EB-5 Immigrant Investor Visas
In 1990, as part of an effort to stimulate the U.S. economy, Congress established the Immigrant Investor Program, known more commonly as the “EB-5” program. Under the EB-5 program, foreign nationals can earn permanent legal resident status (green card status) by investing and creating jobs in the United States.
To qualify for the visa, the investor must:
- Invest in a new commercial enterprise (i.e. one that is established after November 29, 1990 or established before that date, but restructured or reorganized to constitute a new enterprise, or expanded through the investment so that a 40 percent increase in the number of employees or net worth of the business results);
- Create or preserve at least 10 full time jobs for U.S. workers within two years of the investor’s admission to the U.S.; and
- Invest at least $1 million (in cash or property based on its fair market value). The minimum investment is lowered to $500,000 for investments in rural or high unemployment areas.
The EB-5 application process begins with filing a “Petition by Alien Entrepreneur” (U.S. Customs and Immigration Service form I-526), in which the applicant sets forth evidence that he or she has made, or is in the process of making, the requisite investment ($1 million into a new commercial enterprise), that he or she will be actively involved in managing the enterprise, a business plan demonstrating the enterprise’s ability to generate jobs, and an approximate timeline of hiring dates of employees.
After the petition is approved, the applicant must either (1) adjust his residency status to conditional permanent resident if already within the United States or (2) file an application to obtain the EB-5 visa in order to be admitted into the United States.
At that stage, the applicant is considered a conditional permanent resident and allowed to stay in the United States for two years. To remove the conditional status, at least 90 days before the two-year anniversary of the applicant’s admission in the United States, the applicant must file a petition (form I-826) setting forth evidence that the requisite investment has been or is currently being made, and the investment has been sustained during the previous two years. The petition must also set forth evidence that the applicant has created, or will create within a reasonable time, 10 full time jobs for U.S. workers. Once this petition is accepted, the applicant and the applicant’s dependents are granted full permanent legal resident status.
As is often the case, the details of the EB-5 program are paramount to successfully completing each stage of the application process. Issues of valuation, growth-projection, and substantiation of qualifying activities are bound to arise as part of the application process. Moreover, the EB-5 program is just one layer of regulation that an investor must navigate. Starting a business in the United States inherently involves regulation at the federal, state, and local levels which must be accounted and planned for. Finally, a key issue that some investors might overlook is their U.S. income tax obligations.
The United States imposes income tax on the worldwide income of “U.S. persons.” U.S. persons include citizens, green card holders, and those individuals that reside in the U.S. for at least 183 days during a tax year. Thus, after receiving conditional permanent residency and thereafter obtaining green card status, the applicant’s foreign-source income (i.e. income earned in the applicant’s home country) will be subject to U.S. income tax when it was not previously. Moreover, worldwide assets become subject to the U.S. estate tax. For these reasons, pre-immigration tax planning for EB-5 applicants is crucial.
Additionally, U.S. persons have extensive reporting requirements with respect to foreign financial assets. Foreign financial accounts must be reported on Foreign Bank Account Reports and IRS form 8938 on an annual basis, and interests in foreign corporations, partnerships, and trusts must also be disclosed. These reporting requirements are often unknown even to people that have spent their entire lives in the United States, so it is easy to imagine a recent immigrant unintentionally overlooking them.
Finally, EB-5 investors conducting business in the United States while still subject to their home country’s tax and reporting obligations must be cognizant of the fact that violation of their home country’s law (by, for instance, failing to report income or assets in the United States) can subject the investor to prosecution in a U.S. court for using U.S. instrumentalities (phone lines, computer lines, etc.) to defraud a foreign government.
While the EB-5 program is an exciting opportunity for foreign investors, pitfalls are everywhere. Good counsel is essential to a successful EB-5 application and to guaranteeing a smooth transition into permanent legal resident status for the investor. The attorneys at Fuerst Ittleman David & Joseph are well-equipped with the knowledge and connections to assist EB-5 investors in this process.
Just a few of the areas in which the corporate and tax attorneys at Fuerst Ittleman David & Joseph can assist EB-5 applicants are:
- Representation of foreign investors in their preparation and filing of the I-526 and I-829 petitions described above
- Pre-immigration tax planning
- Choosing and structuring the best vehicle for the EB-5 investment
- Obtaining and structuring financing
- Taking advantage of franchise opportunities through EB-5 financing
- Working closely with other professionals, such as immigration counsel, business advisers, economists, and accountants to ensure a successful application
- Compliance with the tax implications of becoming a U.S. person
- Compliance with other applicable laws, all the way from Securities Exchange Commission regulation applicable in soliciting outside investment to local zoning regulations
The government has actively sought to increase the number of EB-5 applications in recent years. The program represents a fantastic opportunity for a foreign entrepreneur to become established in the U.S. market. Fuerst Ittleman David & Joseph is here to assist investors in all stages of this valuable program.
For more information, please contact us at email@example.com or call us directly at 305-350-5690.