The Basics of EB-5 Economic Multipliers

To satisfy the U.S. Citizenship and Immigration Services (USCIS) EB-5 job creation requirement of 10 full-time jobs per investor, EB-5 investors must submit an economic report based on a statistically valid methodology. This analysis accompanies Form I-526 and must sufficiently demonstrate that the 10 jobs have been created or will be created within two years.

The approved methodologies usually rely on input/output models. Despite the common source of the data used for input and output (the U.S. Department of Commerce), some models portray a greater economic impact than others.

Two factors that heavily influence an EB-5 project’s economic multiplier are its regional center geographic coverage and its indirect economic impact on the community.

Regional Center Geographic Scope Multiplier

When an investor chooses to rent an EB-5 regional center, the new business is opened within the regional center’s area of coverage, which can be as small as several counties or as large as several states, but it must be contiguous.

A regional center with a larger geographic scope can impart the advantage of a larger EB-5 economic multiplier. Accordingly, a regional center that covers a multi-state area will have a significantly larger economic multiplier than one that covers a few counties.

As with every aspect of the EB-5 program, meticulous documentation is crucial. Though USCIS strives for objective adjudication and has approved some cases, itis generally less likely to rubber-stamp cases with economic analyses using large EB-5 multipliers based on geographic coverage. A carefully documented proposal with a sound business plan that adequately covers the geographic area has a better chance of being accepted.

Investors can take an extra step toward USCIS approval by supplementing with an Economic Spillover Report, which describes the expected EB-5 economic impact of the investment on a wider area by consolidating several county regions.

EB-5 Indirect Economic Impact / Job Creation Multipliers

The new commercial enterprise’s potential to attract residents, initiate construction projects, requireservices, and employ workers determines its EB-5 dynamic economic multiplier in some input/output models.

A variation of this dynamic EB-5 economic multiplier model includes tourism, reasoning that when a new business is opened in an area, the resulting growth draws tourists, creating a further demand 2 of 2 for goods and services, which creates more jobs. Since this job creation path often isn’t conclusively demonstrable (because such growth can easily be caused by workers moving from one business to another), USCIS typically rejects the tourism model.

We answer your questions about EB-5 economic impact multipliers at EB5 Economist.