The Immigration Corner: Regional Centers, Why Are They a Good Fit for Foreign Investors?
The Regional Center EB-5 Program is a pilot program created in 1993 to increase foreign investment interest for large scale projects after the Direct EB-5 Program requirements proved to be unable to support larger scale investments. The program was created to further help stimulate foreign investment in the U.S. economy with the creation of “regional centers” to pool investment for larger scale projects. As a pilot program, it is a temporary program that requires reauthorization every so often by Congress. The Regional Center EB-5 Program has become immensely popular and has overtaken the permanent Direct EB-5 Program as the primary vehicle for EB-5 investment in the U.S.
The Regional Center EB-5 Program and the Direct EB-5 Program have the same requirements:
- Create jobs
- Manage the business
- Invest in a new commercial enterprise
The EB-5 Program created two minimum investment amounts. The default investment amount is $1,000,000 USD. If the immigrant is investing what is deemed a Targeted Employment Area (TEA), the minimum investment amount is $500,000 USD. The most common form of investment is the investment of cash into the business. Regardless of the type of investment, any investment under the EB-5 program must come from legal sources and the immigrant must be able to document this.
Job creation is essential to the purpose behind the EB-5 Program. For EB-5s, a minimum of 10 full-time jobs must be created by the investment.
Management of the and Investment in a New Commercial Enterprise
Another requirement for the EB-5 classification is for the investor to engage in the management of the business by either having day-to-day managerial responsibility or through policy formation activities. EB-5s require the investment into a new commercial enterprise. This means is that the business entity invested into needs to have been created after November 29, 1990 unless certain exceptions apply.
So, Why Invest in A Regional Center for the EB-5?
Choosing the Regional Center EB-5 program has several advantages over the Direct EB-5 program, particularly when it comes to the investment amount and the job creation requirements for an EB-5. While the same investment requirements apply to both direct EB-5s and regional centers EB-5s, most regional centers associate with projects that are located within TEAs. As a result, the investment amount for the investor through a regional center would be $500,000 USD, instead of $1,000,000 USD.
Similarly, while the same job creation requirements apply to both direct EB-5s and regional center EB-5s, regional centers can count indirect jobs created by the investment in its job creation calculation. This is important for two reasons. First, and most importantly, it expands the number of jobs that can be calculated into the job creation calculation, which makes it easier to meet this requirement. Regional centers use economists to forecast the number of jobs created by a project and utilize that forecast to make certain that only the proper number of EB-5 opportunities are offered, ensuring that each individual EB-5 can meet the job creation requirement. With a regional center, there should be no question about job creation. Second, it allows for the investment in more robust projects because the project can attract multiple EB-5 investors due to the inclusion of indirect jobs while maintaining the EB-5 job creation requirements per investor—something that proves to be difficult under a direct EB-5. For the foreign investor, by investing in a regional center, the investor can potentially be part of mega development projects, such as professional soccer stadiums and major hotels.
When it comes to management of the enterprise, the EB-5 requirements state that the investor must either have day-to-day managerial responsibility or engage in policy formation activities. Typically, for direct EB-5s, the investor will have a hands-on investment. On the other hand, most regional centers will have the investors engage in minimal policy formation activities, as allowed by law. In this case, most of the management of the project is handled by a management company. This results in as close to a passive investment as legally possible, although in practical terms, the investment is essentially a passive one.
Another potential advantage for investing through a regional center as opposed to direct investment is the “pre-approval” of the project meeting the EB-5 requirements by USCIS. Most regional centers seek “pre-approval” for their projects by filing a Form I-924, Application for Regional Center Designation Under the Immigrant Investor Program. While not required for each project, the filing of the form helps in two ways. First, it gives the regional center a “pre-approval” of its project, if the form is approved, because the form requires for the requirements of the EB-5 for investors to be established. An approval establishes that the project is a viable EB-5 option. This determination can be made prior to obtaining EB-5 investors so that it can be used to attract EB-5 investors and ensure the project’s viability. Second, if a regional center has an approved I-924, USCIS generally approves the EB-5 petition from the investor. The only exception to this is the investor’s source of funds. This has nothing to do with the regional center or its project and could lead to the denial of the investor’s petition, if this requirement is not satisfied.
At the end of the day, a regional center can provide an investor with a much easier path to an EB-5 green card. There are several advantages to investing in a regional center as opposed to undertaking a direct EB-5 investment. These advantages include lower investment amounts, limited involvement and “pre-approval” of the project by USCIS. However, not all regional centers can provide this advantage because not all regional centers are created equal. While an immigration attorney will not provide investment advice, an immigration attorney can evaluate a regional center to determine whether a regional center’s project meets the requirements for an EB-5. It is important to consult an immigration attorney with experience in regional center EB-5 cases before making an investment.
Attorney Paul Messina focuses his practice on all aspects of employment-based, investor-based and family-based immigration law. He has extensive experience in proceedings before United States Citizenship and Immigration Services (USCIS) and the Consular Section of the United States Department of State. He has handled a variety of immigration cases, including employment-based green cards, EB-5 investment-based green cards (direct and through regional centers), and many of the non-immigrant visa/status categories as well as family-based green cards.
Author’s note: The Immigration Corner presents current and relevant topics in immigration law. The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.