Regional center operators must apply for USCIS designation by submitting Form I-924, Application for Regional Center under the Immigrant Investor Pilot Program, and the required supporting documentation to USCIS. Foreign and U.S. 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 the ability to take advantage of the funds available from EB-5 investors. Because of the expanded scope of the job-creation requirement, regional center investments often attract multiple EB-5 investors. This provides developers with access to inexpensive capital and creates a win-win situation for investors, developers, and the communities in which projects will be located.
Direct vs. Regional Center EB-5 Program Investments
To become eligible for a green card under the EB-5 Immigrant Investor Program, a foreign entrepreneur must meet certain criteria related to investments and job creation during the conditional residence period. EB-5 investors can achieve this either through direct or regional center investments.
The Difference between Direct and Regional Center Investment Models
As the terminology implies, direct investments involve directly investing in a commercial enterprise without working through an intermediary. 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 the job-creating entity, depending on the structure of the EB-5 project. Finally, the job-creating entity uses the fund’s investment to create indirect employment.
The required capital investment amounts are the same for direct and regional center investments—that is, $1.8 million, which is reduced to $900,000 within a targeted employment area (TEA)—and investors face the same I-526 petition adjudication wait times. However, the job creation criteria differ.
Direct vs. Regional Center Investment Job-Creation Criteria
With direct investments, investors may count only direct job creation toward the requirement to create 10 full-time, permanent jobs for U.S. workers. In contrast, when investing with a regional center, investors can also count indirect job creation toward the 10-job requirement. Direct jobs refer to positions within the new 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.
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 considers the creation or preservation of more jobs, which increases the likelihood that a larger number of immigrant investors will be able to meet the job creation requirements when investing in a single project.
Choosing an EB-5 Investment Model
When comparing direct and regional center EB-5 investment models, investors must fully explore the advantages and disadvantages of each model. For example, direct investments 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 a more limited role.
Applying for EB-5 Regional Center Designation
The EB-5 regional center designation process is complex and best approached with the support of professionals. At the heart of the application lies Form I-924, 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 reliable, concrete, verifiable information that shows the center’s industry and geographic scopes, including any TEAs in which the center will operate. Additionally, the documentation must show how the center will promote and achieve economic growth in its areas of operation.
Form I-924 supporting documentation must include, for example,
- a comprehensive, Matter of Ho–compliant business plan,
- 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.
The project documentation must relate to an actual, a hypothetical, or an exemplar project. A hypothetical project, the simplest of the three, does not necessarily exist but could exist. It shows USCIS the types of projects the regional center intends to pursue by providing supporting documents based on elementary assumptions.
Actual projects are those that are ready to begin as soon as the I-924 application is approved and the developer secures the required funding. The documentation for this type of project should include a business plan and economic report related to the actual project, as well as the actual related documents.
The requirements for exemplar projects are similar to those for actual projects, but the application focuses on a specific example of a project type and includes a completed Form I-526 for an unnamed investor. These projects are viewed as preapproved by USCIS, and the only additional documentation USCIS subsequently needs to review is the source of funds documentation.
Preparing the application and gathering the required documentation can take several weeks—or a few months. Once the completed application pack is submitted to USCIS, processing can take up to a year. However, applications completed by EB5 Affiliate Network typically are approved within approximately seven months.
Operating and Maintaining an EB-5 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.
The 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-924A 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 to secure conditional permanent resident status for investors. Actual or exemplar project documentation must accompany each petition. Furthermore, although EB-5 investors must file Form I-829, Petition by Entrepreneur to Remove Conditions—the final petition in the EB-5 visa application process—themselves, the regional center must prepare and supply 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 those with the required capital and time, others might benefit more from affiliating with or renting an EB-5 regional center.
As of November 2019, there are 811 USCIS-approved regional centers. EB5 Affiliate Network has obtained USCIS approval for 14 regional centers that provide coverage in more than 20 U.S. states and Washington, D.C. Renting a regional center allows stakeholders to still take advantage of benefits such as the favorable job creation requirements, but without the additional costs of applying for regional center designation. The needs of the business typically provide a clear indication of the most suitable option.
Contact EB5 Affiliate Network today for assistance with everything from choosing the best investment model for you to submitting USCIS petitions and applications.