This week, Kate Kalmykov and Ali Brodie attended the Big Brothers Big Sisters of New York City’s Annual Casino Jazz Night, where select members of New York City’s real estate and finance industries were honored for their philanthropic contributions. The event was held at Cipriani 42nd Street and included casino games and a silent auction benefiting Big Brothers Big Sisters, the country’s oldest and largest youth mentoring organization.
Greenberg Traurig recently strengthened its Business Immigration & Compliance Practice EB-5 team with the addition of team members. With attorneys and paraprofessionals in offices within the United States and abroad, the EB-5 team utilizes the firm’s global reach and practices, including Real Estate, Tax and Corporate & Securities, to counsel clients on creating and maintaining successful Regional Centers and projects.
U.S. – Immigration
- Kate Kalmykov
- Jennifer Hermansky
- Laura Reiff
- Nataliya Binshteyn
- Ali Brodie
- James Cormie
- Dillon Colucci
Corporate/Securities Fund Counsel
Kate Kalmykov recently published an article on EB5Investors.com entitled “Actual, Hypothetical and Exemplar – Understanding the Difference.” The post outlines how to effectively seek Regional Center Designation and avoid delays by understanding the difference between “hypothetical,” “exemplar,” and “actual” projects that may be submitted to the USCIS with the I-924 application. To read the full article click here.
When considering the EB-5 Program as an immigration option, it is important to weigh the pros and cons of the EB-5 Regional Center Designation. Time commitment, cost and marketing are all important aspects to consider, as well as others outlined below.
|Pros of EB-5 Regional Center Designation||Cons of EB-5 Regional Center Designation|
The documents necessary for the I-829 petitions differ depending on the “inputs” for the economic report that was attached to the I-526 petition. The I-829 filing must document the foundation facts that were contained in the economic report. Depending upon the economic methodology used, the investor may need to prove some or all of the following:
- Direct employees
- Occupancy rates
- Square footage
- Number of tenants
- Other facts depending upon the bases of the economist’s projections
The below list is intended to give guidance on what documents should be collected based on the particular “input” used in typical economic reports. We suggest that this information be compiled or reviewed at least quarterly.
1. Invoices for expenditures (construction, renovations, etc.) with copies of corresponding wire transfers or cancelled checks to show payment of costs
2. Auditor’s report on expenditures (if available)
3. Detailed spreadsheets of expenditures by type, summarizing expenditures
4. Audited financial statements of the job-creating entity for each year
5. US income tax returns of the job-creating entity
1. Audited financial statements of the job creating entity for each year
2. Detailed statements of cash flows of the job creating entity for each year
3. Independent auditor’s report for the job creating entity for each year
4. US income tax returns of the job-creating entity
Direct Employees at the Job Creating Entity
1. Payroll records for employees at the job creating entity
2. Employer’s IRS Form 941 for each quarter during conditional permanent residence
3. W-2s for employees of the job creating entity, if possible
4. US income tax returns of the job-creating entity
5. If the job-creating entity and the new commercial enterprise are the same, or if direct employees of the new commercial enterprise were included in the job count, proof of U.S. citizenship or permanent residence of each direct employee is required
1. Payroll expense records from job creating entity
2. Employer’s IRS Form 941 from job creating entity for each quarter during conditional permanent residence
3. W-2s for employees of the job creating entity, if possible
4. Audited financial statements of the job creating entity for each year
5. US income tax returns of the job-creating entity
1. Detailed occupancy reports per quarter along with audited financial statements and US tax returns for the job creating entity
2. If new commercial enterprise leases space to tenants who then create jobs, copies of leases for tenants
3. Employer’s IRS Form 941 for each quarter from tenants with leases
1. Documents showing total square footage of the space constructed
2. Floor plans
3. Permits showing square footage
Other Documents for I-829 Purposes
1. CPR green card copies for each family member (it is important to monitor each family member because they could have different I-829 filing windows)
2. ITIN numbers/Social security card copies for investors
3. US income tax returns for the new commercial enterprise
4. Schedule K-1s for each investor for each tax year
5. Bank account statements for the new commercial enterprise
6. Any updates distributed to investors during the CPR period to show active involvement
7. If investors have voted on any issues, copies of votes received
8. If investors have access to any investor databases, show log-ins
For investors seeking lawful permanent residence through the EB-5 program, the first step in the process is to file Form I-526, Immigration Petition for Alien Entrepreneur, together with accompanying evidence in support of the program’s requirements with USCIS. USCIS evaluates and adjudicates I‑526 petitions by reviewing these criteria:
1. A New Commercial Enterprise Has Been Established. An EB-5 investor must evidence that their investment was into an “enterprise” that is “new.” So what is a “new commercial enterprise?” It is any for-profit activity established after November 29, 1990 formed for the ongoing conduct of lawful business including, but not limited to, a sole proprietorship, partnership (whether limited or general), holding company, joint venture, corporation, business trust, or other entity which may be publicly or privately owned. This definition includes a commercial enterprise consisting of a holding company and its wholly-owned subsidiaries, provided that each such subsidiary is engaged in a for-profit activity formed for the ongoing conduct of a lawful business, but it does not include a noncommercial activity such as owning and operating a personal residence.
In the regional center context, the new commercial enterprise is the fund where the alien invests. Usually the fund takes the form of a Limited Partnership or Limited Liability Company. In the direct, non-regional center context, the new commercial enterprise is the business where the alien invests and the business that creates the jobs for U.S. workers.
2. Investment of the Requisite Amount of Capital. An EB-5 petition must be supported by evidence that the petitioner has invested the minimum required capital. In the regional center context, if the project creating the jobs is located in a “targeted employment area” then the minimum amount of investment is $500,000. In the direct investment context, if the new commercial enterprise is located in a “targeted employment area” then the minimum amount of investment is $500,000. A “targeted employment area” is either: (1) an area of high unemployment that has at least 150% of the national unemployment rate; or (2) a rural area outside of a Metropolitan Statistical Area with a population of less than 20,000. If the new commercial enterprise (in the direct context) or project (in the regional center context) is located outside of a targeted employment area, then the minimum amount of investment is $1,000,000.
USCIS expects the investor’s funds to be irrevocably committed to the enterprise. The funds must be “at risk” and used by the new commercial enterprise to create employment.
3. Lawful Source of Capital. Funds used for the EB-5 investment must be earned lawfully. The investor must show the full source of the $500,000 or $1,000,000 investment and then trace those funds from the investor abroad into the new commercial enterprise. Common sources of funds are salary earnings, distributions from businesses or investments, sale of property, mortgage of personal assets owned by the investor, or gifts from third parties. If the investor receives a gift as the source of funds, the giftor must fully trace his or her funds that ultimately became the investment. Funds earned or obtained in the United States while the investor was out of status are not deemed to be lawfully acquired.
4. Active Involvement in the New Commercial Enterprise. The investor is expected to participate in the management of the new commercial enterprise either through day-to-day management or by assisting in the formulation of the enterprise’s business policy. The investor cannot have a purely passive role in regard to the investment.
In the regional center context, investors in an EB-5 enterprise organized as a limited partnership usually have the rights and duties accorded to limited partners under the state’s Limited Partnership Act. The same is true for a limited liability company. This level of involvement is sufficient for EB-5 purposes. In the direct investment context, the investor can manage the enterprise or formulate policy for the business by acting as a member of the Board of Directors or exercising voting control over the business.
5. Employment Creation. The new commercial enterprise must create not fewer than ten (10) full-time positions for qualifying employees for each EB-5 investor. In the direct investment context with no regional center affiliation, the 10 jobs created must be full time (35+ hours per week), permanent, and for W-2 employees of the new commercial enterprise. Independent contractors do not count. Additionally, the positions must be filled by qualifying employees, meaning a United States citizen, a lawfully admitted permanent resident, or other immigrant lawfully authorized to be employed in the United States including, but not limited to, a conditional resident, a temporary resident, an asylee, a refugee, or an alien remaining in the United States under suspension of deportation. This definition does not include the alien entrepreneur, the alien entrepreneur’s spouse, sons, or daughters, or any nonimmigrant alien. At the time of the I-526 petition, if the positions are not yet created, the comprehensive business plan must contain a full description of the hiring plan to show the positions that will be created and when those positions will be filled.
In the regional center context, to show that the new commercial enterprise meets the statutory employment creation requirement, the petition must be accompanied by evidence that the investment will create full-time positions for not fewer than 10 persons either directly or indirectly through revenues generated from increased exports resulting from the Pilot Program. According to USCIS, indirect jobs are those jobs shown to have been created collaterally by the project as a result of capital invested in a commercial enterprise affiliated with a regional center. The number of indirect jobs created through an EB-5 investor’s capital investment is based upon a business plan and a detailed economic analysis. The EB-5 petition must contain evidence, in the form of an economic report, to show that 10 indirect jobs will be created for each investor in the project.
If these requirements are met, the I-526 petition should be approved. If the investor and his family are abroad, they will apply for immigrant visas at a U.S. Consulate abroad. When they enter the U.S. on the visas, they will become conditional permanent residents of the United States. If the investor and his family are in the U.S., they may be eligible to adjust their status to conditional permanent residents. Conditional permanent residence is granted for two years, and at the end of two years, the investor and his family must file Form I-829 to remove those conditions. At that time, the investor must show the new commercial enterprise was sustained during the period of conditional permanent residence, their investment was sustained during the period of conditional permanent residence, and the 10 jobs were created.
Last week, Greenberg Traurig Attorneys Steve Anapoell and Kate Kalmykov served as speakers and/or panelists at the Third Annual EB-5 Investment Summit: Dealmakers Conference hosted by Artisan Business Group in Long Beach, California. The conference featured speakers, panelists and guests from across the EB-5 industry, including immigration attorneys, real estate developers, regional center experts, economic development officials, bankers, and more.
For more photos from EB5Investors.com and information about the 2014 conference click here.
On May 30, 2013, USCIS finally issued the much anticipated Final EB-5 Adjudications Policy Memorandum. The Final EB-5 Adjudications Policy Memorandum makes significant changes to and provides clarifications for the EB-5 Program. Here are some of the highlights:
- Less Regional Center Amendments: The new memo states that USCIS does not require formal amendments to regional center designation when an RC changes its industries of focus, its geographic boundaries, its business plans, or its economic methodologies. Previously, the I-924 listed “acceptable amendments” to include some of these. The memo clarifies the non-mandatory nature of these business changes.
- An RC’s Geographic Area is Determined by Reasonableness: For the first time, USCIS outlined that determinations on the geographic area of a regional center are based on the RC’s ability to establish by a preponderance of the evidence that the proposed economic activity will promote growth in the proposed area. This means that the RC must show that the proposed area contributes significantly to the supply chain and labor pool of the proposed projects.
- Defines Hypothetical, Actual and Exemplar Projects: The memo states that if a project complies with the requirements of a Matter of Ho business plan, it is an “actual project.” If the project does not comply with Matter of Ho, it is “hypothetical.” Additionally, an actual project requires more detail than a hypothetical. Finally, the memo defines an “exemplar” as an actual I-526 petition for a project that USCIS will review for EB-5 compliance, including all transactional documents (such as the offering materials). This is important because if USCIS approves an “actual project,” USCIS will give deference to the later filed I-526s. Hypothetical projects are not accorded deference at the I-526 stage.
- We decided that already! Deference to Prior Decisions: Deference to already adjudicated matters is one of the most significant changes contained within the memo. For example, if USCIS approves an I-924’s Matter of Ho compliant business plan, it will give deference to this at the later I-526 stage. I-924 approval notices should state whether a project has been approved as an exemplar or actual project, thereby being accorded deference in future adjudications.
- Approved the Use of Escrow Accounts: USCIS explicitly approved investor’s use of escrow accounts as long as release of funds is immediate and irrevocable upon approval of the Form I-526 and acquisition of an immigrant visa or approval of Form 1-485 (adjustment of status).
- Bridge financing Permitted If You Just Can’t Wait: If a developer uses bridge financing prior to receipt of the EB-5 capital, this will not affect the job creation calculation whether or not said financing was contemplated before the EB5 financing. However, it is always a best practice to have contemporaneous evidence of the intent to use EB-5 capital.
- USCIS Defers to State Adjudications of TEAs: USCIS will review state determinations of TEAs to see whether they used reasonable methodologies, but will otherwise defer to state determinations.
- Eventual Acquisition of an Asset Does Not Count as “At Risk” Investment: If the investor is individually guaranteed the right to eventual ownership or use of a particular asset in consideration of the capital contribution, then the expected present value of the guaranteed ownership or use does not count toward total amount of the investor’s capital contribution in determining the amount of money truly at risk.
- Restructure or Reorganization Means (probably) a Total Remodel or Significant Addition: Plans to convert a restaurant into a nightclub or add crop production to a livestock operation would constitute restructuring. This seems to mean USCIS wants a complete remodeling or significant addition to the existing business. “Reasonable time” to Create Jobs at I-829 is Not a Free Pass: Investors need not have created all the jobs at the I-829 stage, but need to be in “substantial compliance” and show that they will create jobs “within a reasonable time.” This is not an open-ended allowance, but does provide some flexibility. After this time, jobs will not be considered unless there is a force majeure.
- Material changes at I-829 stage? Don’t Fret: An individual investor can proceed with their Form I-829 petition to remove conditions even if within the time between I-526 approval and submission of the Form I-829 a material change occurred to the business plan. As long as the investor can show that they satisfy the conditions for removal of conditions, USCIS may still issue an approval.
Attorney Jennifer Hermansky was recently recognized by Pennsylvania Super Lawyers magazine as a “Rising Star” in Immigration law for 2013. According to the Super Lawyers website, the Rising Star selection process is based on peer recognition and professional achievement, as well as a third party research.
On Thursday, May 23, 2013 USCIS and twenty five stakeholders held a conference call to discuss the roll-out of the new ELIS system for I-924 and I-526 petitions. If one thing is clear after the USCIS conversation, it’s that the system will be a document library system, not a case management system. Aimed at reducing physical paper submissions, the new ELIS system will allow regional centers and investors to manage and share their documents easily between each other and with USCIS. Perhaps most importantly, USCIS plans to allow physical attestation pages from regional centers and investors to reference the online resource, reducing the repetitive need to physically print files for submissions. USCIS hopes this will reduce adjudication time as well as the bulky paper submissions so many of us are familiar with. Below is a brief discussion of USCIS approach to the regional center’s access, the investor’s access and criticism and questions from the audience.
In terms of access, the system has two operators – the regional center and the investor. To access the regional center side, the RC must designate a representative – perhaps a principal – to manage the account(s). Once that person registers their information with USCIS online, USCIS will send a paper confirmation to the designated representative with information for that person and only that person to access the document library. A phone-text system is contemplated, but for now paper validation creates the most secure form of authentication.
The audience immediately criticized USCIS for only allowing one person to access/alter the documents in the library – why not two? USCIS said it would review this question, but had originally intended single-user access to be a way to maintain privacy and security. Somewhat confusingly, however, one rep may access several different regional centers - as long as they are always the sole person with access to those documents. Reason being that a sole person would manage the accounts and work offline with everyone involved. Responding to the concerns of the audience, USCIS will consider changing this and opening this up to controllers at the NCE level and below when the ELIS system rolls out.
Once past the access stage, the rep has tools at their disposal to speed up the process for adjudication. For example, the rep may upload as many documents as they may need, allow access to investors, and reference their forms in the attestation. When USCIS began to describe ELIS’s functions, however, it was clear that this was not a case management system. ELIS will not ask the rep for the requisite documents to upload, restrict the amount of folders or documents a rep can upload, or tell the user the state of adjudication on a particular deal packet (a USCIS term for an application). In fact, the system will prohibit overwriting or deletion to protect users from deleting whole files. It is in all sense of the word a document library. True, USCIS will look at the documents referenced in the 924 application references, but nothing more.
One commenter brought up whether they could monitor whether the investor included a document in their I-526 application- no. Can the investor see which files have been approved? No. Can the system submit the document with an electronic signature and track case status? No. Although the capabilities of the ELIS system may one day reach those, USCIS voiced concern that practitioner may not adopt overwhelmingly adopt the system—making enhanced features a bit of a waste in their opinion.
After discussing regional centers, USCIS discussed investor access. Basically, a RC rep will designate certain files within the ELIS document library for an investor to review and include in their application. Investors cannot see other documents in the library so that different investors may be offered different deals. The investors then submit their paper application and reference the online documents in their attestation pages. Some criticism was brought up about an RC’s lack of ability to view the documents that the investor was submitting, but USCIS pointed out that there might be personal information involved and that it would be beyond the constraints of the system right now.
There are still many questions yet to be answered, but USCIS feels confident that ELIS will cut down on the time length of adjudication. Additionally, USCIS said that as they add new reviewers in D.C., they will not reduce California until they reach full capacity- creating somewhat of a bubble. Nevertheless, whether USCIS will allow features that would dramatically speed the process up such as giving adjudicated documents a sort of pre-approval for subsequent petitions or something closer to a case management system depends on whether the system becomes popular and new features are demanded.