EP16 - Kon Tiki - IRS Subsidy for ESOPs

On this podcast episode we reference the movie Kon Tiki, which documents the journey of a Norwegian scientist on a raft built with natural materials and proves the ancient peoples sailed to the Polynesia islands.  The trip took 4300 miles in ocean currents without a motor. The podcast uses the concept of “wind in the sails” to review the tax benefits that ESOP companies experience. 

Specifically, this episode dives into defining an S-Corporation ESOP, which means that either in part or in whole the ESOP-owned company has a permanent tax benefit given the income tax is exempt on both the state and federal level.  

Transcript

[0:09] Hey everyone thanks for joining today this is the journey to an ESOP and Beyond podcast featuring Employee Stock ownership plan topics interviews all kinds of things as a resource, we're going to start off today given this we're in the summer with a summer theme check this out.

[0:26] Music.

[0:51] But not this 1. But not this 1 this movie is called Kiki k o n t i k i if you have not seen this movie. Um I know this is not a movie podcast this is really a great movie it's a really interesting story about a Norwegian um by the name of Thor who had a theory that he that the peruvians actually umpopulated Polynesia. And the question is is how do they actually get there so after all the research and everything else what he found was that he had to do a in order to prove that this this theory was right he had to do a raft, trip so they built this raft out of balsa wood and he basically used only the uh the authentic. Types of materials they would have used to build this type of raft so it wasn't no there's no modern-day um. Raft building at this point and they're this was back in the 1940s that actually happened 1 of the things about this movie that I like is because I like movies that have historical. Significance and kind of tells the story of things that have happened so super super cool movie now why are we talking about this this movie Keke so.

[2:12] And or the story, um 1 of the things today that I think is important to always come back to and I've had just a lot of conversations recently about the the value of doing an ESOP versus other things right, so people are tossing up in their minds like should I do an ESOP should I sell my company to a few people in my company or should I do any kind of something else right how do I get how do I get the ownership transition part worked into the. The the scheme of things or the modeling of things and how does that really impact the company now the bottom line to this topic is about, the the, calm the the clarification in in what does it mean to have a the benefits on the tax side so when we we when we talk about this I'm just going to refer to it as the IRS subsidy.

[3:04] In that the IRS, our government saying hey we like esops so much that we're going to actually give you a a tax benefit by doing an ESOP So today we're going to explore that and and just purely conceptually but also kind of look at you know what does that look like for. Um designing an ESOP transaction and why that becomes a a a really high level like when you're looking at your Alternatives 1 of the higher level alternatives for what you might be considering doing in the future.

[3:36] So as always please rate and review the podcast as we look at um what we're doing with content please let us know um through our chat at the journey to an esop.com website how we might be able to help you and look at topics that are that are super helpful for you to better understand the world of Employee Stock ownership plans. Um and as always if there are people that you think hey man that they might be doing an ESOP go ahead and refer the the podcast to them because it could be super helpful for them as well.

[4:09] So let me start off with the idea behind the movie and just write a why did I even use the keiki movie to talk about the IRS subsidy for Nissan. 1 of the 1 of the interviews that we had recently with 1 of our clients regarding their ESOP Journey was that they were looking at. Um the ESOP as a way to kind of promote the the buyout of the sale of the stock. And what happens usually not what happens pretty much in a leveraged transaction is that the company has to borrow money. And then from there the money um the company is creating from cash flow standpoint is going to go ahead and pay off the debt so it's a leveraged buyout at the end of the day and so 1 of the things he said on our interview was the IRS subsidy the tax benefit that we have is kind of like the win behind the sale right that helps to kind of. Promote the uh the the company to move forward having all this continual all this all this debt that's been added onto the company and so I just like that idea so I've been thinking about it since the meeting that we had. I'm like wow that make that makes sense and then I remembered this movie and I'm like wow okay so the whole point of Kiki is that they move across this vast amount of of ocean. Without an engine.

[5:34] And with completely just the win behind the sale moving the raft forward right and then they're in the current as well and so the the the metaphor here is just really that the what is this additional benefit look like, that would make somebody really choose an ESOP over not an ESOP and that's and that's really the connection between the movie I do like the movie too so I wanted to um get that out there for people to be thinking about.

[6:02] Accepted then go ahead D from Peru to Polynesia or Poulter would raftTheory, there will be no 1 to save us out there so the point here as we as we Embark upon digging out like of all the all the potential tax benefits of an ESOP, their situation of course it's like they're going to be rafting across the ocean right and and it almost feels like sometimes when you start something new like like an ESOP or any transition plan that there's a there there's a lot of uncertainty related to what you're doing and how that's all going to work out right and 1 1 of the things that gets asked I I think like and I think it's a good question but it gets asked a lot and I'll throw it out as the question and then I'll kind of answer kind of around that.

[7:00] Is what happens if the company doesn't do well in the future so you go through the process of doing an ESOP. Um this year's been kind of a weird and if everybody knows like it just feels funky with the way the the tariffs win and how they've been going and now that we have this, this new bill in um Congress and how that's going to affect so a lot of the political types of movement in our country has has really. Been volatile regarding our economic you know perception of that like what's real what's not real all of those things but it just has felt a little, kind of tumultuous in that sense with the reality being maybe not as much real reality wise but at the same time this always kind of stirs up this idea like what happens if things don't go go super well right and that's that's kind of 1 of this. Played this scene you know it's it's the idea that if the company doesn't do well how does it pay off the debt How does it go through what it needs to in order to uh make sure that.

[8:00] There's not a a major problem right the ship doesn't sinkand as we think about that. 1 of the things I would say in relationship to designing an ESOP transaction versus designing a different type of transaction is is as we as we put this together and we start thinking about the value, that gets created by not having to pay taxes this is something that. Is as easy as it is to talk about and as for for most people that have been doing esops for a while this might just be so. Obviously basic but I can tell you I've worked with a lot of clients that they asked me that question over and over again you you're you're basically saying to me you know this is them talking that we're not paying income tax.

[8:46] And I'm like yeah you're not paying income tax so let's let's unpack that a little bit as we go but the point is. Is that as we think about making the journeythat starts with the closing of an ESOP going forward, similarly what we're looking at is how does how do the challenges come and running a company where this part. Actually helps to add something that never existed it's a permanent.

[9:14] It's a permanent tax change for the company meaning that as long as it's owned by an ESOP whether it's in part or in whole the company will have a permanent tax benefit. And I'm going to break that down into its components we're we're talking about the company's cash and the company's tax side and then we're going to also dig into the cash side and the tax side for the for the shareholders too because those are obviously just as important now when we think about this as an S corp and as a C Corp it's important to understand like where you are in your company and what really applies to you at this point in regards to what's available when you do your transaction for the ESOP so so let me just say it for what we're designing is a transaction to sell the stock of the company.

[10:07] To a trust the trust being in a place stock ownership Trustall of that is being done by negotiating the value of the stock. With the trustee and a buy side team we've talked about this a lot of different ways now. The reason I bring that up is because of what that does is it allows us when we when we anticipate that in the modeling we're basically building valuation models around what we believe the sale is going to look like. In regards to the value or the dollar amount of that that's going to set up the need for the company to borrow that dollar amount and from there.

[10:46] Um basically go be you know plan to be paying that off so the first modeling and feasibility really exists around cash flow right how much cash flow is available, to service that debt in a multiple forms and it could be um very commonly that the the company borrows money from a bank, that creates a liquidity event that liquidity is is going to be um exchanged for the stock at the closing for the for the shareholders, whatever is left over would be in the form of a seller note that the company would be obligated to pay normally that senior debt that bank financing is going to take on a primary preferred position so principal and interest will go pay pay that first the seller note would be paid on a subordinated basis so that's just a typical structure for the debt now the companies in debt and again we're worried about the question around like what happens if the company doesn't do so well in the future keep in mind every company has to worry about what's going to happen in the future no matter if you sell to an ESOP or you do something else there's always going to be this element of uncertainty related to what the future holds because just as we said we don't know everybody every company has to deal with every single year what their plan is how they make plan.

[12:02] But in the in this situation when we're designing the cash flow for the repayment of the debt we're going to from a company perspective look at whether or not we're an S corporation or a C corporation. Now if we're an S corporation and we've sold the stock. To the ESOP and again in part or in wholethere's 2 tax benefits that are going to be available to the company. The first tax benefit is going to be because the company is going to be able. To make a non-cash contribution to the ESOP on an annual basison all the way up to 25% of their total payroll, and total I'm going to say total eligible payroll just to make sure we're all on the same the same space eligible payroll for an ESOP is the full-time equivalent employees.

[12:59] That are typically non-union.

[13:02] And that would be um anybody that has worked in the company for that payroll cycle for more than a thousand hours that's just a quick quick and dirty definition of eligible payroll.

[13:14] And we can we can contribute up to 25% um on a non-cash basis meaning that we've released shares from the ESOP into the hands of the employees. And the first benefit there is we're going to deduct that payment. On an annual basis that payment is equivalent to the contribution so those are basically synonymousum that goes from the company.

[13:40] Into the ESOP Trust bank account and back into the company operating account so that's called a roundtrip what that does is it makes a payment on what's referred to as the inside note.

[13:53] Once the shares of stock are sold by the shareholders to the company the company will put those shares of stock into the trust. By issuing an inside notethat is different than the outside note obligation so the the notes that I described, earlier in in the statement was the company borrows money from the bank they borrow money from the sellers those are outside notes those cash flow leaving the company the inside note is the company and the note between the company and the trust. So that puts the shares of stock into the trust as we pay an inside note payment we're going to be releasing shares of stock, to the employees over that period of timethat's going to allow for the company to um.

[14:42] Pay that or release the shares and then we'll from a tax perspective reduce the taxable income by that total inside node amount which is going to include both principal and interest. The principal portion usually is the same amount of of what the company has been valued for at the time of of the negotiation but it's not always the same so that's that's kind of a Nuance which we can talk about later. The principal or the interest portion of that is going to be the adjusted federal rate normally again there's always exceptions to everything that we say but. So what that does is is we move the money into the bank account for the ESOP and we move it right back into the um operating account that's a non-cash transaction meaning it's it's not, going to any negate or reduce your cash position it's just going to keep exactly the same amount of cash the company had Meanwhile we're going to deduct the full amount of that principal and interest payment off of the taxable income so now whether I'm an S corporation or a corporation I'm going to have that benefitfor both of those types of scenarios are both of those types of tax entities right notice I'm not talking about a partnership, or an LLC 1 of the things about an ESOP is that you're you're going to have to move the entity that you are in right now.

[16:05] Into either an S corporation tax um company or a C corporation meaning that the corporation is paying taxes at the corporate level. And as a C corporation what happens they the company itself pays income tax. And then they if they dividend money to the individual shareholders there's also another tax that the shareholders pay that's called double taxation which which. Is why some of the companies that are listening are like yeah that's why we're an S corp so as an S corporation it's referred to as a pass through entity meaning that the company, um will report their taxable obligation on their 1120s that gets reported as taxable income. To the individual shareholders on a K1 and if the K1 level that would be input into their 1040 tax return and they'll they're going to pay taxes at that the income tax at that level. So what what's important is is as you're as you're doing the analysis is to understand.

[17:07] That that first benefit that we just talked about the deduction of the inside note payment is going to affect an S corp or C Corp. The next level of benefit as we talk about the tax benefit is going to be only applicable to the S corporation. And that is that whatever the ESOP owns now they're getting a K1 so let's just say you could have a 30% ESOP. 30% of that income from the sorpe goes to as a K1 to the, um to the trust that is tax exempt if a 100% of the company was owned by the an S corp was owned by the ESOP a K1 goes to the ESOP it is tax exempt, so if it's 100% S Corp owned ESOP, then it really doesn't matter on that first deduction but it is important to understand that if you do a partial S corporation ESOP.

[18:00] So what does that mean for now on the Corp side we're getting the tax benefit on the deduction so keep in mind we're still going to be paying corporate tax on an ESOP that's owned by a Corp so what does that mean for. The cash flow that we we just referred to and our model it means that there's going to be a quantifiable dollar amount. That is freed up permanent cash flowas long as the company was making income right if the company is actually making no income, then of course there's no benefit right so keep in mind I mean 1 qualifier might be hey we don't really our company doesn't have any net income so we're not paying any taxes this may not be the good a right fit for you because that's part of what we're we're saying but assuming the company does have income and there is tax in play. Then we are freeing up some some actual real dollars on a permanent level meaning that it's going to be as long as this is structured correctly. In the future you're always going to have that benefit to pay off the to use that additional cash flow to First pay off the debt that I just described. And then secondly to start accumulating.

[19:13] More and more cash on the balance sheet that's that's the company not having to pay those additional income tax so having said that. When I when we say the wind behind the sale it's like this is going to be a a very solid. Um opportunity for additional cash flow that did not exist that's guaranteed what I like about guaranteed cash flow is that.

[19:38] They're all the cash flow of the company has typically is like whoa okay we hit our Revenue numbers, who knows what's going to happen with gross margin who knows if it's going to happen with GNA expense we know we're going to have some net income we don't know exactly what future cash flow holds even, as we start looking at modeling we're always going to want to kind of glean to. The forecast of the company and usually it's a 5-year forecast and we want to make sure that we've thought through that really well because we're predicting future cash flow and part of the. Part of the process of doing modeling is we want to we want to have some level of confidence in that forecast to say yes that's that's going to be where we feel like is going to be a positive um, up you know very high high level of probability with that forecasts because we're going to be really using that to start to analyze the Val the value of the tax benefits that help to pay off the debt. So keep in mind um 1 thing about this that I would say that is is just important and it just comes up every time a lot of times when we're we're just kind of. Talking to people about esops is that it's. There's nothing like an an ESOP when it comes down to what I just told you about the corporate or the company cash flow tax benefits.

[20:55] Because the the, ESOP itself is a legislative tool that has been put in place that works exactly the way I just described. That helps a company transition the amount of debt that's going to have, by transitioning ownership to the employees by doing this in order for the company to besuccessful at the process of doing of of of paying off that debtum. Going back years and years and years ago like when you think about um. You know just the way you know as as a banker and looking at companies and underwrite and underwriting them and thinking about well the decision to take on debt for any company. You know is a big decision you know you're looking at it from maybe a CFO perspective or a controller perspective or the owner perspective doesn't make sense to borrow money for whatever we're we're going to use the money for right so does it make sense to get into debt when you look at this. Umpart of the modeling process that we're talking about what I'm what I'm getting at is that that.

[22:02] It is it does make sense if if the numbers work right and I and I think 1 of the things that, I would say is really important is is modeling the numbers on the cash flow to quantify annually the tax benefits is really critical because you can then you can then look at things like for instancewhat if we do have a bad year like what if as we talk about this this idea of of, the risk it take you know the uncertainty and the risk in the future of of working through some of these challenges.

[22:35] You know we can see what the benefit of this is in the numbers and then we can then do some stress testing on the plan to see yeah we've we, we've got the proper evaluation on an estimate basis and we've looked at that in terms of the company's ability to buy out that valuation with this you know this wind behind your sale metaphor that we that we've been going after today.

[23:02] That's going to beso core and integral to the process of making a decision to go forward on an ESOP, hands downand what happens in this is that we then can kind of play out all the different scenarios around like the what ifs once that once that part has been really built. And and thought through so that is going to be a a part of what we're going to be thinking about but I think the biggest thing here is to understand that the uh the major Point here is that how does this um affect the planning side and that's kind of where we're getting into the value of doing all this is that we can we can actually put, some dollars and cents to that on an annual basis based on what I just explainedby being an S corp or a C Corp.

[24:15] All right so this this is the famous shark scene in the movie kantiki and um. I only played like a little snippet but basically this guy's bird who he loves um gets goes in the water unfortunately and the shark comes and gets it. And um this is like a crazy scene because they they end up pulling the shark up um by its tail up under the raft and. And then they just totallytake out the shark right so it's just it's it's a really, dramatic and crazy seen the reason I wanted to throw this out to everybody is is I think 1 of the things I would say in planning your ESOP is be super careful in terms of this modeling um and the reason I say that is because, all advisors are not created like the same and the the point of modeling let me just say that the point of putting together a model. Is not to put something together to says that says hey because the tax benefits you guys should become an ESOP because blah blah blah um I think that sometimes in our world advisors play off everybody's emotions, to try to get the deal to move forward and I and Iabsolutely philosophically 100% disagree with that.

[25:30] The reason they do that because they want to do the deal and there's money to be made and what not and of course if anybody works for you know to put something together they should get paid. For that and then whether however you know I've talked about the fees and stuff like that multiple times and, and a lot of different ways the point is is that what I have seen specifically when we get to the tax benefits is sometimes the advisors. Will distort what you really would do on the tax side so let's just say for instance ayou are an existing S corporation. And part of this I'm kind of relaying back to the sharks that were just talking about because I'm like there's some sharks in the water here that super be super careful um about. How you you do this but let's just say you're an escortand the advisors come in and they're like yeah you should be an ESOP, um because of this this and this and did you know you can do the 1042 which we're going to talk about next but in order to do the 1042 as a selling shareholder you have to be a corporation.

[26:34] So let's just convert you to a to a C Corp and then make, in like assume that that's what you're going to be now don't worry because you're still going to get a tax benefit and so what I've seen them do is take that 25% limit that we just talked about and Max that out like push that to the highest level. Um in order to show this tax deduction being which is real this is going to happen the problem with it is that you can, create massive amounts of repurchase liability by doing that. Um because really what you're trying to do with the release of those shares and the contribution is stay you know you want to stay within you have to stay within the 25% limit that's called IRS code section 404. However I don't necessarily have to Max it out every year. And in some cases it's better once you look at the benefit testing side it's better for the company not to do that as a company perspective it may not be the most Optimum Tax. Side of it but what it will do if you if you don't if you do Max it out every year and you're just thinking well that's gonna take the maximum tax benefit it will create a repurchase liability that will bite you at the end. Meaning that people will get too many shares too quickly and the company will have a a massive amount of obligation meanwhile they've been trying to pay off all this debt as time goes on so what I've seen people do that are advisors.

[28:02] They'll come in and do the models and not really show you anything related to staying in escorp right and instead of that you should do you should absolutely do both S and A C in your modeling. You should look at the numbers for the company's cash flow on both of those levels and then go go back and look at the cash flows related to the shareholders on both of those levels because there's a lot of nuances to becoming a C Corp and then 1 of the 1 of the things that happens as a as an S moving to a c for the transaction is that you're obligated to stay a core for 5 years.

[28:36] So that means that your your company is going to have to pay those taxes you're not going to get the exemption you will get the benefit of the deductionso having said all that I think it's it's appropriate to say that.

[28:49] Be carefulplan this out alright make sure you ask the right questions um and understand that in even if you. Don't max out the inside note every year what you can do is is look at that inside node amiz and look at. Different scenarios 1 scenario might be for instance on a partial ESOP that's a C Corp. 1 scenario might be hey we used to do that we start with 15 years or 20 years or 25 years or even 30 years. But we can prepay that inside note and we can add another contribution in a tax year up to the 25% if we choose to.

[29:25] But in general we're going to let that advertise longer on a longer term amortization and so that will be realistically what our deductions going to be and what you're doing with that is you're going to compare that Apples to Apples with the scorp example that we just talked about.

[29:40] Now all of that being said there's absolutely no reason you should not look at. The snc versus when you look at the shareholder cash flow and you look at shareholder tax benefits which is where we're going to get into now.

[29:55] So when you think about that we we've we've first off started talking about the wind be behind the company sales to help the transaction work. Because the companies being obligated to pay the debt now we're talking about, the wind behind the sale for the shareholders and the benefits they get as selling shareholders in an ESOP environment and. The primary benefit is for a company for the shareholders is to participate in What's called the 1042 capital capital gains tax deferral. And the 1042 what it is is an IRS code section that's similar to 1031. Which is referred to in the real estate world as the like kind exchange so what happens in the 1031 is similar to the 1042 is that you're taking property that you owned and you sell it and you get to put that. Um in escrow and then eventually you're going to reinvest that as a 1031 into a new piece of property. And not pay capital gains tax so you're just taking it from here moving in here as long as you set that up.

[30:57] And 12 months after the the transaction then you can defer the capital gains tax 1042 works very very similarly in that you're you're going to exchange eligible Securities that you have your privately held Securities stock there that you sell and then that gets exchanged for um eligible Securities in a qualified replacement property and by doing that you can defer the capital gains tax. That long-term capital gains tax rates are 20%. So what's on the table here is we can actually knock off for the shareholder a 20% savings for the initial amount or not not the initial but the entirety of the amount of what they've sold their company for.

[31:39] And so some some advisors again might really kind of use that to say hey this ESOP deal um you could sell it on the market or you could sell it here um and again I'm just saying be careful because I'm not saying they're completely wrong I'm just saying, that the way you lay this out is is highlight the thing is I lay that 1042 out, with other types of opportunities um so for instance if you're an existing Corp 1 of the things we've covered before is maybe the core qualifies for the 1202, code section where they can actually get an exemption without doing the 1042 and the qrp and all those things but there are some bit some some savings here. That are specific to being an ESOP that could be very valuable. Now if you compare that on the shareholder cash flow from a tax benefit side to an s-corp sale meaning I stay I'm an S I'm going to stay an s. Then we might look at things like what is your actual tax retained earnings which is referred to as accumulated adjustment account or your AAA.

[32:42] Some companies have accumulated as a s Corps a very large amount of AAA meaning that their basis is so high, the actual real tax that they're going to be paying is going to be relatively low on the capital gains side.

[32:57] So that's important because if you have a low level of capital gains tax it may be more beneficial for you to just go ahead and and keep it an S don't lose that 5 years of exemption for the you know s to a c. Now if you're already a C Corp here's where it becomes like yeah you already if you're already a Corp you you get the benefit of Both Worlds, you can do the 1042 as a corpse sale and then we can as long as the S Corp rules are are in line depending on you know your shareholders and all those things um then you can flip the company over to an S which is basically means you elect S Corp status after the transaction then at that point once it becomes an S you'll pick up the exemptions that are available so all that being said those are those are pretty valuable tools.

[33:47] To design the cash flow and the tax benefit um and be able to kind of really play that out before in modeling before you jump into the ocean and just say hey let's start swimming and just do this thing right because it's such an exciting you know the ESOP world is such an exciting World ultimately as as I as I unpack those 2 areas company cash flow affected by tax and the shareholder cash flow affected by tax it's really.

[34:13] Umadvisable to make sure that you do your homework on those benefits because they're going to be um really critical to planning out which direction do you go if you're going to keep going um down the road of becoming an ESOP company and so the cool thing about all of this is that it's very predictable and that you can get down to very predictable dollars and cents assuming in your like in your analysis that the the forecast and the information that is where that that's being reviewed and and used is highly reliable and has a high degree of confidence to it but having said all that the business decision behind making the decision towards going down an ESOP path is um, is easier when you have all that data in front of you and when you compare that of course to a non- ESOP scenario which we also do sometimes um you would conceptually can see this right now right in your head that this is going to be because we're not paying that those types of tax rates but.

[35:21] You can look at that side by side and say wow the ESOP is clearly the best choice and I'm saying that. That's a very general statement but that's actually what happens most of the time because you just can't see this kind of tax benefit anywhere in the world now project going forward as we finalize what we're saying here is that.

[35:39] First off we are taking off as a as a benefit we're taking off some of the risks, as the seller's Finance the deal some of that risk is being taken off because of the tax benefit that they would have otherwise right because the company has more cash flow they can pay off that debt sooner so some of that's happening as we as we start to kind of think about that and the future the other thing that that is in play here is, is what people start thinking about and asking questions are like what isn't it for the employees well here's what's in it for the employees the employees will benefit.

[36:14] By the company not paying taxes because the value of their shares is going to go up in the future by cam by the cash flow not leaving the company going to the Internal Revenue Service.

[36:25] Because it's going to stay there and build value for them and that's going to happen in a couple levels. Um as we think about the employees it's going to happen in their retirement plan level this is why statistically an ESOP retirement plan has um 2.5 times more the retirement assets than a non- Estep company so that's part of that um secondly the employees are going to benefit because the company, it's going to have a stronger position to get out of debt so a an unleveraged business is going to be stronger has more staying power the balance sheets better, and then thirdly when you think about the the another level of key people that might be able to participate in the stock appreciation rights program which again is a whole another topic but keep in mind this is a non- ESOP plan that's a a plan that is, designed around compensation around synthetic Equity they're getting the boost on the value of the Tsar plan because the company is not paying income tax so 1 of the things about the benefit of not paying income taxes is not just benefiting the individual shareholders. We are benefiting the company we are benefiting the employees we're benefiting the key employees and this is why we can confidently tell anybody that an ESOP. Generally speaking is a win-win-win for everybody.

[37:46] So having said that hopefully that can help clear the air on some of the things and some of that might have been super basic for people that have already kind of gone through the tax benefits. Or it might be just a good reminder of of how all that works and also a reminder of just making sure that you. Um have have asked the appropriate questions in doing your modeling. So however that works um we're just hoping to encourage you to continue on all the right steps towards your journey to an ESOP thanks for joining us today and we'll we'll see you next time.