The main purpose of the EB-5 program is to encourage foreign investment in U.S. enterprises to create jobs. As a result, the primary requirement for the EB-5 program is that each investment generate no fewer than 10 permanent, full-time jobs for U.S. workers.
The way these jobs are calculated depends on how the investment is made: for direct investments, only direct jobs can be counted; for investments made through regional centers, direct, indirect, and induced jobs can be counted.
Direct, Indirect, and Induced Jobs
Direct jobs are those actually created by the new commercial enterprise receiving the investment. These tend to be the ongoing operational jobs of the new business itself but may include direct construction jobs if the construction period lasts two or more years. Again, for foreign nationals who invest directly in an enterprise, only direct jobs may be counted toward the job creation requirement of the program.
Indirect jobs are those created as a result of the EB-5 project’s spending on goods and services from local companies. Goods may include construction materials, equipment needed for operations, or other locally produced supplies. Services range from building maintenance to legal counsel—any professional service a business may pay a local company to provide.
Unlike direct and indirect jobs, which are created through the payroll and spending of the project itself, induced jobs are those created as a result of employees spending their wages. As the jobs created by the new enterprise provide income for employees, these employees spend some of that income on local goods and services—which further stimulates the local economy.
While any project can count eligible direct jobs, for indirect and induced jobs to be counted as EB-5 jobs, a regional center must be affiliated with the project. A project developer can opt to apply for regional center designation or rent an existing regional center with the necessary geographic scope. Because regional centers can include indirect and induced jobs in a project’s job creation count, sponsoring a project through a regional center almost always produces favorable job creation numbers. For some projects, only indirect and induced jobs can be counted—in such cases, the project must be sponsored through a regional center.
How to Calculate EB-5 Job Creation
Calculating the number of jobs created by an EB-5 project generally requires the assistance of an economist, who generates a report using accepted economic or statistical methodologies. The two most common models used in this process are RIMS II, provided by the U.S. Department of Commerce, and IMPLAN, provided by MIG, Inc.
Both RIMS II and IMPLAN are input/output models that consider the relationships between industries to estimate the overall economic impact the project will have in the region. The models generate a final demand multiplier, which is applied to expenditures to determine job creation.
The primary purpose of this economic report is to demonstrate to the USCIS that the project will create the necessary number of jobs if the business plan and budget are followed. When an investor files his or her I-526 petition, this report serves as evidence that the employment creation requirement of the EB-5 program will be met. Two years later, when the investor files Form I-829, this report is used in conjunction with documentation of actual expenditures to prove the necessary number of jobs were, in fact, created.
Most projects generate jobs from construction as well as operations, and these two job types are calculated differently. Construction jobs are calculated based upon expenditures, not the actual number of people involved in the project’s construction. On the other hand, operations jobs are calculated based upon the actual number of people put to work full time, which can also be calculated based upon revenue.