The Benefits of Rural EB 5 Projects

Immigrating to the United States through most of the available visa programs can be a remarkably lengthy process. To complicate matters further for foreign nationals applying for one of these visas, there is typically little certainty that their petitions will be approved, especially if their immigration status relies on a sponsor or on a company’s financial success.

The EB-5 Immigrant Investor Program stands out among the multitude of uncertain, extremely lengthy immigration options. Thousands of foreign investors are now enjoying permanent U.S. Green Cards (that is, permanent residency) through the EB-5 program. The requirements for EB-5 investors are straightforward 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.

Foreign investors planning to apply for the EB-5 visa may find it challenging to choose a new commercial enterprise from the multitude of available offerings. Fortunately, this decision will likely be easier from now on; newly-implemented regulations have made EB-5 projects in rural areas a premium option. Investing in a rural area EB5 project may result in priority processing for visa applicants and thereby allow them to immigrate to the United States significantly faster than expected.

The Benefits of Selecting a Rural EB5 Project

A Reduced Minimum Investment

In the EB-5 program, certain projects are granted targeted employment area (TEA) status by United States Citizenship and Immigration Services (USCIS). To receive such designation, an area must either possess exceptionally high unemployment in comparison to the national average unemployment rate or be rural.

Rural targeted employment areas cannot house more than 20,000 inhabitants, be located in a metropolitan statistical area (MSA), or border a municipality with a population of 20,000 or more. Rural TEA designation must be supported by data from the most recent ten-year U.S. census.

In some cases, public infrastructure projects can also be designated as TEAs.

Investors who choose TEA projects—either high-unemployment, rural, or infrastructure—are allowed to inject only $800,000 into the NCE as opposed to the standard minimum investment threshold of $1,050,000. The difference of $250,000 between the two minimum investment amounts is significant.

Priority Processing

An equally significant benefit for TEA investors was instituted by the EB-5 Reform and Integrity Act of 2022, a far-reaching reform of EB-5 policies that was signed into law on March 15, 2022. The EB-5 Act of 2022 sets aside for TEA investors 32% of the 10,000 visas allocated to the EB-5 program each year. Investors whose visas are taken from this “reserved pool” receive priority processing for their applications and can thus complete the immigration process much faster than their non-reserved counterparts. In effect, such investors can effectively “skip the line” ahead of other visa applicants.

Investors in high-unemployment and public infrastructure targeted employment areas are granted 10% and 2% of the total visa pool, respectively. These are relatively low percentages of the available EB-5 visas, so it is unclear how much of an impact investing in a high-unemployment or infrastructure TEA project will have on processing times. In contrast, rural TEA investors are granted a significant 20% of the total visa pool. As a result, many investors in rural TEA projects will likely 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. As a result, investors in rural TEAs may receive their Green Cards months or even years earlier than non-reserved investors.

An Invaluable Provision for Investors From Backlogged Countries

The option to receive priority processing is especially beneficial to investors from countries that are currently facing visa retrogression. Visa retrogression occurs when a country has an exceptionally high volume of EB-5 investors that threatens to surpass the maximum number of visas available to that nationality. In these cases, the Department of State (DOS) imposes a restriction known as a final action date on investors from oversubscribed nationalities.

Final Action Dates Cause Significant Delays

In essence, final action dates limit when investors from backlogged countries can receive their EB-5 visas. Applicants from non-backlogged countries can obtain their visas once their I-526 petitions are approved, regardless of when they filed the form. But investors from nationalities 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 imposed 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 measure entails that all Chinese regional centers investors who filed their I-526 petitions after the above date will be unable to immigrate to the United States, even if they have already received USCIS approval. To complicate matters further, there is no telling when the DOS will decide to move the final action date forward and thus allow more Chinese investors to receive their green cards.

Avoiding Processing Delays

The delays caused by final action dates can add years to an investor’s EB-5 process, and before the EB-5 Act of 2022, there was no way for investors from backlogged countries to circumvent this measure. Now, all investors, regardless of whether their nationalities are oversubscribed, can “skip the line,” as it were, by investing in a rural TEA. They will not be subject to final action dates.

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, this country 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 can receive their EB-5 visas, the date for filing limits when Chinese nationals can submit an application to the National Visa Center (NVC). China’s severe backlog means that its investors may take 10 to 15 years just to receive their initial EB-5 Green Cards. The potential to avoid these tremendous delays will likely make rural EB5 projects popular among Chinese investors.

As of April 2022, China is the only country experiencing a backlog. At the same time, other high-demand nationalities such as India and Vietnam are getting nearer to retrogression. Since they may become subject to final action dates in the coming months or years, investors from such countries are also likely to invest in rural EB5 projects and thus avoid inconvenient delays.

Considerations for Investors in Rural EB5 Projects

Despite their enticing potential for priority processing, especially for investors from backlogged nationalities, rural EB5 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.

How to Invest in a Rural EB5 Project

The first step to finding a suitable EB5 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 injects investment funds directly into the business with no intermediation from third parties. 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 an investor’s capital and enjoy more relaxed requirements for job creation; in addition to the standard full-time positions described above, EB 5 regional center program projects can also count indirect and induced employment. These two kinds of jobs are a result of a project’s overall economic impact, and they thus make it easier for EB 5 regional center program investors to create at least 10 positions.

Reducing Financial and Immigration Risk

Regardless of the investment type a foreign national chooses, they will have to do careful research on each available new commercial enterprise to minimize their 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, an investor can mitigate their financial risk by examining each project’s track record in the EB-5 industry. Project managers that have ample experience in the EB-5 field 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 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.

It is crucial for EB-5 projects to avoid overreliance on EB-5 funding, which may not materialize if they fail to subscribe enough investors. Rather, the project developer should commit a substantial amount of capital. A senior bank loan is also a sign that a project is properly capitalized.

Once a foreign national invests in a project, they 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.

Obtaining U.S. Green Cards

Once an investor receives Form I-526 approval, they are granted two-year temporary Green Cards and can live and work in the United States. At the end of this period, they must submit Form I-829, which proves that the EB-5 funding was kept at risk and that at least 10 jobs were created. Approval of the I-829 petition grants investors permanent Green Cards.

Rural EB5 Projects and the Future of the EB-5 Program

Despite the risks involved in rural EB5 projects, these investment options offer a streamlined path to U.S. permanent resident status at a reduced minimum investment amount—a truly rare opportunity. Both direct and regional centers projects can be located in rural TEAs. In 2022 and beyond, the EB-5 industry can expect rural targeted employment area projects to grow in popularity and inject significant amounts of funding into growing economies. Interested foreign investors can reach out to EB5AN to learn more about the EB-5 program and find the safest capital investment opportunities.