The Immigration Act offers a simplified route to permanent resident status for foreign businessmen investing in the American economy. The required investment for a green card is $1,800,000. However, this amount is reduced to $900,000 if the investment is made in specific regions of the United States with unemployment rates above the national average.
For many successful businessmen from other countries, nine hundred thousand or even one million eight hundred thousand dollars is not an exorbitant sum. Interestingly, there is no direct requirement to physically possess such large sums. The EB-5 investor visa can be obtained by those who may not have $900,000 in the bank but can secure the necessary funds through loans or private lending.
The EB-5 program, established in 1990, aims to attract foreign investors to create new business entities in the U.S. Under 8 U.S.C. § 1153(b)(5), the program allows foreigners to obtain permanent resident status by investing capital in the U.S. economy, provided the investment creates 10 full-time jobs for U.S. citizens or permanent residents. To reduce the investment to nine hundred thousand dollars, the investment must be in an area where unemployment is 1.5 times higher than the national average. The investment can also be lowered if directed to rural areas with a population of less than 20,000.
An overseas businessman must file an EB-5 investor visa application using Form I-526. Along with the petition, a complete package of evidence must be submitted to the Immigration Service, showing that the required capital has been secured and that the funds are the legally obtained property of the applicant. According to 8 C.F.R. § 204.6(j), if the required 10 jobs have not been created at the time of petition filing, the petition must include a detailed business plan demonstrating how the company will create 10 new jobs within two years.
After initiating a business, the investor must remain actively involved in setting the company’s policies. Immigration regulations do not permit a complete disengagement from the business’s operations. Initially, the investor is granted conditional permanent resident status with a “probationary period” of two years. After this period, the foreign businessman can file a new petition with the Immigration Service to obtain a permanent green card.
The EB-5 program has an annual visa quota of 10,000. Out of this total, 3,000 visas are designated for investors who inject their capital into high-unemployment regions. Another 3,000 visas are reserved for those investing through “regional centers.”
“Regional Centers”
A “regional center” refers to a private investment fund or a government entity focused on economic development in a specific region. These organizations must undergo preliminary screening and obtain accreditation from U.S.C.I.S. The investment center pilot program, established in 1993, is regularly extended by the U.S. Congress. There are currently over a hundred such centers in the United States.
Investors making investments through “regional centers” enjoy certain benefits. While investors who start their own businesses must demonstrate the direct creation of 10 new jobs, those operating through “regional centers” only need to show that their investment has indirectly contributed to employing 10 new workers. This requirement is relaxed because “regional centers” must have already demonstrated to the Immigration Service at the time of their registration that their activities will lead to the creation of 10 new jobs for each new investor.
Investments in “regional centers” must meet the general requirements of the EB-5 program. If the center is located in a rural area or a region with high unemployment, the investment threshold is reduced to $900,000. “Regional centers” often aggregate investments from several investors to support a single larger business initiative. For instance, 10 foreign investors might combine their resources to establish a substantial enterprise employing a hundred American workers.
However, it is crucial to note that “regional centers” must strictly adhere to their business plans to maintain their accreditation. Failure to do so could result in the loss of their accredited status.
Types of Investments
1. Investments in the Form of Loans: Some regional centers facilitate investor capital allocation by transferring invested funds to a local (usually municipal) organization for infrastructure development. This creates a debtor-creditor relationship between the investor and the organization. The municipal corporation is responsible for returning the invested capital. However, there’s a risk: in the event of a municipal government default or debt restructuring, the investor may lose their money or face delayed returns.
2. Investment in Trading Businesses: Investments through property acquisition can involve owning physical assets (like real estate) or conducting trading operations. For foreign investors, these operations are typically small-scale and outside recognized exchange markets. This investment type carries risks related to supply and demand fluctuations and the commodity’s value. There have been instances where investors lost all their capital with this approach.
3. Investment in Property: Investing in physical assets, particularly real estate, without bank loans is considered the safest way to invest in the U.S. economy. Although real estate prices can drop during economic downturns, they generally rebound and exceed previous values over time.
What Funds Can Be Invested?
The Immigration Service scrutinizes the origin of assets. Foreign investors must demonstrate that the property was not acquired through illegal means. Money received as gifts from relatives or through wills can be used for investment under the EB-5 program. Funds obtained as loans are also permissible.
New Business Entity
The Immigration Act requires foreign investors to establish a “new business entity” in the U.S. Does this mean buying an existing business would not qualify for EB-5 status? Immigration laws define a “new business entity” as one established after November 1990. An existing business can qualify as a “new commercial structure” if the foreign investor significantly restructures the enterprise and expands its activities (by 40 percent or more). This provision offers flexibility for investors seeking EB-5 status through existing business ventures.
The second requirement of U.S. immigration laws is that the entity must be “commercial” in nature. This excludes charitable associations, foundations, and public organizations from fitting this definition. The business being established must be profit-oriented. For instance, purchasing a large mansion and employing 10 servants would not be considered as creating a commercial entity.
In 2002, the U.S. Congress amended parts of the Immigration Act concerning rules for foreign investors, stipulating that an investor does not necessarily need to be personally involved in organizing a company in the United States.
To qualify for investor status when acquiring an existing business, you must demonstrate that the company has increased by 40% in either its total value or the number of employees. This may mean creating more than 10 new jobs to qualify for a green card. Interestingly, when buying a business, it is not required to prove that the investment directly led to increased production metrics. Audited financial statements reflecting an increase in the enterprise’s value are sufficient.
Should an Investor Remain Continuously in Business?
An investor applying for a green card must participate in their business entity. The regulations state that the investor must be “involved” in the company’s management. This involvement can be manifested in two ways: First, the investor may control the day-to-day operations of the company. Alternatively, they can limit their involvement to formulating the company’s key policies and general objectives.
Investments in Strategic Sectors
There are numerous laws restricting certain types of foreign investments in the U.S. economy, particularly in sectors like banking, electronic communications, aviation, shipping, subsoil use, and contracts with government agencies. The U.S. Congress has also set criteria applicable to investments from other countries. Since the investment must be beneficial to the U.S. economy to qualify for an EB-5 visa, any violation of U.S. laws will lead to a negative decision from immigration officers.
How to Count 10 Employees?
Investors are required to provide employment to 10 U.S. citizens, permanent residents, or other immigrants authorized to work in America. These employees must work full-time, defined as at least 35 hours per week. Importantly, the investor and their family members do not count towards these 10 required positions. Additionally, it is prohibited to employ 10 people who came to the U.S. on nonimmigrant temporary work visas for this purpose.
Document Submission Process
After selecting a location for your new business or a “regional center” for your investment, you must complete and submit Form I-526. You might be asked to attend an interview at an Immigration Service office.
Once your I-526 is approved, you need to apply for conditional permanent resident status. If you’re already in the U.S., this involves filing Form I-485. If you’re outside the U.S., you must apply for an immigrant visa at a U.S. diplomatic mission. You will eventually receive a temporary green card.
After residing in the U.S. for 21 months, you can file Form I-829 to remove conditions from your permanent resident status. You’ll need to demonstrate that your business continued operating in the U.S. and supported employment for 10 people during those two years. Five years after receiving your green card, you’re eligible to apply for U.S. citizenship.
Conclusion
Navigating the EB-5 investor immigration program with its complex rules is a challenging task. It is strongly advised not to proceed without professional legal assistance. The right decisions in this process depend on immigration attorneys’ expertise in corporate law, tax law, and business law.
