For questions about Lucid Professional Writing, Suzanne Lazicki, and business plan services, please refer to the About and Business Plans pages. For a digest of my posts on frequently asked questions, see the bottom of the Resources page.
This FAQ page provides a handy reference for USCIS answers to practical questions that affect EB-5 business plans. I have sourced USCIS Policy Manual, 6 USCIS-PM G (November 30, 2016) (the single official EB-5 policy source), recent stakeholder meeting notes, and AAO non-precedent decisions. I will continue to expand and revise this page as I have time and become aware of new statements on business plan-related topics. (Last update: January 19, 2017)
Index to FAQ Topics
EB-5 Business Plans
- Q. Must the I-526 Petition include a business plan? What does Matter of Ho-compliant mean?
A. If the I-526 petition does not include evidence that job creation has already occurred, then petition must be accompanied by a comprehensive business plan. To be considered “comprehensive,” a business plan must be sufficiently detailed to permit USCIS to draw reasonable inferences about the job-creation potential. The precedent decision Matter of Ho articulates the standards by which USCIS reviews I-526 business plans. See 6 USCIS-PM G Chapter 2(B) “Comprehensive Business Plan” and 6 USCIS-PM G Chapter 2(D) subsection 5 “Evidence of Job Creation.” (See also my blog post What does Matter of Ho compliant mean?)
- Q. Must the I-924 Application for Regional Center include project business plans? How detailed and mature do these business plans need to be? What are “actual,” “hypothetical,” and “Exemplar” projects?
A. Quoted from I-924 instructions 3: “The job creation analysis for each economic activity must be supported by a copy of a business plan for an actual or exemplar capital investment project for that category. A business plan provided in support of a regional center application must contain sufficient detail to provide valid and reasoned inputs into the economic forecasting tools and must demonstrate that the proposed project is feasible given current market and economic conditions.” 6 USCIS-PM G Chapter 3(B) “Types of Regional Center Projects” defines I-924 business plan requirements and the “actual project,” “hypothetical project,” and “Exemplar I-526” options. See also 2/26/2014 QA question 13 for discussion of hypothetical project plan detail requirements. Or see my blog post summary: What are the hypothetical, actual, and Exemplar business plan options for a Regional Center application?
Uses of EB-5 Investment
- Q. May the direct or Regional Center investor diversify his/her total EB-5 investment across a portfolio of businesses or projects?
A. Yes, but many conditions apply. For direct investors, the portfolio can only consist of a parent and its wholly-owned subsidiaries. See 6 USCIS-PM G Chapter 2 (A) subsection 3 “Required Amount of Investment” and 6 USCIS-PM G Chapter 2 (D) subsection 2 “Multiple Job-Creating Entities.” Job creation need not be distributed across all businesses in the portfolio, but it seems that each business/project must fall in a TEA for the reduced investment amount to apply. See 2/26/2014 QA question 12. My post Can EB-5 portfolio investment work? deals with this topic in detail.
- Q. May EB-5 investment be used to acquire, salvage, or expand an existing business with existing employees?
A. Yes, but many conditions apply, particularly related to timing and employment. See 6 USCIS-PM G Chapter 2 (C) “New Commercial Enterprise.” and 6 USCIS-PM G Chapter 2 (D) subsection 4 “Measuring Job Creation.” See also my blog post Options for Expanding in an Existing Business.
- Q. May an enterprise still qualify as new if it purchases assets from another company that went out of business? Does USCIS differentiate between purchasing assets and purchasing an existing business?
A. Maybe. The nature, timing, and extent of the asset purchase will be evaluated to determine if this is simply an asset purchase in the course of growing the new commercial enterprise, or if the asset purchase is more likely the acquisition and restructuring/reorganization of an existing business (with different requirements applying either way). See 2/26/2014 QA question 4. For a case study see MAY032016_01B7203, in which USCIS/AAO declined to credit the business or jobs involved as “new” despite purchase from bankruptcy, because the purchase documents did not unambiguously show that the business was non-operational prior to sale, and that the petitioner merely purchased assets, not a business.
- Q. Are there limits to how EB-5 investment may be deployed? May it be used to pay for project costs such as land acquisition, financing costs, and transactional costs?
A. The full amount of the investment must be made available to the business(es) most closely responsible for creating the employment upon which the petition is based. EB-5 investor funds can be used to pay all legitimate business expenses of the job-creating enterprise. Costs such as land acquisition can be considered legitimate business expenses, although they may not be used as inputs in job creation calculations. In regional center cases, the new commercial enterprise may not use EB-5 investment to pay administrative fees, management fees, attorneys’ fees, finders’ fees, syndication fees, and other types of costs that erode the amount of capital made available to the job-creating entity. See 6 USCIS-PM G Chapter 2 (A) “Investment” (particularly the “Made Available” subsection), See 6 USCIS-PM G Chapter 2 (D) “Creation of Jobs,” 5/8/2014 Speech paragraph 28, and 7/2/2012 QA question 2.
- Q. May EB-5 investment be used to replace existing financing, either debt or equity?
A. Yes, under certain conditions, and emphasizing the temporary/short-term nature of the existing financing. See 6 USCIS-PM G Chapter 2 (D) subsection 1″Bridge Financing,” and 2/26/2014 QA question 11.
- Q. May EB-5 investment be used to fund a non-profit?
A. Yes, under certain conditions. The EB-5 new commercial enterprise (NCE) must be for-profit, but (in the Regional Center context) the for-profit NCE may invest in a non-profit entity/project that creates jobs. See 6 USCIS-PM G Chapter 2 (C) “New Commercial Enterprise,” and 2/26/2014 QA question 7.
- Q. Is it okay to change course and use EB-5 investment for a purpose or under conditions that differ from what was specified in the I-526 Petition business plan?
A. It depends on the circumstances. Material changes before I-526 approval will likely result in I-526 denial (requiring the investor to start over and file a new petition with the new facts). Material changes during the conditional residence period may be accepted given good faith and satisfaction of other requirements. See 6 USCIS-PM G Chapter 4(C) “Material Change” and 6 USCIS-PM G Chapter 5(C) “Material Change.” See also my blog post What is material change?
- Q. May a Regional Center sponsor an investment outside of its approved geographic area?
A. The Regional Center must file and receive an approval of an amendment to expand its geographic area before investors can file I-526 petitions for investment outside the originally-approved area. The May 2013 policy memo had said that an amendment was not required to change geographic area, but 6 USCIS-PM G Chapter 3(D) November 2016 “Regional Center Amendments” does not include geographic area on the list of changes for which amendments are optional. In the 3/3/2017 stakeholder engagement, IPO confirmed that “Petitions filed on or after December 23, 2016 must follow the current guidance, which means that Form I-526 petitions based on an area not previously approved will be deniable due to ineligibility at the time of filing.” For a case study of the kind of economic impact analysis required to apply for expanded geographic area, see JUL152016_01K1610.
EB-5 Investment Terms
- Q. Can the investor be guaranteed the right to eventual ownership or use of a particular asset in consideration of his investment?
A. Generally, no. See 6 USCIS-PM G Chapter 2(A) subsection 2 “Investment” subsubsection “Guaranteed Returns and Debt Arrangements.”
- Q. Can an investor receive a distribution of profits during the conditional residency period?
A. Yes, with conditions. Nothing prevents an immigrant investor from receiving a return on his or her capital in the form of a distribution of profits from the new commercial enterprise. This distribution of profits may happen during the conditional residency period and may happen before creating the required jobs. However, the distribution cannot be a portion of the investor’s minimum qualifying investment or guaranteed to the investor. See 6 USCIS-PM G Chapter 2(A) subsection 2 “Investment” subsubsection “Guaranteed Returns and Debt Arrangements.”
- Q. Is it okay to give the developer (not the EB-5 investor) the option to redeem an EB-5 investment at a fixed amount?
A. Maybe. See 2/26/2014 QA question 2 (while keeping in mind 6 USCIS-PM G Chapter 2(A)2).
- Q. Can a new commercial enterprise receiving EB-5 investors also have non-EB-5 owners/investors?
A. Yes, but the source and lawfulness of all capital invested must be documented. Jobs need only be allocated to the EB-5 investors. See 6 USCIS-PM G Chapter 2(C) subsection 2 “Pooled Investments in Original EB-5 Program” and 6 USCIS-PM G Chapter 2(D) subsection 5 “Evidence of Job Creation.”
- Q. Are EB-5 offerings subject to SEC regulation?
A. Yes. For discussion, see 6/13/2013 USCIS/SEC Stakeholder Meeting Summary and Testimony on 2/2/2016 by Stephen Cohen, SEC Division of Enforcement Associate Director before the Senate Judiciary Committee EB-5 HearingVisit the Securities and Exchange Commission website for examples of actions on EB-5 cases.
Job Creation and Economic Analysis
- What are “direct” and “indirect” jobs in the EB-5 context?
The EB-5 definitions of direct and indirect are linked to investment structure. See 6 USCIS-PM G Chapter 2(D) subsection 4 “Measuring Job Creation,” subsubsection “New Commercial Enterprise Located in a Regional Center.” See also my post What is a “direct” job, and what is an “indirect” job?
- Q. May an EB-5 investor deploy capital across a portfolio of projects and then count the required number of jobs from only one of these projects?
A. It appears so. See 6 USCIS-PM G Chapter 2(D) subsection 2 “Multiple Job-Creating Entities.” However, USCIS sends mixed signals. See my post Can EB-5 portfolio investment work?
- Q. How long does a job have to last to be considered “permanent”? May an EB-5 investor count jobs that no longer exist when I-829 is filed.
A. A permanent job is defined as one that lasts at least two years. See 6 USCIS-PM G Chapter 5(B) “Evidence of Job Creation,” including the “Within a Reasonable Time Standard” subsection.
- Q. What is the window for creating jobs?
A. USCIS asks the I-526 plan to show how jobs will be created within 2.5 years of I-526 adjudication. At I-829, USCIS may consider that jobs to be created within a year after I-829 are still within “a reasonable period of time.” See 6 USCIS-PM G Chapter 5(B) subsection 2 “Within a Reasonable Time Standard.” My post on EB-5 Timing Issues has a visual of the EB-5 process and requirements at each stage.
- Q. Can tenant jobs be attributed to the EB-5-funded enterprise that constructed the building occupied by those tenants?
A. Yes in certain circumstances, but there are exacting evidentiary requirements. See 6 USCIS-PM G Chapter 2(D) subsection 6 “Tenant Occupancy Methodology.”
- Q. Can EB-5 investors in a hotel obtain credit for guest expenditure jobs?
A. Yes in certain circumstances, but there are exacting evidentiary requirements. See 2/26/2014 QA question 9, and 7/3/2012 QA question 1.
- Q. Which kinds of project costs can be included in job creation calculations?
A. Not all project costs can be used as inputs to the economic model (e.g. no transactional expenses or transfer payments). However, EB-5 investment can still be allocated toward such costs. See 5/8/2014 Speech, para. 28 and 7/3/2012 QA question 2.
- Q. How granular do economic model job calculations need to be?
A. Must distinguish (not aggregate) direct and indirect jobs, and must differentiate the jobs attributable to each of the model inputs. See 5/8/2014 Speech, para. 30-31.
- Q. Can indirect jobs created outside a Regional Center’s geographic boundary be counted?
A. Yes. See 6 USCIS-PM G Chapter 2(D) subsection 4 “Measuring Job Creation,” subsubsection “New Commercial Enterprise Located Within a Regional Center.”
- Q. At I-829, what evidence does USCIS except to support the creation of model-derived direct jobs supporting a Regional Center investment? Is it possible that USCIS may ask for payroll records to verify model-derived direct jobs?
A. Ambiguous. 6 USCIS-PM G Chapter 2(D) subsection 4 “Measuring Job Creation,” subsubsection “New Commercial Enterprise Located Within a Regional Center” says that “Due to the nature of accepted job creation modeling practices, USCIS relies upon reasonable economic models to determine that it is more likely than not that the indirect jobs are created. USCIS may request additional evidence that the indirect jobs created, or to be created, are full time. USCIS may also request additional evidence to verify that the direct jobs (those held at the new commercial enterprise) will be or are full-time and permanent, which may include a review of W-2 forms or similar evidence. ” 6 USCIS-PM G Chapter 5(B) “Evidence of Job Creation” says that “Where the inputs into the model reflect jobs created directly at the new commercial enterprise or job-creating entity, the investor must demonstrate that the direct jobs input is reasonable. Relevant documentation may include Form I-9, tax or payroll records, or if the jobs are not yet in existence, a comprehensive business plan demonstrating how many jobs will be created and when the jobs will be created.” 2/26/2014 QA question 6 says that the I-829 evidence required depends on the model and inputs used (which may involve verifying revenues and expenditures rather than documenting directly controlled employees).
- Q. How do USCIS economists assess the economic impact analyses filed with EB-5 petitions?
A. The economist training slides from the 2013 USCIS training materials (internal documents obtained by IIUSA via FOIA request) give come clues. For requirements specific to economic impact analysis filed with I-924 regional center applications, and how to justify designation of a certain geographic area, see the AAO decision JUL152016_01K1610. For examples of common problems in EB-5 economic analysis identified by the US Department of Commerce, see page 9 of Estimating the Investment and Job Creation Impact of the EB-5 Program (January 2017).
Direct and Regional Center EB-5
For detail about how and why the direct and RC programs are different see my post Direct and Regional Center EB-5 Comparison. Here are a few FAQ drawing from that post.
- Q: Is a loan model possible in direct EB-5?
A: Basically, no. The loan model typical of regional center deals – where an EB-5 funded new commercial enterprise (NCE) makes a loan to a separate job-creating enterprise (JCE) – isn’t possible in direct EB-5 because direct EB-5 can’t have a separate NCE and JCE. Direct EB-5 can only count “direct” jobs – direct employees of the NCE – and thus the NCE and JCE must be a single enterprise in the direct program (or if multiple entities, than essentially joined by a wholly-owned subsidiary relationship). In theory a direct EB-5 NCE could make a loan to its wholly-owned subsidiary JCE, though that would be about as meaningful as a loan from one pocket to another in the same pair of trousers. For both direct and regional center EB-5, the qualifying investment must be a personal contribution of capital from the petitioner to the NCE, and no debt arrangements between the petitioner and NCE are allowed.
- Q. Can direct EB-5 investment be divided among multiple businesses or entities?
A. Only if they are structurally a single enterprise. All EB-5 investors are required to invest in a single new commercial enterprise (NCE), and direct investors have the additional limitation that job creation must occur in the NCE (and thus the structure can’t include separate job-creating enterprises). Multiple entities can only be involved in direct EB-5 investment and job creation if those entities are united by a wholly—owned subsidiary relationship.
- Q: Does real estate investment work for direct EB-5?
A: Generally, no. “EB” stands for “employment based,” and all EB-5 investments must result in creation of 10+ full-time permanent jobs per investor. Regional Center investors can count indirect job creation, but direct investors can only count direct W-2 employees of the EB-5-funded new commercial enterprise. This excludes all passive real estate investments that don’t create jobs, and (for direct investors) excludes real estate projects that create jobs mainly for third parties (contractors, suppliers, tenants, etc.).
- Q: Does the direct EB-5 program need to be reauthorized by Congress?
A. No. Direct EB-5 is a permanent program. But Congress could pass legislation that would modify the program (for example by changing the minimum investment amounts or the rules for Targeted Employment Areas).