The United States Citizenship and Immigration Services (USCIS) aims to prioritize immigrants who will contribute to the American economy and assist in job creation. The EB-5 visa was designed to allow foreign investors the chance to invest in new commercial enterprises around the country and create jobs for the community.
The EB-5, Green Card through investment, is an immigrant visa category created in 1990 by Congress for immigrants who engage in a commercial enterprise that will benefit the U.S. economy and create at least 10 full-time jobs. Approximately 10,000 visa numbers are allocated annually to EB-5 investors, their spouses and unmarried children under 21.
In order to qualify for the EB-5 visa, investors must
This visa grants investors and their dependents conditional residency for their first two years in the U.S. A petition to remove conditions, also known as the I-829 petition, needs to be filed within 90 days before the end of their two-year conditional residency period.
The principal investor and the investor's spouse and unmarried children under 21 years old can all obtain their green cards through this category.
They do not need to have a degree of higher education and previous business experience. In addition, they do not need to speak English.
The amount of capital depends on where you invest your money. As of October 2021, the required minimum EB-5 investment amount is $1 million and the minimum amount for investment in a Targeted Employment Area (TEA) or rural area is $500,000. The TEA is an area that has experienced unemployment of at least 150 percent of the national average rate. This is the same investment standard used between 1990 and November 20, 2019.
The EB-5 minimum investment amount has been a controversial issue in recent years. On November 21, 2019, the EB-5 Immigrant Investor Program Modernization Final Rule (PDF) (“Final Rule”) took effect. Under this Final Rule, the standard minimum investment level will increase from $1 million to $1.8 million. $900,000 is needed if the investment is in the TEA or a rural area. The Final Rule also eliminates a state’s ability to designate certain geographic and political subdivisions as high-unemployment areas; instead, the Department of Homeland Security (“DHS”) would make such designations directly based on revised requirements.
On June 22, 2021, the U.S. District Court for the Northern District of California, in Behring Regional Center LLC v. Wolf, 20-cv-09263-JSC, vacated the Final Rule, which reverted the EB-5 minimum investment amounts back to the pre-November 21, 2019 level.
On August 23, 2021, DHS appealed the U.S. District Court decision in Behring Regional Center LLC v. Wolf, which held the Final Rule invalid. If the Ninth Circuit reverses the opinion of the U.S. district court, the minimum investment amount may revert back to the investment amounts set forth in the EB-5 Final Rule ($900,000 for Targeted Employed Area (TEA) investments and $1.8 million for non-TEA investments).
With this ongoing uncertainty, we advise each EB-5 investor to double check with your immigration attorney about the correct investment amount and understand the potential risks of making a lower amount investment during the pendency of the appeal.
The definition of "New Commercial Enterprise" under the EB-5 program is very special: it only refers to for-profit businesses established after November 29, 1990. Companies established before this are called "existing businesses".
To establish a new commercial enterprise, there are three ways according to 8 CFR §204.6(h):
(1) Create a brand-new company;
(2) Acquire an existing company and reorganize at the same time or later to form a new commercial enterprise;
(3) Expansion of an existing company through investment to increase its net worth or number of employees by 40%. If you acquire a troubled business, you only need to retain the original employees. If the number of original employees is less than 10, you need to make up to 10.
Obviously, considering the purpose of immigration, it is easier to meet the EB-5 requirements to create a “brand new” enterprise than to acquire a business established before November 29, 1990.
These are the primary advantages of investing through a Regional Center:
Statutory authorization for the EB-5 Regional Center Program lapsed on June 30, 2021. The EB-5 industry is still waiting for the Congress to reauthorize the Regional Center Program.
Due to the lapse in statutory authority for the Regional Center Program, starting on July 1, 2021, USCIS will:
Direct EB-5, as the name implies, means that the jobs created by this kind of EB-5 investment must be direct. They have to be on the business’s payroll. The business should issue Form W-2 to those employees, but not Form 1099, which usually is issued to independent contractors. In contrast, regional center affiliated jobs can be direct, indirect and induced jobs. What jobs will be counted is the key difference between the regional center program and direct EB-5 investment.
In comparison to the regional center affiliated EB-5, investors who choose to make investments in direct EB-5 usually have more control of the business and are more actively involved in the day-to-day operations of the business. In a typical regional center project, the investor may just be one of the hundreds investors, who are called limited partners. They rarely participate in the day-to-day management of the business though they still keep somewhat involvement in the decision making process.
In terms of direct EB-5, the foreign investors typically invest in businesses that sell products or services that they are familiar with, or businesses that they have a personal connection with, such as a friend’s or relative’s business. They may also use their wholly-owned U.S. business as the vehicle for their EB-5 petitions.
There is a widespread misunderstanding about the EB-5 program that only projects in regional centers can reduce investment to 500,000. In fact, the amount of investment does not depend on whether it is a regional center, but whether you invest in a Targeted Employment Area (TEA), that is, an area with an unemployment rate of 1.5 times the national average, or a remote area..
In choosing a business that is suitable for direct EB-5, you should ask:
Since the regional center program has expired, direct EB-5 becomes the only option currently available for foreign investors in the EB-5 category.
There are three steps in order to become an unconditional permanent resident (Green Card holder):
Investors and their families have a high stake in the outcome of their EB-5 visa applications. Due to the complexity of the EB-5 laws and regulations, professional assistance from an experienced EB-5 attorney is recommended..
Choosing a safe and stable EB-5 project is an important step in the EB-5 application. This is because whether the EB-5 project you invested in can create the required jobs as scheduled, and whether the business can continue to operate while you hold a conditional residency are necessary conditions for you to ultimately obtain a permanent green card in the United States. Whether it is a regional center project or a direct EB-5 project, you must do the due diligence yourself to reduce the blindness of investment.
We often encounter situations like this: When we ask investors why they choose a particular project, they usually say that it is because of the recommendation from an immigration agency. If we continue to ask if they know the details about the project, many people will give a negative answer. This is understandable since EB-5 investment documents, such as the Private Placement Memorandum (“PPM”) and Partnership Agreement are written in complicated English with many profound legal terminologies. They usually run for more than 100 pages. Many foreign investors do not speak English. Even if they do, lacking legal or financial knowledge may still cause problems for them to fully understand what those documents say. We strongly suggest investors seek independent opinions from qualified EB-5 attorneys and financial advisors.
Law Office of Lu & Associates is an experienced EB-5 law firm that has assisted a number of high net worth individuals with obtaining U.S. permanent residency through EB-5 petitions. We have the expertise to put together the many moving parts of a direct or regional center EB-5 petition in a smooth and effective manner. We have kept an excellent track record for EB-5 petitions. Please feel free to contact us with your questions.
The source of funds issue is critical for EB-5 Green Card success.
The EB-5 regulations require that the investor prove the invested capital was “obtained through lawful means.” To show that the investor has invested or is in the process of investing capital obtained through lawful means, the regulations at 8 C.F.R. §204.6(j)(3) require that the EB-5 petition include, as applicable, foreign business registration records, corporate, partnership and personal tax returns filed within 5 years, evidence identifying any other source of capital, or documentation of court judgments or pending court cases. The USCIS wants to see (1) how the investor initially obtained the money used for the EB-5 investment and (2) a clearly documented “path of funds” from the original source to the commercial enterprise’s bank account. In practice, the USCIS is prone to hyper-technicality. Be prepared to provide much more extensive documentation than anticipated in the regulations.
The investor may encounter varying country-specific issues in documenting source of funds. Some countries rely heavily on cash transactions or do not require individuals file tax returns, thus making it very difficult to document the source of funds. In some instances, the investor’s tax returns may indicate much less income than what he/she claims to have. In both these cases, it becomes necessary to provide USCIS with an abundance of evidence that will serve to counter any negative inferences that may be drawn.
For example, an investor claims that his EB-5 capital was from the sale proceeds of his house. Besides the documents about the sale, the I-526 petition should also include documentation to prove how this investor initially acquired this house. If the down payment was paid with his accumulated salary, he needs to provide further evidence about his employment. If the house was a gift from his parents, the investor will have to trace his parents’ income as well to show how they bought that house in the first place.
Tracing the EB-5 source of funds and path of funds is tedious. It involves extensive evidence. As a law firm that has abundant first-hand experience in tracing the legal source of funds for investors, we help our clients review their available assets and find the optimal solutions for them. Each client may have a different combination of assets. We evaluate the difficulty in obtaining supporting documents for each asset and suggest practical ways to retrieve relevant documentation. You may schedule a 20-minute free consultation for generic questions about EB-5.
Many EB-5 immigrant investors have fallen victim to scams that have put their personal wealth in jeopardy and taken away their opportunity to attain a U.S. green card. Depending on where the investor is in the immigration process and how much funds have been deployed in the project, the investor will have different remedies available to him/her. The investor may need to work with a group of attorneys, such as immigration attorney and security litigation attorney to secure his/her best interest.
Our years of experience specializing in this area allow us to help foreign investors through the process, helping you obtain your green card in a timely manner. Contact us today for a free consultation.
