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EB-5 Law & Related U.S. Law


FAQs on EB-5 law and related immigration law

[Q] Can EB-5 investor get insurance from a third party for his investment into a new commercial enterprise?

[Q] Can an EB-5 investor use funds unrelated to the EB-5 investment to purchase insurance from a third party (e.g., Lloyd’s of London) in which insurance proceeds would be paid to the investor if the commercial enterprise fails to repay the investor? Assume the third party is unrelated to the commercial enterprise or a regional center.

Let me quote USCIS' answer to this particular question in its entirety, because this issue opens up interesting stuff.

[HOT] [Q] Can relocated jobs count? Assume an architecture firm is moving its division from NY to SF.

CSC takes the position that such relocated jobs cannot count. Their rationale is as follows:

[HOT] [Q] Can an EB-5 investor purchase an existing business created AFTER November 29, 1990 and do EB-5 case?

[Q] Can an EB-5 investor purchase an existing business created AFTER November 29, 1990, and not have to expand or restructure this business and still qualify it as a "new" commercial enterprise?

Yes, because of the Section 11036 of the 21st Century Department of Justice Appropriations Authorization Act, Public Law No. 107-273, the alien investor does not have to have been involved in the creation of the existing commercial enterprise as noted above.

[HOT] [Q] Can a non-profit act as a new commercial enterprise, or as a borrower company creatings jobs?

In context of a regional center based EB-5 project where a new commercial enterprise engages in making loan(s) to job-creating businesses, while a non-profit cannot act as a new commercial enterprise entity (NCE), as the very definition of NCE precludes non-profits, a NCE can pool money and loan such pooled funds to non-profit which creates jobs.

[HOT] [Q] Can an EB-5 investor transfer money from a LLC or corporation controlled by him to new commercial enterprise?

The answer is "no". Don't try it, even though such action would save a lot of tax for the EB-5 investor. USCIS or CSC will deny your case. Their current position is that any transfer of money into a new commercial enterprise other than from the EB-5 investor's personal bank account does not comply with EB-5 law.

[Q] Do jobs created have to be in the same underlying TEA area for non-regional center EB-5 case?

[Q] EB5 Question regarding the targeted employment areas – the regs require that the investment must be made in a new commercial enterprise in a “targeted investment area”. And the definition of targeted investment area is defined by having a high unemployment rate or you also have rural area. Question – for the 10 employees – do they have to be in the same area or if the business in located in the TEA or Rural but jobs are somewhere else? I am thinking that by the definition of TEA and Rural, this would be circumventing the intent of the law?

I assume this is a non-regional center but TEA EB-5 case. The answer is "yes". Since this is a non-regional center EB-5 case, only direct jobs would count; therefore, those direct jobs created should be in the underlying TEA area in which the new commercial enterprise is located in. Otherwise, you can have a new commercial enterprise located in Hawaii and the jobs created in California.

[Q] A troubled business has only 6 full-time jobs. Can I still invest and do EB-5 case through this biz?

Each investor in a “troubled business” must show that the investment will save ten jobs. Therefore, 4 more jobs must be created. Basically, although 6 full-time jobs can be saved, 4 more full-time positions must be created.

[HOT] [Q] What is meant by "EB-5 law"?

A flippant but not a false answer is "EB-5 law is whatever USCIS decides the EB-5 law is." There are certain broad EB-5 statutes and USCIS regulations promulgated pursuant to these statutes, plus precedent AAO decisions, guidance memos and some federal court cases. The problem is that there is no clear guidance on many of the issues arising from real-world scenarios.

[Q] I invested $1 Million USD in two businesses via two separate companies. Can I form holding company now to do direct EB-5?

[Q] I invested over $1 Million USD in two coffee shops and one restaurant several years ago and obtained E-2 visa. I am operating two coffee shops via Corporation A, and one restaurant via Corporation B, both of which are owned by me 100%. Coffee shops created 3 new full-time jobs, whereas the restaurant created 9 full-time new jobs, even though $800,000 USD was invested in the two coffee shops, while $400,000 was invested in the single restaurant. Can I now form a holding company with two subsidiaries and apply for direct individual EB-5 case?

The relevant issue is as follows. Although it is permissible for the fund to be invested in different businesses and different businesses created different number of jobs, this holding company (to be considered a new commercial enterprise) is contemplated to be formed "after the fact", and the holding company did not exist at the beginning of the investment period.

[Q] Why did USCIS deny a majority of I-526 petitions for RC-based EB-5 cases from 1995 to 1999?

People might disagree on the answer, but in our opinion, USCIS denied a majority of I-526 petitions during this "black" period for EB-5 Program primarily for two reasons. First, they did not believe jobs were being created in the applicable region.

[Q] When will USCIS release guidance memos in the works on various EB-5 issues?

[Q] USCIS recently stated during June 2009 stakeholders teleconference that it is in the process of drafting and releasing several guidance memos on various important EB-5 issues. When will such guidance memos be released?

No one knows. We don't even think USCIS itself knows because they are very busy, and they need to think through very carefully before they release anything. Also, such guidance memos need to be reviewed by many USCIS officers and revised before they can be released.

[Q] Is there restriction in EB-5 law against owning and operating houses for dormitory purpose for F-1 students or employees?

There is a regulatory provision which specifically prohibits a new commercial enterprise from non-commercial activity such as owning and operating a personal residence. Although legally speaking, you would be using the houses for commercial activities in housing your employees and customers, I would make sure not to count the houses in the capital amount of your investment.

[Q] What is the legal definition of the term "new commercial enterprise"?

The word "new" in the context of "new commercial enterprise" is defined as any commercial enterprise formed after November 29, 1990. If the commercial enterprise is formed before this date, then to fall within the definition of "new", the existing, i.e., already-established commercial enterprise must be "restructured" or "expanded". No one is sure what is meant by "restructured"; therefore, proceeding through a "restructured" case is not recommended.

The "commercial enterprise" is defined as "any for-profit entity formed for the ongoing conduct of lawful business." Therefore, a limited partnership or corporation can and does qualify as a new commercial enterprise.

[Q] Does the amount of tax I pay during the 2-year CPR period affect my I-829?

[Q] Does the amount of tax I pay during the 2-year CPR period affect my I-829? I ask this is because I'm planning to transfer the ownership of my current company abroad to one of my parents before I become a CPR.

No, the approval of I-829 and the U.S. tax obligations are two separate matters. Tax planning, where appropriate, is recommended in advance of obtaining CPR status.

[Q] Will certain EB-5 cases from Pakistan and Iran nationals be examined more closely?

We have no doubt that these cases will be scrutinized more closely from both security and lawful source angles, although there is no formal words from USCIS stating such; and I don't think USCIS will ever make such formal statements. Having said this, there is no prohibition on Iranian EB-5 cases and they are doable. Following links are relevant to Iranian EB-5 cases:

http://www.bis.doc.gov/policiesandre...tions/Iran.pdf

http://www.ustreas.gov/offices/enfor...ran/iran.shtml

Another helpful resource is: 31 C.F.R. Section 560 and Appendix A to part 560