Job creation is the aim of the EB-5 Program, so investors and developers must come to understand how United States Citizenship and Immigration Services (USCIS) evaluates the job creation potential of EB-5 investments. For real estate developments, jobs are typically broken into two categories: construction and operations. Which jobs fall under each, as well as other topics relevant for EB-5 investors and regional centers, are outlined below.
EB-5 Jobs: Construction versus Operations
Construction jobs are those resulting from the building project, and these can include both direct and indirect or induced jobs. As USCIS only allows direct construction jobs to count toward the total EB-5 requirement for projects lasting more than two years, the job creation report must outline which jobs are direct and which are indirect.
The business plan and job creation report must also provide a timeline for all construction tasks and any costs associated with each. Additionally, projects expected to run longer than two years must be supported by statements from a third party to provide a basis for that timeline. If investors fail to provide sufficient support, USCIS has the discretion to reduce the recognized number of jobs created per investor based on the given information.
Operations jobs are those resulting from businesses owned by the developer and by tenant businesses leasing space in the development. While developer jobs can be credited to EB-5 investors, USCIS places significant restrictions on when tenant jobs can be included in the total number of jobs created. For example, USCIS requires proof that tenant jobs are completely new positions, meaning an operations job transferred from an old location to the new development would not count toward the job creation total.
As proving the creation of tenant jobs is difficult, EB-5 investors tend not to include these jobs in their totals. However, investors choosing to do so must include in their business plans an independent analysis proving that the development area has an unmet need for the tenant’s services and that the tenant jobs would not be created if not for the new development. In this case, investors must be wary of committing to projects that rely heavily on tenant jobs to meet the job creation requirement.
In both cases, construction and operations, investors must conduct their due diligence and provide sufficient supporting documents to prove their job creation numbers.
EB-5 Job Creation Requirements
The EB-5 Program requires that each investor create ten or more fulltime jobs through his or her investment. For example, a project with ten investors would need to create one hundred or more fulltime jobs to meet this standard. However, regional centers should not max out their numbers of investors based on job creation projections, as USCIS might disagree with these estimates and thus reduce the recognized number of jobs created per investor, putting those investors’ visa applications into jeopardy.
For this reason, to ensure that each investor meets the minimum EB-5 job creation requirements, projects should include an investment cushion and obtain investors accounting for only 80% to 85% of projected jobs. A project expected to create one hundred jobs should therefore seek only eight investors to account for any unexpected deviations from the projected number.
For real estate developments, construction job totals should be outlined in the job creation report and are calculated based on hard and soft construction costs as well as the cost of furniture, fixtures, and equipment (FF&E):
- Hard construction costs are the cost of building the development, such as materials and labor.
- Soft construction costs include fees for architects and engineers, permit filing, financing, and attorneys.
- FF&E comprise any furniture, fixtures, and equipment within the development, including those not permanently connected to it.
While most hard construction and FF&E costs can be included when estimating the number of jobs to be created by a development, USCIS generally will not consider soft costs such as taxes, permit filing fees, insurance, and financing to result in the creation of new jobs, and as such investors should carefully consider which costs to include in the job creation report, as errors could incorrectly inflate the estimate of legitimate jobs created by the development and thus affect investors’ EB-5 applications.
The EB-5 Job Creation Timeline
USCIS has mandated that the required ten jobs be created within two and a half years of the date an investor files his or her I-526 application and before the I-829 application is due. The I-526 application is an investor’s petition to immigrate to the United States under the EB-5 Program, whereas the I-829 application is an investor’s petition to remove the conditions of his or her permanent residence. While it is unlikely that an investor will be required to submit an I-829 petition within two and a half years of his or her I-526 application, investors should nonetheless keep this timeline in mind.
For projects where construction lasts less than two years, the job creation timeline is fairly straightforward, as investors must simply ensure that they submit their I-526 petitions within two and a half years prior to the projected construction completion date. For construction projects lasting longer than two years, it may be necessary for regional centers to carefully time job creation to ensure each investor files his or her petition by the correct date and is credited with the required number of jobs.
The economic impact report for each project should therefore outline the number of jobs created over time as well as the appropriate filing date for each investor’s I-526 petition. Regional centers must ensure that construction costs can support the number of investors who will need to file I-526 petitions, while investors themselves may occasionally need to postpone filing their petitions until assured the jobs required to meet the EB-5 standard will be created within two and a half years of their filing dates.
Similarly, the job creation report should carefully outline any operations jobs to be created within the appropriate timeframe.
Successful application for an EB-5 visa requires that investors understand the job creation potential of their projects. For real estate developments, this means diligently calculating both construction and operations jobs supported by the project and ensuring that those fall within the required timeline. USCIS expects that the business plan and job creation report will include full documentation and independent analysis to support any figures claimed, which places a burden on investors and regional centers to carefully plan their projects to meet these stringent requirements.
By breaking down how many jobs can be expected through construction and operations and building an adequate cushion into the number of investors for each project, regional centers can ensure each investor meets the required ten fulltime jobs within two and a half years of his or her I-526 filing date.