A Basic Overview of the EB-5 Immigrant Investor Program’s Requirements

On Dec. 15, 2015, Congress extended the EB-5 Immigrant Investor Program until Sept. 30, 2016. This particular component of the U.S. immigration program exists with a high level of scrutiny (as do numerous other immigration issues, considering immigration is widely considered a hot-button issue) given its susceptibility to abuse and even fraud. A simple Google search for “EB-5 regional center fraud” sadly yields far too many results. However, if used for the purpose for which the program was originally formed, the EB-5 program still has the potential to have a positive outcome. Increasing transparency and accountability would go a long way, but that is outside the scope of this article. This article will provide a basic overview of the EB-5 requirements.

The gist of the EB-5 program is that immigrants have an opportunity to get a Green Card by (1) investing capital (2) in a new commercial enterprise (3) that creates at least 10 jobs. Upon reading, the requirements seem simple, but fulfilling them can become quite tedious and complex. To illustrate the complexities involved, let’s discuss the requirements in a little more detail. By no means is this an exhaustive discussion of the requirements. For an exhaustive discussion, there are several publications that exist, and we will also attempt to post future articles analyzing individual components in more detail.

One requirement is the immigrant must invest capital of at least $1 million or $500,000 in a targeted employment area. The United States Citizenship and Immigration Services (USCIS) regulations define capital broadly to include things such as cash, property, indebtedness secured by assets owned by the immigrant investor, and even promissory notes secured by assets the petitioner owns. This investment must also be “at risk.” “At risk” is defined for all intents and purposes in the negative. A May 30, 2013, USCIS EB-5 adjudications policy memo states, “If the immigrant investor is guaranteed the return of a portion of his or her investment, or is guaranteed a rate of return on a portion of his or her investment, then that portion of the capital is not at risk.” It should further be noted that USCIS requires the capital invested come from a lawful source, that the investor is the legal owner of the invested capital, and the investor will have to provide proof tracing the path of the investor’s funds to the enterprise into which he or she invests. As one can likely infer, documenting lawful source of funds and tracing those funds from the investor to the investment is generally no small task.

The second component requires the investor to invest capital in a “new commercial enterprise,” which USCIS defines as “any for-profit activity formed for the ongoing conduct of lawful business” established after Nov. 29, 1990 (or before said date, if the enterprise can be restructured, reorganized or expanded through the investment).  Examples of commercial enterprises include sole proprietorships, general or limited partnerships, holding companies, joint ventures, corporations, business trusts, or other publicly or privately owned entities. Enterprises that aren’t designed to make a profit are excluded. To obtain a conditional Green Card and have those conditions removed, investors will have to provide a plethora of evidence, including detailed business plans, bank statements, and/or other evidence. Strategizing and planning can help make this process more efficient and maximize the chances of satisfying USCIS requirements.

Finally, the investment must create at least 10 full-time jobs. Whether the jobs must be directly or indirectly created as a result of the investment depends on whether the investor invested in a regional center or non-regional center commercial enterprise. If the enterprise isn’t associated with a regional center, the enterprise must directly create the positions. In essence, it must employ employees to fill 10 full-time positions. If the enterprise is associated with a regional center, however, the requirement provides that direct and indirect jobs qualify to fulfill the job creation requirement. Being able to count indirect jobs obviously casts a wider net and thus offers an incentive to investing in regional centers. Nonetheless, evidence of job creation is an extremely important component of the process and USCIS requires documentation demonstrating these jobs have been or will be created to its satisfaction for immigrants to become lawful permanent residents without conditions.

This article previewed just a few of the components of the EB-5 process and implied just a few of the many challenges to filing the I-526, getting it approved, and then later getting conditions removed. Efficiency and solutions come with proper strategies, organization, and communication by and between the investor and the numerous other parties involved in the process.

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