The EB-5 immigrant classification is the fifth preference employment green card created in 1990 to promote the U.S. economy through the creation of jobs and capital investment by foreign investors. Each year, 10,000 EB-5 visas are issued to immigrants who can invest $500,000 or $1 million into the U.S. economy and also meet other immigration requirements of the program.
An EB-5 project must create or preserve a minimum of 10 full-time U.S. jobs within two years of its approval. It has two distinct pathways through which applicants and their immediate family members can gain lawful permanent residence in the U.S. The two pathways are the Basic Program and the Regional Center Pilot Program. This post gives you all you need to know about EB-5 Regional Centers.
What Do EB-5 Regional Centers Do?
EB-5 regional centers are private or public economic units established to promote the increase of domestic capital investment and improve regional commercial productivity through job creation. They provide a platform and services that help immigrant investors facilitate their EB-5 projects and meet the job creation requirement as well as the other requirements of the program.
What Are the Advantages of Using EB-5 Regional Centers?
The following are some of the reasons why many investors prefer the regional center route over the basic program:
Targeted Employment Area Requirement
An EB-5 immigrant investor is required to invest 1 million dollars in a U.S. enterprise or $500,000 in a targeted employment area. The TEA must either be a rural area or any location with a high unemployment rate of at least 150% of the United States national average. Identifying the areas with these conditions can sometimes be challenging to foreign EB-5 investors. However, to help investors with $500,000 of capital meet the TEA requirements, many EB-5 regional centers are deliberately located in these targeted employment areas.
Indirect Job Creation Requirement
For many EB-5 applicants, getting the $500,000 or $1 million investment amount isn’t the major problem but rather meeting the qualifying job creation requirements. Investing in a direct enterprise will require that your enterprise create ten full-time jobs. This rule can sometimes be problematic for foreign investors who are new to the U.S. investment terrain and can lead to delays in application processing.
Also paying the salaries of 10 workers may be a burden on a new enterprise and will surely add to your administrative cost. However, with your capital invested in a regional center, your project will be deemed to have met this requirement. This is because your investment capital is being used by the center to indirectly create jobs or paying employees’ salaries, which will, in return, translate to a positive economic impact on the region. This will not only save you time but also help your budget.
EB-5 regional centers have an abundant resource through capitals from different participating members. They also have the expertise required to actualize their projects successfully due to their experience in the program.
They are always committed to the success of every project as that helps them rank higher. Unlike the Basic Program where business-related issues such as meeting the overhead expenses may arise along the line, the regional center will use their already-established platform and experience to ensure that their members’ projects succeed.
Passive Role with Guaranteed Return on Investment
Being actively involved in the day-to-day management of your investment is one of the EB-5 requirements. For many applicants, however, their priority mainly lies in the U.S. permanent residence and not in business management.
There are also others who may be genuinely interested in business but in a passive capacity. If you belong in any of these categories of investors, EB-5 regional centers offer the opportunity for limited partnership, which allows you to invest your capital and leave the active running of the project to others.
As a passive partner, you get updates of your project performance as well as the benefits of its profit-sharing regularly. You will also have voting rights regarding the management of the center. With this, you will have enough time for yourself and other commitments.
How Do I Choose the Right EB-5 Regional Centers for Your Investment?
As of June 2019, there are 884 approved EB-5 regional centers in different states across the U.S. engaging in different projects. Choosing the right center for your project will not only lead to your investment success but will also help expedite your green card approval.
Therefore, you will need to do your own research about as many centers as possible to before investing your money into one. Your due diligence research should be centered on the following questions:
Is the Center Approved By the USCIS?
Before investing in any EB-5 regional center, the first thing to check is the center’s approval status. An approved entity must have a valid designation letter from the USCIS. This USCIS website has a list of all the approved centers for your convenience. You can begin your research from there.
However, it is not enough to confirm the center’s approval. You also need to know if the center is still eligible to run EB-5 projects. Every year, each approved center is required to file and I-924A form to demonstrate eligibility and compliance with the government objectives for the program.
Any center without the most recent I-924A approval is likely to have been declared inactive or unqualified due to noncompliance. You can ask to see both the center’s designation letter and its most recent I-924A. Never take the risk of investing your hard-earned capital in a center that has not been approved, is awaiting approval, or is unable to present up-to-date compliance evidence using the I-924A.
How Transparent Are They in Handling Investment Funds?
Every EB-5 applicant is required to file an I-526 form to demonstrate that your chosen project meets the government requirements of the EB-5 program. It is prepared by an attorney after you put your investment capital “at risk”.
A trustworthy center should be prepared to refund investment capital if an applicant’s petition is denied by the USCIS. You will need to know the history of the center in regards to the refund policy for a denied I-526 petition. Ask if the center operates an escrow account where your capital would be held pending your petition approval.
What is Their I-829 Approval Rate?
If your petition is approved, the USCIS will issue you a conditional green card which will be valid for two years. You will need to file an I-829 form to remove the conditions on your permanent residence after the two-year validity period.
In order for the I-829 to be approved, you must prove that your project has, in the past two years, met all the EB-5 program requirements. If a center has a high rate of I-829 denials, this may be a red flag pointing to the structural problems of the management team, especially in meeting the job creation criterion of the program.
How Efficient Are They in Project Management?
Each EB-5 regional center has its own way of managing investor projects. These details must be clearly stated in the agreement details between you and the center. This must include how your money will be managed, your legal and financial obligations, the administrative costs, and other expenses apart from the main capital.
You should review this thoroughly and be sure there are no grey areas in the agreement. If there is anything you are not sure about, ask the center manager to clarify it before investing your money.
What Rate of Return on Investment Do They Offer?
While the ultimate goal of most EB-5 investors is lawful permanent residence, you still want your investment capital to yield a reasonable profit from the project. However, what is defined as reasonable depends on each investor’s perspective.
You might want to speak to your financial advisor as you do your due diligence on different centers. It must be noted, however, that EB-5 regional centers rarely offer a substantial ROI.
Is the Center Located in a TEA?
If your investment amount is $500,000, you will need to check the location of the center to make sure it meets the USCIS definition of targeted employment area (TEA). A TEA is an area is a rural area or a region that has experienced at least 150% unemployment of the national average rate.
A qualified rural area must not be an outskirt or boundary of a metropolitan city or town that has a population of 20,000 or more. If a center location does not meet all these requirements, it will affect your I-829 processing and delay your permanent residence.
EB-5 Program Cost
While it is very common for people to benchmark the investment at just the capital of $500,000 or $1 million, there are other expenses you must include in your budget. These side expenses may vary based on your choice of regional center as well as the legal and administrative services engaged in the process. However, the following are some inevitable extra EB-5 costs:
- I-526 filing fee: $3,675
- I-485 filing fee: $1,140
- I-829 filing fee: $3,750
- USCIS Biometric Fee: $85
- Regional center administrative fee: Varies among regional centers
- Immigration attorney fee: Subject to negotiation with your attorney