There Are Many Names For This Visa: Investor Green Cards; Investment Visa; Employment Creation Visa; Immigration through Investment; $500,000 Investment Green Card; Alien Entrepreneur Investor Program; Immigration Investor; Regional Centers. LIST OF REGIONAL CENTERS
What's it all about?
- What is the Investment Green Card?
- Why are most applications for Investor Green Cards through Regional Centers?
- How are Regional Center investments different from the regular types of investments?
- What types of Regional Center investments are available?
- Who are qualified investor immigrants?
- What kind of money can be used?
- What is meant by new commercial enterprise?
- What is meant by creating an enterprise?
- Can you buy an existing business?
- What are pooling arrangements?
- How “engaged” or involved must the investor be in the new commercial enterprise?
- What is meant by investing or actively in the process of “investing capital”?
- What does the word “invest” mean?
- What is the meaning of investing “capital?”
- Beware that the investment is not restricted by the U.S. government.
- How do you count 10 created or saved jobs?
- Can you count the investor, the investor spouse, or children towards the 10 employee minimum?
- Can you count independent contractors as employees?
- How soon must there be 10 new jobs?
- What constitutes a “targeted area?”
- How do I find targeted areas within a city?
- What is a troubled business?
In 1990 Congress created a new category through which people could get Green Cards.
If an investor created a new commercial enterprise and employed 10 people by investing $1,000,000.00, the investor could get Green Cards.
The amount of the investment is reduced to $500,000.00 if someone invests in an enterprise in a “targeted area.”
A targeted area is defined as an area in the USA that has a population of less than 20,000 people or has more than 150% unemployment than the national average. For example if the national unemployment rate is 4.5% then if someone invested in an enterprise located in an area where the unemployment was 4.75% or more they only needed to invest $500,000.00.
The idea behind this Investor’s Green Card is that the investor applies for a temporary Green Card for 2 years. The application is complex, but it basically proves that the investment was made, 10 people will be employed and the money that was used was legally obtained. Then at the 2 years period, if the investor proves to the Immigration Service that the investment is still in the business and that at least 10 people were employed during that 2 year period, the investor would received a permanent Green Card.
It is also necessary to show that the investor had at least policy decision responsibility in the investment. So the investor is not required to be actively involved in the day to day management of the investment.
In 1993 Congress created the Regional Centers as a pilot program. The creation of the Regional Centers has benefits for many investors that are not available under the regular program. The regular program requires the person to establish a new commercial enterprise and directly employ 10 people.
A Regional Center is not a place, but rather a business that is in a special area. U.S. businesses or private agencies or government agencies can apply to the Immigration Service to have their business idea designated as a Regional Center. A Regional Center can then offer investors opportunities to invest in their commercial projects. The huge difference between the regular EB-5 program and the Regional Centers is that these Regional Centers only need show that their commercial enterprises will indirectly create 10 new jobs for each investment. This is discussed later.
If the Regional Center is in a targeted area, the minimum amount of the investment is $500,000.00.
It is possible to have many investors in a Regional Center. So if a Regional Center program required $5,000,000.00 for it’s commercial enterprise, it could provide 10 investors with an opportunity to obtain Green Cards provided that the Regional Center could prove that its commercial enterprise would directly or indirectly result in the employment of 100 people.
So let us look at a couple of examples of what types of commercial enterprises might be able to get Regional Center designation from the Immigration Service.
Example 1. Let’s say a city had a pretty run down area of warehouses along a waterfront. If someone planned to buy these warehouses and convert them to restaurants, hotels, and specialty boutique shops, it could apply for Regional Center status from the Immigration Service, if it could prove that by creating this entirely new upscale area by new construction, many new jobs will indirectly become available, when the shops need assistance, the hotel need workers, and the restaurants would employ chefs and waiters.
Let’s say that Regional Center operator envisaged that it would keep 30% of profits from rentals and sales, then 70% would be divided among all the investors. This is how an investment deal could be structured for a Regional Center.
Another Example is for a private or governmental agency to create a fund for loans to small businesses. Each investor would invest $1,000,000.00 or $500,000.00 depending on where these loans would be made. Then the interest from these loans would be split between the Regional Center operator and the private investors.
In this situation the application to the Immigration Service for Regional Center staus would include proof that by funding these start up businesses or existing business, each investment ($1,000,000 or $500,000) would indirectly create 10 new jobs.
These Regional Centers, like the regular EB-5 investments, also require that the investor have at least a policy-making responsibility in the investment. Investing in the Regional Centers takes a lot of pressure off the investor, because the day-to-day management is in the hands of the Regional Center operator. If the Regional Center is approved by the Immigration Service, the Service is accepting that direct or indirect employment of 10 people will be created by each investment in the Regional Center project, if the business plan comes to fruition.
Since Regional Center operators are actively involved in the day to day management of the investment, the investors only need to be involved in policy decision making from time to time. This would free up the investor to live anywhere in the United States and not necessarily in the area where the investment was made. Of course, this type of business set up is unsuitable for investors who want to be actively involved in the management of their investment.
In June 2010 the Immigration Service confirmed that there were 94 active Regional Centers, with 29 of them being California Regional Centers. This is up from 17 Regional Centers in March 2007. There are different types of investments that are available to potential investors in Regional Centers.
Please contact us in this regard: Leon Snaid Telephone: (858) 412-1309 Fax: (858) 750-1901
Besides the issues of the investment and what is required in terms of employment, the law does not tell us specifically who may be a qualified applicant for a Green Card. It seems fairly clear that a corporation or a partnership or other entity is not an investor, because they are not human beings and only human beings can make the investment.
Two or more individuals may join together and make an EB-5 investment. But each investor must invest either $1,000,000.00 or $500,000.00 depending on where the single new commercial enterprise is located. Remember that in high unemployment areas the amount required for investment is $500,000.00 per investor. Also at least 10 qualifying new jobs must be attributable to each investor. Remember that in Regional Center investments it is not necessary to prove direct employment, because of the Regional Center had to prove to the Immigration Service that direct or indirect employment would be created for 10 people for each investment. However, the Regional Center must progress according to its business plan.
It is not necessary that all the investors in a single commercial enterprise or Regional Center be people seeking Green Cards. There can be U.S. investors in any of these enterprises.
The Immigration Service wants to be sure that the source of all the capital invested is identified and that all the capital that has been invested has been derived from lawful means. For example a drug trafficker cannot use drug money for the investment. It is possible for the investor to fund the investment from a genuine unsecured loan or even a gift.
There are basically two requirements for a new commercial enterprise.
Firstly the enterprise must be “new” in the sense that it was formed after November 29, 1990. Now it’s quite possible for an enterprise that was formed before this date in 1990 to qualify if the investor “restructures” or “expands” an existing business.
The second requirement is that it must be “a commercial enterprise.” Any for-profit entity formed for the on-going conduct of lawful business would be regarded as a commercial enterprise. This includes sole proprietorships, partnerships whether limited or general, holding companies, joint-ventures, corporations, business trusts or other entities that are either publicly owned or privately owned.
This definition would even include an investment in a holding company and its wholly owned subsidiaries if each subsidiary is engaged in a for-profit activity for the on-going conduct of a lawful business. However, the term new commercial enterprise will not include a non-commercial activity like owning and running your own home where you employ 10 servants. Simply stated the investment must be made to make money.
In 1998 a precedent decision said that the petitioner had to be involved in the creation of the enterprise and had to be present at the beginning of the enterprise. This created problems with people who invested in partnerships. Usually a partnership will be created by a general partner, who will go out and look for individuals to invest as limited partners. According to the Immigration Service interpretation, this situation would not qualify for an investor Green Card, because the investors were not partners at the moment that the original partnership was set up. However, in 2002, Congress said that it was no longer necessary to show that the investors “established” a commercial enterprise themselves, instead they only need to show that they have “invested” in a commercial enterprise.
It is possible to create a new enterprise by expanding a business resulting in at least a 40% increase in the net worth of the business or in the number of employees of the business. Obviously this could require the investor to create more than 10 new jobs to qualify for a Green Card. So a business that employs 100 people would need to hire another 40 employees.
It is interesting to note that it is not necessary to prove that the investment alone caused the 40% increase in the net worth of the business. The AAO tests this by looking at the bottom line. They require audited financial statements of the business at the time of the investment and subsequent to the investment. Bottom line is that it seems that restructuring of a business and expanding a business are pretty much the same thing.
That law allows any number of immigrant investors to join together when they are each seeking EB-5 status. Of course, each investor must invest the required amount and all the new jobs created in the business will be divided among those in the group who are applying for permanent residence.
The AAO has created a restriction on pooling investments by requiring that the Petitioner show that “every investor in a partnership” identify the source of their funds, and prove that they were derived by lawful means. This issues is discussed in greater detail a little later.
The law says that the applicant must be engaged in a new commercial enterprise. The regulations say that the investor must be involved in the management of the new enterprise. This management comes about in 2 situations:
1. The investor can be involved in the day-to-day management and control of the enterprise; or 2. Manage the investment through policy formulation.
Even though the law that was passed by Congress clearly says that an investor has invested or is actively in the process of investing capital, the Immigration Service is not interested in the concept of being actively in the process of investing capital. They want to see that the money is already invested and the money is “at risk” as far as the investor is concerned at the time that the first application is made for the 2 year conditional Green Card. The words “at risk” simply mean that the investor may lose that money.
Invest means to contribute capital. So to put money into a business enterprise provided that you get a note or a bond or convertible debt or any other arrangement that forces the new commercial enterprise to repay the amount of the investment won’t work. There is a difference between investing in a business and lending money to a business.
Capital means cash or what can be called a cash equivalent. So inventory and other tangible property that is used for the investment can be regarded as cash equivalent.
Here is an example of what could qualify: If a person was making a $500,000.00 investment in a targeted area and the investor imported factory machinery from his/her own country, which he personally owned that had a fair market value of $200,000.00, and the investor also contributed $200,000.00 of inventory at its fair market value to the enterprise and then finally added $100,000.00 of cash that was at risk, this situation would probably qualify as in contribution of capital.
Using something intangible such as “retained earnings” this will not be regarded as “capital.”
There are significant regulations relating to investment by foreigners. Some of these laws restrict investment in banking, communications, aviation, shipping, land use, energy sources, and government contracting. Congress has also imposed several disclosure and data requirements on foreign investments.
It must be remembered that the investment must be beneficial to the United States economy and if it goes against any statutory law on foreign investment if will not be regarded as being good for the United States economy.
The investment must create full time employment for ten U.S. citizens, permanent residents, or other immigrants that are allowed to work in the United States.
A full time job requires at least 35 working hours per week regardless of who fills the position.
Job sharing arrangements, where two or more qualified employees share a full time position, will also serve as full time employment if the hourly requirement per week is met. So two people working different shifts doing the same job will qualify both people as employees. Job sharing does not allow a combination of part time jobs even though 2 of them may add up to 35 hours a week.
This is not allowed in calculating 10 full time employees. In fact, non-immigrants are not counted when calculating 10 full time employees. So an investor could not file temporary work permits for friends and employees from the investor’s home country to come and work for the business and count them as employees.
The regulations define an “employee” as someone who provides services or labor to the new commercial enterprise and receives wages or other compensation directly from the enterprise.
Please note: The EB-5 pilot program for Regional Centers does not require the investment to directly create 10 U.S. jobs. What is required for Regional Centers is that they create 10 direct or indirect jobs and that the investment will benefit the U.S. economy.
It is not clear when the new jobs must exist. The law as written requires the creation of 10 new jobs in the commercial enterprise. So the law does not require that the jobs exist exactly at the time that the initial investment is made or when the first petition is filed for conditional residence.
This is when the investment need only be $500,000.00. A targeted employment area fits into two categories:
It is a rural area or an area that has experienced high unemployment of at least 150% of the national average. What is a rural area? An area other than an area within a metropolitan statistical area or within the outer boundary of any city or town having a population of 20,000 or more is considered a rural area. The Office of Management and Budget designates the various metropolitan’s statistical areas. Every state tells the Immigration Service what state agency will apply these guidelines and determine the targeted areas for that state.
Once a decade the government takes a census of all the people in the country. This is a huge undertaking requiring accurate information at the very start of each decade. So the metropolitan areas are divided up into small areas. After the census the government knows how many people live in a particular census area. When people living in a particular or census area claim unemployment benefits, they give their address and so the government gets to know what the unemployment rate is for a particular census area. The government publishes the unemployment rate for each census area and if that rate is 150% above the national unemployment rate then it is a “targeted area.” So it is possible that at a cross street in a city can have one corner that is within a targeted area while the three other corners are not. (Note: The term “government” used in this explanation applies to both the Federal and State governments.)
Firstly the business must have been in existence for two years and has incurred a net loss for accounting purposes during the 12 or 24 month period before the petition is filed. “Net loss” is defined as being at least 20% of the businesses net worth before the loss. In this type of case a Petitioner must prove that the investment is in troubled business and that the business will continue to employ the same number of employees that were in the business prior to the investment for at least two years.