EB-5 Immigrant Investors
Of particular concern to the local immigrants and business communities is learning about and choosing the appropriate category for investment-based travel and immigration to the United States. In this series, we will examine the various options, appropriateness for each particular case and risks associated with each.
In the second of our series on investment-based travel and immigration to the United States, we will look at the “EB-5” immigrant investor visa. There two types of immigration options available under this category: (A) “In General” – investment minimum of $1 million, and (B) “Targeted Employment Areas (TEA)” – investment above $500,000 in government pre-qualified projects. We will limit our discussion today to category (A). In the next article we will visit part (B) in more details and compare both categories in depth, appropriateness for each particular case and risks associated with each.
United States Code, 8 U.S.C. Section § 1153 101(b) (5) (A): Preference allocation for employment-based immigrants – Employment creation, describes the “EB-5: In General” visa category as follows:
Visas shall be made available, in a number not to exceed 7.1 percent of such worldwide level, to qualified immigrants seeking to enter the United States for the purpose of engaging in a new commercial enterprise (including a limited partnership):
- in which such alien has invested (after November 29, 1990) or, is actively in the process of investing, capital; and
- which will benefit the United States economy and create full-time employment for not fewer than 10 United States citizens or aliens lawfully admitted for permanent residence or other immigrants lawfully authorized to be employed in the United States (other than the immigrant and the immigrant’s spouse, sons, or daughters).
The U.S. Congress created the EB-5 immigrant investor visa category in the Immigration Act of 1990 with the goal of creating jobs for American workers by attracting foreign capital to the U.S. The investor is allowed to engage in commercial enterprise, new or existing, anywhere in the US by investing at least $1 million in a new commercial enterprise which will benefit the U.S. economy.
This category is also referred to as the fifth employment-based preference (“EB-5”); it is an immigration type visa, distinct from the E-2 treaty investor nonimmigrant visa category discussed in a previous article. There are 10,000 visas available for participants each year, divided almost equally between category (A) and category (B).
There are three basic requirements for this immigrant visa:
- Creating a New Commercial Enterprise – this can be accomplished through any of these three mechanisms:
- The creation of an original unique business;
- The purchase of an existing business and then immediately restructuring it, creating a new commercial organization; or
- The expansion of an existing business created after November 1990 through the investment of the “required amount,” so that a substantial change in the net worth or number of employees results from the investment of money. The term “substantial change” is defined to mean a 40% increase in either the net worth or number of employees.
- Amount of the Investment – the investor must invest a minimum of $1 million subject to upward or downward adjustment under certain circumstances.
- Create full-time employment for at least 10 US workers- a qualified employee must work a minimum of 35 working hours per week, and can’t be an independent contractor.
EB-5 Document Checklist
- Bank Statements (Business and Personal)
- Foreign Business Registration Records
- Tax Returns (inside or outside the U.S.) (Within the last 5 years)
- Evidence of other sources of capital (Bank Statements – twelve months)
- Passport & I-94 (for the entire family)
- Birth Certificate for principal applicant (and Family)
- Name and ages of everyone in household (Children under 21 years old)
- Marriage Certificate(s) and (divorce certificates – if any)
- The new commercial enterprise can be any for-profit entity including sole proprietorships, partnerships, corporations, holding companies with its subsidiaries, joint ventures, business trusts, etc. Noncommercial activities, such as home ownership, do not qualify.
- The investment can be in the form of cash, equipment, inventory, other tangible property, cash equivalents and indebtedness secured by assets owned by the investor. Further, the investor must prove that the funds were obtained from a lawful source and the required capital is at risk for investment purposes.
- The investor is required to be actively involved in the business either through day-to-day managerial control or through policy formulation, and cannot be a passive investor. The investor must maintain the investment for at least three years and be personally and primarily liable for the enterprise activities.
- Several foreign investors seeking the same status can pool their funds, each contributing the required statutory amount with the job created allocated amongst them to satisfy the third requirement.
- Investors, their spouses and unmarried children under the age of 21 get green cards; all will be conditional for the first two years, and are all eligible for citizenship after 5 years of living in the U.S.
- The application can be filed before making the full required investment as long as the investor can demonstrate that they are in the process of investing and enough invested capital is at risk showing strong commitment to the investment.
Of course, there is always the risk that the “EB-5” visa will be denied. But unlike the “E-2” investor visa, U.S. Embassies do not have unlimited discretion in adjudication, and a properly filed application should be easily approved by USCIS and the investor will only have to wait in line until a visa number is available at the U.S. Embassy. Nevertheless, careful planning in the formation of the investment must be used to insure it meets all the criteria established by USCIS regulations. The documentation which must be submitted, however, is quite extensive.
“EB-5” visas are very complex, and viable alternatives do exist. However, it is a great, practical and fast venue for immigration to the U.S. We recommend seeking the advice of qualified immigration/business counsel, not only for the preparation of the immigration paperwork, but in the investment of the underlying U.S. business entity, or the purchase of an already existing U.S. business.
Our immigration law professionals are sensitive to the needs of our clients and the members of their families. Many members of our staff are themselves foreign born and have family and/or friends who have gone through the immigration process. As a result, they have a personal and unique approach in the processing of visas and for dealing with our foreign national clientele.
Immigration to the U.S. is time-consuming and complex and our staff of business immigration law professionals can clearly explain the process in Arabic, French, Urdu, Mongolian, Russian and English. To schedule a consultation, please feel free to contact us at www.moawad.com.
EB-5 Investment Centers
The Immigrant Investor Pilot Program (“Pilot Program”) was created by Section 610 of Public Law 102-395 (Oct. 6, 1992), and has been extended through Sept. 30, 2012. EB-5 requirements for an investor under the Pilot Program are essentially the same as in the standard EB-5 investor program, except the Pilot Program provides for investments that are affiliated with an economic unit known as a “Regional Center.” Investments made through regional centers can take advantage of a more expansive concept of job creation including both “indirect” and “direct” jobs.
A Regional Center is defined as any economic entity, public or private, which is involved with the promotion of economic growth, improved regional productivity, job creation and increased domestic capital investment. The organizers of a regional center seeking the “Regional Center” designation from USCIS must submit a proposal, supported by economically or statistically valid forecasting tools, showing:
- How the regional center plans to focus on a geographical region within the United States. The proposal must explain how the regional center will promote economic growth in that region.
- How, in verifiable detail (using economic models in some instances), jobs will be created directly or indirectly through capital investments made in accordance with the regional center’s business plan.
- The amount and source of capital committed to the regional center and the promotional efforts made and planned for the business project.
- How the regional center will have a positive impact on the regional or national economy.
Capital Investment Requirements
Capital means cash, equipment, inventory, other tangible property, cash equivalents and indebtedness secured by assets owned by the alien entrepreneur, provided that the alien entrepreneur is personally and primarily liable and that the assets of the new commercial enterprise upon which the petition is based are not used to secure any of the indebtedness. All capital shall be valued at fair-market value in United States dollars. Assets acquired, directly or indirectly, by unlawful means (such as criminal activities) shall not be considered capital for the purposes of section 203(b)(5) of the Act.
Note: Investment capital cannot be borrowed.
Required minimum investments are:
- Targeted Employment Area (High Unemployment or Rural Area). The minimum qualifying investment either within a high-unemployment area or rural area in the United States is $500,000.
- A targeted employment area is an area that, at the time of investment, is a rural area or an area experiencing unemployment of at least 150 percent of the national average rate.
- A rural area is any area outside a metropolitan statistical area (as designated by the Office of Management and Budget) or outside the boundary of any city or town having a population of 20,000 or more according to the decennial census.