EB-5 IMMIGRANT INVESTOR
Investor Visas
The Immigrant Investor Program, also known as the employment based fifth preference category (EB-5), was created by Congress in 1990 to stimulate the U.S. economy through job creation and capital investment by foreign investors.
The Immigrant Investor Pilot Program (commonly referred to as the Regional Center Program) was implemented in 1993, has developed into a key component of the EB-5 category.
The EB-5 requirements for the standard EB-5 investor program and the Regional Center Program are technically very similar, but the Regional Center Program may provide advantages to investors.
Congress has reserved 3,000 visas for foreign investors who invest through a Regional Center. Most EB-5 investors utilize the Regional Center Program and according to USCIS, approximately 90% of EB-5 investor petitions are filed through the Regional Center Program. Currently, there are 291 approved Regional Centers throughout the United States. More specifically, Texas has 22 approved Regional Centers.
The Regional Center Program offers investors the opportunity to invest in a “Regional Center.” A Regional Center is any economic unit, public or private, which is involved with the promotion of economic growth, including increased export sales, improved regional productivity, job creation, and increased domestic capital investment. 8 CFR §204.6(e).
The qualifying investment amount through the standard EB-5 investor program or the Regional Center Program is $1,000,000, unless the investment is in a targeted employment area (TEA). 8 CFR §204.6(f)(1-2). An investment in a TEA only requires a $500,000 investment. 8 CFR §204.6(f)(2). A TEA is defined as an area which, at the time of investment, is a rural area or an area which has experienced unemployment of at least 150% of the national average rate. 8 CFR §204.6(e). Most Regional Centers are located in a TEA. If an investor wants a TEA designation based on the case of high unemployment, he or she must provide statistical evidence of the unemployment to USCIS or a letter from the state designating it as a high unemployment area. 8 CFR §204.6(j)(6)(ii)(A-B). The TEA decision is made during the I-526 petition process, discussed further below. 8 CFR §204.6(i). The area must be designated a TEA at the time of investment and at the time of filing.
HOW TO SEEK A REGIONAL CENTER DESIGNATION?
The organizers of a potential Regional Center must apply to USCIS and request that the entity it is organizing be designated as a Regional Center under the Immigrant Investor Pilot Program. The organizers must submit Form I-924, Application for Regional Center Under the Immigrant Investor Pilot Program. The filing fee is $6,230 for Regional Center proposals and it is filed with the California Service Center.
Form I-924 must be accompanied by a proposal that demonstrates the following initial evidence requirements:
1. A description of how the Regional Center plans to focus on a geographical region within the US. The area must be contiguous and clearly identified in the application by providing a detailed map of the proposed geographic area of the Regional Center. 8 CFR §204.6(m)(3)(i).
2. How the Regional Center will promote economic growth through increased export sales, improved regional productivity, and increased domestic capital investment. 8 CFR § 204.6(m) (3)(i).
3. Demonstrate in detail how at minimum 10 new full-time jobs will be created by each individual investor within the Regional Center either directly or indirectly. 8 CFR §204.6(m)(3)(ii).
a. This will likely be done through economic models demonstrating how jobs will be created through capital investments made in line with the Regional Center’s business plan.
b. Note that the investor, spouse, and children do not count toward the 10 full-time job requirement.
4. Detailed description of promotional activities made and planned for the Regional Center and a budget for those activities. A plan describing how investors will be recruited and how the Regional Center will conduct its due diligence to ensure investor funds are obtained from lawful sources. 8 CFR §204.6(m)(3)(iii).
5. Provide how the Regional Center will have a positive impact on the regional or national economy. 8 CFR §204.6(m)(3)(iv).
a. Increased household earnings
b. Greater demand for business services
c. Greater demand for utilities
d. Greater demand for maintenance and repair; and
6. The application must be supported by economically or statistically valid forecasting tools, using economic models accepted by USCIS. 8 CFR §204.6(m)(3)(v).
To establish evidence of the above six areas, the individual seeking Regional Center designation may include the following documentation:
1. A description and documentation of the business structure of both the Regional Center and the commercial enterprises that are or will be affiliated with it. Documents may include:
a. Articles of incorporation
b. Certificate of incorporation
c. Legal creation as a partnership or limited liability company (LLC)
d. Partnership or LLC agreements
2. Draft subscription agreement for investment into the commercial enterprise.
3. Draft escrow agreement and instructions, if any.
4. List of proposed financial institutions that will serve as the escrow agent, if any.
5. Draft of an offering letter, memorandum, private placement memorandum, or similar offering to be made in writing to an immigrant investor offering capital investments through the Regional Center, and
6. Draft memorandum of understanding, interagency agreement, contract, letter of intent, or similar agreement to be entered into with any other party, agency or organization to engage in activities on behalf of or in the name of the Regional Center. The key requirements of a Regional Center proposal consist of a sound economic analysis model, prediction, or forecast based on defensible economic reasoning and a reliable statistical methodology. That analysis starts with a credible business plan that is the source of the inputs into the analysis. The business plan should describe the industry clusters or business focus for EB-5 investments. It should also contain sufficient detail to support the economic analysis for job creation within each industry category.
More generally, the current processing time for Form I-924 is approximately 8 months for an initial application and 6 months for an amended application. USCIS has stated a goal of 60 days for decisions but that has not been accomplished.
Upon successful review of the application, USCIS will approve the organized entity as a Regional Center. When USCIS approves a Regional Center, it is acknowledging that the econometric models and business plan appear to be feasible and that jobs should be directly or indirectly created through investment in the approved industry categories.
Also, note that USCIS may terminate its designation of a Regional Center if the entity does not serve the purpose of promoting economic growth, improved regional productivity, job creation and increased domestic capital investment. 8 CFR §204.6(6).
HOW DOES THE REGIONAL CENTER INVESTOR NAVIGATE THE APPLICATION PROCESS?
Once the Regional Center is approved or if the immigrant investor seeks to invest in an already established Regional Center, then the next step involves the individual investor filing Form I-526, known as an Immigrant Petition by Alien Entrepreneur. The following discussion of requirements for form I-526 relates to investment in a Regional Center, not the regular EB-5 investment program.
The petition must include evidence that the investor established a new commercial enterprise. 8 CFR §204.6(j)(1). To establish this, the investor should provide evidence of the following:
1. Articles of incorporation
2. Certificate of merger or consolidation
3. Partnership agreement
4. Certificate of limited partnership
5. Joint venture agreement
6. Business trust agreement
7. Or other similar organizational documents. 8 CFR §204.6(j)(1)(i).
A commercial enterprise is defined as any for-profit activity formed to conduct lawful business, such as a corporation. 8 CFR §204.6(e). A “new” commercial enterprise is one established after November 29, 1990, but if established on or before November 29, 1990 the investor must expand and restructure the existing business. 8 CFR §204.6(h)(2-3).
The petition must include evidence that the investor placed the required amount of capital “at risk.” 8 CFR §204.6(j)(2). To establish this, the investor should provide evidence of the following:
1. Bank statements showing amounts deposited in U.S. bank accounts for the enterprise; 8 CFR §204.6(j)(2)(i)
2. Evidence of assets which have been purchased for use in the U.S. enterprise
a. Invoices
b. Sales receipts
c. Purchase contracts; 8 CFR §204.6(j)(2)(ii)
3. Evidence of property transferred from abroad for use in the US enterprise; 8 CFR §204.6(j)(2)(iii)
4. Evidence of monies transferred or committed to the new enterprise in exchange for shares of stock; 8 CFR §204.6(j)(2)(iv)
5. Evidence of any loan or mortgage agreement, promissory note, security agreement, or other evidence of borrowing that the investor is personally and primarily liable; 8 CFR §204.6(j)(2)(v).
The above evidence that the investor provides must demonstrate that the investor is the legal owner of the invested capital, i.e. the supporting documents cannot have someone else listed as the legal owner of the capital. Matter of Ho, 22 I&N Dec. 206, 19 (Assoc. Comm’r, Examinations 1998).
The petition must also include evidence demonstrating that the investor has invested, or is actively in the process of investing capital obtained through “lawful means” in a designated Regional Center. 8 CFR §204.6(j)(3). Capital can include cash, equipment, inventory, other tangible property, cash equivalents, and indebtedness secured by assets owned by the investor. 8 CFR §204.6(e). In practice, the investor must have invested the qualifying investment before he or she files the I-526, not “in the process” as the regulations describe.
The investor must provide evidence of the lawful source of his or her funds. 8 CFR §204.6(j)(3). The evidence includes but is not limited to foreign business registration records, corporate, partnership and personal tax returns for the previous five years and evidence identifying any other source of capital. 8 CFR §204.6(j)(3). The investor will have to document the “path of funds” from its source to investment. Matter of Izummi, 22 I&N Dec. 169, 176 (Assoc. Comm’r Examinations 1998). An investor must provide supporting documentation not just mere assertions to establish his or her finances. Matter of Ho, 22 I&N Dec. 206, 19 (Assoc. Comm’r, Examinations 1998)
The lawful source of funds issue is very important. Some countries have limited documentation available and an immigrant investor must be aware of any issues that may arise in gathering documentation to demonstrate the lawful source of funds.
An I-526 petition will not be approved without clear evidence of lawful source of funds.
The petition must also include evidence that the investment will create no less than 10 full-time positions either directly or indirectly and evidence to meet this requirement may be presented through the economic or statistical forecasting tools as permitted in the Regional Center application. 8 CFR §204.6(j)(4) & 8 CFR §204.6(m)(3)(v). An economist is specialized in drafting these required statistical modules to evidence job creation.
Petitioners must also submit a “comprehensive business plan” demonstrating that the new commercial enterprise will result in ten qualifying employees. 8 CFR §204.6(j)(4)(i)(B). The business plan must be submitted under both the traditional EB-5 investment program and through a Regional Center.
A “comprehensive business plan, at a minimum, should contain a description of the business, its products and/or services, and its objectives.” Matter of Ho, 22 I&N Dec. 206, 19 (Assoc. Comm’r, Examinations 1998).
More specifically, expect to include a sample of some of the following in the business plan:
1. A market analysis
2. Names of competing businesses and their relative strengths and weaknesses
3. Comparison of the competition’s products and pricing structures
4. List of the required permits and licenses obtained
5. Discuss marketing strategy
6. Explain staffing requirements
7. Sales, cost and income projections
Finally, the petition must also demonstrate that the investor will be engaged in the daily management of the enterprise or through the Regional Center’s policy formulation. 8 CFR §204.6(j)(5). This may be established through the following:
A statement of the position title that the investor has or will have in the new enterprise and a description of the position’s duties. 8 CFR §204.6(j)(5)(i).
1. Evidence that the petitioner is a corporate officer or a member of the corporate board of directors 8 CFR §204.6(j)(5)(ii).
2. If the new enterprise is a partnership, either limited or general, evidence that the investor is engaged in either direct management or policy making activities, 8 CFR §204.6(j)(5)(iii).
Finally, if applicable, the investor must provide evidence that the new commercial enterprise has created or will create employment in a targeted employment area (TEA). 8 CFR §204.6(j)(6). Evidence may include a letter from the government indicating the area is certified as a high unemployment area. 8 CFR §204.6(j)(6)(ii)(B).
WHAT ARE INDIRECT JOBS?
The benefit to investing in a Regional Center is that indirect job creation may be included in the mandatory 10 full-time job requirement.
Most investors rely on a combination of direct and indirect job creation to fulfill the requirement of creating 10 full-time positions. Generally, an indirectly created job is a position not employed by the EB-5 company, but in other business in the community as a result of the investment. Indirect jobs are those jobs shown to have been created collaterally or as a result of capital invested in the commercial enterprise. Indirect jobs are those held outside of the new commercial enterprise but are created as a result of the new commercial enterprise. For indirect jobs, the new full-time employees would not be employed directly by the new commercial enterprise. For example, indirect jobs include employees of the producers of materials, equipment, and services that are used by the commercial enterprise.
An example of indirect job creation may be better understood by considering an investment in an aging ski resort. The investor may be able to count the direct hires, ski instructor, grooming positions & indirect new positions created by related businesses, such as shuttle services, outfitters, restaurants, hotels etc.
WHAT HAPPENS WHEN MY I-526 PETITION IS APPROVED?
Once the I-526 petition is approved, the investor either files a Form I-485, known as an Application to Register Permanent Residence or Adjust Status to adjust status to a conditional permanent resident; or the investor files a Form DS-230, known as an Application for Immigrant Visa and Alien Registration.
Once the investor’s I-485 petition is approved, the investor and his or her family are granted conditional permanent residence for a two-year period.
Within ninety days before the two year mark of the investor’s conditional resident status approval, the investor will file Form I-829, known as a Petition by Entrepreneur to Remove Conditions. 8 CFR §216.6(1). The I-829 petition must include evidence that a commercial enterprise was established by the investor, demonstrated by submitting federal income tax returns, audited financial statements, and bank statements, among other evidence. 8 CFR §216.6(4)(i-iv). The investor will also submit evidence indicating that the investor created or can be expected to create within a reasonable time 10 full-time jobs for qualifying employees. 8 CFR §216.6(4)(iv). The investor also must demonstrate that he or she maintained the capital investment throughout the two years of conditional residence. 8 CFR §216.6(4)(iii).
The Regional Center investor will have to work well in advance with the Regional Center to prepare the evidence required for the I-829.
If the petition is approved then the conditions are removed from the investor’s status and the investor and any family members that applied with him will be permanent residents. 8 CFR §216.6(a)(1).
If the investor fails to timely file the I-829 to remove the conditions then he or she will lose conditional residency status, which will result in the initiation of deportation proceedings. 8 CFR § 216.6(a)(5).
CONCLUSION
In summary, this brochure seeks to provide some initial guidance on what evidence and requirements an immigrant investor in a Regional Center may encounter on his or her journey to apply for an EB-5 visa. Clearly, there are other EB-5 issues not discussed above, but this provides a general overview of what may be encountered during the process.