EB-5 Immigrant Investor Pilot Program

November 2008 – by Keil Hackley


The Immigrant Investor Pilot Program (commonly referred to as the Regional Center Program) was established pursuant to Section 610 of Public Law 102-395 on October 6, 1992 and differs in certain aspects from the basic EB-5 investor program.

A Congressional mandate aimed at vitalizing economic activity, generating jobs for U.S. workers next to offering eligible aliens the opportunity to become lawful permanent residents laid the foundation for the Regional Center Program, which encourages foreign investors to place their funds into a unit called .

A Regional Center is defined as any public or private economic unit vested in driving economic growth, regional productivity, job creation, and higher domestic capital investment. Previously, the law asked for an investment in a Regional Center that would produce a rise in export sales. Statutory amendments in 2000 and 2002 did away with the requirement regarding export sales increases, in order to have a Regional Center approved; however, these amendments continue to encourage a growth in export sales.

Currently, the Regional Center Program sets aside up to 5,000 immigrant visas each year. Originally set to terminate on September 30, 2003 , the program was revived and extended by Congress until November 2008. As of 2006, approximately 31 Regional Centers had been designated by U.S. Citizenship and Immigration Services (USCIS) or its predecessor INS . However many are likely to be de-listed for lack of activity. To become designated as a Regional Center , a proposed program has to evidence the following basic requirements:

  • Specific focus on a geographic region
  • Promotion of economic growth through increase in export sales, if applicable
  • Promotion of improved regional productivity
  • Creation of a minimum of 10 direct or indirect jobs per investor
  • Rise in domestic capital investment
  • Promotion and publicity to reach prospective investors
  • Positive impact on regional and national economy through rise in household earnings
  • Increase in demand for business services, utilities, maintenance and repairs and construction projects

The Nexus between the Regional Center Program and the EB-5 Investor Requirements

Overall, the EB-5 investor program and the Regional Center Program have the same requirements, with the exception that the Regional Center Program is more lax in regards to indirect instead of direct job creation. An EB-5 investor is required to make a capital investment of $1 million whether inside or outside a . When investing in a Targeted Employment Area (TEA) or a Rural Area (RA), the EB-5 investor has to place funds in the amount of $500,000. To better understand the requirements, a definition of certain key words is necessary:

  • Indirect Job Creation: A major benefit to obtaining Regional Center designation is the indirect job creation aspect of it, which is easier to achieve than having to evidence the direct creation of 10 new jobs. Indirect job creation can occur through the employment creation multiplier effect, which supports the likelihood that the investment will result in increased employment. This multiplier effect can be evidenced using methodologies including multiplier tables, feasibility studies, domestic and foreign market analyses in regards to goods and services to be exported, next to other economically and statistically sound forecasting tools.
  • Targeted Employment Area (TEA): A TEA is a geographic area or political subdivision set within a metropolitan statistical area OR inside a city or town with a population of more than 20,000 and an unemployment level at least 150 percent of the national unemployment rate. Governors identify and designate TEAs within a state (except the District of Columbia , where the mayor makes the designation). A typically seeks to include one or more TEAs, which within a large city are those delineated census track areas, identified according to measured population unemployment rates within these locations.
  • Rural Area (RA): An RA is a geographic area situated outside a metropolitan statistical area, or an area which is part of the outer limits of any city or town with a population of 20,000 or less. In a less densely populated state, an approved statewide probably holds both TEAs and RAs.
  • Required Amount of Investment: The required investment amount is either $1 million or $500,000 depending on the location of the economic enterprise to be invested in. If the location of the investment falls within a TEA or an RA, the minimum investment is $500,000. In all other instances, the foreign investor has to put forth $1 million in order to qualify.
  • Required Commercial Enterprise: Qualification under the Regional Center Program requires either a $500,000 or $1 million investment be made in a new commercial entity situated inside an approved an approved Regional Center .
  • New Commercial Enterprise: The law stipulates that the business invested in must have been established after November 29, 1990 . If the business started operations prior to 1990, the investment must produce a 40 percent or higher increase in either the business’ net worth or in its number of employees or it has to have been restructured and reorganized in a way that it results in a new commercial enterprise.

The 2002 EB-5 amendments eliminated the requirement that the foreign investor create or establish the new commercial enterprise; however, the law kept the specification that the enterprise invested in has to be new.

  • Risk: The EB-5 category requires a foreign investor to place the investment at reasonable risk for the purpose of generating a return on capital investment. The investment can therefore not hold any guarantees, buy back arrangements, unsecured promissory notes, or other agreements or arrangements, which serve to dress an investment for appearance sake or for the purpose of obtaining permanent U.S. resident status. The foreign investor has to fully invest the capital and put it at risk in the new commercial business to create or generate the required ten jobs.
  • Engagement of the foreign investor in the enterprise: Regulations state that the foreign investor is managing or will manage the new commercial business, either by exercising daily managerial control or by participating in policy-making decisions on behalf of the business.
  • Application for Regional Center designation: Any entity, government, or private organization seeking designation should prepare a written narrative with attached documentation as per 8 C.F.R. 204.6(m) proposing a for-profit investment that includes each of the requirements, in order to become classified as a Regional Center.
  • Looking Ahead: The investor program is coming back to life with more consistent adjudication standards and realistic results. By the end of fiscal year 2006 the USCIS had approved 344 investor petitions with another 175 in the subsequent two quarters, a far cry from the numerical cap. Hopefully, as petition approvals are forthcoming, skepticism will fade and the program may finally evolve into the kind of economically productive program it was intended to be.

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