Congress created the EB-5 immigrant investor
visa category in the Immigration Act of 1990 in the hopes of
attracting foreign capital to the United States and creating jobs
for American workers in the process. The overall advantage of the
EB-5 visa category is that it allows the beneficiary to engage in
commercial enterprise anywhere in the U.S. subject only to some
restriction in the pilot program targeting certain areas. There are
10,000 visas available in the category each year, one-half of which
are reserved for people who participate in a pilot program option
designed for targeted investments in approved regional areas.
There are three basic requirements for the
EB-5 visa: First, the alien must establish a business or invest in
an existing business that was created or restructured after November
19,1990; second, the alien must have invested $1 million ($500,000
in some cases) in the business; third, the business must create
full-time employment for at least 10 U.S. workers.
There are three ways of meeting the
requirement for a qualifying business:
The creation of an original business; the
purchase of an existing business with simultaneous restructuring or
reorganization such that a new commercial organization results; or
the expansion of an existing business created after November 1990
through the investment of the required amount and the creation of 10
new jobs.
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 or business trusts. A holding company
with its subsidiaries would also qualify if each subsidiary is
engaged in the active conduct of business.
Noncommercial activities, such as home
ownership, do not qualify. Also, the alien must be actively involved
in the business, and cannot be a passive investor.
What types of investments meet the
requirements for the EB-5 investor?
The investment can be in the form of 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.
How much investment is required to be an
EB-5 investor?
The basic investment amount is $1 million.
The required investment is $500,000 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 percent of the national average.
For a pilot program investment, the
threshold is a $500,000 capital contribution to a designated
Regional Center, which allocates portions of the capital in the form
of business loans to small business within the targeted area.
There are several ways an EB-5 applicant can
qualify by investing in a new enterprise. The EB-5 investor can
create an original business purchase an existing business or expand
an existing business. Investment in an existing business must result
in a substantial change in the business' net worth or number of
employees by at least 40 percent. The EB-5 investor must meet the
required investment amounts of $1 million. Furthermore, the EB-5
investor must demonstrate that the investment capital was obtained
form a legal source and the required capital is at risk for
investment purposes.
The EB-5 investor should provide evidence of
creation of a new enterprise, or investment in an existing
enterprise including, but not limited to the
following: Articles of incorporation,
partnership agreements, organizational documents; evidence of lease
agreements for the qualifying enterprise; state business licenses;
evidence that the required amount of capital has been transferred;
evidence that investment has resulted in the substantial increase of
net worth; documentation of sources of capital; documentation of
intent to invest or actual commitment to invest capital; and
documentation of assets purchased or transferred from abroad for the
qualifying enterprise.
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