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Through the EB-5 Immigrant Investor Program, foreign nationals can invest in U.S. businesses and relocate to the United States. In addition to the investor, their spouse and dependent children can also benefit from U.S. green cards as a result of the EB-5 investment. Following five years of permanent resident status in the United States, the investor and their family will be eligible to apply for U.S. citizenship.
The program, governed by United States Citizenship and Immigration Services (USCIS), is particularly popular because of the range of projects an investor can choose from. Qualifying EB-5 projects can be found in the real estate industry, hospitality, and tourism. USCIS also allows investors to use funds from any legal source for their investment capital. Furthermore, in June 2021, the EB-5 Modernization Rule was invalidated, meaning that the minimum investment threshold for participation in the EB-5 investment program was reduced. Foreign nationals can now participate in the program for $500,000 in projects located in targeted employment areas (TEAs) or $1,000,000 in projects located outside of a TEA.
Selecting which EB-5 project to subscribe to is one of the most important choices investors need to make at the beginning of the EB5 investment process. However, before an investor can start evaluating potential projects, they first need to decide whether to make a direct EB-5 investment or to invest through a regional center. Although the EB-5 Regional Center Program expired in June 2021 and, as of January 2022, is yet to be reauthorized, EB-5 industry experts predict that it may be reinstated soon.
In this article, we explore the main differences between direct and regional center EB-5 investments, including how the investment is made, the way job creation criteria are fulfilled, and the level of involvement the investor has in the project. These are key factors a prospective investor should consider when choosing their investment route.
Key Features of Direct EB-5 Investments
In a direct EB-5 investment, capital is invested directly into a new commercial enterprise (NCE). According to USCIS regulations, each EB-5 investment must create 10 jobs for U.S. workers. For direct projects, these jobs must be generated by the NCE and appear on its payroll. These roles must be full-time and last for at least two years. USCIS does not require the same employee to fill the role throughout that time; staff changes are acceptable as long as the nature of the role and its duration are in line with the regulations.
Another characteristic of direct EB-5 investments is that investors are typically quite involved in the project. This can be appealing to experienced investors who would like greater influence over the management of the project, including how their EB-5 investment capital is used. This inevitably involves a considerable time commitment on the part of the investor but can potentially result in greater financial returns on the investment.
Key Features of Regional Center EB-5 Investments
The alternative route for EB-5 investors is to subscribe to a regional center project. Regional centers act as agencies or intermediaries between the foreign national and the investment project. In this setup, the regional center manages the EB-5 investment capital.
Because of this structure, there are several differences in the way regional center investments operate compared to direct EB-5 investments. First, when investing in a regional center project, foreign nationals can expect to have little involvement in the day-to-day running of the project.
Second, an EB-5 investment in a regional center project is subject to different job creation calculations, which encompass the investment’s broader impact on the local economy. As well as the roles that appear on the NCE’s payroll, regional center investments can count indirect and induced employment towards the total. Indirect jobs relate to the roles generated because of the EB-5 business’s need for products and services. Induced jobs represent the employment created as a result of the EB-5 project’s employees spending their wages in the local area. As a result, it is usually easier for regional center projects to fulfill the job creation criteria of USCIS, reducing the immigration risk for the investor.
Choosing whether to make a direct or regional center EB-5 investment is an important first step in engaging with the EB-5 program. Prospective investors are advised to weigh the advantages and disadvantages of each route before making a decision. EB-5 experts such as EB5 Affiliate Network can offer advice on which type of investment would best suit each investor’s circumstances and help identify reliable EB-5 projects.
