Imigration Law Update
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This document summarizes the EB-5 immigrant investor visa program. It outlines the two types of EB-5 cases (individual and regional center), requirements for family immigration, the four-step process to become a lawful permanent resident, details about regional centers and how they work, differences between individual and regional center EB-5 cases, general requirements around investing capital in a new commercial enterprise and creating jobs, lawful source of investment capital, and considerations for removing conditional status.
Imigration Law Update
- 3. EB-5 Program Overview • Two types of EB-5 cases: Individual and Regional Center (RC) • Approximately 90-95% of EB-5 cases are filed through Regional Center Program. • 10,000 “EB-5” immigrant visas per year • $500,000 or $1 million investment • Conditional green card – after 2 years investor needs to remove conditions if investment is sustained and jobs are created
- 4. Family Immigration • Who can immigrate with the investor Spouse Unmarried children under 21 • “Aging out” children
- 5. EB-5 Structure There are four steps to becoming a Lawful Permanent Resident (LPR) through the EB-5 program 1. Form I-526 immigrant petition approval (9 months adjudication) 2. Adjustment of Status (4-6 months) or Immigrant Visa Consular Processing (6-10 months) 3. Receive 2-year conditional permanent resident (CPR) status 4. Between 21-24 months of receiving CPR status, file Form I-829 petition to remove the conditions (6-8 months) 5. In about 2.5 years, eligible to apply for citizenship
- 6. Regional Center • Regional Center – business entity approved by USCIS that coordinates EB-5 investment • Multiple Regional Centers in the same geographic location • Specific Industries • Choosing Regional Center: Track record of success - I-526 and I-829 approvals Return of Investment Conditions of Investment Reporting on status of investment to investors Loan or equity projects
- 7. Regional Center Exit Strategy • 5-7 years after investment • Resale of investment share or the project property • Outright sale of the property to another public or private investor • Non-recourse leveraged refinancing of the property and distribution to investors of the excess proceeds as “return of capital” • Sale of the interest to a third party investor, including another managed fund, or co-investor or co-developer • Tax-free exchange or swap • Exchange with an “UPREIT” (tax-free) for listed shares in a real estate investment trust or similar public property investment vehicle
- 8. Individual v Regional Center EB-5 Individual EB-5 • Investor creates a new business or buys an existing business • $1 million investment amount unless the business is in Targeted Employment Area • 10 direct jobs (W-2) • Engagement in the enterprise (investor cannot have merely passive role) Regional Center EB-5 • Investment in a Regional Center • $500,000 investment amount as most RCs are in TEAs • Indirect jobs count • Investor can be a limited partner, less active role
- 9. Individual v Regional Center EB-5 Regional Center EB-5 Individual EB-5 Manage your own business No need to manage business Control profits Creation of jobs possible for Perfect for retirees the business Immigration is main concern Profits are marginal Limited control over investment Easy to show job creation RC will take care of most of the paperwork
- 10. General Requirements • Invest capital - $500,000 or $1 million obtained from lawful source • In a New Commercial Enterprise: Created after 11/29/1990; or Restructured or Reorganized; or Expand business resulting in 40% increase in net worth or number of employees • At risk investment • Engage in Management or Policy Formulation • Create or Save 10 full-time jobs for USC, LPR
- 11. Investment of Capital • Invested or in the process of investment • Investment must be maintained throughout conditional resident period • Reduced capital threshold of $500,000 if Targeted Employment Area (TEA) “High unemployment area” – at least 150% of national average, OR “Rural area” – not within an MSA and not within boundary of any city or town having a population of 20,000 or more
- 12. Lawful Source of Capital • 5 years of income tax return required (business and personal) • If foreign country does not have tax return filing requirement – must prove it • Evidence of lawful acquisition of capital Business earnings Salary Gifts Loans Sale of Real Estate • Tracing of Funds from Investor to Enterprise
- 13. New Commercial Enterprise • Any for-profit business • “New” – means formed after 11/29/1990 • New Commercial Enterprise may be a preexisting business if was created after 1990 • If formed before, have to show substantial reorganization or restructuring - complete transformation of nature of business • Expansion of existing business resulting in 40% increase in net worth or number of employees
- 14. “At risk” Investment • Capital can include cash, equipment, inventory or tangible property • Equity interest is required (stock, LLC/LP interest, etc.) • Commitment of capital without guaranteed return • Loans to enterprise will not work • No guaranteed distributions or redemption provisions • May use escrow, conditioning release of funds to enterprise upon approval of I-526
- 15. Engage in the Enterprise • Day-to-day managerial control, or • Policy formulation • Corporate officer, board member, limited partner with rights and responsibilities of ULPA • Passive investor will not qualify
- 16. Job Creation • Investment must create 10 full-time jobs for 10 workers (USC, LPR, asylee or refugee) • Prove employment with W-2, I-9, payroll records • Independent contractors do not count • Business Plan should detail the timeline for job creation
- 17. Job Creation • At Removal of Conditions stage, must show jobs were created or can be expected to be created within a reasonable period of time • Direct vs Indirect Jobs (RC) Direct – employees of the enterprise Indirect – jobs created collaterally or as a result of capital invested in a commercial enterprise affiliated with a regional center by an EB-5 investor.
- 18. Job Creation – Troubled Business • Job Creation Exception – Troubled Business • Troubled Business Has been in existence for at least 2 years Has incurred a net loss during the 12- or 24-month period prior to I-526 filing, and The loss for such period is at least equal to 20% of net worth prior to such loss • Focus on preserving jobs Number of existing employees must be maintained during conditional period Total positions must be at least 10 (e.g. 8 saved and 2 created)
- 19. EB-5 Considerations • Removal of Conditions in 2 years: Capital invested/sustained, jobs created/preserved • Trends in Adjudication • Statistics – over 90% RC EB-5
- 20. Other Visa Options • E-2 Investment Visa – Investment can later be used for EB-5 • L-1A Intra-Company Transferee Visa • H-1B Work Visa
- 22. Jacob J. Sapochnick, Esq. 619-819-9204 jacob@h1b.biz