The EB-5 Category is an excellent opportunity for many foreign nationals to become permanent residents of the United States.
The important terms are more fully explained below. However, in recent years the EB-5 Regional Center Pilot Program has undergone a number of important changes. Issues such as ‘tenant occupancy’, visa retrogression for Mainland China and Targeted Employment Area designation have required changes in the approach taken by attorneys, developers and investors alike. It is important, therefore, to choose an experienced EB-5 attorney to represent you. Anthony Korda has successfully filed hundreds of investor Petitions, hundreds of Petitions to remove conditions and many Regional Center applications. He represents investor, developer, regional centers and agents and is, therefore, aware of all of the issues that might arise in an EB-5 case.
A person investing $1 million in a business that creates 10 jobs (or $500,000 in certain circumstances) may be granted EB-5 permanent resident status. The basic criteria for this status are:
- Investment must be in a business, not a passive security such as the stock market or real estate;
- Invested funds must be the individual’s, but may be a gift or a loan from a parent or other person;
- The business must have been created after November 29, 1990 or the investment must substantially restructure an older business;
- The amount of investment may be $500,000 in a rural or high unemployment area; and
- Create 10 direct new jobs – indirect job creation is permitted if the investment is in a “Regional Center”.
These investment limits may be increased when the Pilot program expires in September 2016. A proposed Bill intends to raise the minimum investment to $800,000 and $1,200,000 respectively. There are other changes proposed that may impact an EB-5 case. An early consultation with The Korda Law Firm will enable you to make a fully informed decision before proceeding to invest.
The Regional Center Program
To encourage immigration through the EB-5 category, Congress created a Regional Center program in 1990. 5,000 visas have been set aside each year for people to invest at least $500,000 in designated Regional Centers. The Regional Centers program does not require the immigrant investor enterprise itself to employ 10 U.S. workers. Instead, it is sufficient if 10 or more jobs are created directly or indirectly as a result of the investment.
Procedures
EB-5 Permanent Resident status involves making the investment, filing the appropriate petition at the USCIS Immigrant Investor Office in DC, and applying for an Immigrant Visa at a United States consulate or applying for Adjustment of Status in the U.S. After “Conditional” Resident Status (Green Card) is granted, the individual must wait one year and nine months to file an application to remove the “conditional” status. With this application, evidence of the creation of the 10 jobs, if necessary, is required as well as proof that the entire investment has been made and sustained. Upon approval of the application by USCIS, the applicant is granted Permanent Resident status.
Process
It will be necessary to prove a lawful source of funds, after which an Application may be filed with USCIS. There is at present no Premium Processing for this Visa. Once the initial petition is approved, the Visa will either be processed at the Consular Level at the US Embassy where the investor normally resides. If the investor is already present in the US, the next stage will involve filing an application to adjust status. Once approved, the (Conditional) green card will be issued for a two year period. After 21 months, the Investor files a further petition to remove conditions and, upon proof that the jobs have been created and that the investment was made, an unconditional green card is issued.
After 5 years of lawful permanent residence, the Investor and all immediate family members (Spouse and Children (once they reach 18) may apply for US Citizenship.
Investing in a new commercial enterprise ($1 million)
The law requires the investor-petitioner is investing in a “new” commercial enterprise, which must have been one established after November 29, 1990. However, contribution of capital to an “existing” business (that was formed prior to November 29, 1990) may be acceptable in two situations:
- First, the investor may substantially reorganize or restructure the existing business. The mere change in ownership, cosmetic changes to the decor of the business site, and implementation of a new marketing strategy are insufficient changes to constitute establishment of a new commercial enterprise. A complete transformation of the nature of the business is likely to be considered sufficient.
- Second, the investor may expand an existing business resulting in an increase of at least 40 percent of the net worth or number of employees of the business. CIS requires evidence of the change in business in the form of income tax returns, audited financial statements, and employment tax returns.
The investment must be in a “commercial” enterprise. Any for-profit entity formed for the ongoing conduct of lawful business may serve as a commercial enterprise. This includes sole proprietorships, partnerships (whether limited or general), holding companies, joint ventures, corporations, business trusts, or other entities publicly or privately owned. This definition includes a holding company and its wholly owned subsidiaries, if each subsidiary is engaged in a for-profit activity formed for the ongoing conduct of a lawful business. However, the term new commercial enterprise does not include noncommercial activity such as owning and operating a personal residence or buying stock on the stock exchange.
Engaging in a new commercial enterprise
While the law requires the investor to be engaged in a new commercial enterprise, CIS regulations state that if the investor is a corporate officer or board member or, in the case of a limited partnership, a limited partner, then the investor satisfies the management criteria.
Investing capital
The law requires an investor-petitioner to have invested in or be in the process of investing the required capital.
Amount of capital
The amount of required capital is at least $1 million. The minimum investment is reduced to $500,000 in cases of investment in “targeted employment areas,” which are rural areas or areas, which have experienced unemployment of at least 150 percent of the national average rate. A “rural area” is an area not within either a metropolitan statistical area or the outer boundary of any city or town having a population of 20,000 or more. The assessment of whether the investment is in a targeted employment area is based on statistical information relating to the time of investment and the location where the enterprise is principally doing business.
Equity capital
To “invest” is to contribute equity capital to the enterprise. Loans of capital by the investor to the enterprise do not qualify as an appropriate investment. The investor cannot receive any bond, note, or other debt arrangement from the enterprise in exchange for the contribution of capital.
Type of capital
“ Capital” may include cash and cash equivalents, equipment, inventory, and other tangible property. Although capital does not include loans made by the petitioner to the enterprise, the investor may borrow the investment money if it is secured by assets owned by the investor, provided the investor is personally and primarily liable for repayment of the loan, and the assets of the enterprise upon which the petition is based are not used to secure any of the indebtedness.
“At risk”
USCIS requires proof that the capital invested is “at risk.” USCIS focuses on actual and intended uses of capital to confirm that it will be used for job creation and profit-generating activity. USCIS requires more than a deposit of funds into a business account; it also requires evidence of the actual undertaking of business activity. USCIS has held that use of capital for partnership expenses and reserve accounts unrelated to job creation is insufficient.
Tracing and lawful source of funds
Documentary proof is required to show that capital is invested by the investor petitioner. Thus, an investor petitioner should present evidence that traces capital from the petitioner directly to the enterprise.
CIS also requires that an investor petitioner provide evidence to prove that the source of funds was procured by legal means. CIS requires evidence of the investor’s past five years of income tax returns and financial statements to prove the investor has sufficient lawful sources for the capital invested.
Gifted funds
The applicant may receive a gift of the funds.
Creating or saving jobs
The investor must create full-time employment for at least 10 U.S. workers. The investor and his or her spouse and children do not count toward the 10-employee minimum. Note that non-immigrants (i.e., those with E, H, L, and other temporary worker visas) are also excluded from the 10-employee requirement. An “employee” is an individual who provides services or labor for the new commercial enterprise and receives wages or other remuneration directly from the new commercial enterprise. Independent contractors are excluded under this definition.
Types of jobs
The jobs created must be full-time, i.e., positions that require a minimum of 35 working hours per week. Part-time jobs do not count. However, job-sharing arrangements where two or more qualifying employees share one full-time position will be counted.
When jobs must exist
The petitioner may base the petition on proof that the required jobs have been created or on proof that the required jobs will be created before the end of the two-year period of conditional residence. In the latter case the investor must support the petition with a comprehensive business plan demonstrating a need for at least 10 employees before the end of the conditional residence period.
Troubled business/saving jobs
Special rules govern investments in “troubled” businesses. A troubled business is one that has been in existence for at least two years, has incurred a net loss for accounting purposes during the 12 or 24 month period before the petition was filed, and the loss for such period is equal to at least 20 percent of the business’s net worth before the loss. If the petition is based on investment in a troubled business, the investor is not required to create 10 new jobs. Instead, the petition may be based on proof that the business will maintain the number of existing employees during the conditional status period.
REGIONAL CENTER INVESTMENTS ($500,000)
To encourage immigration through investment, and to concentrate investment in specific regions, Congress created a temporary Pilot Program in 1993, directing USCIS to set aside visas for people who invest in a designated “Regional Center. The Pilot Program does not require that the immigrant investor enterprise employ 10 U.S. workers as long as the investor can reasonably demonstrate that the investment in the Regional Center has indirectly created 10 or more jobs and has resulted in improved regional productivity. USCIS has designated a number of Regional Centers located throughout the country and these usually provide the relevant information to the satisfaction of USCIS.
The 10-employee requirement deters many immigrant investors. To resolve this, in 1993, an option was created whereby immigrants may invest $500,000 or more in CIS-designated “Regional Centers” in a high unemployment area.
In this program, a promoter makes a proposal to the CIS. If the CIS finds it will benefit a regional economy and shows potential for providing significant indirect employment, the project will be designated a Regional Center. With CIS approval, the promoter forms a limited partnership or corporation. Investors may apply for green cards upon investing in the relevant Program.
Investors in a Regional Center need not have day-to-day management responsibility nor are they required to prove that the business employs 10 people. Instead, they are entitled to rely on a statistical model provided by the relevant Regional Center Management. A Regional Center means that the CIS is satisfied with the job creation potential. We can provide you with information about specific Regional Center Investments for you to perform due diligence analysis.
Potential Investors should note that most, if not all of the Regional Center Programs charge an Administrative Fee (usually $50,000) and that this does not include the cost of immigration legal fees for the Investor and his family.
