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EB-5 Insights Where Government Policies and Business Realities Converge

What Are the EB-5 Requirements?

Posted in EB-5 Program, EB-5 Project, USCIS

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.