A Streamlined Path to U.S. Green Cards
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Immigrating to the United States is often a long process. To complicate matters further, many foreign nationals are afforded little certainty that their petitions will be approved, especially if their immigration status relies on sponsorship or on a company’s financial success.
Unlike many of the other U.S. immigration options, the EB-5 Immigrant Investor Program stands out as a relatively straightforward path to U.S. lawful permanent resident status. Thousands of foreign investors have obtained U.S. Green Cards through the EB-5 program. The requirements for EB-5 investors are fairly simple and easy to grasp: visa applicants must invest in a new commercial enterprise (NCE)—also known as an EB-5 project—that creates at least 10 jobs per investor and complies with program regulations. An EB-5 project must be a for-profit enterprise that has been created or restructured after November 29, 1990. Aside from this requirement, virtually any kind of business can qualify for EB-5 investment funding. EB-5 projects can be found across numerous industries, including hospitality, real estate development, infrastructure, restaurants, and tech.
One of the biggest challenges for many prospective EB-5 investors is choosing an EB-5 project from the host of available offerings. One newly-implemented regulation may make selecting EB-5 projects easier for investors: investing in an EB-5 project located in a rural targeted employment area (TEA) may result in priority processing for visa applicants, allowing them to immigrate to the United States significantly faster than is otherwise possible.
The Benefits of Selecting a Rural EB-5 Project
Reduced Minimum Investment
Based on an its location, an EB-5 project’s location may qualify as a targeted employment area (TEA) as determined by United States Citizenship and Immigration Services (USCIS). To qualify for such designation, an area must either possess exceptionally high unemployment in comparison to the national average unemployment rate or be rural. Some public infrastructure projects also grant EB-5 projects TEA status.
Rural TEAs cannot have more than 20,000 residents, be located in a metropolitan statistical area (MSA), or border a municipality with a population of 20,000 or more people. Rural TEA designation must be supported by data from the most recent U.S. decennial census.
Investors who choose TEA projects—whether high-unemployment, rural, or infrastructure—are allowed to invest only $800,000 into the NCE as opposed to the standard minimum investment of $1,050,000.
The EB-5 Reform and Integrity Act of 2022 created another significant benefit for investors in projects located in TEAs. This far-reaching reform of EB-5 policies, signed into law on March 15, 2022, sets aside 32% of EB-5 visas for investments in TEAs. Because these visas are reserved, investors in TEA projects and their qualifying family members receive priority processing for their applications and can thus complete the immigration process much faster than if they did not have a reserved visa. In effect, such investors and their families can effectively “skip the line” ahead of other visa applicants.
Of the 32% allotment of reserved visas, 10% are for investments in high-unemployment TEAs and 2% are for investments in public infrastructure TEAs. The high-unemployment TEA category in particular is expected to fill up quickly based on the historic popularity of high-unemployment TEA projects—thus limiting the impact of these visa set asides to a limited number of investors who file early. Because infrastructure TEA projects have relatively few reserved visa slots, the impact of these visa set asides is expected to be relatively small as well. In contrast, 20% of EB-5 visas are reserved for investments in rural TEAs . Due to the greater number of visas reserved for investments within rural TEAs and the historically low number of rural EB-5 projects, many investors in EB-5 projects located in rural TEAs are expected to have their visa petitions processed relatively quickly.
USCIS is known for its lengthy processing times for EB-5 visa petitions. Form I-526, the first application that must be filed after an EB-5 investment is made, can take years to be processed. With the implementation of the reserved visa categories, however, investors in rural TEA projects may receive their Green Cards months or even years earlier than would otherwise happen.
An Invaluable Provision for Investors from Backlogged Countries
The ability to invest in rural TEA projects and receive priority processing is especially beneficial to investors from countries currently facing visa retrogression. Visa retrogression occurs when a country has a higher demand for visas than the available supply. In countries with exceptionally high number of EB-5 investors, the total number of foreign nationals seeking EB-5 visas may surpass the maximum number of visas available to investors and their family members from that nation. In these cases, the Department of State (DOS) assigns a final action date for investors from oversubscribed nations. Visas are available only to applicants whose I-526 filing date is on or before the final action date.
Final Action Date Delays
Final action dates are used to indicate when visas are available for investors from backlogged countries. Typically, applicants can obtain their visas once their I-526 petitions are approved, regardless of when they filed the form. But investors from countries experiencing visa retrogression will be able to obtain Green Cards only if their USCIS priority date for Form I-526—that is, the date on which they filed the petition—is earlier than the final action date published by the DOS.
For example, in its Visa Bulletin for May 2022, the DOS set a final action date of November 22, 2015, for Chinese investors in regional center program-sponsored EB-5 projects. (Regional centers are entities authorized to manage EB-5 investment capital across various projects.) This final action date means that all Chinese regional center investors who filed their I-526 petitions after November 22, 2015, will be unable to obtain an EB-5 visa and immigrate to the United States, even if they have already received USCIS approval on their I-526 petition. To complicate matters further, final action dates advance slowly and unpredictably, making it difficult to know when investors from backlogged countries will be able to obtain their Green Cards.
The delays caused by visa retrogression can add years to the EB-5 process for affected investors. Before the EB-5 Reform and Integrity Act of 2022, prospective EB-5 investors from backlogged countries faced extended delays and no alternative within the EB-5 program. Now, however, EB-5 investors from oversubscribed countries can “skip the line” by investing in rural TEAs since those investments are categorized differently and are not subject to visa retrogression.
China has by far constituted the largest market in the EB-5 industry’s history; a significant portion of the program’s visas have gone to Chinese nationals. As a result of this high demand, China has been in retrogression since 2015, and its final action date has moved very little since 2020. In fact, China’s EB-5 visa backlog is so severe that the DOS imposed another restriction: a date for filing. Whereas the final action date dictates when investors are eligible to receive EB-5 visas, the date for filing limits when investors who are subject to retrogression can submit an application to the National Visa Center (NVC). Due to the severe EB-5 visa backlog, investors from China may not receive their Green Cards for 10 to 15 years.
For investors from China and any other nation facing EB-5 visa retrogression, the potential to avoid these tremendous delays will likely make rural EB-5 projects increasingly popular.
Considerations for Investors in Rural EB-5 Projects
Despite their enticing potential for priority processing, especially for investors from backlogged nationalities, rural EB-5 projects do entail unique challenges and risks. In general, rural areas have a low population and a great need for economic growth. These circumstances usually mean that rural TEA projects are smaller in scope than other offerings in the EB-5 industry, and they may not have the capital to create numerous jobs. Since every EB-5 investor is required to create at least 10 jobs, the reduced scope of rural EB5 projects could reduce their chances of complying with the employment creation threshold.
In addition, projects in rural TEAs are often in the hospitality industry and thus rely on tourism for their success. A hotel development that is open for EB-5 funding, for instance, depends heavily on tourism in the local area to create the needed jobs for its investors and succeed financially. As the COVID-19 pandemic has shown, tourism can be extremely volatile at times, and projects that rely solely on this industry as their source of revenue may be less safe options.
Regardless of which industry an EB-5 new commercial enterprise operates in, investors should carry out thorough research on the project’s management, regional centers sponsor (if any), and capital structure. If a project’s business plan is well-supported and the capital stack does not rely heavily on EB-5 funding for its successful completion, EB-5 applicants can invest with confidence.
Investing in Rural EB-5 Projects
The first step to finding a suitable EB-5 investment project, including a business in a rural TEA, is to decide between the program’s two investment options: the direct model and the EB 5 regional center program. In a direct investment project, a foreign national invests directly into the business with no third-party intermediaries. Moreover, a direct project’s job creation must be made up of full-time positions that appear on the company’s payroll.
In contrast, regional centers manage EB-5 investment capital and allow investors to enjoy more relaxed requirements for job creation. For regional center investments, standard full-time positions are counted for job creation as well as indirect and induced employment calculated by an economist. Indirect and induced jobs are a result of a project’s overall economic impact, and the ability to count these jobs makes it easier for EB 5 regional center program investors to create at least 10 new job positions.
Financial and Immigration Risk
Regardless of which investment type a foreign national chooses, he or she will have to do careful research on available new commercial enterprises to minimize financial and immigration risk.
EB-5 investors typically face a considerable degree of financial risk; USCIS designed the visa program in such a way that no investor can receive a contractual right to repayment or similar guarantees. Realistically, all EB-5 applicants should acknowledge the possibility of financial loss.
At the same time, investors can mitigate their financial risk by carefully examining each project’s risk factors. Projects whose managers have ample experience in the EB-5 industry and have helped several other investors receive Green Cards are the safest options.
Immigration risk is, in many cases, an even more important matter for EB-5 investors. The two most important factors that determine whether an investor will immigrate successfully are a project’s job creation and its capital structure.
When examining a potential project, investors should take a close look at its business plan. If the new commercial enterprise has ample job creation potential, the immigration risk will be significantly reduced. Projects should aim to create more than 10 jobs per investor and thus account for any delays or unforeseen challenges.
EB-5 projects should also be careful to avoid an overreliance on EB-5 funding, which may not materialize if they fail to subscribe enough investors. Projects tend to carry lower immigration risk when the project developer commits a higher percentage of capital. A senior bank loan is also a sign that a project is capitalized in a way that reduces immigration risk for EB-5 investors.
Once a foreign national invests in a project, he or she can file Form I-526. In addition to including proof that an investment has been made in a qualifying project, this petition must also demonstrate that the investor used legally sourced funds. It must also describe the EB-5 project in great detail, explaining how the required jobs will be created. The documentation submitted as part of the investor’s I-526 petition must also sufficiently demonstrate that the project is located in a rural TEA.
Once an investor receives Form I-526 approval, he or she will be eligible to apply for two-year temporary Green Cards and, upon immigrating, is permitted to live and work anywhere in the United States. At the end of this two-year period, the investor must submit Form I-829, which proves that the EB-5 funding was kept at risk and that at least 10 jobs were created by the EB-5 investment. Approval of the I-829 petition grants investors permanent Green Cards.
Rural EB-5 Projects and the Future of the EB-5 Program
EB-5 investment in rural EB-5 projects offers a streamlined path to U.S. permanent resident status at a reduced minimum investment amount. Both direct and regional center projects can be located in rural TEAs. In 2022 and beyond, the EB-5 industry can expect rural TEA projects to grow in popularity, resulting in the infusion of capital into growing economies. Interested foreign investors can reach out to EB5AN to learn more about the EB-5 program and find the safest rural TEA investment opportunities.