EB-5 visa program - regional centers and risks - Complete guide for 2017

EB-5 is a class of United States (US) visa which allows foreign nationals to obtain permanent residency by making investments in a US business. Recipients of the visa (foreign nationals and their immediate family members) can permanently live and work in the U.S, with a path to US citizenship.

The EB-5 visa program was primarily created to generate jobs through capital investment from foreign investors. And it’s administered by the United States Citizenship and Immigration Services (USCIS).

EB-5 eligibility

At a high level there are two primary eligibility criteria. The foreign entrepreneur has to invest money. And that should lead to job creation. The job creation criteria is generally absent in similar programs in other counties. This ties back to the original purpose of the visa program which is to generate jobs in needed areas. Following is the more formal definition,

  • Foreign investor has to invest $1 million in a qualified investment OR

  • $500,000 if the investment is in a “Targeted Employment Area (TEA)”. TEA are certain areas with high unemployment compared to national average. This can be both rural and semi urban areas.

  • The investment should be expected to create at least 10 full-time jobs

  • The investment must be made to create for-profit commercial enterprise

  • Alternatively, investments can be made through predesignated regional centers

Non-commercial investments like personal residence do not qualify for the program

Targeted Employment Areas

Targeted Employment Area (TEA) is defined by USCIS. TEA is defined as a rural area outside a metropolitan statistical area (MSA) or an area within a MSA or an outer boundary of any city or town (with over 20,000 population) which has experienced 150% unemployment rate of the national average at the time of investment.

Investors can also request an area to be designated as TEA by presenting relevant publicly available government data at the time of petitioning USCIS for the visa.

EB-5 visa processing time

Currently USCIS takes about 1-2 years to process a EB-5 petition. Processing time has been creeping higher because of the recent surge in the popularity of the program. However, USCIS has been trying to bring down the processing times to reasonable levels.

The US immigrant investor visa is allocated about 10,000 visas every year to foreign investors. While the demand for the program was low in it’s first 2 decades of existence, demand has been increasing since the turn of this decade. For the first time in 2014, all the 10,000 investor visas were secured by foreign investors. The demand in recent years has been driven by Asian businessmen looking to immigrate to the U.S. The local industry is also helping the growth by creating projects in the regional centers to attract overseas investments.

Regional origin of the visa recipients, 2016 data

EB-5 recipients

EB-5 regional centers

A regional center is an economic unit designated by USCIS, which allows government and private organizations to create investment pools. Regional centers can then launch a new business or revive an existing business through the money in the investment pool. So, instead of individual investors launching a business on their own, they could simply become a participant in the business by contributing money to the investment pool. Jobs created from the individual contribution are counted towards the requirements of the EB 5 investor program.

Regional centers typically build business like casinos, apartments etc. Regional centers help reduce the overseas investors by providing the reducing the burden of launching a business. They also help in meeting the job requirements of the program. It also helps Regional center project developers to raise money for the business initiatives.

Another important advantage of Regional Center petitioners are that they may meet the job creation requirements based on economic projections of either direct or indirect job creation. But the petitioners through new commercial enterprise can only count the directly created jobs for the the job creation requirement.

Currently there are over 1000 USCIS approved regional centers spread across various states.

Regional centers which are also located in TEA areas are the most popular option by a large margin.

Economic vehicle of the US investor visa immigrants, 2016 data

Economic vehicle # of approvals
Commercial Enterprise 103
Commercial Enterprise in a TEA area 350
Regional Center 9
Regional Center in a TEA area 8,043

EB-5 program steps

USCIS conditionally grants green cards to qualified investor and their family members for a period of 2 years. This approval is granted on the evidence that the investor has already invested or actively in the process of investing in an EB-5 eligible investment. Approval also depends on the evidence that the requisite employees have already been hired. If not, a comprehensive business plan needs be submitted showing that at least 10 qualifying employees will be hired due to the nature of the commercial enterprise.

Before the second anniversary, the investor can apply for removal of conditions and obtain permanent residency. USCIS approves this petition based on the evidence that the foreign investor has sustained the qualified investment throughout the 2-year period of conditional permanent residence. It also hinges on evidence that the 10 full time jobs have already been created or will be created in a reasonable amount of time.

EB-5 risks

Even though USCIS approves the regional centers, it doesn’t endorse the activities of the center. The approval also doesn’t eliminate the risk nor does it guarantee U.S. securities laws compliance. Several fraudulent activities have come to the fore in recent times.

Unlike other investments, the primary objective of EB-5 investments is securing a U.S. green card and in many cases the investors are located in a far off country. Fraudulent businesses can take advantage of the situation and raise money from foreign investors by marketing as EB 5 qualifying investment opportunities. Such investors potentially could potentially lose their investments and the immigration petition as well.

The United States Securities and Exchange Commission (SEC) has recently stepped up the monitoring of the immigrant investor visa program. However, SEC urged investors to be cautious of fraudulent investment opportunities. So it’s highly important for the foreign investors to do their own due diligence before making investment decisions.

USCIS has recently stepped up it’s audit efforts of the regional centers. And it periodically terminates regional centers which were approved earlier. Such terminated regional centers are published on the USCIS website

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