Client Advisory: Canada’s Shutdown of Immigrant Investor Program Will Impact U.S. EB-5 Quota

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By Wassem M. Amin, Esq., MBA

The Canadian Government announced on February 12, 2014 that it is shutting down the Immigrant Investor Program, effective immediately, with all pending cases being rejected.  As reported in Forbes.com, an estimated 45,000 Chinese Immigrant Investors with applications pending will be affected by this decision.  With the increased popularity of the U.S. EB-5 Immigrant Investor Program in China, it is inevitable that some of those affected applicants will choose to divert their investments here.

Assuming that even a fraction of those 45,000 investors applied through the EB-5 Program, the impact on the EB-5 Quota will be substantial.  U.S. Immigrations Laws allot 10,000 annual visas to EB-5 Immigrant Investors.  The visas are awarded on a first-come, first-serve basis.  As discussed in prior posts, forecasts indicate that this quota will be met as early as June of 2014–effectively backlogging all Chinese Immigrant Investor applicants.

However, it is critical to note that prior forecasts did not account for the potential influx of rejected Chinese Immigrant Investors from Canada.  This poses immediate consequences for EB-5 applicants from China.  An unexpected increase in Chinese applicants will result in the EB-5 quota being met earlier than the deadline previously forecasted, perhaps as early as April of 2014.  That will cause applications processed by USCIS after the deadline to be backlogged, perhaps by a year or more, in addition to current processing times for an I-526 (Immigrant Investor Application).

Potential EB-5 Applicants, particularly those from China, are advised to contact a legal professional to discuss the potential impacts this may have on their applications.

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Wassem M. Amin, Esq., MBA is an Associate Attorney at Dhar Law LLP in Boston, MA and is the Vice Chairman of the Middle East Division of the American Bar Association.  Wassem has extensive experience in the Middle East, having worked as a consultant in the region for over a decade.  Wassem currently concentrates his practice on Corporate Law, Business Immigration and International Business Transactions.  He has advised countless Eb-5 Investors and assisted developers in structuring USCIS-compliant EB-5 Regional Centers as well as sourcing investors throughout the Middle East.  For more information, please visit the About Us page or request more information on our Contact Us page.

Disclaimer: These materials have been prepared by Wassem M. Amin, Esq. for informational purposes only and are not legal advice.  The material posted on this web site is not intended to create, and receipt of it does not constitute, a lawyer-client relationship, and readers should not act upon it without seeking professional counsel.

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USCIS Continues Positive Reform of the EB-5 Immigrant Investor Program In Policy Memo

imagesBy Wassem Amin, Esq.

On May 30, 2013, USCIS issued the final version of its EB-5 Adjudications Policy.  Although it has been around since 1990, the EB-5 Visa, also known as the Immigrant Investor Visa, has been rising in popularity over the past couple of years.  Summarily speaking, the EB-5 Program is based on three main elements: (1) the immigrant’s investment of capital; (2) in a new commercial enterprise; (3) that creates jobs.

This article summarizes the main changes in USCIS’s adjudications of EB-5 investor and regional center applications.  A complete overview of the EB-5 Visa can be found in previous posts.

  • USCIS explicitly mentioned, for the first time, that administration of the program is done “with the utmost vigilance to program integrity” and that fraudulent applications are referred to appropriate law enforcement and regulatory authorities.  This is perhaps due to the recent high profile fraudulent EB-5 Regional Center in Chicago.
  • Ability to diversify investment:  USCIS clarified that the capital invested may be deployed into a portfolio of wholly-owned businesses, so long as all capital is deployed through a single commercial enterprise.  In other words, an immigrant investor’s capital, whether through a direct investment or regional center, can create a holding company that would receive the funds and distribute them to different businesses – so long as one or more of the portfolio of businesses or projects can create the required number of jobs.
  • Pooled Investments in Non-Regional Center Cases: In a direct investment context, USCIS indicated that the new commercial enterprise can consist of pooled investments OR can have owners who are not applying under the EB-5 program.
  • Geographic Scope of a Regional Center: In adjudicating Regional Center applications, the geographic scope of a Regional Center will be determined on a case-by-case basis.  The Memorandum noted that “the reasonableness of the proposed regional center geographic boundaries may be demonstrated through evidence that the proposed area is contributing significantly to the supply chain, as well as the labor pool, of the proposed projects.”
  • Removal of Conditions on Permanent Resident Status:  USCIS reiterated that the EB-5 Program allows an immigrant investor to become a lawful permanent resident, without conditions, if the immigrant investor has established a new commercial enterprise, substantially met the capital requirements, and can be expected to create within a reasonable time the required number of jobs.  Of particular significance is the fact that all of these requirements need not have been fully realized before the removal of conditions.  It is sufficient that evidence submitted establishes that “it is more likely than not” that the investor is in substantial compliance with the program and job creation will result within a “reasonable time.”  “Reasonable time” is a fact-specific determination, but USCIS indicated that, in most cases, the maximum ceiling allowed will be a one year extension after the original two years.
  • Impact of Regional Center’s change of Plans on Investors: A particularly laudable shift in policy is USCIS’s announcement in the memorandum that it will no longer deny investors’ petitions to remove conditions solely bases on failure to adhere to the plan contained in the Form I-526 (the initial immigrant investor application) OR to pursue business opportunities within an industry category previously approved for the Regional Center.  This will allow Regional Centers significant leeway in pursuing different options if their initial proposed investment fails, which also increases the likelihood of a successful exit for the investor. However, there is a draw back, USCIS noted that:

“it recognizes the fluidity of the business world and therefore allows for material changes to a petitioner’s business plan made after the petitioner has obtained lawful permanent resident status.  However, immigrant investors, and the regional center with whom they associate, should understand that availing themselves of this flexibility does decrease the degree of predictability they will enjoy if they instead adhere to the initial plan that is presented to and approved by USCIS.”

USCIS continues to make positive changes to the EB-5 Immigrant Investor Program.  With many practitioners hopeful that the visa quota will be increased if the new immigration bill passes, the EB-5 Program will most likely to continue to gain popularity among foreign investors as well as an attractive capital source for developers stateside.

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Wassem M. Amin, Esq., MBA is an Attorney at Dhar Law, LLP in Boston, MA. Wassem has extensive experience as a business advisor and consultant, domestically and abroad (in the Middle East region), having worked as a consultant for over 9 years. Wassem currently focuses his practice on Corporate Law, Business Immigration Law, and International Business Transactions; where he works with Firm Partners Vilas S. Dhar and Vikas Dhar to advise Regional Centers and individual investors on EB-5 Visa matters. For more information, please visit http://www.dharlawllp.com and email Wassem at wassem@dharlawllp.com.

Disclaimer: These materials have been prepared by Dhar Law, LLP for informational purposes only and do not constitute legal advice. This article is not intended to create, and receipt of it does not constitute, a lawyer-client relationship, and readers should not act upon it without seeking professional counsel. This material may be considered advertising according to the rules of the Supreme Judicial Court in the Commonwealth of Massachusetts. Reproduction or distribution without prior consent of the author is prohibited.

How will the JOBS Act Impact EB-5 Regional Centers and Immigrant Investors?

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By Wassem Amin, Esq., M.B.A.

Although the EB-5 Immigrant Investor Visa has been around for almost 2 decades, it has only started gaining traction over the last few years.  Discussed in detail in previous posts, in summary, the EB-5 Investor Visa allows foreign investors to obtain permanent residency in the United States if they invest a minimum of $1,000,000 (or $500,000 in a high unemployment or rural area).  The permanent residency is conditioned on the success of the investment after two years and, in particular, whether the investment creates a minimum of 10 full-time jobs for American workers.

A United States Citizenship and Immigration Services (“USCIS”) Pilot Program allows the creation of so-called “Regional Centers” for the sole purpose of structuring, administering, and marketing typically medium to large scale projects funded through the pooling of EB-5 investments.  After receiving approval from USCIS, a Regional Center could then solicit foreign investors for capital.  The benefit to the foreign investor is, of course, the ability to gain permanent residence in the United States.  Likewise, the benefit to the Regional Center is the low cost of capital in comparison to conventional financing methods.

The increased popularity of Regional Centers has also increased the Securities and Exchange Commission’s scrutiny of how the investments are solicited and marketed.  In a recent joint conference call with USCIS, the SEC made it clear that virtually all Regional Center investment solicitation will trigger regulation under federal securities laws.  Regional Centers are considered “issuers” of securities because they are transacting in investment interests.  Although Regional Centers are usually exempt from registering with the SEC, they are not exempt from regulation by the SEC.

Offerings of securities by Regional Centers are still subject to anti-fraud provisions which prohibit general solicitation and advertising, among other restrictions.  That prohibition is so broad that it includes internet posts, local newspapers, and everything in between.

Changes Under the JOBS Act

On April 5, 2012, the President signed the Jumpstart Our Business Startups (“JOBS”) Act.  The main purpose of the Act is to stimulate the growth of small to medium sized companies through facilitated access to capital and reduced regulatory reporting requirements.  Although not yet implemented, the SEC’s proposed rules under the JOBS Act will positively impact EB-5 investment offerings.  Regional Centers will have significantly more latitude with respect to general solicitations and general advertisements.  In combination with the proposed immigration reform bill, the opportunities for Regional Centers to raise capital will significantly increase.

The Securities Act of 1933 requires that all offerings of securities be registered unless there is an applicable exemption from registration.  Regulation D is an exemption used for small private offerings with, among others, limits the size of the offering and the number of investors.  Title II of the JOBS Act requires the SEC to eliminate its ban on general solicitation and advertising in offerings that are exempt from registration under Rule 506 of Regulation D if all investors are accredited or under Rule 144A so long as all investors are qualified institutional buyers. However, proof of “reasonable steps” must be taken and documented to verify accredited investor status before a Regional Center can claim the exemption.

What Does This Mean to a Regional Center?

EB-5 Issuers such as Regional Centers, will now be able to advertise via website advertisements, newspapers, radio, internet posts, and even email.  However, to take advantage of the relaxed rules, Regional Centers must now take “reasonable steps” to verify that the purchasers are in fact accredited investors.  It will no longer be sufficient for an issuer to rely on a questionnaire to establish whether an investor qualifies as an accredited investor.

The extent of “reasonable steps” a Regional Center will depend on: (i) the type of accredited investor the investor claims to be; (ii) the type of information the Regional Center has about the investor; (iii) the manner in which the investor was solicited; and (iv) the size of the offering and minimum investment amount.  For example, if the EB-5 foreign investors are solicited through a publicly accessible website, a mass email, or a Facebook page, the Regional Center will be obligated to take greater measures to verify accredited investor status.  Conversely, if the minimum amount of investment is high (for example, $1million instead of $500,000), the SEC indicated that it may be reasonable for the issuer (the Regional Center) to take fewer steps to verify accredited investor status.

Catch-22: the Regulation S Exemption

Many Regional Centers also rely on the SEC’s Regulation S to exempt them from registration. However, Regulation S, known as the “offshore exemption”, prohibits any “directed selling efforts” within the United States.  Any general solicitation, particularly using the Internet, may be deemed to be directed selling efforts.  In the case of a Regional Center, this may include information on the offering that is on its website.

Therefore, for example, if the website is accessible to people in the United States, a Regional Center will not be in compliance with Regulation S–even though it might be in compliance with the revised Rule 506 of Regulation D.  In other words, taking advantage of the opportunity to conduct general advertisements and solicitations under the proposed rules of Regulation D may eliminate a Regional Center’s ability to rely on Regulation S.

In the process of developing an operational and marketing plan, a Regional Center must consult with an experienced securities attorney to assist it with navigating the complex federal securities regime.  With the increased popularity of the EB-5 program, the SEC has been significantly stepping up its oversight and scrutiny – even leading to a notorious enforcement action against a Regional Center in Chicago.

Finally, it is important to note that the new Regulation D rules under the JOBS Act have not been enacted by the SEC yet.  Until that happens, the ban on general solicitation and advertisement is still in effect.  _________________________________________________

Wassem M. Amin, Esq., MBA is an Attorney at Dhar Law, LLP in Boston, MA. Wassem has extensive experience as a business advisor and consultant, domestically and abroad (in the Middle East region), having worked as a consultant for over 9 years. Wassem currently focuses his practice on Corporate Law, Business Immigration Law, and International Business Transactions; where he works with Firm Partners Vilas S. Dhar and Vikas Dhar to advise Regional Centers and individual investors on EB-5 Visa matters. For more information, please visit http://www.dharlawllp.com and email Wassem at wassem@dharlawllp.com.

Disclaimer: These materials have been prepared by Dhar Law, LLP for informational purposes only and do not constitute legal advice. This article is not intended to create, and receipt of it does not constitute, a lawyer-client relationship, and readers should not act upon it without seeking professional counsel. This material may be considered advertising according to the rules of the Supreme Judicial Court in the Commonwealth of Massachusetts. Reproduction or distribution without prior consent of the author is prohibited.

Developing EB-5 Regional Centers to be Islamic Finance Compliant

By Wassem Amin, Esq., M.B.A.

This Article a general overview of the development process of a Regional Center—and specifically within the context of real estate developments.  Additionally, it discusses Islamic Finance principles and how it may impact the structure of the investment offered.

A designation as a Regional Center by United States Citizenship and Immigration Services (“USCIS”) allows a project developer, or an entity on behalf of a project developer, to raise capital from foreign investors seeking an EB-5 Immigrant Investor Visa.

Utilizing Regional Centers as a source of funding for project developments is an attractive option due to the typically low cost of capital to the developer as well as the ability to generate a profitable revenue stream from administrative fees charged to the immigrant investors.  In addition, administrative fees generated from a Regional Center typically offset the up-front costs involved.

On the other hand, investing through a Regional Center is attractive for foreign investors because the investment is usually held in an irrevocable escrow account pending the approval of their initial application with USCIS (Form I-526).  Upon the approval of the I-526 Application, the funds are released to the developer and the investor is issued conditional permanent residency.  This ensures that, in the unlikely event the foreign investor is denied by USCIS, they are refunded their investment.  As an additional layer of protection, a comprehensive questionnaire is typically used to qualify the foreign investor and determine their eligibility beforehand.  That way, the Regional Center (or the developer) would be able to suggest alternative investments to potential foreign investors who may not be approved by USCIS.

What are Regional Centers?

USCIS defines a Regional Center as “any economic entity, public or private, which is involved in the promotion of economic growth, improved regional productivity, job creation and increased domestic capital investment.”  A Regional Center could be independent of the actual project or created in connection with a specific development.  Regional Centers are set up to act as intermediaries between foreign investors and EB-5 eligible projects in the United States.  To apply for Regional Center designation, a Form I-924 is submitted to USCIS, and processing times are between 4-8 months.

Within the real estate development context, a range of different projects have qualified for regional center status, including shopping malls, hotels, mixed use developments, warehouse distribution centers, manufacturing facilities, and business incubators.

In order to obtain approval from USCIS for designation as a Regional Center, the entity has to submit a proposal which must:

  1. Clearly describe how the center focuses on a geographic regions of the United states and how it will promote economic growth through improved regional productivity, job creation, and increased domestic capital investment;
  2. Provide in verifiable detail how jobs will be created indirectly;
  3. Provide a detailed statement regarding the amount and source of capital which has been committed to the Regional Center, as well as a description of the promotional efforts taken and planned by the sponsors of the Regional Center;
  4. Contain a detailed analysis regarding the manner in which the center will have a positive impact on the regional or national economy in general, as reflected by such factors as increased household earnings, greater demand for business services, utilities, maintenance and repair, and construction both within and without the Regional Center; and
  5. Be supported by economically or statistically valid forecasting tools, including, but not limited to, feasibility studies, analyses of foreign and domestic market for the goods or services to be exported, and/or multiplier tables.

The Job Creation Requirement

The EB-5 visa has two different minimum investment requirements, depending on whether the geographic location of the investment is a Targeted Employment Area (“TEA”).  A TEA is an area that is in a rural location (as determined by each specific state) or an area with an unemployment rate of at least 150% of the national average.  If the investment is in a TEA, the minimum amount per each immigrant investor is $500,000.00.  If it is not in a TEA, then the minimum amount is $1,000,000.00.

Each foreign investor must demonstrate that their investment has created (or will create within two years) a minimum of 10 full-time jobs for U.S. persons (a permanent resident or a citizen).  This requirement is the same whether the investment is within or outside of a TEA—i.e., whether the investment is $500,000 or $1,000,000.  However, if the investment is through a Regional Center, indirect (and induced) jobs may be counted.

To establish that 10 or more indirect or direct jobs will be created by the business, USCIS rules provide that indirect methodologies may be used, which may include multiplier tables, feasibility studies, analyses of foreign and domestic markets for the goods or services to be exported, and other economically or statistically valid forecasting devices which indicate the likelihood that the business will result in increased employment.

For example, if a multitenant shopping center is designated as a regional center, the full-time jobs created by the ownership and management of the shopping center are directly created jobs.  The jobs created by the tenants of the shopping center are indirect jobs. There may be 5 or 10 full-time positions created by operating a property management office, but the jobs created by the tenants of the shopping center could be over 100, and those jobs would all be counted to satisfy the job creation requirement. For these reasons, in a regional center, it is much easier for the investor to meet the employment requirements. Further, if more jobs are counted in the business, more EB-5 investors can participate in the project, resulting in more funding for the developer.

Structuring the Regional Center: Investment Models and Exit Strategies

The creation and management of a Regional Center will require expertise in the following areas: (1) EB-5 process; (2) immigration law; (3) equity fund structuring; (4) transaction due diligence and structuring; (5) economic analysis; (6) securities and corporate law compliance; and (7) marketing.  Dhar Law LLP is able to assist with all of the above—except the marketing.  In addition, while the economic analysis will be conducted under our supervision, it will be primarily done by an economist within our network who specializes in EB-5 Regional Centers.  An additional requirement is having access to pipeline of foreign investors sufficient to meet the capital requirements of the project.

As for the investment models, EB-5 investments are generally one of two high-level models: an Equity Model or a Debt Model.  In the Equity Model, the investor acquires an ownership interest in the development project, entering as limited partner.  This is a well-established model with a track record of USCIS approvals and is currently the primary strategy for EB-5 investments.  At the end of the specified term (generally five years, but could be less), the EB-5 investor’s interest in the project is sold to other interested parties.  The proceeds from the sale are returned to the investor.  Complications could arise in the sale of the equity, so the return of investments is not guaranteed.

In the Debt Model, the investor also joins as a limited partner, but provides a low-interest term loan to the project developer rather than acquiring a stake in the project.  Repayment of the principal is made either through sale of the project or refinancing of the EB-5 loan at the end of the term (also generally five years).  This model, while it has received approvals from USCIS, is still fairly new and may undergo greater scrutiny.  The issue is whether Debt Model projects guarantee repayment to the investor—which is not allowed under EB-5 regulations because the invested capital must be “at risk.”

For example, if a new commercial enterprise’s limited partnership (LP) agreement contains a buy-back agreement (i.e. a redemption clause guaranteeing the return of the investor’s capital investment), then the investor’s capital investment will not be a qualifying “at-risk” investment for EB-5 purposes. Likewise, if the LP agreement requires the payment of fees from the investor’s capital investment to the extent that the investment will be eroded below the qualifying level, preventing the full infusion of the capital into the job creating enterprise, then the investor’s capital investment will not meet the required EB-5 level of investment.

Islamic Finance Compliance and Structuring

In practical terms, the primary differences are the restrictions that Islamic Finance places on the types of permissible investments.  Due to the fact that Islamic Finance is based on Islamic teachings, it prohibits the investment in products that involve the following: the charging of interest, undertaking of excessively speculative or risky ventures, contractual uncertainty or ambiguity, or traditional insurance products.

A Regional Center may qualify as an Islamic-finance compliant investment by structuring the entity as a partnership.  A permissible method of Islamic financing is a musharaka, which, in Arabic, literally means “sharing.”  A musharaka is a joint enterprise formed for a business purpose in which all partners share profits according to a predetermined ratio.  However, the key difference is that losses must be divided exactly in accordance with the pro rata share of capital invested by each partner.  In the context of real estate and project financing, the foreign investor, as a limited partner, would contribute capital while the real estate developer, as the general partner, would contribute either real estate assets or additional capital. The real estate developer would also act as the managing partner and be the solely authorized decision maker.

Within Islamic Finance, the most ideal structure would be an equity-based structure—where the investor purchases a partnership interest with the investment.  At the end of a predetermined period, a similar exit strategy as one used in conventional finance could be implemented.  However, an equity-based model could also be structured to “mimic” a debt-based investment.  This is called a diminishing musharaka.  In such a structure, the general partner (i.e., the project owner) agrees to repurchase the Islamic investor’s interest over an agreed period of time pursuant to a fixed price or formula.  The predetermined repurchase mechanism could be structured to effectively function as debt instrument—i.e., a promissory note.

To ensure compliance with Islamic finance principles, the overall agreement between the partners would need to describe the capital contributions and the allocation of profits and losses, as well as the management responsibilities (which would normally be undertaken by the real estate developer as general partner).  The real estate developer would then undertake the project using the capital and other contributed assets in the construction and operation of the project.

Initial Evidence and Documents Required by USCIS for Approval:

  1. Location of Regional Center: The Regional Center must focus on a specific geographical area.  This area must be contiguous and clearly identified in the application by providing a detailed map of the proposed geographic area of the Regional Center.
  2. Creation of Jobs:  Each Regional Center must fully explain how at least 10 new full-time jobs will be created by each individual alien investor within the Regional Center either directly or indirectly.  The applicant must provide an economic analysis that relies on statistically valid forecasting tools that shows and describes how jobs will be created for each industrial category of economic activity. The job creation analysis for each economic activity must be supported by a copy of a business plan for an actual or exemplar capital investment project for that category.
  3. Business Plan: A business plan provided in support of a regional center application should contain sufficient detail to provide valid and reasoned inputs into the economic forecasting tools and must demonstrate that the proposed project is feasible under current market and economic conditions.  The form of the EB-5 investment from the commercial enterprise into the job-creating project (equity, debt, etc.) should be identified.  The business plan should also identify any and all fees, profits, surcharges, or other similar remittances that will be paid to the regional center or any of its principals or agents through EB-5 capital investment activities.
  4. Infusion of Capital: The application must be supported by a statement from the principal of the Regional Center that explains the methodologies that the Regional Center will use to track the infusion of each EB-5 alien investor’s capital into the job-creating enterprise, and to allocate the jobs created through the EB-5 investments in the job creating enterprise to each associated alien investor.  The anticipated minimum capital investment threshold (either $1,000,000 or $500,000) for each investor must also be identified.
  5. Operational Plan: The application must be supported by a detailed description of the past, present and future promotional activities for the Regional Center.  It must include a description of the budget for this activity, along with evidence of funds committed to the Regional Center for promotional activities.  The plan of operation must also address how investors will be recruited and how the Regional Center will conduct its due diligence to ensure that all immigrant investor funds affiliated with its capital investment projects will be obtained from lawful sources.
  6. Prospective Economic Impact: The application must be supported by a general prediction of the prospective impact of the capital investment projects sponsored by the Regional Center, regionally or nationally, with respect to increases in household earnings, greater demand for business services, utilities, maintenance and repair; and construction both within and outside the Regional Center.
  7. Organizational Structure: The application must fully describe and document the organizational structure of the regional center.  In addition, it should be accompanied by the capital investment offering documents, business structure, and operating agreements of the proposed commercial enterprise that will be affiliated with the Regional Center is compliant with EB-5 statutory and regulatory requirements, as well as binding EB-5 precedent.  A common business structure is summarized in the chart below. EB
  1. Investment Offering Documents: Documentation of the capital investment offering documents must include, at a minimum, the following:
    • A description and documentation of the business structure of both the regional center and the commercial enterprises that are or will be affiliated with the regional center, such as Articles of Incorporation, Certificate of Incorporation, or legal creation as a partnership or limited liability company (LLC), partnership or LLC agreements, etc.;
    • Draft subscription agreements for investment into the commercial enterprise;
    • Draft escrow agreements and instructions, if any;
    • List of the proposed financial institutions that will serve as the Escrow Agent, if any;
    • Draft of the offering letter, memorandum, private placement memorandum, or similar offering to be made in writing to an immigrant investor offering capital investments through the Regional Center; and
    • Draft memorandum of understanding, interagency agreement, letter of intent, or similar agreement to be entered into with any other party, agency or organization to engage in activities on behalf of the Regional Center.

Regional Center Costs

A properly planned and managed Regional Center with a sustained project and investor pipeline can be completely self-funded, and may even generate a profitable revenue stream, using the fees charged to foreign investors.  These fees, typically labeled “administrative fees” are in addition to the principal investment and may range from $35,000 to $65,000 per foreign investor.  However, the majority of Regional Centers charge $40-45,000.

The costs associated with the set-up and management of a Regional Center vary depending primarily on the scope of the proposed project and the extent to which the Regional Center chooses to market.  In addition to start-up costs listed below, first-year sales, operations, and marketing fees should be accounted for.  However, in the case of Real Estate Investment and Development Firm, a lot of these costs could be defrayed by integrating Regional Center operations with the current Firm operations.

Start-up costs and expenses for developing a Regional Center are typically as follows:

  • Economist Fees for: (1) construction and analysis of the econometric model; (2) development and drafting of the EB-5 Business Plan; and (3) development and drafting of the Regional Center Five Year Operating Plan and Budget—$30-55,000.00.
  • Legal and Consulting Fees for: (1) transaction due diligence; (2) equity fund structuring; (3) EB-5 immigration law qualification; (4) securities law diligence and compliance; (5) representation before USCIS for project submission and approval; (6) individual investor preliminary qualification;  (7) drafting application and transactional documents including (i) memorandum of terms, (ii) private placement memorandum, (iii) subscription agreement, (iv) partnership agreement, (v) escrow agreement; and (8) supervision and review of economic impact analysis, operational plan, and business plan to ensure USCIS compliance; (9) Islamic Finance analysis and compliance—$75,000 – $200,000.
  • USCIS Governmental Filing Fees—$6,500.00.

An EB-5 funding model, if carefully planned and structured, could be an excellent and low-cost method of raising capital.  The range of capital raised through EB-5 Regional Centers has individually varied anywhere from $5 Million, on the low end, to $300 Million, on high end.  There has been increased awareness and interest by foreign investors in the EB-5 program, and it is forecasted that a record number of foreign investors will be issued EB-5 visas this year.

Although this is an overview of the process behind setting up a Regional Center, it is important to determine the exact scope of the proposed project to properly assess feasibility.   The first step is to evaluate the underlying project or projects to ensure that they will not only be profitable, but will also meet USCIS requirements of the EB-5 program.  Proper planning and careful due diligence by all parties involved is essential.

At Dhar Law LLP, we are uniquely positioned to provide our clients with comprehensive advisory and legal services in connection with developing a Regional Center.  As we discussed, the development of a Regional Center requires expertise in various areas of law.  Our in-house practice groups consist of a Corporate & Business Law Practice, an Immigration Practice, a Real Estate Practice, and the Middle East Practice.  By leveraging the specialized expertise of our attorneys within each practice, we are able to provide our client with a comprehensive EB-5 Regional Center and Investor advisory solution.

Wassem M. Amin, Esq., MBA is an Attorney at Dhar Law, LLP in Boston, MA. Wassem has extensive experience as a business advisor and consultant, domestically and abroad (in the Middle East region), having worked as a consultant for over 9 years. Wassem currently focuses his practice on Corporate Law, Business Immigration Law, and International Business Transactions; where he works with Firm Partners Vilas S. Dhar and Vikas Dhar to advise Regional Centers and individual investors on EB-5 Visa matters. For more information, please visit http://www.dharlawllp.com and email Wassem at wassem@dharlawllp.com.

Disclaimer: These materials have been prepared by Dhar Law, LLP for informational purposes only and do not constitute legal advice. This article is not intended to create, and receipt of it does not constitute, a lawyer-client relationship, and readers should not act upon it without seeking professional counsel. This material may be considered advertising according to the rules of the Supreme Judicial Court in the Commonwealth of Massachusetts. Reproduction or distribution without prior consent of the author is prohibited.

 

Details and Impact of Key Provisions of the 2013 Senate Immigration Reform Bill

wassem amin

By Wassem M. Amin, Esq.

Officially titled “Border Security, Economic Opportunity, and Immigration Modernization Act of 2013,” the bipartisan immigration reform bill (the “Bill”) introduced to the Senate on April 17, 2013 substantially reforms immigration laws in the United States.  The legislation still has a long way to go, with a series of hearings in the Senate Judiciary Committee, the amendment process, and floor debate–before even any vote.  In addition, the House also needs to pass corresponding legislation before the Bill actually becomes law.  Having said that, however, the Bill is a substantial step in the right direction and contains several provisions that address much-needed shortfalls in current immigration law.

This Article briefly summarizes several key provisions in the 800+ pages of the Bill that will impact a wide and diverse range of immigrants and nonimmigrants as well as potentially having a substantial positive impact on the U.S. economy.

Undocumented Aliens

The Bill extends “Deferred Action for Childhood Arrivals” (“DACA”) to aliens who were present in the United States before December 31, 2011 and expands eligibility by removing the age restriction that DACA imposed.  Under the Bill’s provisions, illegal aliens may qualify for a new lawful status called “Provisional Immigrant” status if the alien was: (1) physically present on the date of the application; (2) physically present in the United States on or before December 31, 2011; and (3) such presence was continuous except for brief and innocuous absence.  The spouse or child of such an alien will also be eligible for Provisional Immigrant status if they were present in the United States on  or before December 31, 2012.

However, the Bill limits this “window of opportunity” for illegal aliens’ ability to apply for Provisional Immigrant status to one year after its enactment, with the possibility for an extension of an additional 18-month period.

The initial period for Provisional Immigrant status is 6 years, renewable for another 6 years if the alien maintains his lawful status and meets certain employment criteria, as outlined in the Bill.  Specifically, the Provisional Immigrant must establish that he or she was regularly employed throughout the duration of status and is not likely to become a public charge; or is able to show that their income throughout that period has not been under the Federal poverty level.

For aliens who were previously granted DACA status, the Bill allows them to petition for Provisional Immigrant status as well.

A [Long and Tough] Pathway to Citizenship

A key provision in the Bill is that it enables so-called Provisional Immigrants to apply for an adjustment of status and obtain permanent residency (i.e., the green card) if they maintain that status throughout, meet minimum employment and education requirements, and have not been absent from the United States for more than 180 days in any calendar year.

However–the Bill also includes a provision literally titled “Back of the Line.”  Perhaps as a way to ‘punish’ illegal aliens, this provision requires illegal aliens who became Provisional Immigrants to wait until immigrant visas have become available for all approved petitions of lawful immigrants in other visa categories.  If, and only if, there are immigrant visas remaining in the annual quotas, would a Provisional Immigrant be able to obtain permanent residency.  In practice, this will make the road to citizenship for Provisional Immigrants a long and arduous one, which may take several years.

The DREAM Act

The Bill attempts to enact the long-applauded “Dream Act” which grants permanent resident status to certain aliens who came to the United States as children—without going through the lengthy process of “regular” Provisional Immigrants.  Specifically, it will allow such aliens to be immediately eligible to adjust their status to that of a permanent resident is they meet the following criteria:

  1. The alien has been a registered Provisional Immigrant for at least 5 years;
  2. The alien was younger than 16 years old on the date they initially entered the United States;
  3. The alien obtained a GED or high school diploma from the United States; and
  4. The alien has completed, at least, 2 years in an accredited bachelor’s degree program or higher in the United States OR has served in the U.S. Military for at least 4 years.

Amendments to Employment H-1B Visas

The Bill increases the number of allotted annual visas in the H-1B category subject to the cap from the current limit of 65,000 annual visas to a 110,000 visas.  This will be undoubtedly welcomed by the many employers and employees who were denied H-1B visas due to the annual cap.  In fiscal year 2013, the cap was reached in just 5 days after April 1, 2012–the date USCIS starts accepting H-1B petitions.

An additional significant amendment is that the Bill proposes that spouses of H-1B employees be automatically granted work permits.  Immigration reform activists have long criticized the fact that spouses were not allowed to work under the H-1B visa.

New “Retiree” Nonimmigrant Visa

A new provision in the Bill grants aliens above the age of 55 the ability to retire in the United States and stay indefinitely if they purchase a residential property in the United States for at least $500,000 and are physically present a minimum of 6 months out of each calendar year.  However, a key restriction in this category is that prevents those who qualify from being able to obtain employment authorization (unless the work is related to managing their residential property).

New “W” Nonimmigrant Visa Category

Although the details on this new category are still unclear, it basically creates a whole new nonimmigrant employment visa specifically targeted to certain “shortage occupations.”  The Bill imposes strict qualification and reporting requirements for both employers and employees under this category.  However, its effect will be to allow more visas to be available under other categories, such as the H-1B.  The number of visas allotted to the W-Employment category in the first year of enactment is 20,000.  This number will be gradually increased to 75,000 visas by the fourth year.

New Category – “INVEST” Immigrant and Non-Immigrant Visas

An acronym for “Investing in New Venture, Entrepreneurial Startups, and Technologies,” the INVEST visa allows certain alien entrepreneurs the opportunity to receive an immigrant or nonimmigrant visa–depending on the size of their new venture or business.

To qualify for a nonimmigrant INVEST visa, the entrepreneur and/or the venture must meet the following minimum criteria:

  • They receive a minimum investment from a “qualified angel investor” or a “qualified venture capitalist” (as these terms are defined by the Bill) of at least $100,000; OR
  • The entrepreneur’s business generates a minimum of $250,000 in revenue for the 3 years preceding the visa petition and creates a minimum of 3 jobs for U.S. citizens or permanent residents.
  • The nonimmigrant INVEST visa is granted for an initial period of 3 years, with the ability to renew it twice for 1 year periods (i.e., maximum 5 years).

To qualify for the immigrant INVEST visa, the entrepreneur and/or the venture must meet the following minimum criteria:

  • They receive a minimum investment from a “super angel investor”, a “super venture capitalist”  (this what they are called in the Bill!) or governmental grant of at least $500,000; OR
  • The entrepreneur’s business generates a minimum of $750,000 in revenue for the 3 years preceding the visa petition and creates a minimum of 5 jobs for U.S. citizens or permanent residents.
  • If the entrepreneur has an advanced STEM degree, then the job requirement is lowered to 4 instead of 5.

Additionally, under the EB-5 visa, the Bill proposes to permanently authorize the EB-5 Regional Center Program as well as increasing the number of visas allotted per year.

As mentioned, these amendments have not been, and may not ever be, enacted into law.  However, strong bipartisan support for this Bill has many observers predicting that it withstands a significant chance of passing.

The full, 800+ pages of the Bill can be viewed here.

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Wassem M. Amin, Esq., MBA is an Attorney at Dhar Law, LLP in Boston, MA. Wassem has extensive experience as a business advisor and consultant, domestically and abroad (in the Middle East region), having worked as a consultant for over 9 years. Wassem currently focuses his practice on Corporate Law, Business Immigration Law, and International Business Transactions; where he works with Firm Partners Vilas S. Dhar and Vikas Dhar to advise Regional Centers and individual investors on EB-5 Visa matters. For more information, please visit http://www.dharlawllp.com and email Wassem at wassem@dharlawllp.com.

Disclaimer: These materials have been prepared by Dhar Law, LLP for informational purposes only and do not constitute legal advice. This article is not intended to create, and receipt of it does not constitute, a lawyer-client relationship, and readers should not act upon it without seeking professional counsel. This material may be considered advertising according to the rules of the Supreme Judicial Court in the Commonwealth of Massachusetts. Reproduction or distribution without prior consent of the author is prohibited.