EB-5 Regional Center Affiliated Investment
Because USCIS designated regional centers cater to the needs of the foreign nationals as described above, and while the standards for individual EB-5 petitions are restrictive, the number of EB-5 regional center affiliated petitions has increased substantially in recent years and in 2014 exceeds 90% of all of EB-5 petitions filed.
The U.S. Immigrant Investor Pilot Program was established in 1992. But the program was suspended in 1997 due to investors’ failure to complete their total investments or the failure of affiliated regional center’ projects to create the necessary required jobs. The new guidelines of the Pilot Program were issued in 2002, whereby regional center investors are now required to invest the full $500,000 before submitting the I-526 petition. As of April1, 2014, there are 480 Regional Centers (RC) that have received designation (approval) from the USCIS with variety of projects from developing hotels, green projects, assisted-living and nursing homes, mixed-use office, medical and residential facilities, agricultural cooperatives, and commercial and developmental loans. When choosing a regional center, it is critical to analyze its business plan and the regional center project’s economic models of job creation methodologies utilized for determining indirect job creation employment, and scrutinize how job creation is documented and calculated to ensure that investor’s permanent residence condition will be successfully removed at the I-829 stage.
The Immigrant Investor Pilot Program remains a “pilot program” with continuing extensions through the present date. The latest extension expires September 30, 2015. Because of the success of the program both in terms of attracting investors and in terms of providing capital for economic development and job creation, as of the date of this article there is an expectation that the pilot program will likely be extended permanently by Congress.
Advantages of EB-5 Regional Center Affiliated Investment
Amount of Investment:
Most of the approved regional centers have been approved as “targeted employment area” investments, thus qualifying for the reduced $500,000 investment requirement. Direct EB-5 investments are either $500,000 or $1,000,000 depending upon whether the investor can prove that the investment is in a “rural area” or in an area which has experienced unemployment of at least 150% of the national average rate. Otherwise, if the investor does not meet her burden of proof on these points, the required amount of investment is $1,000,000.
A direct EB-5 petition requires proof of “full-time employment” as direct employees (not independent contractors) of ten U.S. workers. Although theoretically the requisite employment does not have to have been created at the time of approval of the I-526 petition, adjudication history reveals great difficulty in getting direct EB-5 petitions approved based upon business plans showing that the requisite employment will be created within the two year period before the filing of condition removal petition.
However, with the regional center petition, if the employment creation has been pre-approved for a particular project, the regional center can qualify based upon indirect employment creation generated in the community through the regional center investment.
Although an investment in the regional center does not raise the issue of direct employment creation for purposes of the I-526 approval, the choice of regional center in which the investment is made is critical. In order for the investor to have conditions removed after the end of the two year conditional period, USCIS will have to be satisfied that the direct or indirect employment creation has actually taken place or will occur in a “reasonable time”.
As part of the pre-approval process, the regional center has to satisfy USCIS that the investors will be engaged in the “management” of the enterprise as opposed to maintaining a “purely passive role.” This must be proven on a case-by-case basis by the individual EB-5 petitioner.
Most of the regional centers are limited partnerships. If the petitioner is a limited partner and the limited partnership agreement provides the petitioner with the rights, powers and duties normally granted to limited partners under the Uniform Limited Partnership Act, the investor will be considered sufficiently engaged in the management of the enterprise. As a practical and legal matter, this requirement can be met by a limited partner without the necessity of the investor committing to any specific amount of time or engaging in any day-to-day management, since such activities are performed by the general partner.
Source of Funds:
The requirements for the investor to prove the lawful source of his or her investment funds is the same for direct EB-5 and regional center affiliated petitions. In both cases, the documentation requirements are extensive.