EB-5 visa is an immigrant visa, which entitles a foreign investor (including spouse and unmarried children under age of 21 years) to a green card. Such investor has to enter the U.S. “for the purpose of engaging in a new commercial enterprise” by making an investment of at least $1 million or, if the new commercial enterprise is located in a “targeted investment area” (i.e., a rural area or an area with 150% of the national average unemployment rate) at least $500,000, and create at least 10 full-time U.S. Jobs within 2-3 years after admission of the investor to the United States.
Investment funds must have been obtained by the investor legally, and proof of the lawful source of funds must be presented as part of the EB-5 visa application.
Examples of lawful source of funds and proof thereof include:
- Income from existing business of the applicant: All applicants are required to provide individual and business (if the applicant owns a business) tax returns for the last 5 years. If the investment funds come from the income from the applicant’s business, the business tax returns must show after-tax income in the amount of investment funds.
- Gift from a family member: Applicant must provide to the United States Citizenship and Immigration services (“USCIS”) proof of such gift (e.g., a sworn affidavit of the grantor or in some civil law jurisdiction, a gift contract) and proof that the grantor earned those funds legally (e.g., tax returns of grantor’s business showing enough after-tax income).
- Investment funds were obtained from sale of a valuable property, e.g., appreciated real estate. Applicant must provide to the USCIS documents showing the sale price (e.g., purchase and sale contract) as well as documents stating the price of original acquisition of the property by the investor (e.g., an opinion by a reputable local real estate firm stating the market value of the real estate at the time the investor inherited or privatized it).
All EB-5 applications and supporting documents must be submitted to the USCIS. Currently, the USCIS takes 15+ months to adjudicate an EB-5 application. In the process of adjudication, the USCIS may request additional evidence from the applicant. Upon the approval of investor’s application, the USCIS issues a conditional green card for 2 years. At the end of the 2-year period, the investor must apply for the removal of the condition and prove to the USCIS that the funds were invested and 10 jobs were created or are about to be created. After the condition is removed from the investor’s residency, she is no longer tied to the qualifying business project and may exit from it. At that point, the investor has a green card without conditions and her right to reside and work in the United States is not dependent on the success of any business project she participates in.
A common avenue of satisfying the requirements for an EB-5 visa is by investing into USCIS qualified business projects called “Regional Centers”. The business plans of such Regional Centers have been already vetted by the USCIS, which simplifies the application process for the investors. Regional Centers are often structured as limited partnerships with the investors being limited partners and the managing company being the general partner. Investors will be required to vote occasionally on project-related matters, which will satisfy the “engaging in a new commercial enterprise” requirement.
At the end of the conditional residency period, the management company of the Regional Center will allocate 10 full-time jobs to each EB-5 investor, provided that the Regional Center was able to create such jobs. If the investor is unable to satisfy this requirement, she loses her conditional residence and will have to depart the US.
The challenges of the EB-5 process are as follows:
A backlog of initial petitions for EB-5 visas: Currently the adjudication process takes 15-16 months. During this period, the applicant may not be able to travel to the US on a non-immigrant visa because of the “immigrant intent” problem. Every time an applicant may try to enter the US on a nonimmigrant visa, the officer at the border will be inclined to deny the entry because of a pending immigrant visa. If the applicant is already in the US and applying for a change of status from non-immigrant to immigrant, the applicant will not be able to leave the US until the status is changed, unless there is an extreme emergency and an “advance parole” is obtained. The adjudication of the applications to remove the condition from residence is also quite lengthy at this point. USCIS currently takes over 17 months to adjudicate these applications. Thus, an investor who has already been in the US as a conditional resident for 21 months will wait for another 17 months to know whether her application to remove the condition from residence is approved.
Lack of control over the operations of the Regional Center:
The main goal of the investor in an EB-5 program is to obtain a green card. The second important goal is not to lose the invested money and to earn income on the investment. An investor in a Regional Center will have little or no control over the progress of the business project. For the satisfaction of the job-creating requirement and for the financial performance of the project, the investor will essentially be at the mercy of the general partner / managing company. Choosing a reliable Regional Center is crucially important. However, as with every other type of investment fund, even stellar past performance does not provide a guarantee that the new project will be successful.
An EB-5 green card based on a direct investment requires an understanding of the US business environment, reliable partners, a well-thought out business plan, and a lot of work:
An alternative to investment into a Regional Center for an EB-5 investor is to set up her own business in the United States. This could be challenging for a foreigner who cannot even travel to the US before she obtains an initial conditional green card. According to the USCIS statistics, about 95% of all EB-5 applicants invest in Regional Centers. However, those who have strong connections in the United States, reliable friends or family members who know the local market, have business ideas and can step in to help running the business, it could be a great opportunity to obtain residence in the US and also set up their own business.
Indian Investors and the EB 5 process
An EB-5 visa is an attractive proposition for an Indian Investor as it is the fastest route to move to the U.S. and obtain a green card as opposed to an F1, H1B or any other Visa category. Indian students come to the U.S. in big numbers every year with the dream of acquiring a job after completing their studies, and eventually settling for the long term in the United States. An EB-5 visa ensures a secured future for such students without the need to grapple with the uncertainty of an H1B visa being granted after the graduation. While India, faces a huge backlog in all other types of immigrant visas, both family-based and employment-based, it faces no backlog in the EB-5 visa category yet. EB-5 visa has been so popular with the Chinese investors, so that currently, there is at least a 3.5-years waiting period for Chinese Investors after the initial EB-5 visa application (Form I-526) is approved. Indians do not have this additional lengthy waiting period yet.
It should be mentioned that the amount of the investment required for a U.S. immigrant investor visa is much lower as compared to the immigrant visas in other countries such as Singapore (requiring an investment of $2.5 million), Germany (requiring an Investment of 1 million euros), Switzerland (requiring an investment of $10 million and a processing time of at least 12 years), to name a few.
Indian residents should be aware that the Reserve Bank of India imposes currency controls on the amounts of funds in US Dollars which can be transferred abroad by one person in one financial year, and this Limit was increased to $250,000 per person per financial year in the most recent RBI notification, which means that a couple together can invest $250,000 per person per year and meet the minimum investment amount required for EB-5. However, before making any such investment, careful advice from experienced currency control lawyer is imperative.
In order to mitigate the mentioned risks, Indian investors who are interested in acquiring residence in the United States should consult US attorneys experienced in this area of immigration and corporate law. They may also require assistance of Indian attorneys in the areas of preparing the source of funds documents for the USCIS which is the evidence of the legality of the investment funds. The Regional Centers, their past projects, their success rates in creating jobs for the investors and having the initial immigrant visa applications and applications for the removal of condition from residence approved are monitored by several reputable consulting services in the United States. Contracting these consultants for an evaluation of a Regional Center is worthwhile to further mitigate the risk of the investment. There are professionals in the United States and India who are knowledgeable of this process and who are ready to help.
(Drawing on our solid corporate and transactional expertise, Cogent Law Group attorneys can help foreign high net worth individuals seeking to relocate themselves and the family to the US. For more information please contact Evgenia Sorokina at firstname.lastname@example.org or Prarthna Kedia at email@example.com)