Employment Green Card

Green Cards > Investor Green Card

Fifth Preference – Investors (EB-5 Category)

The Fifth Preference is conditional residency for individuals who invest $1,000,000 (or in certain cases $500,000) in a new commercial enterprise that employs ten or more U.S. citizens or authorized immigrant workers full-time. The applicant must be involved in day-to-day management or policy formation of said commercial enterprise. The specific standards for each criterion are discussed in the links below:

New Commercial Enterprise

A commercial enterprise includes partnerships, holding companies and wholly-owned subsidiaries of for-profit businesses.  Note that the applicant does not need to actually establish the commercial enterprise – it is enough to just “invest” the required amount in a new commercial enterprise. 

There are two ways to meet the “new” standard:

·             The relevant commercial enterprise is in a company formed after November 29, 1990; or

·             If the relevant company was founded before November 29, 1990,

·         The company has been restructured or reorganized so a new commercial enterprise results (although if the applicant causes a net loss of jobs, that is grounds for disqualification); or

·         The company has been significantly expanded in terms of number of employees or net worth.  The increase for either net worth or number of employees must be at least 40%.  Note that for the 40% increase in net worth, all of the money contributed by all investors, not just the applicant, can be counted.

What is Investment for the Purposes of the EB-5 category?

How to Determine Investment Amount

The investment must be made after November 29, 2009 for the applicant to be eligible for an EB-5.  The standard requirement is USD $1,000,000 and the applicant must have invested the amount, or be actively in the process of investing, that amount.  The investment money is valued in U.S. dollars at fair market value.

If the investment is made in a rural area with less than 20,000 people or in an area that has experienced high unemployment of at least 50% of the national average, then the applicant need only invest USD $500,000 to meet the EB-5 standard.

The total amount invested must be put towards only one commercial enterprise; an applicant cannot count investments made to multiple businesses.

The following count as investment: cash, inventory, property, equipment, cash equivalents, and indebtedness secured by assets owned by the applicant, as long as the applicant is personally and primarily liable and the assets of the new commercial enterprise are not themselves used to secure the loan.

Note that the following do not count as investment: a loan to the commercial enterprise from the applicant; payment of partnership expenses; retained earnings.

The investment money can come from funds in a joint bank account owned by spouses, but not from any other kind of joint account (i.e. owned in common with other family members).

The Investment Must be “At Risk”

To be considered investment, the applicant must risk losing the funds or assets in question.  Specifically:

• Promissory notes.  The promissory note must be secured by the applicant’s property because an unsecured note is not considered an investment.  The fair market value of the secured note and not the face value will determine the official investment amount.  Fair market value is determined at the time of filing the EB-5 petition and is based on the fair market value of the assets securing the note, whether the assets can be seized, the terms of the note, and the discounted value of the note among other factors.  Note that the applicant must substantially complete payments on a signed promissory note by the end of the two year conditional residency period which begins after the application is approved.
• Trusts.  To use money from a trust, the funds must be fully available.
• Loans secured by the investment.  Loans which use the investment as a security cannot be counted towards the investment total.
• Reserves.  Money that is set aside and cannot be used by the new commercial enterprise cannot be considered investment.
• Redemption agreements.  An investor cannot create an agreement granting him/her the right to sell his/her interest back to the partnership before all of the cash payments are made on the relevant promissory note.
• Guaranteed interest payments/guaranteed returns.  Promissory notes that guarantee payment or returns do not count as qualifying investment, again because the money is not at risk.  Other examples that do not count as investment include buy/sell options that set the price at something other than fair market value, and any instrument that limits the amount of money actually available to the new commercial enterprise.
• Sole owner cannot meet the “at risk” standard simply by placing money in the company account, because he/she can easily remove it.
• Any investor plans that minimize risk, such as guaranteed interest payments, buy/sell options at fixed prices, etc., may be challenged by the government as failing the “at risk” criterion.

Funds Source(s)

• An applicant must show the source of the investment money and that such money is legitimate.

Partnerships and Multiple Investors

Note that it is acceptable to have multiple investors in the new commercial enterprise, other than the applicant.  All new full-time employee positions created in the new commercial enterprise may be credited to the applicant.

A new limited partnership does qualify as a new commercial enterprise.  It is also acceptable for the applicant to invest in the partnership after its formation.  The relevant limited partnership agreement must give the investor rights and duties in order for the partnership to qualify for EB-5 purposes.  If the limited partnership is an investment fund that funds various companies, then the investor’s management is related to the fund, not those companies that are invested in.

How is job creation for U.S. workers measured?

• An applicant must make full time jobs for at least 10 U.S. citizens, LPRs (Legal Permanent Residents), asylees, beneficiaries of cancellation of removal, and/or temporary residents.  Individuals on a non-immigrant visa or family members of the investor do not count.  Independent contractors are also not considered employees for the purposes of determining EB-5 eligibility.
• The jobs created must be full-time work (at least 35 hours per week).  The relevant inquiry is the job itself, not whether or not the individual filling the position changes.
• If the investment only sustains current employees but does not create new full-time positions, it does not meet this requirement, unless the investment is made in a so-called “troubled business.”  A troubled business is one which has had net loss for one or two years of more than 20% of its net worth.
• If an applicant invests with a participating regional center, he/she may count indirect job creation (see discussion below, under “Investor Pilot Program”).

Types of Evidence Typically Required

The applicant is required to provide extensive documentation in order to demonstrate that the application is eligible for EB-5 classification.  We have set out below an abbreviated list of some of the evidence required for demonstrating eligibility as for EB-5 classification.

New Commercial Enterprise

• Articles of Incorporation
• Documents showing authorization to do business in the relevant state

Investment

• Bank Statements; evidence of purchased assets; evidence of property transferred; loan or mortgage agreements, etc.
• Corporate, partnership and personal tax returns filed within 5 years;
• Evidence relating to any other sources of capital, such as evidence from sales of land or businesses.
• Evidence related to applicant’s personal income during the past few years.

Initial Conditional Nature of EB-5 Status

EB-5 status is conditional for the first two years.  Within 90 days of the completion of the second year in that status, the applicant must request the removal of the conditional status, using Form I-829.  Note that the applicant does not need to be physically in the United States to file this request.  If this request is approved, then the applicant will have permanent resident status that is not subject to any conditions. 

In order to remove the conditional nature of the EB-5, the applicant must show:

• He/she invested or was actively investing the required amount;
• He/she sustained the new commercial enterprise and the investment substantially meets the capital investment requirement;
• He/she created or can expect to create within a reasonable period of time the ten full-time jobs for qualifying employees required by the statute.

Note that if the applicant fails to meet any of the key standards for EB-5 classification listed above, or the government determines that the new enterprise was established only to evade immigration laws, then the government can cancel EB-5 status at any point during the two-year conditional period.  An investor can be deported if his/her EB-5 status is terminated.  Additionally, note that an applicant with a conditional EB-5 can still seek naturalization and such an applicant’s naturalization petition must be reviewed within the time frame required by the law for all other applicants.

Investor Pilot Program: Regional Centers

The government has newly established a pilot program for investors which would allow investment through regional centers with relaxed job creation requirements for EB-5 classification.  This program has a 3000 visa per year limit.

A regional center must establish that it can participate in this pilot program by showing how it will promote economic growth through, among other things, improved regional productivity, job creation or increased domestic capital investment. 

An applicant under this regional pilot program must meet all of the usual requirements for employment creation, except he/she can demonstrate that investment in the regional center will create jobs indirectly beyond the relevant commercial enterprise.

A list of regional centers is located on the USCIS website at: http://www.uscis.gov/portal/site/uscis.....