or something like that, so it would certainly fit within a census tract that could be designated as an Opportunity Zone. That is the key here, that the nuclear facilities, combined cycle gas turbines—lots of energy infrastructure—can fit within these census tracts and be designated as an Opportunity Zone.
Kristin Hayes: Interesting. Okay, all right.
Well, I want to ask you guys: You closed your brief by concluding some recommendations for energy project developers who are looking to take advantage of the QOZ program moving forward. Andy, you started to hint at this a little bit, but I wondered … I just want to give you both a chance to sort of talk us through what the overarching recommendations you’d have for folks who might be interested in this program. What are those?
Andy Rankin: Sure, and I’ll go on a little bit of a monologue here, so I apologize for that, but I like to define the Opportunity Zone program overall as two benefits. Benefit one is good, benefit two is amazing.
Benefit two is, if you have capital gains, be it long term, be it short term—it doesn’t matter what it’s from, from the sale of your company, from the sale of stock, from the sale of crypto, even as far as art or baseball cards, it doesn’t matter is my point to that—if you invest these, and here’s where the alphabet soup comes in, do a Qualified Opportunity Fund, which everybody calls a QOF, and that’s an entity that is, with legal help, relatively easy and inexpensive to set up. You have to do that within six months of realization, which means selling the thing, selling the stock, selling the real estate, selling your business.
That’s 180 days. You have 180 days to do that. Six months, let’s call it. Then you have another 180 days, or six months, to allocate or spend that money or, this is a big or, within that 180 days, you come up with a 31-month plan to allocate it. Really, it’s six months plus six months plus 31 months, which is two years and seven months, so you’re talking three years and seven months, just short of four years. It’s a lot of time to allocate capital, so you do that.
Let’s simplify it. You do that; you comply with everything. It’s 2025—you sell and you make your capital gain in 2025. When should you pay your tax on that in early 2026?
Benefit one is you get five years to pay that tax; you don’t have to pay it for five additional years. You put that into treasuries or a savings account, or whatever. You’re probably going to make, in five years, 25 percent on that money. That’s money you would not have had but for this law. Then, when you ultimately pay the tax five years from now, the tax you pay is reduced by 10 percent, so you get a little reduction. That’s benefit one, and that’s what I call the “good” one.
The even better one is benefit two. Let’s say you buy a project or a business, you qualify under the law, you might do something in a zone to qualify under the law, and there are a lot of legal requirements which would put you and your listeners to sleep. We’ll say, if you have questions about that, we’re happy to talk to you. But the benefit is, if you hold and operate that business or property, or whatever you’re doing that qualifies in a zone—and a lot of things qualify; there are some exemptions, but there are very few. At 10 years and a day—let’s say you bought whatever it is, a piece of property, and you started a business on it. You’re into that property for $1 million, you sell that property for $5 million in 10 years and a day. All the way up to 30 years. You’re into it for $1 million, let’s say you sell it for $5 million. You have a $4-million gain; you should pay tax on $4 million. Your tax is zero. And that’s one of the best things I’ve ever seen in the tax code.
Kristin Hayes: That’s a huge incentive to put money into these QOZs, then. Yeah, okay.
Andy Rankin: With that background, I’ll tell you what we recommend. They’re redoing these zones now, every 10 years. Now, with OB3, the first re-designation is now. One, look at what capital gain you have. Two, think about your future projects, if you have capital gain, and consider Opportunity Zones and if you see something that you may want to do—maybe it’s in a zone, maybe it’s not. Those zones are going to change over the next year, but then they’re going to be fixed for 10 years. So call your lobbyist, call your legal counsel, call your accountant, your financial person who is versed in this (we know plenty of them, we obviously know the legal people who are good at this)and get a plan to allocate your capital gain to defer tax, potentially not pay tax on the gain, and get a new project with greater incentives. That’s the advice.
Kristin Hayes: Okay, all right. Dave, anything you’d want to add on that?
Dave McGimpsey: Absolutely. Andy did a great job and he hit the big point.
What I would recommend for the actual clean energy developers is: Right now, everyone has their head down trying to make a mad dash to get into the safe harbor so that they can qualify for those existing tax credits. But if they look up and see what’s coming and the opportunities available in the Opportunity Zone program, they will be able to set up their own companies, their own development, and clean energy companies for success in the long term by seeking out these new sources of capital so that they can fund additional projects. Right now, everyone has just got their head down again, trying to get into the safe harbor for the existing tax credits, but there is a world of opportunity (no pun intended) to—
Kristin Hayes: It’s hard to not make that pun, to be honest.
Andy Rankin: Once you get “opportunity” on the brain, you want to keep going with it.
Kristin Hayes: Exactly. Yeah, yeah. Sorry, Dave, I interrupted you, but yeah.
Dave McGimpsey: No worries. I just think that there’s a lot of money out there. I’m sure there’s some funds out there that maybe have held Nvidia for a few years and might have a few capital gains to invest in a clean energy project.
Kristin Hayes: Interesting. Well, this is great, guys. I have to admit, I had never heard of the QOZ program before; again, our board member mentioned it a few weeks ago, about a month ago now. It’s just really great to hear about, again, the opportunities here and just the chance for folks to take a fresh look at something and understand what that means, in terms of future certainty.
Dave, just going way back to your point at the beginning, that uncertainty is a challenge for anyone who’s trying to invest in long-term assets—so, this 10-year window, some clarity around the long-term nature of these, that they don’t need extension over time anymore. Hopefully, there’s some new certainty there and some opportunities for folks to take advantage of new flows of capital. I know how important that is for getting any energy project off the ground.
Thank you both this has been really interesting. I want to close with our regular feature, Top of the Stack, so I’m going to invite you both to recommend some content, really, of any type you can recommend to our listeners. It can be on this topic, or it can be on a totally different topic. We take all tops of the stack.
Andy, let me start with you. What’s on the top of your stack?
Andy Rankin: Other than Resources Radio, of course?
Listen, I guess my general advice is to find a good source of relatively neutral news. Of course, everything has an opinion associated with it and a point of view, but find one or two good sources of neutral financial and news-based reporting and then dig into the authors that you like, the numbers that you like, and go from there. I use the Wall Street Journal, but that’s pretty much a safe harbor. And I’m going to flip the script a little bit and say … I’m not going to tell you anything else to listen to, but I want to tell you what not to listen to. Don’t get bogged down in the massive talking heads who get paid to talk for a living. Get your news, get your financial information, and get as much of it as you can, but make sure it’s information.
I still like George Will, and that’s an opinion guy, but I curate that very safely. I don’t want somebody whose goal is to make me angry or to fall in love with something. I want something that can help me analyze.
And then just get out of your own head and go for entertainment from there. That’s my two cents.
Kristin Hayes: I love it. Okay, Dave, what about you?
Dave McGimpsey: Well, I’ll give you a podcast, and it’s a little self-serving, but I’ve got a podcast called the Water Values Podcast. And anyone who’s interested in energy ought to be interested in water, because I’m sure you’ve heard of the water-energy nexus. I encourage folks to check out the Water Values Podcast. It’s a broad-range look at a whole spectrum of issues across the water sector, and it does touch on energy. For example, we did a data center episode not too long ago, so it’s just … If you like energy, you need to like water, as well.
Kristin Hayes: We here at Resources Radio also believe in really good, solid—to whatever extent, anything in the world is neutral, but we certainly aim for a neutral analysis of things. So, Andy, you’re definitely preaching our sermon here. I don’t think that’s an expression, but you know what I mean. And Dave, you’re so right about that energy-water nexus. I have to say, I have a very personal fascination with the data center conversation, so I will definitely check out that episode. That sounds great.
Well, thank you both again. It’s been a pleasure, and we’ll be in touch.
Dave McGimpsey: Thank you, Kristin. I really appreciate the time.
Andy Rankin: Yeah, appreciate it, Kristin. Thank you so much.
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