The EB-5 Immigrant Investor program is a provision of the U.S. immigration law that allows foreign nationals, their spouses, and unmarried minor children to obtain U.S. permanent residence status, which will later allow them to apply for citizenship. To obtain this status, one must invest in a commercial enterprise in the U.S. that creates or preserves 10 permanent full-time jobs for U.S. workers.
This provision of the immigration law has been controversial from the beginning, but has been in the news recently due to the recent news accounts of the promotional trip to China by Nicole Kushner Meyer, sister of Jared Kushner, to find investors for their luxury apartment complex in New Jersey. It is reported that the attendees were reassured that despite his tough talk on immigration, that Trump was a key decision-maker for EB-5 policy and was unlikely to make any changes to it in the near future – making it a safe path to U.S. residency.
Because of all the media attention to this always controversial program, I decided to write this blog to explain the program and some of the issues.
The EB-5 program was created by Congress in 1990 to stimulate the U.S. economy through job creation through investment by foreign persons. This original program, which is now known as the “direct investment” program, is one in which the investor manages and directs the investment.
In 1992, Congress created the Regional Center Program, which sets aside EB-5 visas for those who invest in commercial enterprises associated with regional centers approved by the U.S. Citizenship & Immigration Services (USCIS). As of May 1, 2017, USCIS had approved 883 regional centers, but USCIS warns that approval of an EB-5 regional center by USCIS does not constitute endorsement of the activities of that regional center, guarantee compliance with U.S. Securities laws, or minimize or eliminate risk to the investor.
While the program was first enacted in 1992, the program did not blossom until the financial crisis of 2008. Prior to the financial crisis, the number of visas granted never exceeded 1,000 a year. In 2016, the number granted was over 9,900, not quite reaching the limit of 10,000. Of the visas granted, around 75% have been granted to nationals from mainland China. Recently the countries with the greatest growth in applications have been Brazil, Turkey, and India.
The direct investment EB-5 program has no expiration date, but the Regional Center program has an expiration date that has been extended 11 times since its inception in 1992. It was recently extended on May 5, 2017 through Sept. 30, 2017 and is expected to be extended after that.
The program allocates 10,000 visas a year for EB-5; but the limit counts spouses and children, so the actual number of investments through this program is significantly less than 10,000. Assuming each investor has a spouse and two children, the number would be 2,500 rather than 10,000.
The required minimum investment is generally $1,000,000, but if the investment is in a “targeted employment area” (TEA), the minimum investment is $500,000. A TEA can be a high unemployment area or rural area. A high unemployment area is an area that has experienced unemployment of at least 150% of the national average rate. A rural area is any area not within either a metropolitan statistical area or the outer boundary of any city or town with a population of 20,000 or more according to the most recent census.
There are proposals to increase the minimum required investment for the EB-5 program. Some expect the investment requirement to be increased to $800,000 to $1.2 million, but this increase has not yet been (and may not) be enacted. 85% of the EB-5 visas approved are through the regional center program with only 15% being achieved through the direct investment program.
A major part of the controversy surrounding the EB-5 program revolves around the belief of some that the U.S. should not be “selling” visas. There is also some concern that the Targeted Employment areas are being gerrymandered, don’t really create jobs, and that this program is primarily providing a source of low cost financing to projects that would be built with or without the EB-5 investment.
The other side of this argument is that we should provide visas to those who benefit the country and this program, properly administered, and can result in job creation and economic development that is badly needed in some parts of the country.
The EB-5 process is a long, complicated process that currently can be expected to take 5-7 years from the first filing until residence is obtained. After that, the recipient must be a U.S. permanent resident for five years before being eligible to apply for U.S. citizenship. If you are interested in an EB-5 visa, the first step is consulting with an immigration attorney who can explain the risks and benefits of this program.
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