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EB-5 Visa, EB-5 basics, EB-5 visa requirements
Date
May 18, 2023
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Author
Kurt Reuss
Kurt Reuss
Kurt Reuss is a registered securities broker who has been specializing in EB-5 since 2012. He offers advice on investment structuring and market conditions related to EB-5 investments.

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EB-5 Visa: Requirements & Best Practices

To secure permanent residency status, also known as a Green Card, through the EB-5 program, investors must fulfill specific requirements set by the United States Citizenship and Immigration Services (USCIS).

This article provides an overview of the requirements for obtaining permanent U.S. residency through the EB-5 program and the rules and considerations for Targeted Employment Areas (TEAs) with their lower investment amount and faster visa processing and the different types of business entities that qualify for EB-5 investments.

It highlights the key criteria investors must meet, such as the investment amount, job creation requirements, and lawful source of funds that are acceptable including loans, and various financial documentation that can should be used.

This article provides recommendations and emphasizes the importance of due diligence and expert guidance to ensure compliance.

 

1. Targeted Employment Areas (TEAs)

The EB-5 program offers investment opportunities in Targeted Employment Areas (TEAs), which can be either high-unemployment areas or rural areas.

To qualify as a high-unemployment TEA, an area must have an unemployment average of at least 150% of the U.S. national unemployment rate. Rural TEAs, on the other hand, are defined areas that are located outside a metropolitan statistical area (MSA) and fewer than 20,000 population.

It's important to note that while rural areas maintain a consistent designation, high-unemployment areas can change based on updated census data and moving employment rates. This requires investors in a high-unemployment area to review the most recent census data to ensure ongoing qualification.

The job-creating entity (JCE) must not only conduct its primary business in the TEA but also create jobs within the area.

TEA Data & Methodology

The Department of Homeland Security (DHS) has not specified any required set of data or methodology for applicants and economists to use when determining TEA designation. This lack of clarity also provides some flexibility in demonstrating a project’s TEA status.

DHS accepts TEA data from two reliable sources: the Bureau of Labor Statistics (BLS) and the U.S. Census Bureau's American Community Survey (ACS). Each source has its advantages: the BLS provides more recent data, while the ACS data goes into more granular detail, including census tracts and smaller geographic units. This allows investors and economists to choose the data source that best suits their needs and provides a comprehensive analysis of the TEA area.

Best Practices for Determining TEA Qualification

When seeking to invest $800,000 into a high-unemployment TEA project, economists involved in determining TEA qualification should adhere to the following best practices:

  1. Use direct references to the new regulations to clearly define the geographic area of the TEA.

  2. Ensure that the sources used are transparent and easily accessible, providing clear links to the referenced data online.

  3. Present a comprehensive and transparent calculation process, showcasing all the steps taken in determining TEA qualification.

Failure to present acceptable data for TEA qualification will lead to the denial of the investor's I-526E petition, because the investment amount will be insufficient.

Investment Amount - TEA/Standard

Investments made in a Targeted Employment Area, which includes both high-unemployment and rural areas, the minimum investment amount is $800,000. For a Standard investment - a non-Targeted Employment Area (TEA), the required investment amount is $1,050,000.

 

2. EB-5 Business Entities and Eligibility

To qualify for the EB-5 visa, applicants are required to invest in a New Commercial Enterprise (NCE) that operates as a for-profit business within the United States. The NCE can adopt various business structures, including corporations, partnerships (general or limited), sole proprietorships, business trusts, or other privately or publicly owned entities.

EB-5 investments are always made into the EB-5 Fund, also known as the NCE. The NCE will then directly invest the EB-5 funds into the Job-Creating Entity (JCE, the entity responsible for creating the jobs), or by investing into a series of intermediary entities designed to shield the JCE from legal liabilities.

 

3. EB-5 Business Entities and Eligibility

The USCIS imposes job creation requirements on the EB-5 immigrant investor program, mandating that each investment leads to the creation or preservation of a minimum of 10 full-time jobs for U.S. workers.

Jobs are expected to be created within two years of the investment and may get a one-year extension. If a business fails, it does not need to maintain the jobs created for any minimum time period, but six months may be a minimum.

The EB-5 Regional Center program requires investors to create 10 full-time jobs through economic modeling that encompasses direct, indirect, and induced employment.

Direct jobs pertain to the work of the business, providing either goods or services. Indirect jobs come from the impact on supplier businesses and contractors. Induced jobs refer to employment opportunities stimulated within the broader community due to the spending from the new business and employees affiliated with it.

 

4. Lawful Source of Investment Capital

To combat money laundering and address security concerns, the United States Citizenship and Immigration Services (USCIS) conducts thorough examinations of the source of funds for EB-5 investors.

It is crucial for applicants to provide compelling evidence and documentation to establish the lawful source and path of their investment capital. This stringent requirement aims to ensure transparency and uphold the integrity of the EB-5 program, safeguarding against financial improprieties.

Selecting Potential Sources

EB-5 applicants have a variety of potential sources for the funds they invest, including salaried income, stocks, securities, and bank account deposits. It is essential that all investment funds clearly demonstrate their original source.

When selecting funds, investors and their immigration lawyers must make careful decisions. Complete and valid documentation is crucial to support the legitimacy of the funds. If an applicant's documents are not in English, it is important to provide translations to ensure clarity and understanding. By adhering to these practices, EB-5 applicants can confidently navigate the investment process and meet the program's requirements.

Gifts, Inheritance, and Divorce Proceedings

When considering an EB-5 investment, it’s important to understand that gifts, inheritance, and divorce proceedings can serve as potential sources of funds.

In the case of an inheritance, the applicant will provide estate settlements of the deceased.

For gifts, the registration of the gift money for tax purposes and information regarding the source of income of the gift-giver.

Additionally, funds obtained through divorce settlements and other legal proceedings, including alimony and civil lawsuit proceeds, can be utilized as investment capital, supported by official court judgments.

Loans as a Simple Source of Provable Funds

Obtaining a loan from a reputable financial institution can offer significant advantages, including the simplified documentation needed to prove source of funds to USCIS as the loan itself serves as a clear and traceable source of funds.

Rather than gathering extensive documentation to prove the lawful source and path of the investment capital, investors can rely on the loan agreement and associated collateral as tangible evidence.

When opting for a loan as a source of funds, it is crucial to disclose the collateral used to secure the loan.

USCIS now accepts unsecured loans, which provides investors with more flexible loan options, however, it is important to note that the collateral's value must be equal to or greater than the loan amount. If the collateral value is near the loan amount, USCIS may request additional evidence to ensure compliance.

The advice we’ve received suggests that investors exercise prudence when determining the loan amount with a best practices recommendation that the loan amount not exceed 70% of the value of the collateral property. By ensuring a sufficient margin, the risk of receiving a Request For Evidence (RFE) from USCIS is minimized.

Financial Documentation

Applicants are expected to provide individual and corporate/partnership tax returns for the past five years and might include tax returns for three years with the investor’s highest income.

EB-5 tax planning is a priority and seeking professional expertise before filing an EB-5 petition is a best practice.

Missing Documentation

In certain instances, an EB-5 investor may encounter difficulties obtaining specific documents required for their application. The applicant has the option to submit a detailed declaration explaining the reasons behind the unavailability of the required documents.

While USCIS has occasionally accepted such declarations, it is generally recommended to avoid relying on this practice whenever feasible.

It is crucial to make every effort to provide complete and accurate documentation to ensure a smoother EB-5 application process.

 

Embarking on the EB-5 Visa Journey

The process of obtaining an EB-5 visa requires applicants to fulfill specific criteria which includes making a minimum capital investment of $800,000 into a for-profit U.S. commercial entity and ensuring the creation of at least 10 full-time jobs for U.S. workers.

Additionally, it is crucial to demonstrate the lawful source and path of investment funds.

Navigating the EB-5 visa program involves meeting these requirements to successfully secure permanent residency in the United States.

This article was originally published on November 19th, 2021 and has since been updated for accuracy and relevancy.

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