Transparent and Institutional EB-5 Regional Center Investments

The History of the EB-5 Regional Center Program

When Congress created the EB-5 program in 1990, EB-5 visa applicants could only make direct investments in new commercial enterprises (NCEs). As detailed below, the lack of an EB-5 regional center sponsor required foreign nationals to create standard, full-time job positions that were registered on the company’s payroll. Moreover, EB-5 visa applicants were devoid of the oversight of a regional center sponsor to manage their funds and ensure that their projects complied with United States Citizenship and Immigration Services EB-5 standards.

These and other limitations of EB-5 direct investment led to the creation of the EB-5 Regional Center Program in 1992. Through this program, business entities can now receive a license from United States Citizenship and Immigration Services (that is, regional center designation) to pool EB-5 funding and supervise its release into a project. While the EB-5 Regional Center Program created an important new niche in the EB-5 industry, regional center sponsorship also grants EB-5 foreign nationals the benefit of increased transparency and accounting requirements for their capital.

With the 2008 financial crisis, regional centers experienced increased demand as project developers across the United States looked to the regional center program as an accessible source of below-market funding. Since then, the regional center program has become by far the most popular investment model in the EB-5 industry.

It is important to note that the regional centers model is temporary and depends on periodic renewal by Congress. While the regional center program had expired briefly due to a delayed spending bill, it experienced a significantly longer period of suspension from June 2021 to March 2022, when the EB-5 Reform and Integrity Act of 2022 was passed. Moreover, due to an initially stringent interpretation of the Reform and Integrity Act, it was not until mid-2022 that regional centers were allowed to resume EB-5 operations.

Now, the regional center model is authorized until September 2027. This secures the regional center EB-5 industry for several more years and incentivizes project developers to raise regional center funding.

The Reform and Integrity Act also introduced stricter transparency and reporting requirements for regional center operators.

Why Are Regional Center Projects Preferable to Direct Investment Projects?

In the direct investment model, an EB-5 investor’s capital is injected directly into an NCE, with no intermediaries. Moreover, direct investment EB-5 projects are only allowed to raise funds from one EB-5 investor, and all 10 required jobs must be standard W-2 positions.

These stricter EB-5 requirements can make it more challenging for an EB-5 investor to fulfill all the immigration services criteria for a Green Card. Many foreign nationals also prefer the additional oversight and transparency that a regional center sponsor can provide; they may be able to seek professional advice from their regional centers managers, who are likely experienced in fund management, accounting, immigration law, and other related fields. Most regional center projects are also located in targeted employment areas.

Regional centers control the flow of EB-5 investment capital into a regional center project. This allows for increased supervision of the transactions, and regional centers can carefully vet the project developer they will collaborate with to ensure financial integrity and compliance with immigration services regulations. Foreign investors who work with regional centers often feel more confident that their funds will be managed carefully and used exclusively for EB-5-compliant job creation purposes.

Perhaps the greatest benefit of EB-5 regional centers is their ability to count indirect employment toward fulfilling the 10-job requirement for investors. Indirect employment is calculated, not by an NCE’s payroll records, but by its overall economic impact. Metrics such as the construction expenditures of a project are used for this purpose.

This framework allows EB-5 investors to reach the 10-job requirement more easily. In some cases, EB-5 visa applicants can invest in regional centers projects that have already created part or all of the needed jobs through construction expenditures. In turn, this can significantly increase an EB-5 investor’s chances of immigration and financial success.