The EB-5 visa category is an immigration option for those who can afford to invest at least $1,000,000 in job creation or entrepreneurship in the U.S. (The investment requirement is half as much if it is to be made in a designated “Target Employment Area,” which is either rural or suffering from an unemployment rate at least 1.5 times the national average.) There are two routes to accomplishing this: directly, or through a Regional Center. A simple way of differentiating them is that Regional Centers are for those who want to invest in order to immigrate, while the direct option is for people who want to immigrate in order to invest. EB-5 Direct is the method one uses when the investment is geared toward buying a business, and it allows more personal control over one’s investment, giving the immigrant the chance to maximize his or her profit from the venture. However, without the guidance of a Regional Center, the process can be complex and difficult to navigate. Due to some unpredictable USCIS methods of evaluating EB-5 Direct cases, there are many ways an immigrant can err and potentially delay or lose their chance at the unconditional permanent residence that follows a successful EB-5 investment. This is an area where the right immigration council and make a huge impact in the client’s favor.
For all forms of EB-5, in order to obtain unconditional permanent residence, an immigrant investor is given a two year period in the country (with up to an additional year in many cases) to show that their investment led to the creation or preservation of at least 10 jobs. One needs to only show the “preservation” of jobs if the company being bought is a “troubled business.” (Out of its at least two years of existence, to be classified as “troubled,” a business must have had at least a 20% net loss over the one year or two year period prior to the investor’s I-526 priority date.) Things are difficult on the onset, as the immigrant investor must be able to know how the USCIS will view the acquisition of business assets. In most cases, unless the investor is purchasing a troubled business, he or she should try to avoid becoming a successor in interest of the company selling the assets.
Becoming a successor in interest means obtaining a company’s tax liabilities (among other things). A buyer of all or “substantially all” goods of a business can be considered a successor in interest of that business. While the owner and the name of the business can change, the immigrant buyer can be viewed by USCIS as only continuing the prior business. In such a situation, proving that the immigrant investor is the source of any new jobs becomes more difficult. There have been cases where immigrant investors put the necessary amount of money at risk in starting a business and hiring at least 10 employees, only for USCIS to say that there was inadequate evidence of the employment criterion being met. It appeared that the USCIS suspected that the new employees of the immigrant investor were either carryovers from the prior business or just their replacements. In this sort of case, the net creation of opportunity for U.S. workers is not evident.
Worse, an investor can be treated by the USCIS as a successor in interest of the company that he or she is buying from, even when truly not one. However, there are some ways this can be avoided. The investor could
- avoid buying all the assets of a company, allowing it to continue operating or be merged with or bought out by a third party;
- purchase the assets from a different kind of company than one wishes to start;
- purchase the assets from a company in a different physical territory; or
- wait at least a year after the selling company closes to start the new one.
However, should the immigrant investor choose the route of investing in a “troubled business,” this advice is reversed. Because he or she is aiming to show that the investment was the cause of a company’s no longer being “troubled” and the subsequent preservation of its jobs, he or she should want to be seen as a successor in interest for that business. However, there are other difficulties. A big hurdle up front is proving that the company meets the definition of “troubled business.” Further, and seeming somewhat unreasonable, the USCIS may argue that the preservation of at least 10 jobs hasn’t been proved if the company loses even just one worker despite the investment. (Thus, the argument that even more jobs would have been lost isn’t fail-safe.)