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EB-5 Overview: Immigrant Investors

The employment-based fifth preference category (EB-5), or the “Immigrant Investor Program”, was created by Congress in 1990 as an effort to boost the national economy and create jobs for U.S. workers through foreign investment. Each fiscal year, 10,000 immigrant visa numbers are made available to foreign investors who qualify under this program.

In 1993, Congress created an EB-5 pilot program, the Regional Center Pilot Program, to open up EB-5 classification to foreign investors who have invested through approved regional centers. An additional 3,000 immigrant visas are made available annually for investors qualifying under this program. A “Regional Center” is defined as any economic unit, public or private, engaged in the promotion of economic growth, improved regional productivity, job creation and increased domestic capital investment. To qualify as a Regional Center, an individual or entity must submit a proposal to USCIS and the proposal must be approved. The proposal must include a framework which details how each individual foreign investor affiliated with the Regional Center can satisfy the EB-5 requirements.

Both the Basic Program and the Regional Center Pilot Program require the foreign investor to make a capital investment of at least $1,000,000 (or $500,000 if the investment is in a Targeted Employment Area) in a “new commercial enterprise.” The new commercial enterprise must create or preserve 10 full-time jobs for U.S. workers. The investor must be involved in either day-to-day management of the business or policy formation.

Companies formed after November 29, 1990 are considered new commercial enterprises for EB-5 purposes. Further, certain commercial enterprises formed prior to November 29, 1990 may qualify as new commercial enterprises if: (1) they have been restructured or reorganized such that a new enterprise results; or, (2) they have expanded and this has resulted in a 40% increase in the company’s net worth or number of employees.

The $1,000,000 investment requirement is reduced to $500,000 for investments in a Targeted Employment Area (TEA). A TEA is either a rural area or an area experiencing high unemployment. The term “rural area” is defined as any area that is both outside of a metropolitan statistical area and outside of a city or town having a population of 20,000 or more. A “high unemployment area” is defined as an area which has experienced unemployment of at least 150% of the national average unemployment rate.

Investments under the Basic Program must create direct jobs to satisfy the job creation requirement. Direct jobs are jobs which establish an employer-employer relationship between the new commercial enterprise and its employees.

Investments under the Regional Center Pilot Program may satisfy the job creation requirement through the creation of either direct or indirect jobs. Indirect jobs include jobs that are held by persons who work outside of the new commercial enterprise such as employees of materials producers, equipment and services which are used by the new commercial enterprise. Additionally, indirect jobs encompass induced jobs. Induced jobs are jobs which are created when direct and indirect employees spend their increased incomes on consumer goods and services.

To obtain EB-5 classification, an investor must file a petition with USCIS (I-526 petition). At the time of filing, the investment need not satisfy all of the EB-5 requirements; however, the investor must be actively in the process of investing the required capital. In addition, the petition must include a comprehensive business plan which meets certain minimum requirements under the regulations. Upon the approval of the petition (provided that an immigrant visa number is available), the investor may apply for an immigrant visa or if the investor is in the U.S., adjustment of status. The investor will be granted two-year conditional permanent resident status.

Within 90 days of the two year anniversary of the investor’s admission to the U.S. or adjustment of status, the investor must file a second petition (I-829 petition) for permanent resident status. By this time, the investment must satisfy all of the requirements of the EB-5 program. Specifically, the petition must demonstrate the following: (1) the investor has invested the required capital ($1,000,000 or $500,000 for TEA investments); (2) the investor sustained the investment and enterprise; and, (3) the investor created (or can be expected to create within a reasonable period of time) 10 full-time jobs for qualifying employees.

Since its inception, the EB-5 category has been one of the most underused immigrant visa categories. In December 2009, USCIS released the following statistics for EB-5 petitions:

FY 2009 Receipt Approved Denied
Form I-526 1028 966 163
Form I829 437 335 55