AN OVERVIEW OF THE EB-5 CATEGORY

The EB-5 Category is an excellent opportunity for many foreign nationals to become permanent residents of the United States.

The Regular Program

A person investing $500,000 in certain circumstances or $1 million in a business that creates 10 jobs may be granted EB-5 permanent resident status. The basic government criteria for this excellent status are:

Investment must be in a business, not a passive security such as the stock market;

Invested funds must be the individual's, but may be a gift from a parent or other person, provided the appropriate gift taxes are paid, if required;

The business must have been created after November 29, 1990 or the investment must substantially change an older business;

The amount of investment may be $500,000 in a rural or high unemployment area; and

Create 10 jobs – no direct job creation is required if the investment is in a "Regional Center" (see below).

The Regional Center Program

To encourage immigration through the EB-5 category, Congress created a Regional Center program in 1990. 3,000 visas have been set aside each year for people to invest at least $500,000 in designated Regional Centers. The Regional Centers program does not require the immigrant investor enterprise itself to employ 10 U.S. workers. Instead, it is sufficient if 10 or more jobs are created indirectly as a result of the investment. Regional Centers are designated as "any economic unit, public or private, which is involved with the promotion of economic growth, including increased export sales, improved regional productively, job creation, or increased domestic capital investment." The investment requirement is only $500,000 if a Regional Center is in a targeted employment area, which is either in a rural or high unemployment area, as defined hereinafter in the section on EB-5 Regulations. In 2003, Congress gave CIS (formerly INS) discretion to "give priority" to EB-5 petitions filed through a Regional Center. Once Permanent Resident status is granted, minimal involvement with the investment is permitted, allowing the applicant to work in any business, go to school, or enjoy retirement.

Procedures

EB-5 Permanent Resident status involves making the investment, filing the appropriate petition at a CIS Service Center, and applying for an Immigrant Visa at a United States consulate or applying for Adjustment of Status in the U.S. After "Conditional" Resident Status (Green Card) is granted, the individual must wait one year and nine months to file an application to remove the "conditional" status. With this application, evidence of the creation of the 10 jobs, if necessary, is required as well as proof the entire investment has been made. Upon approval of the application by CIS, the applicant is granted Permanent Resident status.

The CIS has been approving qualifying EB-5 cases following controversy in the 1990s over interpretations of the relevant regulations.

We can analyze business opportunities and advise you whether they may qualify for an EB-5 Green Card. We do not, however, give business advice or analyze an investment for determining financial viability. You are encouraged to hire accounting and business law experts to conduct a due diligence analysis of the investment.

A step-by-step guide to applying for an EB-5 Investor Green Card

STEP-BY-STEP PROCESS FOR EB-5 INVESTOR GREEN CARDS

Step 1 – Schedule a consultation with Steven N. Garmo by calling or sending an email to set up an appointment. Steven N. Garmo can be contacted at 248-626-0050 or by email, steve@garmo.com .

Step 2 – Discuss commitment of funds and required documentation to prove the investment and tracing of the funds.

Step 3 – Investigate whether the investment is financially viable. We recommend you hire experts on business analysis and conduct due diligence on the prospective investment.

Step 4 – Make the capital investment.

Step 5 – File Petition for Alien Entrepreneur with the CIS.  This petition requests CIS to certify the applicant and the investment as eligible for EB-5 status.

Step 6 – Upon approval of the Petition, (a) if you are in the United States, you may apply for Adjustment of Status to Conditional Resident status.  (b) If you are abroad, you must wait for notification from the National Visa center to prepare documents for the Immigrant Visa interview at the U.S. Consulate or Embassy in your home country.

The purpose of the Adjustment of Status or Immigrant Visa interview is to ensure you are not subject to grounds of exclusion, e.g. a criminal past, infectious diseases, etc.

Step 7 – Once granted conditional resident status, wait 21 months to reconfirm that the full investment has been made and 10 jobs created (if required, based on type of investment).

Step 8 – File application to remove conditional resident status (Form I-829) between 21 to 24 months after Conditional Resident status is approved.

Step 9 – Once conditional resident status is removed, a full Green Card is granted for indefinite permanent resident status and work permission in the United States. U.S. Citizenship is possible 5 years later, upon satisfaction of residence and other criteria.

Details on EB-5 Green Card eligibility and procedures.

EB-5 REGULATIONS

Permanent residence is permissible for investors who invest in a commercial enterprise that will benefit the U.S. economy and create at least 10 full-time jobs. The minimum investment is $1 million of capital, which may be reduced to $500,000 if the investment is made in a "targeted employment area".

Procedure

An investor must file a petition with U.S. Citizenship and Immigration Services ("CIS"). Upon approval of the petition, the investor and immediate family (spouse plus single children under 21 years of age) may apply for an Immigrant Visa at a U.S. consulate or apply for Adjustment of Status at a regional CIS office if the investor is already in the United States.

The initial resident status is "conditional" for two years. Prior to the expiration of the two-year period, the conditional resident investor must file a petition with the CIS to request removal of the condition on permanent residence. The petition should be granted if the investor demonstrates that he/she invested or was actively in the process of investing the requisite capital; the investor maintained the investment throughout the two-year period of conditional residence; and the investment created the requisite employment.

Investing in a new commercial enterprise

The law requires the investor-petitioner is investing in a "new" commercial enterprise, which must have been one established after November 29, 1990. However, contribution of capital to an "existing" business (that was formed prior to November 29, 1990) may be acceptable in two situations:

First, the investor may substantially reorganize or restructure the existing business. The mere change in ownership, cosmetic changes to the decor of the business site, and implementation of a new marketing strategy are insufficient changes to constitute establishment of a new commercial enterprise. A complete transformation of the nature of the business is likely to be considered sufficient.

Second, the investor may expand an existing business resulting in an increase of at least 40 percent of the net worth or number of employees of the business. CIS requires evidence of the change in business in the form of income tax returns, audited financial statements, and employment tax returns.

The investment must be in a "commercial" enterprise. Any for-profit entity formed for the ongoing conduct of lawful business may serve as a commercial enterprise. This includes sole proprietorships, partnerships (whether limited or general), holding companies, joint ventures, corporations, business trusts, or other entities publicly or privately owned. This definition includes a holding company and its wholly owned subsidiaries, if each subsidiary is engaged in a for-profit activity formed for the ongoing conduct of a lawful business. However, the term new commercial enterprise does not include noncommercial activity such as owning and operating a personal residence or buying stock on the stock exchange.

Engaging in a new commercial enterprise

While the law requires the investor to be engaged in a new commercial enterprise, CIS regulations state that if the investor is a corporate officer or board member or, in the case of a limited partnership, a limited partner, then the investor satisfies the management criteria.

Investing capital

The law requires an investor-petitioner to have invested in or be in the process of investing the required capital.

A.    Amount of capital

The amount of required capital is at least $1 million. The minimum investment is reduced to $500,000 in cases of investment in "targeted employment areas," which are rural areas or areas which have experienced unemployment of at least 150 percent of the national average rate. A "rural area" is an area not within either a metropolitan statistical area or the outer boundary of any city or town having a population of 20,000 or more. The assessment of whether the investment is in a targeted employment area is based on statistical information relating to the time of investment and the location where the enterprise is principally doing business.

B. Equity capital   

To "invest" is to contribute equity capital to the enterprise. Loans of capital by the investor to the enterprise do not qualify as an appropriate investment. The investor cannot receive any bond, note, or other debt arrangement from the enterprise in exchange for the contribution of capital.    

C. Kinds of capital

"Capital" may include cash and cash equivalents, equipment, inventory, and other tangible property. Although capital does not include loans made by the petitioner to the enterprise, the investor may borrow the investment money if it is secured by assets owned by the investor, provided the investor is personally and primarily liable for repayment of the loan, and the assets of the enterprise upon which the petition is based are not used to secure any of the indebtedness.1

D. "At risk"

CIS requires proof that the capital invested is "at risk." CIS focuses on actual and intended uses of capital to confirm that it will be used for job creation and profit-generating activity. CIS requires more than a deposit of funds into a business account; it also requires evidence of the actual undertaking of business activity. CIS has held that use of capital for partnership expenses and reserve accounts unrelated to job creation is insufficient.

E. Tracing and lawful source

Documenting proof is needed that capital is invested by the investor petitioner. Thus, an investor petitioner should present evidence that traces capital from the petitioner directly to the enterprise.

CIS also requires that an investor petitioner provide evidence to prove that the source of funds was procured by legal means. CIS requires evidence of the investor's past five years of income tax returns and financial statements to prove the investor has sufficient lawful sources for the capital invested.

F.  Gifted funds

The applicant may receive a gift of the funds, provided the proper gift taxes are paid, if required by law.

Creating or saving jobs

The investor must create full-time employment for at least 10 U.S. workers. The investor and his or her spouse and children do not count toward the 10-employee minimum. Note that non-immigrants (i.e., those with E, H, L, and other temporary worker visas) are also excluded from the 10-employee requirement. An "employee" is an individual who provides services or labor for the new commercial enterprise and receives wages or other remuneration directly from the new commercial enterprise. Independent contractors are excluded under this definition.

A. Types of jobs

The jobs created must be full-time, i.e., positions that require a minimum of 35 working hours per week. Part-time jobs do not count. However, job-sharing arrangements where two or more qualifying employees share one full-time position will be counted.

B. When jobs must exist

The petitioner may base the petition on proof that the required jobs have been created or on proof that the required jobs will be created before the end of the two-year period of conditional residence. In the latter case the investor must support the petition with a comprehensive business plan demonstrating a need for at least 10 employees before the end of the conditional residence period.

C. Troubled business/saving jobs

Special rules govern investments in "troubled" businesses. A troubled business is one that has been in existence for at least two years, has incurred a net loss for accounting purposes during the 12 or 24 month period before the petition was filed, and the loss for such period is equal to at least 20 percent of the business’s net worth before the loss. If the petition is based on investment in a troubled business, the investor is not required to create 10 new jobs. Instead, the petition may be based on proof that the business will maintain the number of existing employees during the conditional status period.

D. Regional Center/indirect jobs

To encourage immigration through investment, and to concentrate investment in specific regions, Congress created a temporary Pilot Program in 1993, directing CIS to set aside visas for people who invest in a designated "Regional Center." The Pilot Program does not require that the immigrant investor enterprise employ 10 U.S. workers as long as the investor can reasonably demonstrate that the investment in the Regional Center has indirectly created 10 or more jobs and has resulted in improved regional productivity. The CIS has designated a number of Regional Centers located throughout the country.

Timing

It is currently taking about two months for CIS to process an EB-5 petition. Prior to filing the petition, time is required to conduct due diligence, make the investment, and prepare the documentation in support of the petition. If an individual is in lawful status upon approval of the EB-5 petition, he/she can apply for Adjustment of Status to Conditional resident without departing the United States. This application can take six months or longer to be decided. If not in the United States, he/she will apply for an Immigrant Visa at a U.S. Consulate which typically takes six months or longer depending on the country.

1 Separately, the use of a promissory note payable by the investor to the enterprise – as a present commitment to contribute cash to the enterprise in the future – may be considered capital in limited circumstances where the promissory note is secured by the assets of the petitioner, the obligation is a perfected security interest, and the promissory note is valued in fair market U.S. dollars at the time it is contributed to the enterprise. Valuation of the promissory note requires consideration of the value of the assets securing the note, the amenability of the assets to seizure, and the expenses of enforcing a foreign judgment if necessary. An investor also may use a schedule of payments or a promissory note as evidence of being "in the process of investing" the required capital; however, CIS requires that payments of the minimum-required capital must be substantially completed before the end of the two-year Conditional Residence period.

Information about Immigration approved Regional Center Programs, one of which is a limited partnership investment through which an investor can typically obtain EB-5 permanent resident status in less than 1 year, and then can work in any capacity, go to school or enjoy retirement.

REGIONAL CENTER INVESTMENTS

The 10-employee requirement deters many immigrant investors. To resolve this, in 1993, an option was created whereby immigrants may invest $500,000 or more in CIS-designated "Regional Centers" in a high unemployment area.

In this program, a promoter makes a proposal to the CIS. If the CIS finds it will benefit a regional economy and shows potential for providing significant indirect employment, the project will be designated a Regional Center. With CIS approval, the promoter forms a limited partnership or corporation. Investors may apply for green cards upon making the investment.

Investors in a Regional Center do not have to have day-to-day management responsibility or prove the business employs 10 people. Instead, they may rely on industry job multiplier statistics. A Regional Center means that the CIS is satisfied with the job creation potential. We can provide you with information about specific Regional Center Investments for you to perform due diligence analysis.

Examples of Regional Center Investments include:

1.A real estate limited partnership program that offers an investment in industrial properties in a specified major city. This program, which was granted CIS designation as a Regional Center in 1996, generally involves purchasing low-yielding warehouse properties with invested funds and converting them into higher-value mixed used properties, including office space, retail shops and storage space. Investors participate as limited partners of a limited partnership, and can earn regular monthly income from tenant rentals, as well as a share of future appreciation from the project, when sold. Investment periods vary, but cannot end before receipt of the permanent Green Card by the investor.

2.A limited partnership program that makes low interest loans to businesses in a specified major city. Business investment and development in this program, a CIS Regional Center designee since 2003, targets industry sectors that demonstrate strong indications of expansion, growing employment needs, and returns on investments. The Regional Center directs its efforts at financing projects and developing enterprises within targeted sectors, including hospitality and tourism, trade, technology, higher education, and transportation. The investment period of this program is 5 years.

3.Ownership of 80-acre almond farms in a specified location in California. The investment is used to create a business in California that is 100% owned by the immigrant investor. The business purchases 80 acres of land where almonds are developed, grown and harvested for export. It also purchases raw agricultural stock (almond trees), an irrigation system, plant nutrients and all necessary harvesting equipment and services to develop the land and export the harvested almonds for profit. The investment period for this program, which received CIS designation as a Regional Center in 2002, is 7 years.

FREQUENTLY ASKED QUESTIONS

Questions

1.Who should invest?

2.Is EB-5 a truly passive investment?

3.How long does it take for an EB-5 application to be approved and a Green Card issued?

4.Can money gifted by a parent or other relative be used for an EB-5 investment?

5.Will Steven N. Garmo advise me on whether an investment will provide a good financial return?

6.What is a “conditional” Green Card?

7.Can I qualify for a Green Card another way?

8.How do I start the process?

9.What documents must I prepare to process my investor Green Card petition?

10.What issues have been problematic in EB-5 cases?

11.Are EB-5 visas available to people from any country in the world?

12.Where can I find a copy of the relevant law and regulations to study?

Have additional specific questions regarding your case?

Request a consultation with an immigration attorney.

Answers

1:

Who should invest?

Answer: EB-5 investors include people from all walks of life: professionals, business people, persons wanting to facilitate a child's education, and retirees. Because the EB-5 visa permits employment in the US, many EB-5 investors become involved in charity or part time work. Simply put, the EB-5 visa gives you the flexibility to do what you want in the USA. If you don't want to actively manage your business, you should consider a regional center EB-5 investment. If you have a US citizen parent or child over 21 years of age, you may consider family class visa categories. If you have exceptional skills or are famous, you may qualify for a Green Card based on your extraordinary ability. If you want to manage your own business, consider an L-1 (Intracompany Transferee), E-2 (temporary Treaty Investor), or EB-5 case based on your own business which you control. If your goal is to have a Green Card and not to actively manage a business, it is more often cheaper and/or convenient to utilize the Regional Center EB-5 category rather than to start and maintain your own business.

2:

Is EB-5 a truly passive investment?

Answer: The EB-5 regulations require involvement in management or policy making. The regulations deem a limited partner in a limited partnership that conforms to the Uniform Limited Partnership Act sufficiently engaged in the EB-5 enterprise.

3:

How long does it take for an EB-5 application to be approved and a Green Card issued?

Answer: It takes about two months to make the investment, gather the necessary documents, and file the petition. Most petitions are approved in two to four months, some take longer. One can then apply for adjustment of status in the U.S. or an immigrant visa overseas. Adjustment of status for EB-5 cases can be processed in about six months, but can sometimes take longer. The immigrant visa at the American consulate requires about the same amount of time. After being granted, it usually only takes a few weeks or months for the conditional Green Card to arrive.

4:

Can money gifted by a parent or other relative be used for an EB-5 investment?

Answer: Yes, provided that any applicable gift taxes are paid. It must be demonstrated that the gift is an actual arms length transaction and is a not a mere ruse or that the gifted funds will be given back after permanent resident status is granted.

5:

Will Steven N. Garmo advise me on whether an investment will provide a good financial return?

Answer: No.We will only advise on visa matters. You will need to conduct your own due diligence and economic analysis or hire experts to do so.

6:

What is a “conditional” Green Card?

Answer: A conditional Green Card is a temporary Green Card valid for two years. One year and nine months after it is issued, a three-month window opens up during which an individual must file another application with the CIS to verify that all of the funds have been invested and employment created. When the conditional resident status has been lifted, full resident status is granted and a permanent Green Card is issued.

7:

Can I qualify for a Green Card another way?

Answer: People working for U.S. employers may be sponsored for a Labor Certification. Many highly successful people may qualify for permanent resident status as a person of extraordinary ability.Others may work for a multinational company with offices in the U.S. and overseas and be transferred to work in the U.S.As a result, they may be granted permanent resident status.

8:

How do I start the process?

Answer: contact Steven N. Garmo by calling or sending an email to set up an appointment. Steven N. Garmo can be contacted at 248-626-0050 or by email, steve@garmo.com .

9:

What documents must I prepare to process my investor Green Card petition?

Answer: You must prepare complete biographical information and must prove the source of the investment funds. To prove the source of investment funds, CIS requires five years of personal and business, if any, tax returns, proof of ownership in any businesses and business licenses. You must present a track record of an honest course of dealing. If your capital came from a specific transaction, such as sale of a house, inheritance or gift, you must prove the transaction occurred, by providing an official document, such as a closing statement or contract or other official documents. This is not an exhaustive list. Other documents may be required and vary on a case-by-case basis.

10:

What issues have been problematic in EB-5 cases?

Answer: The most common problem area has been insufficient documentation of the source of funds. Many people try to disclose the least possible information only to have the file returned with a request for further information. It is better to provide too much information rather than too little information. In this era of terror alerts, and suspicions about money laundering, CIS case examiners require a well-documented source of funds.

11:

Are EB-5 visas available to people from any country in the world?

Answer: Legally yes. However, people from countries that do not have reliable tax and other financial documentation will find it much more difficult to prove an EB-5 visa application and we would not recommend these individuals pursue EB-5 visas.

12:

Where can I find a copy of the relevant law and regulations to study?

Answer: Please go to the Citizenship and Immigrations Services (CIS) web site. A direct link to investment visa information is:

http://uscis.gov/graphics/services/residency/investment.htm