The United States Citizenship and Immigration Services (“USCIS”) is a component of the United States Department of Homeland Security (“DHS”) and is the government agency that oversees lawful immigration to the United States including the Immigrant Investor Program, or commonly known as the “EB-5” visa program. An EB-5 visa allows an immigrant investor to enter the US on a Conditional Permanent Resident status and after completion of the EB-5 requirements and filing the necessary paperwork to prove that the investor has met the requirements, that status changes to a Lawful Permanent Resident (“LPR” or commonly referred to as a green card holder, though the identification card is no longer green). Since the early 1990s, Congress has created two special programs for immigrant investors; (i) the traditional EB-5 program which permits immigrant investors to gain potentially permanent residency status through job creation and capital investment via a new commercial enterprise or (ii) by providing working capital to a Regional Center in a new commercial enterprise designated by the USCIS. Both programs have specific conditions including investing in a “new” commercial enterprise, job creation requirements, and capital investment prerequisites that must be fulfilled before the USCIS will allow the immigration status to be obtained. While this may seem daunting at first glance, as a whole, these programs have been exceedingly successful and has allowed for exceptional economic growth. For example, this year, the Chinese EB-5s reached maximum allotment before the end of the fiscal year.
What is a “New” Commercial Enterprise?
All EB-5 applicants must invest in a “new” commercial enterprise. An enterprise for EB-5 purposes, is a sole proprietorship, partnership (limited or general), holding company, joint venture, corporation, business trust or other entity that may be publicly or privately owned. The definition for commercial enterprise includes a holding company and its wholly owned subsidiaries, provided that each such subsidiary is engaged in a for-profit activity and engaged in lawful business conduct. A commercial enterprise does not include owning and operating a personal residence. Further, the enterprise must be considered a “new” enterprise under the law. In order to satisfy the requirements of the program, a new commercial enterprise is defined as:
- An enterprise established after November 29, 1990; or
- An enterprise established on or before November 29, 1990 that is either:
i. purchased and the existing business is restructured or reorganized in such a way that a new commercial enterprise results; or
ii. expands an enterprise through the investment so that a 40 percent increase in the net worth or number of employees occurs.
If an immigrant investor wanted to purchase the Coca-Cola Company, for example, then the investor would have to restructure or reorganize the enterprise or expand the current enterprise so that a 40 percent increase in net worth or number of employees resulted because the company was founded in 1886 (well before the November 29, 1990 deadline). Restructuring or reorganizing would mean more than just completely terminating the current board of directors and replacing them. It would involve taking Coca-Cola from a beverage company to, for example, a software company; a change that is not likely to occur. Additionally, reaching a 40 percent increase in net worth or number of employees is not likely to be achieved with a global and long established company like Coca-Cola. An older company founded before November 29, 1990, however, that has not witnessed the success that Coca-Cola has, may be able to restructure/reorganized or have their net worth and employment based expanded to meet the 40 percent requirement.
What are the Job Creation or Preservation Requirements?
The job creation or preservation requirement of the EB-5 is fairly straightforward but can become complex depending on the type of jobs created or preserved. An immigrant investor must create or preserve at least ten (10) full-time jobs for qualifying US workers within two years. There are exceptions, for example, under certain circumstance the time period may be extended, however, there needs to be proof that at least ten (10) full-time jobs were created or preserved for qualified US workers.
Qualified US Workers. A qualified US worker is a US citizen, Legal Permanent Resident, or other qualified immigrants such as an asylee or refugee. Nonqualified workers include a member of the immigrant investor’s family or any foreign national in any nonimmigrant status (such as an H-1B visa holder) or who is not authorized to work in the United States. A full-time employment position means that a qualified employee was provided employment in a new commercial enterprise in a position that requires a minimum of thirty-five (35) working hours per week. Additionally, a job-sharing arrangement can count towards the ten (10) qualified US full-time positions if two or more qualified employees share a full-time position. For example, three individuals on parental leave that share the same position and maintain a permanent, full-time position including payment of both workman’s compensation and unemployment premiums for the positions by the employer. To prove that the investing capital created or preserved ten (10) full-time jobs for qualifying US workers can be complicated because the creation or preservation can either be direct or indirect depending on whether it was a traditional EB-5 program or a regional center EB-5 program.
Direct and Indirect Job Creation. Direct jobs are actual identifiable jobs for qualified employees located within the commercial enterprise. For example, in the Coke-Cola Company scenario, hiring ten (10) full-time qualified delivery truck drivers would successfully meet the job creation requirement. Indirect jobs are those jobs shown to have been created or preserved collaterally or as a result of capital invested in a commercial enterprise affiliated with a regional center. Indirect jobs are a bit more complex and often require a professional to perform an analysis of how many jobs were created via indirect creation or preservation because a foreign investor may only use the indirect job calculation if he or she is affiliated with a Regional Center. Additional professional analysis may be needed to prove that the immigrant investor’s capital was via preservation because the USCIS only allows for preservation in troubled businesses.
Troubled Business. A troubled business is a commercial enterprise that has been in existence for at least two years and has incurred a net loss during the last twelve (12) or twenty-four (24) month period prior to the priority date on the immigrant investor’s form I-526. The loss for the period must be at least 20 percent of the troubled business’ net worth prior to the loss. If a two year old business had $1 million dollars in net worth at creation then it must have $200,000 dollars in losses for a twelve (12) or twenty-four (24) month period in order to qualify as a troubled business.
What are the Capital Investment Requirements?
First and foremost, capital means cash, equipment, inventory, other tangible property, cash equivalents, and indebtedness secured by assets owned by the immigrant investor. The investor must also provide evidence that he or she is personally and primarily liable and the assets of the new commercial enterprise created by the investment upon which the petition is based are not used as a security interest in any form of indebtedness. Also, the capital must be evaluated at the fair-market value in United States Dollars. There are further restrictions on what capital can be included. For example, assets directly or indirectly acquired by unlawful means such as criminal activities, shall not be considered for the program. This is extremely important because a simple bank deposit slip or letter from said bank will not suffice. There needs to be a detailed and precise documentation of how the funds were lawfully obtained. The immigrant investor must be able to verify the legal path and source of the funds. Without meeting this burden, the investor will not be able to establish that the funds are his or her lawfully obtained assets and will not be able to complete the application process. Additionally, the investment capital cannot be borrowed and the investor must participate in the operational management of the invested business including, but not limited to, being involved in the decision making process of the enterprise or in a management role with the company. He or she cannot simply have a passive part in the business.
The minimum qualifying investment in the United States is $1 million dollars. However, the investment does not always have to be $1 million dollars. If the immigrant investor uses his or her capital in a Targeted Employment Area (“TEA”), then the minimum qualifying investment is $500,000 dollars. A Targeted Employment Area is an area that, at the time of investment, is a rural area or an area experiencing unemployment of at least 150 percent of the national average rate. A rural area is defined as an area outside a metropolitan statistical area designated by the Office of Management and Budget or an area outside the boundary of any city or town having a population of 20,000 or more according to the most recent decennial census. As discussed above, this capital contribution can be in many forms other than cash but it must have an evaluation in United States Dollars and not be illicit gains.
Furthermore, the capital involved must be put “at risk.” This is a fundamental requirement of the EB-5 investment and means that the commercial enterprise agreement, as entered into for the EB-5 application process, cannot include a guarantee on returns of the immigrant investor’s capital investment. If the agreement contains such terms, then the entire application will likely be rejected by the USCIS and will terminate the process. Additionally, the full amount of the capital must be placed at risk. It is not sufficient to place a mere portion of the capital at risk and place the remainder in a guaranteed return position.
How Long Does the Process Take?
The EB-5 immigration process can take a considerable amount of time because they are in numerically limited visa categories. The length of time varies from case to case and cannot be predicted on an individual case basis. The guide below is simply to provide general estimates on the process and how long the applications commonly take. This is not a guarantee of any sort and, as in any business, complications are often more ordinary than expected.
- Form I-526, Petition by Alien Entrepreneur
The form I-526 is an Immigrant Petition by Alien Entrepreneur that initiates the immigration process to, hopefully, become a Lawful Permanent Resident. There is significant evidence that must be presented with the petition and must demonstrate that he or she is in the process of investing, or have already invested the required amount of capital in a suitable EB-5 project. Approval of the petition shows only that the investor has established that the investment qualifies. It does not guarantee that a US Embassy or Consulate will issue the immigrant visa. The immigrant investor must also file a form DS-230/DS-260 or a form I-485 (see below) before he or she is eligible to enter the US.
Processing time: 4 – 6 months
Form Filing Fee: $1,500.00
- Form DS-230 (paper) or DS-260 (electronic), Application for Immigrant Visa and Alien Registration
After the I-526 is approved, the immigrant investor files either a form DS-230 or DS-260 application for an Immigrant Visa and Alien Registration with the US Department of State (“DOS”). Once the application is approved, the immigrant investor is eligible to enter the US. This generally takes 3 to 6 months, but may take significantly longer depending on the embassy or consulate.
Processing time: 3 months – 1 year
Form Filing Fees: $405.00 per application – one filed for investor plus one each for each family member petitioning for entry
- Form I-829, Petition by Entrepreneur to Remove Conditions
Within ninety (90) days of the two (2) year lawful conditional permanent resident status’ expiration date, the immigrant investor must file form I-829 to have his or her conditional status removed. This petition will be granted if the investor has fulfilled all of the EB-5 requirements in accordance with the business plan approved in his or her form I-526 filing. If the immigrant investor does not file a form I-829 then the USCIS will automatically terminate the investor’s conditional residency status and will initiate deportation proceedings.
Processing time: 6 – 10 months
Form Filing Fee: $3,750.00 (Add $85 biometric fee for a total of $3,835. An additional biometric services fee of $85 must be paid for each conditional resident dependent)
- File Form I-485, Application to Register Permanent Residence or Adjust Status
The form I-485 is the application to register as a Permanent Residence or adjust status with USCIS. If approved the immigrant investors status changes from Conditional Permanent Resident to Lawful Permanent Resident within the United States. Depending on the circumstances this can be utilized instead of the Form DS-230/260.
Processing time: 6 – 8 months
Form Filing Fee: $1,070.00 (including biometric fee)
After the investors conditions are removed, he or she is eligible to apply for citizenship after five (5) years. The children of the investor, however, are eligible to receive automatic citizenship after the form I-829 is approved without waiting the five (5) year period.
This immigration law blog post about the immigration process is provided as a general informational service to clients and friends of Feinstein Law, PA and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship.
For more information concerning the rules and regulations affecting the Petition by Alien Entrepreneur process or immigration issues please contact Feinstein Law, PA at (619) 990-7491 or by email at Todd@Feinsteinlawfirm.com or JDunsmoor@Feinsteinlawfirm.com. Please note that the prior results discussed herein do not guarantee similar outcomes. Todd Feinstein is admitted in Florida and Jonathan Dunsmoor is admitted in New York.
