Everything EB-5 investors need to know about job creation for each investment type.
The EB-5 Job Creation Requirement
What Are Qualifying Employees?
When Must the Jobs Be Created?
Do the Employees Need to Be Hired Directly by the EB-5 Project?
How Does an Investor Prove Enough Jobs Were Created?
Do Pre-Existing Jobs Count?
The EB-5 Job Creation Requirement
Long recognized as one of the most straightforward and efficient routes towards a permanent U.S. Green Card, the EB-5 program offers an investment-based visa for qualifying foreign nationals. In exchange for investing in a U.S. business — often referred to as a new commercial enterprise (NCE) — and creating enough jobs for U.S. workers, a foreign national and their immediate family members can permanently live, work, and study in the U.S.
While there are several key elements to the EB-5 process that dictate success, generating enough employment is essential for any EB-5 investor. If an investor’s venture fails to create enough jobs within the designated time window, they will not receive a permanent U.S. Green Card and will have wasted valuable time and money.
Regarding EB-5 job creation, program regulations state the following:
- “A petition submitted for classification as an alien entrepreneur must be accompanied by evidence that the alien has invested or is actively in the process of investing lawfully obtained capital in a new commercial enterprise in the United States which will create full-time positions for not fewer than 10 qualifying employees.” [8 CFR Section 204.6(j)]
Although this statement is relatively succinct, it raises several important questions, such as:
- What are qualifying employees?
- What is considered a full-time position?
- When must the jobs be created?
- Do the employees need to be directly hired by the investor?
- How does an investor prove enough jobs were created?
- Do pre-existing jobs count?
In this piece, we will explore EB-5 job creation in-depth and answer the above questions.
What Are Qualifying Employees?
To be counted towards the job creation total, positions must be filled by qualified employees.
In essence, qualified employees are those with proper authorization to work in the United States, such as U.S. citizens and lawful permanent residents. This also includes conditional residents, temporary residents, asylees, refugees, and persons residing in the United States under suspension of deportation. However, it is important to note that this definition does not include EB-5 investors, their immediate family members, and noncitizens with nonimmigrant status.
To meet the requirements of the EB-5 program, created jobs must be considered full-time — 35 hours or more per week. Part-time positions cannot be counted toward job creation even if the total number of hours is equal to that of a full-time position. However, job sharing arrangements are permitted; two or more qualifying employees may divide the hours of a full-time position provided the hourly requirement per week is met.
Jobs that are seasonal, intermittent, temporary, or transient do not qualify as permanent full-time positions. However, in general, jobs that are expected to last at least two years are not considered seasonal, intermittent, temporary, or transient.
(As we’ll discuss below, the above guidelines apply to jobs created in direct EB-5 projects.)
When Must the Jobs Be Created?
Given that the typical EB-5 immigration process is a years-long venture, a common question among prospective investors is: when do the necessary jobs need to be created? To better answer this question it is helpful to first understand the main stages of the EB-5 journey.
The I-526 Stage
The first stage of the EB-5 process is filing the I-526 or I-526E petition to U.S. Citizenship and Immigration Services (USCIS), the agency that oversees the EB-5 program. How long it takes to process this petition depends on various factors, such as the applicant’s home country, their country’s visa availability, etc.
Upon petition approval, an applicant can either adjust status if already living in the United States or apply for the EB-5 visa through consular processing. Once an investor enters the U.S. on the visa or their adjustment of status is complete they begin their two-year conditional residency period. It is during this two-year period that the necessary jobs must be created.
The I-829 Stage
An EB-5 investor must file the I-829 petition within the final 90 days of their two-year conditional residency period. This petition essentially serves to demonstrate to USCIS that an investor has met all EB-5 program requirements and qualifies for a permanent U.S. Green Card. To receive I-829 approval, an investor must prove that they kept their funds invested in the project and that their funds led to the creation of at least 10 jobs.
Fortunately, USCIS does offer some flexibility if a project fails to create enough jobs by the time an investor files their I-829 petition. If it can be demonstrated that the necessary jobs are “in the process of being created”, the investor’s petition will likely be approved. These jobs must be created within a “reasonable period” after filing Form I-829. When determining the reasonable period, USCIS will consider any information the petitioner has to offer. This can include evidence regarding when the jobs are expected to be created and reasons why they were not created as previously anticipated.
Do the Employees Need to Be Hired Directly by the EB-5 Project?
To best answer this question we must first explore the two different EB-5 investment models: direct investment and investing through a regional center.
Regional Center Investment
Regional centers are entities approved by USCIS to sponsor EB-5 projects. EB-5 investment through a regional center is the only method of the two that allows multiple investors to pool their capital into one project. Because of this, regional centers can gain access to more investment capital and thus typically sponsor large-scale real estate developments such as hotels, resorts, and apartment complexes.
By investing in a regional center project, EB-5 investors are typically classified as limited partners with very little responsibility for managing the NCE. The project developer handles most of the day-to-day operations and will provide necessary documents to an investor when they file their I-526E and I-829 petitions. Such documentation can include business plans that outline projected job creation and evidence that enough jobs have indeed been created.
Direct Investment
As the name implies, direct EB-5 investment involves directly investing in an NCE without a regional center as an intermediary. Unlike its counterpart, direct investment projects can only take on one EB-5 investor at a time.
Types of Jobs in the EB-5 Program
There are three types of jobs relevant to EB-5 investment job creation: direct, indirect, and induced.
- Direct jobs are created when an NCE directly hires an employee.
- In contrast, indirect jobs are created for workers who are not directly employed by the NCE but are involved in its creation. For example, construction workers employed by a third party who work on an EB-5 project often count as indirect jobs.
- Induced jobs are also created from the EB-5 project’s economic impact on the surrounding area. Let’s say an EB-5 enterprise is a large resort that leads to increased tourism in the local community. As a result of this tourism boom, nearby businesses may hire additional workers. These jobs can be considered as induced employment.
In regards to calculating employment generation, regional center projects have a distinct advantage over direct investments. Projects sponsored by regional centers can take credit for direct, indirect, and induced employment when calculating job creation, whereas direct investment projects may only count direct jobs towards job creation requirements.
How Does an Investor Prove Enough Jobs Were Created?
How an EB-5 investor demonstrates job creation to USCIS differs depending on their chosen investment type.
As covered above, direct EB-5 investments may only include direct jobs in the job creation total. To properly demonstrate these jobs were created and sustained for at least two years, direct investors must maintain thorough records of the employment process. Examples of hiring documentation include, but are not limited to, salary statements, timesheets, Form I-9, Form W-4, and Form W-2. An investor submits this information with Form I-829 to prove to USCIS that enough jobs were created.
Although regional center investments can include indirect and induced jobs when fulfilling EB-5 requirements, these may only account for 90% of the job creation total. Therefore, at least one direct job must be created to fully comply with USCIS regulations. Regional center projects demonstrate the creation of direct jobs in the same way as its counterpart method. However, the process is much different when it comes to indirect and induced jobs.
Regional center projects demonstrate the creation of indirect and induced jobs through economic reports that employ certain economic or statistical methodologies. The two most common models used in this process are RIMS II and IMPLAN. Both methods are input/output models that examine the relationships between industries to gauge the overall economic impact the EB-5 project will have in the region. The models generate a final demand multiplier, which is applied to expenditures to determine job creation.
The main purpose of an economic report is to prove to USCIS that a project will create enough jobs if the business plan and budget are followed. An investor submits this report with their I-526 petition to serve as evidence that EB-5 requirements will be met. Two years later, when the investor files Form I-829, this report is used alongside documentation of actual expenditures to prove that enough jobs were, in fact, created.
Do Pre-Existing Jobs Count?
EB-5 regulations state that the NCE must create at least 10 new jobs for qualifying workers. In most cases, this means that the jobs must be newly created positions. For example, if an investor starts a business, all the jobs their investment creates can be counted towards the job creation requirement. If an investor purchases an existing business, the jobs that already exist cannot be counted towards job creation.
The exception to this rule are troubled businesses. If an investor purchases an enterprise that is considered a “troubled business”, they can take credit for any jobs they preserve. USCIS defines a troubled business as an enterprise that has existed for at least two years and incurred a net loss of at least 20% in the 12- or 24-month period before an investor files their I-526 petition.
In cases where an investor purchases a troubled enterprise, they do not necessarily have to create new jobs. For example, an EB5 investment made in a troubled business with 10 employees would not have to create new jobs — it would only have to preserve the 10 existing positions. If the troubled business had nine employees, then the investment would have to preserve the nine positions and create at least one new job to fulfill EB-5 requirements.
Navigating the EB-5 Program’s Requirements
If you are interested in investing in the EB-5 visa or raising funding from EB-5 investors for your real estate project, it’s essential to get proper guidance. EB5AN has spent more than 10 years as one of the most successful fund managers, regional center operators, and consultancies in the industry.
For further information, schedule a free consultation with EB5AN.
