We have selected the most Frequently Asked Questions regarding the United States EB-5 Investment Program.
These questions should enable you to understand what is going to take place before, during and after your EB-5 investment process. As always, please contact Wayfare United directly to discuss any further questions you may have.
A TEA is a rural area or an area that has experienced unemployment of at least 150 percent of the national average rate. A “rural area” is defined as any area not within either a metropolitan statistical area and outside of a city or town having a population of 20,000 or more. An investor must prove TEA status at the time of I-526 submission. The designation may subsequently change, but TEA status must be valid at the time of filing the I-526 Petition.
USCIS only requires that each investor document the lawful source and path of the $500,000/$1,000,000 that are being used as the EB-5 investment. It does not require investors to document the lawful source of their entire wealth. Because the documentation of each investor’s funds will vary, so will the documentation. Our office usually provides investors with a tailored list of documents depending on the lawful source of the investor’s funds, for example business income, sale of a business, Real estate sales income, investments in the stock market,gifts, inheritance, loans, etc)
Total jobs from a project are actually the sum of direct, indirect and induced jobs. Direct jobs are produced by changes in final demand (dollars being spent) on inputs used in the production process by the affected industry. Indirect jobs reflect inter-industry supply chain purchases as those industries that provide inputs to the affected industry, in turn, purchase their own inputs. Induced jobs are the
For investments in areas other than “targeted employment areas,” the minimum amount of investment is $1 million. Investments in “targeted employment areas,” including most regional center projects, can qualify with a minimum of $500,000.
Qualifying family members include investor, spouse, and children under 21 years of age. Normally, all family members get conditional permanent residence status at the same time. In instances when family members cannot, for personal reasons, immigrate at the same time as the primary investor, a follow-to-join petition may be filed to bring the family member to the United States at a later date.
Job creation is a critical element of the EB-5 Program. It is not enough that the Foreign National has invested funds into the U.S. economy; the investment must result in the creation of at least 10 jobs for qualifying U.S. workers. At the I-526 stage, the Foreign National must demonstrate to USCIS that the new commercial enterprise will create the sufficient number of jobs. At the I-829 stage, the Foreign National must demonstrate that the NCE has created or can be expected to create, within a reasonable time, the sufficient number of jobs. Since the burden is on the Foreign National to establish job creation, it is critical for the foreign national to conduct due diligence on the project and understand the methodology that is being used to project job creation.
Yes, this is one of the “bread and butter” types of developments in EB-5 financing., and this I sin the form of condo/hotels, condos or tract duplex and/or four-plex developments. The sectors for job creation are residential construction, architects & engineering, marketing, management, legal and then on the operations side, real estate rentals or sales commissions.
Under the EB-5 Program, the Foreign National is initially granted conditional permanent residence in the United States. The main condition placed on the green card is job creation. Once that condition is removed (with the approval of an I-829 Petition) permanent residence in the United States is valid indefinitely, so long as the Foreign National does not commit a deportable offense or abandon his/her U.S. residence.
The tenant occupancy issue was originally raised as a result of regional center job creating entities (JCE) which built and/or re-furbished office buildings, then rented this space to tenants and subsequently claimed these tenant jobs as jobs created by the JCE. In fact the owner/operator of the building does not employ the doctors, lawyers, etc., leasing the office space so the claim to these jobs was deemed non-allowable by USCIS. In fact these JCE’s are simply renting office space so the jobs that are allowable are in the real estate sector based on rental income, and not the job of the occupants of the office space. Unless a JCE makes it clear that it intends to own and/or operate the business in question, USCIS will not allow investors to claim jobs from these activities, citing the tenant occupancy issue.
We must prove that (1) the investment was made into the new commercial enterprise (NCE) (for example – in the case of funds held in escrow, we must show that the funds were released from escrow and into the NCE); (2) that the investment was sustained, i.e. Funds remain committed to the NCE; and (3) that the NCE created or can be expected to create, within a reasonable time, ten full-time jobs for qualifying employees.
It is extremely important for the Foreign national to monitor his/her investment. If the jobs are not being created as a result of that investment, the Foreign National and his/her family must depart at the end of conditional residence, or a new immigration strategy must be devised. The law provides a small degree of leniency by allowing the NCE to establish that jobs will be created within a reasonable time; however, “reasonableness” is judged in the discretion of USCIS. A sophisticated investor must be well advised in his/her investment because job creation is an essential element within the EB-5 Program.
If the construction period is 24 months or greater in duration, all jobs created (direct, indirect, and induced) can be counted. If the period is less than 24 months duration, only indirect and induced jobs can be counted. The construction period is typically defined as that period where “hard cost” construction is taking place.
Yes, the source of funds may be a gift; however, we must still prove lawfulness. In the case of gifts, we must prove that there is indeed no obligation of repayment, and we must document the lawful source of the funds that were gifted to the Foreign National.
EB-5 investors seek two key items in the long term: a permanent US Visa and return of their capital invested. The risks in not achieving these primary goals exist at the project level first, then at the investor level individually. Project level risks (which affect all investors in a project and other stakeholders as well) include fundamental execution risk (such as not having a strong capital stack, or not succeeding in project development, not managing project cash flows wisely, etc.) and of course, risk of fraud. Investor level risks are primarily operational risks, such as the Regional Center’s lack of ability to provide the audit trail needing to eventually receive I-829 approval and a permanent visa.
Managing and mitigating EB-5 risk requires a more lengthy discussion, to be clear. However, as a basis of beginning the dialogue, investors can mitigate their risks in an EB-5 project with a few key approaches: (a) apply deep due diligence procedures when selecting an EB-5 project (b)work with trusted partners, such as an experienced EB-5 immigration attorney or trusted third-party escrow administrators (c) validate that stringent governance and system controls exist, and finally, (d) request transparency over the life of the investment. .
Investors may not be directly subject to securities laws but certainly want to invest in a project that is inscrutable to the regulators and achieves the job-creation success that facilitates a permanent visa. Investors should absolutely ask the project “issuer” team about compliance procedures for Securities and Exchange Commission (SEC), FINRA and the Investment Company Act of 1940. Investors can ask their EB-5 Immigration Attorney for assistance on assessing the experience of the EB-5 project issuer, any third party involved (such as developer, EB-5 Securities Attorney, or EB-5 Escrow Administrator) and seek US-based legal counsel on the quality of the issuance in general. If the investor is subscribing to a “Regulation D” EB-5 offering, they should consult with a financial advisor, preferably one with a Chartered Financial Analyst (CFA) or similar designation for accredited investor and portfolio suitability in a broader sense. If an EB-5 Project has proper systems to mitigate the risks of EB-5, uses best practices such as escrow accounts, provides transparency to investors, and works with proper third-parties as noted in the prior question – then there is a much higher chance of achieving regulatory and immigration success with an EB–5 investment.
Provided that Foreign National meets all requisites for U.S. Citizenship, he/she can apply after having accumulated 5 years of lawful permanent residence in the United States. It is important to note that the initial 2 years of conditional permanent residence count toward the 5 years necessary for naturalization.
“Transparency” might be generally described as an openness with investors throughout the entire 5 to 7-year cycle of an EB-5 investment and immigration process. More specifically, transparency can be delivered through use of secure investor portal access with segregated investor reports which show investors the exact status of investor capital, details about the accrual of interest and fees assessed, and job-creation status.
Transparency is not required for an EB-5 project, but strongly advised to protect investors and their capital. EB-5 investors should invest in a project using a secure investor portal where the quarterly reports are posted for the project and investor. The investor should request that the project provide a detailed accounting of the flow of monies (sub-accounted to the investor level) and overview of job-creating activities. The investor should also expect to see an audit trail that supports the immigration processes of the I-526 and the I-829 workflows, and supporting reports like construction progress reports.
Transparency can also be defined by a manner in which the project team (or regional center) services the investor: is there a method of submitting questions to the project team? What support and online documents will the project team provide if a Request for Evidence (RFE) is received? Again, a secure investor portal is an important delivery conduit of information flow between investors and their project sponsors.
Most options for attaining lawful permanent residence in the United States require a U.S. Petitioner to sponsor the foreign national for a green card. If the foreign national does not have a petitioner (a U.S. Employer or qualifying family member), the options are much fewer. To “Self-Petition” you must demonstrate that you (1) have extraordinary ability in your field of endeavor and intend to continue to work in that field; (2) you are in the national interest of the United States; or (3) you have made a qualifying EB-5 investment resulting in the creation of at least 10 U.S. Jobs.
An escrow account is a bank account which is controlled in a restricted manner that prevents ungoverned use of investor capital for a certain amount of time. Escrow accounts are not required in EB-5 projects, but strongly advised to protect investors. It’s important to note that only a handful of US banks accept EB-5 deposits in escrow because of the extended compliance procedures over foreign capital, and few banks (if any) offer detailed investor reporting on escrow account. For this reason, specialized EB-5 Escrow Administrators exist to provide more support to the investors and help open the EB-5 bank accounts in a controlled way.
The use escrow accounts in EB-5 is common because investors are provided a higher degree of security over their capital while their funds are in subscription period and while they are invested in the job creating entity. Without escrow, the investors in a project face higher risk of fraud and operational errors that can prevent either the eventual issuance of a permanent visa or a return of capital. Investors wanting maximum protection should ensure that their project is using escrow and using an experienced EB-5 Escrow Administrator.
There are many different types of third parties who are involved in an EB-5 project, some of whom have a direct affect on the investor results. For example, before a project team is raising EB-5 capital at all, experts such as EB-5 economists andbusiness plan writer toassess the job creating ability of the project. US Securities attorneys consult with the developer or regional center on the structure of the offering.. They investor should confirm that a deeply experienced EB-5 economist was used for the job assessment study (“econometrics”.) Likewise, investor should confirm that law firms with sufficient EB-5 experience were involved in the formation of the entity and design of the EB-5 security document (which is usually presented as a private placement memorandum or PPM.) Even though investors learn about a project as the PPM is being finalized and fund-raising begins, asking about the economist and securities attorney can provide insight into the preparation level of the issuer of the security and whether or not the job creation data is supported by experts in EB-5.
When considering an EB-5 project for investment, the investor should find out which EB-5 Escrow Administrator is involved (see question #3 on Escrow) and ensure that Transparency is provided (see question #4 above) by a 3rd-party EB-5 Fund Administrator throughout the life of the project (not just during the Subscription period.) Use of an experienced and independent EB-5 Escrow Administrator and EB-5 Fund Administrator improves the likelihood of accurate accounting and operational support for the immigration process. Investors typically don’t have to interact with a bank after the original wire of the subscription monies, but should ask which banks are used by the project for Escrow and Operating Accounts. Investors should check to see that these banks are experienced with EB-5 deposits and projects.
Fund-raising agents or broker-dealers are not required for an EB-5 project, but may in fact ensure that the project is following US securities law. More importantly, these agents may have a specific plan to reach the fund-raising goals of the project, which increase the likelihood of project success and eventual investor satisfaction. At a minimum, use of a licensed broker-dealer to raise the EB-5 capital protects the project and investors from excess scrutiny from US regulators.
Immigration lawyers play a vital role in the support of the I-526 and I-829 immigration processes, as well as any Requests for Evidence (RFEs) which may occur along the way. To ensure the most streamlined immigration events, investors should ensure that they are working with an experienced EB-5 immigration attorney and ensure that the project team is as well. Investors should ask if the secure, investor portal organizes all immigration documents in one central repository for easy access and review. Often, the EB-5 Fund Administrator can provide the secure online portal and immigration workflow documents in one location.
Auditors and accounting firms play a secondary but important role in overseeing the project team, developer and job-creating entity. Investors should ask which independent accountants and auditors are used and what reports are visible through an investor portal. If no third-party (independent) accounting and audit firm is used, this may be a red flag about the project quality or lack of governance. Finally, US tax attorneys are a vitally important part of EB-5 immigration or immigration process to the US. Most immigration law firms can offer tax experts to consult with each individual investor on their own tax impacts of coming to the US with EB-5 investment. Investors benefit from engaging and EB-5 Immigration Attorney and related EB-5 Tax Expert early in the process and before the subscription.
Zamith Fischer Law, LLC boutique law firm, focusing exclusively in the practice of U.S. immigration law. The firm brings in-depth experience in business immigration, from basic “Green Card” petitions to more innovative and complex National Interest Waivers, Extraordinary Ability petitions, and EB-5 Regional Center petitions.
NES Financial is the leading provider of solutions and services for the EB-5 industry. Their suite of Intelligent EB-5 Solutions offers the highest levels of security, transparency, and compliance for issuers and investors alike. NES Financial has the capabilities to handle the setup of the escrow account, manage the funds from start to finish, and track each investor’s immigration status and documentation throughout the entire EB-5 life cycle. Over 250 EB-5 projects have relied on our experience and expertise to help them achieve project success. Recognized by Artisan Business Group as the 2013 EB-5 Service Provider of the Year, NES Financial allows issuers to streamline the EB-5 process, increase efficiency, and give investors peace of mind. For more information, visit nesfinancial.com.
Specialty: EB-5 Economist and Business Plan Writer
Barnhart Economic Services, LLC is an economic consulting firm specializing in economic impact analysis, EB-5 job creation analysis, business plan preparation services and EB-5 project consultation. The firm has conducted economic studies for projects with capital expenditures in excess of $8 Billion with accompanying gross revenues of $4.3 Billion, all with 100% approval from USCIS.