Investors should know the difference between the two types of EB5 investment options.
Here’s What We’re Going to Cover
What Are EB-5 Investments?
The EB5 visa program is one of the most expedited paths to U.S. permanent residency. The program allows investors who can make a significant financial contribution to the U.S. economy to obtain Green Cards for themselves and their immediate family members (spouses and unmarried children under 21). Permanent residency Green Cards allow investors and their families to work and live anywhere in the United States and travel freely throughout the country. They also eliminate the need for an H-1B visa, an employment sponsor, or a visa sponsor.
The EB-5 Visa Application Process
Once they have made their investments in a new commercial enterprise (any for-profit enterprise established or restructured after November 29, 1990), EB-5 visa program participants file Form I-526E or Form I-526. Once approved by USCIS, EB5 investors who are not yet in the United States file form DS-260 to obtain a visa. Investors already in the United States file Form I-485, Application to Register Permanent Residence or Adjust Status. Since March 2022, investors already in the United States do not have to wait for I-526E petition approval to file Form I-485; both forms can be filed concurrently.
Requirements for EB5 Investments
- EB-5 investments must create a new commercial enterprise, invest in an existing commercial enterprise, or revive a troubled business. In the last case, significant changes must be made to the business.
- EB5 investments must create at least 10 jobs for employees authorized to work in the United States. These jobs must be full-time (at least 35 hours per week) and last for a minimum of two years. While each position must exist for at least two years, positions are not required to be filled by the same individual employee the whole time. Family members of investors who are employed by the business do not count toward the job creation requirement.
- EB-5 investors must prove that their funds were attained legally, e.g., earned or gifted, by providing documentation such as bank statements and tax documents.
A targeted employment area is designated by USCIS (United States Citizenship and Immigration Services) and is defined as a rural area or an area with high levels of unemployment (at least 150% of the national average). Once an investor has injected funds into a commercial enterprise in an area designated as a targeted employment area, the targeted employment area’s designation is valid for the duration of the EB-5 investment.
EB-5 immigrant visa investment options fall under two categories: investments in regional center projects and direct investments. This article will explain the differences between traditional direct investments and investments through regional center entities, and will help investors make an informed decision about which type of investment is best. In addition to seeking out information themselves, it is highly recommended that investors always consult an immigration attorney regarding EB5 investment options.
Direct EB-5 Investment vs. the Regional Center Program
There are two types of EB-5 investments—direct investments and investments in a new commercial enterprise sponsored by a regional center. The requirements for each type of investment differ slightly, as do their processes. There are risks and rewards associated with both investments in a regional center new commercial enterprise and direct investments. Which type of investment is right for each individual investor will depend on the investor’s goals. Once an individual has made an EB-5 investment, they cannot switch from one type of investment to the other, so investors must consider their decision carefully before committing funds to a project.
Direct EB-5 Investment
Direct investments are the standard path for EB-5 investors. With direct investments, EB-5 investors put capital directly into a commercial enterprise. A direct EB-5 investment is a great option for investors who would like to have more control over business decisions and operations. In many cases, EB-5 investors must be directly involved in the business created by a direct investment, though they may restrict their involvement to policy decisions, for example, by becoming a limited partner.
As of March 2022, a direct investment new commercial enterprise may have only one investor, meaning that investors are not permitted to combine funds to invest in the same project. For direct investments, only full-time, W-2 employees of the business itself count toward job creation requirements, and investors must provide documentation proving that their investment created 10 jobs lasting for two years each.
Regional Center-Sponsored Projects
The regional center-sponsored investment model was established in 1992 as a temporary program that must be periodically renewed by the federal government. Investments in regional center-sponsored projects differ from direct EB-5 investments in that they are made in projects sponsored by regional centers. This means that foreign investors will have somewhat less control over business operations than they would with direct investments
Immigrant investor regional centers are agencies that help investors and developers set up an EB-5 new commercial enterprise. Regional centers have to apply for USCIS designation by submitting Form I-956, Application for Regional Center Designation, along with documentation showing that their activities are in line with promoting economic growth as required by the EB-5 investment program. USCIS designation makes a regional center eligible to receive funds from foreign national investors.
A major difference between direct investments and the regional center-sponsored investment model is that regional center-sponsored projects are permitted to use an indirect method to calculate the number of jobs created. In this method, an econometric study is used to determine an investment’s overall impact. For investments in regional center projects, indirect jobs can be counted toward the job creation requirement for up to 90% of jobs created by the project.
Indirect jobs are jobs created for workers who are not directly employed by the new commercial enterprise, but who are involved in its creation. For example, construction workers employed by a third party who work on an EB-5 commercial enterprise could count as indirect jobs.
This rule makes it easier for investors to prove that their EB-5 investment has met the job requirement.
Since March 2022, only regional center-sponsored investment projects are allowed to have more than one EB-5 investor, meaning that if project developers want to combine funds to raise the required capital for a project, they will need to work with a regional center.
What Are the Differences Between Direct Investment and the Regional Center Investment Program?
A major difference between the regional center and direct investment models is that regional center projects are allowed to have more than one investor. This means that investments in regional center projects make good options for investors with limited funds, or investors who want to put money toward projects that require a larger amount of invested capital than one individual can provide.
The special rule that applies to regional center projects regarding the job creation requirement means that investors who partner with regional center entities will have assistance from the regional center in proving that the job creation requirement has been met.
Regional centers are economic units that have been approved by USCIS, meaning that investors can feel secure that investments in projects run by regional center entities are eligible for the EB-5 visa program. Additionally, many regional center projects (though not all of them) are located in designated TEAs, which gives investors the option to invest $800,000 rather than $1,050,000.
While investors in regional center projects will have to do less paperwork to prove that their investments qualify for the EB-5 visa program, they may also have less of a say in decision-making.
One more difference to consider in terms of EB-5 investment options is the differences in financial and immigration risk between regional center and direct investments. Since regional center projects have already been approved by USCIS and make the workload lighter on investors—such as being located in TEAs and helping prove job creation numbers—they tend to make secure investments that give investors’ visa applications high chances of approval.
How to Select the Right Type of Investment
If an investor’s main goal is to become a permanent resident of the United States, investment in a regional center-sponsored commercial enterprise is probably the best option because these investments tend to be safer, but carry less likelihood of large financial reward. They also typically involve less direct involvement in the business on the part of investors, though a level of direct involvement is required for both types of investments. For individuals whose main goal is to become a permanent resident, regional center entities also make good options because there is more freedom to move away from the location of the business in which they have invested. This is especially relevant for investors with family members who may want to seek education or employment opportunities in the United States because they may not want to be tied to a specific geographical location.
If an investor’s main goal is to gain a sizable profit from their investment, a direct investment may be the best option because it is more likely to have this result. A direct investment is also the best option for an investor who wants fuller control over business plans and decisions. However, with direct investments, investors will typically be responsible for proving that the required number of direct jobs were created. Investors who make direct investments will also need to be able to provide the requisite capital for the commercial enterprise on their own without partnering with other investors.
EB-5 Visa Investment Options: Next Steps and Further Assistance
Overall, investors who make direct investments will have the opportunity to be more directly involved in business decisions and practices but may also have to do more extensive paperwork than those who invest in regional center projects.
On the whole, regional center investments tend to have low immigration risk and lower financial reward than direct investments, though projects differ on a case-by-case basis. Because every individual situation is unique, it is best to discuss EB-5 capital investment options with a trusted, credible immigration service.
To discuss EB5 permanent residency investment options with an expert, potential investors can contact EB-5 Affiliate Network (EB5AN) by calling 1-800-288-9138 or sending an email to info@EB5AN.com. Prospective investors are also invited to set up a time to speak to a consultant about the different EB-5 capital investment options and ways EB5AN can provide support.