The Problem with the EB5 Immigration Program in the United States by Andy J. Semotiuk

Filing an EB5 application involving the investment of $ 500,000 U.S. for a period of several years may be a strategic mistake for many investors looking to immigrate to the United States. While the EB5 program remains a popular and viable option for investors with deep pockets and those who want to get their green card right away, many investors are apprehensive about investing $ 500,000 with a third party for several years just to get U.S. permanent resident. They would rather not choose this option if there is a reasonable viable alternative. And that is where the E-2 nonimmigrant work visa comes into play.

While most foreign immigrant investors are fairly familiar with the U.S. EB5 program, there are aspects of the program that may not be as well known and are troublesome.

For one thing, there is the matter of tying up one’s money for a long period of time. While a strict reading of the relevant legal rules provides that under the regional center option the investor needs only to invest for a qualifying period of two years, when one takes into account that there is about a year during which the investor’s funds may be tied up in escrow or otherwise until the funds are in fact committed to the relevant project to commence the qualifying period, and that it takes about another year following the qualification of the investment for the US Citizenship and Immigration Service (USCIS) to remove the conditions on the conditional green card, in total the funds are more likely to be tied up for four and in practice more like five years. In other words, the investor loses control over his funds for a five-year period. That is a significant downside to EB5s.

Moreover, if you do a search on the USCIS web site on the length of time it takes an investor’s I-526 petition to be approved by USCIS, you will find that it is about one and a half years. When you add processing time for the investor and his or her family to be processed through the US Consulate, you are realistically looking at a two-year time frame. With the turbulence of U.S. government shut downs due to debt problems and the addition of a possible massive influx of post immigration reform applications that could flood the USCIS, this delay could become even more significant.

To mitigate and downplay these delays, prominent EB5 regional center representatives indicate that when investors choose their projects, waiting times are significantly reduced “because the EB5 regional center is well known to USCIS officials.” There are anecdotal indications that in some cases this is true and petitions that normally would take a year and a half are approved sooner, in some extraordinary cases as soon as less than six months or so. However, apart from what this says about the fairness of the American immigration system if true, investors even in these circumstances are taking a leap of faith in choosing such projects based on objectively unverifiable assurances of speedy processing and approvals.

What is more significant from the investor’s point of view, is that the investor’s money is not only tied up by the commercial investment involved, but it is also tied up by the immigration bureaucracy involved. Even if there is a quick approval of the petition on the front end, investors still must await USCIS approval of their withdrawal from the investment of the back end. If $ 500,000 is only a small part of an investor’s wealth this is acceptable. But in many cases that is not the case.

For many investors, there is a better alternative. The E-2 nonimmigrant work visa is better for people who:

• Are from a country that has an investment treaty with the United States such as Taiwan but not China, South Korea, Mexico, the U.K., Canada, Iran and Venezela. (Most countries do have an investment treaty with the United States - but not India, the UAE, Saudi Arabia, Kuwait, Nigeria and the like.)
• Speak English
• Want to enter the United States in a few months rather than waiting a year and a half to two years to get permission to enter on an EB5 immigrant visa.
• Are investors who would be more comfortable investing say $ 200,000 in his or her own company, than giving up $ 500,000 to someone else to use for five years with the attendant commercial risks that implies.
• Are initially interested in exploring life in America and getting a business going with some flexibility to travel back and forth to their native country without prejudicing their U.S. status before applying for a green card and permanent status.
• Have children that could benefit from the in-state lower tuition fees charged to local students than the out of state foreign student tuition fees that otherwise would be charged to students without nonimmigrant work visa status in the United States – a benefit that is derived from both the EB5 and the E-2 options.

You can get an E-2 visa in as short as a few weeks, but more likely it will take a couple of months. To get the E-2 visa you will need:

• An incorporated company in the USA.
• A physical location for your office with a phone, fax and maybe a web site.
• Registration of your company to get a Federal Income Tax Identification Number (FEIN) number.
• A company bank account.
• A business plan.
• An investment of say, $ 200,00 US into your company bank account depending on what business you are in.

These must precede the application, but not necessarily our services, and we can help you set these up very quickly.

So What is the E-2 visa?
An E-2 visa is a U.S. business investment visa that enables the investor to start up or purchase a business and get a work permit to run it. The key elements to an E-2 visa are:

• The investor, either a real or corporate person, must be a citizen of a treaty country.
• The investment must be substantial. It must be sufficient to ensure the successful operation of the enterprise. In this regard, the percentage of investment for a low-cost business enterprise must be higher than the percentage of investment in a high-cost enterprise.
• The investment must be a real operating enterprise. Speculative or idle investment does not qualify. Uncommitted funds in a bank account or similar security are not considered an investment. Money cannot simply be put into a bank account and then retrieved after the visa is approved – it must be used by the company for its regular operations.
• The investment may not be marginal. It must generate significantly more income than just to provide a living to the investor and family, or it must have a significant economic impact in the U.S. The approval will depend on a showing of one or more of a) money flowing into the USA, b) employment of U.S. workers or c) innovation being brought to the USA.
• The investor must have control of the funds, and the investment must be at risk in the commercial sense. Loans secured with the assets of the investment enterprise are not allowed.
• The investor must be coming to the U.S. to develop and direct the enterprise. Passive investments do not qualify. If the applicant is not the principal investor, he or she must be employed in a supervisory, executive, or highly specialized skill capacity. Ordinary skilled and unskilled workers do not qualify.

To summarize, the E-2 work visa is a nonimmigrant visa and will require a further initiative to gain permanent resident status in the United States. Howevern an E-2 investor can renew his visa indefinitely for as long as the business continues. As for obtaining permanent residence, this is not easy, but very often it can be done. The EB5 on the other hand is an application for an immigrant visa and permanent residence directly not indirectly as part of a two step process like in the E-2 case. Unlike in the E-2 case where the investment must be active, the EB5 investor does not usually run the business. An E-2 investor must be able to speak at least basic English, whereas an EB5 investor does not.

Perhaps one good reason why the E-2 option has been overshadowed to date is the fact that there are far more in fees available to the promoters of EB5 regional centers and attorneys representing EB5 investor clients, than there are in fees for helping investors with E-2 visas. Nonetheless, as is clear from this article, the E-2 is an attractive option for many would-be investors. It is worthy of consideration due to its attractive speed of entry and control over investment as well as the benefits involved, particularly in regard to enrolling children into college at internal state resident rates.

Copyright A.J. Semotiuk 2013 - All rights reserved.

Permission to reprint should be requested from Mr. Semotiuk at Andy@myworkvisa.com