EB-5

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EB-5 REGIONAL CENTERS

Martin Lawler and his expert team of EB-5 lawyers assist developers and financiers with setting up and operating EB-5 regional centers. They will advise on structuring the organization, drafting and reviewing the necessary documents, supervising the regional center’s operation, and filing USCIS annual reports.

Martin and his team have obtained USCIS approval for a number of regional centers for foreign investors to qualify for EB-5 investor green cards as well as amendments and exemplars for new projects. Within 12 months of approval, one of these regional centers raised about $40 million, with many more investing each month. Martin is in the process of filing several more regional center applications. Martin also represents many regional centers on an ongoing basis and files amendments for them.

Martin will recommend an economist, a business and securities lawyer, and a business plan writer with expertise in EB-5 regional center applications. Together these professionals will prepare the necessary documents.

  • Overview

    In some cases, investors can capitalize the regional center’s project as a direct investment in a stand-alone project and the investor’s EB-5 application (I-526) can be filed before the regional center is approved by the USCIS. In other cases, investments can be made in the regional center project while its designation application is pending with the USCIS. However, an I-526 individual petition based on a regional center project cannot be filed until the regional center application is granted.

    Regional centers are complex, expensive, and time-consuming to operate. They involve constant marketing, government compliance, and project evaluation and management. They can be excellent means of raising capital, but they require a substantial commitment.

    A flowchart of these steps can be found here. Further information can also be obtained from a news story about EB-5 immigration on CNBC in which Martin is quoted. A link to this story can be found here.

  • Advantages of a Regional Center

    The principal advantage of a regional center is that “indirect” employment can be counted toward the 10 jobs each EB-5 investor must create. For example, if an EB-5 visa petitioner invests in a new manufacturing company that will itself hire ten workers, then a regional center is not needed, because the job creation threshold will be met through direct employment creation. In contrast, if the EB-5 petitioner invests in a construction project to build a hotel, which is then leased to a management company that hires hotel workers, then a regional center is needed to count the hotel jobs. The job creation threshold in this hotel example can only be met through indirect employment creation, because the hotel employees will not directly be hired by the construction project that the EB-5 investor capitalized.

    The law permits a regional center investor to qualify for an EB-5 green card by creating (or, in some cases, saving) 10 direct or indirect jobs, such as those in the hotel example. Induced jobs downstream in the economy may also be counted. Indirect and induced employment is usually measured by an econometric input-output model.Another advantage is that a regional center may create a limited partnership which loans EB-5 funds to a company or project. The investor may not loan the funds directly to an enterprise. The investor must make an “at-risk” investment with no guarantee that the capital will be returned. But USCIS policy permits regional center enterprises that receive EB-5 funds to loan them to a job-creating enterprise.

    Regional centers provide other advantages, including that the funds are considered “at risk” when they are deposited with the regional center or placed in an escrow account. This means the investor’s EB-5 petition can usually be filed more quickly than if he/she invests in a stand-alone commercial enterprise, which must spend a substantial portion of the EB-5 funds to prove they are at risk.

  • The Regional Center

    A regional center is any economic unit, public or private, engaged in the promotion of economic growth, improved regional productivity, job creation, and/or an increased domestic capital investment. USCIS rules and regulations establish eligibility criteria for a regional center and annual reporting requirements. In most cases, a regional center operates a limited partnership for each project, but other entities are permissible.

  • Geographic Area

    Each regional center designates a geographic area for its investment projects. The region must be contiguous and may involve many counties or a whole state, as long as the economic impact of the regional center extends throughout the area. There can be more than one regional center in the same area. A person (or group) may set up more than one regional center, or expand the jurisdiction of an existing regional center by requesting an amendment to USCIS’s regional center designation.

  • Economic Activity

    A regional center must designate the type(s) of economic activity(ies) to be funded, such as real estate, hotel, wind power, etc. The regional center application can be amended at a later time to include additional economic activities. Regional center applications must be supported by an economic analysis demonstrating the economic benefit and job creation for each economic activity.

  • Two Models - Loan and Equity

    Generally, there are two regional center models. One takes in investors’ capital and loans it out to a job-creating project. The other model involves developing from the ground up or purchasing an investment project, and expanding or rehabilitating it with investors’ capital. A regional center may do both. Some regional centers offer investments in multiple businesses, similar to venture capital funding. This involves complex tracing of the capital and jobs.

  • Amount of Investor Capital - TEA

    If the investment project is in a targeted employment area (TEA), the EB-5 immigrant’s capital investment is $500,000 (soon to be $800,000). The regional center also typically charges a separate subscription or management fee that ranges from $35,000 to $60,000). A project outside a TEA requires an investment of at least $1 million (soon to be $1.2 million). Regional centers can fund projects in TEAs and other areas. A TEA is defined as either a high unemployment area (150% unemployment above the national rate) or a rural area (outside a town of 20,000 population and outside a metropolitan statistical area). Since most regional center projects are in TEAs, it is difficult to compete with them by offering investors a $1 million investment project.

    In some cases, states will allow the combining of census tracts to show an area is a TEA.

    Details about TEAs

    Changes in the data used to determine the unemployment rate for certification of targeted employment areas (TEAs) may have consequences for funding current and future projects.

    The project must principally do business in a TEA at the time of the immigrant’s investment for the reduced minimum investment amount. Whether the area later loses TEA status should not be relevant to the individual investor.

    Certification of TEAs is based on high unemployment, and is left to the states. To determine whether census tracts (CTs) have high unemployment, most states use the “census share” technique. Those that rely on the 2010 census tract boundaries must use the most recent labor force data available. However, some states in the past – including California, Arizona, Illinois, New Jersey, New York, and Massachusetts – relied on decennial census 2000 and older labor force data.

    Changes in the labor force since 2000 can mean a substantial difference in the unemployment rate when recalculated using current data. Thus, areas that previously qualified as TEAs may not qualify (or vice-versa) if states switch over to using the 2010 census data. California, Illinois and Arizona will switched in 2014. Other states using old data have not confirmed when they will make the switch.

    If you are thinking of capitalizing a project in a particular area based on a single CT or group of CTs in a state that is still using 2000 data, it is best to double-check the unemployment rate using 2010 data to make sure the project remains in a TEA when the state switches over. Lawler & Lawler can help with this.

  • Capital for setting up the regional center

    USCIS requires a regional center to be adequately capitalized with about $100,000. An explanation regarding the sources of these funds must also be provided.

  • Cost of Setting up a Regional Center

    In addition to the owner’s capitalization of the regional center, other costs of setting up and obtaining USCIS approval of a regional center include fees for:

    • An immigration attorney
    • An economist
    • A business and securities attorney
    • A business plan writer to assist in drafting the needed business and operational plans
    • A market analyst – in most cases, USCIS wants evidence about the project’s market to verify the economic claims and financial projections.

    Once Martin learns more about your plans and project(s), he can provide fee quotes for setting up a regional center and help assemble the team needed for your regional center application. He can also introduce you to a regional center marketing expert in China.

    The USCIS’s filing fee for a regional center application is $6,230.

    After approval of a regional center application, there are legal fees for ongoing consultation, research, and preparation of annual reports to USCIS.

  • Timeframe

    USCIS says regional center applications are decided in about 12 months. Some take longer.

  • Operating A Regional Center

    The regional center business is challenging. There is considerable competition. There are about 220 approved regional centers (although most do not have projects and are not yet in operation). Some regional centers have been in operation for many years. Some are newly formed. USCIS rules are not always clear and often change, and job creation is always key. Investors are primarily interested in immigration and want to see the return of their capital, not high profit. In addition, there are all the problems associated with locating, managing, and monitoring good projects that create 10 jobs per investor.

    There are, however, many investors looking for good projects. The Canadian investor program, although much different than ours, has temporarily closed because its waiting list hit 20,000 investors. Investors are looking more often at our EB-5 program.

    Martin will provide ongoing advice and assistance with annual reports required by USCIS.

  • Statistics

    There are 10,000 visas per year reserved for the EB-5 category. Of these, 3,000 are reserved for regional center applicants (although regional center investors can use all 10,000 visas). The 10,000 visas have never been exhausted since the EB-5 program was created, even though each investor and dependent family member needs a visa number (the principal investor may bring his/her spouse and children under age 21). However, the U.S. State Department predicts in FY2014 or sooner there will be a waiting time for a visa number – a wait of months, not years. USCIS reports the following numbers of EB-5 visas issued (this includes family members):

    Fiscal Year

    Number of EB-5 Visas Issued

    2014

    10,000

    2013

    8,567

    2012

    7,641

    2011

    3,463

    2010

    1,885

    2009

    4,218

    2008

    1,443

    2007

    793

    Today, about 70% of EB-5 investors come from China.

  • Statute Expiration

    The regional center statute was created in 1993 with a five-year expiration date. It has been extended many times over the years. The current law expires on December 11, 2015. Congress likes the EB-5 program and extension is anticipated. We anticipate many changes in the law, including a raise in the minimum investment amount and the designation of targeted employment areas. Lawler & Lawler is monitoring developments closely.

  • Documents

    Once retained, Martin will provide a list of documents needed for the regional center application. He and his associates will work closely with you, the economist, the business and securities attorney, and the business plan writer. Martin would be pleased to talk with you about setting up a regional center. Please contact our office to schedule an appointment.

  • Compliance

    Lawler & Lawler is a leading EB-5 law firm for setting up and assisting with compliance issues relating to EB-5 regional centers.

    Martin Lawler has been practicing immigration law for more than 30 years. He is a leading EB-5 lawyer. He is listed in Best Lawyers of America and has an “A” rating from Martindale-Hubbell. He has also received a number of American Immigration Lawyers Association (AILA) presidential awards.