Everything Has a Price

by Alexandra Sanchez

In 1990, U.S. Citizenship and Immigration Services endeavored to stimulate the U.S. economy through administering the Immigrant Investor Program.[1] This program, better known as “EB-5,” attracts foreign capital investment in domestic projects that creates jobs across the U.S.[2] In exchange for the investment, foreign nationals are granted temporary U.S. visas for themselves and their families.[3] These temporary visas enable the investor to live and conduct business in the U.S. throughout the program’s two-year conditional period.[4] Once the period is up, the investment’s success will be evaluated.[5] A successful investment may lead to legal permanent residency in the U.S.[6]

All EB-5 investors are required to invest in a new commercial enterprise that creates or preserves at least ten full-time jobs for U.S. workers within two years.[7] To prove that at least ten jobs will be created, the prospective immigrant investor may employ economically or statistically valid forecasting devices.[8] The minimum qualifying investment for the program is $1,000,000.[9] If the investor wishes to create a profitable business in a highly unemployed or rural area, the investment is lowered to a minimum of $500,000.[10] Additionally, the investor’s capital must come from a lawful source.[11] This can be proven through means of tax returns, sale of property or business records, or lawful loans or gifts.[12] The investor must be “engaged in the management of the new commercial enterprise; he or she may not be a passive investor.”[13] An investor is encouraged to be a member of the board of directors, a corporate office, or a limited partner. [14]

Since the implementation of the EB-5 program, it has evolved into a multi-billion dollar industry.[15] In New York City alone, a handful of mega projects raised $250 million each from 499 investors.[16] Over $3.39 billion of EB-5 investments contributed to U.S. gross domestic product in the fiscal year of 2012 alone.[17]  In 2012, this program sustained over 42,000 American jobs.[18] In that same fiscal year, the EB-5 program generated over $712 federal, state, and local tax revenue—all at no cost to the U.S. taxpayer.[19] From the fiscal years of 2005 through 2013, over $6.5 billion in capital investment supported over 131,000 U.S. jobs.[20] These numbers are growing every day. This program has met Congress’s initial goals of stimulating the U.S. economy, in fact.

For the first time in the program’s history, the U.S. has exhausted its annual supply of EB-5 immigrant investor visas.[21] Following a “surge” of applications from Chinese nationals, an overwhelming 10,300 EB-5 applications have been pending as of August.[22] This represents 300 more than the maximum allotment per year.[23] In 2004, only sixteen Chinese nationals were granted EB-5 visas.[24] Last year, Chinese nationals accounted for more than 80%, nearly 6,900, of all EB-5 visas issued.[25]

Other countries have similar programs to the EB-5 program.[26] So, what makes the U.S. such an attractive candidate for foreigners? Comparatively, the U.S. program is cheaper and more promising to candidates. Australia’s investor visa requires a $4.5 million investment—nine times the minimum investment amount required by the U.S.[27] Additionally, Australia’s program only allows for temporary residency.[28] Further, foreign nationals seeking to invest in Australia must be younger than 45 years old to be considered.[29]

This multi-billion dollar industry is only growing in the U.S. Most recently, the Canadian Foreign Investment Program was terminated, which attracted more foreign nationals to the U.S.[30] The current spike in popularity of the program has led to a visa backlog.[31] Unfortunately for prospective investors, this backlog may prolong entrance into the U.S. Prospective investors should apply as soon as possible. EB-5 investors’ beneficiaries, especially unmarried children under twenty-one years old, should pay close attention to the backlog situation.[32] These children could be the most negatively affected by the backlog. By the time a visa may become available, the child may age out of the program.[33]

[1] EB-5 Immigrant Investor, U.S. Citizenship and Immigr. Services, http://www.uscis.gov/working-united-states/permanent-workers/employment-based-immigration-fifth-preference-eb-5/eb-5-immigrant-investor (last updated July 3, 2014).

[2] Id.

[3] J. Elias O’Neal, Foreign Cash Could Boost City Center, Daily Press, July 6, 2014, at A1, available at LEXIS.

[4] Eugene F. Segrest, et al., EB-5- A Call to Foreign Investors From U.S. Developers and Business Owners, K&L Gates (Apr. 3, 2012), http://www.klgates.com/files/Publication/000f84a9-1f15-466a-80e3-755fbf65f149/Presentation/PublicationAttachment/bb54371b-55a0-46b5-a9c8-6c71f8524057/EB5_Alert.pdf.

[5] Id.

[6] Id.

[7] Id.

[8] Id.

[9] Id.

[10] Id.

[11] Id.

[12] Fredrick Voigtmann, EB-5 Investor Visa USA Requirements, EB-5 Investors, http://www.eb5investors.com/eb5-basics/eb-5-investor-visa-usa-requirements (last visited Sept. 28, 2014).

[13] Id.

[14] Id.

[15] Mona Shah & Yi Song, EB-5 Visa Unavailability will Have a Large Impact, Law 360 (Sept. 10, 2014, 1:01 PM), http://www.law360.com/articles/571564/eb-5-visa-unavailability-will-have-a-large-impact.

[16] Id.

[17] Association to Invest in USA, IIUSA, https://iiusa.org (last visited Sept. 28, 2014).

[18] Id.

[19] Id.

[20] Id.

[21] Sophia Yan, U.S. Runs Out of Investor Visas as Chinese Overwhelm Program, CNN Money (Aug. 28, 2014, 3:10 AM), http://money.cnn.com/2014/08/27/news/economy/china-us-visa/.

[22] Id.

[23] Id.

[24] Id.

[25] Id.

[26] International Immigrant Investor Programs, EB-5 Investors, http://www.eb5investors.com/eb5-basics/international-immigrant-investor-programs (last visited Sept. 28, 2014).

[27] Yan, supra note 21.

[28] EB-5 Investors, supra note 26.

[29] Id.

[30] Investors, Government of Canada, http://www.cic.gc.ca/English/immigrate/business/investors/index.asp, (last modified July 11, 2014).

[31] Bethany L. LaFlam, Fill for the Funding Dip: EB-5 Visas, Law 360 (Feb. 2, 2012, 3:31 PM), http://www.law360.com/articles/304543/fill-for-the-funding-dip-eb-5-visas.

[32] Id.

[33] Id. (noting that the U.S. grants visas to immigrants, their spouses, and unmarried dependents under the age of twenty-one, provided that they meet the other requirements for investment).

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