Search results for: job creation

Presently there is a large interest by EB-5 investors  in filing an I-526 Petition following the Behring federal court decision, which invalidated the 2019 EB-5 regulations. With the minimum investment amount decreased from $900,000 to $500,000 for targeted employment area investments, a window has opened for investors to potentially file an I-526 Petition at the $500,000 investment level. However, the EB-5 regional center program has lapsed and currently requires Congress to pass legislation reauthorizing it before new I-526 Petitions can be filed with USCIS.

In contrast, the “direct” EB-5 program is a permanent program that does not require reauthorization by Congress. As the program is permanent, I-526 Petitions based on a direct investment can be filed with USCIS. Following the Behring decision, a “direct” EB-5 Petition requires a minimum investment of at least $500,000, if the business will be located in a rural area or an area of high unemployment. The business must also create 10 new, permanent, and full-time positions for U.S. workers.

The job creation requirement in the “direct” EB-5 Petition context is much more narrow than in the regional center program context. Importantly, the investor makes the investment into a “new commercial enterprise” or NCE. In the direct EB-5 context, the NCE must be the same business entity employing the workers that will qualify for job creation purposes. Generally only the NCE or its wholly owned subsidiary can be the employer for job creation purposes in the direct EB-5 context. Jobs created at a separate entity are not allowable in the “direct” EB-5 Petition context; for this reason, construction jobs, which are frequently used for job creation purposes in the regional center context, are generally not allowable in the direct EB-5 context because those construction workers are employed by entities that are not the NCE. Likewise, “direct” employees working at a business – such as a hotel – may not be allowable in the direct EB-5 context if they are not W2 employees of the NCE or its wholly-owned subsidiary. Proper structuring for the direct context is critical to make sure the job creation comports with the EB-5 requirements.

Moreover, in the direct EB-5 context, the jobs created must be full-time, meaning each job will be at least 35 hours per week. The jobs also must be permanent, with an expectation that the job will last at least 24 months; seasonal or temporary jobs do not count for this purpose. The employees also must be W2 employees of the NCE; independent contractors or positions created by separate entities, as described above, will not be counted by USCIS. Finally, the positions must be filled by U.S. workers. A direct EB-5 petition must fully outline the jobs that will be created at the NCE, the positions to be created a filled, the timeline for creating those jobs, and the hours of employees.

Because the regional center EB-5 program is paused, until it is reauthorized by Congress, many investors are eager to pursue a “direct” EB-5 investment at the lower $500,000 amount. For those investors considering investing in their own start up business or a pre-packaged “direct” project, evaluation of the project structure and job creation is critical to approval. The limitations on job creation in the direct EB-5 context must be understood, and the investment structure must be developed properly to ensure USCIS will approve the job creation.

On March 14, 2019, the EB-5 Investment Coalition, in cooperation with Invest in the USA (IIUSA), released the most comprehensive economic analysis of the EB-5 program to date. Laura Reiff, co-chair of Greenberg Traurig’s Immigration & Compliance Practice, commented on the report: “Without the typical data limitations and constraints on economic analysis, premier industry economists measured and determinized the billions of dollars in economic activity created by EB-5.  At a time of needed reauthorization and legislated reforms, we hope to present this data to the Administration and Congress to help make sound economic-based reforms to this vital economic engine and job-creating EB-5 program.”

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As the Sept. 30, 2016, sunset date approaches for the EB-5 Regional Center program, the EB-5 industry has come together with a unified voice calling for the program to be extended with appropriate reforms.  On Sept. 7, 2016, a letter was circulated to the Members of the Judiciary Committees of the U.S. Senate and House of Representatives calling for reauthorization of the EB-5 program, signed by the American Immigration Lawyers Association, the U.S. Chamber of Commerce, the EB-5 Investment Coalition, Invest in the USA, and The Real Estate Roundtable.

On Sept. 9, 2016, a draft of an EB-5 bill, titled the “American Job Creation and Investment Promotion Reform Act of 2016,” was circulated to the industry.  On Sept. 12, 2016, the bill, H.R. 5992, was introduced into the second session of the 114th Congress by House Judiciary Committee Chairman Bob Goodlatte, and a markup of H.R. 5992 was scheduled for Sept. 14, 2016.  Given the short amount of time between the bill’s introduction and the scheduled markup, the EB-5 industry joined together again on Sept. 12, 2016, and sent a letter to the Members of the Judiciary Committees of the U.S. Senate and House of Representatives with a list of concerns over the contents of the bill.  The markup was canceled on Sept. 13, 2016, with no new date set.

Greenberg Traurig will continue to monitor the activities of H.R. 5992.

On Aug. 26, 2016, U.S. Citizenship and Immigration Services (USCIS) announced a notice of proposed rulemaking for an International Entrepreneur Rule, and provided an advance version of the proposed rule for public review.

According to an announcement from USCIS, the proposed rule will allow the Department of Homeland Security (DHS) to exercise discretion, on a case-by-case basis, to provide parole for foreign entrepreneurs who are directing the development of a startup business entity in the United States and whose involvement in the startup would provide a significant public benefit.  USCIS proposes to amend its regulations in connection with Section 212(d)(5) of the INA to provide a “transparent framework” for the exercise of agency discretion and the case-by-case adjudication of parole requests for start-up entrepreneurs.

In order to be considered for parole under the proposed rule, an immigrant entrepreneur would be required to:

  • Own at least 15 percent of the startup and be actively involved in its operation
  • Have formed the business in the United States within the previous three years.

The entrepreneur must also demonstrate that his or her business the potential for job creation and growth by showing:

  • Investment of a minimum of $345,000 from qualified U.S. investors with success in prior investments
  • The receipt of grants or awards from federal, state, or local government entities.

The proposed rule also provides flexibility for an entrepreneur who may only partially satisfy one or both of the above criteria, by permitting the entrepreneur to provide evidence of the start-up’s potential for growth and job creation.

Under the proposed rule, a qualifying entrepreneur may receive parole for a two-year period, and may be eligible for renewal based upon the success of the start-up.

When finalized, the proposed rule may hold potential for immigrants who find themselves caught in current immigrant visa backlogs, as well as individuals who seek to emigrate from countries that do not have E-1 or E-2 visa status such as Mainland China and Vietnam.  Further analysis of the proposed rule may also illuminate potential opportunities for EB-5 investors who are awaiting the availability of a visa number.

Upon publication of the rule in the Federal Register, the public will have 45 days during which to provide comment on the rule.

As we review the text of the proposed rule thoroughly, we will provide additional insights and discussion about the potential opportunities it could present to immigrants in different contexts.

Introduction

The Government Accountability Office wrote in its report of August 12, 2015 that 90 percent of EB-5 investments are made in Targeted Employment Areas (TEA).  Under current EB-5 law, a Targeted Employment Area is an area that qualifies for a reduced investment amount of $500,000.  To be designated a TEA, a geographic area must either be rural, or be experiencing a level of unemployment that is 150 percent of the national average unemployment rate. Section 203(b)(5)(B)(ii) of the Immigration and Nationality Act (INA) defines a high unemployment area as “an area which has experienced high unemployment (of at least 150 percent of the national average rate).”  Current regulations permit state officials to make TEA designations that encompass multiple census tracts and which take into account commuting patterns in a given region.  In other words, current TEA policy reflects economic reality in the sense that most Americans do not live where they work and that unemployment in one area can be reduced by those residents’ employment in a geographically distant but economically linked area.  The statute’s broad and non-restrictive language clearly permits this approach.  Policy concerning TEAs is crucial to the EB-5 industry and, depending on how legislators resolve the issue, it has the potential to either maximize job creation through the EB-5 program, or severely constrict its potential.

This article will look at the high unemployment TEA provisions contained in three pending bills in Congress: H.R.616, the American Entrepreneurship and Investment Act, H.R.3370, the Entrepreneurial Business Creating Jobs Act (EB-JOBS), and S.1501, the American Job Creation and Investment Promotion Reform Act.

H.R.616, the American Entrepreneurship and Investment Act (Reps. Polis and Amodei)

In H.R.616, Representatives Polis and Amodei make two refinements to current TEA policy, but leave the current INA definition of “high unemployment” intact.  The bill would codify current regulations that permit the states to have a role in determining the economic needs and conditions of their localities.  Specifically, in section 2(a)(2)(B), the bill would require the Secretary of Homeland Security to “defer to a state’s designation as conclusive.”  The clause, however, would require the state determination to be made using “acceptable data sources” to ensure that the determination reflected economic conditions fairly and accurately.  H.R.616 contemplates no change to current law and regulation concerning high unemployment TEA definitions, but recommends that Congress formalize in statute the important role that the state leaders currently play in making economic decisions in the best interests of their communities.

H.R.3370, the Entrepreneurial Business Creating Jobs Act (Reps. Lofgren and Gutierrez)

H.R.3370 presents a new definition for high unemployment: “an area, comprised of one or more contiguous census tracts within one Core Based Statistical Area, that has an unemployment rate that is at least 150 percent of the national average unemployment rate.” The U.S. Census Bureau describes a Core Based Statistical Area (CBSA) as a “core area containing a substantial population nucleus, together with adjacent communities having a high degree of economic and social integration with that core.”  By permitting contiguous census tracts within a CBSA that meet the unemployment threshold Representatives Lofgren and Gutierrez recognize the significance of commuting patterns and the economic reality of an integrated metropolitan area.  In simpler terms, H.R.3370 takes the view that where workers who commute from a higher unemployment area to an area of lower unemployment (which may be less residential) to work, the policy underlying the TEA designation is being honored.  This is an especially important consideration in light of the fact that the Federal Government measures unemployment rates based upon where people live, not where they work.

S.1501, the American Job Creation and Investment Promotion Reform Act (Sens. Leahy and Grassley)

In S.1501 Senators Leahy and Grassley take a narrower approach with respect to the definition of high unemployment area for purposes of TEA designation.  S.1501 defines a high unemployment area as “a census tract that has an unemployment rate that is at least 150 percent of the national average unemployment rate.”  By limiting to a single census tract the geographic area that may qualify using an average unemployment rate, and discounting commuting patterns in urban and suburban areas across the country, S.1501 would preclude TEA eligibility for urban or suburban projects that can reduce unemployment in areas that are economically linked to an area where EB-5-financed economic development is occurring.

TEA Policy Should Promote Job Creation in Urban and Rural Areas Alike

Congress created the EB-5 visa with an eye toward harnessing foreign investor dollars to spur national job creation and avoided regional favoritism by establishing TEA eligibility for both rural and urban areas.  In light of the GAO’s finding that 90 percent of EB-5 dollars are invested in TEAs, and the practical reality that investors will continue to do so, Congress should seek to modernize the TEA rules in a way that will maximize, not stifle, job creation in areas where a project in one area employs residents of another area within the same economically interlinked area.  The program’s history has demonstrated that investors will seek the best value for their investment and federal policy should capitalize on that.

In creating the EB-5 visa and the targeted employment area designation, Congress focused on both rural and high unemployment (urban) areas.  Overly restrictive definitions for high unemployment will exclude countless urban areas of the country that are currently using EB-5 to put Americans to work.  Dramatically limiting the high unemployment definition will have the practical effect of turning the EB-5 program into a program whose benefits flow exclusively to rural areas—a result that Congress did not intend and a result that would likely diminish participation in the program.  The EB-5 program should complement, rather than be redesigned to replace existing federal programs that are targeted directly to rural and high poverty area economic development such as the USDA’s Rural Business Development Grant program and the New Market Tax Credits program.

In considering optimal TEA policy, Congress should look to policies that serve the national interest, and which reflect the economic needs and realities of both urban and rural areas.  Currently, EB-5 is financing projects in diverse locations across the country including energy exploration in North Dakota, winter sports resort development in Utah, and the rebuilding of the World Trade Center site in New York, to name only a few. Policy that promotes the economic well-being of urban and rural areas alike is policy that serves the national interest.  Sound TEA policy will not only maximize program participation—and thus foreign investment—but will serve all Americans equally regardless of geography.

The American Job Creation and Investment Promotion Reform Act, S. 1501, was introduced in the Senate by Senate Judiciary Committee Chairman Charles Grassley (R- IA) and Senate Judiciary Committee Ranking Member Patrick Leahy (D-VT).  S.1501 seeks to reauthorize the program for five years and proposes a number of integrity reforms for the EB-5 program.  EB-5 Investment Coalition has analyzed the Bill and produced a detailed section-by-section analysis.

 

A June U.S. Policy Metrics/Hamilton Place Strategies report Harnessing Private Capital For Job Creation: An Analysis Of The EB-5 Visa Program demonstrates the impact of the EB-5 visa program as a net job creator and budget-neutral catalyst for bringing private investment into the U.S. The report was commissioned by the EB-5 Investment Coalition (EB-5IC), a broad-based, bipartisan organization focused on reauthorizing and strengthening the EB-5 Regional Center Program. This report is authored by Steve McMillin, a partner at U.S. Policy Metrics and former deputy director of the White House Office of Management and Budget under President George W. Bush; Michael Solon, also a partner at U.S. Policy Metrics and former budget advisor to Senate Majority Leader Mitch McConnell (R-KY); and Matt McDonald, a partner at Hamilton Place Strategies and a former advisor to President George W. Bush.

Continue Reading New Report Validates the EB-5 Program as a Most Efficient Job Creation Program

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:

  • Expenditures
  • Revenues
  • 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.

Expenditures

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

Revenues

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

Salary Expenditures

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

Occupancy Rates/Tenancy

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

Square Footage

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 regional centers and project companies, jobs created through construction represent a path of least resistance for obtaining approval for I-924 applications, I-526 petitions and I-829 petitions by USCIS.  The reason is two-fold: (1) projects usually meet or exceed the construction budget and the jobs are thereby deemed created at the I-829 stage; and (2) construction jobs are easy to prove from a documentary perspective because the regional center and the project company need only show through routine construction auditing that the qualifying hard and soft costs from construction have been spent.  For both of these reasons, it is easy for the investor to prove, under a preponderance of the evidence standard, that the jobs have been created at the I-829 stage.

While construction jobs are usually the easiest jobs to prove at the I-829 stage, USCIS still scrutinizes the project company’s budget and construction timeline carefully.  Here are five practice pointers that regional centers and project companies should observe when using construction jobs:

  1. Economists separate construction jobs into two categories:  direct and indirect construction jobs.  Direct jobs represent those jobs on site during construction.  USCIS has defined indirect jobs as those created in suppliers, transportation, engineering, and architectural services, maintenance and repair services, interior design services, and manufacturing of components and materials.  The use of direct construction jobs usually substantially increases the amount of jobs created in the project, and so, many projects attempt to use them in the job creation count in addition to indirect construction jobs.
  2. According to the June 17, 2009 USCIS Memorandum “EB-5 Entrepreneurs – Job Creation and Full Time Positions,” the EB-5 job count can include both direct and indirect construction jobs if the construction timeline is 24 months or longer.  If the construction timeline is less than 24 months, only indirect construction jobs can be counted.
  3. The construction timeline used to determine the 24+ month period for direct construction jobs commences when shovels are in the ground and continues through when the temporary certificate of occupancy is received.  The timeline may be extended if the construction period includes continuous tenant improvements on site.
  4. USCIS will want to see independent evidence that the construction timeline and the construction budget are reasonable for the size, scope and location of the project.  All I-924 applications and I-526 petitions should include a 3rd party report that reviews the construction budget and timeline to show the project is within the normal range and that the timeline is not prolonged or inflated to pad the construction job creation number.
  5. Depending on the project’s start date in relation to the I-526 filing dates, regional centers and project companies should be aware that a long construction timeline that maximizes construction jobs may also decrease the amount of qualifying operations jobs that can be counted in the project.  USCIS requires the EB-5 petitioner to show that jobs will be created within 2 ½ years of I-526 approval.  If construction is not slated to start until the EB-5 money is received, operations jobs may not be created within the relevant timeframe.  This is especially true of the money remains in escrow until the I-526 petitions are approved.

Contact Greenberg Traurig’s EB-5 team for further information.

In the following message publicized today by the USCIS, Director Alejandro Mayorkas announced the creation of a new EB-5 Program office, as well as the implementation of a special review board this month to oversee pending cases that have been recommended for a denial.

I am pleased to announce that U.S. Citizenship and Immigration Services (USCIS) will be creating a new office to oversee our administration of the EB-5 Immigrant Investor program.

The EB-5 program has spurred the creation of tens of thousands of new jobs and the injection of billions of dollars into the U.S. economy since Congress created the program in 1990. Interest in the EB-5 program has grown exponentially in recent years, both from domestic project developers seeking capital and foreign investors who have the capital that can fuel economic growth. USCIS has met this unprecedented growth and interest with a corresponding dedication of resources. USCIS has approved more than 3,100 Form I-526 petitions in Fiscal Year 2012 to date, more than triple the number approved in all of Fiscal Year 2009. Since 2009, we have quadrupled the size of the EB-5 adjudications team and brought on board eight expert economists dedicated to the EB-5 program to ensure that EB-5 cases are handled expeditiously and with appropriate expertise. In the next month, two full-time attorneys with substantial transactional experience will enter on duty as new additions to the USCIS EB-5 program team. And by the end of July, a special Review Board consisting of two Supervisory Immigration Services Officers and one economist will review every pending application for regional center designation for which a denial has been recommended, with applicants receiving the opportunity to discuss their cases in-person before any final adverse decision is rendered.

By now creating a dedicated program office, we will build on these steps toward ensuring that this important and complex program is appropriately resourced and managed under a single leadership structure.

I am also excited to announce that the new office will be led by a new Chief of Immigrant Investor Programs, and that an advertisement for this new leadership position will be posting today. Our new program chief will have significant experience in the business world and will assume responsibility for ensuring that the program is administered efficiently, with integrity, with predictability, and with an understanding of today’s business realities. 

We understand that more work needs to be done to further improve our administration of the EB-5 program. We are committed to this work. USCIS welcomes and appreciates your input as we stand up our new EB-5 Program Office. 

Thank you.

Alejandro N. Mayorkas 

The job posting is available at: http://www.usajobs.gov/GetJob/ViewDetails/321010400