What Are Direct EB-5 Investments?

In light of the suspension of the EB-5 regional center program on June 30, 2021, many foreign nationals interested in making an EB-5 investment may wonder whether United States Citizenship and Immigration Services (USCIS) is still supporting the EB-5 program. The answer is yes—the EB-5 Immigrant Investor Program is fully active despite the expiration of the regional center program. Even though most EB-5 investments were formerly made through regional center projects, foreign nationals can still make direct EB-5 investments and obtain U.S. green cards for themselves and their immediate family members. As the EB-5 program has brought countless benefits to the U.S. economy, investors can be certain that USCIS will continue to oversee the program as usual.

Regional center projects offered EB-5 investors many advantages, including more flexible job creation requirements. Still, direct investments may better suit the needs of many EB-5 investors and are the only way to participate in the program as of June 30, 2021. This article outlines the characteristics of direct EB-5 investments and analyzes their recent history.

Direct EB-5 Investments: An Overview

As their name indicates, these investments are made directly in EB-5 projects without the intermediacy of a regional center. Direct EB-5 projects must follow strict job creation requirements—unlike regional center projects, direct EB-5 projects are allowed to count only directly created jobs. This means that EB-5 projects must hire qualifying U.S. employees whose full-time positions last a minimum of two years. Further, these workers must be included on the project’s payroll. If these criteria are not met, the project cannot count the jobs toward fulfilling USCIS’s job creation requirements.

Further, the way direct EB-5 investment projects and regional center projects are organized is usually quite different. For example, the new commercial enterprise (NCE) in charge of a direct EB-5 project must be the same as the job-creating entity (JCE). There are numerous other differences in the structure of regional center and non-regional center projects, so foreign nationals unfamiliar with direct investments should do extensive research on all applicable USCIS regulations.

One of the most distinguishing characteristics of direct EB-5 projects is the role that investors are expected to play. Direct EB-5 investors are typically involved in the NCE’s day-to-day operations and make important decisions regarding the project. Therefore, foreign nationals planning a direct EB-5 investment should keep in mind that they will not only have to make one sole investment—they will also have to commit their time and energy to managing the business. Still, direct investors usually gain more control over how their investments are used and may obtain a significant profit from their projects.

USCIS dictates that EB-5 projects located in targeted employment areas (TEAs), which are either rural or have high unemployment, can accept a reduced minimum investment amount of $500,000. Since the minimum investment amount is usually $1,000,000, many foreign investors are attracted to TEA projects. However, direct EB-5 businesses are often located in urban, densely populated areas, so they may not qualify as TEA projects.

Direct Investments Since 2000

direct invetments eb-5 visa by years

The recent history of direct EB-5 investments shows that non-regional center projects have occasionally been more popular than regional center investments. As the above graphic indicates, the number of direct EB-5 visas issued grew suddenly in 2015 because of the approaching suspension of the regional center program. Moreover, direct investments were the predominant EB5 investment option before the 2008 financial crisis.

The Future of Direct Investments

EB-5 direct investments may well regain their original popularity due to the aforementioned expiration of the regional center program, which occurred due to the failure of the EB-5 Reform and Integrity Act to be passed. This legislation had promised to authorize regional center investments until 2026, but the unanimous consent vote for the act was blocked. Despite this setback, the Senate will likely reapprove the regional center program.

In the meantime, foreign nationals interested in making an EB5 investment should work with an immigration attorney and EB-5 professionals to learn about the current investment opportunities. EB5AN would be delighted to answer your questions in a free consultation.