Alan Lee Speaks on Immigration to United Chinese Association of Brooklyn on May 15th Concerning L-1A Intracompany Transfers, EB-5 Investment, and PERM Labor Certifications. (Part 2)
By Alan Lee, Esq.†
[This is the second of a three part series of the talk that Alan Lee gave to the Chinese United Association of Brooklyn. The first part which was published here on June 3rd concerned L-1A intracompany transfers. The second part will focus on EB-5 Investment.]
The investor immigration law was passed in the U.S. on November 29, 1990, and languished for many years because of lack of interest accompanied by the questionable attitude by U.S.C.I.S. In recent years, the immigrant investment category (EB-5) has seen a more responsive attitude by the agency. The EB-5 program has been growing in popularity among Chinese nationals due to the growing wealth of China and its people and the increasing backlogs for U.S. immigration through other categories. The EB-5 category quota has traditionally been and is likely to remain open in the future. It has an annual quota of 10,000 visas and U.S.C.I.S. figures show that at in fiscal year 2010, 1885 EB-5 visas were issued, 4218 in fiscal year 2009 and 1360 in fiscal year 2008.
There are two ways to immigrate under the EB-5 category - through regional centers (currently 250 across the nation of which half of them have been designated on a list by U.S.C.I.S.) or through individual investing. You can get a copy of the list by accessing U.S.C.I.S. at "www.uscis.gov/eb-5centers." In either case, it must be noted that there is no guarantee that the investor will recoup the amount of the investment or receive the green card. When Immigration puts regional centers on the list, it only means that it has reviewed the proposed business plan, what we call the econometric model which is an economist's view of future growth of the project, location, and proposed job creation - and determined that the business plan meets the requirements of the immigrant investor pilot program. U.S.C.I.S. does not conduct background checks, and generally does not monitor the performance of the regional centers. On the list, it does not publish which regional centers are operational or the rates of approval of their petitions. The investor does not control the investment in regional centers, but in most cases will control the destiny of the funds in an individual investment vehicle.
In a regional investment center case, the amount of required investment is generally $500,000 (USD), and the investment center is responsible for the hiring of 10 U.S. workers. In individual investment cases, the amount usually required is $1 million (USD) and the investment must employ 10 U.S. workers. The investor is responsible for ensuring that 10 people are hired and that they are U.S. workers.
EB-5 investors are allowed to immigrate with spouses and children under the age of 21 at the time that the petition is filed and unmarried. Investment cases currently average 5-6 months for I-526 petition approval. Following petition approval, consular processing takes approximately 9 months if the investor is overseas and adjustment of status 6-9 months if the investor is in the U.S.
An approved investor will receive a conditional residence card valid for two years which is in all respects a green card except for having an expiration date. In the 90 day period prior to the second anniversary of obtaining the conditional card, the investor must submit a further application and documentation to U.S.C.I.S. proving that all facets of the investment immigration requirements have been fulfilled.
That is in short an overview of investor immigration. More specifically, the $500,000 investment instead of $1 million can only be made where the rate of unemployment is at least 150% the national average or the investment is in a rural area which is defined as not within in a metropolitan statistical zone or within 20 mi. of a city or town having a population of at least 20,000 people. These are Targeted Employment Areas or TEAS. High unemployment areas can be determined through looking at the Bureau of Labor Statistics (BLS) data or obtaining a state agency letter of high unemployment. Determining a rural area can be done by looking at the 2000 census at the present time. The rule is that the $500,000 targeted employment area is determined either at the time of investment or filing the I-526 petition. If the money goes into an escrow account, which means it is being held in trust and not released to a regional center, the time for determining whether the area is a TEA is the time of filing the petition.
In determining how many jobs must be created, the normal number is 10. There are, however, some exceptions. If you're doing individual cases, and the company that you're using as an investment came into being before November 29, 1990, you're what they call an existing company. An existing company must either be restructured or reorganized to qualify; or it must show that the investment has either increased the net worth of the company by 140% or the number of jobs in the company by 140%. Restructuring or reorganizing means real change in the company and Immigration has in the past approved a horse breeder adding the services of horse training to the business. In these cases, you have to at least add 10 workers, but may have to add more if you're trying to show that the number of jobs increased by 140%. For example, if the existing company had 40 employees previously, you have add on another 16 to increase the number by 40%.
There are two basic models of regional centers at this time. One is the equity model in which people are pooling the money into the investment center which is running its own project. The second is the loan model in which the regional center is taking in money from investors and loaning it out to third-party organizations which will supposedly give it back with interest in the future.
Regardless of whether you're doing a regional or individual investment case, you would submit a Form I-526 Immigrant Petition by Alien Entrepreneur to U.S.C.I.S.'s California Service Center to begin the process. What are the things that we would recommend documenting to the Center? Although not important in a regional center case in which the investors are limited partners, showing the investor's qualifications may be more relevant in an individual investment case in which the applicant will likely take more of a hand in running the business. For that, we generally tried to obtain information on the potential investors such as a CV or resume and proof of schooling or work experience.
Evidence of the investment amount in the form of transfer of funds to the U.S. is always very important and so we will try and have the investor account for proof of transfer from the investor's overseas account to the investor's personal or investment company escrow or other account in the U.S., which will include the record of the overseas bank, U.S. receiving bank, and receiving bank transfer of funds to the investment vehicle.
If it is an individual investment case, and if the investment has already been put into place and used to some extent, we would like to show some of the following although I note that proof of where the money went is usually more relevant later on when trying to remove the conditional basis of the green card: proof of purchase of materials, equipment, land, cars, furniture, used in the investment etc.,
Source of funds is very important to Immigration as it wants to ensure that the people who are investing are using funds legally received. For this, you try and trace back the invested funds as far back as possible, and if the money came from others in the form of loans or gifts, even where the gift giver or loan giver got the money themselves. So we try to obtain evidence of some of the following: tax returns for at least the last five years, and other proof of the financial standing of the investor including banking statements, proof of ownership of property or companies, or of loans, bequests, or gifts which are being used to fund the investment.
Finally there has to be some evidence of what is the investment vehicle. If it is a regional center, the center will usually have a package of materials already. If an individual investment, we recommend that you be able to show the corporate set up and any signs of the company's beginning business. These might include tax returns or audited financial statements, W-4's and I-9's filled out for employees, and quarterly federal and state tax statements. If the organization has not yet hired ten U.S. workers, you also have to provide U.S.C.I.S. with a detailed business plan including how the organization will market its products, its competitors, sources of supply, contracts, and how it will hire the ten U.S. workers.
U.S.C.I.S.'s present rule is that job creation must be done within 2 1/2 years after the approval of the I-526 petition. It figures that it would take someone approximately six months to immigrate following the I-526 approval, and then two years to complete the hiring of 10 U.S. workers. In the 90 day period before the two years is up on the conditional green card, the investor must file Form I-829 Petition by Entrepreneur to Remove Conditions to the California Service Center in which he/she must prove that the correct amount of the investment was given, that the investment was sustained in that the investor did not take back the money or part of it, and that the appropriate number of jobs was created.
I want to acquaint you with some other U.S.C.I.S. statistics which it gave in February 2011 that mainland born Chinese were far away at 41% the top receivers of EB-5 visas, that there were 124 approved regional centers and the same number of regional center pending approval, and that the overall approval rate of I-526 petitions in fiscal year 2010 was 89%, 2009 86%, and 2008 84%. For I-829 petitions, U.S.C.I.S. approved 83% in fiscal year 2010, 86% in 2009 and 70% in 2008.
As can be seen by the figures, there are a plethora of choices if you want to go with investment immigration through a regional center. Which one do you pick? From what we see and hear, potential investors want the green card. They also want safety for their money. Can you have it guaranteed? U.S.C.I.S. has indicated that it considers a guarantee by a third-party insurance company to be acceptable. Otherwise of course, there are the top two kinds of risk that an investor must face.
-- immigration risk
-- investment risk
I must say to you that of the two risks, immigration lawyers are generally more comfortable speaking about the immigration risk. That is because immigration issues are things that they work with constantly. Most lawyers are not versed in finance and do not have licenses as brokers or dealers. They like us are not equipped to advise a client on what is a good investment or not. An investment in one of these projects is like investing in a stock which may go up, but which may also decline. How many of you have lost money on a stock in the market? -- so you know what I mean. The old saying of all who are familiar with the market is that today's performance of a particular stock cannot be seen as an accurate prognosticator of a stock's performance of the future. To me, if the investment amount is a matter of life and death to the potential investor, he/she should not invest. Only if the investor is comfortable with the idea of risk and losing the money or part of it if there is no guarantee by an insurance company should he/she go forward. Even in the loan situation where the investment vehicle is lending money out to be paid back after a certain amount of years, there's a problem if the party to which the money is loaned defaults or becomes bankrupt.
In terms of the immigration risk, lawyers like us would be willing to look into regional centers that investors are interested in joining with and asking questions concerning relevant aspects of their program to assess the immigration risk. We're much more comfortable doing us than assessing financial safety.
Whatever you do, you should look at immigration investment as a good opportunity, but you must be careful.