To qualify, applicants need to invest or be in the process of investing $1 million ($1.8 million starting from November 21,2019) in a new commercial enterprise (NCE). If applicants choose to invest in targeted employment areas (TEAs) or in regional centers approved by U.S. Citizenship and Immigration Services (USCIS), the minimum investment amount is lowered to $500,000 ($900,000 starting from November 21, 2019).
In addition to the minimum qualifying amount, investments must also be at risk: foreign entrepreneurs are required to invest the full amount of at-risk capital into their enterprises. Accordingly, if there is, for example, a redemption clause in an applicant’s business agreement guaranteeing him or her a return, such an investment would generally not qualify for EB-5 purposes.
Legitimate Source and Path of Funds
Assets acquired directly or indirectly by unlawful means, such as by way of criminal activities, are not acceptable forms of capital. In practice, USCIS is very strict about reviewing the legitimacy of funds.
Further, applicants are required to submit evidence demonstrating a direct link from the original lawful source of funds to the investors themselves, and from the investors themselves to their NCEs. Again, USCIS is strict about this aspect of the investment.
(For the full relevant statutory text describing source and path of funds, see 8 C.F.R. § 204.6(e).)
Acceptable Types of Investment
Cash, cash equivalents, and indebtedness secured by investor-owned assets, as well as equipment, inventory, and other tangible property are all acceptable investments for an EB-5. A loan to the enterprise or any other debt between the enterprise and investor would not constitute an investment, however; such a monetary transfer does not bear any investment risk (some exceptions do apply, so continue reading below). Purely passive investments, such as the purchase of a property without any commercial or job-creating function, would similarly not qualify. All acceptable forms of capital are valued at fair-market price in U.S. dollars. Further, note that investors need not commit the entire amount of capital, irrespective of the type, immediately, but must have done so by the end of their two-year conditional residency period.
Type of Enterprise
In investing their capital into a commercial enterprise, foreign investors must keep in mind several factors. First, there’s the nominal requirement, i.e. that the enterprise be a “new commercial enterprise” (NCE). Precise definitions govern what USCIS considers “new” and what it considers a “commercial enterprise.”
A new enterprise is one that was:
- Established after November 29, 1990; or
- Established on or before November 29, 1990, that is either: v1) Purchased and the existing business is restructured or reorganized in such a way that an NCE results, or 2) Expanded through the investment so that at least a 40-percent increase in the net worth or in the number of employees occurs
A commercial enterprise is defined as any for-profit activity formed for the ongoing conduct of lawful business, including, but not limited to:
- A sole proprietorship
- Partnership (limited or general)
- Holding company
- Joint venture
- Business trust
- Or another entity (publicly or privately owned)
Noncommercial activities, such as owning and operating a personal residence, fail to meet the EB-5 requirements for an enterprise. Nonprofits are ineligible. In contrast, a commercial enterprise consisting of a holding company and its wholly owned subsidiaries, if each subsidiary is engaged in a for-profit activity formed for the ongoing conduct of a lawful business, is eligible.
Corporations and other non-individuals are barred from being investors in an EB-5 petition. However, USCIS does permit multiple investors to jointly establish an NCE for EB-5 classification. Note that each investor is still required to meet the individual EB-5 visa requirements. In other words, each individual must invest the requisite amount of capital, and each individual investment must create at least 10 full-time jobs for qualifying U.S. workers.
If they choose, immigrant investors can direct their capital to a “troubled business.” USCIS defines a troubled business as one in existence for at least two years that has incurred a net loss during the 12- or 24-month period prior to the priority date of the immigrant investor’s Form I-526. The loss must be at least 20 percent of the business’s net worth prior to the loss.
The core policy goal of the EB-5 visa program is to increase foreign capital investment in the U.S. and, in so doing, stimulate job creation and economic growth. As such, the central requirement of a qualifying investment under this category is the creation of at least 10 full-time employment opportunities for U.S. workers. The specific job creation requirements are contingent on the type of enterprise.
For direct investment in an NCE, the full-time jobs must be created directly by the business. In other words, the NCE (or its wholly owned subsidiaries) must itself be the employer.
Direct jobs are those that establish an employer-employee relationship between the NCE and the people it employs.
For investment in a regional center, the full-time positions can be created directly or indirectly by the commercial enterprise. They can also be induced by the commercial enterprise. Indirect jobs are ancillary to the commercial enterprise but are created as a result of the enterprise. Induced jobs are employment opportunities created within the greater community where the commercial enterprise is located, which come about as a result of, for instance, income spent by EB-5 project employees.
For a troubled business, an immigrant investor can rely on job preservation. To this end, the investor must demonstrate that the number of existing employees has been, or will be, maintained at no less than the pre-investment level for a period of no fewer than two years. The numerical requirement of at least 10 (preserved) jobs holds.
Notably, USCIS has not defined any age requirements for the EB-5 category. Instead, restrictions are essentially a function of the state where the enterprise will be located, since some states require people to be of a certain age to enter into certain contracts. Further, many EB-5 regional centers welcome investors of all ages. In other words, 18-year-old potential investors may just be out of high school, but as long as they have the funding and foresight, they’re eligible to apply.