The ultimate purpose of the EB-5 Visa (Immigrant Investor Program) is to stimulate the United States economy by promoting job growth through the investment of foreign capital in U.S. companies. Toward meeting this objective, U.S. Citizenship and Immigration Services (USCIS) requires EB-5 investors to invest amounts ranging from $500,000 to $1,000,000, or to invest in specific Regional Centers. But what are the consequences if the investment falters?
USCIS EB-5 Visa Requirements
USCIS enforces the following EB-5 investment criteria:
- Investments in Regional Centers, 69 of which are located in the state of Florida.
- At least $1,000,000 when investing in “General Areas” (e.g. suburban areas, areas with low unemployment rates).
- At least $500,000 when investing in a “Targeted Employment Area” (TEA), including:
- Rural areas with maximum populations of 20,000.
- Areas with high unemployment rates which are at least 150% of the national average. (The BLS reports a current national rate of 5.5%.)
Investment capital must come directly from the investor him- or herself: the funding cannot be borrowed from lenders.
Additionally, EB-5 projects must create (or maintain, if the enterprise is a designated “troubled business”) a minimum of 10 jobs. EB-5 enterprises have two years to meet this goal, counting down from the date the investor is granted Conditional Permanent Resident status. If the enterprise fails to meet this requirement in the allotted two-year period, unfortunately there can be serious legal ramifications for the foreign investor.
Can the Investor Recoup their Losses if the Enterprise Fails to Create Jobs?
The broad purpose of the EB-5 program is to increase employment in the United States. Therefore, when EB-5 enterprises fall short of the aforementioned USCIS standards for job creation, significant legal issues can arise — notably financial losses and Green Card denials.
For example, in order for the petitioner to remove their conditional status and become a permanent resident, the I-829 (Petition by Entrepreneur to Remove Conditions) requires successful compliance with EB-5 job creation requirements. Therefore, if the underlying EB-5 enterprise fails to create the minimum 10 jobs, the investor will lose their chance of being approved for permanent residency.
This brings up a pertinent question: if a foreign investor’s Green Card is denied due to EB-5 job creation failure, will the investor then be able to recoup his or her investment?
The likelihood of reimbursement is impacted by whether the EB-5 investment went toward a Regional Center. While some Regional Centers allow arrangements for the foreign investor to either file a new petition or amend an existing petition, there is no concrete guarantee that an investor will be refunded.
On the contrary, as USCIS notes in one May 2013 policy memorandum (PM-602-0083), “The benefit to the U.S. economy is greatest when capital is placed at risk.” In fact, 8 C.F.R. §204.6(j)(2) provides the following:
To show that the petitioner has invested or is actively in the process of investing the required amount of capital, the petition must be accompanied by evidence that the petitioner has placed the required amount of capital at risk for the purpose of generating a return on the capital placed at risk.
To guarantee a return in the event of EB-5 failure would stand in direct opposition to this at-risk criteria. As stated by USCIS in the same memo, a “promise to return any portion of the immigrant investor’s minimum required capital negates the required element of risk.”
That being said, in some instances EB-5 investors can recoup the lost funds if their I-526 (Immigrant Petition by Alien Entrepreneur) is denied, including administrative fees depending on the Regional Center. Certain Regional Centers will keep the investment funds in an escrow account while approval of the I-526 is pending, and depending on the provisions of the specific escrow agreement, the funds may be returnable to the investor in the event of an I-526 denial. PPMs, or Private Placement Memorandums, also describe the rules and restrictions applicable to the return of funds should an EB-5 enterprise fail. Recouping investments is generally more challenging if the failure arises after the I-829 has already been approved.
If you’re considering applying for an EB-5 Visa, or are concerned about compliance with USCIS investment and job creation criteria, the experienced investor visa lawyers of Colombo & Hurd can help guide you through your legal options. To begin discussing your situation in a confidential case evaluation, call our law offices today at (800) 659-7142.
