How It Works - EB-5 Regional Center Visa Program

History
The EB-5 visa was created in 1991 to encourage foreign investment in the U.S. The standard program required that an investor contribute $1,000,000 to a U.S. business that would create 10 U.S. jobs. If the investor complied with the requirements, he/she would be entitled to U.S. “Green Card” (known more formally as “lawful permanent residence” or “LPR”). This program had been greatly underused in the past (averaging fewer than 500 visas issued per year out of 10,000 available visas during the last 17 years) due to, among other reasons, to the difficulty foreign investors encountered in developing and managing a new or significantly restructured business in the U.S., far from their home country.

In 1993 the INS (now called the “USCIS”) offered a second option: the “Regional Center Pilot Program”. In the this 2nd variant of the EB-5, the investor invests not directly in his own business, but rather in a fund, previously approved by the U.S. government, that manages businesses creating jobs in rural or high unemployment areas (defined as 150% or more above U.S. average). The program was conceived as a win/win/win situation: 1) the local U.S. managers get a source of investment funds from foreign investors, and 2) the foreign investors can obtain a green card for himself and his family while avoiding the business startup costs, ongoing management, and other complexities of the standard program, and 3) the U.S. government gets investment in economically depressed areas to help reduce U.S. unemployment.

Everyone was happy, right? Not quite. The U.S. government failed to adequately monitor the regional centers in the early years of the program, and this permitted the creation of too many underfunded or mismanaged regional centers. The U.S. government all but suspended the EB-5 Regional Center Program from 1998 until 2003 while abuses were removed from the system. The program was reorganized in 2003 so that all regional centers would be reviewed, approved/denied, and monitored by a an entirely new “Investor and Regional Center Unit” within the USCIS. Confidence has started to return to the system and new, sounder regional centers have been forming throughout the U.S. The program is starting to fulfill it’s original mission, and the program is generating new excitement among investors (see 08 March 2008 New York Times Article “For Foreign Investors, Profit Isn’t Only Goal” and 02 Nov 2007 Wall Street Journal Article “Got $500,000? The U.S. Awaits”

Requirements
1. Invest US $500,000 in a USCIS approved “Designated Regional Center”
2. The investor must have a minimal policy-making role (the limited partnership role offered by most Regional Centers will qualify)
3. The investment must directly or indirectly create 10 U.S. jobs

Annual Quota
The EB-5 visa program has an annual maximum of 10,000 visas issued per year. 5000 of these visas are reserved for the Regional Center Pilot Program.

Legal Issues
Because Regional Center investors place their money in a fund previously approved by the USCIS for the job creation and other requirements of the EB-5 visa, many of the legal issues in a standard program filing - such as demonstrating a qualified commercial enterprise, projecting 10 U.S. job creation, etc., are eliminated or greatly simplified. Nonetheless, issues remain:

Lawful Source of Funds
The investor must document that the capital invested has been legally obtained. The investor must submit, among other things, tax returns for the previous 5 years, or equivalent documentation to show that the investor has sufficient lawful sources for the capital invested. Gifts as a source of the capital (for example a parent gifts USD 50,000 to a child to help the child obtain resident status in the U.S.) is acceptable. Loans in some circumstances may also be acceptable.
Removal of Conditions
To remove the “conditional” nature of the initial Green Card, you must prove that you invested the required amounts in the USCIS-approved regional center, that that commercial enterprise was established, that it created directly or indirectly 10 full-time jobs, that you have continuously maintained this investment during the 2 year period and, if some of the jobs you count toward the 10 are indirectly created, that the regional center is still approved by USCIS.
Tax Issues
The United States charges income tax on all US citizens and permanent residents based on worldwide income. Treaties and various exemptions eliminate some but not all of the risk of double taxation. Each state of the United States has its own tax system. Investors should consider the tax effects of becoming a US resident before investing. As a general rule, if you are moving all of your assets to the US you will not have a problem with double taxation. If you will continue working or investing in your home country after moving to the US, a trip to your tax advisor is in order.
Grounds of Excludability
EB-5 visa applicants are subject to the same bars against entry as are other intending U.S. immigrants. Grounds for denying a visa include:
1. Overstay of prior U.S. visa of more than six months
2. Prior criminal conviction
3. Communicable illness (AIDS, infectious tuberculosis, syphilis, etc.)
4. Membership in a Communist or any totalitarian party
5. illegal export of sensitive U.S. technology, goods, or information
6. Money Laundering
7. Terrorist Activities
8. Sexual Abuse of Minors
Waivers are available for most of these bars, although they can be difficult to obtain.
“Pilot” Program Status
The program is labeled “Pilot” because the Program is not yet permanent in U.S. immigration law, but must be re-authorized every five years by the U.S. government. The current authorization is set to expire on 6 March 2009.

Procedure