New York Lawyer's Legal Updates

Business Immigration: EB 5

Author: Business Visa Attorney Alena Shautsova

Brief Overview

EB5 is an Immigrant petition that allows its beneficiary to obtain permanent resident status in the United States. The procedure starts with the development of the business plan of a desired enterprise and a decision as to: in what business and what size of investment a person is ready to make. A person has a choice to invest in a new enterprise, an enterprise in a rural or targeted area or into a regional center. 95% of EB5 petitions are filed based on investments into a regional center.

A beneficiary of an approved EB5 (form I-526) petition may bring to the US as dependents his spouse and unmarried children under 21 years old. Siblings and parents may not immigrate as dependents.

Once an EB 5 petition is approved, an applicant files for an immigrant visa or an adjustment of status if he is already in the US in a lawful status. Such a visa is first granted on a conditional basis (to prevent immigration fraud). Within the 90 days of the expiration of the second anniversary of the conditional permanent residency, a beneficiary has to apply for the removal of the condition. During this step, a person must demonstrate that the business he invested in is a legitimate operation and all the key requirements were in fact fulfilled. To wit, according to the USCIS with the application to remove the condition, an applicant has to present:

RequirementsSupporting Documents (Evidence)*
Investment

Evidence that you in fact invested in a new commercial enterprise. This evidence may include, but is not limited to, copies of the business’ organizational documents and federal tax returns.

Evidence that you have invested or are actively in the process of investing the total amount of required funds.

Evidence that you have sustained your investment in the new commercial enterprise throughout your two-year period of conditional permanent residence. This evidence may include, but is not limited to, the following:

  • Business invoices and receipts
  • Bank statements
  • Contracts
  • Business licenses
  • Audited or reviewed financial statements.
  • Complete copies of federal or state income tax returns or quarterly tax statements
Job Creation

Evidence that you created or will create within a reasonable time 10 full-time jobs for qualifying employees. Such evidence may include, but is not limited to:

  • Business payroll records
  • Relevant tax documents
  • Employee Forms I-9
Job Preservation—Troubled Business

The same documentary requirements for job creation mentioned above, except that the investor must show that he or she has maintained (not created) the number of existing employees at no less than the pre-investment level for the period following his or her admission as a conditional permanent resident.

*Note: To be approvable, at least 10 jobs must be maintained.

*Note: Regional center-affiliated cases must show that the capital investment was made in accordance with the regional center’s business plan in order to be credited with the preservation of indirect jobs.

If the application to remove condition is successful, person will be granted a permanent resident status. When a person spends 4 years and 9 month in permanent resident status (including conditional status) a person may apply for the US citizenship (provided all other requirements for the citizenship are met).

Key requirements

Investment amount

A minimum investment amount for an EB-5 visa is typically $500,000. The EB-5 investment can take the form of cash, inventory, equipment, secured indebtedness, tangible property, or cash equivalents and is valuated based on U.S. dollar fair-market value.

$500,000 investment must be made in a commercial entity that is located in a targeted employment area (TEA) designated by the government. Such EB-5 project must either be in a rural area or in an area that has high unemployment in order to qualify for TEA designation.

High unemployment areas are geographic locations with an unemployment rate that is at least 150 percent of the national unemployment rate at the time of the EB-5 investment. Rural areas are geographic regions that are outside of a city with a population of 20,000 or more. Rural areas can also be geographic regions that are outside of what the U.S. Office of Management and Budget has designated as metropolitan statistical areas.

A $1M investment can be done anywhere based on the investor’s choice. It does not have to be special area.

Important: the investment must be at risk: it means that an investor has to be able to show he may lose his business (as a natural consequence of business operation) and does not need this money to survive in the US. Secured loans are generally disfavored: assets owned by the alien entrepreneur, provided that the alien entrepreneur is personally and primarily liable and that the assets of the new commercial enterprise upon which the petition is based are not used to secure any of the indebtedness. All capital shall be valued at fair-market value in United States dollars. Assets acquired, directly or indirectly, by unlawful means (such as criminal activities) shall not be considered capital for the purposes of section 203(b)(5) of the Act.

Note: Investment capital cannot be borrowed.

New commercial enterprise

All EB-5 investors must invest in a new commercial enterprise, which is a commercial enterprise:

  • stablished after Nov. 29, 1990, or
  • Established on or before Nov. 29, 1990, that is:1. Purchased and the existing business is restructured or reorganized in such a way that a new commercial enterprise results, or2. Expanded through the investment so that a 40-percent increase in the net worth or number of employees occurs

Commercial enterprise means any for-profit activity formed for the ongoing conduct of lawful business including, but not limited to:

  • A sole proprietorship
  • Partnership (whether limited or general)
  • Holding company
  • Joint venture
  • Corporation
  • Business trust or other entity, which may be publicly or privately owned
  • Note: This definition does not include noncommercial activity such as owning and operating a personal residence. It means that investing in a real estate for personal use does not provide for EB 5 status, even if the real estate cost is over $1M.

Except in a regional center company case, investors are required to participate in the operational management of the invested enterprise; in practice, this can be satisfied by taking a managing position, participating in the decision-making process or being a limited partner in a LLP.

Job Creation Requirements

Further, the enterprise must be such as to create at least 10 jobs:

  • Create or preserve at least 10 full-time jobs for qualifying U.S. workers within two years (or under certain circumstances, within a reasonable time after the two-year period) of the immigrant investor’s admission to the United States as a Conditional Permanent Resident.
  • Create or preserve either direct or indirect jobs:
    • Direct jobs are actual identifiable jobs for qualified employees located within the commercial enterprise into which the EB-5 investor has directly invested his or her capital.
    • Indirect jobs are those jobs shown to have been created collaterally or as a result of capital invested in a commercial enterprise affiliated with a regional center by an EB-5 investor. A foreign investor may only use the indirect job calculation if affiliated with a regional center.
  • Note: Investors may only be credited with preserving jobs in a troubled business.

A troubled business is an enterprise that has been in existence for at least two years and has incurred a net loss during the 12- or 24-month period prior to the priority date on the immigrant investor’s Form I-526. The loss for this period must be at least 20 percent of the troubled business’ net worth prior to the loss. For purposes of determining whether the troubled business has been in existence for two years, successors in interest to the troubled business will be deemed to have been in existence for the same period of time as the business they succeeded.

A qualified employee is a U.S. citizen, permanent resident or other immigrant authorized to work in the United States. The individual may be a conditional resident, an asylee, a refugee, or a person residing in the United States under suspension of deportation. This definition does not include the immigrant investor; his or her spouse, sons, or daughters; 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.

Full-time employment means employment of a qualifying employee by the new commercial enterprise in a position that requires a minimum of 35 working hours per week. In the case of the Immigrant Investor Pilot Program, "full-time employment" also means employment of a qualifying employee in a position that has been created indirectly from investments associated with the Pilot Program.

A job-sharing arrangement whereby two or more qualifying employees share a full-time position will count as full-time employment provided the hourly requirement per week is met. This definition does not include combinations of part-time positions or full-time equivalents even if, when combined, the positions meet the hourly requirement per week. The position must be permanent, full-time and constant. The two qualified employees sharing the job must be permanent and share the associated benefits normally related to any permanent, full-time position, including payment of both workman’s compensation and unemployment premiums for the position by the employer.

Regional center option: Also, it is possible to invest in a regional center: it is a special enterprise that is created under the US Immigration laws to attract EB 5 investors. Good thing about working with a regional center: investments made through regional centers can take advantage of a more expansive concept of job creation including both “indirect” and “direct” jobs.  Some typical Regional Center Programs: a real estate limited partnership program that offers investment in industrial properties in a specified major city, a limited partnership program that makes low interest loans to businesses in a specified major city, ownership of an 80-acre almond farm in a specified location in California.

General Requirements:

  • Invest at least $1,000,000 in a regional center or $500,000 if the Regional Center is located in a Targeted Employment Area. The area of the regional centered must be clearly defined.
  • Create 10 new full-time jobs directly or indirectly.
  • A detailed description of how the investment within the specified area will create jobs directly or indirectly.
  • A detailed administrative structure of the regional center which explains how it will promote more investment, assess investor projects, oversee all investment activities, and structure its own investment capital.
04 June 2014
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