Despite the impact of the COVID-19 pandemic, the EB-5 investment program continues to thrive in the changing economic landscape. More U.S. businesses are turning to EB-5 funds as a reliable source of capital, leading to new investment opportunities for foreign nationals. The EB-5 program is among the most popular visa-by-investment programs in the world, offering investors U.S. permanent resident status and a path to citizenship in exchange for EB5 investment capital.
However, prospective investors are advised to carefully consider a number of factors before choosing to participate in the program. The regulations laid out by United States Citizenship and Immigration Services (USCIS) in governing the program mean that every EB5 investment and EB-5 project must fulfill specific criteria to qualify. In this article, we will examine these factors, which can help foreign nationals to assess whether the EB-5 program is right for them.
EB-5 Investment Risks
There are two types of risk involved when making an EB-5 investment: financial risk and immigration risk. The financial risk refers to the risk that the investor may not regain their full capital at the end of the investment period. In fact, this risk is a requirement for every EB-5 investment, as stipulated by USCIS: the capital must remain at risk throughout the investment period, with no guarantee that the investor will recoup their original funds. Still, investors can minimize their financial risk by investing in safe projects that are likely to be completed.
The immigration risk associated with an EB-5 investment refers to the fact that, although the EB-5 program is a route to permanent residency, investors are not automatically guaranteed to receive a green card. If USCIS determines that an investment is not fully compliant with their regulations, the foreign national’s visa petitions may be denied.
Proof of Source-of-Funds
There are high evidentiary standards for the visa petitions adjudicated by USCIS, and EB-5 investors will need to provide substantial evidence to support the claims they make in their petitions. The claim that typically requires the most supporting documentation is the source of funds. In their I-526 petition, an investor will need to trace the EB-5 capital back to its source, demonstrating that it was acquired and handled in a legal manner.
USCIS does not place restrictions on the type of funds that can be used for an EB-5 investment, but the documentation required for proving the legal status of the capital is different for varying sources of funds. For example, it is relatively easy to document funds received from salary payments. On the other hand, funds from stock proceeds or inheritances require more complex documentation.
There are inevitable costs associated with the EB-5 process, both in terms of the investment to be made and additional expenses. The minimum EB-5 investment amount is $500,000 for projects located in targeted employment areas (TEAs) as of June 2021. For projects in other areas, the minimum investment threshold is $1,000,000. The additional expenses include fees for immigration counsel and filing visa petitions at USCIS, as well as the costs of relocating to the United States.
EB-5 program regulations are subject to change, and foreign nationals interested in making an EB-5 investment need to know about recent changes as well as the potential for future developments. In June 2021, for example, two significant changes occurred. First, the repeal of the EB-5 Modernization Rule changed the guidelines for EB-5 investments, including lowering the minimum investment thresholds from their previous levels. Second, the popular EB-5 Regional Center Program expired, and as of December 2021, has not yet been re-authorized.
Interested foreign nationals should become familiar with the EB-5 investment industry before deciding whether it is right for them. However, many foreign nationals have found that the benefits outweighed the risks, and they now enjoy permanent residency in the United States.