Overview of EB-5 Immigrant Investor Category
In 1990, Congress created the employment based 5th preference (EB-5) immigrant visa category. The EB-5 offers 10,000 “green cards” (permanent resident status) annually to immigrants who invest in U.S. businesses that benefit the economy and create or save jobs. While the normal required minimum investment is $1 million, that amount is reduced to $500,000 if the investment is made in a high unemployment area.
The immigrant may invest in a new start-up business or in an existing entity. After the immigrant moves forward with the investment and is approved by Citizenship and Immigration services (CIS), s/he obtains conditional residence status for two years. After two years, if s/he proves that s/he maintained the investment and created or saved at least ten jobs, the conditional status will be removed and s/he will become a full-fledged lawful permanent resident.
Private Regional Center (PRC)
A PRC is a private business entity that is pre-approved by the U.S. government for an EB-5 and that satisfies certain geographical, growth of economy and employment criteria. Once the government has approved a PRC, a foreign investor identifies the right opportunity and invests the $500,000 in the regional center’s project. A positive return on investment coupled with U.S. permanent resident status provides more than enough incentive for the foreign investor.
Over 25 EB-5 regional centers exist around the United States, including in Texas, California, Pennsylvania, Vermont, and Hawaii. Other applications are pending from such states as Iowa and New York. Examples of PRC projects include urban development, providing bridge loans to companies for renovations, purchasing, renovating and managing industrial properties, purchasing land and harvesting export crops.
See Listing of EB-5 Regional Centers
The minimum investment for an EB-5/PRC project is $500,000. The money is released for project use when the immigrant is conditionally approved for the green card and refunded if s/he is denied. The investment vehicle is usually a limited partnership (pooled investments) with a General Partner receiving fees. Rates of return on the investment vary, of course, but current real estate projects average 4-5% on renting and a portion of profits on sale. In addition to a positive return, the foreign national is able to obtain U.S. permanent resident status through the investment.
It should be noted, however, that investments into qualified PRCs are not restricted to intending immigrants. The projects have universal appeal to all investors, including U.S. citizens. In fact, through discussions with principals of operating PRCs, I have learned that many U.S. citizens prefer these investment projects because they offer cash on cash returns with low risk inherent in real estate. In addition, the projects are exclusive equity deals because no bank financing is necessary.
Positive Outlook for the EB-5
For a variety of reasons, the EB-5 program has always been underutilized. At its height in 1997, only 1,300 people obtained green cards through the EB-5 program. This represented only about 13% of the annual limit. Then, in 1998, the former Immigration and Naturalization Service (INS) changed its interpretation of the EB-5 program, making it extremely difficult for new investors to qualify.
The good news is that Congress recently signaled its continued interest in the EB-5 program by extending the EB-5 regional center pilot program. This subset of the EB-5 program allows the government to set aside up to 3,000 of the 10,000 EB-5 green cards each year for investors who invest in designated governmental or private regional centers. EB-5 petitions filed through regional centers only have to show indirect, not direct, job creation.
The recent extension and revisions to the EB-5 category is evidence of a commitment by the U.S. to attract and encourage foreign investors. There has been no better time than now for foreign nationals to invest in the United States and utilize the EB-5 category to attain their immigration goals.