EB-5 visa applicants have several options for where to invest their money, each with their own advantages and disadvantages: They can opt to use their capital in new commercial enterprises (NCEs), troubled businesses, or regional centers. In this article, we focus on regional centers, defined by U.S. Citizenship and Immigration Services (USCIS) as “any economic unit, public or private, engaged in the promotion of economic growth, improved regional productivity, job creation, and increased domestic capital investment” (definition cited in this link) set up specifically for EB-5 investment.
Regional centers entail specific requirements, many of which make investment in them attractive for the vast majority of EB-5 investors. For one, regional centers do not require investors to participate in day-to-day operations at the business, and they allow for the creation of 10 indirect or induced jobs (as opposed to direct jobs) to satisfy the EB-5 job creation requirement. It is important to note that regional centers located in targeted employment areas (TEAs) are also eligible for the TEA discount, so participants need only invest a minimum of $500,000 into a project, while regional center investors outside of a TEA must commit the full $1,000,000. (USCIS publishes an up-to-date list of approved regional centers here.)
Because they are established to facilitate the flow of foreign investment into U.S. communities, regional centers are also attractive to U.S. entrepreneurs seeking to secure funding for their domestic projects. Fortunately for these individuals, a person doesn’t have to be an EB-5 investor to set up a regional center. (Of course, an EB-5 investor could establish his or her own regional center, too.)
To take advantage of funds available from EB-5 investors for their projects, both domestic and foreign entrepreneurs can apply to start their own regional centers. This can be an effective strategy for entrepreneurs because EB-5 investors do not usually expect high returns (in fact, because EB-5 investors’ capital investments must be "at risk" investments, they can’t demand a return). And, naturally, EB-5 applicants are more concerned with becoming lawful permanent residents, so the issue of a return is not necessarily primary.
Having USCIS’s stamp of approval as a regional center is a great marketing tool for the operators/promoters of regional centers and up and coming projects. Commonly, before the project is ready, a hypothetical project proposal can be used to establish a regional center from USCIS. The hypothetical project must contain a specific business proposal and its positive economic impact on the region. However, USCIS does not require that the hypothetical project be followed through. The hypothetical project is merely a general project proposal. I-526 or I-924 filed based on the hypothetical project will be reviewed as a new case and deference will not be given based on a pre-approved hypothetical project. This allows the project to try to attract investors before taking major steps in starting the project.
On the other hand, an actual projectis a shovel-ready project that is ready for development. Unlike hypothetical projects, approvals of actual projects will be accorded deference in subsequent filing of I-526 applications. To receive approval of an actual project for regional center designation, the business plan must have sufficient verifiable detail. Evidence to obtain approval include but are not limited to a description of the business, experience of business’ owners, business marketing plan and market analysis, general structure and objects, budget, job descriptions for positions needed, and a timetable for hiring needed positions. A hypothetical project will transform into an actual project when USCIS approve an amendment of the I-924 form OR when the first I-526 application based on the project is approved.
Interested in establishing a regional center? Continue reading below for our distillation of the process.
Regional Center Proposal Process
First, you would be wise to consult with a few people to ensure that your plan is viable. The following professionals can help make the process go as smoothly as possible:
Submitting the Application
To submit a regional center proposal to USCIS, applicants must send Form I-924 along with a $17,795 filing fee. (To amend a USCIS-designated regional center, the submission of an I-924 with the same fee is required, too.) For reference, note that it took an average of about 10 months for USCIS to process I-924 petitions in 2016.
Entrepreneurs seeking to form or designate a regional center should develop a comprehensive proposal containing relevant information about their business plan. According to Chapter 3 of the USCIS policy manual, a proposal should:
In addition to the information, which essentially serves to explain how a project will impact an area in terms of its economic and employment outlook, a proposal should contain information about how the regional center will be run and operated. USCIS further stipulates that applicants show how the regional center will:
-For example, a characterization as to whether the investment capital sought for job-creating companies will consist solely of immigrant investor capital or a combination of immigrant investor capital and domestic capital; and a characterization as to how the distribution of the investment capital will be structured, whether through, say, loans to developers or venture capital; and
Documentation I-924 applicants can submit to serve as evidence of the above includes:
After you submit your petition and all of the necessary documentation, USCIS may adjudicate the application as received, or, if it finds the documentation insufficient to reach a decision, it may issue a request for additional evidence (RFE). An RFE will state what USCIS believes to be missing or weak in the application, and provide the applicant with an opportunity to submit more evidence before a final decision is made.
Once the underlying I-924 is approved, the now-designated regional center must file Form I-924A annually to demonstrate their continued eligibility for this designation. Submission of an I-924 requires a filing fee of $3,035, and in the application, the regional center must provide information showing its sustained promotion of economic growth, improved regional productivity in the defined geographic area, job creation, and increased domestic capital investments in its location. [8 C.F.R. §204.6(m)(6)]. Additionally, the regional center should document all approved Form I-526 and Form I-829 applications; the aggregate capital invested; the number of jobs created; information on all investors; and the regional center’s administrative structure and methodologies. If the regional center fails to adequately demonstrate these I-924A requirements, or if USCIS concludes that the regional center “no longer serves the purpose of promoting economic growth,” then USCIS has the authority to terminate the regional center. (For the full statutory text, see 8 C.F.R. §204.6(m)(6).)
A Note on the Status of the Regional Center Program
In 1992, Congress created the concept of EB-5 regional centers as part of a legislative upgrade of the visa category. Legislators initially launched regional centers on a pilot basis in the Immigrant Investor Pilot Program. Fast forward almost three decades, and, notably, the regional center pilot program has yet to become a permanent fixture of immigration law. Instead, it has been prolonged by way of successive reauthorizations. The most recent reauthorization occurred in May 2017, and allows for the program to continue without changes through September 30, 2017.
For more detailed information about the EB-5 visa, refer to the following links: