Our board certified immigration expert has succeeded in gaining USCIS approval for his business clients that seek to raise EB-5 capital. Michael Harris has represented EB-5 Regional Centers who are seeking to raise between as little as $8 million in capital, to $250 million for a variety of industry projects.

HOW TO USE THE EB-5 PROGRAM FOR YOUR PROJECT

A business developer has two options when seeking to use the EB-5 Immigrant Investor Program to develop and fund its projects:

(1) a Direct EB-5 Investment, or

(2) an investment funded under the EB-5 Regional Center Program.

Deciding which option to use as part of your capital stack has various pros and cons. Both can allow you to offer a foreign investor the ability to obtain a green card in exchange for their capital contribution to your business. The principal difference between the two options comes down to the methodologies used in and the time-constraints impacted by job creation. This is because only an EB-5 Regional Center is permitted to create jobs indirectly based on the expenditures and revenues of a project, as well as the induced spending on the local economy, as predicted by an economic impact study. If a project is not affiliated with an EB-5 Regional Center, then it may still benefit from EB-5 capital—but it may only rely on direct jobs.

WHAT IS AN EB-5 REGIONAL CENTER?

A “Regional Center” is a company that has been approved by the U.S. Citizenship and Immigration Services (USCIS) to focus on a specific geographical area within the United States by seeking to promote economic growth through improved regional productivity, creation of new jobs, and increased domestic capital investment. A project which is affiliated with an Regional Center can utilize the direct jobs created by the commercial enterprise, as well as the indirect and induced jobs created according to a reasonable economic impact study’s prediction. Further, the project has the option of only relying on the indirect jobs created, which can be a tremendous benefit to large commercial enterprises by not having to rely exclusively on direct jobs (and the large volume of employment and tax records needed).

A capital investment made under the Regional Center Program is funded through a commercial enterprise located within a “regional center,” which is defined as “any economic unit, public or private, which is involved with the promotion of economic growth, including increased export sales, improved regional productivity, job creation, or increased domestic capital investment.” To be able to use the benefits of an EB-5 Regional Center, an applicant must first seek USCIS approval by submitting a proposal showing how it plans to focus on a geographical region and industry or industries within the United States and achieve the required growth by the means specified. The proposal must show “in verifiable detail how jobs will be created,” as well as the amount and source of capital committed and the promotional efforts made and planned.

In summary, the USCIS will require a Regional Center proposal to show the kinds of commercial enterprises that will receive capital from investors; the jobs that will be created directly and indirectly as a result of the investment of capital; the other positive economic impacts that will result from the investment of capital; whether the Regional Center’s project is a government-defined Infrastructure project or located within Targeted Area of Employment or TEA (e.g. a U.S. Census-defined metropolitan statistical area (MSA) where the unemployment is at least 150% of the national average, or in a “rural” area that is outside an MSA and has a population of less than 20,000 people); and the management plans for the Regional Center (once approved and receiving EB-5 Investor capital) to oversee its annual reporting requirements.

To prepare an EB-5 compliant Regional Center proposal, the immigration filing will generally require project documentation (discussed below), an economic impact study, a comprehensive business plan, and private placement contracts concerning an actual potential project (hypothetical projects will not require a private placement offering initially). Before commencing a Regional Center proposal, it is highly recommended that a business developer conduct due diligence to assure the feasibility of their project. Other levels of due diligence are also advised, such as working with immigration counsel and an economist to study whether the project will lead to enough direct, indirect and/or induced jobs, as well as evaluating whether the project will be located in a TEA.

HOW IS A REGIONAL CENTER PROJECT DIFFERENT THAN AN EB-5 DIRECT PROJECT?

The project requirements for an EB-5 Direct Project are very similar to a project that is affiliated with a Regional Center. The following items distinguish an EB-5 Direct Project from a Regional Center project:

1. Economic Impact Study. A direct project does not require an economic impact study as only direct jobs are allowed. The predicted job creation must be articulated in verifiable detail in a comprehensive business plan. When an investor seeks to petition the USCIS to remove the conditions on his or her residence, proof of the direct job creation will be documented with employment and tax records, as well as other documentation showing that the investor’s EB-5 capital was spent on the EB-5 project as planned.

2. USCIS Pre-Approval. A direct project does not have to seek project pre-approval from USCIS. This may be beneficial for some project owners who do not wish to wait the many months necessary for USCIS to adjudicate a new Regional Center. USCIS processing times for new Regional Center applications varied tremendously over the years. An investor can only invest in a regional center after it has been designated by USCIS. This additional delay and expense may not always be in the best interest of a project owner’s desired timeline to commence work. Note that after a regional center has been approved, subsequent projects that are within the previously-approved geographic territory do not require pre-approval by USCIS. Those project must submit an application, however, to USCIS to have their business plan approved.

3. When Can Initial Investors File? A direct project can only have one EB-5 investor, who can file his or her petition immediately upon having a set of EB-5 compliant materials (e.g. a business plan, corporate documentation, and proof of the actual project’s imminent commencement). A Regional Center project is able to do the same for new projects only after making its initial request to USCIS for business plan approval through the filing of Form I-956F.

4. Affiliation Fees to a Regional Center. A direct project owner is not required to pay “rent” or fees to a Regional Center to obtain EB-5 capital. Regional Centers may  charge a fee for projects to utilize their designation. This may range from a combination including an amount per investor, a signup fee, a percentage of the EB-5 funds borrowed through the regional center, and even a part of the project owner’s equity stake in the enterprise.

5. USCIS Annual Report. A direct project owner is not currently required to submit an annual report on all of its EB-5 activities each year to the USCIS. Regional center owners are required to file an annual report prior to the end of the calendar year. Failure to file an annual report may lead to termination or revocation of a Regional Center’s designation.

6. USCIS Filing Fee. A direct project owner does not have to pay a filing fee to have his project approved by USCIS. An investor filing under the direct project will pay their own filing fee. A project seeking to fund through an existing USCIS-approved Regional Center will need to pay a USCIS filing fee. That fee is currently $17,795.

7. EB-5 Investment Funds May Be Pooled Only in Regional Center Projects. As a result of the enactment of the RIA, Direct EB-5 projects cannot use pooled investments from from more than one EB-5 investor. Other investors may invest in a direct project, but the law only allows one EB-5 investor per direct project. Regional Center projects may pool funds many EB-5 investors.

8. Portfolio Funds Allowed. Both types of projects may allow investors to fund investments through portfolios, however a direct project will require a holding company to wholly own the underlying subsidiaries where job creation occurs.

9. Minimum Investment of $800,000. Both types of projects allow for investments to be made in TEAs at a $800,000 amount per investor.

10. Business Plan Required. Both types of projects must have a comprehensive business plan. But only a regional center project must have the business reviewed in an additional project application.

GENERAL PROJECT REQUIREMENTS

In terms of an EB-5 Regional Center application, when it has been approved by USCIS an investor applicant seeking EB-5 status under the program may make the qualifying investment (i.e., $800,000 or $1.05 million) within an approved Regional Center. The requirement of creating at least 10 new full-time jobs for qualified U.S. workers is met by a showing that as a result of the new enterprise, such jobs will be created directly and indirectly. It is also important to note that under recent USCIS guidance, an EB-5 Regional Center project can seek to utilize construction jobs as direct jobs only if they are expected to last at least two years. As well, the project may also choose to rely solely on a verifiable and reasonable economic job creation methodology that shows that the necessary project expenditures or infusion into the local economy will result in the minimum amount of direct, indirect and/or induced jobs.

In today’s marketplace for commercial loans and investment capital when traditional sources of funding may have become increasingly unavailable for industrial development, real estate, construction, and venture-capital-seeking businesses, the EB-5 Immigrant Investor Program has attracted great interest. Today, more businesses are choosing to seek EB-5 capital, whether with one EB-5 investor in a Direct EB-5 project, by forming a Regional Center, or by having their project sponsored by an existing Regional Center. Many thousands of foreign investors are willing to invest at least $800,000 for the opportunity to secure a green card. At HarrisLaw, we have represented EB-5 Regional Center Projects which have sought EB-5 capital raises ranging from $8 million to $250 million. We also have represented smaller Direct EB-5 projects where the pooled funds sought were as little as $500,000. Our commitment to ensuring our clients success in the EB-5 program is dedicated, as shown through our membership in organizations such as IIUSA, the nation’s largest EB-5 industry trade association, the American Immigration Lawyers Association (AILA), as well as through Michael A. Harris’s certification by the Florida Bar as a specialist in Immigration and Nationality Law.

If you are interested, please contact us for more information and our office will be happy to discuss the EB-5 program with you.