Choosing NAICS Codes

Each Regional Center is approved for “a limited geographic area” and “defined economic zones” (see Public Law 107-273). USCIS now specifies that economic zones need to be defined according to the North American Industry Classification System (NAICS). The I-924 Form directs applicants to “Identify each industry that has or will be the focus of EB-5 capital investments sponsored through the Regional Center” by filling in the “NAICS Code for the Industry Category.”

What is NAICS? How can you choose the NAICS codes that are appropriate for your investment focus? How specific do you need to be?

First of all, you can find NAICS codes and their descriptions at the US Census Bureau.

Here is official guidance from USCIS to keep in mind.

The I-924 Instructions explain:
Provide the industry category title and the North American Industry Classification System (NAICS) code for each industry category. The NAICS code can be obtained from the U.S. Department of Commerce, Census Bureau. Enter the code from left to right, one digit in each of the six boxes provided in the form in Part 3, item 7. If you use a code with fewer than six digits, enter the code left to right and then add zeros in the remaining unoccupied boxes.

The 9/15/2011 EB-5 Stakeholder Meeting Presentation includes some advice on NAICS codes in answer to the question “What are common reasons for RFEs and denials on I-924 applications?”
…3. Choosing and Identifying Appropriate NAIC Codes. (Form I-924, Part 7.)
A. NAIC code should be appropriate to the requested industry;
B. An overly broad NAIC code may not be representative of the requested industry;
C. An overly narrow NAIC code may be too restrictive for the scope of the contemplated investment project(s) in the requested industry, e.g “NAIC Code 62” includes assisted living facilities but also covers hospitals. There may be a more appropriate for the requested industry.

The The 12/06/2011 I-924a Q&A provides guidance for the I-924a that may also apply to the I-924.
Q. What level of detail must a regional center use to identify the NAICS code for the Industry Category in Part 3.2 of Form I-924A?

• A. The purpose of collecting North American Industry Classification System (“NAICS code”) information regarding the industries in which EB-5 capital is invested and jobs are created is to enable USCIS to provide information to internal and external stakeholders about the industries that are participating in EB-5 capital investment projects.
• According to the U.S. Census Bureau’s FAQs regarding the NAICS codes, NAICS is a two- through six-digit hierarchical classification system, offering five levels of detail. Each digit in the code is part of a series of progressively narrower categories, and the more digits in the code signify greater classification detail. The first two digits designate the economic sector, the third digit designates the subsector, the fourth digit designates the industry group, the fifth digit designates the NAICS industry, and the sixth digit designates the national industry.
• The NAICS code identified in Part 3.2 of Form I-924A should have sufficient detail to identify the industry for the primary business activity of the capital investment project. In general a NAICS code with four-digits, which identifies the industry group of a given economic activity would be an appropriate entry. For example, if the capital investment project involved Fruit and Nut then the appropriate NAICS code to use would be 1113.

These three sources represent all official guidance on NAICS code selection, so far as I know, and the last item with the four-digit-code recommendation is brand new as of today. You may also be curious to know how NAICS codes are being handled in practice. For what it’s worth (and this may change at any time) here is what I have seen:

• RC applications for real estate development projects tend to include an NAICS code for construction and for each of the tenants expected to occupy the new development: for example retail, restaurant, and hotel. Office space is tricky because potential office tenants span a wide range of industries with varying job creation potential, including information, finance and insurance, real estate rental and leasing, professional scientific and technical services, management of companies and enterprises, administrative and support services, medical office, and public administration.
• I have seen RC applications that include specific codes in the economic analysis but more general codes to describe the industry categories requested for approval. For example an application might present a new electron tube manufacturer as its sample project (NAICS 334411) but then apply for the general Manufacturing sector (NAICS 31-33) to allow for investing in the future in other types of manufacturers.
• I have seen USCIS complain, in RFEs, about mis-applied or mis-identified codes. I haven’t yet seen a complaint about too much generality, except in context of the econ analysis. (For example: NAICS 44-45 for “retail” has been approved many times.)
• Selecting NAICS codes requires close cooperation between the applicant (business person), economist, and lawyer. The economist is most qualified to deal with NAICS categories, but the applicant needs to ensure that the economist understands the business and the options required. Don’t be the Regional Center that discovers it can’t count fast food restaurant jobs because the NAICS code in the application only covers full service restaurants, or that finds its nursing home wrongly analysed in the assisted living category because the economist didn’t understand the business. When you get your econometric study, visit the Census Bureau and check the codes to make sure that they really match what you’re planning to do.