The EB-5 is an investment-based Green Card classification that is available to investors of all nationalities. The EB-5 requires a minimum investment of $1M (or $500K in certain areas) either directly into an enterprise or through designated regional centers. Also, each EB-5 investor must create 10 jobs for U.S. workers, which includes U.S. citizens, Green Card holders, asylees, refugees, and a few other categories. It does not include the investor or his/her spouse or children, nor does it include those in nonimmigrant status such as H-1B.
The first step in the EB-5 process is to plan and make the necessary investment, after which each investor will file an I-526: Immigrant Petition by Alien Entrepreneur. Once the I-526 is approved investors will receive a two-year conditional Green Card, during which time the investment must create 10 full-time jobs for the conditions to be released. The investor will receive a permanent Green Card after filing an I-829: Petition to Remove Conditions and supporting evidence.
Currently, each EB-5 investment must be at least $1,000,000.00 unless it is in a Targeted Employment Area (TEA), in which case the investment can be as low as $500,000.00. TEAs include rural areas and areas with high unemployment rates. TEAs change often according to updated census data. Nearby populated areas they can often be situated in a way that a designated TEA where a half-million dollar investment will suffice is across the street from a non-TEA where the full million dollar investment must be made. As such, investors who are seeking the lower investment threshold should consult an immigration attorney to ensure the investment is in a TEA.
Proposed EB-5 reforms could drastically increase the minimum investment thresholds. The general investment would increase from $1M to $1.8M, which the minimum investment for TEA projects would increase from $500K to $1.35M. It would reshape the TEA/rural area regulations to encourage development outside of major cities.
EB-5 investment capital can take many forms as long as it is irrevocably committed, or put “at risk” of commercial loss with the goal of becoming a profitable business. If structured correctly, capital can be considered irrevocably committed by placing it in escrow with a third party. The investment can be cash, assets, inventory, equipment, loans and even promissory notes. Be sure to maintain proof of fund transfer(s), repayments and satisfaction of related debt(s), and evidence of the legal source of invested capital. Legal source of funds merely means that the investment capital is not from criminal activity. The law permits capital to be sourced from gifts or loans, sometimes even from the original owner of an enterprise.
The EB-5 is a popular second step for investors who have already made a qualifying E-2 investment but now wish to invest more and attain permanent residence. Such investors can make subsequent capital infusions into the business until the EB-5 investment minimum is met, which will vary according to whether the E-2 business is in a TEA or not. For example, an investor in E-2 status because of an investment of $300,000.00 for a business in a rural area would need to invest an additional $200,000.00 to qualify for the EB-5 program. Unlike the E-2 visa, the EB-5 requires the creation of 10 jobs for U.S. workers. Consult with your immigration attorney as soon as possible if you are considering the E-2 → EB-5 pathway because the E-2 business structure and location(s) should be curated with the future EB-5 in mind.
Regional Center versus Direct Investment:
EB-5 investors can either invest through a USCIS designated regional center or directly invest their capital into an enterprise of their choosing. Regional centers work by accumulating capital from several investors and coordinating the investment(s) into a project or a portfolio of projects that have been pre-approved by the USCIS. Note that the approval of a regional center and its project is not an endorsement by the USCIS of the profitability or compliance thereof.
There are numerous differences between direct investment and regional center investment. Generally speaking, regional center projects will be larger scale than that of a single direct investor because of the accumulation of funds from several investors. The executive and/or managerial role of investors are drastically minimized when investing through a regional center, which generally manage most aspects of their projects. The key difference between the two investment types is that the USCIS allows regional center investments to use count both direct and indirect job creation towards the ten full-time job requirement, while direct investors can only count direct employees toward job creation.
Direct investors can only count full-time payroll employees to demonstrate the satisfaction of the job-creation requirement. But those who invest through a regional center are also permitted to use indirect job creation as calculated by “reasonable economic or statistical methodologies.” Commonly accepted methodologies indicate indirect job creation as calculated from the project’s direct job creation, expenditures, and/or revenues. The USCIS recently quit accepting models that calculated job creation from tenant occupancy. In other words, no longer can an investor claim that, for example, a commercial development project will house five businesses with two new full-time jobs each, resulting in ten jobs created. This model was recently rejected by the USCIS because the link between the EB-5 project and the projected job creation is too weak.
There is an exception to the ten job requirement for troubled businesses because saving jobs also benefits the U.S. economy. Investments into qualifying “troubled businesses” can rely on preserved pre-existing positions as well as newly created positions to satisfy the ten job requirement. For example, an investor would satisfy the ten job requirement by buying a troubled business with seven existing full-time employees and creating three additional full-time positions. A troubled business is one that has existed for at least two years and has incurred a net loss of at least 20% of its net worth during the 12- or 24-month period leading up to filing date of the I-526.