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Why Direct EB-5 Investments Will Likely Surge in Popularity

Why Direct EB-5 Investments Will Likely Surge in Popularity

The EB-5 Immigrant Investor Program renders invaluable assistance to the U.S. economy by providing local businesses with much-needed EB-5 investment capital. Due to the thorough source-of-funds evaluations carried out by United States Citizenship and Immigration Services (USCIS), project developers can be sure that their EB-5 investment funds were sourced legally by qualifying foreign nationals.

Despite the massive success of the EB-5 program and the thousands of foreign nationals that have obtained permanent resident status through it, the EB-5 investment industry has been subject to ever-changing government regulations. This has been particularly true since November 2019, when the controversial EB-5 Modernization Rule came into effect. To the disappointment of most industry members, the Modernization Rule significantly raised the required minimum investment amounts.

June 2021 was an even more volatile period for the EB-5 program. On June 22, the U.S. District Court of the Northern District of California ruled that the Modernization Rule had been implemented improperly by the Department of Homeland Security (DHS), thereby invalidating the higher investment amounts. As the EB-5 program returned to its pre-November 2019 status, investors and project developers alike celebrated the court’s ruling. However, another abrupt change to the EB-5 industry came shortly afterward: on June 30, the regional center program expired because the Senate had failed to pass a critically important EB-5 reform bill. The regional center program and the Modernization Rule could potentially be reauthorized in the future, but it is unclear if or when this will happen.

These cataclysmic events in the EB-5 investment industry have changed the way investors and project developers operate. As of June 2021, investors can only make direct EB-5 investments due to the suspension of the regional center program. Direct EB-5 investments have been a part of the EB-5 program since its beginning in 1990, and they will likely experience a surge in popularity.

Advantages of Making a Direct EB-5 Investment

When compared to regional center investments, direct projects usually offer investors more control over how their EB-5 investment capital will be used. Therefore, foreign nationals who are looking to gain significant profits through the EB-5 program as well as permanent resident status often choose to invest directly. Further, direct EB-5 projects are allowed to receive investments at the reduced amounts of $500,000 for targeted employment area (TEA) projects and $1,000,000 for non-TEA projects.

Perhaps the greatest benefit direct investments offer is their stability—unlike the regional center program, the direct EB-5 investment industry does not depend on periodic government reauthorization. In light of the events that transpired in June 2021, many foreign nationals will likely opt for the stability of direct investments.

Requirements for Direct EB-5 Investments

A successful direct EB-5 investment must fulfill all the basic requirements of the EB-5 program—the investment must be made to a qualifying new commercial enterprise (NCE), create or preserve at least 10 full-time jobs, and use legally sourced funds. The principal difference between direct and regional center EB-5 investments is that the former are made directly to the NCE in question and not through a regional center.

Moreover, foreign nationals who make a direct EB5 investment must fulfill strict job creation requirements. Direct EB-5 projects are not allowed to count indirect or induced employment toward creating the needed jobs. Rather, the NCE must create 10 full-time jobs directly, and these positions must appear on the project’s payroll. Jobs created by a direct EB5 investment must last for a minimum of two years and be filled by qualifying U.S. workers.

Foreign nationals interested in making a direct EB-5 investment have many options. Direct investors often choose to work with technology, infrastructure, hospitality, or construction projects. Despite the wide variety of EB-5 projects available, investors should carry out thorough research on each project to ensure its legitimacy and verify that it will be able to create the needed jobs. EB5AN has a 100% I-526 and I-924 approval rate, offering some of the most reliable projects in the EB5 investment industry.