EB-5 Visa (Immigrant Entrepreneur)

This visa category is also referred to as the fifth employment-based preference ("EB-5 visa") category. Ten-thousand (10,000) EB-5 visas per year are available for immigrants seeking to enter the United States for the purpose of investing at least $1 million in a new commercial enterprise which will benefit the US economy and create at least 10 full-time jobs for American citizens, lawful permanent residents or other employment-authorized aliens. This immigrant category should be distinguished from the Treaty Investor E-2 visa, which is a nonimmigrant category.

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Definition of Capital

The EB-5 visa investor must establish the business and have invested, or be in the process of investing, the required capital after 29 November 1990. The term "capital" is defined in the regulations as cash, equipment, inventory, other tangible property, cash equivalents and indebtedness secured by assets owned by the alien provided that he or she is personally and primarily liable and the assets of the new commercial enterprise are not used to secure any of the indebtedness. The definition specifically excludes capital acquired by unlawful means.

Although not specifically referred to in the Immigration and Nationality Act ("INA"), §204.6(e) of Title 8 of the Code of Federal Regulations ("8 CFR") states that indebtedness secured by assets owned by the alien entrepreneur may also be considered capital. The Department of State ("DOS") also takes the position that "investment" includes the investment of debt, provided that the EB-5 visa investor is personally and primarily liable for the debts and that the assets of the EB-5 visa enterprise are not used to secure any of the indebtedness.

Amount of the EB-5 Visa Investment

The basic EB-5 visa investment amount is $1 million. The Attorney General has the authority to increase, by regulation, the required investment up to $3 million for a business established in a "high employment area". "High employment area" means part of a metropolitan statistical area that at the time of the investment is not a targeted employment area and is an area with an unemployment rate significantly below the national average. However, the required EB-5 visa investment in such cases is still currently $1 million.

The Attorney General also has the authority to reduce the required EB-5 visa investment to as low as $500,000.00 for a business established in a "targeted employment area". Targeted employment areas include:

rural areas, defined as any area other than one within a metropolitan statistical area or within the boundary of a city or town with a population of 20,000 or more; and
areas having an unemployment rate that is at least 150% of the national average.

The current regulations set the required EB-5 visa investment for a targeted employment area at $500,000.00.

EB-5 visa qualifying investments may be pooled with investments of others seeking permanent investor EB-5 visas. However, each EB-5 visa investor is required to invest the applicable statutory amount.

Job Creation in EB-5 Visa Cases

As mentioned above, the EB-5 visa qualifying investment must create at least 10 full-time jobs for American citizens, lawful permanent residents or other immigrants lawfully authorized to be employed in the United States. This includes conditional residents, temporary residents, asylees, refugees, and recipients of suspension of deportation.

The 10 positions must be full time. This means employment of a qualified employee in a position that requires a minimum of 35 working hours per week. Although two employees may share a full-time position, part-time employment is specifically excluded. Therefore, a combination of two or more part-time positions will not qualify for EB-5 visa purposes, even if they collectively meet the 35 hour per week requirement.

In calculating the required number of employment positions created, an EB-5 visa investor may count family members who are employed in a new enterprise. However, the investor and his immediate family are excluded.

The term "employee" is defined as an individual who: (a) provides services or labor for the new commercial enterprise, and (b) receives wages or other remuneration directly from the new commercial enterprise. Accordingly, independent contractors will not qualify as employees for the purposes of the EB-5 visa investor category.

A new commercial enterprise established through an EB-5 visa qualifying investment in a "troubled business", as defined in the regulations, will also qualify if the number of existing employees is being or will be maintained at no less than the pre-investment level for at least two years. The term "troubled business" means a business that has been in existence for at least two years, has incurred a net loss for accounting purposes during the twelve-month or twenty-four month period prior to the priority date on the alien's petition and the loss for such period is at least equal to 20% of the troubled business' net worth prior to such loss.

Where the alien's EB-5 qualifying investment amount is pooled with investments of other aliens seeking EB-5 visas, all of the new jobs created by the new commercial enterprise will be allocated among those aliens.

Creating an EB-5 Qualifying New Commercial Enterprise

The regulations permit three methods of establishing an EB-5 visa qualifying new commercial enterprise:

the creation of an original business;
the purchase of an existing business and simultaneous restructuring or reorganization such that a new commercial organization results; or
expansion of an existing business through the investment of the required amount, so that a substantial change in the net worth or number of employees results from the investment of capital. The term "substantial change" is defined to mean a 40% increase in either the net worth or number of employees so that the new net worth or number of employees equals at least 140% of the business' pre-expansion net worth or number of employees.

According to the INA, the EB-5 investor must have made the investment after 29 November 1990. Any for-profit entity formed for the ongoing conduct of lawful business may serve as a commercial enterprise, including sole proprietorships, partnerships, holding companies, joint ventures, corporations, business trusts, etc. However, the term "new commercial enterprise" does not include noncommercial activities, such as owning and operating a personal residence.

The EB-5 Visa Alien's Role in the Business

The alien may not qualify under the EB-5 visa category as a passive investor. It must be established that the alien investor will either have day-to-day management control of the business or act as a policy maker. Pursuant to 8 CFR §204.6(j)(5), if the investor holds a position as a corporate officer of board member or, in the case of a limited partnership, is a limited partner under the provisions of the Uniform Limited Partnership Act ("ULPA"), this will satisfy the EB-5 visa management requirement.

Benefiting the United States Economy

For the EB-5 investor to be eligible for permanent residence, an EB-5 qualifying investment must "benefit the U.S. economy". Unfortunately, the INA provides no guidance on how to determine this issue. It is arguable that simply meeting the employment and investment requirements of the EB-5 category may benefit the US economy. However, it is quite possible that the EB-5 investor will be required to independently establish that the enterprise, through its business operations, will benefit the US economy.

Conditional Permanent Residence for EB-5 Visa Holders

In order to deter fraud, EB-5 investors, their spouses and dependent children are subject to conditional permanent residence for a two-year period. The EB-5 alien must file a petition to remove the conditions during a 90 day period prior to the second anniversary of the alien's lawful admission as a permanent resident. US Citizenship and Immigration Service ("USCIS") will examine the business at the end of the two year period to determine whether or not the alien has complied with all of the requirements.

The EB-5 alien must also show that he or she "sustained the actions required for removal of the conditions" during his or her residence in the United States. An EB-5 entrepreneur will have met this requirement if he or she has "substantially met" the capital investment requirement and has continuously maintained this investment during the conditional residence period. The EB-5 entrepreneur's residence may be terminated at the end of the two-year period or earlier if it is found that the EB-5 business was not established, or was established solely to evade immigration laws or that the requirements were otherwise violated.

Immigrant Investor Pilot Program and EB-5 Regional Centers

As a result of a disappointing response to the basic EB-5 immigrant investor program, Congress enacted a five-year immigrant investor pilot program, which commenced on October 1, 1993. Pursuant to INA §203(b)(5), 300 immigrant EB-5 visas were set aside each year for this pilot program. Section 116(a) of the Commerce, Justice, State and Judiciary Appropriation Bill increased the annual EB-5 visa numbers from 300 to 3,000 and extended the program from five years to seven years. On 28 October 2009, the President signed the Department of Homeland Security Appropriations Act of 2010, which extended the EB-5 regional center pilot program until 30 September 2012.

The requirements of the EB-5 pilot program are essentially the same as in the basic EB-5 visa investor program, with certain exceptions. In order to qualify under the EB-5 pilot program, an investment of at least $500,000.00 must be made in a commercial enterprise located within an approved "regional center", defined by the regulations as "any economic unit, public or private, which is involved with the promotion of economic growth, including increased export sales, improved regional productivity, job creation and increased domestic capital investment."

The requirement of creating at least 10 new full-time jobs is met by showing that, as a result of the new enterprise, such jobs will be created directly or indirectly through revenues generated from increased exports. The term "exports" means services or goods which are produced directly or indirectly through revenues generated from a new commercial enterprise and which are transported out of the United States. To show that 10 or more jobs are actually created indirectly by the business, reasonable methodologies may be used. Such methodologies may include 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 which indicate the likelihood that the business will result in increased employment.

General Counsel Opinion Regarding Certain EB-5 Business Arrangements and the Current Hold on Certain EB-5 Cases

Since the EB-5 visa program was first implemented, several private companies have attempted to establish business structures that comply with the relevant statutory and regulatory requirements while still protecting the EB-5 investor from risk. However, these business structures have recently come under scrutiny. At the end of 1997, the former INS (now "USCIS") issued a field memorandum instructing officers to closely scrutinize petitions that included such arrangements. The Department of State recently ordered its consular posts to suspend visa processing of such EB-5 visa cases.

USCIS (formerly "INS") issued a formal opinion on the matter. In a memorandum dated December 19, 1997, the agency's General Counsel considered the legality of business arrangements that involved some combination of the following:

the use of a down payment of cash with the remainder of the alien's contribution in the form of a promissory note;
a multi-year installment payment plan on a promissory note with a substantial balloon payment after the conditions on the alien's lawful permanent resident status are removed;
an option given to the alien to sell his or her investment for a fixed price that may be less than, equal to or greater than the alien's cash contribution (usually exercisable before or at approximately the same time as the balloon payment on the promissory note is due);
an option given to the enterprise or limited partnership to buy the investment at a fixed price (usually exercisable before or at the same time as the balloon payment on the promissory note is due);
a provision that allows or requires the commercial enterprise to place sufficient cash into a bank account to guarantee that funds will be available to repay the alien if the alien exercises the sell option;
withholding of a portion of the alien's capital contribution for attorneys' and finders' fees and other administrative costs; and
a guaranteed return on the cash portion of the alien's "investment".

The General Counsel opinion concluded that business arrangements involving guaranteed interest payments, "buy and sell" options, and other mechanisms designed to limit the investor's risk do not comply with the statute and regulations governing the EB-5 visa program. It also concluded that the agency was permitted to:

retroactively revoke previously approved EB-5 visa petitions,
terminate the status of existing EB-5 conditional permanent residents, and
ask the Department of State to cease issuing EB-5 visas where the alien's EB-5 visa entitlement was based on these impugned business arrangements.

On 1 December 1997, the Office of Adjudications requested that Service Centers refrain from adjudicating EB-5 visa petitions involving the complex financial arrangements addressed in the legal memorandum. Subsequently, at the Service's request, the Department of State instituted a similar "hold" of EB-5 visa applications containing these arrangements. The current hold remains in place for all initial EB-5 petitions seeking immigrant investor classification, petitions returned from consulates, petitions for removal of conditions filed under section 216A of the Immigration and Nationality Act, and related matters which contain the provisions mentioned in the above-referenced General Counsel opinion.

However, the hold does not apply to all EB-5 visa petitions. USCIS Service Centers are instructed to continue to adjudicate immigrant investor EB-5 visa petitions that are not subject to the hold. Petitions subject to the hold may be withdrawn and new EB-5 visa petitions that are not subject to the hold may be filed and adjudicated. Any such new petitions, however, should be treated in the same manner as any other newly filed EB-5 visa petition.

All-Inclusive Legal Services for the EB-5 Immigrant Entrepreneur

In addition to representing international investors and expansionists before the US government, Ortega-Medina & Associates' all-inclusive fee structure includes identifying an appropriate investment opportunity, escrow negotiations, incorporating the new US enterprise, obtaining a Federal Employer ID number, locating a temporary or permanent business address for the company (including telephone and fax number), obtaining the appropriate business licenses, and a complimentary one-hour, post-visa consultation with our firm's business and employment law expert.

Ortega-Medina & Associates has over ten years experience dealing with similar business visa cases. We have experienced success in many cases that were considered hopeless by other law firms. If we decide to take on a case, it is because we feel it stands a good chance of succeeding. If your EB-5 visa is denied, for any reason other than a determination that you are inadmissible for reasons of criminality or fraud, we will appeal the denial at no additional cost to you and/or attempt to reprocess your case in an alternative visa category. Please contact us so that we can help you determine whether you are an appropriate candidate for the EB-5 visa category.

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