The EB-5 Immigrant Investor Program has long been a common pathway for foreign nationals to obtain permanent residency status in the United States, exploding in popularity in the 2010s after severe underutilization in its first two decades of existence. But it isn’t the EB-5 program itself that accounts for most of these EB-5 investments—it’s the EB-5 Regional Center Program. Regional centers are overwhelmingly the preferred vehicle for EB5 investments for a number of reasons. In fact, in FY2019, 96% of investors made their EB-5 investment through a regional center.
The EB-5 Regional Center Program was born in 1992, just two years after the EB-5 program itself. Its purpose was to consolidate EB-5 investment funds from different investors to drive more economic growth and achieve higher job creation figures. Since its initial creation, the program has faced several reauthorizations but has yet to be established as a permanent immigration program, even though EB-5 itself is a permanent visa category. After several months of deauthorization since June 2021, the regional center program was revalidated in March 2022 by the EB-5 Reform and Integrity Act.
What Is a Regional Center?
A regional center is a commercial entity that promotes and manages EB5 investment funds and funnels them into select new commercial enterprises (NCEs) that qualify for the EB-5 program. Most regional centers are limited partnerships or limited liability corporations and may be owned privately or publicly or through a public–private partnership. In most cases, they rely on third-party intermediaries to promote their EB5 investment opportunities to prospective investors, although the rise of the internet opens more avenues for regional centers to conduct recruitment themselves.
A regional center must obtain designation from United States Citizenship and Immigration Services (USCIS) by filing Form I-924. Regional centers apply for designation in a specific geographic area, which can be as large as multiple states and as small as a single county. To maintain their regional center designation, they must demonstrate to USCIS in their annual I-924A report that they are promoting economic growth throughout their entire region of designation. Regional centers may apply to adjust their geographic reach.
Regional Center Terminations
The number of USCIS-approved EB-5 regional centers has followed the same trend as the EB-5 program itself. In 2007, USCIS only listed 11 approved regional centers across the United States, a figure that exploded over the proceeding decade to 674 as of December 2020. However, December 2020’s figure comes off the trail of rampant regional center terminations since 2018. Also in December 2020, USCIS listed a whopping 532 regional centers that it had terminated since 2008, with 73% of those meeting their end since 2018. This highlights the importance for foreign nationals considering making an EB-5 investment through a regional center to conduct careful due diligence before committing their funds.
It is worth noting, however, that a regional center termination only affects investors who have yet to receive their conditional permanent resident status. Foreign nationals (and their immediate family members) who make an EB5 investment through a regional center and obtain conditional permanent resident status after I-526 petition approval are unaffected by their affiliated regional center being terminated, as long as they continue to demonstrate compliance with program regulations. Moreover, the Reform and Integrity Act introduced provisions for innocent investors whose regional centers are terminated—they can now reinvest in another project without losing their processing priority date.
Benefits of Regional Center EB-5 Investment
Why do the majority of EB-5 investors choose regional centers? After all, the EB-5 Regional Center Program is only temporary, whereas the base EB-5 Immigrant Investor Program is permanent.
The overall EB5 investment process is usually much more streamlined and secure for regional center investors. The program requirements remain the same, but the program offers two key differences that facilitate the process for investors: relaxed job creation calculation methodology and differently structured governance that affords investors more freedom.
Anyone who makes an EB-5 investment must demonstrate the creation of at least 10 new jobs for U.S. workers to qualify for the permanent resident immigration benefits the program offers. However, while direct EB-5 investors are restricted to direct jobs listed on the NCE’s payroll—which may be impossible for certain types of businesses—regional center investors may additionally count indirect and induced jobs. Indirect jobs are those created by the NCE’s expenditures on external goods and services, while induced jobs are those created in the community by the local spending of the NCE’s employees. Hiring a third-party economist and using approved calculation methodologies, a regional center investor can meet the 10-job EB-5 requirement much more easily than a direct investor.
Next is the different governance structure of regional center EB5 investments, where investors typically serve as limited partners, voting on important business decisions. This is enough to satisfy the requirement of active involvement in the NCE and can be accomplished remotely, allowing an EB-5 investor to live anywhere in the United States, even if it’s far away from their EB-5 project. It also allows those with limited managerial experience to participate in the EB-5 program. Direct investors, conversely, generally engage in the daily management operations of the NCE, which may necessitate managerial know-how and require them to live near the business.