EB-5 Investment Through Regional Centers: Requirements For Business Leaders
I am the Managing Partner of EB5 Affiliate Network – a national EB-5 visa firm with 1,800+ foreign investors from 60+ countries.
In 1990, Congress established the EB-5 Immigrant Investor Program, known simply as the EB-5 program, to attract foreign direct investment. By making a qualifying investment, a foreign national and members of their immediate family can qualify for a permanent U.S. green card. These investments are often made in rural or high-unemployment areas that are in dire need of economic growth through job creation.
As the managing partner of an EB-5 firm that operates numerous regional centers across the U.S., I have helped many investors and business leaders navigate the EB-5 program and achieve their EB-5 investment goals. While the program’s benefits to communities are clear, developers can also benefit from it, as EB-5 capital is often available at below-market rates.
What Is An EB-5 Regional Center?
United States Citizenship and Immigration Services (USCIS) designates and oversees regional centers to ensure that they are qualified to receive EB-5 investments from immigrant investors and continue working toward the EB-5 program goals. In short, USCIS-designated regional centers act as service agents for developers and investors who want to engage in EB-5 projects.
Regional centers fall under the EB-5 Immigrant Investor Regional Center Program, a stand-alone program authorized in 1992. While the regional center program is related to the EB-5 program, it is a separate program. The EB-5 program is a permanent, stand-alone federal program, but the regional center program must be reauthorized periodically. On June 30, 2021, the regional center program lapsed, and as of August 2021, it has not yet been reauthorized. The lapse is likely to be temporary because of the popularity of the regional center program.
According to the EB-5 trade association Invest in the USA (IIUSA), based on statistics released by the Department of State, 93.4% of EB-5 investor applicants have historically been through regional center projects. For investors, EB-5 regional center investments could reduce immigration risk because of less stringent job-creation requirements.
The Difference Between Direct And Regional Center EB-5 Investments
Whatever the investment model chosen (direct vs. regional center), EB-5 investors must meet the same requirements to be eligible for an EB-5 visa. Their investment must create 10 full-time jobs for U.S. workers, and the investment must remain “at-risk” during the investment period.
With direct EB-5 investment, the investor makes an EB-5 investment directly in a new commercial enterprise (NCE), which must be the entity that creates the required number of jobs. Only direct jobs count toward the job-creation total. In other words, employees must work for the NCE itself. For direct EB-5 projects, payroll records are typically used to prove job creation.
With regional center EB-5 investment, the investor purchases an equity stake in an investment fund entity that is affiliated with a regional center. Then, the fund entity either loans the money or purchases an equity stake in the job-creating entity (JCE). The JCE uses the fund’s investment to create employment by deploying the capital into a project. Under this model, investors can count direct, indirect and induced jobs toward their job-creation totals. These jobs include those created by other entities that do business with the JCE, such as companies that provide materials, equipment or services. For regional center EB-5 projects, an economic impact study prepared by a reputable economist is typically used to prove job creation.
Five Guidelines To Determine If Your Project Qualifies For EB-5 Regional Center Investment
If you are interested in using EB-5 capital for your next project, answer the following five questions to assess the characteristics and needs of your project.
1. Is the project suitable for regional center sponsorship? Regional center sponsorship is more practical for larger projects that can support multiple EB-5 investors. New development is a popular choice because construction expenditures can generate a high number of EB-5 jobs. Direct investment is better suited to smaller projects or businesses with many full-time employees.
2. Is the project located in an area covered by a regional center? Regional centers’ operations are restricted to specific geographical areas. In some cases, regional centers have successfully petitioned USCIS for temporary geographic expansion for projects that fall near the boundaries of their coverage area.
3. Will your project be attractive for EB-5 investors? EB-5 investors’ goal is to secure permanent U.S. residency. To attract investors, your project must offer acceptable levels of both immigration and financial risk. This includes a reasonable repayment timeline and a concrete plan to ensure that EB-5 investments remain at-risk for the required period.
4. Will your project create enough jobs for all EB-5 investors? To qualify for an EB-5 visa, each investor must create 10 full-time, permanent jobs with their investment. Attractive EB-5 projects include a job cushion, or more jobs than the minimum requirement of 10 jobs per investor. This reassures investors about the likelihood that the project will meet EB-5 program requirements.
5. Does your business plan support your job-creation projections? A credible, accurate economic impact study is the foundation of a business plan that satisfies both investors and USCIS adjudicators. The business plan must also include a credible plan that supports the job-creation projections.
When it comes to using capital derived from regional center EB-5 investments, the two key factors to consider are the specific capital needs and timing of your project and job creation. If EB-5 investors can meet the requirements of the EB-5 program by investing in your project, you can consider EB-5 regional center sponsorship.
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