Immigration and Investment: The Changing World of the EB-5 Program
Currently the EB-5 program is an inexpensive and popular way of becoming a resident of a country – particularly the United States. However, beginning in 2017, changes are going to occur in the U.S.-based EB-5 Program.
Congress created the EB-5 Program in 1990 to stimulate the U.S. economy through job creation and capital investment by foreign investors. Initially the EB-5 applicant had to create an entirely new business. But in 1992, Congress created the Immigrant Investor Program, also known as the Regional Center Program. A regional center is a third-party managed investment vehicle (private or public) that manages the investments and fulfills the requirements for the EB-5 applicant.
The regional center sets aside EB-5 visas for participants who invest in commercial enterprises associated with regional centers approved by U.S. Citizenship and Immigration Services (“USCIS” – a division of the U.S. Department of Homeland Security) based on proposals for promoting economic growth. For example, a developer can form their own regional center in order to solicit EB-5 investment funds to build a hotel or apartments.
USCIS administers the EB-5 Program (https://www.uscis.gov/eb-5). Under this program, entrepreneurs (and their spouses and unmarried children under 21) are eligible to apply for a green card (permanent residence) if they:
- Make the necessary investment in a commercial enterprise in the United States; and
- Plan to create or preserve 10 permanent full-time jobs for qualified U.S. workers.
There is a maximum of 10,000 green cards issued every year. Since 2014, there has been over $10B invested into the States with the majority of investments originating from China.
Requirements of the EB-5 program:
- Investment in a new for-profit commercial enterprise or investment in a targeted employment area (TEA) which is defined as an economically distress area (high unemployment) or rural area.
- Evidence that you have invested or are in the process of investing the amount required ($1 million in new commercial enterprise or $500,000 if project is located in TEA). In addition, you must provide evidence that the investment funds were obtained through lawful means (source of funds).
- Job creation – evidence that the new commercial enterprise will create at least 10 full time positions. The number of jobs must be maintained for 2 years.
The rules outlined above are scheduled to “sunset” on April 28, 2017.
The most significant proposed changes are with respect to the minimum investment amounts:
- Increase TEA investment amount from $500,000 to $1.35 million.
- Increase non-TEA investment amount from $1 million to $1.8 million.
We suspect there to be some tweaks to current policy including:
- Rules with reference to on sight visits of regional centers / commercial enterprises.
- Better fraud controls.
- Tighter security for the source of funds compliance.
With the new administration’s eye on national security, how will the EB-5 program be overhauled? With the increase in investment, will it weaken the investment appetite by EB-5 applicants? 2017 should be an interesting year and we will keep you updated as rules and regulations progress.
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