The profiles of the individual or direct EB-5 investor and the regional center EB-5 investor are generally rather different.
The direct EB-5 investor generally has some or all of the following characteristics:
- He or she actually wants to start and/or manage a business.
- His or her business will be creating employment.
- The investment is the driving force behind his or her wanting to come to the US.
- He or she wants to have control over his or her investment.
- He or she wants to maximize profits from his or her investment.
On the other hand, the regional center often meets the needs of investors with a different set of characteristics:
- He or she is not interested in starting a business.
- He or she may be a retiree.
- Although he or she may want to start a business, it will not create sufficient employment for a direct EB-5.
- He or she wants to be geographically mobile.
- He or she wants to spend a significant amount of his or her time outside of the US.
- Immigration – – rather than US business – – is the driving force behind his or her investment.
Partly because regional center investments address the needs of the foreign nationals described above, and partly because the standards for direct EB-5 petitions are so restrictive, the number of EB-5 regional center petitions now exceeds 90% of the total number of EB-5 petitions filed.
The regional center program remains a “temporary” with continuing extensions through the present date. The latest extension expires September 30, 2016. Because of the success of the program both in terms of attracting investors and in terms of providing capital for economic development and job creation, there is an expectation that the program will be extended –perhaps with some changes-by congress as it has been extended continuously since 2002.
Comparing Reginal Center & Direct EB-5
The major advantage of the regional center as compared with a direct EB-5 investment is that indirect employment creation is allowable. In many cases especially where the regional center project has been pre-approved by USCIS, the sole remaining issues are tracing the funds from the investor to the regional center and proving the lawful source of the investor’s funds. This eliminates the need to deal with the many complicated issues involved in a direct EB-5 petition for which the investment enterprise has not been pre-approved.
In addition, the regional center option is advantageous because:
- The foreign national can live anywhere he or she wishes in the U.S.;
- The foreign national can work anywhere he or she wants; or not work, as he or she pleases;
- The foreign national’s children may stay in the U.S. and study in the U.S.; and
- The foreign national can travel in and out of the U.S. as frequently as he or she desires.
The following analysis illustrates the similarities and differences between the direct EB-5 investment and the regional center investment with reference to some of the major elements involved in EB-5 adjudications:
Amount of Investment:
Most of the approved regional centers have been approved as “targeted employment area” investments, thus qualifying for the reduced $500,000 investment requirement. 8 C.F.R. § 204.6 (e). Direct EB-5 investments are either $500,000 or $1,000,000 depending upon whether the investor can prove that the investment is in a “rural area” or in an area which has experienced unemployment of at least 150% of the national average rate. Otherwise, if the investor does not meet her burden of proof on these points, the required amount of investment is $1,000,000.
An individual EB-5 petition requires proof of “full-time employment” as direct employees (not independent contractors) of ten U.S. workers. 8 C.F.R. § 204.6 (j)(4). USCIS policy requires proof by a preponderance of the evidence that all of the necessary jobs will be created within 2.5 years. In any event, pursuant to 8 CFR §204.6 (e), the regional center can qualify based upon indirect employment creation generated in the community through the regional center investment.
Although an investment a the regional center project does not raise the issue of direct employment creation for purposes of the I-526 approval, the choice of project in which the investment is made is critical. In order for the investor to have conditions removed after the end of the two year conditional period, USCIS will have to be satisfied that the direct or indirect employment creation has actually taken place or will occur in a “reasonable time”. 8 C.F.R. § 204.6 (a)(4). In a policy memorandum dated May 30, 2013, USCIS defined “reasonable time” as one year after I-829 filing absent force majeure. The investor should scrutinize how job creation is documented and calculated and the economic models of job creation methodologies utilized for determining indirect job creation.
The direct EB-5 investor must satisfy USCIS that the investor will be engaged in the “management” of the enterprise as opposed to maintaining a “purely passive role.” 8 C.F.R. § 204.6 (j)(5). This does not require actual employment or day-to-day management and could include, for example, serving in an oversight or advisory capacity.
Most of the regional centers projects are limited partnerships or LLC’s. Pursuant to 8 CFR §204.6 (j)(5)(iii), if the petitioner is a limited partner and the limited partnership agreement provides the petitioner with the rights, powers and duties normally granted to limited partners under the Uniform Limited Partnership Act, the investor will be considered sufficiently engaged in the management of the enterprise. As a practical and legal matter, this requirement can be met by a limited partner without the necessity of the investor committing to any specific amount of time or engaging in any day-to-day management, since such activities are performed by the general partner. In practice, the same policy applies to members of LLC’s.
Source of Funds:
The requirement for the investor to prove the lawful source of his or her investment funds is the same for individual and regional center EB-5 petitions. 8 C.F.R. § 204.6 (j)(3). In both cases, the documentation requirements are extensive.
USCIS processing time for I-526 petitions excels 12 months. Investors from any country other than China can proceed immediately to apply for conditional resident status through adjustment as status or immigrant visa processing at a U.S. Consulate for Chinese investors, they cannot proceed to the conditioned residence process until their priority date is reached under the Chinese quota. Most I-526 petitions are approved within three to six months of filing. Since the quota is current for this category of immigrants, within three to six months of filing of the I-526, the investor and his or her family who are in the U.S. are able to file applications for permanent residence, employment authorization and advance parole travel documents. For investors and families outside of the U.S., the procedure for issuance of immigrant visas generally averages 5 to 9 months. A general timeline is as follows:
- Attorney works with investor on documenting lawful source of funds
- Investor chooses investment project based both on immigration due diligence (which we provide) and financial due diligence (which should be provided by a qualified professional).
- Attorney prepares EB-5 petition package.
- I-526 EB-5 petition package filed (government filing fee $1500)
- EB-5 petition approved – average processing time varies (approximately 14 month average as of January 2016).
- Adjustment of status average processing time 6 to 12 months; consular immigrant visa average processing time 9 to 12 months depending upon U.S. Consulate
- Likely waiting period of two or more years for Chinese nationals before Step 3 can be pursued.