EB-5: Immigration Through Investment

April 1, 2011

By Laura J. Danielson

Over twenty years ago Congress created the EB-5 immigrant visa category for investors making significant investments in commercial enterprises that benefit the U.S. economy and create at least ten full-time jobs. Due to onerous restrictions, however, this category was under-utilized for many years. In 2003, Congress initiated a study of the EB-5 program to determine why and concluded that the rigorous application process was deterring applicants. It also found that even though few people had participated, EB-5 investors had invested an estimated $1 billion in a variety of U.S. businesses. Since then we have seen a steady growth in the number of EB-5 investment projects, and particularly in the number of approved Regional Centers. Even though the category remains under-utilized, EB-5 investment is increasingly being looked at as a means of revitalizing the U.S. economy.

Basic EB 5 Requirements

Approximately 10,000 visas are reserved annually for applicants to invest in a new commercial enterprise employing at least ten full-time U.S. workers. To qualify under the EB-5 program, the new enterprise must be one in which the applicant must invest (or be in the process of investing) at least $1 million (or $500,000 if investing in a “targeted employment area”, discussed below). The investment must benefit the U.S. economy and create the requisite ten jobs. Permanent residence for EB-5 investors is granted conditionally for two years, at which time they need to file an application to remove the conditions, proving that their investment has continued to qualify.

Regional Centers

A few years after developing the EB-5 category Congress created a program to encourage its utilization, called the Investor Pilot Program, which set aside 3,000 EB-5 visas each year for those who invest in “designated regional centers”. Although efforts are underway to make this program permanent, it is still temporary and has been renewed several times, most recently until September 30, 2012. At present over ninety percent of all EB-5 investments are made through regional centers. A regional center is defined as an “economic unit, public or private, which is involved with the promotion of economic growth, including increased export sales, improved regional productivity, job creation, or increased domestic capital investment.” The benefit to investors is that the pilot program does not require that they directly employ ten U.S. workers (as “indirect” job creation is sufficient) or that they be engaged in the day-to-day management of the business.

In order to be approved, a regional center must submit a detailed proposal outlining how it plans to focus on a geographical region in the U.S. to achieve the required job creation and growth. It must also outline the amount and sources of committed capital and the plan for promoting the project. The U.S. Citizenship and Immigration Service (“USCIS”) has been strict in approving regional center applications and reviewing existing centers, requiring that substantial information must be carefully tracked. Regional center projects need not be in targeted employment areas (TEA’s), meaning that the amount of the investment could vary from $500,000 to $1 million depending on the project. From a practical standpoint, nearly all regional centers are in TEA’s.

Qualified Investors

USCIS precludes corporate or other non-individual investors from the EB-5 category, but more than one investor can participate in the same, new commercial enterprise provided that each one has invested (or is actively in the process of investing) the required amount and a minimum of ten jobs are attributable to each investor. The source of all capital must be identified and all invested capital must have been obtained lawfully. The regular EB-5 program and the pilot program have similar requirements, with the distinction that the former requires the investor to submit all of the evidence whereas the latter requires the regional center to prove that the investor has met its criteria regarding the particular investment project.

In addition, it is critical that all investors prove that their capital is “at risk” at the time of making the application. It is not enough to intend to invest; there must be an actual commitment of funds. The full amount of the required capital must be expended directly on job creation activities to establish that it is truly at risk.

In order to prove that the capital was lawfully acquired, investors must submit tax returns for the previous five years. Money earned or assets acquired while in the U.S. in unlawful status are not considered lawful means to acquire capital. If the capital is based on earned income, it is important to document exactly how the money was earned and to show tax returns proving that all due taxes were paid in full. Capital can be given as a gift, but the donor must then document his or her lawful source of funds, along with tax returns. If gift taxes apply they must be paid.

In a regular EB-5 case investors must prove that they will be managing the new commercial enterprises. They must either be involved in the day-to-day control of the enterprise or manage through policy formulation (for example, through serving as a corporate officer or on the board). This presents an obstacle for U.S. companies seeking investors that are not interested in giving up an element of control, which helps explain why this represents less than ten percent of all EB-5 investment. The non-regional center solution is more workable for immigrants who are investing in companies they plan to own and manage.

Qualified Investments

USCIS requires that the entire amount of capital be invested and at risk at the time the application is filed, including binding debt arrangements. The term “invest” means to contribute capital, so a contribution made as a loan in exchange for a note, bond, or any other debt arrangement does not qualify. “Capital” means cash and cash equivalents, inventory, and other tangible property. Retained earnings do not qualify as “capital”. Indebtedness secured by assets owned by the investor may be considered capital if the investor is personally liable and the assets of the new enterprise are not used as security. A signed promissory note, for example, generally constitutes a contribution of capital provided the petitioner is obliged to make all the requisite payments and there are no “escape” clauses. USCIC has ruled that the full amount of the promissory note must be paid off by the end of the two year conditional residence period.

New Commercial Enterprises

To qualify as “new”, businesses must be created after November 29, 1990, and must be “commercial” for-profit entities. There are exceptions, however, when an investor restructures, reorganizes, or expands. Unfortunately the rules provide minimal insight into what level of restructuring or reorganizing must be done to establish a new enterprise, and all but one of the challenged cases found that the businesses failed to do so. Expanding an existing business requires that there be an increase of at least 40% in the net worth or the number of employees.

A new enterprise established through the capital investment in a troubled business must prove that the number of existing employees will be maintained at no less than the pre-investment level for a period of at least two years. A “troubled business” is one that has been in existence for at least two years and has incurred a net loss during the 12 to 24 month period before the petition was filed of at least 20 % of the business’s net worth before the loss.

Targeted Employment Areas

To qualify for the lower investment amount of $500,000, the employment must be created in a targeted employment area. Therefore the EB-5 investment must either be in a rural area (located outside any standard metropolitan statistical area or within any cities with a population of 20,000 or more) or in a high unemployment area (with an unemployment rate of at least 150 percent of the national average). TEA determinations are made by each State’s authorities.

Benefiting the U.S. Economy

To qualify for EB-5 status, investments must “benefit the U.S. economy”, but no guidance is provided in the rules as to exactly what this means. The USCIS examiners are therefore left to their own interpretations when adjudicating petitions. Also, it is important to ensure that the business does not violate any U.S. limitations on foreign investments.

Creating Jobs

Normally, except with troubled business applications, at least 10 full time jobs must be created per EB-5 investment. These jobs must be for direct employees of the enterprise and not for independent contractors. The employees may be U.S. citizens, lawful permanent residents, or other immigrants (asylees, refugees, and conditional residents), but they cannot include the investor’s dependents. Full time jobs require at minimum 35 hours per week (including job sharing arrangements). The jobs don’t need to be created immediately at the time of the initial investment and can be rolled out over the two year period of the EB-5 investor’s conditional residence, with a detailed business plan explaining the strategy. The jobs must be located in a TEA to qualify for the $500,000 investment.

Removing Conditional Residence

When the initial application has been approved, the investor either adjusts status (if within the US) or is admitted on an immigrant visa, at which time he or she becomes a conditional resident for two years. In order to remove the conditions a petition must be filed establishing that the individual invested the required capital and that the investment created or will create ten full-time jobs. Technically under the rules an investor will qualify for removal of the permanent residence conditions if it can be shown that the capital investment requirements have been “substantially met” during the conditional period, but as a practical matter CIS is most likely to require that the capital has been fully invested. If the ten requisite jobs aren’t fully staffed by the end of the initial two years USCIS will want proof that those jobs will be created “within a clear, defined and credible period of time.” Investors’ conditional status is extended during the pendency of their applications. If denied, the EB-5 investor will be asked to leave the U.S. and is deportable.

To deter fraud, Congress ruled that the fraudulent creation of EB-5 enterprises, meaning those created for the purpose of “evading any provision of the immigration laws” is a felony punishable by up to five years in prison.


The history of the EB-5 program has proved difficult, with USCIS applying an extremely strict interpretation of the rules. Accordingly, despite the backlog in many of the other employment based immigrant categories, EB-5 approvals have never gotten close to their 10,000 annual maximum. More recently, however, USCIS has begun to improve its policies. USCIS has stated that its goal is to “strengthen and protect the integrity of the program while promoting the intent of Congress to encourage investment and increase employment within the United States.” Given the persistent high rates of unemployment in the U.S. at present, the EB-5 program is an excellent source of investment capital into the U.S. at a time when it is badly needed.