IMMIGRATION THROUGH INVESTMENT – THE EB-5 VISA
By: Fernando O. Zambrana-Aviles, Esq.
The immigration laws of the United States recognize four major ways an alien can immigrate lawfully to the United States: through family links, employment, diversity and investment and job creation. For over two decades immigration through investment and job creation has been a viable alternative for hundreds of aliens who wish to immigrate to the United States for any reason, but have no family links or employment opportunities.
I. The EB-5 and Regional Center Programs
The Immigrant Investor Program, also known as “EB-5”, was created by the Congress of the United States in 1990 under § 203(b)(5) of the Immigration and Nationality Act (INA) to stimulate the economy of the country through job creation and capital investment by alien (foreign) investors. Alien investors have the opportunity to obtain lawful permanent residence in the United State for themselves, their spouses, and their minor unmarried children by investing a certain amount of capital in a new commercial enterprise which will directly create and/or preserve at least 10 full-time jobs for American workers.## In its most basic form, an alien may make the minimum investment necessary and then file a petition for the EB-5 immigrant visa.
The minimum amount of capital investment depends on the level of economic development of the area targeted for investment by an alien. For an area of low population density or high unemployment (targeted employment areas, abbreviated as TEA), the minimum amount of an investment so as to qualify with the parameters of the EB-5 program is $500,000.00, and for any other areas $1,000.000.00.
In 1992 Congress created the “Immigrant Investor Pilot Program” (Pilot Program), which allows alien investors to participate in the EB-5 program through investments that are affiliated with an economic unit known as a “Regional Center”. A “Regional Center” may be a public or private entity “engaged in the promotion of economic growth, improved regional productivity, job creation, and increased domestic capital investment”. The biggest difference between direct investment by an alien and investment through a “Regional Center” is that the latter allows an applicant to qualify with the “job creation” requirement through the creation of either direct or indirect jobs.
The Pilot Program has been extended by legislation in multiple occasions, as recently as last year. The success of this program in the past has facilitated its continued survival through special legislation for over twenty years.
A public or private entity may request “Regional Center” classification from the Bureau of Citizenship and Immigration Services (USCIS) of the Department of Homeland Security. This classification may be granted by the USCIS after the agency receives an application from the candidate entity with information about the geographical area of the “Regional Center” and its targeted employment areas, a description about the proposed investment activities and how it will generate employment, the impact the investment might have, among others.
The requirements to apply and successfully obtain an EB-5 visa through investment in a Regional Center are the same across the board: (1) the alien investor must invest or must be in the process of investing in a new “for profit” commercial enterprise (i.e. established after November 29, 1990), (2) will be actively involved in the management of the commercial enterprise (day to day or through policy-making), (3) the investment must be of at least $1,000,000.00, or $500,000.00 if the Regional Center operates in a TEA, (4) the funds invested are property of the investor and they were obtained lawfully, and (5) the commercial enterprise will directly or indirectly create 10 full time positions for United States Citizens or Lawful Permanent Residents.
If an immigrant investor succeeds in the application process, he will receive a conditional permanent resident status, valid for two years. At the end of that period, the investor will have to file a petition with the USCIS to remove the conditions from his permanent residence. This petition is basically a verification that during the period of conditional permanent residence the immigrant went through with the investment, the direct or indirect jobs were created and that he or she exercised control of the investment through direct management or policy. If the petition is approved, the immigrant will no longer need to continue participating in the investment scheme. However, the process to withdraw the investment and/or gains is subject to the investment contract signed between the immigrant and the regional center.
II. Active and Credited Regional Centers
According to the information provided by the USCIS’ website, there are over two hundred credited Regional Centers. Each Regional Center is independently owned and administrated, and none can offer any guarantees that the immigrant will recoup his or her investment, or that the application for an immigrant visa and/or permanent resident status will lead to the desired result.
Sometimes, Regional Centers offer assistance in completing the immigration paperwork of the alien investor through referrals to outside counsel (attorneys). This assistance, naturally, is offered after the alien investor engages the Regional Center and makes a commitment by investing at least a portion of the minimum amount necessary (i.e. $500,000.00 or $1,000,000.00). The alien investor can also use the services of his or her attorney of choice for the process.
Other Investment Opportunities
These hundreds of investment opportunities under the Regional Center Pilot Program under the aegis of the EB-5 visa. While drafting this memorandum, we found that many regional centers were still in the early stages of finding investors, while others did not even have a web page. We strongly encourage that you browse for opportunities if you are interested in exploring other options. Many of these Regional Centers have web pages where they offer information regarding their activities and past experiences.
III. Investing in Puerto Rico
There are multiple benefits for choosing Puerto Rico as a target of investment, even under the EB-5 program. One of the best known is the package of tax incentives for individuals under Act 22 of 2012. Basically, Act 22 investors are given a 100% tax exemption on all dividends and interest income, plus a 100% tax exemption of all capital gains.
The following information about benefits is reproduced from the website of Puerto Rico’s Department of Economic Development.
Many favorable conditions come together in Puerto Rico to make it a premier location for business and investment:
- First-rate workforce
- Global experience
- Advanced infrastructure
- Attractive tax incentives
- United States legal framework
- Puerto Rico is strategically located between the Caribbean Sea and Atlantic Ocean, midway between North and South America, making it the perfect bridge between both continents. It is a 2.5-hour direct flight away from Miami and a 3.5-hour direct flight away from New York City. There are direct international flights to Bogotá, Frankfurt, and Panama City.
Puerto Rico also offers the benefits of operating within a United States jurisdiction while providing the tax benefits of a foreign tax structure. Strategic industries in manufacturing activities and services as well as in export services enjoy a 4% fixed income tax rate. Pioneer activities receive a preferential tax rate of 0% to 1%. Several incentive acts have been approved to stimulate economic development and attract Foreign Direct Investment (FDI) in the following sectors: manufacturing, tourism, export services, insurance, financial services, agriculture, hospitality and hotel development, and renewable energy. In addition, Puerto Rico was ranked among the top 15 Foreign Trade Zones by the US National Association of Foreign Trade Zones 2011 report.
Puerto Rico is part of the US free trade zones and customs system, is under the US legal framework and intellectual property protection, the protection of the Homeland Security Act, our banking system is regulated under US laws (FDIC), and our territory has access to US federal programs and funds.