Understanding EB-5 Job Creation for Real Estate Projects

The EB-5 program is designed to create jobs, so a clear understanding of what U.S. Citizenship and Immigration Services (USCIS) considers a job, how EB-5 job creation totals are calculated, and the deadline for their creation is essential for EB-5 investors. Here we explore real estate projects, which generally divide job creation into the categories of construction and operations.

EB-5 Construction Jobs

Direct, indirect, and induced jobs related to the construction phase of the project are all categorized as construction jobs; however, only direct jobs that continue for at least two years count toward the EB-5 job creation total. Consequently, the project’s direct and indirect job numbers must be distinguished in its job creation report.

USCIS documentation requirements for construction jobs include the items listed below. Failure to furnish the requisite documentation may result in lower job creation numbers.

  • A job creation report that delineates the numbers of direct and indirect jobs and a timeline of expected construction with corresponding monthly costs
  • A business plan with the same timeline and cost projections
  • A third-party analysis that validates the timeline and cost projections

EB-5 Operations Jobs

Positions available in the businesses the developer owns or in businesses leasing space in the development (tenants) are considered operations jobs. Since many tenant jobs are not actually created, but simply transferred from an older location to a space in the new development, USCIS requires authentication of tenant jobs as genuinely new in order to count them. Developer jobs, on the other hand, are easily included.

To authenticate tenant jobs, an unaffiliated party may conduct an analysis to prove jobs that would be otherwise nonexistent are created by the development’s meeting a need in the community. Any EB-5 investor determined to include these jobs must submit such an analysis along with the I-526, but most investors exclude tenant jobs from their applications since proving their creation is a challenge. Wise EB-5 investors avoid projects in which meeting the EB-5 job creation requirement depends on the ability to count tenant jobs.

EB-5 Job Creation Requirements

In every case, it’s vital that EB-5 investors thoroughly research projects before committing investment funds and submit all the necessary job creation documentation to gain USCIS approval. Each investor must prove his or her investment creates 10 full-time jobs to meet EB-5 program requirements.

An EB-5 project that creates 100 jobs can theoretically support 10 investors; however, it’s unwise for a regional center to allot the maximum number of investors to a project because it leaves no room for error in the anticipated job creation numbers. If USCIS were to dispute the job creation projections, those investors’ petitions would be subject to a greater possibility of denial.

One way regional centers can minimize risk for investors is by preserving a job cushion. Only 80% to 85% of projected jobs should be taken into account when recruiting investors to help them safely meet EB-5 program requirements. For a project expected to create 100 jobs, no more than eight investors should be tapped, leaving a cushion of 2.5 jobs per investor. In this case, if the project fails to create 12.5 jobs per investor, it’s still likely to create at least 10.

Real estate construction job numbers are part of the EB-5 job creation report. Their calculation is based on the factors listed below. The exclusion or inclusion of these factors in the job creation calculations depends on their correlation with job creation and economic stimulus. Investors should be judicious about which of these factors to include since poor projection can negatively influence I-526 approval.

  • Soft construction costs include fees such as architectural, engineering, financing, permit filing, and legal fees; most are excluded from job creation calculations.
  • Hard construction costs are the cost of building the development, such as materials and labor; most are included in job creation calculations.
  • FF&E are built-in or freestanding furniture, fixtures, and equipment necessary to complete the development.

Coordinating EB-5 Job Creation With the I-526 Application

To gain approval for the EB-5 visa, real estate investors must be fully informed about their investment’s job creation potential. Meticulous planning, conscientious calculation of construction and operations jobs, job creation within the program’s time constraints, and precise documentation are integral to an effective I-526 application. About two and a half years passes between I-526 filing, when the EB-5 investor applies for a conditional green card, and I-829 filing, when the investor applies to remove the conditions. This is the period in which USCIS dictates that the investor must create the required number of jobs, though in actuality it’s often longer.

When the construction phase of a project is expected to be completed in less than two years, investors can include construction jobs by filing the I-526 no more than two and a half years before the anticipated end date of the construction. When construction is projected to last more than two years, regional centers can create jobs on a timeline that safeguards each investor’s job creation numbers to enable them to file the I-526 at the right time.

Documentation required by USCIS includes a credible business plan and job creation report with thorough descriptions of operations jobs created during the relevant period. The figures projected in these documents need to have been confirmed by a third-party analysis. An economic impact analysis should be submitted for the project providing details about the number and timeline of created jobs and the date of I-526 filing for each investor.

Investors and regional centers will need to work together to coordinate the construction and operations job creation timeline with the optimal time for investors to file I-526 applications.Regional centers will also need to ensure construction cost calculations accurately reflect the project’s job creation potential and calibrate the number of EB-5 investors contributing to a project to the number of jobs. This will provide enough flexibility to enable all the project’s investors to meet the EB-5 job creation requirements.

Contact EB5 Economist at (800) 775-1988 to learn more about EB-5 job creation requirements and EB-5 real estate development projects.