Three Paths to EB-5?

When researching the options for making an EB-5 investment, clients often hear about the two EB-5 investment paths - direct and indirect.  But are there really three paths?  The answer to this question is yes and no.  This article will detail the different options a potential investor has when deciding to make their EB-5 investment.

By far the most popular option for EB-5 is the indirect regional center investment.  The indirect regional center investment allows the client to make a completely passive investment in a project that will be the sole responsibility of the developer to maintain.  These investments are generally loan based, but in some instances may be equity based investments.

The EB-5 investor will not have any managerial or day-to-day responsibility.  They simply invest their money and leave it in the hands of the developer to meet the immigration requirements so they can become full-fledged green card holders.  It’s an affordable option because the vast majority of regional center projects are located in targeted employment areas that allow for the reduced investment of only $500,000.

What are the positive attributes of an indirect regional center investment?  The reduced investment amount is what makes the regional center path most appealing to clients.  Some investors also enjoy not having to worry about the day-to-day burden of running the business.  While a client may have created a successful business in their home country, they may be unfamiliar with US business practices and culture and opt to have the project managed for them.  For these investors, the regional center path fits perfectly into their immigration plan.

What are the negatives of an indirect regional center investment?  Regional center investments will offer a low return.  This isn’t to say that the project is bad – it’s just the nature of EB-5.  A typical regional center project will generally yield a 0.5% - 1% return.  This isn’t very high, so investors wishing to obtain a larger return should choose a different path for their EB-5 investment.  Clients should be very wary of regional center projects offering them large returns.  Another potential negative aspect is that the EB-5 investor doesn’t have any decision making power in the business.  This may not be ideal for clients that consider themselves to be savvy investors.

So what are the options for investors not wishing to invest through the indirect regional center path?  Here is where the discussion of three paths to EB-5 comes up.  Many clients (and immigration attorneys) misinterpret the rules regarding a direct (non regional center) investment.  Often they think the investor must be involved in the day-to-day operation and running of the business.  They believe they have to live in the same city and go into the business daily to qualify for EB-5.  That is one option, what I refer to as a “true” direct EB-5 investment, but it’s not the only option for direct EB-5.

So what are the two paths under the direct EB-5 umbrella?  It’s first important to examine the rules regulating the requirement that the EB-5 immigrant investor be engaged in the management of the new commercial enterprise.  The EB-5 Program requires the immigrant investor to be engaged in the management of the new commercial enterprise, either through the exercise of day-to-day managerial responsibility OR through policy formulation.  8 C.F.R. §204.6(j)(5). 

For investors courageous enough to take the plunge and run their own EB-5 business, they can do so through the “true” direct EB-5 path.  They will be responsible for the creation and day-to-day management of the business, as well as meeting all the immigration requirements.  Their investment return will be based solely on their own personal efforts.  This path can prove to be risky and should only be undertaken by clients confident in their ability to meet all requirements under the program.

This may work for some investors, but the majority of EB-5 clients do not want to assume full responsibility for their immigration future.  These clients may benefit from a more “hands off” direct investment.  This “hands off” direct investment path is great for investors wishing to invest in smaller projects that may yield significantly higher returns than the indirect regional center investment.  In conformity with the rules, these investors will have a policy-making role by being a corporate officer or member of the corporate board of directors.

These investors get the best of both worlds.  Unlike the regional center path they have some control over the business and typically receive a larger return.  However, there is no requirement for then to run the day-to-day operations and they leave the responsibility of meeting the immigration requirements to the project developer.  The EB-5 investor is free to live and work anywhere in the United States, regardless of the business location.  This path is ideal for all EB-5 investors frustrated with the lack of control and low returns of an indirect regional center investment.

For more information on the EB-5 Visa Program and which EB-5 path is most suited for your investment needs, contact General Counsel, PC and speak to one of our Washington DC EB-5 attorneys. 

www.eb5investmentlaw.com | www.generalcounsellaw.com

6849 Old Dominion Dr. Suite 220, McLean, VA 22101 | 703.556.0411 | kbarella@gcpc.com

Washington DC EB-5 Attorneys | Northern VA EB-5 Attorneys

EB-5 Processing Times to Decrease

The EB-5 Immigrant Investor Visa offers a solution for high net-worth individuals to permanently immigrate to the United States.  The program has no language or education requirements, and more importantly, does not require any family ties for sponsorship.  Provided the foreign national has the requisite funds for the investment, he or she has an opportunity to obtain a green card.

Gone are the glory days of EB-5 when I-526 Petitions were approved in 2-5 months.  The past few years have seen a steady increase in processing times of EB-5 Petitions.  It’s not uncommon to hear of investors waiting over 12 months for their approval.  However, there is light at the end of the tunnel.  USCIS has recognized that processing times over a year are unreasonable, and have taken steps to remedy the situation.  

The processing of I-526 Petitions are becoming more streamlined with the recent move of EB-5 adjudication from California to Washington, DC.  USCIS recently advertised on the government jobs website, usajobs.gov for multiple EB-5 Adjudicator position openings.  The posting deadline closed April 16, and USCIS should begin vetting candidates shortly.  

What does this all mean for EB-5 Investors?  The good news is that processing times are decreasing.  With USCIS hiring multiple adjudicators for the program, we should begin to see the processing times drop.  Less than a month ago, uscis.gov listed EB-5 processing at around 13 months.  Today, the times have already dropped to 11 months.  Although this is a small start, we should expect faster processing in the near future.

U.S. Sanctions on Russia and the impact on Russian EB-5 investors

Since the collapse of the Soviet Union in the early 1990s, the United States has welcomed a steady flow of immigrants from Russia – many settling in cities like Miami, New York, Denver, Los Angeles and Baltimore.

Russian EB-5 investors, while prosperous in Russia, choose to leave when government corruption and unpredictability become a factor.  These individuals recognize that Russia cannot provide a safe investment environment to protect their wealth, only economic uncertainty. This is evident with Russia’s recent annexation of Crimea, which contributed to the ruble and Russian stock market plummeting earlier this month. The $500,000 EB-5 investment now costs up to 8% more in rubles than it would have just a few months ago. Fortunately, many wealthy Russians who qualify for the EB-5 Visa maintain dollar and/or Euro accounts outside of Russia.

With the recent U.S. sanctions in place, can Russian investors expect other uncertainties during the investment process?

On its face, it appears that unless the investor is part of President Vladimir Putin’s “inner circle”, most EB-5 clients will not be directly affected by the sanctions.  However, although the sanctions appear insignificant to most individuals in Russia, recent sanctions against Bank Rossiya for example, prompted Standard & Poor’s (S&P) rating agency to downgrade its outlook for the lender from stable to a negative rating. As a result, the S&P foresees a deterioration of the bank’s future business and financial profiles. Further, Bank Rossiya can no longer engage in dollar-based transactions, and western banks will not be able to engage in business with them. 

The sanctions on Bank Rossiya were meant to directly impact Putin and other top government officials. The actual ramifications to potential investors, for now, are minimal. However, some economists are predicting the crisis over Crimea could tip the Russian economy into a recession this year, which could serve as a push to potential EB-5 Investors to leave Russia sooner.

Barella Law | +1 (239) 228-2895 | kbarella@barellalaw.com | www.barellalaw.com

The Information contained in this blog is for information purposes only, and should not be considered legal advice for any individual case or situation.  The information provided is not a substitute for consultation with an attorney.  No attorney/client relationship is created by the information contained herein.

The Cost of an EB-5 Regional Center Project Investment

As an immigration attorney representing EB-5 investors, one of the frequently asked questions is: what is the total cost of an EB-5 Regional Center investment?  Savvy investors understand, in order to go through the EB-5 Visa process, they will incur other expenses in addition to the $500,000 capital investment.

So what is the cost of an EB-5 investment?  Unfortunately, there is no set dollar amount.  Each client’s case is distinct, and there are a multitude of factors that may influence their costs.  This article will address the most common EB-5 costs - but it’s important to keep in mind that expenditures for your specific case may vary.

The Investment:
One cost that is universal for all clients is the invested capital.  Most Regional Center projects are located in a Targeted Employment Area, which allows for a reduced investment amount of $500,000.

Legal Fees:
Just as you wouldn’t forgo obtaining a doctor to perform a surgery, you also want to be sure to retain a competent EB-5 attorney to file your petition.  Depending on whether your lawyer bills a flat fee or hourly rate for an EB-5 investment, you can expect to pay anywhere from $10,000 to $20,000 for legal services.  Depending on the firm you choose, this may or may not include the services of an EB-5 Investment Advisor.

Project Administration Fees:
The majority of projects out there charge an administration fee when subscribing to their project.  The typical administration fee ranges from $30,000 to $60,000.  These fees are generally used to pay marketing costs, as well as “finder fees” for agents abroad.

Filing Fees:
With every I-526 Petition filed, USCIS requires the payment of a filing fee.  Currently, the filing fee for an I-526 Petition is $1,500.

Translation Fees:
USCIS requires any documentation or evidence not in English to be accompanied by an English translation.  Further, in their latest EB-5 stakeholder meeting, USCIS indicated that the entire document will need translating and abstract translations are not accepted.  Translation service fees vary depending on the document content and number of words.  You can expect to pay between $0.25 and $0.50 per word.

Miscellaneous Costs:
If you choose to travel to the US to speak with Regional Centers or your attorney, you might incur additional expenses such as travel, housing and visa costs.

Although these are a few of the most common expenses associated with the EB-5 investor visa, additional costs may arise depending on your individual case.  You may also be able to mitigate the costs of EB-5 through varies means.  A conservative estimate of an EB-5 investment from start to finish will be around $568,000.

Barella Law | +1 (239) 228-2895 | kbarella@barellalaw.com | www.barellalaw.com

The Information contained in this blog is for information purposes only, and should not be considered legal advice for any individual case or situation.  The information provided is not a substitute for consultation with an attorney.  No attorney/client relationship is created by the information contained herein.

Conférence Snowbirds en Floride (Snowbirds Conference in Florida)

On January 28, Barella Law, LLC spoke to a group of Quebeckers at the annual Conférence Snowbirds en Floride (Snowbirds Conference in Florida) in Aventura, Florida.

The conference was a great opportunity to explain the different immigration options Canadians have to enter to the US.  We also had the opportunity to meet others in professional industries that serve snowbirds in Florida.Along with our immigration firm, other speakers included a CPA, insurance representative, financial planner, and a Québec attorney.

The conference attendees were very receptive and eager to ask questions.  Barella Law continues to promote and build a relationship with our clients in Québec, as well as other parts of Canada, and around the world. We look forward to hopefully participating in next year’s conference.

Barella Law | +1 (239) 228-2895 | kbarella@barellalaw.com | www.barellalaw.com

EB-5 Regional Centers and Securities Law

EB-5 investors are becoming increasingly aware of the Securities and Exchange Commission (SEC),  the top U.S. securities regulator, and its involvement in the EB-5 Visa Program. As a result, investors are anxious to learn the connection between the nation’s financial watchdog and the immigration program.  Created by the Securities Act of 1934, the SEC was designed to protect investors from fraud by enforcing securities laws requiring complete disclosure of information and regulating the people involved in the securities transactions.  Attorneys handling EB-5 Visa clients should be prepared to provide a competent explanation on both immigration and securities issues involved in the EB-5 process.  In the past, securities law was considered a specialty area of law reserved for large firms in cities such as New York.  However, at present, to practice as an EB-5 attorney, it is important to have at least a minimum understanding of the U.S. securities law.

The SEC defines a security as any stock, bond, debenture, note, transferable share, investment contract or certificate of interest in a profit-sharing agreement. In general, all securities offered in the United States must be registered with the SEC and comply with the regulations, or be eligible to claim an exemption from registration. A typical EB-5 Regional Center Project is structured in the form of a Limited Partnership and according to SEC, interest in the partnership is an investment contract and therefore, a security . To further elaborate on the term “investment contract”, the Supreme Court of the United States determined the definition in the landmark case of SEC v. Howey.

According to the Supreme Court, an investment contract is any transaction in which (1) a person invests money (2) in a common enterprise (3) is led to expect profits and (4) solely from the efforts of others.  The four elements combined  are commonly referred to as the Howey Test and are used to determine whether an instrument qualifies an investment contract. 

The first element is interpreted as the investor not purchasing a consumable commodity or service, rather, making an actual bona fide at risk investment.  The second element of commonality is determined by multiple investors having interrelated interest in a common scheme (it is sufficient if a single investor has a common interest).  The third element of expectation of profits is interpreted as expected returns must come from the earnings of the enterprise.  Lastly, earnings must come from the efforts of others, this is broadly construed to mean that the efforts of managers must predominate over the passive investor.

EB-5 Regional Center Projects structured as a Limited Partnership meet all 4 elements of the Howey Test and are therefore defined as an “investment contract”. Foreign investors (1) invest at minimum $500,000 (2) into a common enterprise, Limited Partnership, (3) with an expectation of returns on the investment and (4) through the efforts of the managing partner. 

Simply meeting the definition of a security is just the beginning of the complex regulations of U.S. securities. In our next blog, we will elaborate on the scope of the regulatory authority of the EB-5 Visa Program by SEC. 

For more information on the EB-5 Visa and SEC compliance, please contact our office today.

Barella Law | +1 (239) 228-2895 | kbarella@barellalaw.com | www.barellalaw.com

The Information contained in this blog is for information purposes only, and should not be considered legal advice for any individual case or situation.  The information provided is not a substitute for consultation with an attorney.  No attorney/client relationship is created by the information contained herein.

Lawful Source of Funds for EB-5

Perhaps the most important aspect of any EB-5 Petition is the Lawful Source of Funds requirement by USCIS.  For apparent reasons, USCIS must ensure that every petitioner has acquired the funds to make their EB-5 investment through lawful means.

Given the different accounting and taxing principles around the world, this sometimes proves to be difficult to trace.  Through no fault of the attorney or investor, some countries simply do not practice the standard of record keeping required by USCIS.  This hurdle may be overcome by providing affidavits and other evidence and documentation to get around the deficiency.

Communication between the client and the attorney is most crucial during this stage of the EB-5 process.  An attorney may only perform his/her job when the client has made a complete disclosure of their source of funds.  USCIS needs to see the money traced back to its origin.

For example, if an investor claims to have gained the funds for the investment through the sale of a property, he must show more than just the bill of sale for that property.  USCIS will want to see that he was in fact the owner of the property, and owned it for a reasonable time.  This may be proved by the investor providing his original purchase agreement, or other evidence to prove ownership.

Although the EB-5 Investment is $500,000 for Regional Center Projects located in target employment areas, there are other costs associated with the investment.  Generally an administration fee is assessed to the Petitioner.  Although an attorney should not have to account for the administration fee in the Lawful Source of Funds, the trend among EB-5 attorneys has been to provide documentation accounting for that money. The last thing an attorney wants is to give USCIS an excuse to issue a Request for Evidence (RFE).

Barella Law | +1 (239) 228-2895 | kbarella@barellalaw.com | www.barellalaw.com

The Information contained in this blog is for information purposes only, and should not be considered legal advice for any individual case or situation.  The information provided is not a substitute for consultation with an attorney.  No attorney/client relationship is created by the information contained herein.

The EB-5 Visa: An Increasing Contributor to the Growth of the US Economy

The EB-5 Visa Program has a reputation of being a cash for green card business.  Some view it as a system where wealthy individuals essentially buy their way into the United States.  However, this misconception of the EB-5 program is inaccurate and has often led to negative press regarding the visa.

While it is true that foreign nationals who invest through the EB-5 visa must furnish at minimum around $550,000 ($500,000 investment plus regional center administration fees and legal fees), not all of the investors come from extreme wealth.  Many investors work hard to save the money over years, take out a loan (secured on assets) or inherit the money from family.  These investors make sacrifices in their lives because they still believe in the “American Dream,” and understand that this country still has much to offer.

The EB-5 Visa Program is beneficial to both the foreign investor and the US economy.  Apart from creating ten jobs for US Citizens or Permanent Residents (A requirement for obtaining the EB-5 visa), these foreign nationals invest in real estate, contribute to the local economy, and enroll their children in university programs.  Compared to other paths of obtaining permanent residency, the EB-5 visa comes with positive advantages for US citizens and our economy.

A growing trend among potential EB-5 candidates is their discovery of the program through their student child.  F-1 Student Visas are on the rise, and today more than ever, foreign students are coming to the US to take advantage of our educational programs.  Often, when the student is finished studying their program they have no legal status to remain in the United States.  Unless they secure a job that is willing to sponsor them, they must eventually return to their home country.

Many students are doing their own research on the EB-5 Program, and encouraging their parents to make the investment on their behalf.  It is important to note that unmarried children under the age of 21 may be included on their parents’ petition.  For children 21 years and older, they must file their own EB-5 petition.

Barella Law | +1 (239) 228-2895 | kbarella@barellalaw.com | www.barellalaw.com

The Information contained in this blog is for information purposes only, and should not be considered legal advice for any individual case or situation.  The information provided is not a substitute for consultation with an attorney.  No attorney/client relationship is created by the information contained herein.