Recently, I attended a concert which included a composition by a living composer, who happened to be present for the performance. The orchestra manager announced that the orchestra’s “Patrons” were welcome to attend a special reception after the performance, where they could meet the composer.

Not being a Patron of that particular orchestra, I was unable to attend the post-concert reception to meet the composer that night. However, because of my financial support of other music non-profits, I receive a discount on overpriced food and on certain concert tickets at one concert venue.  As a donor, I get free ticket exchanges for concerts sponsored by another nonprofit. And I am given advance access to tickets for another music nonprofit I support.

I would like to say that I support the arts only for the sake of the arts. Yet, when deciding how much to donate, I consider which level of donor benefits I might use. Some people donate to receive free tote bags or other promotional items. Others may like seeing their name printed in a program or posted on a donor wall.

It is doubtful professional fundraisers would continue to offer benefits to donors if they did not increase donations. Further, very few donors choose to decline donation benefits or insist on “anonymous” listings in programs.  It appears that most people enjoy receiving recognition or some sort of personal benefit from their donation.

The United States Citizenship and Immigration Services (USCIS) oversees a program, known as the EB-5 Immigrant Investor Program (EB-5 Program), which encourages foreign entrepreneurs to invest in commercial enterprise in the U.S. These foreign investors choose the amount and type of investment they make because of the benefit they and their families can enjoy as a result–US permanent residency (referred to as obtaining a “Green Card”).

An EB-5 visa is available to foreign nationals who make an investment of $1,000,000 ($500,000 for certain target areas) in a for-profit enterprise which creates at least ten full-time jobs for US citizens or others legally authorized to work in the US. EB-5 investors, as they are known, and their families, then, can apply for EB-5 visas to enter the US and are placed on a path to obtain a Green Card.

History and Status of the EB-5 Visa Program

Congress created the EB-5 Visa in 1990 to benefit the U.S. economy and to incentivize foreign investment that creates or preserves US jobs. EB-5 visas originally were available only to foreign nationals who created, invested in, and managed for-profit businesses, which created or preserved at least ten permanent, full-time US jobs.

In 1992 Congress expanded the program to create the regional center program, which is how most EB-5 investments are made today. The regional center program does not require that the immigrant investor create and manage the for-profit business that directly created jobs. Rather, immigrant investors may invest through an approved regional center, which pools their investments into for-profit business that directly or indirectly create or preserve jobs. Economists then use reasonable economic methodologies to model the indirect job creation.

Congress originally created the regional center program for a five-year trial period. Since then, Congress has extended the regional center program’s “sunset” several times.[1] The most recent extension, signed by President Trump on March 23, 2018, extends the regional center program through September 30, 2018.[2]

EB-5 Basics

Businesses find EB-5 investment an attractive way to raise funds because of its low cost. Immigrant investors' motivation to invest is the desire to receive a Green Card. Therefore, they are willing to accept a low return on their investment compared to banks, private equity funds, and other financing sources.

Small businesses may find it challenging and expensive to work through the regulatory process to qualify for EB-5. It also may be difficult for small businesses to find immigrant investors. Therefore, most businesses raise EB-5 funds through an established regional center.

EB-5 may be attractive, but the process is complicated, and the stakes are high. Therefore, Investors and businesses alike should allow qualified legal counsel to guide and assist them through the process.

USCIS must approve Regional centers in advance. Regional Centers additionally may seek approval of specific projects in advance. Regional centers also provide economic analysis and assist with the regulatory process. Many also have an established pipeline of immigrant investors.

For an opportunity to be most attractive to immigrant investors, it should be in either a rural area or a targeted economic area (TEA). To be a TEA an area must have unemployment of at least 150% of the national average. Investors in those two types of areas may qualify for an EB-5 Visa by investing only $500,000. Investments in other areas must be $1,000,000 to qualify.

Each immigrant investor’s investment must create or preserve ten permanent, full-time U.S. jobs. Qualifying jobs must be held by employees lawfully authorized to work in the U.S. A business that does not use a Regional Center must directly create those jobs and hire the employees. The immigrant investor and the investor’s immediate family members may not be among those employees.

For projects in a Regional Center or Regional Center projects, indirect job creation also is permitted. However, an economist or other qualified expert must evaluate the individual project and provide a report supporting any indirect job creation.

Once an immigrant investor has invested (or is in the process of investing), the investor must file an Immigrant Petition by Alien Entrepreneur (Form I-526) to apply for the EB-5 Visa. Among other things, the investor must demonstrate:

• that the required investment has been/is being made
• that the funds used to invest were obtained lawfully
• that the investment is at risk, with an opportunity for gain
• that ten permanent, full-time, qualifying jobs will be created as a result of the investment
• the immigrant investor will be engaged in the management of the business, through day-to-day management or policy formulation.

The immigrant investor may need to wait a year or years. EB-5 Visas are capped at 10,000 per year, with a minimum of 3,000 of those visas being allocated to regional centers. Technically, only about 710 visas can be issued to immigrant investors from any one country in a single year. However, extra visas may be reallocated to a country which has more than 710 immigrant investors seeking visas. China has for several years been hitting the cap[3], and this year, there are concerns that India also may hit its annual EB-5 Visa cap.[4]

Upon immigration under an EB-5 Visa, the immigrant and qualified family members receive a conditional Green Card. As they approach the second anniversary of their immigration, the investor and family members must file Form I-829, requesting removal of the conditions their Green Cards. If the investor provides acceptable evidence that the investment was made and sustained on the required terms, that the jobs have been created, the investor and family members will receive an unconditional Green Card.

Future of the EB-5 Program

Even though the EB-5 Program is approaching its 30th anniversary, it not without detractors. Some have described it as a “visa for sale” program that caters to the wealthy.[5] Others have raised concerns that criminals and even terrorists may use the EB-5 Program to enter the US.[6]

There have been situations where the alleged criminals were not the EB-5 Visa recipients, but rather US persons who were accused of selling fraudulent, non-existent deals to unsuspecting immigrant investors.[7]  In addition to facing potential loss of their investments, immigrant investors in fraudulent deals may find their immigration status in jeopardy.

USCIS backlogs have contributed to concerns, as the anticipated five-year waiting period for EB-5 investor green cards has been extended by no fault of the investors or EB-5 sponsors. This has forced EB-5 sponsors to identify new opportunities for EB-5 investment to preserve their investors' eligibility.[7]

Also, there is disagreement whether the EB-5 Program is an appropriate way to encourage foreign investment into US businesses. The debate surely will continue when the EB-5 Program next comes up for renewal before Congress.

Yet, the flaws in the EB-5 Program are by and large, not the fault or responsibility of the honest real estate developers and immigrant investors who participate in the EB-5 Program. In many ways, they are a lot like I and others are when we make donation decisions.

Yes, real estate developers and businesses need financing, and immigrant investors have funds to invest. But, it is the benefits they can receive from the EB-5 Program, rather than an altruistic desire to create U.S. jobs, which likely is the deciding factor in their participation in the EB-5 Program.

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[1] https://www.uscis.gov/policymanual/HTML/PolicyManual-Volume6-PartG-Chapter1.html#S-B

[2] https://www.uscis.gov/working-united-states/permanent-workers/employment-based-immigration-fifth-preference-eb-5/about-eb-5-visa-classification

[3] Sophia Yan, U.S. runs out of investor visas again as Chinese flood program, CNN Money (April 15, 2015).

[4] India may Hit EB-5 Visa Annual Cap For the First Time, Little India (May 16, 2018). Some predict that Brazil will soon become a popular alternative for sourcing of EB-5 investors. See Could This Be the Next Hot Spot for Securing EB-5 Investment?

[5] Steven Strauss, Citizenship for sale: EB-5 visas and the wealthy’s brilliant plan to help the wealthy, USA Today (Apr. 26, 2018).

[6] Brian Ross & Matthew Mosk, The $500,000 Green Card – Are Suspected Criminals, Spies And Terrorists Buying Their Way Into America?, ABC News.

[7] Catherine Wilson, Accused EB-5 Visa Fraud Organizer Reaches $84 million SEC Settlement, Daily Business Review (February 2, 2018). James Rufus Koren, Pair misspent millions from Chinese investors in EB-5 visa program, SEC says, Los Angeles Times (Dec. 4, 2015).

This series draws from Elizabeth Whitman’s background in and passion for classical music to illustrate creative solutions for legal challenges experienced by businesses and real estate investors.