EB-5 Visas: Green Cards for Immigrant Investors

• What is an EB-visa?
• Who can obtain an EB-5 visa?
• What is the minimum investment required?
• What kinds of investments are allowed?
• How strict is the job creation requirement?
• What is a regional center-based EB-5 investment?
• What is the difference between a regional center-based EB-5 investment and regular EB-5 investment?
• What are the steps for immigrating through the EB-5 visa category?
• How long will the EB-5 process take?
• What are the advantages of the EB-5 visa category compared to other options?
• What are the disadvantages of the EB-5 visa compared to other options?

What is an EB-visa?

An “EB-5 visa” refers to the path of obtaining U.S. lawful permanent residence through investment. To be eligible for an EB-5 visa, an individual must meet three basic requirements: (1) invest at least $1 million in a New Commercial Enterprise in the U.S. (or invest at least $500,000 if the investment is made in a Targeted Employment Area); (2) prove that the capital invested comes from a legal source (e.g., was not obtained through criminal activities); and (3) show that the investment has created or preserved, or will create or preserve, at least 10 new jobs for U.S. workers.

Who can obtain an EB-5 visa?

In addition to the principal investor, the investor’s spouse and the investor’s unmarried children under age 21 can also qualify for EB-5 visas as derivative beneficiaries.

What is the minimum investment required?

Currently, the minimum investment amount for EB-5 visa eligibility is $1 million, except if the investment is made in a “Targeted Employment Area” (“TEA”). A TEA could be one of the following:

• Rural Area – An area that is both outside of a metropolitan statistical area (MSA) and outside of a city or town having a population of 20,000 or more, based on the most recent U.S. census.
• High Unemployment Area – An area with an unemployment rate that is at least 150% of the national average unemployment rate for the same period, based on the most recent information available to the general public from federal or state governmental sources at the time of investment. State agencies have the authority to designate customized geographic areas as high unemployment areas for TEA purposes.

The minimum investment amounts are likely to increase in the near future, most likely to $1.2 million and $800,000, either through legislative changes by Congress or regulatory changes by the U.S. Citizenship and Immigration Services (“USCIS”). In addition, Congress may restrict the definition of a TEA in the future.

What kinds of investments are allowed?

To qualify for EB-5 purposes, an investment must be in a “New Commercial Enterprise” (“NCE”), meaning any for-profit U.S. entity formed after November 29, 1990 for the ongoing conduct of lawful business in the U.S. The NCE’s management structure must provide for the EB-5 investor’s involvement, either through day-to-day managerial control or policy formulation. Although an EB-5 investor can satisfy the management requirement by taking a relatively hands-off policy formulation role, it is important to note that purely passive investments, such as the purchase of a residence or other property without any commercial or job-creating component, do not qualify for EB-5 purposes.

How strict is the job creation requirement?

Every EB-5 investor must show that his or her investment in the NCE resulted in the creation of at least 10 full-time jobs for U.S. workers. If there are multiple EB-5 investors in a single NCE, the total number of jobs must be sufficient to allocate 10 full-time jobs to each EB-5 investor. Full-time means at least 35 hours per week. U.S. workers means U.S. citizens, green card holders, and other employment-authorized immigrant categories; those in nonimmigrant status, the alien, and the alien’s spouse and children do not count.

The job creation requirement is relaxed somewhat if the investment is associated with a USCIS-designated regional center. Full-time jobs in the regional center context can include indirect jobs as calculated using a reasonable economic methodology. In the non-regional center context, the jobs created must be actual, W-2 positions employed by the NCE. If the investment is in a troubled business, the investor can receive credit for jobs preserved in addition to jobs created, as long as the total number of jobs preserved and/or created is at least at the pre-investment level and sufficient to allocate at least 10 jobs to each EB-5 investor. To qualify as a troubled business, a business must have been in existence for at least two years and have incurred a net loss, equal to at least 20% of its net worth, during the 12- or 24-month period prior to the investor’s I-526 filing.

What is a regional center-based EB-5 investment?

An EB-5 investment may (but does not have to) be associated with a USCIS-designated regional center. A regional center is a public or private entity, such as a corporation or limited liability company, which has applied for and obtained designation from USCIS to participate in the Immigrant Investor Program (also called the “regional center program”). A USCIS-designated regional center is authorized to sponsor job-creating capital investment projects in a defined geographic area and within specified industries for the purpose of enabling investors in such projects to receive credit for both directly and indirectly created jobs. By contrast, investors investing in standalone/non-regional center projects can only receive credit for jobs created directly by the NCE. (See below.)

What is the difference between a regional center-based EB-5 investment and regular EB-5 investment?

Regardless of whether an investment is associated with a regional center, every investor seeking an EB-5 visa must satisfy the 3 basic requirements (minimum investment in an NCE, lawful source of capital, and credible projection of job creation or preservation). The main distinction between regional center-based investments and regular/non-regional center EB-5 investments is in how USCIS evaluates job creation.

Investors in the non-regional center context can only receive credit for direct jobs—actual, W-2 positions employed by the NCE. By contrast, investors in the regional center context can receive credit for indirect jobs (i.e., jobs created outside of the NCE) in addition to direct jobs (i.e., jobs created within the NCE). USCIS allows indirect jobs in the regional center context to be estimated using reasonable methodologies such as IMPLAN, RIMS II, REMI, or REDYN. This indirect jobs rule allows the Job Creating Entity (“JCE”) to be separate from the NCE in the regional center context. For this reason, a common investment structure in the regional center context is the so-called “loan structure,” in which an NCE raises capital from EB-5 investors and then loans the EB-5 capital to a separate JCE that uses the capital to create jobs. In the non-regional center context, such a loan structure is not allowed because the NCE always must be the JCE.

Many investors prefer to invest in a project that is sponsored by a regional center, because they do not have the desire or ability to start and manage their own business in the U.S. On the other hand, some investors do not feel comfortable entrusting a third party with their money and want to have full control over all business decisions. Such investors may prefer the direct EB-5 option, but should first thoroughly consider the pros and cons of investing in their own business in a foreign country (the U.S.), preferably in consultation with reputable and experienced business consultants, financial advisors, business lawyers, and/or U.S. business owners.

What are the steps for immigrating through the EB-5 visa category?

Obtaining an EB-5 visa is essentially a three-step process.

• Step 1 – Filing an Immigrant Petition: The investor must file a Form I-526, Immigrant Petition by Alien Entrepreneur with USCIS. The petition must include thorough documentation show that the investor meets all of the criteria for EB-5 visa eligibility (minimum investment in an NCE, lawful source of capital, and credible projection of job creation or preservation).
• Step 2 – Obtaining Conditional Residence: After USCIS approves the I-526, the investor and qualifying family members can apply for initial "conditional" permanent resident status (i.e., a temporary green card) valid for two years.
• If the investor is residing outside of the U.S. at the time of I-526 approval, he or she must file a Form DS-260, Immigrant Visa Electronic Application with the National Visa Center and then attend an immigrant visa interview at the appropriate U.S. Consulate or Embassy abroad. If the visa is granted, the investor must enter the U.S. prior to its expiration (typically 6 months from the date of issuance), after which USCIS will mail a temporary green card to the investor and qualifying family members.
• Alternatively, if the investor is already in the U.S. in valid nonimmigrant status, the investor may apply for adjustment of status by submitting a Form I-485, Application to Adjust Status to USCIS. If USCIS approves the I-485, it will issue the investor and qualifying family members a temporary green card.

• Step 3 – Obtaining Removal of Conditions: Within the last 90 days of the two-year conditional permanent residence period, the investor must file a Form I-829, Petition by Entrepreneur to Remove Conditions demonstrating that (1) the investor sustained his or her investment in the NCE during the two-year conditional period and (2) that the investment created, or can be expected to create within a reasonable time, the requisite 10 jobs. (For investments in a troubled business, the I-829 must show that the NCE maintained the number of existing employees at no less than the pre-investment level during the two-year conditional period.) If USCIS approves the I-829, it will issue the investor and qualifying family members who were included in the I-829 petition a 10-year green card without any remaining conditions.

How long will the EB-5 process take?

Each of the three major steps in the EB-5 process involves a separate government processing queue. Processing times are fluid, but it is now typically taking USCIS about a year-and-a-half to adjudicate the I-526 and I-829 petitions. The immigrant visa/adjustment of status application normally takes 6-9 months. Requests for evidence or administrative processing could further protract processing times. In addition to processing times, investors should expect to spend several months preparing the documentation required for each submission.

Investors born in mainland China can expect to face an additional wait of two years or more due to visa backlogs. Only about 10,000 visas are available per year in the EB-5 category. Of that total, the number made available to persons born in any single country may not exceed 7 percent (about 700), unless there are remaining visa numbers that would otherwise be unused. If demand from a particular country exceeds available EB-5 visas, a backlog occurs and the Department of State will establish a cutoff date in its monthly Visa Bulletin that determines how long an individual from the oversubscribed country must wait in line before being able to apply for a visa. (The cutoff date corresponds to the date of I-526 submission.) Currently, the demand from China well exceeds available EB-5 visas, even after allocating unused visas from other countries. The first cutoff date for China-born investors was established in April 2015, and since then has consistently reflected a backlog of approximately 24 to 28 months.

What are the advantages of the EB-5 visa category compared to other options?

In general, the EB-5 visa has the following advantages over other employment-based green card options:

• Does not require a permanent job offer in the U.S. In comparison, the more common business-related green card category, EB-1C Multinational Executives or Managers (which is the "permanent" version of the L-1A Multinational Executives or Managers nonimmigrant visa), requires the foreign beneficiary to have a permanent job offer from a U.S. employer.
• Does not require that the investor maintain his or her existing home-country business. If the investor owns a business outside the U.S., the investor can shut down those business operations and still obtain a green card in the U.S. In comparison, under the EB-1C Multinational Executives or Managers green card option, business operations in the home country must be maintained throughout the green card application process.
• Does not require a minimum level of income, education, experience, or business achievements. An EB-5 investor need not be independently wealthy or successful in business. He or she just has to have $1 million (or $500,000) in legitimately obtained money to invest in the U.S., and that money may be derived entirely from a gift.

What are the disadvantages of the EB-5 visa compared to other options?

In general, the EB-5 visa category has the following disadvantages compared to other employment-based green card options:

• Requires lots of money. Depending on how and where the investment is made, the investor must invest at least $500,000 or $1 million. In addition, there are administrative fees, legal fees, and other expenses above and beyond the required investment amount.
• Involves investment risk and other challenges. All investments involve financial risks. There are also several areas of additional risk of investing in a new country, such as the U.S. Cultural, language, legal, and business differences can all make the job of investigating and carrying out an investment more difficult in the U.S. than in one’s home country.
• Is not a direct path to permanent resident status. Unlike most other green card paths, the EB-5 category gives the investor two-year conditional permanent resident status (i.e., a temporary green card) initially. To obtain a long-term green card, the investor must file and obtain approval of an I-829 petition seeking removal of conditions on his or her residence. The I-829 petition requires significant documentation, a substantial filing fee, and additional processing time. In addition, I-829 petitioners may be required to attend a USCIS interview as part of the adjudication process.
• Involves long waits for investors born in mainland China due to visa quotas. (See above.) This could result in children of an EB-5 investor “aging out,” or reaching the age of 21 before the investor’s priority date becomes current, thus ceasing to qualify as a derivative beneficiary.