EB-5 Immigrant Visa

This category is also referred to as the fifth employment-based preference (“EB-5”). 10,000 visas per year are available under this category for immigrants seeking to enter the United States for the purpose of investing at least $1 million in a new commercial enterprise which will benefit the U.S. economy and create at least 10 full-time jobs for U.S. citizens, lawful permanent residents or other employment-authorized aliens.

The Immigration Act of 1990 (“IMMACT 90”) amended the Immigration and Nationality Act (“INA”) by establishing the EB-5 immigrant investor category.  In January 2005, United States Citizenship and Immigration Services (“USCIS”) issued a significant memorandum on the EB-5 program. Among other things, the memo established a new Investor and Regional Center Unit (“IRCU”) which would be responsible for overseeing the EB-5 program. Since it began, the IRCU has significantly increased the predictability of EB-5 adjudications.

The regulations permit three methods of establishing a new commercial enterprise:

  1. Creation of an original business;
  2. Purchase of an existing business and simultaneous restructuring or reorganization such that a new commercial organization results; or
  3. Expansion of an existing business through the investment of the required amount, so that a substantial change in the net worth or number of employees results from the investment of capital.

The term “substantial change” is defined to mean a 40% increase in either the net worth or number of employees so that the new net worth or number of employees equals at least 140% of the business’ pre-expansion net worth or number of employees.

According to the INA, the investor must make an investment in new commercial enterprise (i.e. formed after November 29, 1990, the date of enactment of IMMACT 90). Any for-profit entity formed for the ongoing conduct of lawful business may serve as a commercial enterprise, including sole proprietorships, partnerships, holding companies, joint ventures, corporations, business trusts, etc. However, the term “new commercial enterprise” does not include noncommercial activities, such as owning and operating a personal residence.

The requirement to create a new commercial enterprise can create problems for entrepreneurs who seek to invest in a business enterprise that was in existence prior to November 29, 1990. If the business enterprise is considered “restructured” or “reorganized,” it may be acceptable. However, there is very little guidance regarding what degree of restructuring or reorganization must be done before an existing business will be considered a new commercial enterprise. Another way to establish a new commercial enterprise using a business that existed prior to November 29, 1990 is to show that either the net worth or the number of employees has expanded by at least 40% because of the investment. Otherwise, investments made in businesses that existed prior to November 29, 1990 will not qualify.

Definition of Capital

The INA requires that an EB-5 petitioner have invested or be in the process of investing. Although it specifically states that the investor may be “in the process of investing,” as a practical matter USCIS requires the entire investment to be invested and at risk in the commercial enterprise before the I-526 immigrant petition will be approved.

The INA also states the term “invest” means to contribute capital. A contribution of capital in exchange for a note, bond, convertible debt, obligation, or any other debt arrangement between the entrepreneur and the new commercial enterprise does not constitute a contribution of capital and will not be counted as an investment.

“Capital” is defined in the regulations as cash, equipment, inventory, other tangible property, cash equivalents and indebtedness secured by assets owned by the alien provided that he or she is personally and primarily liable and the assets of the new commercial enterprise are not used to secure any of the indebtedness. The definition specifically excludes capital acquired by unlawful means.

Although not specifically referred to in the INA, the regulations state that indebtedness secured by assets owned by the alien entrepreneur may also be considered capital, provided the investor is personally and primarily liable for the debts and assets of the enterprise upon which the petition is based are not used to secure any of the indebtedness.

The Administrative Appeals Office (“AAO”) has held that merely putting cash into the corporate account of a business does not show that the capital is “at risk” for the purpose of generating a return. The AAO has also held that the full amount of the required capital must be expended by the enterprise directly toward job creation or the capital is not considered at risk of loss.

Amount of the Investment

The basic investment amount is $1 million dollars. The Attorney General also has the authority to reduce the required investment to as low as $500,000.00 for a business established in a “targeted employment area”. Targeted employment areas include:

1.  Rural areas, defined as any area other than one within a metropolitan statistical area or within the boundary of a city or town with a population of 20,000 or more; and

2.  Areas having an unemployment rate that is at least 150% of the national average.

The current regulations set the required investment for a targeted employment area at $500,000.00.

Investments may be pooled with the funds of other investors seeking permanent investor visas. However, each investor is required to invest the applicable statutory amount and all of the jobs created by the new commercial enterprise will be allocated among those within the pool seeking investor visas. In addition, subsequent decisions of the AAO have added a restriction on pooled investments by requiring the petitioner to show that every investor in the partnership identify the source of funds and prove that they were derived from lawful means.

Employment Creation

As mentioned above, the investment must create at least 10 full-time jobs for U.S. citizens, lawful permanent residents, or other immigrants lawfully authorized to be employed in the United States. Conditional residents, temporary residents, asylees, refugees, and recipients of suspension of deportation or cancellation of removal may all be considered employees for EB-5 purposes. The investor and his or her spouse or children may not be counted toward the job creation requirement but other family members should qualify as employees for EB-5 purposes.

The 10 positions must be full-time. This means employment of a qualified employee in a position that requires a minimum of 35 working hours per week. Although two employees may share a full-time position, part-time employment is specifically excluded. Therefore, a combination of two or more part-time positions (i.e. part-time waiters, cashiers, etc.) will not qualify, even if they collectively meet the 35 hour per week requirement.

The term “employee” is defined in the regulations as an individual who: (a) provides services or labor for the new commercial enterprise, and (b) receives wages or other remuneration directly from the new commercial enterprise. Accordingly, independent contractors will not qualify as employees for the purposes of the investor category.

A new commercial enterprise established through an investment in a “troubled business”, as defined in the regulations, will also qualify if the number of existing employees is being or will be maintained at no less than the pre-investment level for at least two years. The term “troubled business” means a business that:

  1. Has been in existence for at least two years, and
  2. Has incurred a net loss for accounting purposes during the 12- or 24-month period before the alien’s petition was filed, and the loss for such period is at least equal to 20% of the troubled business’ net worth prior to such loss.

Engaging in a New Commercial Enterprise

The INA requires an EB-5 applicant to “engage” in a new commercial enterprise. The investor must therefore maintain more than just a passive role in the business. The regulations require an EB-5 applicant to be involved in the management of the new commercial enterprise. The regulations state that the petitioner must either be involved in the day-to-day management of the business or manage it through policy formulation. The regulations also state that, if the investor holds a position as a corporate officer of board member or, in the case of a limited partnership, is a limited partner under the provisions of the Uniform Limited Partnership Act (“ULPA”), this will satisfy the management requirement.
Benefiting the United States Economy:

For the investor to be eligible for permanent residence under this category, an investment must “benefit the U.S. economy”. Unfortunately, the INA provides no guidance on how to determine this issue. It is arguable that simply meeting the employment and investment requirements of the category may benefit the U.S. economy. However, it is quite possible that the investor will be required to independently establish that the enterprise, through its business operations, will benefit the U.S. economy.

Immigrant Investor Pilot Program and Regional Centers

As a result of a disappointing response to the basic immigrant investor program, Congress enacted a five-year immigrant investor pilot program, which commenced on October 1, 1993. A total of 300 immigrant visas were initially set aside each year for this pilot program. The Commerce, Justice, State and Judiciary Appropriation Bill increased the annual visa numbers from 300 to 3,000 and extended the program from five years to seven years.

This pilot program has been extended several times. Most recently, the President signed the Department of Homeland Security Appropriations Act of 2010 on October 28, 2009. This has extended the EB-5 regional center pilot programuntil September 30, 2012.

Special rules apply where the investment is made within an approved “regional center”, which is defined by the regulations as “any economic unit, public or private, which is involved with the promotion of economic growth, including increased export sales, improved regional productivity, job creation and increased domestic capital investment.” Where an applicant invests in a regional center, the new commercial enterprise does not have to directly employ 10 U.S. workers. Instead, it is sufficient to show that 10 or more jobs will be created directly (i.e. through the use of independent contractors) or indirectly (i.e. using economically or statistically valid forecasting devices) as a result of the investment.

It should be mentioned that investing in an approved regional center does not automatically reduce the required investment from $1 Million USD to $500,000.00USD. Approval as a regional center only provides an alternate method of satisfying the job creation requirement.

In order to qualify based on an investment of $500,000.00USD, the applicant must also invest in a targeted employment area. Fortunately, many of the investment projects located within approved regional centers are also located in targeted employment areas. An investment in a project located in a regional center and targeted employment area will permit the EB-5 applicant to qualify based on an investment of $500,000.00USD without having to directly employ any U.S. workers.

Conditional Permanent Residence

In order to deter fraud, immigrant investors, their spouses and dependent children are subject to conditional permanent residence for a two-year period. The alien must file a petition to remove the conditions (using Form I-829) during a 90-day period prior to the second anniversary of the alien’s lawful admission as a permanent resident. USCIS will examine the business at the end of the two year period to determine whether or not the alien has complied with all of the requirements.

The alien must also show that he or she “sustained the actions required for removal of the conditions” during his or her residence in the United States. An alien entrepreneur will have met this requirement if he or she has “substantially met” the capital investment requirement and has continuously maintained this investment during the conditional residence period. The entrepreneur’s conditional residence may be terminated at the end of the two-year period or earlier if it is found that the business was not established, or was established solely to evade immigration laws or that the requirements were otherwise violated.


The EB-5 is one of the most complicated areas of U.S. immigration law. Where it appears to be the most appropriate option, entrepreneurs should not hesitate to consider the EB-5 category as a means of acquiring lawful permanent residence in the United States.