In early 1992, the United States legislature created the EB-5 visa program to help stimulate the U.S. economy. The EB-5 program is intended to support job creation through capital investment from foreign investors.
The EB-5 process differs from most other business-related visas in that the norm is for an employer to petition. The EB-5 process is initiated directly by the visa applicant. The process can be complicated in that:
- Only businesses established after November 29, 1990 or meeting certain purchase, restructuring or expansion requirements will form the basis for a qualifying investment
- Evidence of the required $500,000 or $1,000,000 investment is required, including:
- Proof of a legal source of funds; and
- Proof that the funds have been transferred through a legal path
- Evidence is required to demonstrate that the new enterprise will create at least 10 full-time positions, excluding those held by the applicant and certain others
Attempting the EB-5 visa application process without knowledgeable guidance can be a serious mistake. At a minimum, the process will require extensive research and time investment. In a worst-case scenario, a visa applicant who could have qualified might be denied because he or she did not fully understand the requirements or failed to provide adequate supporting documentation in one or more areas.
EB-5 Visa Requirements
An in-depth understanding of the requirements briefly set forth above and the supporting documentation required for each is critical to a successful EB-5 visa application process.
New Commercial Enterprise
The definition of “new commercial enterprise” for purposes of the EB-5 visa process is not precisely in accord with the common meaning of the phrase. New commercial enterprise means an enterprise that was:
- Established after November 29, 1990; or
- Established on or before November 29, 1990, but meets certain other requirements discussed in more detail below
Note that: unless Congress makes a change at some point in the future, this qualifying date remains static. Thus, although the standard referred to a truly new business when the program was created, enterprises established more than 15 years ago currently meet the per se “new” requirement.
In some cases, an organization established earlier than the benchmark date may qualify. There are two exceptions to the timeline requirement:
- The enterprise is being purchased, and the existing operation reorganized or restructured such that a new commercial enterprise results; or
- The investment will expand the enterprise in such a way that either the company’s net worth or the number of employees increases by 40%
Active Engagement in the Business
A direct EB-5 investor must be able to demonstrate that he or she is or will be actively engaged in the business. This may either involve day-to-day management or a policy-making role. However, a Regional Center investment, discussed in greater detail below, does not require active participation in the management or policymaking of the enterprise.
Investment
Most potential applicants for an EB-5 visa know that an investment of $1,000,000 must be documented, unless the investment is in a Targeted Employment Area. Targeted Employment Area status may be granted on the basis of the area being:
- Rural; or
- A high unemployment area
Targeted Employment Area designation is determined as a part of the I-526 process. If the designation is granted, the required investment is $500,000 rather than $1,000,000. Except in Regional Center-based cases, it is the responsibility of the applicant to supply sufficient evidence that the area is rural or a high unemployment area. An experienced immigration attorney can explain the options for supporting evidence, as well as the specifics as to what must be included in the letter.
In addition, many investors are not aware that they will also be asked to provide proof that the funds were obtained lawfully, and perhaps that the path the funds have traveled to reach the United States was also legal. Some of the most common types of documentation submitted with regard to this issue are records from an established foreign business and business and/or personal income tax returns from any country.
Source of funds issues, which are discussed in more detail below, are playing a larger and larger role in the consideration of an EB-5 visa application. This is one area in which it is particularly advantageous to have an experienced immigration attorney working with you from the beginning to ensure that you have the right type of documentation available.
Creating or Preserving Jobs
Economic growth, specifically job creation, is the purpose behind the EB-5 visa program. Thus, evidence that the new enterprise will create at least 10 full-time jobs is key to the application. These jobs must be created within the organization the petitioner invests in, and must each provide at least 35 work hours per week. The rules governing qualifying jobs are very specific. For example, a full-time job-share arrangement can be counted as one full-time job, but two part-time jobs cannot, even if they combine to more than 35 hours per week.
It is important to note that not every job created within the organization will be counted toward this goal, even if the job is full-time. Specifically, the 10-job minimum may not include positions filled by:
- The investor
- The investor’s spouse
- The investor’s children
- Temporary workers
- Nonimmigrant workers
Of course, the count also does not include any workers not authorized to work in the United States.
Adequate evidence concerning job creation generally includes a detailed business plan supporting the need for at least 10 new full-time employees over the subsequent two years, and where on the timeline each employee is expected to be hired. As with regard to active engagement in business, the requirements are somewhat different for Regional Center-affiliated investments.
When the business in question is “troubled,” the investor may satisfy this requirement by demonstrating that the investment will result in the preservation of at least 10 jobs. However, the United States Citizenship and Immigration Services (USCIS) has a very specific definition of “troubled business,” and preserved jobs are considered only when the following conditions are met:
- The business has existed for at least two years;
- The business has posted a net loss for the previous 12-month or 24-month period; and
- The loss is equal to or greater than 20% of the net worth of the company prior to the loss
The EB-5 Immigrant Investor Application Process
The first official step toward entering the United States or changing status based on an EB-5 investment is filing of Form I-526, Petition by Alien Entrepreneur. Then, once that petition has been granted, the applicant must file either Form I-485 (Application to Register Permanent Residence or Adjust Status) or Form DS-230/DS-260 (Application for Immigrant Visa and Alien Registration).
Petition by Alien Entrepreneur
Form I-526 is the core of the Immigrant Investor application process. It is at this stage that the foreign investor must establish and provide documentation in connection with the considerations listed above, along with other information.
While it is possible to complete Form I-526 independently, working with an experienced immigration attorney to complete the petition and assemble supporting documents and information can make a significant difference in the outcome. Most business people, and even attorneys who do not have specific expertise and experience in the area of immigration law, simply do not have the detailed knowledge and insight necessary to construct a strong petition with all necessary and effective supporting materials.
Application to Register Permanent Residence or Adjust Status
After the I-526 petition is approved, an immigrant investor who is already in the United States must file Form I-485. In connection with this petition, the investor will be required to submit biographical information that will help USCIS determine whether or not the petitioner is eligible for permanent residence in the U.S.
Note that this petition is only for investors already in the country. Those who are still in their home countries at the time the I-526 is granted must file DS-230 or DS-260.
Application for Immigrant Visa and Alien Registration
The next step for a foreign investor who has received I-526 approval but remains in his or her home country is DS-230 or DS-260. These forms are substantively alike, though one is hard copy and the other electronic.
These petitions are processed through the investor’s local U.S. consulate or embassy. Filling out the form completely is critical to the petition. Any blanks or notations such as “n/a” or “not applicable” will result in the petition being rejected.
As with the I-526 petition, the process will generally go more smoothly and your chances of putting together a successful petition without the need for supplemental information or resubmission will be enhanced by the assistance of an experienced immigration lawyer.
EB-5 Source of Funds Documentation and Analysis
One of the potentially most complicated aspects of the I-526 process is providing adequate documentation of a legal source of funds. This may include administrative fees as well as investment capital. In addition, the source of funds inquiry considers not only where the funds originated but also whether they reached the investment point via a legal path.
One key point to be aware of is that source of funds issues must be proven only by a preponderance of the evidence, which is a lower standard than that applied to many other immigration issues. Proving a point by a preponderance of the evidence means only establishing that it is more likely than not.
Documentation Set Forth in EB-5 Regulations
EB-5 regulations list four categories of documentation required to demonstrate that investment funds came from a legitimate source and arrived in the United States by legal means:
- Foreign business registration records
- Tax returns (corporate, partnership and/or personal)
- Evidence identifying other sources of capital
- Certified copies of any judgments, pending court cases and administrative proceedings dating back 15 years
In practice, however, additional documentation is often required. Some additional items might include:
- Bank statements
- Real estate deeds and/or contracts
- Property appraisals
- Employment contracts
Of course, these are just examples, and the specific documentation will vary depending upon the source of the funds and the type of transfer the investor is attempting to document. In some cases, the inquiry will extend further back than the investor himself or herself. For example, if the funds have been acquired through inheritance, USCIS may require documentation demonstrating that the decedent obtained the funds by legal means.
Proving Source of Funds
Difficulty often arises in proving source of funds, path of funds, or both. You might initially assume that since the funds were legally acquired and transferred, it will be easy to document those facts. However, that is not always true.
It is sometimes possible to fill in gaps in the documentation with declarations about the source of the funds or the mechanism by which the funds were moved, but this is far from the preferred means of proving up source of funds. Whenever possible, actual documentation should be provided.
One factor that sometimes complicates documentation is that certain countries have limitations on the amount of money that may be transferred abroad on an annual basis. This often means that investors must plan ahead and transfer funds in stages or find alternate legal means of making funds available for the investment.
In some countries, this limit is quite low. For example, China prohibits the transfer of more than $50,000 U.S. dollars abroad in a year. Until recently, India imposed a similar limitation in the amount of $75,000. However, that ceiling has recently been raised to $250,000 per year, making EB-5 investment much more manageable for potential investors living in or having accumulated their wealth in India.
This is just one example of an obstacle that may mean a multi-step transfer process, requiring multiple layers of documentation. When you are preparing documentation to prove source of funds in connection with an EB-5 visa application, the assistances of a seasoned immigration attorney can be invaluable.
Fifth-Preference Visas
The EB-5 Investor visa is a fifth-preference visa, meaning that immigrants under this classification receive the lowest priority in allocation of the limited number of visas available. Thus, even after a petition for immigration is granted, there may be a significant delay in the issuance of an immigrant visa number. Wait times can be especially long when the petitioner comes from a country where there is high demand for U.S. immigrant visas.
It is in your best interest to conduct thorough research, get knowledgeable guidance and ensure that your petition is well constructed and fully supported, so as to avoid further extending the process with the need for supplemental information or even re-application.
Regional Center-Affiliated Cases
EB-5 Regional Centers are regulated by USCIS, and are designed to facilitate economic development by pooling EB-5 investments to maximize job creation potential. Investments made through Regional Centers are subject to the same state and federal regulations as other investments. A Regional Center-based investment differs from a direct investment primarily in two regards:
- Because the Regional Center aggregates capital from EB-5 investors, the requirement that the investor demonstrates active engagement in management and decision-making does not apply; and
- The job creation requirement operates somewhat differently, in that the created jobs may be direct, indirect or induced
Working through a Regional Center also removes some of the burden on the investor applicant, in that it is the Regional Center and not the investor who puts together job creation projection. The broader nature of the job creation requirement also makes it somewhat simpler to fulfill that requirement.
Job Creation Requirements for Regional Center-Based EB-5 Investments
While direct jobs like those described in the job creation section above are counted, for Regional Center-based investments may also be supported by indirect or induced job creation. Indirect job creation includes those jobs that are created as a result of the investment, in businesses associated with the EB-5 Regional Center. Most often, these jobs are created in the investment project’s supply chain. For example, an investment in a company that makes wooden furniture could potentially trigger job creation in the mill that planes raw timber and provides usable wood to the furniture manufacturer.
Induced jobs are even further removed, representing job creation within the community as a result of the increased economic activity, including the increase in spending by EB-5 project workers in created jobs.
However, the fact that these jobs are further removed from the investment does not mean that they may be theoretical. The Regional Center must calculate indirect job creation using one of two acceptable methodologies:
- Base job creation from the injection of capital into a job-creating enterprise; or
- Through economic modeling that projects the indirect job creation based on direct job creation
There are multiple accepted economic models that Regional Centers may choose to employ. When the investment is through a Regional Center, however, the individual investor need not conduct the analysis or retain an expert to put together projections and a detailed business plan.
EB-5 Investment Scams
The desirability of obtaining an EB-5 visa as a means of entry to the United States has made opportunities for investors a fertile ground for fraud. While the Securities and Exchange Commission (SEC) and USCIS work together to put a stop to fraudulent securities offerings made by EB-5, the investor must exercise due diligence in selecting an investment opportunity.
In a joint alert issued by the SEC and USCIC, the agencies warned:
The fact that a business is designated as a regional center by USCIS does not mean that USCIS, the SEC, or any other government agency has approved the investments offered by the business, or has otherwise expressed a view on the quality of the investment.
Any potential EB-5 investor should take the time and obtain the assistance necessary to fully vet the opportunity involved, the prospect for job creation and other issues as early in the process as possible, and definitely prior to making a commitment.
Work with an Experienced Immigration Attorney
When you are applying for an EB-5 visa, you may encounter complications in one or more of a number of areas. From making an objective analysis that will help you avoid investment scams to assembling sufficient documentation to meet your burden of proof with regard to source of funds, a veteran immigration lawyer can be your best tool.
The process of obtaining an EB-5 visa can be time consuming. Long waiting periods may apply even after you have put together a successful petition and provided the required documentation. You cannot afford to delay the process further with mistakes, overlooked requirements or inadequate documentation. Get help from a professional with in-depth knowledge of the procedures, regulations, and unwritten realities of the process. Contact KPPB LAW for more information.
Beeraj Patel, Esq.
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