The Immigration Act of 1990 created the employment-based fifth preference, or (EB-5) immigrant investor category. Under the EB-5 provisions, 10,000 visas shall are available each year to immigrants seeking to enter the U.S. for the purpose of-

A. Engaging in a new commercial enterprise;

B. In which the immigrant has invested a qualifying amount of capital of not less than $500,000;

C. Which will create at least 10 full-time jobs for persons other than the investor’s immediate family.

While the law provides that for a standard investment amount of $1,000,000, the capital amount may be decreased to $500,000.00, in the case of investment in a business that is primarily doing business in a “targeted employment area” as specified in the Immigration Service regulations. The investor is granted lawful permanent resident status on a conditional basis for two years. Immigration Service regulations provide the following additional details:

Engagement in Management

The investor must either be engaged in the day-to-day management of the business, or exercise control through policy formulation as a corporate officer or member of the board of directors. A limited partner will be considered to be sufficiently engaged in the management of a limited partnership.

Multiple Investors

The new enterprise may be a basis of petitions for more than one investor. However, each investor must invest the required amount and each individual investment must result in the creation of at least ten full-time jobs. The new business may be used as a basis of a petition even though there are other owners of the enterprise not seeking immigrant investor visas.

Investment in a New Commercial Enterprise

A qualifying business may be any for-profit activity formed for the ongoing conduct of business. This definition does not include a noncommercial activity such as owning and operating a personal residence or non-profit enterprise.

There are two basic methods for showing investment in a new enterprise:

1. Investing an original new business after November 29, 1990; or
2. Investing in an business established before November 29, 1990 so as to either –
* Cause the restructuring or reorganization of the enterprise; or
* Expand an existing business through investment of the required amount so that a 40% increase in either the net worth or number of employees results so that the new net worth or number of employees is at 40% greater than it was before the investment.

All of these options still require the investment of the minimum capital amount and creation of the required minimum number of new jobs.

Investment

To show that the investor has invested, or is actively in the process of investing, the regulations require that there be an actual commitment of the required amount of capital. Evidence of prospective arrangements to invest without a present commitment will not be sufficient to show that the individual is in the active process of investing.

Capital

A capital contribution may include cash, equipment, inventory, and other tangible property. Intangibles such as patents or copyrights are not considered capital under the regulations. Borrowed funds may be used as long as the investor is personally liable and the assets of the new enterprise are not used to secure the indebtedness. Capital will be valued at fair market value in U.S. dollars.

Required Amount of Capital

The standard investment amount required by is $1,000,000. A lowered investment amount of $500,000 is authorized for a rural area or an area that has experienced high unemployment. It should also be noted that the law sets aside 3,000 of the 10,000 visas each year for investors who invest in rural or high unemployment areas.

Lawful Source of Capital

To deter the use of illegally acquired funds to obtain U.S. immigrant status, the EB-5 regulations require the investor to submit documentation clearly showing the lawful source of the capital invested in the enterprise. The invested capital must be the personal funds of the investor, as opposed to funds belonging to a third person or a business entity owned by the investor.

The investor may have acquired the funds invested in any lawful manner. For example, the funds may have been earned as personal income in the form of wages, or as distributed profits or earnings from a business or other investment. The funds may have been obtained by the sale of a valuable asset owned by the investor, or by a loan secured by other personal assets owned by the investor. The funds may not, however, be derived from a loan secured by the assets of the qualifying U.S. enterprise.

The invested funds may have been received from another person by gift or inheritance. In the case of funds received as a gift or loan from a third party, documentation must be submitted to prove the lawful manner in which that party acquired the funds.

Employment Creation

The investment must create at least 10 new full-time positions for U.S. workers. These jobs must be created within two years. If the ten employees have not been hired at the time of filing of the I-526 petition, the petition must be accompanied by a detailed business plan showing that ten qualified employees will be hired within two years. For this purpose, independent contractors are not considered employees.

The job creation requirement may also be satisfied through an investment in a “troubled business” which results in the retention of jobs for at least two years at a level no less than the number of employees prior to the investment. A “troubled business” is one that has been in existence for at least two years and which has had a net loss of at least 20% of the business’s net worth.

Regional Designated Center Pilot Program

To encourage immigration through the immigrant investor category, the U.S. Congress created the Designated Regional Center Pilot Program in 1993. The Pilot Program sets aside 3,000 visas each year for people who invest the required amount of capital in a Designated Regional Center. A Regional Center is an entity, organization or agency that has been approved as such by the Service, which

  • Focuses on a specific geographic area within the United States; and
  • Seeks to promote economic growth through increased export sales, improved regional productivity, creation of new jobs, or increased domestic capital investment.

A business established within a Regional Center is not itself required to employ 10 U.S. workers, as long it is demonstrated that by participating in the Regional Center, the investor’s new business will indirectly create 10 or more jobs and improve regional productivity. A prospective investor seeking an immigrant visa under the Regional Center Pilot Program must demonstrate the following:

  • That his or her qualifying investment is within a Designated Regional Center; and
  • That such investment will create jobs indirectly through revenues generated from increased sales, improved regional productivity, job creation, or increased domestic capital.

Application Process

Persons seeking visas under the immigrant investor provisions must first file a Form I-526, Immigrant Petition by Alien Entrepreneur, together with the required documentation with U.S. Citizenship and Immigration Services. Each investor will be assigned a priority date under the visa quota system based on the date the petition is filed. After approval of the petition, which may take between three to six months, qualified investors and their accompanying family members, (spouses and unmarried children under 21 years old) may apply for immigrant visas at a U.S. Embassy or Consulate abroad. Eligible persons in the U.S. may apply for adjustment of status to that of lawful permanent residents at either the USCIS California or Texas Service Center depending on their place of residence in the U.S.

Removal of Conditions

Under the EB-5 provisions, the investor and his family dependents will be granted permanent resident status on a conditional basis. During the three-month window prior to the second anniversary of becoming a conditional resident, the investor will need to file a Form I-829, Petition to Remove Conditions, with the Immigration Service. That I-829 petition must show that the required capital was invested as planned, that the enterprise was maintained for two years, and that the enterprise has satisfied the job creation requirements of the law.