What is the EB-5?

The EB-5 Investor Program, administered by the United States Citizenship and Immigration Services, was established by Congress in 1990 to stimulate the U.S. Economy through the creating of jobs and capital investments by foreign investors.

Requirements for the EB-5 Investor Program:

The following are the three requirements for participating in the EB-5 Investor Program:

• Creating of a New Commercial Enterprise
• Creation and Preservation of Jobs
• Capital Investment

Creation of a New Commercial Enterprise

EB-5 Investors must create a new commercial enterprise. A commercial enterprise means any for-profit activity formed for the ongoing conduct of lawful business (non-commercial activity, such as a holding company only holding a residence or other personal or real property, is not sufficient). Commercial Enterprise includes the following business types; Partnership (limited or general), holding company, joint venture, corporation (S or C), business trust, or sole proprietorship (may be public or private). There may be more business structures depending on the state where the business you intend on investing in is located. If you are investing in a holding company, that holding company may own subsidiaries, only if, all subsidiaries engage in lawful for-profit activity.

Further, the requirement that the business be a “new” commercial enterprise is fulfilled in one of two ways. First, if the business came into existence after November 29, 1990. Second, the “new” commercial enterprise requirement is also fulfilled when a business was established on or before Nov. 29, 1990, with the following stipulations:

• The purchased business is restructured or reorganized in such a way that a “new” commercial enterprise results; or
• The purchased business is expanded through the investment where there is at least a forty (40) percent increase in the net worth of the business or number of employees.

Creation and Preservation of Jobs

In order to obtain a Permanent Resident Visa, an EB-5 investor must create or preserve at least 10 full-time jobs for qualifying U.S. Workers within two years. In some instances, the time limit of two years may be extended. To meet this threshold, the EB-5 Investor can create or preserve jobs directly or indirectly.

The following are the ways in which an investor may create jobs:

• Directly: an investor may create jobs stemming from qualified employees located within the commercial enterprise
• Indirectly: an investor may create jobs collaterally or as a result of capital invested in a commercial enterprise affiliated with a regional center. Only investors who are affiliated with regional centers can use this direct job calculation.
   An invest may only preserve jobs (directly or indirectly) in a troubled business. A troubled business is a business that has been in existence for at least two years and has suffered net loss for at least the year prior to the immigrant investor filing their 1-526 EB-5 Form. The net loss must be at least twenty (20) percent of the troubled business’ net worth prior to the loss.

Further, the following definitions are relevant in understanding the requirements of the EB-5 Investor Program:

• Qualified Employee: A qualified employee s a U.S. citizen, permanent resident or other immigrant authorized to work in the United States. The individual may be a conditional resident, an asylee, a refugee, or a person residing in the United States under suspension of deportation. This definition does not include the immigrant investor; his or her spouse, sons, or daughters; or any foreign national in any nonimmigrant status (such as an H-1B visa holder), or any one else not authorized to work in the United States.
• Full-time Employment: Full-time employment requires that a qualified employee work a minimum of 35 working hours per week.
• Job-Sharing Arrangement: This arrangement is where two or more qualifying employees share a permanent, consistent and full-time position. In this instance, these qualifying employees will count for the definition of full-time employment provided the hourly requirement per week is met by each (35 hours). However, you may not combine multiple part-time positions or full-time equivalents even if, when combined, the positions meet the hourly requirement per week. The two qualified employees sharing the job must be permanent and share the associated benefits normally related to any permanent, full-time position, including payment of both workman’s compensation and unemployment premiums for the position by the employer.

Capital Investment

An EB-5 Investor must contribute a capital investment. A capital investment may include cash, equipment, inventory, tangible property, cash equivalents. The EB-5 Investor may also secure their indebtedness by asset they own (which cannot include the assets from the invested U.S. business), provided that the Investor is personally and primarily liable for the debt (personal guarantee).

All capital contributed shall be valued at fair-market value and in United States dollars. Assets acquired, directly or indirectly, by unlawful means (such as criminal activities) shall not be considered capital for the purposes of section 203(b)(5) of the Act. Also, capital investments cannot be borrowed form another investor.

Required minimum capital investments:

• Non-Targeted Employment Area: This is any area that is not rural or suffering from high unemployment. The minimum qualifying investment in the United States is $1 million.
• Targeted Employment Area: This is an area that is rural or suffering from high unemployment. The minimum qualifying investment either within a high-unemployment area or rural area in the United States is $500,000.

Further, the following definitions are relevant in understanding the requirements of the EB-5 Investor Program:

• Targeted Employment Area: A targeted employment area is an area that, at the time of investment, is a rural area or an area experiencing unemployment of at least 150 percent of the national average rate.
• Rural Employment Area: A rural area is any area outside a metropolitan statistical area (as designated by the Office of Management and Budget) or outside the boundary of any city or town having a population of 20,000 or more according to the decennial census.