This article explains the basics of the EB-5 visa program for foreign investors.

EB-5 basics

U.S. Citizenship and Immigration Services (USCIS) administers the EB-5 visa program, which stands for Employment-Based Immigration: Fifth Preference. The EB-5 program has enabled foreign investors to gain permanent residence status — a green card — if the investor:

  • invests the appropriate amount in a commercial enterprise; and
  • plans to create at least ten permanent, full-time jobs for qualified U.S. workers, or preserve ten jobs of what is currently classified as a “troubled business.” [8 Code of Federal Regulations 204.6]

To qualify, the EB-5 investors needs to invest at minimum:

  • $1 million; or
  • $500,000 in:
    • a high unemployment area, which is any area with an unemployment rate 150% or higher than the national average; or
    • a rural area, which is any area outside a designated metropolitan statistical area (MSA).

This investment needs to be associated with a sponsoring organization approved by the USCIS to participate in the EB-5 program, called a Regional Center. Typically, the Regional Center is organized as a limited liability company (LLC) and can be publicly or privately owned. The investor becomes an investing member of the Regional Center, which uses the money of its members to participate in the local economy by purchasing property and creating jobs. [8 CFR §204.6(m)(3)]

California is a popular destination for EB-5 investors. 192 Regional Centers exist in California, totaling 17% of the total number of Regional Centers located across the U.S. Many of these Regional Centers are property investment firms or LLCs. An investor wishing to meet the job and investment requirements by investing in their own personal residence does not qualify. Of course, they may purchase a personal residence in the U.S., but they also need to separately fulfill the Regional Center and employment requirement to qualify for the EB-5 visa.

Worries about program abuse

How does USCIS ensure foreign investors don’t abuse the program? After all, can’t an applicant apply with the “plan” to create ten full-time jobs and then never follow through? Or, what’s to stop them from reneging on their promise to invest in a Regional Center?

In fact, shortly after the program first started in 1992, Congress identified many abuses of the program. As a result, the EB-5 program was frozen from 1998-2002, and no new applicants were accepted until 2003. In 2016, demand for EB-5 applications is high, with nearly 60,000 investor applications awaiting processing. In contrast, the U.S. caps the number of new EB-5 investors at 10,000 annually.

Today, investors are required to submit evidence of their commitment to participate in the job-creating aspect of the program before gaining admittance into the EB-5 visa program. The evidence needs to show how:

  • the individual has already invested or is in the process of investing the appropriate amount of money in a commercial enterprise that was established:
    • after November 29, 1990; or
    • on or before November 29, 1990 that has been restructured since then so that it is essentially a new business, or expanded so that a 40% increase in net worth or number of employees occurs;
  • the individual will be actively involved in the day-to-day running of the commercial enterprise;
  • the money invested was acquired through lawful means;
  • the ten-worker minimum will be met through a detailed business plan; and
  • the ten-worker minimum will not be met by hiring of family members or individuals not authorized to work in the U.S.

More significantly, in order for the investor and their family to remain in the U.S., they need to provide evidence in the 90 days following their two-year anniversary of admission into the U.S. that they have met the terms of the EB-5 program. Therefore, if the investor did not succeed in creating at least ten full-time permanent jobs and/or in rehabilitating a failing business, their visa will be revoked. If they have met the terms of the program, they receive permanent residence status, which means their green card does not need to be renewed.

Come to America, we want your money!

Since its inception, the EB-5 visa program has aimed to stimulate and grow the U.S. economy. It does this by acknowledging the fact that the U.S. has numerous benefits that are attractive to foreign families, like a good educational system and solid investment opportunities. When it works, it’s a win-win situation for the U.S. and local economy and the foreign investor and their family.

To that end, some Regional Centers have fully embraced the green card part of the program. For instance, Live in America-California Regional Center simply asks the question:

Do you and your family want to live in America?

If you have $500,000, the EB-5 program is for you!

It outlines the various projects program participants can invest in, like the California Investment Immigration Fund, LLC, which finances and develops commercial and mixed-use real estate projects in Los Angeles County.

International migration has a strong influence on U.S. economics, especially in California. Our state receives the most international migrants each year, netting 161,000 new individuals from outside the country in 2014, according to the U.S. Census. Many of these individuals are undocumented, working low-paying and unstable jobs. While low wages limit the amount undocumented workers can contribute to their local economies, they still perform necessary jobs to keep California’s economy rolling, specifically in the agriculture sector.

With the EB-5 program, the federal government seeks to increase the number of wealthy international migrants. These individuals are most likely to purchase not only commercial real estate, but also personal residences to house them and their families. Investments made through the EB-5 program created a total of $3.4 billion in revenue during 2012, and the program is estimated to support 42,000 jobs annually, according to Invest in the USA, a trade organization which advocates for the EB-5 program.

Demand to participate in the EB-5 program will only increase in 2016, as investors uncertain in the global economy turn to the relative safety of U.S. investments. The dollar is strong in the U.S., and the economy is solid in 2016.

California, which already has 17% of the U.S.’s Regional Centers, will continue to profit. Most migrants who choose to purchase real estate in California say they wish to be closer to family and friends already in the state.

Real estate agents seeking more international clients may become familiar with the EB-5 visa program. Then, share the program with current or past international clients so they can pass on the information to their international family and friends who may also wish to move to California.