The Regional Center Pilot Program is a subcategory of the Employment Based Fifth Preference Immigrant category also known as EB-5 or the Alien Entrepreneur Program. The program was first instituted in 1992. Three thousand of the 10,000 total available EB-5 visas are set aside for aliens who invest in a US Citizenship & Immigration Service (“USCIS”) designated “regional center” in the United States organized ”for the promotion of economic growth, including improved regional productivity, job creation, and increased domestic capital investment.”
A Regional Center is defined as any economic unit, public or private, which is involved with the promotion of economic growth, improved regional productivity, job creation, and increased domestic capital investment. The advantage of creating a “regional center” is that it is pre-approved by the USCIS for investors to receive permanent residence on an expedited basis.
The alternative to a creating a regional center is when a foreign investor establishes his or her own enterprise for the purpose of investing capital which would lead to permanent residence. This is what is called an individual (in comparison to a regional) EB-5 application. Such foreign investor must show that he had invested or is actively in the process of investment of at least $1,000,000 (or $500,000 in a targeted employment area) into a new commercial enterprise which would employ at least 10 US workers. A foreign investor investing in a new commercial enterprise affiliated with and located in a regional center is not required to demonstrate that the new commercial enterprise itself directly employs ten U.S. workers; a showing of indirect job creation and improved regional productivity will suffice. Another advantage of creating a regional center is that it provides permanent residence to the foreign investor on much more expedited basis that would an individual EB-5 application. For instance, once the regional center is approved, a foreign investor could receive permanent residence in 6 months as compared to at least one year when an individual EB-5 application is sought.
The Process of Creating a Regional Center
III. Creating the Organizational Infrastructure of the Regional Center
It is imperative to retain the services of experienced legal counsel who would draft the corporate or organizing documents which would establish the legal entity or entities operating the regional center and the future investment opportunities. There are several issues that must be considered when selecting the most appropriate organizational structure that would achieve the regional center administrator’s short and long term goals. The organizational structure must weigh the regional center’s liabilities in the face of capital raising endeavor. There are potential securities regulations issue that must also be considered as well as the corporate matters. Ultimately, the corporate lawyer will not only draft the organizational structure of the Regional Center, she will also draft the agreements between the future foreign investors and the regional center administrators. There has been numerous incidences of litigation in this area, and the corporate counsel must carefully study the failures of others in order to avoid the same pitfalls.
A. The Geographic boundaries of The Regional Center
The first step in creating a regional center is identifying the geographic area which would encompass the boundaries of the planned commercial enterprise. Any jobs claimed to have been created either directly or indirectly by the planned commercial activity that forms the basis of the regional center must be located within the geographic boundaries of the regional center itself. In addition, the regional center planners must show that their planned commercial activities will benefit the area. While there exists a natural desire to enlarge the regional center boundaries to include as many “indirect jobs” as possible, there is also the desire to limit the boundaries of the regional center to maximize on the positive economic impact brought about the planned commercial endeavor. Hence, the delineation of the boundaries of the regional center must be undertaken with great care thereby balancing these opposing objectives.
Put in other way, the higher the population of the area encompassing the regional center, the less impact per capita will the regional center inure.
The boundaries of the regional center should not be gerrymandered to avoid pockets of high population concentration as the USCIS will look disfavorably at such application as lacking in genuineness. The choice of the boundaries of the regional center in this case must be done in consultation with a credible economic and legal counsel to study the benefits and costs of including some or all of the proposed dairy operations into one regional center.
B. The Economic Study
The regulations require the planners of a proposed regional center to present a credible economic study which has the following main components:
• How the regional center plans to focus on a geographical region within the U.S., and must explain how the regional center will achieve the required economic growth within this regional area;
• That the regional center’s business plan can be relied upon as a viable business model grounded in reasonable and credible estimates and assumptions for market conditions, project costs, and activity timelines;
• How in verifiable detail (using economic models in some instances) jobs will be created directly or indirectly through capital investments made in accordance with the regional center’s business plan; and
• The amount and source of capital committed to the project and the promotional efforts made and planned for the business project.
The planning and execution of an economic study is a major undertaking as the economic, business and legal objectives may not overlap and the parties representing these interests must work closely and in tandem to achieve the “point of equilibrium” of these competing goals. Once the economic study is complete and reviewed, the next step in the establishmnet of a regional center is to present it to the USCIS with the required immigration forms. The USCIS will review the proposal and may have several questions before approving the petition which would establish the regional center. Once the regional center is approved, it is now ready for foreign investors to apply for permanent residence through investing capital into the regional center directly.
It must be noted that subsequent to the approval of the regional center the USCIS expects the regional center administrators to stand in the shows of the USCIS in managing the regional center moving forward. The USCIS has recently expressed that it will withdraw approval from regional centers which will not comply with the regulatory directives relative to the basic EB-5 program itself insofar as they apply to regional cetners. The relevant points the USCIS identified recently include:
• Establish representative point of contact with USCIS;
• Documentation of due diligence relative to alien’s source of funds;
• Documentation of evaluation, oversight and follow up of any proposed commercial activity that will be utilized by the alien investor to create new jobs.
• Inventory of all participating aliens, nationality, address in the US, etc.
• Categories of business activities within the geographic boundaries of the regional center;
• Documentation relative to each job creating commercial enterprise located within the commercial enterprise;
• Amount of alien investor capital and amounts of other domestic capital that has been invested together in each job creating commercial enterprise.
• Total aggregate of approved EB-5 alien investor petitions for each fiscal year.
• Total aggregate of “new” direct and/or indirect jobs created by the EB-5 investor through the regional center for each fiscal year from inception.
• Total aggregate “preserved” jobs by the EB-5 alien investors into troubled business if applicable.
• Notification of any fiscal year not having investors participating with explanation and plans to procure investments.
• Notification within 30 days of any material change.
C. The Permanent Residence Application Process
The process begins by filing an Immigrant Petition for Alien Entrepreneur with the USCIS at the California Service Center which has jurisdiction over the administration of the alien entrepreneur program.
As mentioned previously, the foreign investor can only file for his or her immigrant petition after proof of investment is submitted and after the regional center had been approved by the USCIS. Once the Immigrant petition is approved, the foreign investor is now ready to apply for permanent residence along with his immediate dependents.
Permanent residence is initially issued conditionally for 2 years after which the foreign investor must file again to remove the conditions. In the subsequent application, the foreign investor must prove that the terms and conditions on which the regional center was created continue and remain intact throughout the 2 year period. Once the USCIS is satisfied that such conditions are met, the foreign investor receives permanent residence for 10 years.