The United States Congress created in 1990 the “EB-5” Program, (Employment Based Fifth Preference Category), to stimulate the U.S. economy by granting permanent resident status to immigrant investors who invest either $1 million or $500,000 and either create or save 10 jobs through their investment. 10,000 visas are set aside annually for immigrant investors, 3,000 of which are reserved for investment within rural areas or targeted employment areas, (TEAs).
Congress expanded the EB-5 category in 1992, setting aside 3,000 visas for the EB-5 immigrant investor pilot program, promoting investment in Regional Centers designated by the USCIS to foster regional economic growth through select projects. Over and above direct job creation, regional centers permit the investor to rely on indirect job creation to qualify for permanent resident status, by factoring employment within business that cater to supply side, commercial consumer or private consumer markets that are created as an outgrowth of the EB-5 investment enterprise.
All EB-5 investors must invest in a new commercial enterprise, which is any for-profit entrepreneurial activity transacted through an entity that conducts ongoing lawful business. Qualified business entities include, but are not limited to:
- A sole proprietorship
- Partnership (whether limited or general)
- Holding company
- Joint venture
- Business trust or other entity, which may be publicly or privately owned
This definition includes a commercial enterprise such as a holding company and its wholly owned subsidiaries, provided that each subsidiary is engaged in for-profit activity formed for the ongoing conduct of a lawful business. This definition does not include noncommercial activity such as owning a personal residence, or passive commercial business activity, such as owning one or a few rental properties, or buy-sell commodity or real property transactions, except to the extent that the management of such activities becomes an active employment-generating entrepreneurial activity.
The Terminology of Job Creation Requirements
The Immigrant investor must create or preserve at least 10 full-time jobs for qualifying U.S. workers within two years of the approval of the EB-5 petition, (or under certain circumstances, within a reasonable time after the two-year period, which has been suggested to be 2½ years according to guiding CIS memorandum. Creating or preserving either direct or indirect jobs requires the following highlighted terms be defined to be understood, as follows:
- Direct jobs are performed by qualified employees who are directly employed within the commercial enterprise into which the EB-5 investor has invested his or her capital.
- Indirect jobs are those jobs shown to have been created collaterally or as a result of capital invested in a commercial enterprise by an EB-5 investor through a regional center. A foreign investor may only use the indirect job calculation if affiliated with a regional center.
- Investors may only be credited with preserving or saving jobs for workers employed within troubled business. A troubled business must have been in existence for at least two years, and during this time, it must have incurred a net loss of 10% within each of the past two fiscal years or of 20% within the past two years. To determine if the troubled business has been in existence for two years at the time of investment, successors in interest to the troubled business will be deemed to have been in existence for the same period of time as the business they succeeded.
- A qualified employee is a U.S. citizen, permanent resident or other immigrant authorized to work in the United States. The qualified employee may be a conditional resident, an asylee, a refugee, or a person residing in the United States with suspension of deportation or cancellation of removal. This definition does not include the immigrant investor; his or her spouse, sons, or daughters. Nor does it include a foreign national in any nonimmigrant status (such as an H-1B, E-2, or L-1 non-immigrant visa holder) or who is not authorized to work in the United States.
- Full-time employment means direct or indirect employment, as explained above, in a position that requires a minimum of 35 working hours per week.
- A job-sharing arrangement whereby two or more qualifying employees share a full-time position will count as full-time employment provided the hourly requirement per week is met. This definition does not include combinations of part-time positions or full-time equivalents even if, when combined, the positions meet the hourly requirement per week. The position must be permanent, full-time and constant. The two qualified employees sharing the job must be permanent and share the associated benefits normally related to any permanent, full-time position, including payment of both workman’s compensation and unemployment premiums for the position by the employer.
Conditional Permanent Resident Status
Filing Form I-525, Immigrant Petition by Alien Entrepreneur, with a filing fee of $1,500, is a prerequisite to being an immigrant investor. Approval of Form I-526, qualifies the investor, his spouse and children, (unmarried and under 21 years of age), to apply for Conditional Permanent Resident Status. They may either apply for conditional permanent resident status through adjustment of status within the United States or by consular processing for an immigrant visa from their home country to present for admission to the United States as a conditional permanent resident, if they are qualified to do so and/or are not otherwise inadmissible.
Whether immigration is accomplished through adjustment of status or consular processing, the immigrant investor and his immediate family are conditionally granted permanent resident status for two years. A 90 day period is provided at the end for this two-year period, during which time the immigrant investor must file Form I-829, Petition by Entrepreneur to Remove Conditions, for himself and his immediate family. Family members can file this petition on their own where circumstances require. The filing fee is $3,750 for the entire family, plus an $85 biometrics fee for each family member. Failure to file Form I-829 results in loss of conditional permanent resident status and prospective placement within removal proceedings. Late filed Form I-829 brings the same consequence, unless accompanied by a written explanation of good cause with extenuating circumstances.
Capital Investment Requirements
Capital means cash, equipment, inventory, other tangible property, cash equivalents and indebtedness secured by assets owned by the alien entrepreneur. However, security for debt cannot be the investment enterprise, itself, but must be secured by other unrelated assets. Invested capital must be valued at fair-market value in United States dollars. Assets acquired, directly or indirectly, by unlawful means or criminal activities shall not be considered capital for the purposes of section 203(b)(5) of the Act.
Generally, the minimum qualifying investment in the United States is $1 million. For a Targeted Employment Area, TEA, which is a high unemployment or rural area, the minimum qualifying investment is $500,000.
- A targeted employment area is an area that, at the time of investment, is a rural area or an area experiencing unemployment of at least 150 percent of the average rate of unemployment in the United States
- A rural area is any area outside a metropolitan statistical area (as designated by the Office of Management and Budget) or outside the boundary of any city or town having a population of 20,000 or more according to the decennial census.