The EB-5 program was created by the Immigration Act of 1990. The program provides EB -5 immigrant investor visas (“investor visas”) to alien entrepreneurs who invest in the United States. In general terms, the EB-5 program requires an alien to “invest or be actively in the process of investing” either US $1,000,000 in urban settings or US $500,000 in rural settings in exchange for the opportunity to obtain permanent residence (a “green card”) in the US.
In addition to the minimum investment requirements, the EB-5 program requires an alien to:
Ensure that the investment is active or “at risk”,
Make the investment in a “new” or “existing business enterprise”, and
Demonstrate that the investment directly or indirectly results in the creation or preservation of ten full-time (at least 35 hours per week) jobs for a two year period.
Under the EB-5 regulations, there are three types of qualifying investments for investor visa purposes:
A “new commercial enterprise” is either the creation of an original business or the present or later restructuring of an existing business such that a new commercial enterprise results,
An “expansion of an existing business” may qualify if the required investment amount results in a 40% increase in either the net worth or number of employees of the business, or
A “troubled business” investment may qualify if the required amount is invested in a business that has been in existence for at least two years and has lost profits equal to at least 20% of the business net worth for a period of 12 to 24 months prior to filing the immigration petition.
An alien is required to “invest or be actively in the process of investing” the required capital. The mere intent to invest does not meet this requirement. However, the US Citizenship and Immigration Service (“USCIS”) does allow investors to fulfill the requirement by demonstrating the “commitment of the required amount” at the time of filing the immigration petition. As a result, the investor may initially invest only a percentage of the required capital – in some cases, as little as US $137,000. The difference between the initial capital investment and the US $500,000 required total can be satisfied through a bank loan.
The regulations define capital as cash, cash equivalents, equipment, inventory, other tangible property, and indebtedness secured by assets owned by the alien entrepreneur. Debt will qualify as capital only when the alien entrepreneur is primarily and personally liable for the indebtedness or the debt is secured by the alien’s own assets.
The investor must be “active” in the management of the investment enterprise, either through day-to-day managerial control or through policy formulation. However, the regulations specifically allow an investor to qualify if he or she is a “limited partner” as defined in the Revised Uniform Limited Partnership Act. This allows the investor to continue to engage in his or her other businesses without participating in the operations of the investment enterprise. Additionally, the investor may live where he or she pleases with the ability to enter and exit the US without an obligation to manage the investment. Most importantly, the limited partner, like the corporate shareholder, is liable to creditors of the business only to the extent of his or her investment in the enterprise.
The regulations require the investor to demonstrate that the assets invested were gained in a lawful manner such as through a legitimate business, salary, investments, property sale, inheritance, gift, or loan. Investors must reveal where and how they obtained at least US $537,000 of the assets invested and where and how they obtained any loan.
To qualify for an immigrant investor visa, an investor must apply to the USCIS and submit a number of required documents including immigration forms, personal financial information, business plans, a legal brief on qualifications under the proposed application, geographic statistics, and other supporting evidence. Very few circumstances disqualify or exclude an applicant. However, a criminal record involving crimes of moral turpitude is disqualifying unless the crime was political in nature or occurred over 20 years prior to the application.
An investor who is approved receives a “conditional green card” (which is actually pink) which, unlike a permanent green card, must be reissued after two years. The two cards otherwise offer the same rights and privileges. After two years, the investor must demonstrate that he or she has made all required investment payments and that the requisite jobs have been created or preserved by the investment enterprise. The investor and his or her family then will be issued unconditional green cards that contain no expiration dates.
The average processing time for an EB-5 program application is six months. The EB-5 program allots 10,000 visas per year for aliens whose qualifying investments will create or preserve at least ten full-time jobs for US workers. Three thousand immigrant visas are set aside for aliens who invest in areas of high unemployment or qualifying rural areas.
For further information or inquires regarding the EB-5 visa program, qualification as an investor, or qualification as a potential investment project seeking foreign investment capital, please contact Simon Edelstein or Randolph M. Wright.