If you’re reading this article, you probably know that in order to obtain an EB-5 visa, you have to invest a large sum of money into a business in the United States that creates at least 10 new jobs, among other requirements. How large this “large sum of money” is depends on where exactly you will be investing your money. While the minimum sum for an EB-5 investment is generally $1,000,000, this amount is cut in half if you decide to invest your money in a region known as a “targeted employment area,” or TEA. Thus, you are only required to invest $500,000 in a job-creating business in the U.S. if this business is located in a TEA.
The difference in minimum investment amounts makes sense if you recall that Congress created the EB-5 visa explicitly to spur job creation. Obviously, some geographical regions of the country need jobs more than others, so lawmakers reduced the investment requirement as a way to entice investors to infuse money into areas that otherwise might not be as attractive to them and that stand to benefit most from increased capital flows. Of course, the lower investment amount for a TEA also compensates investors themselves for the increased risk they take on when doing business in less economically viable areas.
In this article, we’ll clarify everything you need to know about targeted employment areas so that you can decide whether investing in one is your cup of TEA.
A targeted employment area is a part of the country that is either rural or experiencing high unemployment at the time of EB-5 investment.
For EB-5 purposes, a rural area is any area located outside of a metropolitan statistical area (MSA). A metropolitan statistical area is a section of the country, as defined by the Office of Management and Budget (OMB), that has a large, concentrated population center. In a nutshell, they generally include cities and towns and their surrounding areas. The map below, from the U.S. Census Bureau, shows all of the country’s metropolitan statistical areas (in dark green), along with all of the country’s micropolitan areas (in light green). Click here for a larger version.
As you can see, MSAs include many of the country’s investment hotspots, such as New York City, Los Angeles, much of Florida, and the Pacific Northwest. So, if you want to invest in a business in a rural area, you might have to venture outside of the popular investment areas and into Middle America, the country’s “heartland.” (However, even if a business is located within an MSA, it may still qualify as a TEA investment if it has a high unemployment rate, as we will discuss in the next section.)
In addition to being outside of a metropolitan statistical area, a rural area must also be located outside of the outer boundaries of cities or towns with a population of 20,000 people or more.
High Unemployment Area
A TEA can also be a part of the country experiencing unemployment of at least 150 percent of the national average at the time of EB-5 investment. The national average unemployment rate is determined by the Bureau of Labor Statistics (BLS) and was 4.1 percent as of April 2017. Therefore, the minimum unemployment rate required to define an area as a TEA in April 2017 was 6.2 percent.
And so, even if an area is not rural, it can still be classified as a TEA if it has a high unemployment rate. For example, a sliver of land in downtown Manhattan (Census Tract 31) between Broadway and Canal Street had an unemployment rate of 7.7% in 2016, putting it more than 150% above the national average and thereby making it eligible for TEA classification, even though Manhattan is in an MSA.
Taking Care of Business
Don’t forget that the EB-5 is all about creating jobs, so U.S. Citizenship and Immigration Services (USCIS) will have to make sure that any business you invest in will actually generate jobs within the TEA. It’s not enough for a business to be headquartered in a TEA if it is not actually doing business there. In order for a business to qualify for the minimum EB-5 investment of $500,000, it must be “principally doing business” in the TEA, which means that it is regularly, systematically, and continuously providing goods or services that support job creation in an area that meets the requirements listed above. Even if the commercial enterprise provides goods or services in more than one location, it will be considered to be “principally doing business” in the location that is most significantly related to the job creation. According to Matter of Izummi, a decision issued by the USCIS Administrative Appeals Office (AAO), factors that may be considered in determining whether the enterprise is considered as “principally doing business” in the TEA include the location of any jobs directly created by the enterprise; the location of any expenditures of capital related to the creation of jobs; where the new commercial enterprise conducts its day-to-day operations; and where new commercial enterprise maintains assets that are utilized in the creation of jobs.
Individual states are able to designate their own TEAs, provided that they adhere to USCIS requirements for rural or high unemployment areas. USCIS defers to state determinations of the appropriate boundaries of a geographical or political subdivision that constitutes a TEA, basically only ensuring fulfillment of the statutory requirement that any state-defined area in fact has an unemployment rate at least 150 percent of the national average rate.
To assist foreign investors, some states, such as Florida and Washington, provide lists of TEAs in their states on their official websites. If you do not find a list of TEAs for the state in which you want to invest your requisite capital, you can refer to the Metropolitan Statistical Area page on the U.S. Census Bureau’s website to determine whether the area would be considered rural. Data regarding an area’s unemployment rates can be found on the BLS website.
For more detailed information about the EB-5 visa, refer to the following links: