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Immigration Procedures under the EB-5 Immigrant
Investor Pilot Program
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There are a lot of misconceptions about the EB-5 regional center
program, and so with this article I would like to shed some light on the
important procedural steps, requirements, and considerations the
investor should bear in mind when considering whether to pursue
immigration under this program and when considering with which regional
center program to invest. This article should not be considered as legal
advice, it is not directed to any one person, and it is a general
discussion. A prospective investor should consult with the appropriate
professionals in conducting due diligence on the regional centre(s) that
they are considering, including an immigration attorney with experience
in handling cases under the EB-5 regional center program in order to
evaluate how well the regional center’s project qualifies and whether
the prospective investor qualifies.
Due Diligence
When examining regional center programs and their specific projects,
their track record of getting cases approved is extremely important, but
the inquiry should not end there. It is important to bear in mind that
the regional center designation is not a free pass for all projects and
petitions emanating from that regional center. U.S. Citizenship and
Immigration Services (“CIS”) examines and decides each petition of each
project of each regional center program individually. So, the regional
center designation is just a threshold requirement for whether a
petition can be submitted under the EB-5 regional center program based
on investment in a project created and managed by the organization
holding the regional center designation, and operating within the
geographic boundaries of the regional center program application that
was approved by CIS or its predecessor “Immigration and Naturalization
Service.”
The track record of a regional center program is indicative of the
regional center program having the “know how” and ability to develop
projects that qualify to get the investors approved, but it does not
guarantee that all of their projects will ultimately get their investors
approved at the I-526 petition stage (the qualifying round prior to
obtaining conditional permanent residence in the U.S.) and at the I-829
petition stage (the petition to remove the condition from the
conditional permanent residence—we will discuss these procedures later
in the article). Therefore, it is essential to have the specific project
in which you are considering to invest with the regional center program
examined by an immigration attorney to determine whether the individual
project is likely to satisfy CIS’s requirements at the above-mentioned
two crucial stages of the immigration process.
The prospective investor should also retain an accountant, preferably a
certified public accountant, who has satisfied higher licensing
requirements, particularly one who is experienced at examining
investment opportunities. First and foremost, you should have the
accountant to help you to examine how secure the investment is, how
likely it is that you will be able to get your investment capital back
out of the investment. Typically, the regional center program investment
projects produce a return that is at or below market averages for
comparable investment opportunities, and so the accountant will need to
conduct their evaluation with the understanding that the regional center
programs, by the requirements of the program, are located in higher
unemployment, economically less prosperous regions, and so their return
is typically not competitive with the best in the market, but that is
why the government is offering permanent residence in the U.S. as an
incentive. The main point for the prospective investor is to minimize
the chances that his investment will be lost, or the requisite job
creation not be achieved. And so the accountant’s evaluation should be
geared mainly toward safety of investment rather than on telling you
that the investment will produce a low rate of return, which is pretty
much a “given” in the regional center context.
When you have an accountant and an immigration attorney evaluating a
regional center program project, it can be useful for the accountant and
the immigration attorney to consult with one another about the
likelihood of the project achieving the results it states in its
business plan with regard to employment creation. Important for the
removal of the condition from the conditional permanent residence is the
regional center program proving that the project has satisfied the
requirement that at least 10 jobs per investor must be created, either
directly or indirectly. While the partnership or limited liability
company in which the investor invests does not have to hire 10 employees
per investor, it must be able to show that the investment funds are
being invested in a way that it will cause certain local businesses to
hire sufficient new employees in the targeted employment area, that when
the number of new employees is “plugged into” the relevant economist’s
model, a sufficient number of total direct and indirect jobs will be
created in order to qualify all investors under the project. There are
some regional centers which can show satisfaction of the job creation
requirement based on a certain amount of investment being made without
proving the creation of a specific number of jobs directly. The
accountant can help the immigration attorney to assess the likelihood of
the regional center program’s project, with whatever vehicle for
employment creation it is employing, achieving sufficient job creation
under the given econometric model.
In examining the regional center program, the prospective investor
should determine whether the regional center program is willing to
refund the investment in the case of denial, and if so, under what
specific circumstances. Typically the refund is offered mainly if the
denial is due to a problem with the regional center’s project, but not
necessarily offered when the denial is due to the investor’s own source
of fund evidence or criminal convictions. The policies of the regional
center vary on this point, and it is very important to find out their
policies ahead of time.
It is also advisable for a prospective investor to consult with an
accountant who is familiar with advising foreign clients, particularly
ones from the investor’s home country, in order to plan for the tax
consequences of becoming a U.S. tax resident, in particular, the
resulting interplay with the investor’s home country’s tax laws. The
prospective investor must bear in mind that he or she will become a U.S.
tax resident from the moment that he or she becomes a conditional
permanent resident. This means that the U.S. will be able to tax the
worldwide income of the investor, albeit with allowances for taxes
already paid abroad, particularly if there is an income tax treaty with
the person’s home country. While the U.S.’s tax rates are typically
lower than those in many developed countries, sometimes there are
special tax shelters or discounts that the investor’s accountant in his
home country has taken advantage of, but these may not apply in the U.S.
So, income tax planning is very important.
Estate tax planning likewise comes into play, since EB-5 investors
typically have substantial assets and are often married and at an age
when they have children and maybe even grandchildren. If the person is
from a country with an estate tax treaty with the U.S., becoming a
conditional permanent resident in the U.S. entails also moving their
domicile to the U.S. which would likely have consequences under the
estate tax treaty. In any case, the purchase of a real estate property
in the U.S., typically what will become the investor’s personal
residence, means that the investor will have a U.S. estate which must be
dealt with in accordance with the local laws in the U.S. The investor
will also need to be aware of differing estate tax treatment, depending
on whether their heir is a (conditional or unconditional) permanent
resident or a U.S. citizen.
So, for multiple reasons, the prospective investor should consult with
an accountant with relevant experience, or with a full-service
accounting firm also with relevant experience.
Each regional center program has its own limited partnership or limited
liability company structure, and has a subscription agreement with the
investor, which the prospective investor should have examined by an
experienced business attorney. It is important for the prospective
investor to understand what his rights and obligations will be under the
subscription agreement and the partnership agreement (if a limited
partnership) or operating agreement (if a limited liability company). A
business attorney can also help to do a background check on the
principal directors of the program, in order to determine whether the
person has any criminal convictions, or has been the subject of civil
lawsuits by previous investors.
The prospective investor should also conduct due diligence on himself,
so to speak. The investor should obtain a police certificate on himself
or herself and on his or hers spouse, if married. In case the investor
or spouse has any criminal convictions, it is important that those
conviction(s) be evaluated by an immigration attorney in order to
determine whether the conviction(s) is/are sufficiently serious in
nature to render him or her inadmissible, and hence ineligible for
permanent residence.
One final issue is that the regional center programs offer an investment
opportunity, which has the effect of subjecting them to U.S. securities
regulations. Most, if not all, of the regional centers qualify
themselves under an exception from the securities regulations based on
offering their investment opportunities only to accredited investors.
Accredited investors are those investors who have assets with a net
worth of at least $1 million, or have had annual income of at least
$200,000 in each of the last two years, or a total combined annual
income with their spouse of at least $300,000 in each of the last two
years. When the regional center programs ask investors about the net
worth of their assets or their income to see if they satisfy these
guidelines, sometimes the investors understand this to be a requirement
under the EB-5 immigrant investor program, but it is really a
requirement under the securities regulations.
The Investment and I-526 Petition Process
If the prospective investor decides, based on the due diligence results,
to pursue immigration through investment in the EB-5 regional center
program under consideration, then he or she will need to invest the
requisite $500,000, plus pay the regional center program’s program fee,
and sign the regional center program’s subscription agreement. The
payment procedures vary from one regional center program to another.
Some programs allow the investor to make an initial deposit, and then
pay in the remainder of the investment within 3 months, while other
programs require the payment of the entire investment plus program fee
at the same time. With some programs the funds are paid into an escrow
account until the I-526 petition is approved, and then the funds are
paid into the limited partnership’s account. Alternatively, should the
I-526 petition be denied, depending on the policies of the regional
center program, the regional center program may refund the investment to
the investor, particularly when the denial is due to the program not
satisfying CIS’s requirements for approval of the I-526 petition. As
mentioned above in the discussion of due diligence, it is very important
to understand clearly what the regional center program’s policy is on
refunds in the case of denial.
The investor needs to work with his or her immigration attorney in order
to figure out what documentation will be necessary in order to show that
the investment funds were acquired legally, and then to provide such
documents to the attorney. Typically, very extensive documentation is
necessary, and such documentation generally spans several years. At the
very least, CIS expects 5 years of personal tax returns, unless there is
a convincing explanation of why there are no personal tax returns filed
in the investor’s home country, or why the investor would be exempt from
filing. This is typically just the starting point, unless the investor’s
income alone was sufficiently high to enable the investor to set aside
enough money in the course of the past 5 years in order to make the
$500,000 investment. In many cases, the funds come from the sale of an
asset such as a real estate property or taking out a loan secured by
such an asset which the investor has purchased and maybe paid for over a
period of time beyond 5 years. In such a case, then we need to document
acquisition of the asset and how the money was freed up from it. In
other cases, the investor receives the money as a gift, in which case we
have to document how the gift giver earned the money. In yet other
cases, the investor receives the money as an inheritance, and so the
investor must document that he or she inherited the money, and to he
extent possible, show that the person from whom the investor inherited
had not obtained the money through criminal activity.
The regional center program will provide the immigration attorney with
documentation about the project in which the investor has invested,
documentation of having received the investment funds from the investor,
proof of the investor having signed the subscription agreement and been
admitted as a limited partner or member, and an economist’s report that
projects, based on calculations using an accepted econometric model, at
least 10 new jobs per investor being created directly or indirectly by
the project. As I previously stated, since the project has to qualify
with CIS on its merits, the documentation from the regional center
program regarding the specific project must be submitted with each
petition in order to qualify that petition. Nevertheless, once other
petitions have been approved under the same project, then CIS focuses
primarily on the source of funds of the investor rather than on the
project itself; although, I have anecdotal evidence of CIS raising
questions on the project in later petitions that it did not raise while
adjudicating prior petitions.
In the event that CIS requests further evidence, the CIS examiner sets
the time limit for response to anywhere from 15 to 90 days. If CIS
examiner is not satisfied with the evidence submitted, then the CIS
examiner will either deny the petition or else issue a “Notice of Intent
to Deny” which gives the investor typically 15 to 30 days during which
to respond to the issues about which the examiner is still not
satisfied. The examiner could still approve the petition, but if not,
then the investor can choose to appeal the denial to the Administrative
Appeals Office.
Adjustment of Status or Consular Processing of an Immigrant Visa
If and when the investor’s I-526 petition is approved, then the investor
and his or her family proceeds to the next stage of the process. If the
investor and his or her family is currently living in the U.S. in legal
temporary (non-immigrant) visa immigration status, which is still valid
at the time of the I-526 petition approval, then the investor and his or
her family can apply for conditional permanent residence through CIS in
the U.S. under the adjustment of status procedures.
If the investor is in the U.S. in some sort of temporary (non-immigrant)
visa, then it is crucial to examine realistically whether the I-526 will
be approved prior to the expiration of the investor’s and his or her
family’s temporary visa status. If it may run close, then it is probably
safer to opt for consular processing in the investor’s country of
citizenship. The selection of adjustment of status or consular
processing is made on the I-526 petition form. Once the I-526 petition
is approved, it could take several months to change the case from
adjustment of status to consular processing, or vice versa. Therefore,
it is extremely important to think realistically about where the
investor will be living at the time when the I-526 petition is approved,
and choose adjustment of status or consular processing accordingly.
If the investor opts for adjustment of status, then the adjustment of
status will be filed with the appropriate regional service center. The
investor and his family will receive work authorizations and advance
parole travel documents enabling them to work and travel while their
adjustment of status case is pending. The investor and his family
members will then be considered to be in legal status in the U.S. while
the adjustment of status case is pending, even if the visa status which
they held at the time of filing for adjustment of status subsequently
lapses. In any case, though, it is necessary for the investor and all
members of his family to have legal temporary visa status in the U.S. at
the time of filing for adjustment of status. This does not include
status under the Visa Waiver Program. Otherwise, they must request to
switch their case to consular processing in order to complete the
process through the consulate. The CIS service center usually decides
the case without an interview, and notifies the investor of its
decision, which is usually approval, unless the investor has a serious
criminal conviction, serious communicable disease, or serious
immigration law violations.
If the investor opted for consular processing, then once the I-526
petition is approved the case will be forwarded to the National Visa
Center, where processing of the immigrant visa application will begin.
The National Visa Center collects the fees for the process, reviews the
application forms for correctness and completeness, and gathers all
required documents in order to make sure that the consulate will have
the documents it needs in order to decide the case. Once the National
Visa Center is satisfied with the forms and the evidence submitted, then
it schedules an interview appointment at the consulate for the investor
and his or her family, or else forwards the case to the consulate for
the consulate to schedule the interview appointment. Every consular
processing case must go to a personal interview at the consulate. As
previously mentioned in the discussion of adjustment of status, the
application for an immigrant visa should usually be approved, unless the
investor has a serious criminal conviction, serious communicable
disease, or serious immigration law violations.
In the case of the approval of the adjustment of status, then the
investor becomes a conditional permanent resident immediately upon CIS’s
approval of the adjustment of status application. In the case of
approval of an immigrant visa at the U.S. consulate, then the investor
and his or her family receive an immigrant visa that is valid for only 6
months, and so they must enter the U.S. before the expiration of the
immigrant visa. When they enter the U.S. for the first time with the
immigrant visa, they will become conditional permanent residents
immediately upon being admitted to the U.S. with the immigrant visa. The
immigration officer at the airport will stamp their passport as proof of
their having been admitted as conditional permanent residents.
The clock for determining when the investor and his or her family must
apply to remove the condition from their permanent residence begins to
run from the date that the investor becomes a conditional permanent
resident. We proceed now to discuss the process of petitioning to remove
the condition from the conditional permanent residence.
The I-829 Petition to Remove the Condition from the Conditional
Permanent Residence
In the final ninety days of the two-year conditional permanent residence
period, it is required that the investor file the I-829 petition to
request removal of the condition from his or her conditional permanent
residence. It is necessary to prove that the investor has maintained the
investment. It is not necessary to go back and prove how the investor
originally made the investment, but rather just to prove that the
investor has not taken his or her investment out of the regional center
project.
The main issue to prove is that the regional center program has pursued
the business plan that it originally provided to CIS with the investor’s
I-526 petition. In particular, CIS wants to see that the project has
brought about the direct and indirect employment creation that was
projected in the economist’s report that accompanied the I-526 petition.
The main documentary evidence CIS is looking for is proof of the direct
employment creation. CIS is currently taking the position that the
regional center program must provide documentation of the jobs created
directly, in the form of immigration and tax forms for those positions.
Once again, the limited partnership or limited liability company in
which the investor invests does not have to hire anyone. Instead, the
regional center program makes arrangements, for instance, that
businesses to which the investment limited partnership or company lends
money produces the necessary direct jobs, or else that the businesses
that rent their business premises from the investment partnership or
company create the direct jobs. The CIS then bases its decision on
whether the number of direct jobs, when “plugged into” the econometric
model (which has certain multipliers based on the type of industry)
produces at least 10 new direct and indirect jobs per immigrant
investor. CIS has also taken the position that it will not count direct
jobs that are relocated from elsewhere into the targeted employment
area.
Some regional centers have obtained approval from CIS to use an
econometric model that calculates employment creation based on a certain
amount of investment being made. For instance, the investment limited
partnership or company lends money to a private company or government
agency that agrees to invest a certain amount of money. Then that amount
of money is “plugged into” the econometric model to calculate a certain
number of jobs are created based on the amount of money spent by the
borrower. Under this scenario, it would be necessary to show that the
borrower of the money has spent the requisite amount of money in order
to have brought about a sufficient amount of employment creation under
the econometric model, i.e., at least 10 new jobs per investor.
CIS’s regulations allows for some flexibility in the event that not
enough direct jobs have been created, or sufficient funds have not yet
been invested by the borrower of the loans in order to satisfy the
employment creation requirements. CIS can still approve the petition if
the regional center program provides convincing evidence that the
employment creation is behind schedule due to factors beyond its
control, such as delays in obtaining necessary building permits, the
borrower has been delayed by factors beyond its control in making its
investments, but in both cases they will follow through with the steps
that they need to take in order to bring about the required job
creation, and that they will achieve the results within a “reasonable
time.” Certainly, CIS will not be understanding of delays through
negligence or bad faith, but they will favorably consider proof that the
delay was not the fault of the regional center program, and that the
regional center program used its best efforts in order to remedy the
problems in order to bring the project back onto schedule.
One other element of flexibility exists under the regulations for the
family of the investor in the event that the investor dies an untimely
death prior to the condition being removed from the investor’s
conditional permanent residence. CIS will decide an I-829 petition for
removal of conditions from conditional permanent residence for the
dependent spouse and/or children of the investor on the same terms as if
the investor were still alive.
Conclusion
The EB-5 immigrant investor regional center program is a complicated
immigration program under which a person should not immigrate without
seeking out qualified and competent advice of an immigration attorney.
Moreover, the investor should not proceed with investment in a regional
center program without conducting his or her own due diligence of the
regional center program in which they are considering to invest, which
also includes evaluation of the regional center program’s likelihood of
success in obtaining for the investor conditional, and later
unconditional, permanent residence in the U.S., in addition to
determining the likelihood of the program being able to return the
investor’s capital investment upon completion of the immigration
process. At the same time, it is important for the investor to look into
the income and estate tax consequences of moving to the U.S.
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