EB-5 INVESTOR GREEN CARD

EB-5 Immigrant Investor visas become more and more popular. Unlike the E-2 investor visa which requires a treaty of foreign commerce and friendship between the U.S. and foreign national’s home country, the EB-5 enables people from any country (including China, India, Brazil, Russia and Venezuela) to immigrate to the U.S. provided they have the required funds to invest here in a business enterprise to create jobs in America and stimulate the American economy. The word capital does not mean only cash. Instead, the broad definition of capital takes into account the many different ways in which a person can make a contribution of financial value to a business. Capital can include the immigrant investor’s promise to pay (a promissory note), as long as the immigrant investor is personally and primarily liable for the promissory note debt and his or her assets adequately secure the note.

Permanent residence is permissible for investors who invest in a commercial enterprise that will benefit the U.S. economy and create at least 10 full-time jobs. The immigrant investor is required to invest his or her own capital. The petitioner must document the path of the funds to establish that the investment was made, or is actively in the process of being made, with the immigrant investor’s own funds. For petitions filed on or after March 15, 2022, the capital must be expected to remain invested for not less than 2 years.

The immigrant investor must invest at least the standard minimum investment amount in capital in a new commercial enterprise that creates no fewer than 10 jobs for U.S. workers. An exception exists if the immigrant investor invests their capital in a new commercial enterprise that is principally doing business in and creates jobs in a TEA or, for regional center petitions filed on or after May 14, 2022, in an infrastructure project.

This means that the present fair market value, in U.S. dollars, of the immigrant investor’s lawfully-derived capital must be at least $1,000,000, or $500,000 if investing in a TEA for petitions filed before March 15, 2022. For petitions filed on or after March 15, 2022, those amounts are $1,050,000 or $800,000 if investing in a TEA or infrastructure project, and will automatically increase January 1, 2027, and every 5 years thereafter.

The EB-5 program grants two-year conditional visas to individuals seeking permanent residence based on their involvement in a new commercial enterprise. These visas are also available for the investors’ immediate family members. Investors can qualify for an EB-5 visa in three ways:

• • • • • Under the first option, a foreign national is required to invest $1 million in a commercial enterprise. After the two-year conditional period has expired, the visa holder must prove that the enterprise directly created ten full-time U.S. jobs in order to receive legal permanent resident status.
        • EB-5 visas are also issued to foreign nationals who invest $500,000 in enterprises located in rural areas – with populations of less than 20,000 – or in areas with unemployment rates at 150 percent or more of the national unemployment rate. As with the first option, the granting of legal permanent resident status is made contingent upon whether or not the enterprise directly created ten full-time U.S. jobs.
        • Under a so-called “Immigrant Investor Pilot Program,” foreign nationals can combine their investments in “regional centers.” Investors may prove that their enterprises either directly or indirectly created ten U.S. jobs, and they must meet the employment requirement at the end of the two-year conditional period to qualify for adjustment to legal permanent resident status.

About 10,000 visas are set aside annually for the EB-5 program, with 3,000 of these reserved for the Immigrant Investor Pilot Program.  (8 U.S.C. 1153 (b)(5)).

Elements of EB-5 Visas:

1. The enterprise must be new (formed after November 29, 1990) and it must be a commercial enterprise.  An enterprise formed before this date may qualify if an investor “restructures” or “expands” an existing business. Regardless of methods used to create a “new” enterprise, the focus of the law is on the creation of at least 10 incremental employment opportunities. Investments creating a new enterprise but failing to create 10 new jobs will fail to qualify for EB-5 classification. In addition, “new commercial enterprise” does not include noncommercial activity, such as owning and operating a personal residence or nonprofit enterprise.
2. To show that the petitioner has invested or is actively in the process of investing, the petition must be accompanied by evidence that the entire capital amount has already been invested and is at risk in the commercial enterprise at the time of the petition.  The regulation defines “capital” as cash and cash equivalents, equipment, inventory, stocks, LP interest, and other tangible property. Capital does not include loans by the petitioner or other parties. However, indebtedness secured by assets owned by the petitioner may be considered capital, provided the investor is personally reliable for the debts and the assets of the enterprise upon which the petition is based are not used to secure any of the indebtedness. See article by H. Ronald Klasko that discusses investment requirements.  EB-5 investor
3. The petitioner must have legally acquired the funds invested, including being in legal immigration status if funds are eared or acquired in the U.S.  To establish that capital used in the new enterprise was acquired by legitimate means, the following types of documentation may be filed: (1) foreign business registration records; (2) personal and business tax returns, or other tax returns of any kind filed anywhere in the world within the previous five years; (3) documents identifying any other source of money; or (5) certified copies of all pending governmental civil or criminal actions and proceedings, or any private civil actions involving money judgments against the investor within the past 15 years. China and Russia are under high scrutiny.
4. To show that his or her investment will create at least 10 full-time positions for US workers, i.e. U.S. citizens,  lawful permanent residents, and H-1B visa holders; jobs must be full-time : 35 hours minimum, part-time employees do not count, but two employees are allowed to share one full-time position; petition must be accompanied by one of the following. 
   • Photocopies of relevant tax records, Forms I-9, or similar documents for 10 qualifying employees; or
   • A comprehensive business plan showing the need for at least 10 qualifying employees, and when the employees will be hired.
5. The petitioner must be involved in the day-to-day managerial control of the enterprise.  This requirement may be evidenced by: (1) a comprehensive job description for the petitioner; (2) evidence that the petitioner is a corporate officer or on the board of directors; or (3) evidence that the petitioner is involved in direct management activities or policy-making activities of a general or limited partnership.
6. Debt instruments are prohibited for EB-5 investments, i.e. EB-5 enterprise cannot promise to repay the investor.  However, the investor can lend money from a family member or a bank and invest into enterprise.

Troubled Business Investment

An investment in a troubled business enterprise must meet the following criteria to be considered an eligible investment for EB-5 purposes:

• Must be in the process of investing at least $1,000,000 in the United States, OR
• Must be in the process of investing at least $500,000 if the enterprise is located in a Targeted Employment Area (TEA)
• The business enterprise must have existed for two years
• The business enterprise must have incurred a net loss for the 12 to 24 month period prior to submitting an application
• This net loss must be at least 20% of the business’ net worth before the loss was incurred
• Upon investment, the enterprise must maintain the pre-investment level of employment for at least two years
• The investor must be involved in the day-to-day management or policy making for the business

Regional center program: 

Under this program, foreign investors who invest $500,000 or more in economically challenged U.S. regions qualify for immediate immigration to the U.S. together with their families. They will be issued conditional green cards that are valid for two years and eligible to have the conditions removed at the end of the two year period if all requirements are met. Review the list of Regional Centers.

How to Evaluate a Regional Center?

When was the company granted USCIS Regional Center Designation?

In 2002 USCIS imposed stricter requirements on existing regional centers and new regional center applications. To maintain their designation and to continue operations, centers approved in the 1990s , were required to reapply to USCIS and demonstrate that they met the new requirements. Often referred to as a “re-designation,” some of the older regional centers successfully showed they met the new requirements and were approved after 2002.

How many investors have received I-526 petition approvals?

In the Designation Regional Center setting, I-526 petition approvals show that the specific investment used by the investor meets the requirements of the EB-5 visa.  Regional Center Designation by itself does not satisfy these requirements.  Regional centers with a history of many I-526 approvals have more experience working with USCIS and often a better understanding of what is required for the investors to receive them.

Does the regional center have any investors with an approved I-829 Removal of Conditions?

 Each I-829 Removal of Conditions petition approval is a key indicator of the quality of the EB-5 investment, the viability of the business enterprise, the strength of its executives and managers, the soundness of the business and employment plan, and the capabilities of the regional center and its staff.  Regional centers that have I-829 petition approvals have been in business longer and their investment programs have been proven to produce results that meet the requirements for unconditional permanent residency.  Further, at the I-829 Removal of Conditions step, a regional center’s familiarity with Service Center expectations is extremely valuable.

Does the investor have to pay the regional center an upfront administrative fee or subscription fee?

 Most regional centers charge investors a fee to participate in their investments.  Often referred to as administrative, syndication, or subscription fees, these charges may or may not cover attorney fees or USCIS application fees for preparing and processing various visa applications.  In some cases this fee is the only source of income for the regional center.  When considering alternative investments, it is important to know the fees, what they cover, and what other costs the investor will have to pay.  In many cases, once the fee is paid the regional center has no further financial interest in the final outcome of the EB-5 qualifying investment.  Fees of this sort should not be confused with deposits required by some regional centers to pay for services rendered on behalf of the investor such as legal fees and USCIS filing fees.

Does the regional center sponsor have a track record of business success?

Regardless of the visa benefit, EB-5 investments are real businesses with large amounts of capital at risk. To earn profits, avoid losses, and meet the objectives of the business plan, these projects require experienced management and executive leadership by seasoned business people.  This essential ingredient is missing in some EB-5 investments managed by people who have no experience in the business of the enterprise and in some cases, have no experience successfully running businesses at all.

Do investments sponsored by the regional center fit the ‘at-risk’ description outlined in the EB-5 precedent case decision Matter of Izummi?

          Matter of Izummi describes the requirements to qualify an EB-5 investment as truly ‘at risk.’  Matter of Izummi states:

“An investment assumes that a risk exists.  The alien must go into the investment not knowing for sure if he will be able to sell his interest at all after he obtains his unconditional permanent resident status; and if he is successful in selling his interest, the sale price may be disappointingly low (or surprisingly high and more than what he paid).  This way the alien risks both gain and loss.  To allow otherwise transforms the arrangement into a loan.”

There has been a recent resurgence of investment models that are structured similarly to a loan.  In these circumstances, the manner by which the funds go to the enterprise looks like a loan, pays interest like a loan, and is repaid like a loan. However, any type of redemption agreement or guaranteed return of capital is expressly prohibited for those seeking permanent residency through the EB-5 investor visa category.  To offer such a guarantee would violate the “at risk” requirement and greatly jeopardize the applicant’s immigration process.

How does the regional center, or the investment entity, protect its investors from investment risk?

 EB-5 investments have 2 risks.  One deals with visa qualification.  The other is the loss of the investment. Some regional centers may not have the experience or the resources necessary to manage these risks and meet their investors’ immigration and investment expectations.  Experienced, well-conceived regional centers manage the EB-5 visa process and oversee the investor’s interest in the business enterprise.

What is the projected exit event?

The exit event describes the time and circumstances of the return of the investment.  Not all regional centers have a clearly defined exit event that, upon close analysis, exhibits a high probability of actually occurring.  A full understanding of if or how the investment will be returned and when this will occur is essential to making a well informed decision to invest in a regional center or program.

Where is the EB-5 project located?

The location of the project should accommodate the specific needs of the business enterprise.  Factors such as facility requirements, availability of an appropriately skilled workforce, access to suppliers, and convenience for consumers, should all be considered.

Is the regional center sponsor physically located within the regional center’s area of operation?

Projects located near the offices of a regional center provide convenient access for prospective investors to complete their due diligence of the investment.  Proximity to their projects also allows a regional center frequent and routine oversight and management of the investment on behalf of the investor.  This also enables the principals of the center, and the managers of the business enterprise, to respond quickly to questions or concerns of investors.

Is it possible to tour the project location with a regional center representative?

With many regional centers scattered throughout the U.S., it can be very difficult to assess them and the projects they promote.  A site visit to the project provides an efficient way to evaluate the regional center and the quality of their investments by having a face-to-face meeting with the principals of the center and key executives of the projects.

1. Inability to demonstrate direct job creation (just for two years, employees can vary)

To file I-829 – Petition to remove condition

• W-2s (not 1099 or illegal employees);
• Form I-9s;
• Quarterly and annual reports;
• Quarterly and annual tax returns;
• Payroll records;
• Proof that employees are USCs, LPRs, H1-Bs.

2.  Difficulties to prove that the business falls within the definition of a “new commercial enterprise”

•   For new enterprises – Corporate formation documents
•   For investors that acquire an existing business
•    Either proof that they significantly restructured an existing business, or
•    Expended the existing business by at least 40%

3. Business plan is not approved.

A business plan that is compliant with Matter of Ho. [22 I&N Dec 206 (July 31, 1998).]

(1) Merely establishing and capitalizing a new commercial enterprise and signing a commercial lease are not sufficient to show that an immigrant-investor petitioner has placed his capital at risk. The petitioner must present, instead, evidence that he has actually under taken meaningful concrete business activity.

(2) The petitioner must establish that he has placed his own capital at risk, that is to say, he must show that he was the legal owner of the invested capital. Bank statements and other financial documents do not meet this requirement if the documents show someone else as the legal owner of the capital.

(3) The petitioner must also establish that he acquired the legal ownership of the invested capital through lawful means. Mere assertions about the petitioner’s financial situation or work history, without supporting documentary evidence, are not sufficient to meet this requirement.

(4) To establish that qualifying employment positions have been created, INS Forms I-9 presented by a petitioner must be accompanied by other evidence to show that these employees have commenced work activities and have been hired in permanent, full-time positions.

(5) In order to demonstrate that the new commercial enterprise will create not fewer than 10 full-time positions, the petitioner must either provide evidence that the new commercial enterprise has created such positions or furnish a comprehensive, detailed, and credible business plan demonstrating the need for the positions and the schedule for hiring the employees.

4.  Risk that investment will no longer be considered to be in a rural area or a TEA, therefore raising the investment from half a million to one million.

List of documents investors need to provide

1.      Narrative of the investor’s past earning history, current occupation or business, history of how he or she has made the investment funds;

2.      Investor’s CV;
3.      Investor’s academic degree;
4.      Five years’ worth of tax returns for every country where the person has paid taxes;
5.      If the investment funds come from a business the investor owns, add:

• Five years of the business’s tax returns or audited financial statements;
• Website printouts showing the existence of the business and other relevant materials
• Business info and registration
• recent bank statements

6.      If the investment funds come from earnings from an employer, add:
one or two years of pay stubs;

• employment confirmation letter confirming the individual’s title, rate of pay, and length of employment;

7.      Recent bank account statements showing personal savings;
8.      Recent securities account statements if the money comes from stocks, bonds, or trading.
9.      If the investment funds are a gift from a family member, add:

• Document as relates to the giver, as well as the investor;
• A gift affidavit explaining the reason for the gift, and how the giver has earned his or her money;
• Documentation of the relationship between the giver and investor.

10.  Criminal history
11.  History of any financial investigations
12.  Office of Foreign Assets Control license if required

      Resources:

U.S. Policy Manual

Census Bureau Homepage 

Bureau of Labor Statistics 

Fact Finder

CONTACT WASHINGTON, D.C. IMMIGRATION LAWYER TO HELP YOU WITH YOUR INVESTMENT APPLICATION.

Follow
Irina Vinogradsky on Google+!