Congress created the Immigrant Investor Program, otherwise known as Eb-5, in 1990 to stimulate the U.S. economy through job creation and capital investment by foreign national investors. In 1992 Congress authorized the creation of Regional Centers for investors under a pilot program, which has since been regularly reauthorized. Absent a further reauthorization, the Regional Center pilot program will sunset on 30 September 2015. Currently, there are over 600 approved Regional Centers across the country.
Eb-5 investors must invest in a new commercial enterprise as defined by regulation and all investors have a job creation requirement and a capital investment requirement. Most Eb-5 investors invest in Regional Centers.
Job Creation Requirement:
An investor must create at least 10 fulltime jobs for qualifying U.S. workers within a two-year period, or under certain circumstances, within a reasonable time thereafter. Fulltime employment can either be direct or indirect. Direct jobs are those identifiable within the investor's Eb-5 enterprise and indirect jobs are those which have been created collaterally as a result of the capital invested in the Eb-5 enterprise.
Capital Investment Requirement:
The general minimum qualifying investment is $1 million, unless the investment is in a Targeted Employment Area (TEA). TEA's are subcategorized into high unemployment and rural areas. The minimum investment is $500,000.00. A high unemployment area is one which experiences unemployment of at least 150% of the national average. A rural area is outside the boundaries of a metropolitan statistical area and has a population less than 20,000 according to census data.
Capital comes in many forms and includes cash, cash equivalents, equipment, inventory, other tangible property and indebtedness secured by the investor's own assets.
Like any other employment-based visa category, the Eb-5 classification is subject to annual numerical limitations. Chinese investors account for over 80% of all Eb-5 capital and on Saturday, August 23, 2014, Charles Oppenheim, Chief of the Department of State Immigrant Visa Control and Reporting Division, announced that effective immediately, the Eb-5 preference category had become unavailable to Chinese Eb-5 applicants.
This is the first time since the pilot program's inception in 1992 that the category has become unavailable. Although 10,000+ new Eb-5 numbers will become available with the beginning of the next fiscal year on October 1, 2014; for the fiscal year 2014 the numbers for Chinese investors have been exhausted.
The U.S. Department of State (DOS) has already allocated immigrant visa numbers for Chinese Eb-5 applicants whose consular appointments have been scheduled for August and September 2014. Chinese applicants who are stateside and have been scheduled for adjustment of status interviews after August 23, 2014 and before October 1, 2014, will not receive visa numbers because the USCIS does not request visa numbers form the DOS until the time of the interview. USCIS will conduct the interviews and hold the applications in abeyance until visa numbers become available after October 1, 2014.
Although most other employment and family categories are backlogged and have long waiting periods, this is the first time the Eb-5 category has reached its annual numerical limit. One cannot predict whether the Eb-5 category will become oversubscribed, but given Mr. Oppenheim's comments last week, it is likely that the DOS will establish a cut-off date, possibly as early as May 2015.
While this development is evidence of the Pilot Program's popularity (Eb-5 demand has increased by 700% since 2007), it causes much concern. Processing times for Eb-5 applications are well over one year already and visa availability cut-off dates will add many more months.
This development will further complicate the already extremely complex job creation models in Regional Centers and may impact derivative children with respect to age-out regulations. Finally, Regional Centers may have to reconsider their economic models and business plans to adjust to longer un anticipated processing times and the unavailability of visas for ready, willing, and available foreign investors.
Stay tuned for additional updates on developments.