EB-5 Immigrant Investor Program a Win-Win for Foreign Nationals, U.S. Economy

One of the main tools for regional economic development across the United States may be a 25-year-old immigrant investor program that has remained underutilized. The EB-5 Immigrant Investor Program was initially established by the Immigration Act of 1990, and has aimed to attract immigrant investors and entrepreneurs from across the world in greater numbers.

The EB-5 program allows foreign nationals to obtain a green card for residence in the United States if their investment creates jobs here. Specifically, individuals must invest at least $1 million in a business that creates at least 10 jobs for U.S. workers (not counting the investor and his or her immediate family). Or, individuals can invest in a “targeted employment area,” such as a rural area or an area with high unemployment. A lower minimum investment usually applies to such investments. Regardless of the initial investment amount, however, the key requirement for investors is to lay down personal and business roots that ensure success for them and their families.

The EB-5 program benefits foreign nationals and the U.S. economy. For foreign nationals, the EB-5 program represents an opportunity to expand a business into the United States, or invest in U.S. businesses, while acquiring permanent residency. The boost to the local economy comes from the program’s role as a magnet for capital investments and leading entrepreneurial talent to the country.

Two Types of EB-5 Investments

Mahnaz Khazen, president and CEO of the U.S. Immigration Investment Center (USIIC), believes the EB5 program has enormous potential if its benefits could be better communicated to would-be investor immigrants. “This program has infinite potential if it is promoted more ambitiously by the U.S. public, private, and non-profit sectors,” she says.

These investments can be made in one of two ways: either directly into a new or already existing commercial enterprise, or into an EB-5 Regional Center. “A direct investor is an entrepreneur or business person who wishes to build or expand his or her own business,” Khazen explains. “A Regional Center, by contrast, is a U.S. government-approved organization, usually a partnership, established to conduct a project. An investor in a Regional Center is primarily a passive investor.

When it comes to counting jobs created by the investment, the Regional Center may count jobs indirectly created in the vicinity as a result of the project as well as jobs directly created by the project.

So which type of EB-5 investment is best? Khazen says it depends on who the foreign national is. “If the investor is a successful business owner in another country and is confident he or she can be a hands-on owner in the same or a related field here, then direct investment is usually preferable. If the investor prefers being a silent partner, then investing through a Regional Center is more appropriate.”

Other Considerations 

Here are a few other considerations to keep in mind in deciding which type of EB-5 investment might be best:

• Direct investment in a project requires hands-on, day-to-day management of the business, while investing through a Regional Center is a more passive activity. However, direct investors have more control over the success or failure of the business.
• Direct investment also requires extensive hands-on preparation and organization by the foreign national. This includes creating a business plan in accordance with established guidelines and working closely with an immigration attorney to obtain a temporary work visa and a business attorney to establish the business’ legal structure.
• Investing through a Regional Center requires none of this hands-on preparation and organization. The foreign national only needs to sign up with the Regional Center and deposit the investment funds into an escrow account.
• Investors who have multiple business interests often prefer working through a Regional Center so their time is freed up to pursue their local and international business activities.
• When investing directly in a project, the foreign national must live in the area where the business will be located. When investing through a Regional Center, the foreign national can live wherever he or she chooses.
• Regional Centers tend to specialize in specific industries, which can limit the types of investment options available to foreign nationals. They also tend to charge higher administration fees than are assessed via direct investments.
• For direct investors, finding the best partner and project advisor in the United States allows them to pool their business acumen while the applicant’s green card is being processed.

A Real-World Example

One real-world example of the potential offered by the EB-5 program is USIIC’s current massive renovation of the old Merritt Hotel, first built in 1926. The building is situated on scenic Lake Merritt in the city of Oakland, Calif., and is being transformed into a state-of-the-art student residence with over 92 rooms for a local professional school. According to Khazen, EB-5 investors have helped transform the formerly derelict building into a great example of community revitalization, while preserving the building’s historic design. As she says,“This project is an example of impact investing at its best, creating jobs and security while preserving a historic building.”