What investors need to know about RFEs.
- What is the Minimum Investment Amount?
- Meeting the At-Risk Requirement
- EB-5 Job Creation
- Source of Funds
- NCE Validity
- Adequate Investment
- Source-of-Funds Documentation
- Evidence of Job Creation
- Level of Involvement
- Business Plan
- What if United States Citizenship and Immigration Services Requires More Information?
What is the EB-5 Program?
The United States Immigrant Investor Program—also known as the EB-5 program—was created by Congress in 1990. Administered by United States Citizenship and Immigration Services, the program serves to stimulate the U.S. economy through the infusion of foreign investment and job creation. In exchange for making a qualifying investment and satisfying EB5 requirements, investors can obtain U.S. permanent residency and a path to U.S. citizenship, if desired. The program remains one of the most popular methods for foreign nationals to immigrate to the U.S.
The EB5 program is carefully regulated by United States Citizenship and Immigration Services. All petitions submitted by investors throughout their EB5 timeline must be filed according to United States Citizenship and Immigration Services guidelines. Of the various petitions, Form I-526E can be particularly challenging. As the first petition investors file, it essentially acts as the EB5 application, in which investors must demonstrate that their investment follows United States Citizenship and Immigration Services regulations.
Form I-526E approval means the investor is eligible for a Green Card that grants conditional permanent residency. However, approval can be delayed if the information included in the petition package is inaccurate, incomplete, or otherwise insufficient. In these cases, United States Citizenship and Immigration Services issues a request for evidence (RFE).
In this piece, we will cover the basic EB5 program requirements, how to properly fill out Form I-526E, and how to respond to an RFE.
EB-5 Program Requirements
To satisfy EB5 program requirements and become eligible for a Green Card, investors must meet the following criteria:
- Their investment meets the minimum threshold.
- They invest in a qualifying business where the invested capital remains at-risk for the duration of the project.
- They create a minimum of 10 jobs for U.S. workers.
- Their funds are traceable to a legal source.
What is the Minimum Investment Amount?
In March 2022, the EB5 Reform and Integrity Act was signed into immigration law, increasing the EB-5 investment requirement. Projects located in targeted employment areas (TEAs) require $800,000, and projects outside of TEAs require $1,050,000.
Meeting the At-Risk Requirement
One of the requirements for a successful EB5 project is that the invested capital remains at-risk for the duration of the investment. This does not mean the project itself must be considered “risky.” In fact, investors are strongly encouraged to conduct proper due diligence on EB5 projects to minimize immigration and financial risk.
The at-risk requirement serves to ensure the EB5 investment incurs not only a chance of gain, but a risk of loss as well. EB5 applicants must actually invest in new commercial enterprises (NCEs), create jobs, and stimulate the U.S. economy instead of simply “buying” a Green Card.
EB-5 Job Creation
The main purpose of the EB5 program is to encourage foreign investment into the United States to create jobs. As a result, qualifying EB5 investments must result in the creation of at least 10 job positions for each investor involved in the project.
For those who choose the direct investment model, only direct jobs can be counted towards the job total, whereas regional center investments may count direct, indirect, and induced jobs. However, regional center investments may only include indirect and induced jobs to meet 90% of the job creation total. This means that these projects will have to create at least one direct job position.
Direct jobs are positions created by the project itself and filled by qualified U.S. workers. These tend to be ongoing operational positions or construction jobs. They must be full-time — at least 35 hours per week. Part-time positions cannot be counted as direct, but job-sharing arrangements are allowed. In such cases, employees divide the hours of a full-time position.
Indirect jobs are created from an EB5 project’s spending on goods and services from local companies. Goods can include operation equipment, construction materials, or other locally produced supplies. Services an EB5 project may need can range from building maintenance to legal counsel.
Induced jobs are similar to indirect jobs in that they reflect the economic impact the EB5 project has on the surrounding community. However, whereas direct and indirect jobs are created through project spending, induced jobs result from employees spending their wages. As employees of the NCE spend their income within the community, they stimulate the local economy and help create induced jobs.
Source of Funds
The source-of-funds requirement is one of the most crucial aspects of the I-526E petition. This requirement serves to ensure the investment capital was obtained through legal means. A detailed and extensive trail of the investment capital funds all the way from their source to the EB5 project is necessary for petition approval.
Preparing Form I-526E
Once an EB5 investor has chosen a project and made the necessary investment, they must then compile their I-526E petition package and submit it to United States Citizenship and Immigration Services. United States Citizenship and Immigration Services evaluates petitions based on the criteria in the previous section, as well as the validity of the NCE and the investors’ level of involvement. As an investor’s eligibility for a Green Card depends on I-526E approval, it is crucial that detailed and thorough supporting evidence is provided alongside the petition.
In this section, we will cover the variety of documentation EB5 investors will need when compiling and submitting their I-526E petition packages.
In the EB5 program, an NCE is defined as a for-profit entity that was created or restructured after November 29, 1990. Sole proprietorships, general or limited partnerships, holding companies, joint ventures, corporations, business trusts, or other entities that may be publicly or privately owned all qualify as NCEs. In short, investors can choose any type of legal business entity other than a nonprofit organization.
Investors must provide proof that the required amount of investment capital was received by the NCE. Documentation that demonstrates this includes the following:
- The NCE’s bank statements showing receipt of the investment;
- Receipts/invoices for assets purchased for the NCE;
- Promissory notes;
- Funds held in escrow.
Those who choose to invest in an EB5 project located within a TEA must also provide proof of the TEA’s status. The necessary documentation for this will vary depending on the type of TEA, as they can be defined as rural or high-unemployment.
A region qualifies as a rural TEA if it meets the following requirements: it cannot be located within a metropolitan statistical area (MSA) as defined by the U.S. Office of Management and Budget; and it may not directly border a city or town with a population greater than 20,000. The population statistics used to demonstrate rural TEA status must use data derived from the most recent decennial U.S. census.
Investors aiming to prove high-unemployment TEA status must provide the region’s unemployment rate and the national unemployment rate of the United States. Both data figures must come from the same source and cover the same period of time.
There are two different methodologies EB5 investors can use to determine if an area qualifies as a high-unemployment TEA:
- American Community Survey (ACS) Data: The ACS is a demographics survey that collects unemployment data by census tract every five-years.
- Census-Share Method: This approach combines ACS data with county-level Local Area Unemployment Statistics (LAUS) to create a one-year unemployment rate average.
Once United States Citizenship and Immigration Services designates an area as a TEA, the status will be valid for two years beginning either when an investor submits their I-526E petition or at the time of investment.
United States Citizenship and Immigration Services sets a very high evidentiary standard for investors proving TEA status. All statistics must be up-to-date and consistent. If the data is not current when the investor submits their I-526E petition, they will not be eligible for TEA status.
Providing source-of-funds documentation is one of the most important aspects of the I-526E petition. In-sufficient evidence is one of the most common reasons for petition denial. Investors must be able to prove that the entirety of the investment capital was obtained through legal means. This can be done via documents that demonstrate the trail of funds from their source to the NCE.
Each EB5 investor will acquire their investment funds in a different way. As such, the documents for the source-of-funds section will vary accordingly. Some examples of documents that can be provided include:
- Tax returns;
- Property sales contract;
- Bank statements;
- Proof of sale of securities;
- Legal will to support inheritance;
- Deed of gift.
The last two documents listed are funds obtained from another person. In such cases, the investor must also prove that person’s lawful source-of-funds.
Evidence of Job Creation
EB5 investors must prove that their investment will lead to the creation of at least 10 jobs for qualified U.S. workers. This can be done through a business plan (which will be discussed in greater detail below) that demonstrates that, due to the nature and projected size of the EB5 project, at least 10 jobs will be created.
Level of Involvement
The level of involvement required from an investor depends on the investment type. As one of the main appeals to direct investment, investors often have more control over their funds and business. Naturally, this necessitates a high level of involvement and entails daily management responsibilities. Those who instead choose regional center investment can often take a passive role with minimal management responsibilities.
In either case, an investor must accurately demonstrate their level of involvement with the EB5 project. This can be done through documentation such as:
- A written statement outlining the investor’s title and responsibilities within the NCE;
- Proof that the investor is a member of the board of directors, a partner, or a corporate officer.
All I-526E petitions must include a business plan to demonstrate to United States Citizenship and Immigration Services that the project meets EB5 program requirements. Moreover, a business plan should present data regarding economic projections and financial analyses to further prove the feasibility of the project. As the business plan is a common reason for RFEs and even outright petition denial, it is crucial for investors to compile a highly detailed, comprehensive, and credible business plan. EB5 investors should aim to create well-organized business plans that convey information as efficiently as possible.
To begin an EB5 business plan, investors should include a description of the project regarding the business concept and business model. This description can include the following:
- Business industry;
- Operations, personnel, and business purpose;
- The business’s mission;
- Future plans for the business;
- Business and owner history.
United States Citizenship and Immigration Services wants to know how likely it is that an investor’s NCE will succeed in a competitive marketplace. Thus, EB5 business plans should provide detailed information on the project’s key personnel, including experience, background, management philosophy, and responsibilities within the business.
As covered before, EB5 investment funds must remain at-risk for the duration of the project. A statement that the investment capital will be at risk is not enough to satisfy this requirement. If an investor has already committed their capital at the time of filing their I-526E petition, they must provide documentation that demonstrates this. If they have not committed the capital, they must instead prove it will be at the time of I-526E approval.
Investors will need to show United States Citizenship and Immigration Services that they have thoroughly analyzed the market, that they understand its market position, and that they have researched their competitors. Budget expenses, such as raw materials and licenses, should be provided, as well as proof that the NCE will be able to afford these expenses.
If the EB5 business will need permits, licenses, and other legal necessities to operate, these must be obtained before filing Form I-526E and submitted alongside the business plan.
What if United States Citizenship and Immigration Services Requires More Information?
EB5 investors who compile a detailed, comprehensive, and accurate I-526E petition package will likely see United States Citizenship and Immigration Services approval without delay. However, this is not always the case, as some I-526E petitions are not straightforward enough under the eyes of United States Citizenship and Immigration Services. If United States Citizenship and Immigration Services requires more information or clarification, the investor will receive a request for evidence (RFE).
What is an RFE?
United States Citizenship and Immigration Services governs the structure of EB5 projects, how the investments are made, and ensures projects remain in compliance with program regulations. If an EB5 investor’s I-526E petition includes inaccurate, incomplete, or inconsistent information, United States Citizenship and Immigration Services will issue an RFE.
Some common reasons for being issued an RFE USCIS include inadequate details regarding the EB5 project or a lack of third-party evidence backing the project’s usefulness. Issues with information in the business plan are a common cause of RFEs as well. Discrepancies between budgets or operating dates, or in-sufficient evidence behind the project’s job creation potential and funding plans can cause United States Citizenship and Immigration Services to send out an RFE. Investors must make sure their business plans are free from inaccurate or inconsistent information before filing the petition. Assistance from experienced attorneys in immigration law is highly recommended for this process.
While receiving an RFE USCIS is a setback in an investor’s EB5 timeline, it does not automatically entail I-526E petition denial. Additionally, not receiving an RFE does not mean the petition will be approved. An RFE simply means United States Citizenship and Immigration Services is seeking additional information regarding the petition, and there is some missing evidence. United States Citizenship and Immigration Services will provide the investor with concise direction on what missing evidence is needed. Once the requested information is provided, United States Citizenship and Immigration Services can reevaluate the petition. In essence, investors can view RFEs as a second opportunity to provide additional evidence.
How to Respond to an RFE
Investors must respond to RFEs fully, accurately, and promptly. Upon receiving an RFE, the EB5 applicant has a limited time to respond. Moreover, once an RFE is issued, case adjudication is halted. Failure to respond before the deadline will likely result in petition denial.
Most RFEs can be responded to in a similar manner. These steps include the following:
- All RFEs will clearly state what information is required from the investor. For example, they may ask for required initial evidence in the form of documents or third-party appraisals. To successfully respond to an RFE, an investor must first carefully note its contents to identify what additional evidence is needed.
- Investors must write a cover letter explaining which documents of additional evidence are being provided in the RFE response. This should include a list of every new piece of evidence and which request they each relate to; preferably in the same order used within the RFE. This step allows United States Citizenship and Immigration Services to more efficiently assess the new information.
- Following the cover letter, investors should attach all forms and documents that were requested in the RFE. To streamline the RFE response process, this requested evidence must be well-organized.
RFEs Can Be Responded Successfully
Not every investor will be issued an RFE during their EB5 timeline. However, receiving an RFE EB5 does not mean one’s I-526E petition will be denied. United States Citizenship and Immigration Services simply requires additional information to the evidence submitted. While RFEs create delays, investors can view them as a second chance to prove their eligibility through the requested evidence. Those who receive I-526E approval can move on to securing permanent residency status through the EB5 visa.
While obtaining I-526E petition approval can be a complex process, investors should not be discouraged. With the help of industry professionals, immigration via the EB5 program can be a smooth and delay-free process. For guidance on Form I-526E, responding to RFEs, and more, contact EB5AN today.