EB-5 Investment Requirements

The EB-5 Visa (conditional green card) program provides an applicant with a path to citizenship for foreign individuals who invest funds in a new commercial enterprise. The objective is to spur job creation as well as incentivize foreign investment. The program is managed by the United States Customs and Immigration Service (USCIS).

This article discusses the various requirements for the EB-5 program.

Investment

The applicant must have invested or be in the process of investing a specific amount of capital in a “new commercial enterprise” (discussed below). If the capital has not been fully invested, it must be irrevocably committed to the business — such as held in trust or escrow. The amount of investment must be either $500,000 or $1,000,000. If the location of the commercial enterprise is “rural” or deemed a “targeted employment area”, the amount is $500,000. For all other areas, the higher amount applies.

A targeted employment area must have an unemployment rate of 50% higher than the national average. The state can certify an area as targeted employment. A “rural” area must have a local population of less than 20,000.

Source of Funds

The funds invested must come from a lawful source. The applicant must have records sufficient to document the source of the funds. There is no clear guidance on how thorough the documentation must be. You can likely expect to have to produce tax returns or other records concerning gift or inheritance. If you earned the money from a company, you will have to show that the company is legitimate. If the funds came through gift or inheritance, you will have to substantiate how those individuals came by the funds. Substantiating lawfulness of the funds may be a very demanding aspect of the application due to the volume of records required.

New Commercial Enterprise

The investor must invest in a company that is founded after November 29, 1990. To many people, this is not a very new company; but, it qualifies for purposes of the regulation. If the company is older than this, it may still qualify if, following investment, the company will grow in value by 40% or will reorganize or result in a new commercial unity.

Job Creation

The investment in the new commercial enterprise must have the effect of creating jobs. The burden is on the applicant to demonstrate that the investment will produce a minimum of 10, new, full-time jobs in the United States within the next two years. This requirement is reduced if the investment is in a “troubled business”. A troubled business has reported net losses of more than 20% of its net worth within the past two years. If this is the case, the investor may be able to show that the investment allows the business to sustain current levels of employment (generally ten employees or more).

It is difficult to substantiate a claim that a business will create the required jobs. The Visa applicant must be able to demonstrate the job creation potential through any “reasonable economic methodologies”. Generally, this will require a detailed business plan with thoroughly developed financial projections.

Active Management

The investor must take part in the active management of the new commercial enterprise. It is not adequate that the investor simply serve as a passive capital investor. Likely, the minimum required is that the investor serve on the board of directors, as a company officer, or as a member (LLC) or limited partner (partnership)

Path to Citizenship

After two years of maintaining the investment and meeting the job creation requirements, the Visa applicant is eligible to receive a green card (lawful permanent resident status). That is, the conditional status on the green card may be removed. The petition for removal of the conditional status must be filed prior to the end of the two-year period following investment for job creation.