The Immigrant Investor Program, also known as “EB-5,” provides a means for foreign nationals to obtain Lawful Permanent Resident Status (a “Green Card”) in the United States through specific types of investments, thus affording them with the opportunity to live and work permanently in America. Congress created the EB-5 program in 1990 to stimulate the U.S. economy through job creation and capital investment by foreign investors. After a very slow start, the program has grown and flourished. Foreign nationals utilize this program not only as a path to permanent residence, but as a means to eventual naturalization as well; once a certain period of time as a green card holder has passed, qualified individuals may apply for U.S. citizenship. This article aims to provide residents of other countries with a better understanding of the process of becoming a U.S. permanent resident through investing in the EB-5 program.
While the 10,000 visas that have been set aside for the EB-5 foreign investor program are part of the perpetual law, the regional center program, which permits businesses to combine the investment takings for larger missions, is not. In its place, the regional center program was originally created for a limited time period as a pilot program. The regional center program has been an overwhelming success, generating tens of thousands of jobs and billions in investment dollars. However, the regional center program has never been made permanent as Congress has periodically reauthorized the program for three to five years. The last time the program was renewed was in September 2012. Up until recently, the regional center pilot program was set to expire on September 30, 2015.
Congress now has ten weeks to permit legislation to perpetuate the EB-5 regional center program and make any changes that they think will make it better. In the meantime, U.S. Citizenship & Immigration Services was swamped with new applications filed prior to September 30, 2015, in order to be treated under the old law if there are changes in the program which become effective on October 1, 2015, or when the new legislation is enacted. If the legislation is completed before December 11, the new bill takes control. If Congress is unable to rectify all the differences before December 11, it will need to pass another extension of the existing law for a definite period of time, like 90 days. At this time, we cannot predict when Congress will pass legislation on the regional center program and reform to the EB-5 investor program.
Obviously, we would like to get some sort of legislation in a permanent position as soon as possible, because it causes insecurity when a program could change at any time. However, we are confident that eventually some legislation will pass. In “Letters to the Editor,” Ali Noorani, executive director of the National Immigration Forum, had to say this about the EB-5 program: “The EB-5 visa program brings foreign capital into the United States to help public-private partnerships finance myriad development projects across the nation. The program puts Americans to work. It has helped to fund infrastructure, real estate development, energy production, health-care facilities, charter schools, ski resorts, hotels and manufacturing plants, among others. EB-5 visas have generated $5.2 billion over the eight-year period from 2005 to 2013. In 2013 alone, its $1.6 billion in investments generated a potential 31,000 jobs based on minimum program requirements. To put that into perspective, 12 states have seen fewer than 31,000 new jobs created in the past 12 months.”
To qualify under the EB-5 program, an individual must invest in an American new commercial enterprise. This is defined as an enterprise established after November 29, 1990 (or if established prior to that date, the investor must have purchased the existing business and restructured it as a new commercial enterprise); or the enterprise must have expanded through the investment so that a 40 percent increase in the net worth or the number of employees occurred. The enterprise can be any for-profit purpose formed to conduct lawful business, including a corporation, joint venture, holding company, partnership, sole proprietorship or business trust. Noncommercial activity such as owning and operating a personal residence is not included in the definition of commercial enterprise.
There are two different types of investments that can be made for EB-5 purposes. The first involves a minimum investment of $1 million, and the hiring of 10 full-time workers qualified to work in the U.S. The other option is investing in a Targeted Employment Area (a qualifying rural area or an area with a high unemployment rate). The minimum qualifying investment in a Targeted Employment Area in the U.S. is $500,000. A targeted employment area must be a rural area or an area experiencing unemployment of at least 150 percent of the national average rate at the time of the investment.
The capital investment may be made in cash, equipment, inventory, other tangible property, cash equivalents and indebtedness secured by assets owned by the foreign investor, provided that he/she is personally and primarily liable and the assets of the new commercial enterprise are not used to secure any of the indebtedness. The capital should be valued at fair-market value in United States dollars. Capital does not include any assets acquired (directly or indirectly) by unlawful means, such as criminal activity. Borrowed capital will not count for the EB-5 investor program. A primary part of the EB-5 application process includes proving through extensive documentation and explaining exactly where the investment funds derived.
In addition to the actual investment, EB-5 immigrant investors must create or preserve at least 10 full-time jobs for qualifying U.S. workers within two years of the investors’ admission to America. A qualified U.S. worker is a U.S. citizen, permanent resident, or other immigrant legally authorized to work in the United States. However, this definition does not include the investor, his/her spouse, children or a foreign national in non-immigrant status (such as an H-1B visa holder) or who is not authorized to work in the U.S.
An EB-5 immigrant investor may invest in an approved regional center, which is a public or private economic entity involved in the promotion of economic growth, improved regional productivity, job creation and increased domestic capital investment. Individuals seeking to organize an approved regional center can apply to USCIS and submit a proposal. When a regional center is approved, USCIS recognizes it as an economic entity which is a designated participant in the EB-5 program. The EB-5 regional center program does not require that the foreign investor’s enterprise itself directly employ 10 full-time U.S. workers. Instead, it is enough if 10 or more jobs will be created directly or indirectly as a result of the investment. Regional centers are USCIS-approved entities in designated geographical areas for which the U.S. government has determined that investments will create the necessary 10 jobs per investor, whether directly or indirectly. Virtually all of the regional centers are located in established targeted employment areas (“TEAs”) and qualify for the reduced $500,000 investment minimum.
After the requisite forms, applications and supporting documents have been submitted and an EB-5 immigrant visa has been approved by USCIS, the EB-5 investor (and his/her derivative family members, if any) may be granted conditional permanent residence for a period of two years, provided that s/he secured the approval of his/her application to adjust to permanent resident status, or upon his arrival to the U.S. on his EB-5 immigrant visa. The investor must apply for the conditions to be removed within 90 days prior to the two-year anniversary of receiving conditional permanent resident status. If this application is also approved, then the investor will enjoy permanent resident status without conditions, allowing him/her (and derivative family members) to permanently live and work in the U.S. and eventually apply for naturalization. There is no requirement that the investor work for the regional center at all.
Investing in EB-5 projects is not a game for amateurs. Risks are inherent in the project and fraud is abound. The EB-5 application requires very extensive documentation and evidence that must be submitted to the government documenting each step of the EB-5 application process. Without doubt, it is always best to consult with an expert immigration attorney to assist with preparation of such an extensive and complex application.
As we look to the future, it is imperative to our society that we promote the immigration of people who can be contributing members to society. The EB-5 program allows for both an important investment in our economy that creates jobs, but it also provides permanent residence to an immigrant who will be a contributing member to our society and not leeching off the system. Although we are a country that has open arms for all cultures and members of different social strata, the EB-5 program is an important aspect of our immigration system that should be made permanent so we can seek foreign investors in the future without the possibility of this important proposed regulation being eradicated.
* This article is based on information available as of its publication and is not intended to be all-inclusive or to furnish advice in a particular case. We are not responsible for any changes in regulations that may occur subsequent to publication. Please feel free to contact our office for further information and advice.
Michael J. Wildes is the managing partner of Wildes & Weinberg, P.C. Mr. Wildes is a former federal prosecutor with the United States Attorney’s Office in Brooklyn (1989-1993). Mr. Wildes has testified on Capitol Hill in connection with anti-terrorism legislation and is internationally renowned for his successful representation of several defectors who have provided difficult-to-obtain national security information. He is frequently a legal commentator/analyst for network television. He is an adjunct professor at the Benjamin N. Cardozo School of Law in New York and teaches business immigration law. From 2004 through 2010, Mr. Wildes was also the mayor of Englewood, New Jersey—where he resides. Wildes and Weinberg, P.C., has offices in New York, New Jersey and Florida. If you would like to contact Michael Wildes please email him at [email protected] and visit the firm’s website at www.wildeslaw.com.
By Michael J. Wildes