The EB5 Investor Green Card

By Attorneys Robert L. Reeves & Joseph I. Elias

Foreign investors who wish to immigrate to the U.S. have vast and often perplexing number of visa options to choose from. Some allow for permanent residency while others do not. One in particular, the EB-5 immigrant visa category, is one of the most underutilized categories. This is due in part to inaccurate perceptions of investors fueled by rumors and past practices of the Immigration Service. The legacy Immigration Service had little guidance with which to administer the EB-5 program which resulted in uncertainty in the outcome of these cases. Court decisions since the 1990 and a restructuring of the adjudication unit within the Immigration Services has allowed the EB-5 program to become a more reliable immigration option for investors. This may even be a preferred and quicker option given the backlog of available visas in most visa categories.

Congress created the EB-5 investor category to allow foreign investors and their immediate family members to obtain permanent residency in the U.S. in exchange for investing in an employment-creation commercial enterprise. An EB-5 investor must either create a new business, purchase an existing business and reorganize it so that a new commercial enterprise results, or expand an existing business. The business must also be able employ no less than 10 full-time U.S. workers. The EB-5 investor is initially granted conditional resident status for a two-year period in order to manage the enterprise either through day-to-day managerial control or through policy formation (e.g. member of the board of directors). As a conditional resident, the investor has the full rights of a permanent resident including the ability to work and travel in and out of the U.S.

At the end of the two years the investor must show that the commercial enterprise employs 10 full-time U.S. workers, is an ongoing business concern, and that the investor has invested the required capital amount. The Immigration Service will then remove the conditional status and grant the investor full or unconditional permanent resident status.

The investment funds must be placed at risk without conditions and continue to be at risk at the time the EB-5 investor applies to remove their conditional status. The investment amount is typically $1 million for establishing a new business or purchasing an existing business. This visa category is also known as the $1 million investment visa. This gives the perception that the minimum investment amount is $1million causing many investors to shy away from the EB-5. In actuality, the investment amount in an employment creation enterprise can be as low as $500,000.

Investments in targeted employment areas only require an investment amount of $500,000. These are defined as rural areas (population less than 20,000) or State designated high unemployment areas (at least 150% of the national average). Congress also created a subcategory of investment where the investment capital can be $500,000 if placed at risk with a USCIS pre-approved Pilot Project Center. Pilot Projects have already demonstrated to the USCIS that they create directly or indirectly 10 or more jobs for U.S. workers based on their activity. Most are located in targeted employment areas allowing for a $500,000 investment amount and are required to be open to any investor.

The Pilot Project for many investors is a better alternative. The investor will not have to demonstrate or prove the creation of new jobs to the USCIS. This has already been accomplished by the Pilot Project. Also, the investor can play a more limited role, typically as a limited liability partner, leaving the day-to-day management of the company to fall on others. This frees the investor to pursue other activities at the same time. The approved Pilot Projects are engaged in a variety of businesses such as land development, dairy farming, commercial banking and real-estate development. These are for-profit or quasi government entities and as with any investment carry their own degree of risk.

The EB-5 visa also allows investors who prefer a hands on approach to directly manage their risk and run their own business. They can set up a new business or purchase an existing one. Buying an existing business requires raising the net worth or increasing the number of its employees by at least 140%, but not less than 10 U.S. workers by the end of 2 years.

USCIS processing of EB-5 visas is now consistent and with the backing of the courts, this category is no longer a speculative one. Some successful examples of EB-5 businesses include restaurants, motels, import-export companies, car dealerships and small manufacturing companies. Investment options are more flexible then generally perceived. Investors should definitely discuss and explore this visa category with their immigration counsel. While the EB-5 is a viable option for many investors, an EB-5 visa application must be well prepared and documented.