phone +91 84482 35879 email info@gmnevents.com

THE EB-5 IMMIGRANT VISA PROGRAMME FOR THE US

March 10, 2023 | Lavanya | Blog

Every year, thousands of families from around the world make the decision to immigrate to the United States through the EB-5 immigrant investor visa programme. The EB-5 programme is a permanent residence programme designed to attract foreign investment and create jobs by allowing for immigration by investment to the United States of America. Success in EB-5 ultimately provides permanent residency (green card) in the US to the EB-5 investor, their spouse, and their unmarried children under twenty-one years of age, allowing them to live, work, and travel anywhere in the United States. Unlike other US immigrant and non-immigrant programmes or immigration by investment programmes from around the world, the EB-5 regional centre programme does not require the investor to run the business/project they invested in or live in a defined location. Additionally, unlike the E2 programme, you and your family’s green card status is permanent and does not require an ongoing renewal based upon the performance of a business.
The EB-5 programme was established in 1990 to stimulate the US economy and create new American jobs through foreign investment. Although the specific requirements of the programme have varied over its thirty-year history, the fundamentals have remained the same.

EB-5 Requirements
An EB-5 investor must make a qualifying investment into a “new commercial enterprise” (NCE) that creates jobs for US workers. Currently, the programme requires an investment of $1.05 million USD, but allows a reduced investment of $800,000 for investments in projects located within in a qualifying rural “Targeted Employment Areas” (TEA), and government-run infrastructure projects. A TEA is an area of high unemployment (an area that has experienced unemployment of at least 150 per cent of the national average rate) or a rural area.
The EB-5 investor’s investment must be a bona fide “at-risk” investment. The USCIS states that at risk means that there must be a chance for gain and a risk of loss. This means that investors cannot simply make a loan or have any type of guarantee made directly to them for a return of their investment funds at any specific point in time, including after their immigration petition is approved.
The EB-5 investor must prove via their immigration petition to the United State Citizenship and Immigration Service (USCIS) that their investment funds did not come from an unlawful source, and must provide detailed records demonstrating the legitimate source of their funds. Additionally, the EB-5 investor must demonstrate that their invested funds resulted in the creation of at least ten new American jobs.

Two Paths to an EB-5 Programme Green Card
The programme includes two distinct channels: the direct EB-5 programme and the regional centre programme. Both programmes require EB-5 participants to invest in an NCE that will ultimately create the required ten new jobs. With the direct EB-5 programme, the investment is limited to a single EB-5 investor and cannot be pooled with other EB-5 investors. The NCE must directly take on the responsibility of having an employee-employer relationship and the requirements to identify, employ, train, staff, and schedule the appropriately documented persons in jobs that meet the EB-5 qualifications. The USCIS requires that a direct EB-5 participant’s proof of job creation include such documentary evidence as Form I-9 Employment Eligibility Verification, supporting individual employment documents, e.g., payroll records, time slips, operational revenues, for each job position claimed.
On the other hand, the regional centre programme allows for EB-5 investors to make their investments into an NCE affiliated to or sponsored by an approved EB-5 regional centre. However, the NCE does not need to directly own or operate the project or business that will meet the job creation requirements of the programme. A regional centre is a private or public entity designated by USCIS that is authorized to coordinate with multiple immigrant investors and to pool their investments for greater economic impact. Regional centres are authorized to operate within defined geographic regions and within specific industry sectors.
One major benefit that the regional centre programme has over the direct programme is that former can not only count the direct jobs created, but also allows for the use of economic modelling to calculate the relevant job creation associated with a project that has been funded or financed by the NCE. Regional centre NCEs can include model-derived direct, indirect, and induced job creation that results from the capital expenditures associated with the construction of a project that is not directly owned or affiliated to the NCE. Additionally, because the new commercial enterprise does not have to directly own or operate the job-creating project (known as the Job Creating Entity), the investor’s investment and ongoing responsibilities can be structured to be far more passive and in some cases more risk averse in nature. As a result of these benefits to participants, the path chosen by the vast majority of all EB-5 participants is to participate through a regional-centre-associated project.

Goals of the EB-5 Investor and Proper Due Diligence
Foreign nationals who choose to pursue and EB-5 visa want to immigrate to America for many reasons. These reasons range from a better education for their children, to better business opportunities or access to the US market, or just simply for retirement. Regardless of the specific reason behind pursuing EB-5, all investors must carefully evaluate the risks associated with achieving their immigration goals. The biggest risk is not the financial risk (though that is incredibly important since the petitioner must make an “at-risk” investment); rather, it is the immigration risk of not being able to permanently immigrate to the United States. This is why due diligence is key when deciding to pursues an EB-5 visa.
Even though EB-5 investors from around the world come from a wide range of backgrounds and have different motives to immigrate to the US, they are usually consistent in their desired goals for pursuing an EB-5 visa: first, obtaining permanent residency in the United States; second, ensuring the investment is secure and the ability to receive their money back at the end of the process; and third, possibly receiving a modest return on the investment.
If these goals are not prioritized in the appropriate order, an EB-5 investor and their family will likely increase the risk of not achieving the most important goal: their immigration pursuit, even if they succeed elsewhere. Not only are these three goals of utmost importance, they also must be maintained in correct order to ensure the highest likelihood of success for the EB-5 investor.
As an investor considers any EB-5 opportunity, they must make certain that the goals of each party in the investment are clearly understood. It is especially important to ensure that the goals of the regional centre/manager or general partner of the NCE align with the goals of the investor. The responsibility of the regional centre/ manager or general partner of the NCE is to be a fiduciary for the investors. That responsibility includes standing on the side of the investor and their family to ensure that the project moves forward, creates jobs, and eventually returns their capital. This is why, when deciding on a regional-centre-based EB-5 investment, choosing non-vertically integrated EB-5 investment opportunities (when a regional centre and developer/borrower do not share common ownership or interests in the project) and debt-based (loan model) investments (as opposed to an equity structure) may be the preferred path for any investor looking to make an EB-5 investment.
In a loan model and non-vertically integrated investment, the EB-5 investor invests in a partnership (NCE) that loans the pooled EB-5 capital from that investor and other EB-5 investors to a third-party borrower, who provides certain collaterals to the partnership to help mitigate the risk in the investment. The general partner of the partnership acts as the responsible party to hold the developer and borrower accountable for the use of the funds and the performance of the project, which allows the investor and their family to have peace of mind, knowing that someone is monitoring the investment at all times. In doing so, the regional centre closely aligns their goals with the goals of the investor.
In a vertically integrated project, this third-party lender-borrower relationship is absent. Not only are the developer/borrower’s and regional centre/general partner’s interests aligned, should something go wrong there is a major conflict of interest for the regional centre /general partner, which typically results in the investors having to stand in opposition to both parties with little or no rights.
Ensuring that the regional centre’s goals align with the investor is a significant part of any prospective EB-5 investor’s due diligence, but it cannot end there. As investors continue their due diligence and evaluating different regional centres, they must also evaluate the project, the developer, the immigration attorney (especially if assigned or required by the regional centre), any agency or third-party promoter of the project, broker dealer, and any other parties assisting in the decision-making process. The number one thing to remember while conducting EB-5 due diligence is to ask hard questions of everyone involved in the EB-5 process and make them prove their answers.
One of the best questions in ensuring that goals are aligned is determining how each party receives compensation. Recognizing that compensation is essential in order to continue serving the client does not mean turning a blind eye to the structure and amount of that compensation. Investment opportunities exist in the market where the attorney, marketing agency, and due diligence firms are all being paid outrageous fees by the developer or the regional centre. Who do those parties actually care about? What is their involvement after the EB-5 investor subscribes and they are paid a fee on an ongoing basis? Who do those parties actually work for? If something goes wrong, whose side will they be on?
Unfortunately, past headlines have been filled with EB-5 regional centre projects and unscrupulous operators who have taken advantage of investors. Many EB-5 investors from around the world have lost their investments and their immigration benefit due to bad actor EB-5 regional centre operators with little or no business background. There have also been myriad complicit immigration agencies and project representatives (including some attorneys) who pushed investors to invest in risky EB-5 regional centre projects based upon the payment of the highest commission, and not the basis of having the greatest chance of their client’s success.

EB-5 Reform and Integrity Act of 2022
On 15 March 2022, President Biden signed into law the EB-5 Reform and Integrity Act of 2022. The long-awaited bill will establish authorization for the EB-5 regional centre programme following an eleven-month lapse. Although the bill passed on 15 March, the programme will become authorized (allowing for new investors to file their petitions) in sixty days or on 15 May 2022. The EB-5 Reform and Integrity Act has brought with it several things for new investors to get excited about. Now all existing and new petitions filed before 30 September 2026 will be grandfathered in. This means you can rest assured that the processing of your petition will proceed regardless of any future lapse in program authorization. Additionally, the programme will now set aside a certain number of visas to be made available for certain project categories, potentially allowing for the priority processing and/or availability of visas that could help protect against long backlogs. Perhaps most importantly, the reforms will improve the integrity of the programme to protect investors and root out bad actors.

What to do before 15 May 2022
Prospective EB-5 investors should work closely with their immigration attorney on preparing their source of funds, as this can be a complex and time-consuming process. Additionally, prospective investors should continue to perform their due diligence on regional centre operators and their projects, asking tough questions about their track record, experience, and the specifics of the project. That way, once the programme receives authorization, prospective investors will be ready to choose a project to invest into and file their petition with the USCIS without delay. These are some of the typical questions any prospective EB-5 investor should ask regional centers and attorneys when performing their due diligence:
• How many EB-5 investments has your company created and successfully filled?
• How many of them have been approved by the United States Citizenship and Immigration Services (USCIS)? Can you prove it? Have any been denied?
• How many investor families have received an I-526 approval? How many have received an I-829 approval? How many have received a return on their investment?
• Are you and the developer affiliated in any way? If so, how?
• How many EB-5 petitions have you and your firm filed? How many have been approved? How many have been denied? If denied, why?

Lavanya author

EVENT

DETAILS

17th Edition Mumbai

19 - 20 April 2024
The St. Regis, Mumbai
Friday - Saturday, 11am - 7pm

Event Venue

The St. Regis Mumbai
Senapati Bapat Marg, Lower Parel,
Mumbai, Maharashtra-400013

GET IN TOUCH

CONTACT US

Our Office

120 Sector 44, Gurgaon 122003,
NCR Delhi, India
+91 124 4932020

Contact Information

Lavanya Anand

lavanya@gmnindia.com

+91 98 184 74860


Rohan Varghese

rohan@gmnindia.com

+91 96 199 44811


Sonal Gupta

sonal@gmnindia.com

+91 98 711 13351