EB-5 Immigrant Investors

Posted on: May 21st, 2013
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In 1990, Congress created the EB-5 Immigrant Investor Program with hopes of attracting foreign capital and creating jobs for American workers. The overall advantage of the EB-5 visa category is that it allows immigrant beneficiaries to engage in commercial enterprise anywhere in the United States (subject only to some restrictions in the Pilot Program which targets certain approved regional areas). There are 10,000 visas available each year in the EB-5 category and half of the allotted 10,000 are reserved for applicants who decide to participate in the Pilot Program, which is reauthorized regularly.

 

What is the application process for the EB-5 visa?

EB-5 applicants must file a Form 1-526, Immigrant Petition by Alien Entrepreneur, with the appropriate regional USCIS Service Center and must also include evidence supporting his or her application. In addition, a $1,500 filing fee is required to process all EB-5 applications.

 

What are the basic requirements for the EB-5 visa?

There are three basic requirements:

  • The investor must establish a new business or invest in an existing business that was created or restructured after November 19,1990
  • The investor must have invested $1 million ($500,000, in some cases) in the business
  • The business must create (or maintain, in some cases) full-time employment for at least 10 American workers

 

 

How does the EB-5 investor meet the requirement for a qualifying business?

There are three ways of meeting the requirement a qualifying business:

  • The creation of an original business;
  • The purchase of an existing business with simultaneous restructuring or reorganization such that a new commercial organization results; or
  • Expansion of an existing business created after November 1990 through the investment of the required amount and the creation of ten new jobs.

 

 

What types of investments meet the requirements for the EB-5 investor?

The investment can be in the form of cash, equipment, inventory, other tangible property, cash equivalents and indebtedness secured by assets owned by the investor provided that he or she is personally and primarily liable and the assets of the new commercial enterprise are not used to secure any of the indebtedness. The definition specifically excludes capital acquired by unlawful means.

 

How much investment is required to be an EB-5 investor?

Generally, the minimum required investment amount is $1 million. However, the required investment amount for a business established in a “targeted employment area” is $500,000.

Targeted employment areas include:

  • Rural areas, which are defined as any area outside a metropolitan statistical area or outside the boundary of a any city or town with a population of 20,000 or more; and
  • Areas with an unemployment rate that is at least 150% of the national average.

 

For a Pilot Program investment, the minimum requirement is a $500,000 capital contribution to a designated Regional Center which allocates portions of the capital (in the form of business loans) to small businesses within the targeted employment area.

 

What entities qualify as Regional Centers for the purposes of the Pilot Program?

Any economic unit, public or private, involved with the promotion of economic growth in a particular region may qualify as a Regional Center. Proposals for participation in the Immigrant Investor Pilot Program should be submitted to the Assistant Commissioner for Adjudications and should include the following documentation:

  • A description of the regional focus of the center and how it will promote economic growth
  • Details on how jobs will be created directly or indirectly through capital investments made through the regional center
  • A description of capital, both sources and amounts, committed to the Regional Center as well as the promotional efforts made in accordance with the Regional Center’s business plan
  • Forecasts of the positive impact on the regional or national economy

 

 

How may the EB-5 Investor invest in a qualifying new enterprise?

The EB-5 investor has the option of creating an original business, purchasing an existing business, or expanding an existing one. An investment in an existing business must result in a substantial change in the business’ net worth or an increase in the number of employees by at least 40%. Furthermore, the EB-5 investor must meet the required investment amounts of $1,000,000 and demonstrate that the investment capital was obtained form a legal source.

 

What evidence is required for an application for the EB-5 investor investing in a new enterprise?

The EB-5 investor should provide evidence of creation of a new enterprise, or investment in an existing enterprise including, but not limited to the following:

  • Articles of incorporation, partnership agreements, organizational documents
  • Evidence of lease agreements for the qualifying enterprise
  • State business licenses
  • Evidence that the required amount of capital has been transferred
  • Evidence that investment has resulted in the substantial increase of net worth
  • Documentation of sources of capital
  • Documentation of intent to invest or actual commitment to invest capital
  • Documentation of assets purchased or transferred from abroad for the qualifying enterprise

 

 

How many full-time jobs must be created by the EB-5 qualifying investment?

The investment must create at least 10 full-time jobs for U.S. citizens, lawful permanent residents or other immigrants lawfully authorized to be employed in the United States. The term “full-time employees” is defined as workers who work at least thirty-five hours per week. This includes conditional residents, temporary residents, asylees, refugees, and recipients of suspension of deportation, but it does not include non-immigrants. In calculating the required number of employment positions, the investor may not include spouses or children, but may include other family members who are employed by the business.

 

Can a commercial enterprise involving multiple investors be used as a basis for classification as an EB-5 investor?

Yes. Multiple investors may establish a new commercial enterprise which can be the basis for the EB-5 classification. However, each investor applying for the classification must meet the requirements for the EB-5 classification separately. For example, each investor must create 10 jobs for U.S. workers.

 

Must the EB-5 Investor be involved in the management of the qualifying enterprise?

Yes. An EB-5 investor must be engaged in the management of the qualifying enterprise, either through day-to-day managerial control or through policy formulation. A purely passive role is not permitted. An EB-5 investor should submit documentation verifying such a role and such documentation may include the following:

  • A statement of position or title and a description of duties
  • Evidence EB-5 investor is a corporate officer or member of the board of corporate officers
  • Evidence demonstrating management role of EB-5 investor if qualifying enterprise is a partnership