The US EB-5 Investor Program is the employment fifth preference green card category that allows a foreign investor to invest in job-creating commercial enterprise in the U.S. as a means to gain permanent residency (green card status). The invested capital must be at least $500,000 and be invested in a commercial enterprise that employs at least 10 full-time workers.
What are the EB-5 Investor Visa Requirements?
There are two ways of gaining green cards via the EB-5 Investor Program, also known as EB-5 Investor Visa or EB-5 Investor green card. The foreign national investor may either invest directly into a U.S. new commercial enterprise (Direct Investment) or into an approved project EB-5 regional center project (Regional Center). While both direct and regional center investments have several distinct requirements, they must fulfill the following EB-5 investor program basic requirements:
- Investment capital must be $1,000,000 or $500,000 if exception applies;
- The investment must be made into a new commercial enterprise
- Proving the funds come from a lawful source;
- Investment must be “at risks” and no guarantee of the return of funds can be given;
- The invested commercial enterprise must employ at least ten (10) full time workers who are either U.S. citizens, permanent residents or other qualified immigrants.
- The investment must be sustained throughout the conditional residency period.
What is the required amount of money that must be invested into an EB-5 project?
EB-5 rules require that $1,000,000 be invested or that the investor be in the process of investing $1,000,000. However, the investment amount may be reduced to $500,000 if the investment is in a targeted employment area. A targeted employment area is a rural area of less than 20,000 inhabitants or an area which has experienced high unemployment of at least 150% of the national average. Because populations and unemployment rates can fluctuate, it is important that the investor have a good understanding of where the new commercial enterprise is located as the area must be a targeted employment area for the duration of the EB-5 investment.
The investment can be cash, equipment, inventory, or other tangible property, cash equivalents, and indebtedness secured by assets owned by the entrepreneur, provided that the entrepreneur is personally and primarily liable and that the assets of the new commercial enterprise are not used to secure any of the indebtedness.
How do you define a New Commercial Enterprise?
A new commercial enterprise is defined as an enterprise that is established after November 29, 1990. There are certain exceptions to the new commercial enterprise requirement which include investment into a business formed prior to November 29, 1990 whereby the purchased business is restructured or reorganized so that a new commercial enterprise results or the investment expands the business so that there is a 40% increase in the net worth or number of employees. Generally, it is less risky to invest in a new commercial enterprise formed after November 29, 1990. While an existing business can be purchased, generally it is essential to be able to prove that an additional 10 full time US jobs were created.
How to prove lawful source of investment funds?
The capital amount that a foreign investor invests into the new commercial enterprise must be shown to originate from a lawful source. Some sources of funds are much easier to prove than others i.e. sale or leverage of older, appreciated real estate. However, not all funds can be easily traced and proven to be lawful, especially if proper documentation is lacking to meet the requirements. This frequently occurs in countries where the documentary requirements are not common due to laws or procedures that are substantially different than the United States. There are many ways to prove source of funds depending on the kind of investment funds in question. All funds invested in the EB-5 investor program must be carefully traced, clearly documented in order to prove that such investment capital comes from a legal source. In addition to a U.S. immigration lawyer, an overseas accountant or tax professional may be necessary to provide a source of funds report.
EB-5 Investment Amount Must Be “At Risk”
The investment must be at risk and should be treated as any other investment where the funds are at risk. It should be an investment, not a loan. If there is indebtedness, the note must be secured by the Investor’s assets. There should not be a guarantee rate of return by the commercial enterprise. In some regional center projects the new commercial enterprise loans the invested funds into the job creating entity. However, the structure of the project should be carefully reviewed in advance of making the investment.
EB-5 Job Creation
It is essential to prove that the invested funds and the commercial enterprise create full time jobs for at least 10 qualifying U.S. Citizens or Immigrant workers within the 2 year conditional residency period. The investor him/herself and immediate family members cannot be counted among the ten full time workers. Full time employment is 35 hours per week or more. As will be described below, the advantage of regional center projects over direct investment projects is indirect job creation is permitted. Indirect job creation enables a project to utilize jobs indirectly created by the investor’s investment. Indirect job creation can be a contentious issue in EB-5 cases and it’s important to understand the methodology the regional center uses in advance as well as the projected ratio of direct to indirect jobs created. Moreover, the total capital expected to be raised should be compared to total direct and indirect jobs that are expected to be created.
How to sustain an EB-5 investment during the two years of conditional residency period?
Once the foreign investor obtained his/her temporary residence status, also known as EB-5 conditional green card, the investor must continue to “sustain” the investment in the new commercial enterprise until the end of the two year period of their conditional green card. The foreign investor must show proof of continued investment in the commercial enterprise and there was no withdrawal of the capital funds invested.
EB-5 Investment methods
There are two investment methods within the EB-5 Investor Program whereby the investor invests either directly to a newly or existing commercial enterprise, or indirectly into an USCIS approved investment project via a Regional Center.
EB-5 Direct Investment (Direct Job Creation)
When a foreign investor invests directly into a new commercial enterprise, the Investor must be involved in the management of the investment. The invested funds must directly create at least 10 full time jobs for U.S. citizens or other qualified immigrants not related to the foreign investor. Pooling investments are permitted whereby all the jobs created may be attributed to the investors. In instances where there are non-foreign investors, all the job creation can be attributed to the foreign nationals for EB-5 purposes.
EB-5 Regional Center Investment Pilot Program (Indirect Job Creation)
A Regional Center process involves a regional center that has received USCIS approval for EB-5 new commercial enterprises to operate within a particular geographical region. Most of these projects are in Targeted Employment Areas (TEA) where the investment capital requirement is reduced to $500,000 and the investment is passive.
Job creation in Regional Center projects can be indirectly created (i.e. economic studies may document how jobs are indirectly created as a byproduct of the investor’s EB-5 investment). The investor is generally not involved in the management of a regional center investment project. Obtaining Regional Center approval can be an expensive undertaking in terms of time and money. Some new commercial enterprises license the Regional Center designation for a fee. However, the investment will be bound to the respective regional area and type of activities in which the Regional Center received approval. The form of investment for Regional Center is generally direct equity investment into a new commercial enterprise or funds loaned to the job creating entity.
EB-5 Immigration Timeline
Upon approval of the EB5 Petition, also known as Immigrant Petition of Alien Entrepreneur (Form I-526) and a successful consulate interview or adjustment of status application, the investor and the dependent family members will receive conditional resident status (conditional green card), which is valid for 2 years to live and work in the United States. Travel outside the US during this 2 year period is permitted, but you should consult with your immigration lawyer about length and frequency of travel outside the United States to avoid being deemed to have abandoned the resident status. Also, naturalization considerations are a factor in overseas travel as a conditional or permanent resident.
Three months prior to the conditional residency application, the investor and the dependent family members need to file an application to remove the conditions showing that the investment has been maintained and the 10 full time jobs have been created. Upon approval of the removal of conditions application, the investor and the dependent family members will be permanent residents.
The EB-5 Investor Program is one of the most complex areas of U.S. immigration law. It requires due diligence by the Investor and an experienced immigration lawyer to help you navigate the process and strategically prepare the whole EB-5 application. Moreover, the EB-5 process usually involves a team of professionals including the immigration lawyer, overseas consultant for assisting facilitating the documents and communication with other experts, business lawyer, tax expert, investment adviser, and an overseas banker. In direct investment cases a business plan writer is important to the process. The immigration lawyer will help coordinate the process. To discuss whether you may be eligible for an EB-5 investor program, contact Cipolla Law Group for a consultation.