Thousands of foreign nationals have benefitted from participating in the EB-5 Immigrant Investor Program and are currently enjoying the benefits of obtaining U.S. green cards for themselves and their immediate family members. The EB-5 program enables foreign nationals to invest in qualifying U.S. businesses, create at least 10 full-time jobs, and thus apply for permanent resident status. Since 1990, the EB-5 investment industry has had a remarkably positive impact on the United States, providing businesses with invaluable investment capital. Moreover, the successful and wealthy foreign nationals who relocate to the United States through their EB-5 investments become valuable assets to the country.
Despite their positive effects, the EB-5 program’s regulations are subject to government modification, which has occasionally resulted in sudden changes to the EB-5 investment industry. Two of the most notable examples of such policy changes took place in June 2021. On June 22, a federal court ruled to invalidate the EB-5 Final Rule, a controversial set of regulations that had made several important changes to the EB-5 program. The most significant change brought about by the Final Rule was the raising of the minimum required investment amounts. As of the June 22 ruling, foreign nationals are allowed to make an EB5 investment at $500,000 for targeted employment area (TEA) projects and $1,000,000 for non-TEA projects.
Just a few days after the court ruling, the EB5 investment industry received another shock when the regional center program expired on June 30, 2021. The Senate had failed to pass the EB-5 Reform and Integrity Act, a bill that would have reauthorized regional center investments for several more years. Even though this suspension is likely temporary, many foreign nationals interested in making an EB-5 investment may have been discouraged by the news—after all, regional center investments had been the most popular way to participate in the EB-5 program. Despite these abrupt changes, EB-5 investors still have at their disposal a promising alternative to regional center projects: direct EB-5 investments.
What Are Direct EB-5 Investments?
Direct EB-5 investments are made directly to the EB-5 business in question and not to a regional center. United States Citizenship and Immigration Services (USCIS) has set stricter job creation requirements for direct EB-5 projects—direct investors can only count jobs that are created by the EB-5 business and appear on its payroll. Since indirect and induced jobs do not count toward fulfilling the employment creation requirement, it is usually more difficult for direct EB-5 investors to generate the necessary number of jobs.
Interested foreign nationals should note that, as of June 30, 2021, they are only allowed to make direct EB-5 investments. In fact, USCIS released a statement on its website confirming that they will no longer accept I-526 petitions associated with regional centers. In contrast, the direct EB5 investment industry does not depend on periodic renewal.
Why Make a Direct EB-5 Investment?
Despite the stricter guidelines for calculating employment creation, direct EB-5 projects do qualify for the above-mentioned reduced investment amounts. Moreover, many foreign nationals find that direct EB-5 investments may better suit their needs if they want to gain significant profits as well as permanent resident status: direct projects typically offer investors more control over operations and management decisions than regional center projects, in which investors do not necessarily have to be involved in day-to-day operations.
Direct EB-5 investors are allowed to invest in a wide variety of businesses. They may even choose to invest in a troubled business, an existing business, or a new branch of a franchise. The latter option offers several enticing benefits for investors, allowing them to enjoy the existing franchise’s marketing, experience, and successful branding.
As the above facts indicate, direct EB-5 investments are a promising alternative to regional center projects. Keeping in mind that the minimum investment amounts may be raised once more, potential investors would do well to identify suitable direct EB-5 investment opportunities as soon as possible.