The profiles of the individual EB-5 investor and the regional center EB-5 investor are generally rather different. The individual EB-5 investor generally has the following characteristics:
- He or she actually wants to start and/or manage a business.
- His or her business will be creating employment up front.
- The investment is the driving force behind his or her wanting to come to the US.
- He or she wants to have control over his or her investment.
- He or she wants to maximize profits from his or her investment.
On the other hand, the regional center often meets the needs of investors with a different set of characteristics:
- He or she is not interested in starting a business.
- He or she may be a retiree.
- Although he or she may want to start a business, it will not create sufficient employment for an individual EB-5.
- He or she wants to be geographically mobile.
- He or she wants to spend a significant amount of his or her time outside of the US.
- Immigration – – rather than US business – – is the driving force behind his or her investment.
Partly because regional center investments address the needs of the foreign nationals described above, and partly because the standards for individual EB-5 petitions are so restrictive, the number of EB-5 regional center petitions has increased substantially in recent years and now exceeds 90% of the total number of EB-5 petitions filed.
Before discussing the details of EB-5 regional center petition filings, some background is in order. Established in 1992, the U.S. Immigrant Investor Pilot Program has had a troubled past. The program was suspended in 1997 because of two major problems:
a. Failure by investors to complete their total investments; and
b. Failure of the investment projects to create jobs.
Under the new guidelines of the program, issued in 2002, regional center investors are now required to invest the full $500,000 before submitting the I-526 petition, thereby resolving the first problem. As will be discussed in more detail below, the second problem has been resolved to a greater extent by some regional centers and to a lesser extent by others. For this reason, choosing the optimal regional center is a critical decision.
The Immigrant Investor Pilot Program remains a “pilot program” with continuing extensions through the present date. The latest extension expires September 30, 2012. Because of the success of the program both in terms of attracting investors and in terms of providing capital for economic development and job creation, as of the date of this article there is an expectation that the pilot program will be extended –perhaps permanently–by Congress.
Comparing Regional Center and Individual EB-5
The major advantage of the regional center as compared with an individual EB-5 investment is that indirect employment creation is allowable. In many cases, the sole remaining issues are tracing the funds from the investor to the regional center and proving the lawful source of the investor’s funds. This eliminates the need to deal with the many complicated issues involved in an individual EB-5 petition for which the investment enterprise has not been pre-approved, such as whether the investment entity qualifies as a “new commercial enterprise;” whether the investment is in a “troubled business;” and whether the requisite “direct employment creation” has taken place.
In addition, the regional center option is advantageous because:
- The foreign national can live anywhere he or she wishes in the U.S.;
- The foreign national can work anywhere he or she wants; or not work, as he or she pleases;
- The foreign national’s children may stay in the U.S. and study in the U.S.; and
- The foreign national can travel in and out of the U.S. as frequently as he or she desires.
The following analysis illustrates the similarities and differences between the individual EB-5 investment and the regional center investment with reference to some of the major elements involved in EB-5 adjudications:
Amount of Investment
Most of the approved regional centers have been approved as “targeted employment area” investments, thus qualifying for the reduced $500,000 investment requirement. 8 C.F.R. § 204.6 (e). Individual EB-5 investments are either $500,000 or $1,000,000 depending upon whether the investor can prove that the investment is in a “rural area” or in an area which has experienced unemployment of at least 150% of the national average rate. Otherwise, if the investor does not meet her burden of proof on these points, the required amount of investment is $1,000,000.
An individual EB-5 petition requires proof of “full-time employment” as direct employees (not independent contractors) of ten U.S. workers. 8 C.F.R. § 204.6 (j)(4). Although technically the requisite employment does not have to have been created at the time of approval of the I-526 petition, adjudication history reveals great difficulty in getting individual EB-5 petitions approved based upon business plans showing that the requisite employment will be created within the two year period before the necessity of filing a condition removal petition.
This problem is solved with the regional center petition if the employment creation has been pre-approved for a particular project. In any event, pursuant to 8 CFR §204.6 (e), the regional center can qualify based upon indirect employment creation generated in the community through the regional center investment.
Although an investment in the regional center does not raise the issue of direct employment creation for purposes of the I-526 approval, the choice of regional center in which the investment is made is critical. In order for the investor to have conditions removed after the end of the two year conditional period, USCIS will have to be satisfied that the direct or indirect employment creation has actually taken place or will occur in a “reasonable time”. 8 C.F.R. § 204.6 (a)(4). Choosing a regional center with a track record of employment creation thus enhances the likelihood that the investor will, in fact, be able to remove conditions, and become a non-conditional permanent resident. The investor should scrutinize how job creation is documented and calculated and the economic models of job creation methodologies utilized for determining indirect job creation.
As part of the pre-approval process, the regional center had to satisfy USCIS that the investors would be engaged in the “management” of the enterprise as opposed to maintaining a “purely passive role.” 8 C.F.R. § 204.6 (j)(5). This must be proven on a case-by-case basis by the individual EB-5 petitioner.
Most of the regional centers are limited partnerships. Pursuant to 8 CFR §204.6 (j)(5)(iii), if the petitioner is a limited partner and the limited partnership agreement provides the petitioner with the rights, powers and duties normally granted to limited partners under the Uniform Limited Partnership Act, the investor will be considered sufficiently engaged in the management of the enterprise. As a practical and legal matter, this requirement can be met by a limited partner without the necessity of the investor committing to any specific amount of time or engaging in any day-to-day management, since such activities are performed by the general partner.
Source of Funds
The requirements for the investor to prove the lawful source of his or her investment funds is the same for individual and regional center EB-5 petitions. 8 C.F.R. § 204.6 (j)(3). In both cases, the documentation requirements are extensive.
Most I-526 petitions are approved within three to six months of filing. Since the quota is current for this category of immigrants, within three to six months of filing of the I-526, the investor and his or her family who are in the U.S. are able to file applications for permanent residence, employment authorization and advance parole travel documents. For investors and families outside of the U.S., the procedure for issuance of immigrant visas generally averages 5 to 9 months.