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EB 5 visa problems: Potential Pitfalls and Challenges in Obtaining Eb-5 Visa

Common challenges and pitfalls that investors may encounter during eb 5 status check. Navigating EB-5 Visa complexities: Understand the potential challenges and prepare for the pitfalls in obtaining U.S. residency.

last updated Thursday, October 24, 2024
#eb 5 visa problems #eb5 success rate

John Burson

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KEY TAKEAWAYS

The investing landscape has been vastly transformed, so modern investors face many unique challenges.
Perhaps the most daunting challenge modern investors face is the sheer speed and volume of information.
With time, many investors learn to filter out information and create a select pool of reliable sources that match their investing tastes.
Even if you have a good handle on quality information, you can still get burned when inaccurate information or fundamental uncertainty hits the market.
Advertising can sometimes push an investor toward an edge by hyping an investment that isn't necessarily the best fit.

Just like with any valuable endeavor, there are inherent risks to consider. These include concerns about foreign capital impacting the U.S. economy, the potential for fraud, or the misappropriation of funds. The crucial factor is maintaining a vigilant and transparent approach while remaining fully aware of the rights and obligations of all parties involved. This diligence helps ensure the integrity and success of the EB-5 investment process.

Potential Pitfalls in the EB-5 Visa Process

Source of Funds

While this requirement for the eb5 success rate may appear straightforward, initiating the visa application by submitting the I-526 petition is more complex than it initially seems.

Form I-526 necessitates information about the NCE and detailed documentation regarding the source of the invested funds.

The main goal of this project is to prove that the investor owns the money they're investing and that it was obtained legally. This is necessary to support their application for a visa. To do this, investors can provide different kinds of documents that fall into four main categories: records showing the registration of their business, tax returns or similar documents from the past five years, evidence of other sources of money they have, and copies of any legal cases or proceedings they've been involved in for the past 15 years.

Investment Amount

To be eligible for an EB-5 visa and EB5 backlog, individuals must invest a minimum of $900,000 in a new commercial enterprise (NCE) to create at least ten full-time jobs for American workers.

When investing in the EB-5 program, it's essential to prove where your money comes from, including any fees associated with the investment. This can be tricky if your money comes from various sources, like loans or gifts. It's best to work with an immigration attorney or EB-5 professional to figure out the easiest way to prove the source of your investment funds. Some sources, like personal savings and investments, are easier to prove than others.

Learn more Details on EB5 Investment Amount

Importance of Lawful Source of Funds for EB-5 Investors

In the EB 5 application, USCIS mandates the provision of well-documented evidence to establish the legality of the capital investment and demonstrate a direct link between the investor and the path of funds from their home country to the U.S. investment.

Capital can generally be sourced from any location globally, including the U.S., as long as the investor legally owns it.

Comprehensive documentation regarding the source and path of funds is of paramount importance. The funds necessary for the EB-5 investment may encompass:

Accumulation of salary
Earnings from business ownership
Proceeds from the sale/mortgage of real estate property
Gifts from Family
Inheritance

Complex fund tracing often results in larger Source of Funds (SOF) documentation files. These files should include "point in time" events that unequivocally establish ownership of the funds. To demonstrate that the investment funds originate from legal sources, investors should collaborate with their immigration attorney.

While utilizing the proceeds of a loan for the investment is permissible, securing the loan with an asset is advisable as a best practice.

EB 5 Direct Investment vs Regional Center

What is Regional Center EB5 investment?

The Regional Center (RC) is a USCIS-regulated entity aggregating EB-5 capital from multiple foreign investors for job-creating projects within specific geographic regions and industries.

What is Direct EB5 investment?

The direct EB-5 program is a permanent option, while the RC EB-5 program had a sunset date of September 30, 2015, but is expected to be reauthorized for another five years, with proposed legislation aiming to make it permanent.

Direct vs. Reginal Center investment:

There are approximately 600 plus approved Reginal Centers, and nearly 95% of EB-5 petitions are based on RC investments.
Notably, EB-5 RC investment funds are subject to U.S. securities and anti-fraud laws, with the SEC and USCIS emphasizing the importance of due diligence for foreign investors.
In the direct EB-5 route, foreign nationals achieve immigration goals while investing in a business they manage, potentially yielding significant returns.
In contrast, RC EB-5 investments typically offer a lower rate of return (0.5-2%), with investors playing a more passive role.
However, direct EB-5 investors must demonstrate direct employment of ten U.S. workers, whereas RC EB-5 investments rely on a combination of direct, indirect, and induced employment using economic methodologies.
Most RCs are located in Targeted Employment Areas (TEAs) with a minimum investment of $500,000, but there are direct EB-5 investments that also qualify for reduced capital requirements.
Both EB-5 options necessitate investor engagement in the "management" of the enterprise, which can be satisfied if the investor holds the rights, powers, and duties typically granted to limited partners under the Uniform Limited Partnership Act.

Choosing between these EB-5 options depends on the investor's circumstances and goals.

Learn more EB5 Investment Projects the Guide. Direct and regional center investment projects.

No Fast Track EB-5 Process and No Guaranteed US Permanent Residence

EB-5 investors do not have a guaranteed path to obtaining a green card by investment due to the extended process and the potential for project failure or significant changes.

There is no expedited processing available for EB-5 petitions. The journey begins with the submission of an I-526 immigrant entrepreneur petition to USCIS, where the investor must establish the legal source of funds, detail the investment's path, and demonstrate the creation of ten U.S. jobs within two years or show that these jobs have already been generated as a result of the investment.

Submitting the I-526 petition alone does not grant the investor the right to reside or work in the U.S. The current average processing time for I-526 petitions is approximately 14 months, and even upon approval, it does not confer permanent residence.

Instead, once the I-526 is approved, if the investor is outside the U.S., they and their dependent family members must apply for immigrant visas at the U.S. Consulate in their home country.

This step involves additional documentation and security checks, extending the process by another 6-12 months. If the investor is already in the U.S. under valid nonimmigrant status, they can adjust their status to become permanent residents, which typically takes about six months.

Therefore, after 2-3 years (assuming no visa retrogression), the investor obtains a conditional green card for two years.

EB5 Job Creation: Direct, Indirect, and Induced Jobs

For EB-5 investors who choose to invest directly in a New Commercial Enterprise (NCE), the program's job creation requirements focus solely on direct job positions created by the NCE. These direct jobs are roles generated by the project itself and must be filled by qualified U.S. workers.

To meet EB-5 program criteria, these positions must be considered full-time, meaning they entail 35 hours or more of work per week.

Part-time positions do not count toward job creation, even if their total hours are equivalent to those of a full-time position. However, job-sharing arrangements are permissible, where qualified employees divide the hours of a full-time position.

In 1992, regional centers were introduced into the EB-5 program as economic entities that included direct and indirect and induced jobs when calculating employment creation.

This flexibility in job counting is a distinct advantage of investing in a project sponsored by a regional center.

In contrast to direct jobs, indirect jobs are not directly produced by the EB-5 project. Instead, they arise as a consequence of the project's economic influence. As the invested capital is expended on goods and services to support the project, indirect jobs exist.

Induced jobs share similarities with indirect jobs in that they reflect the project's economic impact. However, induced jobs result from new employment opportunities. As the income earned by the project's new employees circulates within the local community, it creates additional job positions.

It's important to note that indirect and induced job creation can only be considered for investments in projects sponsored by USCIS-approved regional centers. These jobs must be substantiated through an economic report that employs reasonable economic or statistical forecasting methodologies.

Qualified Employees

For a job position to be considered part of the employment creation requirement of the EB-5 program, it must be filled by a qualified employee.

Qualified employees are individuals who possess the necessary authorization to work in the United States. This authorization can be established through citizenship or permanent resident status. It also encompasses individuals presently residing in the U.S. under various statuses, including conditional residents, refugees, asylees, or those granted suspension of deportation.

However, foreign nationals residing in the U.S. as nonimmigrants, including those holding H-1B visas, do not qualify as employees for EB-5 employment creation.

It's essential to note that the EB-5 investor and their dependent family members do not fall within the category of qualified employees and cannot be counted toward the job creation requirement.

Documenting Direct Employment in Addition to Indirect Employment Calculations

While many EB-5 filings typically involve business models that don't directly create jobs within the new commercial enterprise (NCE), regional center filings have the flexibility to do so. Utilizing the NCE's employees can offer certain advantages, such as leveraging the indirect employment effects of these workers' salaries.

However, documenting qualifying "direct employment" poses challenges that non-regional center EB-5 investors often encounter.

To count as part of the job creation requirement, employees of the new commercial enterprise must be "qualifying employees." This term includes U.S. citizens, lawful permanent residents, and other immigrants lawfully authorized to work in the United States.

This broader category encompasses conditional residents, temporary residents, asylees, refugees, and aliens remaining in the U.S. under suspension of deportation. It's worth noting that the examples of "other immigrants" are inclusive, and precisely who qualifies remains somewhat ambiguous.

Proving that these employees are full-time necessitates demonstrating that they work at least 35 hours per week. This can be substantiated using IRS Forms W-2 and 941, which confirm the total number of employees and employer-employee relationships.

Payroll records can further establish that employees have met the required hours. Establishing the full-time status of salaried employees, who may not have traditional hourly records, can be more intricate. Employers might use unique benefits like health care or retirement contributions, employee schedules, or affidavits in such cases.

However, verifying that these employees qualify in terms of immigration status presents its own set of challenges. Documentation may involve submitting Form I-9, but it's advisable to have an immigration attorney review these forms and conduct an audit if necessary to avoid issues with Immigration and Customs Enforcement.

The documents requested to establish immigration status in I-829 RFEs can be more restrictive than those needed to complete an I-9, which could lead to fines and complications. Therefore, collecting the necessary documents separately from the I-9 process is prudent.

In documenting job creation following an EB-5 investment, reviewing successful strategies employed by others and staying updated on changes in EB-5 law and requirements is advisable, given the evolving nature of legislation in this field.

EB5 Employment Requirement for Troubled Businesses

The EB-5 program offers the option to invest in troubled businesses. To qualify as a troubled business for EB-5 purposes and EB5 visa business plan, the enterprise must have been in operation for at least two years. Additionally, in the 12 to 24 months following the receipt of the EB-5 investment, the business must have incurred a net loss amounting to no less than 20% of its net worth.

In these scenarios, the focus shifts away from job creation. Instead, the EB-5 program necessitates that investors show evidence of preserving jobs at levels consistent with those before the investment was made.

Deadlines for Job Creation

Is eb5 worth it? Before an investor can submit Form I-526, the Immigrant Petition by Alien Entrepreneur, they must be firmly committed to the chosen project to know the EB 5 visa success rate.

Furthermore, if the required jobs have not yet been generated, it is necessary to provide evidence of their anticipated creation within the subsequent two years. This should be substantiated through a credible and well-defined business plan.

Upon accepting an investor's I-526 petition, two years of conditional permanent residence is granted. As this conditional period nears its end, the investor must file Form I-829, the Petition by Entrepreneur to Remove Conditions. At this stage, concrete evidence of job creation must be presented.

EB5 Visa Immigration Policy Changes and Impact

Current Policy	Adopted Change	Impact
Priority Date Retention
Current DHS regulations do not permit investors to use the priority date of an immigrant petition approved for classification as an investor for a subsequently filed immigrant petition for the same classification.	DHS will allow an EB-5 immigrant petitioner to use the priority date of an immigrant petition approved for classification as an investor for a subsequently filed immigrant petition for the same classification for which the petitioner qualifies unless DHS revokes the petition’s approval for fraud or willful misrepresentation by the petitioner, or revokes the petition for a material error.	It makes visa allocation more predictable for investors, with less possibility of significant fluctuations in visa availability dates due to regional center termination. Provides greater certainty and stability regarding the timing of eligibility for investors pursuing permanent residence in the U.S., thus lessening the burden of unexpected changes in the underlying investment. It provides more flexibility to investors to contribute to more viable investments, potentially reducing fraud and improving the potential for job creation. Costs: None anticipated
Current Policy	Adopted Change	Impact
Increases in Investment Amounts
The standard minimum investment amount has been $1 million since 1990 and has not kept pace with inflation – losing almost half its actual value. Further, the statute authorizes a reduction in the minimum investment amount by up to 50 percent of the standard minimum investment amount when such investment is made in a TEA. Since 1991, DHS regulations have set the TEA investment threshold at 50 percent of the minimum investment amount. Similarly, DHS has not increased the minimum investment amount for investments made in a high employment area beyond the standard amount.	DHS will account for inflation in the investment amount since the program's inception. DHS will raise the minimum investment amount to $1.8 million to account for inflation through 2015 and includes a mechanism to automatically adjust the minimum investment amount based on the unadjusted CPI every five years. DHS will retain the TEA minimum investment amount at 50 percent of the standard amount. The minimum investment amount in a TEA will initially increase to $900,000. DHS is not changing the equivalency between the standard minimum investment amount and those made in high-employment areas. As such, DHS will set the minimum investment amounts in high employment areas to be $1.8 million and follow the exact mechanism for future inflationary adjustments.	Increases in investment amounts are necessary to keep pace with inflation and the actual value of investments; Raising the investment amounts increases the amount invested by each investor and potentially increases the total amount invested under this program. For regional centers, the higher investment amounts per investor will mean fewer investors will have to be recruited to pool the requisite capital for the project, so searching and matching investors to projects could be less costly. Costs: Some investors may be unable or unwilling to invest at the higher levels of investment. Fewer jobs may be created if significantly fewer investors invest at higher investment amounts. For regional centers, the higher amounts could reduce the number of investors in the global pool and result in fewer investors, thus potentially making the search and matching of investors to projects more costly. Potentially reduced numbers of EB-5 investors could prevent certain projects from moving forward due to a lack of requisite capital. An increase in the investment amount could make foreign investor visa programs offered by other countries more attractive.
Current Policy	Adopted Change	Impact
Targeted Employment Areas Designations
A Targeted Employment Area (TEA) is defined by statute as a rural area or an area that has experienced high unemployment (of at least 150 percent of the national average rate). Currently, investors demonstrate that their investments are in a high unemployment area in two ways: Providing evidence that the Metropolitan Statistical Area (MSA), the specific county within the MSA, or the county in which a city or town with a population of 20,000 or more is located, in which the new commercial enterprise is principally doing business, has experienced an average unemployment rate of at least 150 percent of the national average rate; or Submitting a letter from an authorized body of the government of the state in which the new commercial enterprise is located, which certifies that the geographic or political subdivision of the metropolitan statistical area or of the city or town with a population of 20,000 or more in which the enterprise is principally doing business has been designated a high unemployment area.	DHS will eliminate the state designation of high-unemployment areas. DHS also amends how investors can demonstrate that their investments are in a high unemployment area. DHS will add cities and towns outside of MSAs with a population of 20,000 or more as specific and separate areas that may qualify as TEA based on high unemployment. DHS will amend its regulations so that a TEA may consist of a census tract or contiguous census tracts in which the new commercial enterprise is principally doing business if the new commercial enterprise is located in more than one census tract and The weighted average of the unemployment rate for the tract or tracts is at least 150 percent of the national average. DHS will also amend its regulations so that a TEA may consist of an area comprising the census tract(s) in which the new commercial enterprise is principally doing business, including any adjacent tracts, if the weighted average of the unemployment rate for all included tracts is at least 150 percent of the national average.	Rules out TEA configurations that rely on many census tracts indirectly linked to the actual project tract by numerous degrees of separation. Potential to better stimulate job growth in areas with the highest unemployment rates, consistent with congressional intent. Costs: This TEA provision could cause some projects and investments to no longer qualify as being in high unemployment areas. DHS presents the potential number of projects and investments.
Current technical issues: The current regulation does not clearly define the process by which derivatives may file a Form I-829 petition when they are not included on the principal’s petition. Interviews for Form I-829 petitions are generally scheduled at the location of the new commercial enterprise. The current regulations require an immigrant investor and their derivatives to report to a district office to process their permanent resident cards.	DHS will amend its regulations to include the following technical changes: Clarify the filing process for derivatives filing a Form I-829 petition separately from the immigrant investor. Provide flexibility in determining the interview location related to the Form I-829 petition. Amend the regulation by which the immigrant investor obtains the new permanent resident card after approving the Form I-829 petition because DHS captures biometric data when the immigrant investor and derivatives appear at an ASC for fingerprinting. Add 8 CFR 204.6(n) to allow certain investors to remain eligible for the EB-5 classification if a project’s offering is amended or supplemented based on the final rule’s effectiveness.	It adds clarity and eliminates confusion for derivatives who file separately from the principal immigrant investor. Costs: The total cost to applicants filing separately will be $91,023 annually. Conditions of Interview Benefits: Interviews may be scheduled at the USCIS office having jurisdiction over either the immigrant investor’s commercial enterprise, the immigrant investor’s residence, or the location where the Form I-829 petition is being adjudicated, thus making the interview program more effective and reducing burdens on the immigrant investor. Some petitioners will benefit by traveling shorter distances for interviews and thus see cost savings in travel costs and opportunity costs of time for travel and interview time. Costs: None anticipated. Investors Obtaining a Permanent Resident Card Benefits: Cost and time savings for applicants for biometric data. Costs: None anticipated. Eligibility Following Changes to Offering Benefits: An amendment to a project’s offering based on the final rule’s provisions might not result in the denial or revocation of a petition. Costs: None anticipated.

Source: https://www.uscis.gov/policy-manual/updates

Strategies for Overcoming EB5 Challenges

Despite the challenges associated with the EB-5 program, it has witnessed numerous successful business deals and contributed to various noteworthy projects.

Examples include the repurposing of military bases in Southern California and Philadelphia, as well as the support of major infrastructure initiatives like airports and public transit systems. Additionally, EB-5 funding has played a pivotal role in revitalizing Seattle's SoDo industrial district.

As an economic development tool, EB-5 investments facilitated through regional centers offer a means of obtaining pooled investments to finance projects that benefit local economies.

To fully harness the potential of the EB-5 program for regional economic development, changes are needed at both the federal and state levels. While immigration policy is undergoing scrutiny and potential reform, the regional center program is expected to remain a permanent fixture of the EB-5 investor visa program.

The program's recent growth, with an increasing number of regional centers and immigrants seeking visas for investments, indicates its growing popularity as a funding source for economic development projects.

To enhance the program's attractiveness to investors and improve its efficiency, we offer suggestions for federal policymakers.

Additionally, we provide tools for ongoing program evaluation and propose changes and enhancements to the regional center program to benefit regional economies.

Appeal of the EB-5 Visa For Foreign Investors

In a last-minute development, the U.S. Citizenship and Immigration Service (USCIS) has filed an appeal regarding the Behring Regional Center lawsuit related to the U.S. EB-5 investor immigration program.

This appeal centers on a preliminary injunction the Behring Regional Center secured against the Department of Homeland Security's EB-5 Modernization Rule, which became effective on November 21, 2019.

The EB-5 Modernization Rule increased the minimum investment threshold for EB-5 projects to $900,000 in Targeted Employment Areas (TEAs) and $1.8 million outside of TEAs, up from the previous levels of $500,000 and $1 million, respectively.

The injunction, issued by the U.S. District Court for the Northern District of California, aimed to overturn the EB-5 Modernization Rule and revert to the previous investment requirement of $500,000. USCIS has now filed an appeal seeking to reinstate the investment threshold to $900,000.

Privacy Matters in EB-5 Investments

Maintaining data security introduces an additional level of intricacy. As you adhere to immigration regulations that necessitate comprehensive data on your foreign investors, your dedication to safeguarding privacy and data security should remain unwavering.

Investor Interest and Regulatory Compliance

A vital component of harnessing EB-5 Visas for the success of your startup involves finding a harmonious balance. On the one hand, you have enthusiastic foreign investors eager to participate in the American dream. On the other, there exist intricate regulatory requirements that demand meticulous navigation.

Thorough documentation becomes paramount in effectively maintaining this intricate equilibrium. It's essential to remember that every Form I-526 submission requires substantial supporting documentation that outlines your business plan and job creation strategy in detail.

Role of Comprehensive Documentation

To navigate this delicate balance successfully for green cards for investors, thorough documentation is of utmost importance. It's crucial to remember that each Form I-526 submission should be accompanied by comprehensive supporting documents that meticulously outline your business plan and strategy for job creation.

Navigating Securities Law

When attracting foreign investors, it's essential to remain mindful of the complexities of securities laws. It's not merely raising capital; it also involves operating within a highly regulated financial environment where international transactions are subject to scrutiny and oversight.

Survival Tips for Startups Using EB-5 Financing

Partnering with an experienced attorney specializing in immigration law can be invaluable. They can translate complex legal terminology into actionable guidance and assist in navigating market dynamics, ensuring you have the knowledge and expertise to make the most of the EB-5 program and green card rejection rate. To further streamline your immigration processes, consider utilizing the services of paperfree.com, a platform designed to simplify document management and compliance.

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