Every year, foreign nationals flock to the EB-5 Immigrant Investor Program, injecting their EB-5 investment capital into the U.S. economy to create new jobs for U.S. workers and earn U.S. green cards for themselves, their spouse, and their unmarried children younger than 21. Since 1990, the program has welcomed thousands of new entrepreneurial spirits to the United States, and since 1992, most have made their EB5 investment through a regional center. For numerous reasons, the EB-5 Regional Center Program is by far the preferred method for EB-5 investment.
EB-5 Regional Center Investment vs. Direct Investment
Thanks to the EB-5 Regional Center Program, program participants have two choices for their EB5 investment: investing directly in the EB-5 project or investing indirectly via an EB-5 regional center. Both pathways have advantages and disadvantages, so investors should carefully consider their needs and goals to determine the best route for their investment. In most cases, however, investors opt for regional center investment.
Advantages of Direct Investment
More Control over Investment
Direct investment is particularly useful for investors with a high level of managerial experience. For highly competent managers who wish to earn a large financial return on their EB-5 investment and are willing devote a significant amount of time to this end, direct investment may be better suited to their goals.
Since direct EB-5 investors only have to deal with the new commercial enterprise (NCE) and job-creating enterprise (JCE), they are subject to less bureaucracy than regional center investors, who have the added paperwork and regulations of the regional center to wade through. Investing directly in the NCE positions an investor closer to the EB-5 project itself.
Advantages of Regional Center Investment
Easier Managerial Involvement Requirements
Program participants with less managerial experience are advised to select the regional center route, as it all but forgoes the EB-5 program’s managerial involvement requirement. Regional center investors must still technically involve themselves in managerial work, but simply signing on as a limited partner is typically sufficient. As a limited partner, an investor will be required to vote on pertinent matters, but that is the extent of their managerial involvement. Thus, a regional center investment is highly passive and well suited to those with little managerial experience or little desire to engage in intensive managerial labor.
Relaxed Job Creation Requirements
Usually cited as the most popular EB-5 regional center investment incentive, the relaxed job creation requirements of the regional center route draw in investors from all over. All EB5 investment participants are required to demonstrate the creation of at least 10 new U.S. jobs through their capital, but for direct investors, accepted jobs are limited to those on the NCE’s payroll and construction jobs that last at least two years. Those who make an EB-5 investment through a regional center may prove sufficient job creation through indirect and induced jobs calculated in an economic analysis using approved calculation methodology. This condition significantly facilitates satisfying the job creation requirement and thus lowers immigration risk for EB-5 investors.
Since regional center investors are not required to engage in day-to-day managerial work, they do not have to live anywhere near their EB-5 project. This setup frees up an investor to select the most suitable EB-5 project for their goals while simultaneously setting up house in the location of their choice. For example, an investor can make an EB-5 investment in a Florida EB-5 project but settle down in Michigan.
An added advantage of this freedom is the consideration that the most favorable EB-5 projects are typically in targeted employment areas (TEAs), which qualify the investor for the lower investment amount of $900,000 (as opposed to $1.8 million). As TEAs are necessarily rural or high-unemployment urban areas, they may not be an ideal area for an investor to reside in.
Access to Experienced EB-5 Experts
A reputable EB-5 regional center has been approved by United States Citizenship and Immigration Services (USCIS) and boasts a team of experienced EB-5 professionals. Investors should seek out regional centers with strong track records of I-526 and I-829 petition approval and an executive team of professionals with extensive experience in business, investment, project development, and more. Working with experts further lowers an investor’s immigration risk.
Affiliating with a Regional Center vs. Creating a Regional Center
For the reasons enumerated above, project developers interested in EB-5 investment capital would be wise to offer prospective investors the regional center investment route. In this matter, project developers also have a choice: affiliating with an existing regional center or creating their own regional center. While setting up one’s own regional center offers more managerial freedom, project developers are strongly encouraged to affiliate with an existing regional center instead.
Advantages of Regional Center Affiliation
Establishing a regional center is not cheap. The fee for the I-924 petition—the form required to set up a regional center—totals a whopping $17,795. After this major upfront cost, regional center operators are required to file annual I-924A reports, with the associated fees split up among the projects the regional center oversees. This means affiliation is almost always significantly cheaper.
Faster and More Certain
Any project developer looking to set up their own regional center should bank on a few years of processing time before they receive an adjudication. As of February 2021, the USCIS Check Case Processing Times page shows an estimated processing range of 28–60 months—that’s two to five years. Project developers looking for quicker EB5 investment funding should affiliate instead.
Another risk of submitting an I-924 petition is the high rejection rate USCIS has been doling out in FY2020 and FY2021. In line with the trend of rampant regional center terminations, newly created regional centers are also scarce.
Access to EB-5 Experts
A project developer may have ample business and investment experience, but they’re unlikely to be well versed in the specific nuances of the EB-5 program. Affiliating with an existing regional center enables a project developer to work with EB-5 experts with a track record of EB-5 project success. This allows the project developer to offer an attractive EB-5 investment opportunity to prospective investors and to continually navigate the hurdles of an EB5 investment journey. In this sense, a project developer can reduce the immigration risk of its EB-5 investors, decreasing the risk of litigation from disgruntled investors.