- August 14, 2016
- Posted by: eb5-economist
- Category: About the EB-5 Program, EB-5 Economics
The Immigration Act of 1990 paved the way for immigrant investors to earn permanent residence in the United States through the EB-5 Program. Through this program, United States Citizenship and Immigration Services (USCIS) grants approximately 10,000 conditional two-year visas annually to immigrant investors, who have the opportunity to apply for permanent residence at the end of that period provided they have fulfilled their obligations under the EB-5 Program.
Created to stimulate economic growth and create jobs, the EB-5 Program requires that investors commit $1,000,000 in a new commercial enterprise—or $500,000 in a targeted employment area (TEA). With their visa applications, investors must provide a comprehensive business plan outlining the job creation timeline and economic impact of the proposed business as well as documentation proving the legal source of investment funds.
While the EB-5 Program offers the opportunity for high returns and U.S. permanent residence for the investor and his or her family, the program nonetheless poses risks of which investors should be aware.
What Investment Options Exist under the EB-5 Program?
Investors are required to invest in a new commercial enterprise, meaning one established after the passage of the Immigration Act on November 29, 1990. However, certain cases necessitating the creation of jobs would allow for investment in businesses established before that date or in an existing commercial enterprise that has experienced a loss of 20% of its net worth in the two years preceding the investment.
Investors have the option of investing either directly in a TEA or in a regional center certified by USCIS. Each year, 3,000 visas are allocated for investors in each of these options.
A TEA is (1) an area with 150% the national unemployment rate or (2) a rural area with a population under 20,000. To encourage investment and economic growth in these areas, USCIS has lowered the required EB-5 investment amount from $1,000,000 to $500,000. In addition to the separate regional center option below, some regional centers invest in TEAs and will make investors aware of this fact.
A regional center facilitates EB-5 projects by acquiring funds from multiple investors, each of whom will create the required ten fulltime jobs within the two-year conditional residence as part of the project. In this scenario, as the EB-5 Program requires the funds to be placed at risk for the duration of the application process, the regional center will generally loan the funds to the enterprise responsible for job creation, this being known as the job-creating entity (JCE).
The Investment Process
The first step in applying for the EB-5 visa is to file Form I-526, Immigrant Petition by Alien Entrepreneur, to outline the business to USCIS and prove that the investor has made or is in the process of making the required investment. This application must be thorough in providing the following information:
- The investor must provide a business plan presenting the nature of the new commercial enterprise and the economic impact of the business. This plan must comply with USCIS guidelines as outlined in the Matter of Ho ruling and other recommendations.
- If the investor has invested $500,000, he or she must prove that the new commercial enterprise exists within a TEA.
- The investor must provide financial statements and escrow agreements to prove that the funds are at risk through investment in a new commercial enterprise or JCE. The investor must also prove that these funds have been sourced legally.
- The investor must prove through the business plan, financial projections, and job creation timeline that the new commercial enterprise will create ten fulltime jobs for workers in the United States.
- The investor must play an active management role in the business through direct management or by voting on policy formulation.
USCIS bases its decision to grant the investor’s I-526 petition on the comprehensiveness of the materials provided, so investors must conduct their due diligence and work with experienced professionals such as immigration and securities attorneys to file a successful petition.
Applying for Permanent Residence
Within 90 days of the two-year anniversary of the acceptance of the I-526 petition, the investor must file an I-829 petition to remove the conditions of residence. This allows the investor to become a lawful permanent resident of the United States and is contingent upon the investor having met certain obligations under the EB-5 Program, these being that the new commercial enterprise remains operational, the investor demonstrates continued involvement in its management, and the investment amount has been at risk throughout the residence period and has been used to create ten fulltime jobs during that time, as proved by financial statements and other reports.
The approval of the I-829 petition thereby grants the investor and his or her derivative family members the status of permanent residents of the United States.
Economic growth in countries such as China and India has made the EB-5 Program an attractive opportunity for foreign investors hoping to immigrate to the United States, and only recently have annual visa caps been reached. However, Chinese retrogression quotas have introduced wait times and thus further risk for some investors. Those considering applying to the EB-5 Program must therefore explore its benefits and drawbacks carefully to determine whether it suits their investment and immigration needs.