Part 1: What is the EB-5 Visa Program?

August 19, 2015

This is part one in a five-part series of short papers on the EB-5 Immigrant Investor Visa program. Full series available here.

The U.S. government has taken steps aimed at increasing the level of foreign investment for nearly a century. In the Immigration Act of 1924, Congress introduced the E-1 treaty trader class to help facilitate trade by foreign merchants in the United States on a temporary basis. This program was expanded through the Immigration and Nationality Act (INA) of 1952, which created the E-2 treaty investor class to further attract foreign investment. Four decades later, in the 1990’s, U.S. officials introduced the EB-5 Immigrant Investor Visa program, which is intended to stimulate the economy through job creation and capital investment by foreign investors.

The “Immigrant Investor Program”, also known as the EB-5 visa program, is a leading option for investors seeking opportunity to invest in the United States. Created by Congress as a part of the Immigration Act of 1990, the EB-5 visa program was intended to spur the country’s job creation and capital investment. It encourages wealthy investors to inject money into a project in the United States by making available conditional green cards, which potentially may be upgraded to permanent green cards at a later date if certain conditions are met. In 1992, U.S. officials created the EB-5 Regional Center Program, whose requirements are the same as for the original Immigrant Investor Program, with one major exception: under the EB-5 Regional Center Program, the investment can be with a “regional center,” defined by the regulations as “any economic unit, public or private, which is involved with the promotion of economic growth, including increased export sales, improved regional productivity, job creation, and increased domestic capital investment.” 8 CFR 204.6(e). Importantly, in an effort to promote investment in larger projects, Congress permitted investors to fulfill the law’s job creation requirement using indirect jobs. The EB-5 Regional Center Program is currently set to expire on September 30, 2015, and absent action by Congress, will terminate at that time.

The EB-5 visa program’s core requirement is that investors must demonstrate that their investment will create 10 U.S. jobs. As defined by USCIS, a commercial enterprise is “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.” Specifically, the new commercial enterprise has been defined as a commercial enterprise that was established after Nov. 29, 1990; or established on or before Nov. 29, 1990, but either (1) purchased and restructured or reorganized in such a way that a new commercial enterprise results, or (2) expanded through the investment so that a 40% increase in the net worth or number of employees occurs.

Under the EB-5 program, 10,000 EB-5 visas are made available to qualifying foreign investors, with family members counting against the cap. Only a limited number of investors from each country may receive EB-5 visas under existing country caps. The program requires that applicants must add or preserve either “direct jobs,” which 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; or “indirect jobs,” which are those shown to have been created collaterally or as a result of capital invested in a commercial enterprise associated with a regional center by an EB-5 investor. Foreign investors are required to create or preserve at least 10 full-time jobs for qualifying U.S. workers within two years of the immigrant investor’s admission to the United States (or in certain circumstances, within a reasonable time after the two-year period).

Additionally, USCIS may credit investors with preserving jobs in a troubled business, which is defined as an enterprise that has been in existence for at least two years and has suffered a net loss during either the previous 12 months or 24 months before the priority date on the immigrant investor’s initial petition. The investor must demonstrate that the number of existing employees is being or will be maintained at no less than the pre-investment level.

The program maintains strict capital requirements, requiring applicants to demonstrate a minimum qualifying investment of $1 million, or $500,000 if invested in “Targeted Employment Areas” (TEA), which include certain designated high-unemployment or rural areas. The majority of the approved regional centers develop investment opportunities that are located in TEAs, which qualifies their foreign investors for the lower investment threshold.

Once USCIS approves the I-526 petition, either the State Department will issue an EB-5 visa for admission to the country, or USCIS will “adjust” the status of the investor and family members to that of conditional permanent residents. To clarify, EB-5 investors and their family members are granted conditional permanent residence for a two-year period after their applications to adjust status are approved or upon entering the United States under an EB-5 immigrant visa.

Eventually, EB-5 investors and their family members may be able to qualify for permanent residence status, allowing them to permanently live and work in the United States, if they are able to prove fulfillment of the EB-5 program requirements at the end of the two-year admission period.

Continue reading PART 2: PUTTING EB-5 INVESTMENTS IN CONTEXT

 

The National Immigration Forum would like to thank Zuzana C. Jerabek, former Policy Intern, for her extensive contributions to this EB-5 series. If you have any questions regarding the series please contact policy@immigrationforum.org.

Full EB-5 Visa series available here.