EB-5 CATEGORY

The EB-5 Category is an excellent opportunity for many foreign nationals to become permanent residents of the United States.

The Regular Program
A person investing $500,000 in certain circumstances or $1 million in a business that creates 10 jobs may be granted EB-5 permanent resident status. The basic government criteria for this excellent status are:

• Investment must be in a business, not a passive security such as the stock market;
• Invested funds must be the individual's, but may be a gift from a parent or other person, provided the appropriate gift taxes are paid, if required;
• The business must have been created after November 29, 1990 or the investment must substantially change an older business;
• The amount of investment may be $500,000 in a rural or high unemployment area; and
• Create 10 jobs - no direct job creation is required if the investment is in a "Regional Center" (see below).

The Regional Center Program

To encourage immigration through the EB-5 category, Congress created a Regional Center program in 1990. 5,000 visas have been set aside each year for people to invest at least $500,000 in designated Regional Centers. The Regional Centers program does not require the immigrant investor enterprise itself to employ 10 U.S. workers. Instead, it is sufficient if 10 or more jobs are created indirectly as a result of the investment.

Procedures

EB-5 Permanent Resident status involves making the investment, filing the appropriate petition at a CIS Service Center, and applying for an Immigrant Visa at a United States consulate or applying for Adjustment of Status in the U.S. After "Conditional" Resident Status (Green Card) is granted, the individual must wait one year and nine months to file an application to remove the "conditional" status. With this application, evidence of the creation of the 10 jobs, if necessary, is required as well as proof the entire investment has been made. Upon approval of the application by CIS, the applicant is granted Permanent Resident status.

Process

We shall look into the net worth areas related to current market value of the assets (Movable and Immovable) owned by you through personal endeavors and/or received through gifts. You should review among various investment options and conduct required due diligence. This will be followed by investment and filing of petition for Alien Entrepreneur. CIC certifies the applicant and the investment to be eligible for EB-5 status. You will then apply for visa stamping in the home country and if in USA, you may apply for adjustment of status to conditional resident status. After a period of 21 months, you shall provide evidence of full investment and creation of 10 jobs. Then you will file for removal of conditional resident status. This will be followed by a full green card that permits indefinite resident status and work permission in USA. At a later stage-after 5 years- you may apply for and get US Citizenship- subject to meeting the residency requirements and other requirements.

Investing in a new commercial enterprise

The law requires the investor-petitioner is investing in a "new" commercial enterprise, which must have been one established after November 29, 1990. However, contribution of capital to an "existing" business (that was formed prior to November 29, 1990) may be acceptable in two situations:

• First, the investor may substantially reorganize or restructure the existing business. The mere change in ownership, cosmetic changes to the decor of the business site, and implementation of a new marketing strategy are insufficient changes to constitute establishment of a new commercial enterprise. A complete transformation of the nature of the business is likely to be considered sufficient.
• Second, the investor may expand an existing business resulting in an increase of at least 40 percent of the net worth or number of employees of the business. CIS requires evidence of the change in business in the form of income tax returns, audited financial statements, and employment tax returns.

The investment must be in a "commercial" enterprise. Any for-profit entity formed for the ongoing conduct of lawful business may serve as a commercial enterprise. This includes sole proprietorships, partnerships (whether limited or general), holding companies, joint ventures, corporations, business trusts, or other entities publicly or privately owned. This definition includes a holding company and its wholly owned subsidiaries, if each subsidiary is engaged in a for-profit activity formed for the ongoing conduct of a lawful business. However, the term new commercial enterprise does not include noncommercial activity such as owning and operating a personal residence or buying stock on the stock exchange.

Engaging in a new commercial enterprise

While the law requires the investor to be engaged in a new commercial enterprise, CIS regulations state that if the investor is a corporate officer or board member or, in the case of a limited partnership, a limited partner, then the investor satisfies the management criteria.

Investing capital

The law requires an investor-petitioner to have invested in or be in the process of investing the required capital.

A. Amount of capital

The amount of required capital is at least $1 million. The minimum investment is reduced to $500,000 in cases of investment in "targeted employment areas," which are rural areas or areas which have experienced unemployment of at least 150 percent of the national average rate. A "rural area" is an area not within either a metropolitan statistical area or the outer boundary of any city or town having a population of 20,000 or more. The assessment of whether the investment is in a targeted employment area is based on statistical information relating to the time of investment and the location where the enterprise is principally doing business.

B. Equity capital

To "invest" is to contribute equity capital to the enterprise. Loans of capital by the investor to the enterprise do not qualify as an appropriate investment. The investor cannot receive any bond, note, or other debt arrangement from the enterprise in exchange for the contribution of capital.

C. Kinds of capital

"Capital" may include cash and cash equivalents, equipment, inventory, and other tangible property. Although capital does not include loans made by the petitioner to the enterprise, the investor may borrow the investment money if it is secured by assets owned by the investor, provided the investor is personally and primarily liable for repayment of the loan, and the assets of the enterprise upon which the petition is based are not used to secure any of the indebtedness. 1

D. "At risk"

CIS requires proof that the capital invested is "at risk." CIS focuses on actual and intended uses of capital to confirm that it will be used for job creation and profit-generating activity. CIS requires more than a deposit of funds into a business account; it also requires evidence of the actual undertaking of business activity. CIS has held that use of capital for partnership expenses and reserve accounts unrelated to job creation is insufficient.

E. Tracing and lawful source

Documenting proof is needed that capital is invested by the investor petitioner. Thus, an investor petitioner should present evidence that traces capital from the petitioner directly to the enterprise.
CIS also requires that an investor petitioner provide evidence to prove that the source of funds was procured by legal means. CIS requires evidence of the investor's past five years of income tax returns and financial statements to prove the investor has sufficient lawful sources for the capital invested.

F. Gifted funds

The applicant may receive a gift of the funds, provided the proper gift taxes are paid, if required by law.

Creating or saving jobs

The investor must create full-time employment for at least 10 U.S. workers. The investor and his or her spouse and children do not count toward the 10-employee minimum. Note that non-immigrants (i.e., those with E, H, L, and other temporary worker visas) are also excluded from the 10-employee requirement. An "employee" is an individual who provides services or labor for the new commercial enterprise and receives wages or other remuneration directly from the new commercial enterprise. Independent contractors are excluded under this definition.

A. Types of jobs

The jobs created must be full-time, i.e., positions that require a minimum of 35 working hours per week. Part-time jobs do not count. However, job-sharing arrangements where two or more qualifying employees share one full-time position will be counted.

B. When jobs must exist

The petitioner may base the petition on proof that the required jobs have been created or on proof that the required jobs will be created before the end of the two-year period of conditional residence. In the latter case the investor must support the petition with a comprehensive business plan demonstrating a need for at least 10 employees before the end of the conditional residence period.

C. Troubled business/saving jobs

Special rules govern investments in "troubled" businesses. A troubled business is one that has been in existence for at least two years, has incurred a net loss for accounting purposes during the 12 or 24 month period before the petition was filed, and the loss for such period is equal to at least 20 percent of the businesses net worth before the loss. If the petition is based on investment in a troubled business, the investor is not required to create 10 new jobs. Instead, the petition may be based on proof that the business will maintain the number of existing employees during the conditional status period.

D. Regional Center/indirect jobs

To encourage immigration through investment, and to concentrate investment in specific regions, Congress created a temporary Pilot Program in 1993, directing CIS to set aside visas for people who invest in a designated "Regional Center.* The Pilot Program does not require that the immigrant investor enterprise employ 10 U.S. workers as l ong as the investor can reasonably demonstrate that the investment in the Regional Center has indirectly created 10 or more jobs and has resulted in improved regional productivity. The CIS has designated a number of Regional Centers located throughout the country.

Timing

It is currently taking about two-six months for CIS to process an EB-5 petition. Prior to filing the petition, time is required to conduct due diligence, make the investment, and prepare the documentation in support of the petition. If an individual is in lawful status upon approval of the EB-5 petition, he/she can apply for Adjustment of Status to Conditional resident without departing the United States. This application can take six months or longer to be decided. If not in the United States, he/she will apply for an Immigrant Visa at a U.S. Consulate which typically takes six months or longer depending on the country.

REGIONAL CENTER INVESTMENTS

The 10-employee requirement deters many immigrant investors. To resolve this, in 1993, an option was created whereby immigrants may invest $500,000 or more in CIS-designated "Regional Centers" in a high unemployment area.

In this program, a promoter makes a proposal to the CIS. If the CIS finds it will benefit a regional economy and shows potential for providing significant indirect employment, the project will be designated a Regional Center. With CIS approval, the promoter forms a limited partnership or corporation. Investors may apply for green cards upon making the investment.

Investors in a Regional Center do not have to have day-to-day management responsibility or prove the business employs 10 people. Instead, they may rely on industry job multiplier statistics. A Regional Center means that the CIS is satisfied with the job creation potential. We can provide you with information about specific Regional Center Investments for you to perform due diligence analysis.