What is the EB5 Preference Category?
The employment-based fifth preference category (EB5) is for immigrant investors. Each year, a limited number of immigrant visas may be allocated to qualifying immigrant investors. Recipients of immigrant visas in the EB5 category will be subject to a two-year conditional permanent residency period, and will be required to apply for the removal of conditions before the conditional permanent residency period expires. An immigrant investor may also afford derivative status to his or her spouse and unmarried children. Unlike many other employment-based preference cases, a person seeking an immigrant visa in the EB5 preference category may self-petition.
The EB5 program was created to incentivize persons to make substantial investments in the United States in return for the benefits of permanent resident status.
10,000 immigrant visas in the EB5 category may be awarded each year. 3,000 such visas are set aside for those seeking EB5 visas through the Regional Center Pilot Program.
What Kind of Investment Qualifies?
There are very specific rules for the types of investments that may qualify an individual for status through the EB5 preference category. The individual may invest privately in a new commercial enterprise, invest privately in a troubled business, or invest in an approved regional center under the EB5 Regional Center Pilot Program. In the subsequent sections, we will briefly examine each of these three modes of investment that may qualify an individual for EB5 status.
Private Investment in a Commercial Enterprise or Troubled Business
An individual may seek an immigrant visa through the EB5 process by investing to:
- Establish a new commercial enterprise;
- Purchasing an existing commercial enterprise and subsequently restructuring or reorganizing the commercial enterprise such that a new commercial enterprise results; or
- Expanding an existing business by 140% of the pre-investment number of jobs or net worth, or by retaining all existing jobs in a troubled business that has lost 20% of its net worth over the past one to two years.
A commercial enterprise is defined by the United States Citizenship and Immigration Services (USCIS) as including any for-profit activity that is “formed for the ongoing conduct of lawful business” (see PM-602-0083).
A “troubled business” is defined by regulations found in 8 C.F.R. 204.6(e) as a business that has been in existence for at least two years, has incurred a net loss for accounting purposes during the twelve- or twenty-four- month period prior to the priority date on the alien entrepreneur’s immigrant visa petition, and that the loss for such period is at least equal to 20% of the trouble business’s net worth prior to such loss.
In order to for the investment to qualify, the alien investor must invest at least one million dollars into the business venture in the United States. However, this requirement is lowered to half-a-million dollars if the investment is made in what is called a “targeted employment area” (TEA). A “TEA” is defined as a locale that has experienced unemployment of at least 150% of the national average rate, or a rural area. 3,000 EB5 visas are designated annually for investments in TEAs.
The investment must create at least ten full-time work opportunities. If the investment is being made in a “troubled business,” it must maintain the number of existing employees at no less than the pre-investment level for a period of two years. For an investment in a troubled business, at least ten jobs must be maintained. The jobs of the investor or his or her immediate family cannot be included in this calculation. However, positions for permanent residents and other non-resident aliens who are authorized for employment in the United States are counted. The investor will be required to submit a detailed business plan with regard to this requirement in seeking a visa in the EB5 preference category.
The funds for the investment must have been lawfully obtained by the investor. The investor will be required to submit documentation establishing the source of his or her investment funds. The investor must establish that his or her investment will benefit the U.S. economy by providing goods and services. Finally, the investor must establish that he or she will be involved in the day-to-day management of the commercial enterprise. This means that merely investing the requisite funds in a qualifying commercial enterprise is not sufficient for establishing eligibility for an EB5 visa.
In the above cases, the investment funds do not necessarily need to be paid up-front. Although the best method may differ from case to case, an individual may generally pay one-third of the total requisite investment upfront, and may accumulate the rest while the business is operating. However, in all cases, the EB5 petition must establish that the investor’s own funds will be at risk and that he or she has a plan and the wherewithal to meet the investing requirements.
EB5 Regional Center Pilot Program
An individual may seek an immigrant investor visa through the EB5 Regional Center Pilot Program. Although investing in an EB5 Regional Center is similar to other EB5 investments, there are certain key differences that have advantages and disadvantages relative to other EB5 investments.
Firstly, the investment must be made in a designated EB5 Regional Center. The USCIS regularly updates the list of qualifying EB5 Regional Centers. Secondly, jobs created as a direct result of the investment or as an indirect result of the investment are counted toward the job creation requirements. In many cases, this may make meeting the job creation requirements easier than it would be with non-Regional Center investments. Finally, the investor is not required to be involved in the day-to-day operation of the business, thereby freeing the investor to pursue other business ventures.
However, an investment in an EB5 Regional Center must be made in full up-front. This is distinct from non-Regional Center investments where the investment may be made in stages. Furthermore, the investment must be made in a single commercial enterprise, and cannot be made directly in unrelated entities.
Application Process and Removal of Conditions
An individual seeking an EB5 visa must file his or her petition on the Form I-526, Immigrant Petition by Alien Entrepreneur. If the petition is approved, the individual may file for an immigrant visa abroad or adjustment of status from within the United States when an immigrant visa number is available.
Within 90 days of two years from the date the individual becomes a conditional permanent resident, the individual must apply to have the conditions removed from his or her permanent resident status. The application is filed on the Form I-829, Petition by Entrepreneur to Remove Conditions. The evidence submitted with the Form I-829 must establish that the investor had made the requisite investment, is actively in the process of investing the funds (or has invested them in the Regional Center context), and that he or she has sustained the investment for the two-year period. The evidence must also establish that the investor has met or is on pace to meet the job creation requirements (or in the case of a troubled business, that the investor has maintained the requisite number of jobs). The investor’s dependent spouse or children may have the conditions removed from their permanent resident status along with the investor.
Petitioning for immigrant investor status through the EB5 program is an extremely complicated and document-intensive process. Prospective investors should consult with an experienced immigration attorney before taking actions toward seeking permanent resident status through the EB5 program. An experienced immigration attorney will be able to assess the immigrant investor’s overall situation and proposed investment and determine whether the investor will be able to file an approvable petition for an EB5 visa. If so, an experienced immigration attorney will be able to guide the immigrant investor through the petitioning process and help him or her determine the best way to make the qualifying investment. An experienced immigration attorney should also be consulted in the petitioning process for the removal of conditions.
For investors who cannot meet the EB5 requirements, there may be other immigration options available. For example, the E2 treaty investors visa provides a nonimmigrant path for investing in the United States for aliens from qualifying countries. Certain other immigrant and nonimmigrant employment-based visa categories may be conducive to making investments in the United States. An experienced immigration attorney will be able to assist an alien in determining which immigration method is best for meeting his or her investment or business goals.