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FAQs about EB-5 Immigrant Investor Visas (i.e., Green Cards)
For a general overview of what the EB-5 program is, who qualifies, how the application process works,
how long it takes, what the advantages and disadvantages are, etc., please see main page on
EB-5 Immigrant Investor Visas.
You have two primary choices for attempting to obtain your green card
through the EB-5 investor visa program:
- Invest in an opportunity of your own choosing (i.e., "sefl-petition"
EB-5 petition).
- Invest in a USCIS-designated "Regional Center." A "Regional
Center" is an organization that USCIS has pre-certified for accepting EB-5
investment money from EB-5 immigrant investors and investing those funds in
various projects within a particular geographic area. (In other words,
instead of finding your own investment, you provide the money to the
Regional Center, and the Regional Center invests the money for you and
manages the investment company. The
Regional Center also becomes responsible for the "create 10 jobs"
requirement.)
The Regional Center is a virtually "hands off" investment
approach. It has advantages and disadvantages, depending on your
circumstances. These are the primary advantages of investing through a
Regional Center:
- Lower investment requirement. If you invest through a Regional Center, you only need to invest
$500,000 instead of the standard $1,000,000 requirement.
- Lower-activity investment. Because the Regional Center receives and controls you
money, you do not have to play an active role in the investment. The Regional
Center takes responsibility for ensuring that your investment there meets the
"create 10 jobs" requirement.
- Easier "create 10 jobs" requirement. If you invest on your own, you have
to create (or in the "troubled business" scenario, "save") 10 jobs for U.S.
workers, but Regional Centers can also add in any "indirect" jobs created by
your investment. Specifically, because employees spend some of their
earnings buying
food, clothing, and services for themselves and their families, each
new "direct" job created by your investment also creates the need for some
"indirect" jobs in the same geographic area. Economists have developed so-called
"multiplier" tables that show approximately how many additional
"indirect" jobs are created for each new "direct" job created in a
particular geographic location. These multiplier tables can also show
how many additional indirect jobs are created for each dollar invested in
a particular industry in a particular location. To encourage investors
to invest in "Regional Centers," the immigration rules allow Regional
Centers to use the multiplier tables to a number of
"indirect" jobs to the number of "direct" job actually created.
The Regional Center still needs to show that your investment created a total of 10 jobs, but that can be achieved
through any combination of direct and indirect jobs that adds up to 10
jobs for U.S. workers.
- Potentially more predictable result. If you select a solid, well-run
Regional Center, you may find that they have a solid track record of success
in getting the conditional green card applications approved and the
conditions subsequently removed without undue burden on the investor.
Because the Regional Center approach is relatively "hands off," the
disadvantages are the flip side of the advantages above.
- Virtually no control over day-to-day management. Once you invest your
$500,000 in a Regional Center and you file your conditional green card
application, the Regional Center takes over and you have virtually no
control over the day-to-day management of your funds or the day-to-day
management.
- Potentially difficult to control the sale of your investment. The typical
legal structure of a Regional Center is a limited partnership, which means your
ownership status will be as a "limited partner," which by definition is a
passive investor of virtually no legal authority to control the investment,
including the sale of project to get your money back out.
- Potentially low sale price if sell your ownership in the project. In
addition to holding only a limited partnership ownership interest in the
Regional Center project, you will also be holding a "minority interest" in
the project. Because you do not have majority interest, you have little
control, so when you go to sell your interest to other potential investors,
they will "discount" (sometimes very deeply) your interest and pay you much
less than what you paid into it.
- Potentially high "management" fees and charges. It is normal in investment
scenarios for the person who creates a great deal to take a large percentage of
the daily operating profits or a larger percentage of the sale proceeds (or high
percentages of both operating profits and sales proceeds). Sometimes these can
be as high as 30-50%. Regional Centers sometimes charge EB-5 investors very
large percentages as well. (Before investing in a Regional Center, it is
important to have competent investment counsel review the investment documents
very carefully, so you know exactly what how large of a cut the Regional Center
is going to take out of your share of the daily profits and sales proceeds.)
- Less than "market" conditions. In the real world, if someone offers
you a bad deal, you can just so somewhere else. That is the way the market works. In the
EB-5 context, however, you have dual goals: preserving/making money and
obtaining your green card. Regional Centers know this very well. As a
result, they have less incentive to offer you a good deal, because they know
you have a higher than normal need to make an investment (because you need a
green card, too).
- Potentially weaker investments, because of geographic limitations. Normally, investors
invest where they can make the most money for a given amount of risk. Regional
Centers, however, are limited to investing in specific geographic areas and
frequently in a limited set of industries. As long as they receive funds from
EB-5 immigrant investors, however, they are going to invest those funds within
that geographic area even if they could earn better rates of return at the same
risk level elsewhere. As a result, your funds could be invested in
weaker-than-market conditions.
- Potentially inflated the property values. Because Regional Centers
must invest only within their respective
geographically restricted areas to comply with their CIS certification,
larger Regional Centers investing large amounts of immigrant funds in a
relatively small geographic area can contribute to property inflation within
the geographic area. Therefore, the
economics of supply and demand mean the Regional Center could be paying higher than
market
prices for the project being purchased with your funds. (As
long as additional investors come in behind you, you might in turn benefit
from their investments likewise driving up the value of your investment,
too, but if CIS
closes the Regional Center after you invest in it, shutting down the stream
of investors, then you may have paid inflated prices without receiving the
additional benefit from subsequent investors' funds.)
- No control over CIS's decisions to close a Regional Center. Under applicable
law, CIS may revoke at any time a Regional Center's authority to operate. This
could have a serious impact on your application.
No. Regional Centers can still be the best choice for the right
person. They are particular advantageous for those who do not want to
participate actively in investing. There are many good reasons for not
want spend significant time and effort on actively overseeing your
immigration-related investment. Here are a few examples:
- You want to do something else with your time. For example,
if you are a highly paid physician who wants to practice medicine instead of
overseeing the day-to-day activities of your investment, a Regional Center
could be a good fit.
- You feel you face too many cultural, legal, and
business challenges. lf you are unfamiliar with America's cultural,
legal, and business interactions, you may feel it makes sense to accept a
potentially smaller return on your investment while you learn more about the
American way of life before you begin investing on your own.
- You want to focus on investing in something else. Even if
you are completely familiar with the United States and feel comfortable
diving right into investing on your own, you may prefer to focus on your own
investments, especially if your preferred investments are real estate or other ventures that do not typically
create a large number of jobs. That is, if you are in a very good
financial position, you might be interested in setting aside
the $500,000 needed for the Regional Center investment and then use your
other funds to focus on your own real estate
investments without having to worry about ensuring that your investment
meets the "create 10 jobs" requirement. (If you invest $500,000 in a
Regional Center, the Regional Center retains the responsibility to meet the
"create 10 jobs requirement.)
- You feel that a Regional Center is a safer "immigration" gamble. EB-5
investments should solve both your "investment" and "green card" needs. Both
needs are important, but you may feel the "green card" factor is of primary
importance and you may also feel that the Regional Center approach is
potentially safer for your family and you to obtain your green cards. If so, a
Regional Center investment may be better for you than trying to invest on your
own. Of course, even if you decide to invest through a Regional Center, you
still need to review your choices carefully to make sure you select the one that
best fits your needs.
Generally, when you invest on your own (i.e., not through a Regional
Center), the investment amount required is $1,000,000.
If you invest in a "Targeted Employment Area," however, the investment
requirement drops to $500,000.
There are two
types of "targeted employment areas": rural areas and high unemployment
areas.
- Rural areas. "Rural areas" are areas outside of metropolitan statistical areas
(generally medium to large cities and their surrounding suburbs) and outside the city limits of towns
larger than 20,000 residents.
- High unemployment areas. "High unemployment areas" are areas (anywhere
in the United States) with unemployment
rates at least 150% of the national average.
As mentioned above, "targeted employment
areas" are important, because if you invest in one, the EB-5
"investment" requirement drops from $1 million to $500,000.
Please note that "targeted employment areas" are not the same
as "Regional Centers." A Regional Center is a separate organization; you give
them money and they invest it. In a "targeted employment area," you make your
own investment and you retain control over the enterprise in which you invest.
The "create 10 jobs" rule applies to all investments, but if you invest in a
"targeted employment area," the "investment" requirement drops from $1 million
to $500,000.
If you invest in a Regional Center, you will be limited to investing
in the investment(s) available through the Regional Center. If you
invest on your own, however, you have several different choices for how
to invest: creating a business, restructuring a business, expanding a
business, or stabilizing a "troubled business."
- Buying a business is not enough. The first question that
most potential EB-5 investors wonder is, "Can I satisfy the
"investment" requirement and the "create 10 jobs" requirement by buying an
existing company that already has 10 employees
working there?" The general answer is no. (The exceptions are "restructuring" a business
or stabilizing a "troubled business", which are discussed
below.)
- Creating a business. Creating a business is the most obvious way to
prove you have created the jobs you are required to create. If you
create your business from scratch, then you can more easily prove two
years later (i.e., when applying to remove conditions from your
temporary green card) that all of the jobs in that business were created
by your investment.
- "Restructuring" a business. You can buy and restructure a business and
use that business to create 10 jobs, but if the business is not a
"troubled business" (discussed below), then you have to show not only
that you purchased the new business, but that you "restructured" it.
The "restructuring" requirement is not very well defined, but it is safe
to say that merely changing the company name, changing the legal structure,
or revising the restaurant menu is not enough. You must engage in
"business" restructuring. (Because of the risk of CIS disagreeing
with you over
what exactly constitutes a "restructured" business, you should
discuss the "restructuring" issue with your immigration lawyer if
you are thinking of buying and restructuring an existing business to create your 10 jobs.)
- "Expanding" a business. You can also buy (or buy into) an existing
business and "expand" it. To use this path, you have to show that you
increased either the net worth of the business or the number of
employees by at least 40%. (The "create 10 jobs" rule still applies.)
- Stabilizing a "troubled business." A "troubled business" is one that has been in
existence for at least two years, but has lost 20 percent of its net
worth over the past 12 to 24 months. If you invest in a "troubled business," you
only need
to "save" 10 jobs for U.S. workers during the two-year conditional
residency period. You
can also combine any new jobs you have "created" with the jobs you have
"saved" during this period, as long as the total jobs "created" or "saved"
is 10 or more.
In general, if you invest in a Regional Center, you will have
virtually no active role, other than perhaps providing input on "policy"
matters. If you invest on your own, you have to "actively" participate.
Of course, you still need to create 10 jobs anyway, so if you do not
want to play an overly active role in your own investment, you can
always hire a higher-level manager to assist you in overseeing the
day-to-day management of the business.
Generally, if you are investing on your own, the "create 10 jobs"
rule means just that. The exception is for "troubled" businesses. There,
you just need to "save" 10 jobs for U.S. workers.
If you invest through a Regional Center, the Regional Center is responsible
for ensuring that your investment there meets the "create 10 jobs"
requirement.
If you
would like Peng & Weber lawyers to help you resolve the many
immigration-related challenges of obtaining your and your family's green cards
through the EB-5 immigrant investor category, or if you would like more
information about this green card category, please
contact us for more
information.
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