EB-5 DETAILS

Procedure

An investor must file a petition (Form I-526) with the U.S. Citizenship and Immigration Services ("USCIS"). Upon approval of the petition, the investor and immediate family (spouse plus single children under 21 years of age) may apply for an immigrant visa at a U.S. consulate or apply for adjustment of status at a regional USCIS office if the investor is already in the United States.

The initial resident status is "conditional" for two years. Prior to the expiration of the two-year period, the conditional resident investor must file a petition (Form I-829) with the USCIS to request removal of the condition on permanent residence. The petition should be granted if the investor demonstrates that he/she invested the requisite capital; the investor maintained the investment throughout the two-year period of conditional residence; and the investment created the necessary employment.

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. USCIS requires evidence of the change in business in the form of income tax returns, 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 commercial enterprise

While the law requires the investor to be engaged in a the commercial enterprise, USCIS 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. It is recommended to invest all capital before filing the I-526 petition that starts the visa process.

A. Amount of capital

The amount of required capital is usually $500,000 (plus the Regional Center fee) instead of $1 million. The minimum investment is $500,000 when the investment is in "targeted employment areas (TEA)" 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 TEA is based on statistical information relating to the time of investment and the location where the enterprise is principally doing business. Most regional center projects are located in high unemployment or rural zones. Most Regional Center projects are in a TEA.

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. Regional Centers, however, may loan investors' funds out to a project. 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.

C. Kinds of capital

"Capital" may include cash and cash equivalents, equipment, inventory, and other tangible property. Investors almost always make an all cash investment.

D. "At risk"

USCIS requires proof that the capital invested is "at risk." USCIS focuses on actual and intended uses of capital to confirm that it will be used for job creation and profit-generating activity. For a Regional Center investment, the cash is at risk when deposited or put in an escrow account. For a business created or purchased by the investor, the USCIS requires more than a deposit of funds into a business account; it also requires evidence of the actual undertaking of business activity (i.e., a substantial part is spent). USCIS has held that use of capital for partnership expenses and reserve accounts unrelated to job creation is insufficient. Giving the funds to the Regional Center puts them at risk immediately, provided there is no redemption agreement. Creating a new business requires spending a significant amount of the capital before the I-526 is filed.

E. Tracing and lawful source

Documens are needed to prove that capital is invested by the investor. Thus, an investor includes evidence that traces the capital from the investor directly to the enterprise.

USCIS also requires that an investor provide evidence to prove that the source of funds was procurred by legal means. USCIS requires evidence of the investor's past five years of income tax returns, financial statements, and in some cases other documents to prove the investor has lawfully acquired the invested capital.

Martin Lawler and his staff will assist investors to document the source of funds.

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's funds must create full-time employment for at least 10 U.S. workers. A Regional Center will usually prove job creation with an economist opinion based on an in-put-out-put omdel. In other cases, a Regional Center will use employer tax records to prove the employment generation of the project.

For those creating their own business, 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. Regional Center/indirect jobs

To encourage immigration through investment, and to concentrate investment in specific regions, Congress created a Regional Center Program in 1993, directing USCIS to set aside visas for people who invest in a designated "Regional Center." The Program does not require that the immigrant investor enterprise employ 10 U.S. workers directly as long 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 USCIS has designated 95 Regional Centers located throughout the country. Not all are active. We can send you a list. Regional Centers are permitted to use economic models to prove the funds created the jobs. We have won many I-829 petitions. In some cases, all the jobs were not yet created but the USCIS could see the project was well on its way to completion and the economic projections showed the indirect job creation once the project is completed.

C. When jobs must exist

The investor 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. Recently, the USCIS issued a policy that requires the job creation by at least two and a half years from the approval of the I-526. 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. The Regional Center will provide this information. As stated above, in some cases, if the new project is well on its way to completion the I-829 will be granted for Regional Center investments before all the jobs are created.

D. 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 business's 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 10 jobs during the conditional status period.

Timing

It is currently taking three to five months for USCIS 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 to support the petition. If an individual is in lawful status upon approval of the EB-5 petition, he/she can often apply for adjustment of status to conditional resident without departing the United States. This application can take six weeks to six months 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.

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