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Immigration Through Investment: A More Conventional Path
For a person of moderate-to-substantial means looking to come to and live in the U.S. with a Green Card, immigration through investment can be a relatively convenient vehicle.
One major problem with more “traditional” methods of immigration is that they require either a qualifying family or employer petitioner. In both cases, government processing delays and quota unavailability are frequent impediments. For example, a typical case for an employee who is either a skilled worker or a professional looking to come to the U.S. will take four to six years, and cases involving lesser-skilled workers can take longer. Even worse is family immigration, where (aside from immediate relatives of U.S. citizens) it can take as long as 20 years.
Conversely, most investor cases will be completed well within one year.
So how is this possible?
Historically, investors were treated the same as retirees who wanted to live in this country and would not compete for U.S. jobs. To qualify, an individual had to invest a minimum of $10,000 in a business which he intended to operate. Those who qualified under this law were placed in the lowest category under the quota, and could only come if there were available Visa numbers not used by the higher categories. By 1976, that portion of the quota was so far behind that it was eliminated. Thus, entrepreneurial permanent immigration ceased this to exist.
In 1990, Congress overhauled the employment based immigration laws and quotas and created a category known as EB-5 for investors. The purpose of the law was to stimulate the economy through influx of foreign money and employment creation. The basic requirements of the new investor law were $1 million in capital invested in a new business enterprise, and that business directly created 10 full-time permanent jobs. Additionally, the investor had to show that his/her investment would prospectively benefit the United States economy.
The statute required some hands-on contact with the new business, and an immigrant investor had the burden of showing that the funds used for the enterprise were gained by lawful means. The status granted is permanent, but subject to the conditions that the applicant show that the investment has been fully made within two years and that jobs had been created within that time period. An application to remove the conditional basis of the permanent residence is required near the end of the two-year period.
The statute also provides that if the investment were in a "targeted employment area," the total investment would be reduced to $500,000. A "targeted employment area" is defined as a rural area or an area which experienced unemployment at 150% of the national average.
Immigration published regulations which clarified certain confusing provisions of the statute. For example, one could create a "new business" by purchasing an existing business and expanding it so that the net worth or number of employees was increased by 40% as a result of the investment. Additionally, the regulations allow for a savings of jobs in lieu of creating jobs in the event that the enterprise qualifies as a "troubled business”.
There are two other significant regulations which have molded the modern course for entrepreneurial Green Cards. The first deals with the level of control which an investor must have over the enterprise. It provides that if the investment is in a limited partnership and if the limited partner is contractually granted all of the rights and liabilities of a limited partner pursuant to the Uniform Limited Partnership Act, then he/she will be sufficiently engaged in the management of the enterprise to qualify for EB-5 status.
The next significant regulation provided for the establishment of "Regional Centers," wherein job creation can be either direct or indirect by virtue of the revenues generated by the project.
The combination of the two regulations caused a maelstrom of activity during the mid-1990s. Numerous limited partnerships were created in targeted employment areas, thereby reducing the minimum investment to $500,000. These investments generally required an initial capital investment of approximately $100,000, with the balance being paid out of the earnings of the initial investment along with a final payment at the end of two years. These programs were preapproved by immigration.
However, these programs were also abused. Often, final payments were never demanded. Although initial Green Cards were issued, the application to remove the conditional basis of the residence after two years were frequently denied or indefinitely delayed, and many otherwise innocent immigrants found themselves in deportation proceedings.
Ultimately new limited partnerships emerged, requiring a full investment of $500,000 at the outset in a Regional Center preapproved by the Immigration Service. Numerous Regional Centers with EB-5 limited partnerships have been established all over the country and all have the blessings of Immigration.
The projects are diverse - everything from urban redevelopment to ski-area hotels to motion pictures. All of the projects require an initial capital outlay of $500,000 plus anywhere from 5 to 7% to cover "soft costs." The initial investment of $500,000 is kept in an escrow account by the developer until such time as the immigration petition has been approved.
The only true expense to the investor is the "soft costs". Although the developer is not allowed to guarantee either refund of principal or earnings on principal after two years, experience shows that the investments are solid, and the investor should not have to worry about the safety of his/her money.
The largest stumbling block in obtaining approval of the investor petition is proving that the source of funds is legitimate. Immigration authorities are very strict in demanding that the source of funds be documented meticulously, but for that issue there is a nearly 100% approval rate on investor petitions involving preapproved Regional Centers.
Of course, traditional investment in a new or existing commercial enterprise which creates 10 jobs is still available. It is obvious however, that investment in a properly structured Regional Center is more effective toward achieving the applicant's goal of quickly obtaining a Green Card for the investor and his/her immediate family.
For more information, please contact Attorney Joseph M. Tapper.