Immigrating to the United States as an Investor: the EB-5 Investor Visa
Foreign nationals may seek permanent residency in the United States as an immigrant investor pursuant to section 203(b)(5) of the Immigration and Nationality Act, 8 U.S.C. § 1153(b)(5). This employment-based immigrant category is given fifth preference (EB-5) and is allotted 10,000 visas annually. Generally, the investor immigrant is required to invest $1 million in a U.S. business, but this amount can be as little as $500,000 depending upon the geographic area. Although the immigrant investor category may initially seem to be a quick route to permanent residency for those with sufficient capital, it can prove to be quite complicated, requiring extensive documentation and planning. In fact, unlike most other immigrants, immigrant investors are only granted conditional permanent residency in the US. This condition must be removed after two years in order to become a true permanent resident. Therefore, it is wise for those interested in this category to consult with an immigration attorney before investing any capital in a U.S. business with the intent to immigrate as an investor.
There are basic requirements listed below that may help a foreign national decide whether to pursue permanent residency as an investor (set forth in federal regulations at 8 C.F.R. 204.6):
- The investor must have invested or must be actively in the process of investing the required amount of capital ($500,000 or $1 million).
- The investment must be "at risk" for the purposes of generating a return on the capital.
- The invested capital must have been obtained by lawful means.
- The investment must establish a "new commercial enterprise".
- The new commercial enterprise has created or will create no fewer than ten (10) full-time positions.
- The investor is or will be engaged in the management of the new commercial enterprise either through the exercise of day-to-day managerial control or through policy formulation.
The following questions and answers are designed to further explain each of the above requirements.
When can the amount of investment capital be less than $1 million?
If the immigrant investor invests in a geographically-defined "targeted employment area" the investment capital required is only $500,000. A targeted employment area is defined as either a rural area (any area not within either a metropolitan statistical area or not within the outer boundary of any city or town having a population of 20,000) or an area with unemployment of at least 150 percent of the national average rate.
Does a loan count as the investment of capital?
Yes, but a contribution of capital in exchange for a note, bond, convertible debt, obligation, or any other debt arrangement between the alien entrepreneur and the new commercial enterprise does not constitute a contribution of capital.
Does "capital" include more than cash?
Yes. Capital means cash, equipment, inventory, other tangible property, cash equivalents, and indebtedness secured by assets owned by the foreign national, provided that he or she is personally and primarily liable. All capital is valued at fair market value in US dollars.
Can the foreign investor petition for permanent residence with the intent to invest the required capital?
No. An actual investment of capital is required, not simply the intent to do so. The investor is required to show (1) bank statements showing a transfer of capital to the enterprise, (2) evidence of the purchase of assets or property transferred from abroad to be used in the enterprise, (3) evidence of money transferred or committed to be transferred to the new commercial enterprise in exchange for shares of stock, (4) evidence of any loan or mortgage agreement, promissory note, security agreement, or other evidence of borrowing secured by assets of the investor.
What does it mean for the investment to be "at risk"?
For the investment to be "at risk" the immigrant investor must be personally and primarily liable for any loss or gain on the investment made in the enterprise. And, according to In re Soffici, 22 I&N Dec. 158 (BIA 1998), the capital cannot be contributed by a corporation owned or controlled by the investor.
May the immigrant investor use an escrow agreement to protect his or her investment in case of denial or the petition?
Yes. An immigrant investor may put the funds under an escrow agreement that will transfer the funds to the enterprise upon the approval of the immigrant petition as long as the escrow agreement provides that upon approval of the petition the funds will be immediately and irrevocably committed to the new commercial enterprise.
"Obtained by Lawful Means"
What does it mean for the invested capital to have been "obtained by lawful means"?
This requirement simply means that the immigrant investor will have to provide business and tax records to show that the invested funds have legitimate sources such as salary, investment, inheritance or gifts.
Establishing a New Commercial Enterprise
What qualifies as the establishment of a "new commercial enterprise"?
The establishment of a new commercial enterprise means that the investor will either (1) create a an original business, (2) purchase and reorganize an existing company creating a new commercial enterprise, or (3) invest in an existing business that results in at least a 40% increase in net worth, a 40% increase in the number of employees, or both.
Can multiple investors invest in a new commercial enterprise and qualify for investor visa status?
Yes, as long as each individual investor invests the required amount of capital to qualify for the visa, and each individual investment results in the creation of at least 10 full-time positions.
Creating 10 New Full-Time Positions
What is meant by the requirement that the new commercial enterprise has created at least 10 full-time positions?
This means that the immigrant investor must show that the infusion of capital into the "new commercial enterprise" has created at least 10 new jobs for employees who work at least 35 hours per week. These 10 new positions can include employees in job-sharing arrangements; however, such job-sharing only counts as one new position.
What if there is simply the expectation that the investment will create 10 new full-time positions?
The expectation of the creation of 10 new full-time positions can qualify under the investor immigrant program as long as the investor submits a business plan showing that, due to the nature and projected size of the new commercial enterprise, the need for not fewer than 10 qualifying employees will result, including approximate dates, within the next two years, and when such employees will be hired.
Are there any exceptions to the requirement of creating 10 new full-time positions?
Yes. If the investor invests in a "troubled business." A troubled business is defined as a business that has been in existence for at least two years that has recently experienced a net loss of 20% of net worth. In such a case, the petition must be simply accompanied by evidence that the number of existing employees is being or will be maintained at no less than the pre-investment level for a period of at least two years.
Investor is Engaged in Management of the Enterprise
What is required to show that the investor is engaged in the management of the enterprise?
It must be shown through evidence that the investor exercises day-to-day managerial control or policy formation (this includes evidence that investor is a corporate officer or a member of the board of directors) as opposed to maintaining a purely passive role in regard to the investment.
Immigrant Investor Pilot Program
Potential immigrant investors should consider investing in a pre-approved regional center as part of the immigrant investor pilot program. A “regional center” is defined as any economic unit, public or private, which is involved with the promotion of economic growth, including improved regional productivity, job creation, and increased domestic capital investment. The principal benefit to this program is that it eases the job-creation requirement. Under the program, proof of indirect job creation is sufficient. Additionally, such indirect job creation may be simply shown by “reasonable methodologies” such as multiplier tables, feasibility studies, analyses of foreign and domestic markets for the goods or services to be exported, and other economically or statistically valid forecasting devices that would indicate the likelihood that the business will result in increased employment.
- 3,000 visas out of the 10,000 investor visas are allotted to the pilot program annually
- Although indirect job creation is permitted, it still must be shown that the investment will create full-time positions for not fewer than 10 persons either directly or indirectly through revenues generated from increased exports resulting from the pilot program.
There are about 160 regional centers currently active for the immigrant investor pilot program. They can be found all over the US. For more details on active regional centers, please click here.
A new regional center can also be created by filing an application with US Immigration Services that:
- Clearly describes how the regional center focuses on a geographical region of the United States, and how it will promote economic growth through increased export sales, improved regional productivity, job creation, and increased domestic capital investment;
- Provides in verifiable detail how jobs will be created indirectly through increased exports;
- Provides a detailed statement regarding the amount and source of capital which has been committed to the regional center, as well as a description of the promotional efforts taken and planned by the sponsors of the regional center;
- Contains a detailed prediction regarding the manner in which the regional center will have a positive impact on the regional or national economy in general as reflected by such factors as increased household earnings, greater demand for business services, utilities, maintenance and repair, and construction both within and without the regional center; and
- Is supported by economically or statistically valid forecasting tools, including, but not limited to, feasibility studies, analyses of foreign and domestic markets for the goods or services to be exported, and/or multiplier tables.
Although both immigrating as an investor and creating a new regional center both involve applications with the US Citizenship and Immigration Services, creating a new regional center is an entirely separate process and is not a requirement of becoming an immigrant investor. The currently active regional centers focus on economic growth in a wide range of areas, including biofuels, tourism, trade, technology, health care, and financial services. Therefore, immigrant investors considering the pilot program should carefully investigate existing regional centers to see if one or more of them targets the area of economic growth in which the immigrant investor wishes to invest.
Goswami, Strand and Seaborn has represented both investors in Pilot Program Regional Centers and labor intensive individual investments.