Thursday, January 22, 2009

Retire In America - EB-5 Investment Green Card

There are numerous reasons why investors want to live in America. Some foreign nationals already have a lot of family members in the U.S. and others wish to escape threats of kidnapping or terrorism in their own country. Others are motivated by taxation issues or simply desire greater personal liberty by having more options to accommodate their personal life. Many individuals wish to pursue an education, make a career change, or retire in safer and more stable surroundings.

One of the ways to remain in America legally is to obtain "Lawful Permanent Residence," commonly referred to as "EB-5 Investment Green Card" status. The EB-5 Investment Green Card can be obtained by investing $500,000 in a Regional Center Project to financially revive a designated geographic area of the United States. The investment must benefit the U.S. economy and create 10 new full time positions for authorized U.S. workers. If a foreign investor has a spouse and children under 21, they are automatically included in the EB-5 application for green cards. Five thousand green cards are available each year for foreign investors who wish to live in America as Lawful Permanent Residents by investing $500,000.

What is a Regional Center Project?

There are 17 pre-approved Regional Center Projects located throughout America. For example, one project is located in California and invests in commercial fruit trees, nut trees and grape vines for domestic and export markets. Another project is located in Vermont, and invests in ski hotels, spas, stores, restaurants, and a ski rental center. Yet another project is located in New Orleans and is devoted to investing in hotels, casinos and commercial fishing.

Each Regional Center Project is eager to provide foreign investors with specific prospectus information about how to become a Limited Partner and about the expected distributions and risks. In exchange for $500,000, the Regional Center Project must provide each investor verification of employment of the 10+ employees hired due to the investor's investment, as well as documentary proof of the investor's deposit of funds. The foreign investor may request information from all 17 Regional Center Projects before making an informed investment decision about which one to select.

Can You Name a Specific Regional Center Project?

One Regional Center Project that was started in 1996 is the Seattle Regional Center. It comprises the industrial district immediately south of downtown Seattle, Washington, commonly known as SODO. In 1996, the U.S. Government approved their proposal to use immigrant investor capital to purchase, renovate and manage aging industrial properties and new developments in the SODO area of Seattle, Washington.

Through the Seattle Regional Center, each foreign investor purchases a partnership interest in a specific investment partnership that owns, renovates and manages property. Indirect employment results from jobs created by elevating a previously underutilized property to a more productive use. This particular project involves purchasing low-yielding warehouse properties with foreign investor funds, and converting them into higher-value mixed use properties, such as office space, retail shops and storage space. Investors participate as Limited Partners of a Limited Partnership, and can earn a share of monthly income (if any) from tenant rentals, as well as a share of capital gains (if any) when sold.

How Involved is the Investor?

Investing in a Regional Center Project only allows for policy involvement as an investor in a Limited Partnership or a Limited Liability Corporation that is owned by a group of investors who have pooled their capital. The day-to-day operations are managed by commercial enterprises or other entities, not the foreign investors.

How Much Money Is Required to Invest?

In pursuing this type of EB-5 Investment Green Card, a foreign investor will be investing U.S. $500,000 in a Regional Center Project that may have a low return ranging from 0 to 6 percent, depending on the profitability of the business. Sometimes a governmental agency is certified as a Regional Center Project, and sometimes it is a private entity. The foreign investor may request periodic financial information about the Regional Center Project's activities, but would not have the opportunity to closely control the business operations. The foreign investor will put forth a substantial amount of money but assume a possible enormous risk of loss, so it is imperative to select a Regional Center Project with a good track record carefully.

How Do I Transfer the Funds to the United States?

Each Regional Center Project has different methods and requirements for the receipt of funds; it is best to wait until instructions are issued before transferring funds to the United States. Reputable foreign exchange companies are utilized for currency transfers.

Do I Pay the $500,000 Before the Government Approves the EB-5 Investment Green Card?

Yes. The government requires that the entire amount of money already be invested and "at risk" before the EB-5 Investment Green Card application is filed. In addition, many Regional Center Projects charge an additional $25,000 to set up the Limited Partnership, and immigration attorneys charge a legal fee as well. The $500,000 is usually placed in a reputable American escrow company while the green card application is pending.

American regulations define capital as cash and cash equivalents, equipment, inventory, and other intangible property. Retained earning cannot count as capital. Indebtedness secured by assets owned by the investor may be considered capital, provided the investor is personally and primarily liable for the debts. A signed promissory note that is security by the investor's personal assets constitutes a contribution of capital by the investor. All capital is valued at fair market value in U.S. dollars at the time it is given.

What Sources of Money Are Allowed?

The foreign investor cannot loan money to the investment - investors have to invest a large sum of hard cash for the sake of EB-5 Investment Green Card eligibility, even where other financing and capital investment arrangements may make better sense. A contribution of money in exchange for promissory note, a bond, a convertible debt, obligation or any other debt arrangement is not considered an investment.

Assuming that the requisite capital can be furnished, the EB-5 investor must provide detailed records showing that the source of investment funds is lawful (such as all personal and business tax returns filed worldwide for the last five years). Investors are allowed to accept a gift from a family member, but may at times be required to provide proof of gift-tax reporting, and needs to demonstrate where the gift donor obtained the money in the first place. If the investment funds were earned by the investor's spouse, the investor must prove where the spouse's earnings came from. Sometimes fund transfers from a joint account of a husband and wife might not be considered a valid source of money if the foreign national's home country doesn't recognize the concept of community property.

How Does the Investment Have to Benefit the American Economy?

The investor must show that the Regional Center Project he is investing in provides goods or services to American markets. For example, if a Regional Center Project served customers outside of the U.S. with no return benefit to the U.S. economy, it would not be seen as benefitting the American economy.

What About the 10 New Jobs?

With regard to the job creation aspect, the foreign investor must show that the enterprise will generate no less than 10 full time (35 hour per week) job positions within two years. It is important for the investor to have the opportunity to review the economic analysis report of any Regional Center Project he is considering to understand how capable they are in creating 10 new actual new jobs. New jobs held by an independent contractor, or the investor and his family, are not counted.

How Long Does it Take? Why is There a Two Step Process?

Investors have to go through two steps; (1) first obtain a conditional green card; and (2) obtain a second green card without conditions. Working closely with the Regional Center Project staff, the Immigration Attorney represents and guides the investor in each of the two steps.

In order to complete Step One, the EB-5 package is prepared by the Immigration Attorney and submitted to the U.S. government. The government's processing time to review the EB-5 package may take six months or more. Assuming that an approval of the EB-5 package is obtained, a request for the investor to be interviewed is made to the U.S. Embassy in their home country, which may take about nine more months. If the investor is already in the U.S., they do not have to back to their home country to the U.S. Embassy for their interview; it will be held inside the United States. Sometimes the case is delayed if there is a problem with the FBI (Federal Bureau of Investigation) background security check. So, overall, the processing time for getting through Step One generally ranges between 15 and 24 months.

Then, to have the conditions on the first EB-5 Green Card removed and become a "true" permanent resident, the investor must complete Step Two and file another package with the U.S. government at the end of the two years. Working closely with the Regional Center Project staff, the Immigration Attorney again prepares and submits the second set of documents. Processing time for Step Two generally takes one year because the government almost always asks for more information than is submitted (no matter how much was submitted!).

When the investor submits the second package to the government, a receipt is supposed to be issued to automatically extend the investor's (and his family's) status and allow him to exit and re-enter America without problems. Oftentimes the time frame from start to finish is five years. Throughout that period the EB-5 investor is taxed by the U.S. government on their worldwide income (not just the income from the American investment).

When Do I Pay the Attorney's Fees and the Investment Fees?

Generally Immigration Attorneys require that their retainer be paid at the beginning of each step, and if the foreign national changes their mind in the middle of a step a partial refund may be appropriate. In addition to the previously mentioned $25,000 processing fee charged by many Regional Center Projects, most require an initial $50,000 deposit, with the balance of the $500,000 due within 90 days.

Is the EB-5 Investment Green Card Guaranteed?

The Immigration Attorney nor the Regional Center Project has the authority to make guarantees regarding the issuance of EB-5 Investment Green Cards. The foreign investor must analyze the track record of each Regional Center Project carefully to ascertain the certainty of success, both in getting the green cards and making a profit. It is important that investors enter into an escrow refund clause to get a refund if the green card is not approved. After both steps of the green card processing are finished, the Regional Center Project should have an option to pay the principal back to investors who no longer wish to remain a Limited Partner. Investment periods vary, but cannot end before receipt of the permanent green card by the investor.

When Does the EB-5 Investment Green Card Law Expire?

The Regional Center Project was established by Congress as a pilot program to determine the level of interest by foreign investors in investing $500,000 in exchange for an EB-5 Investment Green Card. So far, not all of the 5,000 EB-5 Investment Green Cards set aside each year for foreign investors have been used. For example, during the fiscal year 2008, only 1,017 applications were filed. The EB-5 Investment Green Card program expires on March 6, 2009, but a Congressional bill called "HR 5569" is currently pending to extend the program for 5 years until 2012.

What Should I Do First?

A foreign national who is interested in investing in exchange for an EB-5 Investment Green Card, should retain the services of a reputable Immigration Attorney in America, preferably one who is a member of the American Immigration Lawyers Association (AILA). The Immigration Attorney's job is to assist the investor in obtaining information from the Regional Center Projects so that he can make a decision about which one is the best. After the foreign investor selects a Regional Center Project to invest in, the Immigration Attorney will guide the foreign investor through the investment and EB-5 Investment Green Card application process.

The author is Attorney Danielle Homant Nelisse, owner of the Law Offices of Danielle Homant Nelisse. She has been practicing U.S. immigration law since 1999. She specializes in U.S. citizenship, lawful permanent residence through marriage, and work visas. She has a staff of translators who speak Arabic, German, French, Spanish, Dutch, Russian, Chinese, Japanese and other languages.

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