The EB-5 investment program offers foreign nationals a route to permanent resident status in the United States. Since its inception over 30 years ago, the program has enabled thousands of investors to obtain U.S. green cards, not only for themselves but also for their dependent family. The program has also supported hundreds of businesses with injections of capital and created thousands of jobs for U.S. workers.
The regulations governing the EB-5 program are not static, and occasionally changes occur that have a notable impact on the industry. Two such changes occurred during 2021. First, the EB-5 Modernization Rule was overturned on June 22. As a result of this federal court ruling, the minimum thresholds for EB-5 investments were reduced. Foreign nationals can now participate in the EB-5 investment program for as little as $500,000 if they choose projects located within targeted employment areas (TEAs).
The second change to take place in June 2021 was the closure of the EB-5 Regional Center Program. The existing authorization for the program expired on June 30, and Congress failed to pass the legislation necessary to reauthorize it. As of December 2021, the program is yet to be restored, and prospective investors do not currently have the option of subscribing to regional center projects.
Nevertheless, interested foreign nationals can still participate in the EB5 investment program by subscribing to a direct project. Unlike regional center projects, direct EB-5 projects are set up and conducted directly between the investor and the business. Because of this, there are a number of differences between the direct and regional center EB-5 investment models.
Job Creation for Direct EB-5 Investments
According to United States Citizenship and Immigration Services (USCIS), every EB-5 investment must generate a minimum of 10 jobs for U.S. workers. While this minimum is the same for direct investments and regional center investments, the way created jobs are calculated is different.
For direct EB5 investment projects, only the positions that are created by the EB-5 business count towards the investor’s quota. These are the jobs that appear on the company’s payroll and are directly linked to its activities. For regional center projects, however, the investor is allowed to include induced and indirect jobs in the calculation, taking into account the positive impact of the investment on the local economy.
Because of these regulations, it is usually easier for regional center projects to fulfill the job creation criteria. Prospective investors looking for direct EB-5 projects should examine each offering carefully, particularly in relation to the job creation plans, to ensure that a sufficient number of roles will be generated.
Greater Involvement in Projects
While the job creation criteria may present more of a challenge, many investors often prefer the direct EB-5 investment option because they will have more control over the projects in which they invest. Regional center investors typically do not participate in the daily management of the business. Direct EB-5 projects, on the other hand, allow investors to be more involved in business operations.
Evidently, direct EB5 investment is an appealing route for potential investors. As there is no guarantee of how long the minimum threshold of $500,000 will remain in place, foreign nationals considering an EB5 investment should contact an experienced immigration attorney and look into potential direct investment projects.