Free EB-5 Evaluation

An Overview of EB-5 Regional Centers

A regional center is any private or public economic unit involved in promoting economic growth, improving regional productivity, creating jobs, and increasing domestic capital investment, and designated as such by United States Citizenship and Immigration Services (USCIS). In other words, a regional center is an agency that has demonstrated to USCIS that it is working toward the EB-5 program’s goals of stimulating the U.S. economy through foreign investment and job creation. Regional center designation allows a business entity to work as a service agent for EB-5 investors and project developers by managing the investors’ funds.

Business entities interested in operating a regional center must apply for USCIS designation by submitting Form I-956, Application for Regional Center Designation, and the required supporting documentation to USCIS. U.S. project developers can apply for regional center designation, and both domestic and immigrant investors can invest in regional center projects.

The main benefit of establishing a regional center is gaining access to funds from EB-5 investors. Because of the expanded flexibility of the job-creation requirement for foreign investors in regional center projects, these investments often attract multiple EB-5 visa applicants. As a result, project developers gain access to inexpensive capital, and this creates a win-win situation for investors, project developers, and the communities in which the projects are located.

Direct vs. Regional Center EB-5 Investments

To become eligible for a Green Card under the EB-5 Immigrant Investor Program, a foreign investor must meet certain criteria related to their investments and to job creation. EB-5 investors can choose between two investment models to fulfill these criteria.

The Difference between the Direct and Regional Center Investment Models

As the terminology implies, direct investments involve directly investing in a commercial enterprise, without an intermediary. In contrast, in regional center investments, the regional center sets up an investment fund, and investors buy equity stakes in this fund. The fund then either loans money to or buys equity in a job-creating entity. Finally, the job-creating entity uses the fund’s investment to create employment.

Another key difference is that direct EB-5 projects can accept funding from only one EB-5 investor, while regional center-sponsored projects can pool capital from multiple visa applicants. As a result, regional center projects usually have a larger scope than direct offerings.

The required capital investment amounts are the same for direct and regional center investments. Regardless of the investment type, EB-5 projects located within a targeted employment area (TEA) have an investment threshold of $800,000; the minimum amount for all other projects is $1,050,000. Direct and regional center projects also experience the same I-526 petition processing wait times.

However, the job creation criteria differ significantly between the two investment models.

Direct vs. Regional Center Investment Job Creation Criteria

Investors in direct projects may count only standard, W-2 job positions toward fulfilling the requirement to create 10 full-time, permanent jobs for U.S. workers. Direct jobs refer to positions within the commercial enterprise, and investors must verify direct job creation numbers through the payroll records of the enterprise. A new business typically creates relatively few new, permanent, full-time jobs.

In contrast, when investing with a regional center, investors can also count indirect job creation toward the 10-job requirement.

Indirect jobs, according to the USCIS Policy Manual, “are those that are held outside of the new commercial enterprise but are created as a result of the new commercial enterprise.” These jobs include jobs held by employees of the job-creating entity, provided the new commercial entity and job-creating entity are not the same entity, and jobs held by employees of companies that provide “materials, equipment, or services used by the new commercial enterprise or job-creating entity.” This expanded employment scope counts the creation of more jobs, increasing the likelihood that a larger number of investors will be able to meet the job creation requirements when investing in a single project. Indirect employment is calculated through econometric modelling and makes achieving the 10 required jobs significantly easier.

Choosing an EB-5 Investment Model

When deciding between the direct and regional center EB-5 investment models, investors must fully explore the advantages and disadvantages of each option. For example, foreign direct investment projects typically require a more active management role, while regional center investments require a more passive role. Therefore, regional center investments might not be suitable for investors who prefer a more hands-on approach, but they are ideal for those who prefer limited managerial responsibilities.

Applying for EB-5 Regional Center Designation

The regional center designation process is complex and best approached with the support of professionals. At the heart of the application lies Form I-956, which must be completed and submitted with supporting documentation that demonstrates the economic unit’s suitability for designation as a regional center.

The supporting documents must contain concrete, verifiable information that shows the industries in which the regional center plans to operate and its geographic scope, including any TEAs in which the center will operate. Additionally, the documentation must show how the center will promote and achieve economic growth.

Form I-956 supporting documentation must include, for example,

  • relevant operating and/or partnership agreements,
  • an economic report that sets out job-creation forecasts calculated using established economic models,
  • a private placement memorandum (PPM), and
  • professionally prepared transactional, corporate, securities, and/or loan documents.

While the I-956 petition requires applicants to define the regional center’s planned coverage area, applicants can choose between smaller coverage areas, even spanning a single census tract, to larger areas encompassing multiple states. Of course, the projected business plan must prove that the regional center has the resources necessary to promote economic growth and create employment throughout its coverage area. Applicants must also describe the kinds of EB-5 projects they will sponsor and their projected employment creation. A detailed, third-party economic impact study calculating the projected employment will be particularly useful in this section of Form I-956.

In addition, Form I-956 must identify all individuals involved in managing the regional center, and a separate application, Form I-956H, should be submitted with biometrics and detailed background information. Only U.S. citizens and lawful permanent residents can be involved in managing an EB5 regional center or investment project.

Preparing the application and gathering the required documentation can take several weeks—or a few months. Once the completed application is submitted to USCIS along with the $17,795 filing fee, processing can take up to a year.

Operating and Maintaining a Regional Center

A regional center’s responsibilities include not only managing projects but also maintaining USCIS compliance, filing investors’ I-526 petitions, and providing supporting documentation for investors’ I-829 petitions.

An approved regional center must ensure compliance with U.S. securities laws at the state and local levels, as set out in the United States Securities Act of 1933 and regulated by the U.S. Securities and Exchange Commission (SEC) and other agencies.

Additionally, the regional center must track the job-creation data related to its projects and file Form I-924G, Regional Center Annual Statement, after each fiscal year has ended, on or before December 29 of each calendar year, to show that it continues to meet the requirements for regional centers. Failure to file this form can lead to termination of the agency’s regional center designation.

Designated regional centers can also submit EB-5 investors’ I-526 petitions. Form I-526 is the first application that investors file in the EB-5 visa process, and approval leads to a two-year conditional residency. Each I-526 petition must be accompanied by project documentation, including the business plan and job creation projections. Furthermore, although EB-5 investors must file Form I-829—the final petition to obtain a permanent EB-5 visa—themselves, the regional center typically prepares and supplies the required supporting documentation.

Alternative Regional Center Investment Options

Establishing a regional center can be slow and expensive. Although this can be the ideal option for businesses with the required capital and time, others may benefit from affiliating with or renting a regional center.

As of October 2021, there were 632 USCIS-approved regional centers. In fact, EB5 Affiliate Network has obtained USCIS approval for more than 10 regional centers across the United states. Purchasing a regional center allows businesses benefit from the favorable job creation criteria, but without the additional delays associated with filing Form I-956.

The June 2022 Reauthorization of the Regional Center Program

The regional center program is not a permanent component of the EB-5 industry; it requires periodic reauthorization from the U.S. Congress. After a nearly year-long lapse, a June 24, 2022, court decision fully reauthorized the regional center program, meaning that regional centers can once again accept investments, and visa applicants in regional center projects can submit their I-526 petitions to begin the immigration process. Even though USCIS had previously indicated that existing regional centers would have to go through a lengthy regional center redesignation process, the June 24 ruling made it clear that existing regional centers can continue to operate without reapplying to USCIS. The regional center redesignation process may have involved adjudication times of several months, thereby putting regional center projects on hold even longer.

Regional centers and EB-5 investors can now benefit from the new integrity measures introduced by the EB-5 Reform and Integrity Act of 2022. This reform bill, which was signed into law in March 2022, significantly reduces the risk of fraud or fund misappropriation in regional centers and requires increased transparency. The Integrity Act also introduces new set-aside visa categories for investors in TEA projects. New regional center investors from countries with a high demand for the EB-5 visa can now immigrate years earlier than prior by investing in a TEA project.

Contact EB5 Affiliate Network today for assistance with everything from choosing the best investment model for you to submitting regional center petitions and applications. We are offering our professional advice to EB-5 industry members who would like to submit Form I-956, purchase regional centers, or sell their existing regional centers.