Establishing a Regional Center

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.

Overview

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.

Interested in establishing a regional center? Continue reading below for our distillation of the process.

Regional Center Proposal Process

Preliminary Steps

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:

  • An experienced immigration attorney to ensure that your business plan and other documents are in compliance with USCIS policy and any other government regulations, and to prepare and file your petition.
  • A bank escrow agent to protect investor funds while applicants’ EB-5 petitions are pending.
  • An economist to analyze and project direct, indirect, and/or induced job creation, and to determine and establish TEAs.
  • A business attorney to prepare the offering documents, subscription agreement, and private placement memo; and to describe any risks of the investment.
  • A business plan writer to draft comprehensive business and operational plans, including a timeline, job creation descriptions, and all other aspects of the proposed regional center.

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:

  • Clearly describe how the ​regional ​center​ focuses on a geographical region of the United States​ and ​how it will promote economic growth through ​increased export sales, ​improved regional productivity, job creation, and increased domestic capital investment;​
  • Provide in verifiable detail how jobs will be created directly or indirectly;​
  • Provide a detailed statement regarding the amount​s​ and source​s of capital that have​ been ​committed to the ​regional ​center​;
  • Provide ​a description of the promotional efforts taken and planned by the sponsors of the ​regional ​center​;
  • Include ​a detailed prediction​how ​the ​regional ​center​ will have a positive impact on the regional or national economy ​based on​ factors ​such ​as increased household earnings, greater demand for business services, utilities, maintenance and repair, and construction both within and outside of the regional center​;​ and​
  • Be supported by ​economically or statistically ​valid ​forecasting tools, including, but not limited to, feasibility studies, analyses of foreign and domestic markets for the goods or services to be exported, ​or​ multiplier tables.

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:

  • Be promoted to attract ​immigrant ​investors, including a description of the budget for promotional activities​;​
  • Identify​, assess​,​ and evaluate ​proposed​ ​immigrant investor projects and enterprises;​
  • Characterizes the structure of the​ investment capital​ it will sponsor​;
  • -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​

  • Oversee all investment activities affiliated with, ​through​,​ or under the sponsorship of the proposed ​regional ​center​.​

Documentation I-924 applicants can submit to serve as evidence of the above includes:

  • Maps clearly indicating the contiguous geographical area of the regional center
    • If the regional center is located in a TEA, then statistical evidence demonstrating such
  • Analyses evidencing the economic situation of the geographic region
  • Job creation projections
  • Business plans
  • Industrial NAICS codes
  • Operational and marketing plans
  • Organizational structure and budget, and other corporate paperwork
  • Statement from the principal of the regional center explaining the methodologies that the regional center will use to track the infusion of each investor’s capital into the job-creating enterprise(s) and to allocate the jobs created
  • Draft subscription agreements
  • Draft escrow agreements
  • Draft private placement memo
  • Plans to remain in compliance with USCIS monitoring requirements
  • Documents showing investors’ involvement in the regional center
  • Procedure the regional center will use to perform due diligence on the source of funds of the investors (to ensure they originated from a lawful source)
  • Documentation of community or political support

Post-Application

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:

Updated 06/09/2017