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An Overview Of EB-5 Regional Centers

The EB-5 Regional Center Program is the bedrock of the EB-5 visa program for investors and project developers alike.

In fact, a 2019 study found that a staggering 96% of approved EB-5 visas were awarded to regional center investors.

The regional center program allows project developers to pool even more investment capital by sourcing from multiple EB-5 investors instead of just one.

It also offers EB-5 immigrant investors greater flexibility in meeting the requirements of the EB-5 program.

In this article, we will explore the key differences between regional center investment and direct investment, and the process of applying for regional center designation from United States Citizenship and Immigration Services (USCIS).

What Is an EB-5 Regional Center?

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 being designated as such by 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.

What Are the Benefits of Establishing a Regional Center?

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 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.

By contrast, with 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.

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-526E petition processing wait times. (Direct investors use Form I-526, a slightly different form than the I-526E petition used by regional center investors.)

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.

Key Point: What Is A W-2 Job Position?

A W-2 Job Position refers to employment where an individual is considered an employee and receives a W-2 form from their employer at the end of the tax year.

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.

By 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.”

Most importantly, it includes jobs derived from a project’s overall economic impact through its construction expenditures.

This expanded employment scope allows for the creation of more jobs by 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 modeling, which 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 investors to perform a more active managerial 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 in and its geographic scope, including any targeted employment areas (TEAs) in which the center will operate. Additionally, the documentation must show how the regional center will promote and achieve economic growth.

Form I-956 supporting documentation may include, for example:

  • Relevant operating and/or partnership agreements
  • An economic report that sets out job-creation forecasts calculated by using established economic models
  • A private placement memorandum (PPM)
  • 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 necessary resources 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 EB-5 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 has been submitted to USCIS along with the $17,795 filing fee, processing can take several months.

Operating and Maintaining a Regional Center

A regional center’s responsibilities include not only managing projects but also maintaining USCIS compliance, filing investors’ I-526E 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.

Designated regional centers can also provide some of the documents needed for their EB-5 investors’ I-526E petitions.

Form I-526E is the first application that investors file in the EB-5 visa process, and approval leads to two-year conditional residency. Each I-526E petition must be accompanied by project documentation, including the business plan and job creation projections.

Regional centers can also provide the necessary evidence of job creation and other required supporting documentation for Form I-829, the final EB-5 petition for a permanent green card.

Sid, an Indian EB-5 Investor, recommends that you do some serious due diligence before investing in an EB-5 project. Here is his advice…

Alternative Regional Center Investment Options

Establishing a regional center can be a slow and expensive process. 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.

Purchasing a regional center allows businesses to benefit from the favorable job creation criteria, without facing additional delays associated with the filing of 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 visa category; it requires periodic reauthorization by the U.S. Congress.

After a nearly year-long lapse, a June 24th, 2022 court decision fully reauthorized the regional center program, which means that regional centers can once again accept investments, and visa applicants in regional center projects can submit their I-526E 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 24th ruling made it clear that existing regional centers can continue to operate without reapplying to USCIS.

The initially envisaged 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 investors from countries with a high demand for the EB-5 visa can now immigrate years earlier by investing in a TEA project.

Navigating the regional center program can be daunting without professional help, for project developers and immigrant investors alike. Fortunately, EB5AN is here to help.

The Final Word

EB5AN offers professional advice to EB-5 industry members who would like to purchase regional centers, or sell their existing regional centers.

Contact EB5AN today for assistance with everything from choosing the best investment model to submitting regional center petitions and applications.