A successful I-526 petition (the first and primary investor application) must fulfil many requirements for the investment, job creation, the business plan, and the source of funds.
1. Investment requirements
The standard (non-TEA) EB-5 investment amount is $1,000,000. The discounted amount for a Targeted Employment Area investment (TEA) is $500,000.
Targeted Employment Areas
Congress allowed for a reduced investment amount to encourage investment in areas of greatest need, otherwise known as Targeted Employment Areas. Targeted Employment Areas may be either rural or high-unemployment areas.
A qualifying rural area exists outside a standard metropolitan statistical area (MSA), and outside a city or town with a population of 20,000 or more.
A qualifying high-unemployment area has an unemployment rate of at least 150% of the national average.
Investment must me made in a New Commercial Enterprise
The EB-5 investment must be made into a new commercial enterprise (NCE), a for-profit U.S. business.
Types of allowable business structures for an NCE include corporations, partnerships (general or limited), sole proprietorships, business trusts, joint ventures, holding companies, or other privately or publicly owned entities.
For an investment to qualify for the lower TEA amount, the new commercial enterprise must be principally doing business in the TEA.
Investor NCE management requirements
An investor must be engaged in the management of the new commercial enterprise, either with daily managerial responsibility or through policy formulation.
Capital must be ‘at risk’’; no loans or debt arrangements
The EB-5 investment capital must be “at risk” until the completion of conditional permanent residency. This requires a risk of loss and a chance for gain.
The investment is not considered at risk if either all or a portion of the capital is guaranteed a return, or a rate of return.
Qualifying investment capital cannot take the form of a loan to the new commercial enterprise. The investment of capital cannot be in exchange for a bond, note, convertible debt, obligation, or any other type of debt arrangement.
Further, if the investor is guaranteed future ownership or use of an asset, that asset’s expected value is deducted from the total qualifying capital contribution.
2. Job creation
As EB-5 is fundamentally a U.S. economic-stimulus program, USCIS describes the element of job creation as “critical.” Each investor’s investment of capital must result in the new commercial enterprise creating at least 10 full-time jobs for eligible employees.
Full-time employment requires a minimum of 35 hours per week. Eligible employees include U.S. citizens, permanent residents, or other immigrants legally able to be employed in the U.S.
Direct EB-5 job creation
A direct EB-5 investment must result in 10 jobs within the business that received the capital. These can only include jobs involved in the direct operation of the business. The EB-5 investor and their family are not eligible as qualifying employees for the purposes of job creation.
Regional center job creation
For job-creation quotas, a regional center investment can include directly hired employees, like construction workers, as well as indirect jobs (supplier industry employment), and induced jobs (employment created in the local economy because of the project).
When do the jobs have to be created?
USCIS requires that job creation occurs “within a reasonable time.” This is typically expected to happen during the two-year period of an investor’s conditional permanent residency. However, mitigating factors, such as unexpected economic or weather conditions, can allow for flexibility for the timeline of the job creation.
Actual job creation is determined during the adjudication of the investor’s I-829 petition to remove conditions on permanent residency.
3. Business plan
A business plan is a vital element of an investor’s petition. It details how the investment of capital in a new commercial enterprise will fulfill EB-5 program requirements, including job creation.
According to USCIS, “a comprehensive business plan should contain, at a minimum, a description of the business, its products or services (or both), and its objectives.”
This Immigration Service advises the plan should include the following:
— market analysis, including the competition’s products, pricing, and strength’s and weakness
— target market
— required permits and licenses acquired
— manufacturing process, materials, and suppliers and contracts (if applicable)
— distribution contracts
— marketing strategy, including pricing, advertising, and servicing
— the business’ organizational structure and personnel experience
— employment requirements and descriptions, including a hiring timeline
— cost, sales, and income projections
USCIS says the above all else, “the business plan must be credible.” An adjudicating officer will review the plan in its totality to determine if a business plan is comprehensive and credible. The Immigration Service advises petitioners that the more details that are included, the greater the likelihood the plan will be deemed comprehensive and credible.
4. Source of funds
USCIS requires that an EB-5 petitioner provides a preponderance of evidence that demonstrates a lawful source and path of funds for the capital investment. This applies to both direct and indirect income sources.
The potential sources of funds may include the following income or proceeds:
— income from employment or other business activities
— income from royalties or patents or special rights
— interest, dividends and bonuses
— income from the rental properties or real estate transactions
— inheritance or gifts; proceeds from divorce or other legal proceedings
— any incidental or taxable income.
Investors should note that selecting which income to use as a source of funds is a strategic decision that should be made with an immigration lawyer experienced in EB-5.
Unsecured loans as a source of funds
In 2020, a D.C. appeals court upheld a 2018 federal court decision that EB-5 investors can use the proceeds of unsecured loans for their investment capital. This landmark decision was contrary to the USCIS practice of not accepting such a source of funds.
The court ruling also determined that even if an investor were to default on a such a loan, the proceeds should still be permissible for their investment.
The path of funds must also be lawful
Investors must also show evidence of a lawful path of their investment capital, from acquisition to remittance to the new commercial enterprise account.
For investors in countries that limit the outflow of money, this can present challenges as many transactions may be necessary to provide the full investment amount to the new commercial enterprise.