Why the EB-5 Program Requires Economic Analysis
Congress implemented the EB-5 investment program in order to spur economic growth by creating jobs without drawing on taxpayer funding. To meet this goal, a measurable economic impact must be produced by each EB-5 project, the centerpiece of which is the creation of 10 full-time jobs per investor.
U.S. Citizenship and Immigration Services (USCIS) describes the jobs that count toward this requirement:
- direct jobs—employees of the new business
- indirect jobs—positions created by other businesses to supply goods and services for the project
- induced jobs—positions created by other businesses in response to wage spending by the project’s employees
Investing through an EB-5 regional center enables the investor to meet the job creation requirement more readily. While investors who invest independently may only count direct jobs, investors who affiliate with a regional center can include direct, indirect, and induced jobs in their total. It also helps when a project receives most of its funding from sources other than EB-5 investments; these projects typically provide more jobs per investor and lessen the difficulty of meeting the requirements.
Before submitting Form I-526, the investor is obligated to demonstrate to USCIS that the positions have been or will be created. For regional center projects, which count indirect and induced jobs, this is where an economic analysis comes in.
EB-5 Economic Analysis Determinants
Of the factors that determine the project’s economic impact on its community and influence EB-5 economic impact analysis, industry and geographic location are the most meaningful.
Based on their activities, businesses are assigned codes according to the North American Industry Classification System (NAICS). This system is a simple way to sort businesses into industrial categories (such as finance, real estate, or healthcare) for statistical purposes. Since some industries have larger multipliers than others, the NAICS code is an important element of the economic analysis. For example, manufacturing engenders a more extensive economic impact than retail.
The location and impact area of a regional center investment project are based on where the new business sells its goods and services and where its employees reside. A larger area and higher population are both factors that result in a larger multiplier because they yield more bountiful job creation.
How Economic Analysis Estimates EB-5 Job Creation
USCIS guidelines call for the use of reasonable methodologies to calculate job creation. The most widely employed models for EB-5 economic analysis are input/output models such as RIMS II and IMPLAN. EB5 Affiliate Network encourages the use of RIMS II since it originates from the U.S. Department of Commerce and often estimates job creation numbers more generously.
These input/output models portray the flow of money in an economy by using a multiplier to show how a change in one part of the economy affects interdependent industries. In the case of EB-5 projects, they effectively depict the radiating direct, indirect, and induced economic effects of a new commercial enterprise rather than simply considering the infusion of capital from the EB-5 investor. The project catalyzes changes in revenue, construction spending, salary spending, and tenant occupancy in related industries. These changes can be used to measure EB-5 economic impact.
To learn more about EB-5 economic impact analysis, visit EB5 Economistor call usat (800) 775-1988.