EB-5 IMMIGRANT INVESTMENT CATEGORY

EB-5 Program Overview• Two types of EB-5 cases: Individual and Regional

Center (RC)• Approximately 90-95% of EB-5 cases are filed

through Regional Center Program.• 10,000 “EB-5” immigrant visas per year• $500,000 or $1 million investment • Conditional green card – after 2 years investor

needs to remove conditions if investment is sustained and jobs are created

Family Immigration• Who can immigrate with the investor

Spouse Unmarried children under 21

• “Aging out” children

EB-5 StructureThere are four steps to becoming a Lawful Permanent

Resident (LPR) through the EB-5 program1. Form I-526 immigrant petition approval (9 months

adjudication)2. Adjustment of Status (4-6 months) or Immigrant Visa

Consular Processing (6-10 months)3. Receive 2-year conditional permanent resident (CPR)

status4. Between 21-24 months of receiving CPR status, file Form

I-829 petition to remove the conditions (6-8 months)5. In about 2.5 years, eligible to apply for citizenship

Regional Center• Regional Center – business entity approved by USCIS

that coordinates EB-5 investment • Multiple Regional Centers in the same geographic

location • Specific Industries• Choosing Regional Center:

Track record of success - I-526 and I-829 approvals Return of Investment Conditions of Investment Reporting on status of investment to investors Loan or equity projects

Regional Center Exit Strategy• 5-7 years after investment• Resale of investment share or the project property• Outright sale of the property to another public or private

investor• Non-recourse leveraged refinancing of the property and

distribution to investors of the excess proceeds as “return of capital”

• Sale of the interest to a third party investor, including another managed fund, or co-investor or co-developer

• Tax-free exchange or swap• Exchange with an “UPREIT” (tax-free) for listed shares in a real

estate investment trust or similar public property investment vehicle

Individual v Regional Center EB-5Individual EB-5

• Investor creates a new business or buys an existing business

• $1 million investment amount unless the business is in Targeted Employment Area

• 10 direct jobs (W-2)• Engagement in the

enterprise (investor cannot have merely passive role)

Regional Center EB-5• Investment in a Regional

Center• $500,000 investment

amount as most RCs are in TEAs

• Indirect jobs count• Investor can be a limited

partner, less active role

Individual v Regional Center EB-5Individual EB-5

Manage your own business Control profits Creation of jobs possible for

the business

Regional Center EB-5 No need to manage

business Perfect for retirees Immigration is main

concern Profits are marginal Limited control over

investment Easy to show job creation RC will take care of most of

the paperwork

General Requirements• Invest capital - $500,000 or $1 million obtained from lawful

source• In a New Commercial Enterprise:

Created after 11/29/1990; orRestructured or Reorganized; orExpand business resulting in 40% increase in net worth or

number of employees• At risk investment• Engage in Management or Policy Formulation• Create or Save 10 full-time jobs for USC, LPR

Investment of Capital• Invested or in the process of investment• Investment must be maintained throughout conditional

resident period• Reduced capital threshold of $500,000 if Targeted

Employment Area (TEA) “High unemployment area” – at least 150% of

national average, OR “Rural area” – not within an MSA and not within

boundary of any city or town having a population of 20,000 or more

Lawful Source of Capital• 5 years of income tax return required (business and personal)• If foreign country does not have tax return filing requirement

– must prove it• Evidence of lawful acquisition of capital

Business earnings Salary Gifts Loans Sale of Real Estate

• Tracing of Funds from Investor to Enterprise

New Commercial Enterprise• Any for-profit business • “New” – means formed after 11/29/1990• New Commercial Enterprise may be a preexisting business if

was created after 1990• If formed before, have to show substantial reorganization or

restructuring - complete transformation of nature of business• Expansion of existing business resulting in 40% increase in net

worth or number of employees

“At risk” Investment• Capital can include cash, equipment, inventory or tangible

property• Equity interest is required (stock, LLC/LP interest, etc.)• Commitment of capital without guaranteed return• Loans to enterprise will not work• No guaranteed distributions or redemption provisions• May use escrow, conditioning release of funds to enterprise

upon approval of I-526

Engage in the Enterprise• Day-to-day managerial control, or• Policy formulation• Corporate officer, board member, limited partner with rights

and responsibilities of ULPA• Passive investor will not qualify

Job Creation • Investment must create 10 full-time jobs for 10 workers (USC,

LPR, asylee or refugee)• Prove employment with W-2, I-9, payroll records• Independent contractors do not count• Business Plan should detail the timeline for job creation

Job Creation• At Removal of Conditions stage, must show jobs were created

or can be expected to be created within a reasonable period of time

• Direct vs Indirect Jobs (RC)Direct – employees of the enterpriseIndirect – jobs created collaterally or as a result of capital

invested in a commercial enterprise affiliated with a regional center by an EB-5 investor.

Job Creation – Troubled Business• Job Creation Exception – Troubled Business• Troubled Business

Has been in existence for at least 2 years Has incurred a net loss during the 12- or 24-month

period prior to I-526 filing, and The loss for such period is at least equal to 20% of net

worth prior to such loss• Focus on preserving jobs

Number of existing employees must be maintained during conditional period

Total positions must be at least 10 (e.g. 8 saved and 2 created)

EB-5 Considerations

• Removal of Conditions in 2 years: Capital invested/sustained, jobs created/preserved

• Trends in Adjudication• Statistics – over 90% RC EB-5

Other Visa Options• E-2 Investment Visa – Investment can later be used for

EB-5• L-1A Intra-Company Transferee Visa • H-1B Work Visa

QUESTIONS AND ANSWERS

Jacob J. Sapochnick, Esq.

619-819-9204

jacob@h1b.biz