Investment For Permanent Residence

“EB5” is a short reference to the employment-based fifth preference category of immigration. The U.S. Congress has authorized 10,000 immigrant visas annually for the EB5 category. Given that 10,000 immigrant visas is far more than the number that is used in any one year, the immigrant visas for E85 investors are always “current” and immediately available.

Standard processing times range from 6 to 8 months, counting from the time the initial investor petition is filed with U.S. Citizenship and Immigration Services (“USCIS”) to the time the immigrant visa is issued. Actual processing times in a particular case can vary widely, due to government changes in staffing and priorities.

U.S. law provides that U.S. permanent residence may be granted where there is an investment of $1 million (or as low as $500,000 in many cases) and a plan for creation of 10 jobs.

Investment is not the only means for achieving U.S. permanent residence. Other avenues include petitions by family members and employers, and in many situations these alternative avenues are preferred.

Filing a Petition
The EB5 process is commenced when the investor files a petition. Form I-526, with the USCIS. The petition and supporting documentation must demonstrate EB5 eligibility according to the requirements indicated below.

Invest in a New Commercial Enterprise
The law requires the investor-petitioner to invest in a new commercial enterprise. The enterprise must be “new,” i.e., started alter November 29, 1990, the date the law was enacted. However, an investor’s contribution of capital to an existing business that was formed prior to November 29, 1990 may be acceptable in cases of substantial restructuring or expansion.

The investment must be in a “commercial” enterprise. Any for-profit entity formed for the ongoing conduct of lawful business may serve as a commercial enterprise. This includes sole proprietorship, partnerships, holding companies, joint ventures, corporations, business trusts, or other entities publicly or privately owned. This definition includes a holding company and its wholly-owned subsidiaries, if each subsidiary is engaged in a for-profit activity formed for the ongoing conduct of a lawful business. However, the term “new commercial enterprise” does not include noncommercial activity such as owning a personal residence.

Engage in a New Commercial Enterprise
The law requires the investor to engage in a new commercial enterprise. A passive investor cannot qualify for permanent residence in this visa category. The investor must be involved either in the day-to-day managerial control of the commercial enterprise, or in the management of the enterprise through policy formulation. The USCIS regulations state that if the investor is a corporate officer or board member, or, in the case of a limited partnership, is a limited partner with the rights and responsibilities typically provided under the provisions of the Uniform Limited Partnership Act, then the investor satisfies the requirement of engaging in the management of the new commercial enterprise. The USCIS has stated that the investor must actually engage in management rather than just carry the title.

Investment of Capital
The law requires an investor-petitioner to have invested or be in the process of investing the required capital. This requirement has several elements that require separate consideration.

Amount of Capital
First, the amount of required capital is a minimum $1 million. The minimum amount is reduced to $500,000 in cases-of investment in “targeted employment areas”, which are either rural areas or areas which experience unemployment of at least 150 percent of the national average rate. A rural area is an area not-within either a metropolitan statistical area or the outer boundary of any city or town having a population of 20,000 or more. The assessment of whether the investment is in a targeted employment area is based on statistical relating to the time of investment, and is based on the location where the enterprise is principally doing business.

Equity Capital
Next, to “invest” is to contribute equity capital to the enterprise. Loans of capital by the investor to the enterprise do not count. The investor cannot receive any bond, note, or other debt arrangement from the enterprise in exchange for the contribution of capital: This includes any stock redeemable at the holder’s request. Provision for guaranteed returns and redemption might be classified by the USCIS as impermissible debt arrangements. Also, the petitioner’s personal guarantee of a loan that is the primary obligation of the enterprise does not constitute an equity investment of capital by the petitioner.

Kinds of Capital
“Capital” may include cash and cash equivalents, equipment, inventory, and other tangible  property. Although capital does not include loans made by the petitioner to the enterprise, the investor’s contribution to the enterprise of the cash proceeds of a loan secured by assets owned by the investor may be Considered capital, provided the investor is personally and primarily liable for repayment of the debt, and the assets of the enterprise upon which the petition is based are not used to secure any of the indebtedness.

Separately, the use of a promissory note payable by the investor to the enterprise- as a present commitment to contribute cash to the enterprise in the future – may be considered capital in limited circumstances where the promissory note is secured by the assets of the petitioner, the obligation is a perfected security interest, and the promissory note is valued in fair market U.S. dollars at the time it is contributed to the enterprise. Valuation of the promissory note requires consideration of the value of the assets securing the note, the amenability of the assets to seizure, and the expenses of enforcing a foreign judgment if necessary. An investor also may use a schedule of payments or a promissory note as evidence of being “in the process of investing” the required capital, however, the USCIS requires that payments of the minimum-required capital must be substantially completed before the end of the two-year conditional residence period.

Escrow
The investor may use an escrow, conditioning release of funds to the enterprise on approval of conditional residence status or approval of Form I-526. However, the USCIS has advised that the escrow must release funds directly into the enterprise’s accounts for job-creation purposes.

“At Risk”
The USCIS requires proof that the capital invested is “at risk.” The USCIS focuses on actual and intended uses of capital to confirm that it will be used for job creation and profit-generating activity. The USCIS requires more than a deposit of funds into a business account, instead requiring evidence of the actual undertaking of business activity. The USCIS has held that use of capital for partnership expenses and reserve accounts unrelated to job creation eliminates, consideration of that capital in counting the amount invested by the petitioner.

Tracing and Lawful Source
The law requires proof that capital is invested by the petitioner. Thus, an investor-petitioner should present evidence that traces capital from the enterprise back to the-petitioner as a source.

The USCIS also has required that a petitioner present evidence that the source of the capital is a lawful  one. Regulations specify evidence requirements such as five years of income tax returns. The USCIS also has required evidence of the investor’s level of income. Where the investor’s funds have been received by gift or loan, substantial evidence concerning the bona fides of the donor or lender typically is required.

Benefit the U.S. Economy
The investment must “benefit the U.S. economy” in order to qualify the investor for permanent residence status. Arguably, the petitioner has benefited the economy by meeting the employment and investment requirements of the visa classification. No additional evidence is required in the typical case. However, considering that federal regulation of foreign investment is extensive (for example, in aviation, banking, communications and energy resources) and local economic factors vary widely, it is possible that an investment may not be deemed beneficial to the U.S. economy if it is made in a regulated industry sector or in a volatile local economy sector that protests the foreign investment.

Create or Save Jobs
The investor must create full-time employment positions for at least 10 U.S. citizens, lawful permanent residents or other immigrants lawfully authorized to be employed in the United States. The investor, his or her spouse and children do not count toward the 10 employee minimum. Non immigrants (i.e., those with E, H, L and other temporary worker visas) are also excluded from the count. An “employee” is an individual who provides services or labor for the new commercial enterprise, and receives wages or other remuneration directly from the new commercial enterprise. This definition excludes independent contractors. Under the investor Pilot Program the jab creation is not restricted to employees of the new commercial enterprise, but rather the investor’s petition may include evidence of indirect creation of jobs throughout the economy, as estimated by an expert economic analysis or other reasonable methodology.

When Jobs Must Exist
The petitioner may base the Form I-526 on proof that the required jobs have been created, or on proof that the required jobs will be created before the end of the two-year conditional residence period. in the latter case the investor must support the Form I-526 with a comprehensive business plan demonstrating a need for at least 10 employees before the end of the conditional residence period, The plan must describe the business, its products and services; must include a marketing analysis, including an analysis of the competition’s products and pricing; must include a marketing strategy; must identify the organizational structure and specific plans for hiring of staffing; and must provide financial projections. This requirement may be modified in cases involving investment with a regional center.

Troubled Business/Saving Jobs
Special rules govern investments in “troubled” businesses. A troubled business is one that has been in existence for at least two years, has incurred a net loss for accounting purposes during the 12 or 24 month period before the petition was filed, and the loss for such period is at least equal to 20 percent of the business’s net worth before the loss. If the petition is based on investment in a troubled business, the investor is not required to create 10 new jobs. Instead, the petition may be based on proof that the business will maintain the number of existing employees during the conditional status period.

Regional Center/Indirect Jobs
To encourage immigration through investment, and to concentrate investment in specific regions, Congress created a temporary Pilot Program in 1992, directing the USCIS to set aside visas for people who invest in a designated “regional center.” The Pilot Program currently sets aside 3,000 visas annually. The Pilot Program does not require that the commercial enterprise employ 10 U.S. workers, as long as the investor can reasonably demonstrate that the investment has Created 10 or more jobs indirectly.

Conditional Permanent Residence
When the EB5 investor enters the United States with an immigrant visa (or adjusts status), the investor commences permanent residence status. The investor has the fully-vested status of any permanent resident, including the rights to live, work, and enter the country at will, and earn time toward U.S. citizenship. However, in the EB5 category permanent residence is conditional for the first two years. The significance is that at the end of the two-year period, the investor must file a petition to remove the conditions. The purpose of imposing a condition is to deter fraud. Thus, in very general terms, if the investor demonstrates at the end of the two-year period that the required  investment was made and sustained, USCIS should approve the petition to remove the conditions. if so, the investor’s permanent residence will be without condition. As a practical matter, not all USCIS examiners have substantial experience with EB5 investor cases, and the adjudications of cases can be complicated by onerous requests for further information. Prior substantial practice experience with these cases; therefore, is a blessing for the experienced attorney to share with EB5 investor clients.

Removal of Conditions
A successful investor obtains permanent residence status on a conditional basis. Within the ninety days immediately preceding the second anniversary of obtaining conditional permanent residence status an immigrant investor must file a petition, form I-829, to remove the conditions. Failure to file the I-829 petition Will result in termination of permanent residence status.

The petition must be accompanied by evidence that the alien invested or was in the process of investing the required capital, that the enterprise and investment were sustained throughout the two-year conditional period, and that the investor created or can be expected to create within a reasonable period of time 10 full-time jobs. The jobs requirement is slightly modified in the case of investment with a regional center.

The USCIS should issue a receipt notice for the filing of the I-829 petition. The receipt notice typically is valid for one year, and is used as a travel document and as proof of permanent residence status. Thereafter, if the I-829 petition remains pending beyond the validity of the receipt notice, the investor must Obtain a stamp in the passport to document continuing lawful status.

A failure to remove the conditions may require departure from the United States. It is essential, therefore, that the investor consider – before commencing the EB5 process – the means for removal of the conditions.

If the USCIS approves an I-829 petition, the investor and immediate family will obtain new green cards that are not conditional.

Maintaining Permanent Residence: A Path to U.S. Citizenship
Upon receipt of permanent resident status, each investor is expected to follow the necessary steps to maintain that status.

Maintaining permanent resident status means acting in accordance with an intention to make the United States your permanent home country. Appropriate steps include: establish a US home residence address; obtain a Social Security Number; comply with income tax reporting requirements; register with the Selective Service, if you are a male between the ages of 18 and 26; establish US bank accounts; obtain a state-issued driver’s license; and enroll minor children in US schools.

A permanent resident can travel freely outside of the United States arid reenter the country with an unexpired passport and the green card. However, a permanent resident should not be absent from the United States for more than 180 days during any one time, as this prolonged absence could be considered an abandonment of permanent residence. Extended absences may be permitted, without threat to maintaining permanent residence status, if a reentry permit is obtained.

An absence of more than 180 days also will break the continuity of residence for the purpose of U.S. citizenship by naturalization. The residence requirements for naturalization include continuous residence in the United States for five years. The five-year period commences on the first day the EB5 investor becomes a conditional permanent resident.

Regional Centers
As it was initially enacted in 1990, the immigrant investor EB5 visa category was intended to attract foreign investment and to reverse the debilitating effects of growing unemployment. In 1992, Congress authorized a Pilot Program to facilitate increased immigrant investment in the United States. The Pilot Program is designed to amass and pool capital for targeted investment by “pooling investments in a region of the United States in order to develop interrelated enterprises which would increase the employment base and economic productivity of that region.” These regional areas may be identified with city or county boundaries, a redevelopment area, an enterprise zone, or any similar geographic area with definite boundaries.

A “regional center is a designation granted by USCIS on the basis of a proposal for economic growth in the particular geographic area. The applicant for regional center designation is an entity; it may be any private or public economic development agency, or any for-profit private entity, that advances a general plan to use immigrant investor capital to fuel economic growth within the defined geographic area. In short, a “regional center” is an entity organized in the form of a company or an agency that has received USCIS designation to operate within the rules of the EB5 Pilot Program.

EB5 investors who invest with a designated regional center are not required to rely on proof of direct job creation, but instead may include in their petitions seeking permanent residence proof of indirect job creation based on “reasonable methodologies.” Often, this proof is in the form of expert analysis by an economist. This feature of the Pilot Program is perceived as a relaxation of the evidentiary standards for job creation that otherwise govern in the adjudication of immigrant investor petitions.

With the one exception of proof of job creation, all other EB5 eligibility requirements remain the same for the regional center affiliated EB5 investor.

As of mid-year 2009, USCIS has designated more than 40 regional centers that are spread throughout the United States.

Checklist: Due Diligence Before You Invest
Identify the reasons you desire U.S. permanent residence and set a timeline for immigrating

Assess financial capability, including likely financial resources available to you after immigrating to the United States

Determine whether you can provide documentation to USCIS that would be evidence of the source of capital that you will invest

Hire an expert EB5 lawyer who will advise you concerning eligibility and will guide you through the application process

Determine whether you will invest in a U.S. business that you will solely manage, or in a “regional center” enterprise that typically involves multiple investors

Confer with a qualified professional about the economic merits of the proposed investment

Confer with a tax expert about tax and estate planning

Confer with your EB5 lawyer and ask whether the proposed investment will qualify you for permanent residence based on the investment in The U.S. commercial enterprise you have selected

If your proposed investment involves other investors, such as in a limited partnership that is linked to a regional center, seek out information from other investors

Alternatives to EB5
Not everyone has the ability to invest one million or even half a million dollars. While the process may be longer, there are other alternatives which do not require such a substantial investment,

“E” visa Status
The Immigration and Nationality Act dives special status to citizens of countries which have entered into “treaties of commerce and navigation” or “bilateral investment treaties” with the United States. (Please see Appendix I for the list of Treaty Countries). As a result of the NAFTA treaty, Canadian and Mexican citizens are now eligible for “E” status.

The “E” non-immigrant visa category is particularly useful for business owners, managers, and certain employees requiring extended periods of stay in the United States to conduct business as it relates to (a) trade between the United States and a foreign state or (b) a major investment in the United States. E visas also offer benefits which are not available in many other non-immigrant categories. For example, E visa holders can extend the duration of their visas almost indefinitely and do not have to show ties to the home country such as Canada or Mexico as long as they affirm that they will leave the United States when the period of their authorized stay ends (including any extensions). Further, dependent spouses of E-visa holders can request a work authorization document upon application for their own E visa status.

Overview of the “E” Visa
The E-visa category can be used by the company’s principals or by certain of its employees if it is shown that they are performing functions approved by the applicable rules. With the E visa status, a foreign national is entering the United States solely to (a) carry on substantial trade principally between the United States and the foreign state of which he/she is a national or (b) to conduct, develop, or direct the operations of an enterprise in which substantial investment has been placed. The four (4) main requisite elements of the E visa category are the following:

  1. a treaty must exist between the United States and another foreign state (except as noted above);
  2. a foreign person is entering the United States with an ultimate intention to depart the United States and not to permanently remain: (Note however, that no temporariness or intent to return to the foreign residence is required);
  3. majority ownership or control of the trading or investing company must be held by nationals of the foreign state; and
  4. foreign state citizenship must be held by each employee or principal of the company who seeks E status under the treaty.

Required Nationality
Only citizens or nationals of a treaty country may apply for an E visa. Therefore, landed immigrants into Mexico or Canada are not eligible for E-1 or E-2 visas unless their country of origin/citizenship has entered into its own treaty of commerce and navigation or bilateral investment treaty With the United States. The U.S. Consulate in Toronto will entertain an E visa application pursuant to a treaty other than NAFTA provided that the applicant is also a resident of Canada. The U.S. Consulates in Mexico with few exceptions, will accept for adjudication applications from Mexican citizens only.

The citizenship or nationality of an individual is determined by his or her country of citizenship. In the case of a corporation, its nationality is determined by examining its stock ownership. The nationality of such a corporation is the nationality of the individuals owning at least 50% of the corporation’s stock. In cases where a corporation is sold exclusively on a stock exchange in the country of incorporation, the nationality of the corporation is presumed to be the location of the exchange, However, where a corporation’s stock is exchanged in more than one country, then the applicant must prove and satisfy the consular officer by the best evidence available that the business meets the nationality requirement.

In a situation where the treaty trader or investor is a corporation, individual employees entering the United States under E status must have the same nationality as that treaty business. For example, a national of England could not enter the United States as the manager of a Mexican company.

“E-1” Treaty Trader Visa — Basic Requirements
The E-1 treaty trader visa is available to enterprises engaged in trade with the United States. The trade must be “substantial”, principally between the United States and the treaty country, and the employee or principal trader entering the United States must serve the company in either a managerial or executive position or is performing some “essential skills” in the company. The term “trade’ is defined as including the exchange, purchase or sale of goods having intrinsic value and/or services. Trading in services is permissible, but establishing the existence of such trade through documentary evidence is more difficult. For E-1 purposes, the word “substantial” is defined as meaning where at least 51% of the total volume of the foreign business’ trade is between the U.S. and the treaty country.

The treaty country must show a continued course of trade so trade must have already commenced prior to the alien applying for E status. However, the total income earned from such trade does not have to be substantial as long as the volume of trade itself is substantial. The applicant may be a new hire and prior employment with the company is not required.

E-2 Treaty investor Visa Basic Requirements
The E-2 treaty investor visa is available to nationals of the treaty country who are engaging in investment activities in the United States. The investor must show that he or she has either made a substantial investment or is actively in the process of making a substantial investment in the U.S. business. The funds must be committed and personally at risk in order to qualify and the business must be an active and substantial investment. Holding stocks and undeveloped land and / or depositing funds in a bank account would not qualify as an active investment as they do not involve the operation of an active business.

The principal investor who enters the United States must have control over the business and be responsible for the development and direction of the investment. In the case of an employee of the business, the employee must be either a manager/executive or an employee possessing essential skills which are essential to the operation of the business.

In order for an investment to be “substantial”, it must be proportional to the total value of the business. For example, if the total value of the business is small, the E-2 investment must be a greater proportion of that amount. For new businesses, the investment must be the amount normally considered necessary to establish a viable business.

Although proportionality is specifically referred to as the test for substantiality in the Foreign Affairs Manual (the manual referred to by U.S. consulates), in practice the quantum of the investment is also considered. However, the Foreign Affairs Manual does not state a minimum required investment for E-2 eligibility. In a case involving $50,000.00, it is possible to argue substantiality since the Foreign Affairs Manual specifically refers to an investment of $50,000.00 but requiring a percentage of investment approaching 90-100% of the total value of the business. However, consulates in other countries often require a higher investment amount.

The investment must not be “marginal”, meaning that the investment must not only support  the  investor and his/her family but also in most cases, should create job opportunities for United States workers. Therefore, the investment:

  1. can not be made solely to earn a living but must generate income substantial above that amount needed for living expenses.
  2. must expand job opportunities.

Furthermore, the investor must not work simply as a skilled or unskilled worker.

Visas Required for Canadians/Mexicans
While Canadians are visa-exempt for most categories, S212.1 (1) of the immigration regulations specifically requires any alien seeking admission as a treaty trader or investor under the provisions of NAFTA must be in possession of a non-immigrant visa issued by an American consular officer classifying the alien under that section. Several U.S. consulates in Canada are currently issuing “E” visas. Mexicans may apply for the E visas in various U.S. consulates in Mexico.

If the Canadian or Mexican is already in the United States under another non-immigrant visa category, it is also possible to apply with the Citizenship and Immigration Service (CIS) for a change of status to the E status from within the United States. However, if the Canadian or Mexican leaves the United States and attempts to re-enter, he/she will need an E visa issued by a U.S. consulate abroad to reenter the United States.

United States consulates generally believe that they should be adjudicating E visa cases rather than the CIS. Furthermore, the United States consulate office will consider the case “de novo” notwithstanding that the Immigration and Naturalization Service has issued an E visa approval in the United States. It is therefore recommended that Canadians or Mexicans seeking “E” classification apply at a U.S. consulate, even if they are eligible for a chance of status, if the applicant will be traveling abroad on a regular basis.

Duration of Stay and Extensions
“E” visas are generally valid for a period of five (5) years or less. The maximum visa duration permitted will depend upon the nationality of the alien. This maximum period allowed for each nationality can be determined by referring to the “Reciprocity Schedules” contained in the Foreign Affairs Manual. For example, the maximum duration of a treaty trader or investor visa for Canadian citizens is 60 months, or five (5) years. It is important to remember that a consular officer may: choose to grant a “E” visa for a shorter period of time.

Despite the fact that “E” visas may be valid for up to five (5) years, treaty traders and investors may not be admitted by the CIS for an initial period of more than one (1) year and may not be granted extensions of stay in increments of more than two (2) years pursuant to federal regulation 8 CFR S214.2(e)(1). Therefore, a foreign worker in treaty trader or investor status with a five (5) year visa issued by the United States Consulate Will initially be admitted by the CBP for only one (1) year. He or she can apply for an extension of stay of two (2) years or simply leave the United States and seek reentry with the valid visa. In the latter CBP will again grant the, foreign worker a one (1) year period of stay.

There is no limit on the number of extensions allowed under this category. While dual intent is Statutorily recognized only for and L non-immigrants; in Practice, dual intent is recognized for E non-immigrants as well.

Processing Time
E-2 Applications made at the U.S. consulates in Mexico and Canada require a processing period that varies from post to post.

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