EB-5 Investment-Based Permanent Residency (Green Card)
The fifth employment-based preference category permits people to immigrate to the United States based on their investment in a new business enterprise. The investment must be at least $1 million ($500,000 in some cases) and must create full-time employment for at least 10 U.S. workers.
Qualifying a foreign investor for EB-5 status is one of the most complicated processes within the immigration law. A sophisticated knowledge of investment, immigration and corporate law are all needed to successfully complete the EB-5 process. This is precisely why the combination of our practice areas is suited perfected to guide our clients through the entire EB-5 process successfully.
(Links to headings below)
General Information
10 Full-time Jobs Requirement
In which situations is Job Preservation (instead of Job Creation) sufficient?
What does it mean to “Invest Capital”?
The Business Plan
“New Commercial Enterprise” Requirement. Can the investor invest in a business that already exists?
What is the minimum amount of investment required to qualify for an EB-5 Visa? What is a “targeted employment area”?
The Pilot Program and Regional Centers
Obtaining Lawful Permanent Resident (Green Card) Status through EB-5
How long does it take to process EB-5 Visa petitions?
What are the processing procedures?
How long do I have to sustain my investment?
How long do jobs created as a result of the investment need to be maintained?
How long do I need to stay in the U.S. each year? Do I need to be present in the United States at the time of filing the petition to remove conditions on my permanent residence?
Can an investor apply from within the United States if the investor is currently out-of-status? (without a current visa)
What documents will I need to prepare for the EB-5 petition?
Can the funds be held in escrow until the investor’s EB-5 visa is issued?
Can a foreign investor file an EB-5 petition seeking credit for indirect job creation prior to the approval and designation of the regional center associated with the capital investment project?
Can a foreign investor work for another employer after making the EB-5 investment?
Can children of a foreign investor come to United States as his/her dependents at any age?
Is it difficult to meet the 10 full-time direct job creation requirement in a regular EB-5 case?
Does the capital amount for the investment need to come from abroad?
Can the investor buy a house for $1 million and qualify for an EB-5 visa?
What are the disadvantages and advantages of filing the individual EB-5 petition and vs. Regional Center Pilot Program petition?
Numerical Limits
Helpful Links
General Information
The EB-5 Immigrant Investor Program provides a possibility of obtaining a permanent resident status by foreign nationals who invest money in the United States. The EB-5 Program got created by Congress through the Immigration Act of 1990. Under section 203(b)(5) of the Immigration and Nationality Act (INA), 8 U.S.C. § 1153(b)(5), 10,000 immigrant visas per year are available to qualified individuals seeking permanent resident status on the basis of their engagement in a new commercial enterprise. Of the 10,000 investor visas (i.e., EB-5 visas) available annually, 5,000 are set aside for those who apply under a pilot program involving an CIS-designated “Regional Center.”
To be eligible for EB-5, the foreign national needs to engage in a new commercial enterprise. The EB-5 beneficiary must be an individual or group of individuals who join to make an EB-5 investment. The EB-5 beneficiary cannot be a corporation. An EB-5 investor must be involved in the management of a new commercial enterprise to qualify for a visa. Such managerial role includes either the day-to-day managerial control of the enterprise, or managing it through policy formulation, as opposed to maintaining a purely passive role in regard to the investment.
10 Full-time Jobs Requirement
To qualify as an immigrant investor or entrepreneur, a foreign citizen must invest between a half and 1 million U.S. Dollars in a new commercial enterprise in the United States. Additionally, to meet the requirements, such investment needs to result with creation or preservation of at least 10 full-time W-2 jobs (positions requiring 35 hours/week are considered full-time) for qualifying U.S. workers within two years of the investor’s admission to the United States. In certain situations such requirements can be met within a “reasonable time” after the two-year period. There is no definition of “reasonable time”. In such situation, it is incumbent upon the investor to document and explain the reason why the job creation was delayed beyond the anticipated period. Investments that fail to create ten new jobs for qualifying U.S. workers will fail to qualify for EB-5 classification. “Qualifying U.S. workers” include U.S. citizens, legal permanent residents, asylees and refugees and exclude the investor and his/her family and nonimmigrants. Independent contractors do not count towards the 10 full-time jobs requirement. Full-time employment requirement excludes jobs that are intermittent, temporary, seasonal or transient in nature. In the past the construction jobs were not counted toward the required job creation due to their temporary nature, however, nowadays such direct construction jobs may count as long as they are created by the foreign national’s investment and are expected to last for a minimum of two years, including the time when the petitioner files for removal of conditions on his permanent residence. The jobs created as a result of the investment must be maintained through the entire period of conditional residence. The conditional residence ends upon the approval of petition for removal of conditions.
If a few investors invest in a single new commercial enterprise, such new enterprise may be used for satisfying the EB-5 employment-creation requirement by more than one investor, provided that the creation of at least ten qualifying full-time positions may be attributable to each investor and, additionally, each petitioning investor has invested the required minimum amount ($500,000 or $1,000,000). There is a restriction on pooling investments which requires the petitioner to show that every investor in the partnership identify the source of their funds and prove that they were derived by lawful means. Money earned or assets acquired while in the United States in an unlawful status are not considered lawful means to acquire capital.
In which situations is Job Preservation (instead of Job Creation) sufficient?
The EB-5 entrepreneur needs to invest in a “troubled business” to meet the requirement for “preservation” of 10 full-time jobs. It means that the business needs to maintain at least the amount of its present employees for the two years of conditional status period.
The “troubled business” is one that has existed for at least two years and has incurred a net loss for accounting purposes during the one or two year period before the petition was filed, and the loss for such period equals at least 20 percent of the business’s net worth before the loss. Additionally the business needs to remain afloat for a minimum of two years after the investment for the EB-5 investor to keep his status. At the moment of filing a petition for removal of conditions the investor needs to prove that all of the jobs have been saved and that the number of saved jobs equals at least ten.
What does it mean to “Invest Capital”?
An EB-5 investor is required to have invested or be “in the process of investing” capital into a new commercial enterprise. Even though the statute states that the investor can be “in the process of investing” USCIS requires that at the time the EB-5 petition is filed, the entire capital amount be already committed and invested in the commercial enterprise (the investor’s money must be “at risk”).
Capital can be defined as cash and its equivalents or tangible property (e.g. inventory and equipment). Retained earnings and loans by the petitioner cannot count as capital. Additionally, contribution of capital in exchange for some debt arrangement (e.g. for a note or bond) between the investor and the enterprise cannot be treated as an investment meeting the requirements of the EB-5 visa. In a situation when the immigrant investor is personally and primarily liable for the debts of the enterprise, the indebtedness secured by investor’s assets may be considered capital, provided that none of the assets of the new enterprise is securing such debt. That means that in case of such indebtedness it needs to be clearly stated that the investor is the one obligated to make all the payments required. An EB-5 investor also cannot receive any stock that would be redeemable at his request or any bonds or notes, in return for investing in the enterprise. If a new commercial enterprise’s limited partnership agreement contains a redemption clause (i.e. a buy-back agreement) that guarantees the return of the invested capital, then the alien investor’s capital investment will not meet the EB-5 “at-risk” investment requirement.
The Business Plan
The business plan submitted with the EB-5 petition serves the USCIS in determining whether the required amount of jobs has been or will be created within a reasonable period of time and whether the capital investment has been sustained during the investor’s two-year period of conditional residency. Foreign Investors may encounter difficulties when unforeseen circumstances make it impossible to create the required amount of jobs as outlined in an approved initial petition. It is also possible that the investment project, upon which the EB-5 petition relied, fails or cannot be completed within the two-year period. Unfortunately, the business plan included in the original EB-5 petition cannot be materially altered after its filing.
If there are material changes in the original business plan, the investor needs to file a new EB-5 petition with the new business plan. If approved, such new petition also means a different application for a new two year period of conditional permanent residence status as well as an application to abandon the previous status as a conditional permanent resident. Filing such new petition is burdensome and may cause certain problems (e.g. investor’s employment authorization and travel permission can be jeopardized until the new employment authorization and travel permission are approved).
“New Commercial Enterprise” Requirement. Can the investor invest in a business that already exists?
A “Commercial Enterprise” may mean a corporation, partnership or sole proprietorship, joint venture or a business entity (e.g. trust) owned publicly or privately. The “Commercial Enterprise” also includes a holding company together with its wholly owned subsidiaries, under condition that each such subsidiary is engaged in a for-profit commercial activity formed for the ongoing conduct of a lawful business. To qualify under the EB-5 category, the new enterprise must benefit the U.S. economy.
To be “New” such Commercial Enterprise needs to be established after November 29, 1990. If the enterprise was established before that date it may still be treated as a “New Commercial Enterprise” if as a result of the investment it expands and its net worth or number of employees increases by at least 40%. Proof of expansion of the company by at least 40% in its net worth requires audited financial statements concerning the company’s former net worth at the time of investment. Additionally, if the enterprise was formed before November 29, 1990, it may still be treated as a “New Commercial Enterprise” if it is purchased and reorganized or restructured and results with a new commercial enterprise. However, simply changing the legal form of the enterprise does not satisfy the reorganization or restructuring requirement.
The term “New Commercial Enterprise” does not include a noncommercial activity, such as owning and operating a personal residence.
What is the minimum amount of investment required to qualify for an EB-5 Visa? What is a “targeted employment area”?
The EB-5 Investor needs to invest a minimum of U.S. $500,000 or $1,000,000. The requirement for the investment depends on the area. The investor can invest $500,000 in certain “targeted employment areas”.
Such targeted area is a rural area or another area with the high unemployment rate that is at least 150 percent of the national average at the time of investment. Rural areas exclude metropolitan statistical areas (designated by the Office of Management and Budget) and cities or towns with a population of 20,000 or more. There is no general list of the targeted employment areas because each state determines its own targeted employment areas. The targeted employment area needs to be evidenced by submitting a letter from the state’s agency confirming that the area has high unemployment and defining the statistical area. 3,000 of the 10,000 EB-5 visas are reserved for the foreign investors who invest in targeted employment areas.
The Pilot Program and Regional Centers
There are two different EB-5 pathways for a foreign investor to gain lawful permanent residence, the Basic Program and the Regional Center Pilot Program. 95% of all EB-5 applications are filed through the Regional Center Pilot Program.
The Immigrant Investor Pilot Program (“Pilot Program”) was created on October 6, 1992 and has recently been extended through September 30, 2015. Pilot Program is, and has been, renewing legislation since its inception. To qualify for the Pilot Program, an investment must be made in a commercial enterprise located within a USCIS approved regional center.
EB-5 requirements under the Pilot Program are basically the same as in the standard EB-5 investor program, with a difference that the Pilot Program provides for investments that are affiliated with a “Regional Center”. Under the Regional Center Pilot Program, an individual or entity must file a proposal to request USCIS approval and designation of the entity that filed the proposal as a Regional Center. A Regional Center is defined as any business entity, public or private, involved in promotion of job creation, economic growth, increased domestic capital investment and improved regional productivity. Such Center coordinates and oversees foreign investment projects within a specific geographic area within the EB-5 framework. The Center needs to demonstrate in detail how jobs will be created and it needs to commit sufficient funds to oversee and promote the capital investment opportunities within the region. (A complete list of the approved regional centers.)
The role of a regional center is to decide on new investment projects within the area, oversee the EB-5 petition filings of the investors affiliated with the center, monitor compliance with the business plan, tracking the infusion of capital into enterprises as well as allocation of jobs between investors.
Investments made through regional centers can take advantage of a less restrictive concept of job creation including both “indirect” and “direct” jobs, whereas the EB-5 investors not within the pilot program need to fulfill a stricter requirement of creating 10 direct jobs only.
Direct jobs for qualified employees are jobs created within the commercial enterprise into which the foreign investor has directly invested his/her capital. They establish an employer-employee relationship between the employed persons and the commercial enterprise. Indirect jobs include those positions that have been created as a result of capital invested by the foreign investor in a commercial enterprise affiliated with a regional center or that have been created collaterally. If a foreign investor is involved in a pilot program, showing indirect job creation and improved regional productivity is sufficient.
The regular EB-5 program and the pilot program have similar requirements for the beginning of the process. One of the differences between the two processes is that the regular program requires the petitioner to submit all of the described evidence, and the pilot program requires a certification from the designated regional center confirming that the investor has met its criteria.
Obtaining Lawful Permanent Resident (Green Card) Status through EB-5
A foreign Investor can obtain a lawful permanent resident status either through adjustment of status in the United States, or through an application for immigrant visa filed when the investor is outside of the United States.
Upon approval of the adjustment of status or admission on an EB-5 immigrant visa, the foreign EB-5 Investor is granted a two-year conditional permanent resident status. Individual Investor’s family may also receive permanent residency. The family includes husband, wife and any unmarried children (including adopted children) of the investor under the age of 21. If the EB-5 conditions are fulfilled ( the investment has been sustained and created the necessary 10 full-time jobs) within the two-year period, the petition for removal of conditions on the legal permanent resident status should be filed at the end of the two-year period. If the petition is approved, the investor will become an unconditional Legal Permanent Resident. Usually, the spouse and children of the foreign investor have their conditions removed at the same time as the investor. In a situation where the Investor decides to abandon his/her permanent resident status, his/her family members will not be able to remove the conditions on their permanent residence status. The Investor can apply for naturalization (U.S. Citizenship) four years and nine months after the date he/she became a conditional permanent resident.
How long does it take to process EB-5 Visa petitions?
Processing times are different for each investor. For some it may take as little as a few weeks and for some it may take as much as nine months. In all likelihood, the wait for an EB-5 petition approval will take longer than this. The processing time depends on many factors, such as which country the investor is in, how fast CSC adjudicates the EB-5 petition, etc.
What are the processing procedures?
The process begins with filing a petition for the foreign investor with the USCIS. If the EB-5 petition is approved, the investor must wait for the interview notice from the U.S. Embassy or Consulate in his/her home country. If the investor is already present in the United States, he/she may apply for the adjustment of status from within the United States (not his/her home country). If the application is approved, the investor receives a travel document and a conditional green card for a period of two years. After the two years of conditional residence, the investor may file for removal of conditions on his/her permanent resident status.
How long do I have to sustain my investment?
The foreign investor must sustain the investment not only during the two years of conditional permanent residence, but also until the approval of the petition for removal of conditions on his/her permanent resident status. Due to long processing times of the petitions, the investor needs to be prepared to wait for five or more years before the investment can be redeemed safely.
How long do jobs created as a result of the investment need to be maintained?
The jobs created as a result of the investment must be maintained through the entire period of conditional residence (until the approval of the petition for removal of conditions on the permanent resident status). It is possible that the jobs will be created immediately before the filing of petition for removal of conditions. Such situation is acceptable because the foreign investor is allowed to show that the jobs were either created or are expected to be created within a reasonable time.
How long do I need to stay in the U.S. each year? Do I need to be present in the United States at the time of filing the petition to remove conditions on my permanent residence?
After receiving the visa, the investor has 180 days to enter the United States. Then, the investor needs to establish and maintain the intent to be a resident. It means that the investor does not need to have a physical presence in the U.S. but the intent to be a resident can be established by paying taxes, obtaining a U.S. driver’s license and a social security number, opening bank accounts and buying/renting a home. Even though the investor may reside overseas, it is advised that he/she should visit the U.S. at least once every six months so that his/her permanent resident status is not endangered. There is a possibility of obtaining a re-entry permit for some of the investors which would allow them to stay overseas for the whole two years without the need of re-entering the U.S.
The petition for removal of conditions on permanent resident status can be filed regardless of whether the investor is physically present in the U.S. at the moment of filing. Once the petition is filed, the investor can travel outside the U.S., however he/she needs to return to the United States to comply with the interview requirements.
Can an investor apply from within the United States if the investor is currently out-of-status? (without a current visa)
Such investors must first return to their home country and apply through the U. S. Embassy there, since the out-of status persons are no longer permitted to apply for permanent residence from within the United States.
What documents will I need to prepare for the EB-5 petition?
Every petition is individual and will require the submission of different documents. Documents that are required for every petition are the ones providing the complete biographical information of the applicant as well as the documents that prove the lawful source of the investment funds. Such documents may include five years of tax returns and bank records, closing statements, contracts (if the funds came from a specific transaction), business licenses and financial statements for each business that the investor owns.
An example of a source of funds may be inheritance or receiving money as a gift. The history of such funds needs to be documented in detail, and the confirmation that all taxes have been paid in connection with such funds, is required. Earned income is generally the most straightforward source of funds, however, the investor needs to document in detail how he/she earned the money and should provide tax returns documenting that all taxes were paid in full. If the investor is from Iran or other country against which U.S. has sanctions, the Office of Foreign Assets Control needs to be consulted to confirm the lawful source of investment funds.
If the investor is affiliated with a regional center, the required supporting documents will vary based on the regional center application. Upon approval of a regional center application, the approval notice will include a list of the documents that should be submitted in support of the EB-5 petition.
Can the funds be held in escrow until the investor’s EB-5 visa is issued?
Setting up an escrow account is a standard procedure for regional centers to receive investors’ funds. As long as the escrow agreement is EB-5 compliant and as long as the investor’s EB-5 petition is accompanied by evidence that the required amount of capital has been placed at risk, the funds can be placed in escrow until the investor’s visa is issued. If the investor is not affiliated with a regional center, using an escrow account is permissible, if the funds are put at risk and committed to be released to the new commercial enterprise the moment the investor’s EB-5 petition is approved.
Can a foreign investor file an EB-5 petition seeking credit for indirect job creation prior to the approval and designation of the regional center associated with the capital investment project?
An investor cannot seek credit for indirect job creation prior to the approval and designation of the regional center. Whether the investor petition is affiliated with a regional center or not is determined at the moment of filing of such petition. The investors who filed the EB-5 petitions before the approval of a regional center can seek credit for creation of direct jobs only, when they file a petition for removal of conditions.
Can a foreign investor work for another employer after making the EB-5 investment?
The EB-5 investors are not prohibited from starting other businesses or working for different US employers.
Can children of a foreign investor come to United States as his/her dependents at any age?
If the child wishes to immigrate to U.S. as a dependent of the investor parent, the EB-5 petition needs to be filed before the child turns 21. If the child is 21 years of age or older, the child can apply as the principal EB-5 investor but not as a dependent of an investor parent.
Is it difficult to meet the 10 full-time direct job creation requirement in a regular EB-5 case?
Very often it is difficult to meet the 10 full-time job creation requirement because the regular EB-5 cases require to form the jobs directly. The jobs have to be new and not already existing. Very often a new business is small and sensitive to economy and forming 10 new job positions within the two-year period is difficult. For that reason the majority of investors choose the Regional Center Pilot Program over the individual EB-5 petition.
Does the capital amount for the investment need to come from abroad?
The money for the EB-5 investment does not have to come from a foreign source. As long as the money got lawfully earned in the United States while the investor was in lawful status, the money can be used for the EB-5 investment.
Can the investor buy a house for $1 million and qualify for an EB-5 visa?
The investment for EB-5 purposes needs to be an investment in a commercial, for-profit activity and investing in a residential real estate is not a commercial activity. Additionally, the EB-5 investment needs to create 10 full-time positions and that would be difficult to achieve through investing in a residential property.
What are the disadvantages and advantages of filing the individual EB-5 petition and vs. Regional Center Pilot Program petition?
If the investor decides to file an individual EB-5 petition, the investor is the one who decides about the form of the investment. Additionally, the investor has some control over the business and is responsible for the way his/her money is being spent and can decide whether to sell his/her interest in the business. If the enterprise is operating successfully, the investor can derive significant profits from it. If the enterprise is not very successful, the investor can make decisions about finding the solutions to improve the performance of the business. However, the major requirement for the individual EB-5 petition is to create 10 jobs directly and in many cases it is very difficult to achieve as many new enterprises are small and susceptible to the market fluctuations. Additionally, the investor needs to spend more time and effort on running the enterprise. In many cases, the individual investments will exceed the required amount of $1 million and if the investment is not a success, the investor risks losing all of his/her money. Furthermore, the individual EB-5 petitions are more difficult to prepare, because they need to be tailored to the needs of a specific investor and need to be prepared from scratch.
If the investor decides to file the petition through the regional center, he/she will not have the right to manage the business on a day to day basis. The investor will most probably be a limited partner and his/her part in managing the business will be limited to voting on important decisions regarding the investment. Additionally, money of the investor is usually locked in for a certain period of time, therefore, the investor cannot withdraw from the business if the investment fails.
