EB-5 Immigrant Investor Program – A Changing Landscape

January 01, 2012

By Bernard P. Wolfsdorf, Naveen R. Bhora, Richard Yemm

The EB-5 Immigrant Investor Program is one of the most controversial and challenging provisions in the Immigration Act of 1990, Pub. L. No. 101-649, 104 Stat. 4978 (IMMACT90)1. The Program’s instability, the changing economic environment, and friendlier immigrant investor programs offered by other nations have all led to its underutilization. Of the 130,000 visas allocated between 1992 and 2004, only 6,024 visas were issued to immigrant investors and their dependent family members. Of this group, only 643 investors were successful in removing the conditional requirement and receiving full permanent resident status.2 However, due to some positive developments in recent years, we now have seen a surge in EB-5 investor petitions and USCIS approval rates. Recently released data shows that the number of petitions has increased from 332 in 2005 to 4,156 in 2012 and, during that same period, approval rates have risen from 53% to 79%.3 This article aims to review the program’s history and recent developments and will show that it now provides an excellent path to permanent residence for foreign investors and entrepreneurs and is sure to boost the U.S. economy.

The Statutory Framework

IMMACT90 was enacted during a different era—one that reflected a relatively prosperous, proimmigrant period in U.S. immigration history. Congress recognized that “it is unlikely that enough U.S. workers will be trained quickly enough to meet legitimate employment needs, and … immigration can and should be incorporated into an overall strategy that promotes the creation of the type of workforce needed in an increasingly global economy.”4

IMMACT90 allocated 140,000 visas annually to employment-based immigrants, almost tripling the number allocated in prior years.5 The fifth employment-based preference (EB-5), created for immigrant investors, is the category for the new Employment Creation Program, aimed at “creat[ing] new employment for U.S. workers and to infuse new capital into the country.”6 To achieve this, Congress allocated approximately 10,000 visas each year for immigrant investors who invest at least $1 million in a business and generate a minimum of 10 new jobs for U.S. workers.7

Of the 10,000 visas available annually for immigrant investors, 3,000 visas are reserved for investment in targeted employment areas. Another 3,000 are set aside for investment through the Regional Center Program.8 This program allows investors to meet the criteria of the 10 minimum job creation by allowing for indirect employment by individuals who invest their capital in a “designated” regional center that promotes economic growth or creates jobs. A regional center is “any economic unit, public or private, which is involved with the promotion of economic growth, including increased export sales, improved regional productivity, job creation, and increased domestic capital investment.”9

Furthermore, if the regional center or individual commercial enterprise is in a targeted employment area, the capital investment is reduced to $500,000.10 A targeted employment area is an area that, at the time of the investment, is a rural area or an area that has experienced unemployment of at least 150 percent of the national average.11

The Regional Center Pilot Program was initially set to expire in 2000, but the Visa Waiver Permanent Program Act of 200012, extended the Pilot Program for three years until September 30, 2003. On the eve of its expiration, Senator Chuck Grassley (R-Ia.) introduced the Basic Pilot Program Extension and Expansion Act of 2003 to extend the Pilot Program for another five years until September 30, 200813. Thereafter, Senator Patrick Leahy (D-VT) had tried to push for another five-year extension of the Pilot Program and even introduced legislation to make the program permanent; however, on September 30, 2008, just in time to avoid a gap, the Regional Center Pilot Program was extended until March 6, 200914 and then again extended until September 30, 2009.15 On October 1, 2009, President Obama signed a stopgap bill to extend the program until October 31, 2009. Thereafter, on October 28, 2009, he signed into law the FY10 Department of Homeland Security Appropriations bill, which extended the EB-5 Program through September 30, 2012.16 Most recently, on September 28, 2012, the President passed a three-year renewal of the EB-5 program. 17

The extensions of the program are an important sign of strong bipartisan support and Congressional commitment to the Immigrant Investor Program. However, unless Congress makes the Regional Center Program permanent, the program will continue to be marred with uncertainty and deter potential investors that want to commit to the program long term.

Requirements and Restrictions

Immigrant investor eligibility requires proof that: (1) petitioner has invested or is actively in the process of investing the required amount of capital in a new commercial enterprise; (2) the investment is at risk; and (3) petitioner is or will be engaged in the management of the new commercial enterprise, either through day-to-day managerial control or policy formulation.18 An investor qualifies by initially filing Form I-526, Immigrant Petition by Alien Entrepreneur.19 After the petition is approved, the investor must apply for adjustment of status in the United States or at a U.S. consulate/embassy overseas.20 Upon approval, the investor is then granted a two-year conditional green card.

During the 90-day period prior to expiration of the conditional period, Form I-829, Petition by Entrepreneur to Remove Conditions, must be filed.21 In this petition, the investor must demonstrate the stated investment was made or still sustained over the two-year conditional period, and the requisite full-time jobs were created or will be created within a reasonable period of time. Only upon approval of the I-829 petition is the conditional nature of the green card lifted and full permanent residence granted.

Restrictive Interpretation of Regulatory Goals

During the first 15 years, the restrictive interpretation of the regulations drastically limited the types of investment permitted under the program. For example, a purely passive investment of more than $1 million that created at least 10 jobs would be denied for failure to meet the managerial requirement.22 Likewise, if an investor sought to expand an already existing business that did not result in a substantial change, i.e., an increase of at least 40 percent in either the net worth or number of employees, the petition would be denied for failure to meet the establishment requirement.23 A strict reading of the regulation would mean that if an investor wished to risk $1 million in an existing enterprise that already has 100 employees, he or she had to create at least 40 new jobs with his or her investment, despite the statutory requirement of creating only 10 new jobs, as clearly designated by Congress. These restrictions enormously altered the statutory goals of the EB-5 program and made investment in existing businesses difficult. While a passive investment or an expansion of a business may have met the goals of employment creation and infusion of capital, it would not meet the government’s restrictive interpretations and would thereby lose its eligibility under the EB-5 regulations.

Restrictive Standard of Adjudication

Not only did the regulations alter the statutory goals, but legacy INS’s restrictive standards of adjudication further stifled the EB-5 program. In 1997, the Office of General Counsel issued an opinion that drastically altered the existing regulations and devastated an already faltering program.24 The General Counsel’s legal opinion prohibited certain types of business arrangements, such as: (1) the use of a down payment of cash with the remainder of the alien’s contribution in the form of a promissory note; (2) a multi-year installment plan on a promissory note with a substantial “balloon” payment after the removal of the conditional status of the alien’s permanent residence; (3) an option given to the alien to sell his or her investment for a fixed price that may be less than, equal to, or greater than the alien’s cash contribution; (4) an option given to the enterprise or limited partnership to buy the investment at a fixed price; (5) a provision that allows or requires the commercial enterprise to place sufficient cash into a bank account to guarantee that funds will be available to repay the alien if the alien exercises an option to sell; (6) the withholding of a portion of the alien’s capital contribution for attorneys’ and finders’ fees and other costs; and (7) a guaranteed return on the cash portion of the alien’s investment.25

Many of the initial EB-5 applications involved business plans where the creation of a limited partnership was used to pool multiple investors’ money to invest in either a new or a troubled business in the United States. Unfortunately, some of these limited partnership agreements were designed to reduce the investor’s risk, so that only a small amount of the investment capital actually reached the business enterprise, and much of the investment included promissory notes of collateral where it was clear the actual, designated cash amount was not at risk.26 In 1998, the Administrative Appeals Office (AAO) issued a series of opinions (Matter of Soffici, Matter of Izumii, Matter of Hsiung, and Matter of Ho), collectively known as the “1998 precedent decisions” that not only echoed the 1997 legacy INS mandate, but effectively signaled the end of the road for the EB-5 program.27

These decisions applied a restrictive approach and, even worse, retroactively applied the 1998 interpretations to investors who already had received I-526 approvals but were still subject to the two-year conditional residency requirement. For example, under the initial regulation, a promissory note could be valued at face value, but under the new standard, the promissory note had to be valued at fair market value. Under the old standard, the term of the promissory note was limitless, but under the new standard, the note had to be paid after two years. Furthermore, bank accounts could no longer be used as security.28

As a result, hundreds of I-829 petitions filed by immigrant investors were denied based on the retroactive criteria. Most of the I-526 investor petitions filed after 1998 never had a chance, as investors relied on plausible interpretations of published regulations and invested in what appeared to be lawful investment plans, but ultimately became entangled in the government’s restrictive interpretation of the law.

Judicial Involvement

In May 2001, a California federal district court in Chang v. United States chastised the government and ruled that INS could not apply the new standards of adjudication retroactively in connection with approved I-526 petitions.29 The court held that:

INS could not “change the rules of the game” by automatically applying its new more restrictive interpretations retroactively to investors who had already received conditional green cards and who are now trying to have those conditions removed. Instead, the agency must allow some investors an opportunity to show how such a retroactive application would hurt them.

Despite this apparent victory for immigrant investors, this decision actually had the effect of curtailing the program. The court ordered that the merits of the retroactivity claim be remanded to the administrative courts for review. Unfortunately, INS refused to hear the retroactivity claims. Even though the parties argued the issue of retroactivity before the district court, the subject was left unresolved.

Two years later, on April 29, 2003, the Ninth Circuit Court of Appeals issued its review of Chang v. United States30. The court held that no further exhaustion of the administrative process was necessary and that it had jurisdiction to review the claims. More significantly, the court performed the retroactivity analysis, noting that the district court’s actions were irrational because it “wasted judicial resources by remanding to the INS for it to do what it firmly states it may not and will not do . . . The district court was itself fully capable of doing what it asked the INS to do against its will. The remand was thus an abuse of discretion.”31 The Ninth Circuit determined that retroactive application of the 1998 AAO precedent decisions was impermissible. It further chastised the government, stating:

INS’s approving and receiving the benefits of [immigrant] investments, only to renege on the promise of LPR status once those benefits were garnered, must seem very unfair. It is hard to imagine how the INS has a compelling statutory interest in such an outcome. Congress has not repealed the EB-5 program; it still intends for it to continue. The reputation and integrity of the EB-5 program is ill-served by the proposition that INS approval of an I-526 petition as satisfying EB-5’s requirements cannot be relied upon.32

Consequently, for those investors caught in the midst of the rule changes, this landmark decision provided the first indication that the 10-year pattern of negative, restrictive adjudication might be drawing to a close based on the appellate court’s conclusion that retroactive application of the 1998 precedent decisions was impermissible.

Congressional Involvement

While the federal courts breathed new life into an otherwise moribund program, Congress also tried to revive the program with the 21st Century Department of Justice Appropriations Authorization Act (“DOJ Amendments”), signed into law on November 2, 2002.33 This law was specifically designed to reform the program and provide some regulatory guidance. The DOJ Amendments considerably eased the regulations by providing relief to investors left in limbo by the restrictive 1998 precedent decisions, outlining special procedures for investors with I-526 petition approvals between January 1, 1995 and August 31, 1998 and who had filed an adjustment of status application or had applied for an immigrant visa overseas.34

Some investor applicants with denied I-829 petitions were given an opportunity to file a motion to reopen, and others with approved I-526 petitions awaiting removal of conditional resident status in the United States were given a second chance at compliance.35 Even investor applicants outside of the United States with approved I-526 petitions were given an opportunity to return to the United States, if necessary, to obtain adjustment.36

The DOJ Amendments eliminated the “establishment” requirement—that EB-5 investors have “established” a commercial enterprise.37 Instead, investors only needed to show they have “invested” in a commercial enterprise. Thus, immigrant investors who invest in an existing enterprise no longer had to prove they expanded the net worth or the number of employees by 40 percent.38 This significantly altered the original regulations and eliminated one of the biggest obstacles created by the 1998 precedent decisions. For instance, in Matter of Izumii, the AAO determined that the limited partners who had joined the general partnership over varying periods had used these “pooling agreements” to circumvent the establishment of a new business enterprise requirement. Because the DOJ Amendments eliminated the “establishment” requirement, the finding stated in Matter of Izumii is no longer applicable.

For advocates of the investor visa program, Congress’s decision to eliminate the establishment requirement was seen as a significant positive development. However, soon after those judicial and statutory victories were celebrated, USCIS once again dealt the program another setback. On June 10, 2003, USCIS issued an interim guidance memo confirming that although an “alien entrepreneur is no longer required to establish a commercial enterprise,”39 the new law does not remove the requirement that the enterprise be “new,” as defined in 8 CFR §204.6(e). From this restrictive interpretation, it appeared that the “establishment of a new commercial enterprise” requirement still pertained to those enterprises established prior to November 29, 1990.

Investors should continue to exercise caution in applying for immigrant investor visas as restrictive adjudications continue. For this reason, most EB-5 investors choose to participate in recently approved program designated regional centers, as they allow for creation of indirect employment, and the alien investor is not required to engage in the day-to-day management of the new commercial enterprise.40 Also, USCIS appears to be approving cases for designated regional centers at a higher rate than traditional cases. However, the investor is cautioned that the strict reading of the source of the funds issue continues to be rigorously enforced for all cases. Also with so many new regional centers being established, there are now concerns as to whether some will be economically viable, and if they will be able to meet the requirements to remove the conditional nature of the residency that is granted for an initial two-year period.

The Effectiveness of the Program

The Basic Pilot Program Extension and Expansion Act of 2003 mandated the Government
Accountability Office (GAO) to study the efficacy of the EB-5 program.41 The GAO found that
despite its turbulent history and negative perception by the government and potential investors, the
program has been beneficial to the economy.42 The 653 immigrant investors who have managed to
attain permanent residency have collectively invested approximately $1 billion. This is a small
estimate of the total investment in the U.S. economy because it only accounts for just over 10
percent of all EB-5 participants who have invested over a 13-year period. The GAO found that
investments were made in various industries, including real estate, hotels/motels, manufacturing,
import/export, agriculture, and technology, and across 17 states. However, California was the
primary recipient, having drawn 41 percent of the investors.
The GAO concluded that the EB-5 program has a worthy mandate that can be beneficial to the
U.S. economy and recommended that DHS issue the long-awaited regulations, thereby providing
relief to the hundreds of investors whose status and cases have been in limbo for years.
Furthermore, the GAO determined that the regulations will help provide guidance for adjudicators
and potential investors.

Restrictive Evidentiary Requirements

Consistent with the restrictive standards of adjudication and ever wary of fraud, the USCIS
requests extensive documentation. To cite a few examples, both I-526 and I-829 petitions require
extensive proof that an investment has been made or is in the process of being made and must
include evidence that the petitioner’s personal capital was placed at risk.43
USCIS will not
recognize investments made directly through a petitioner’s incorporated or limited liability
business because the corporate assets are not considered the petitioner’s personal assets.44
Furthermore, the investment arrangement cannot be structured to shift the financial risk from the
investor to the commercial enterprise.
USCIS also has been particularly concerned about whether the capital used for the investment was
obtained through lawful means. The regulations instruct the petitioner to document the source of
funds by providing foreign business registration, five years of tax return filings (within and
outside the United States), and evidence identifying any other source of capital (e.g.,
In practice, the petitioner may have to trace the lawful source of funds back by several decades to
the origin—which can be a daunting, if not impossible, task. Business in many countries is
conducted on a trust basis and parties may agree to a contract with a handshake. This is a common
problem particularly with emerging economies that do not have the sophisticated documentary
paper trails by which U.S. businesses are generally required to possess. Investors from certain
countries often simply do not have credible records of income tax documents. Moreover, even
where the investment can be traced to an original source, USCIS continues to use every technical

basis to deny cases, leaving some potential investors discouraged from pursuing the EB-5
category because of the rigorous evidentiary requirements for both the initial I-526 and the
subsequent I-829 petitions.
Another example of unduly strict interpretation affects investors who transfer exactly $500,000 or
$1 million as required but neglect to calculate the cost of the nominal bank wire transfer fee. The
USCIS will routinely reject these investors based on such minor technical grounds.

The Landscape Changes

Several positive developments in the last few years indicate the landscape may be changing, as
USCIS begins to approve EB-5 applications. Investors applying through the Employment Creation
program’s regional centers appear to have met with considerably more success recently. By
investing in commercial enterprises located within a designated regional center and targeted
employment area, the investment amount is reduced to $500,000, and the petitioner does not have
to directly prove job creation. USCIS appears to show preference for these types of cases, and
there have been several reports confirming the higher rate of approval for investments made under
the program. This positive development provides greater certainty that both the I-526 and I-829
petitions will be approved, and the investor will eventually succeed in obtaining permanent
residence status. Unfortunately, most of the previously designated regional centers are now
defunct, and investors are encouraged to undertake extensive due diligence analysis before
applying for EB-5 status.
Another positive development occurred in January 2005, when USCIS established within the
agency the Investor and Regional Center Unit (IRCU) to provide oversight for policy and
regulatory development, field design, case auditing, and training on regional center adjudication.
This was relatively short-lived and was terminated by memorandum in 2009, with jurisdiction
being transferred to the USCIS California Service Center,
46 however a recent message from
USCIS Director Mayorkas announced that they will soon be creating a new and dedicated Office
of Immigrant Investor Programs, to be led by a new program chief with “significant experience in
the business world.”47
USCIS maintains a public list of all approved regional centers and prospective investors may
currently choose from 226 approved regional centers operating in 42 states.48

Job Creation Methodology

In a further sign that that the government is warming up to the EB-5 investor program, USCIS
recently issued two important memos clarifying key program questions and stakeholder concerns.
Michael Aytes, Acting Deputy Director of the USCIS issued the first memo, titled “Response to
Recommendation 40, Employment Creation Immigrant Visa (EB-5) Program Recommendations,”
on June 12, 2009.49
The memo provides responses to eight issues highlighted by Acting USCIS
Ombudsman Richard Flowers concerning the improvements to the immigrant-investor program.
Among others, Mr. Flowers had urged USCIS to issue procedures “specifically direct[ing] EB-5
adjudicators to not reconsider or re-adjudicate the indirect job creation methodology in Regional
Center cases, absent clear error or evidence of fraud.”50
In response, the Aytes memo states:51

USCIS concurs with the intent of this recommendation to the extent that EB-5 adjudicators
should not re-adjudicate the indirect job creation methodology for Regional Center cases
absent clear error or evidence of fraud. USCIS will, however, continue to review the I-829
petitions to ensure that all measurable variables and assumptions that underlie the indirect
job creation methodology have, in fact, been met. For example, an investor may make a
proposal to create a shopping center that would be leased to various businesses. At the I-
526 stage, the investor may claim that this proposal would result in the hiring of a certain
number of employees by the tenant-businesses and that a certain number of indirect jobs
would be created as well. USCIS must ensure that the tenant jobs have substantially been
filled to support the indirect job count. This is not re-adjudicating the job creation
methodology, merely verification of an assertion previously made during the I-526 stage.
In the alternative, if the job creation was based on total expenditure of capital to create the
shopping center, USCIS must make sure the full amount has, in fact, been invested in the
job creating enterprise to support the job count.

As is apparent, USCIS conceded that the job creation methodology “is an issue”52 and should not
be re-adjudicated in Regional Center EB-5 cases. The USCIS also stated that the government’s
goal is not to re-adjudicate issues “previously decided in instances where circumstances remain
Following comments from EB-5 stakeholders, in January 2012 USCIS released a
revised draft guidance memorandum, which confirms that “where USCIS has evaluated and
approved certain aspects of an EB-5 investment, that favorable determination should generally be
given deference at a subsequent stage in the EB-5 process.” 54
In the recent May 8, 2012
operational guidance regarding tenant-occupancy methodology, USCIS further confirmed this
policy but again stated that if “the facts underlying application of the economic methodology have
materially changed, then we will conduct a fresh review of the new facts to determine whether the

petitioner or applicant has complied with the requirements of the EB-5 program, including the job
creation requirement.” 55
Evidently the agency retains the right to review this same methodology at the stage of the I-829
petition to remove conditions. Presently, California Service Center (CSC) adjudicators continue
to demand proof of indirect job creation and issue challenges regarding previously cleared
methodologies to both I-526 and I-829 petitioners. Furthermore, CSC continues to question the
factors and models that formed the basis for gaining approval of Regional Centers every step of
the process. Thus, it remains to be seen what impact such concessions will have on future EB-5
cases and petition approval rates.

Timing of Job Creation

On June 17, 2009, USCIS published a memorandum from Donald Neufeld, Acting Associate
Director, USCIS Domestics Operations, titled “EB-5 Entrepreneurs – Job Creation and Full-Time
Under USCIS regulations, I-526 petitions must be accompanied by “a
comprehensive business plan showing that, due to the nature and projected size of the new
commercial enterprise, the need for not fewer than ten (10) qualifying employees will result,
including approximate dates, within the next two years, and when such employees will be
The Neufeld memo updates the Adjudicators Field Manual (AFM), clarifying that “each
petitioner must submit a business plan”58 and that the requirement that the requisite jobs will be
created in two years “applies to all Form I-526 petitions, including those filed under the Regional
Center Program, [which] rely on indirect job creation to satisfy the statutory employment creation

The memo acknowledges that USCIS regulations do not specify when the two-year period begins
for purposes of adjudicating I-526 petitions and that the phrase “next two years” referenced in 8
C.F.R. Sec. 204.6(j)(4)(i)(B) “relates to the two-year period of conditional residence.”60
In other
words, at the end of the two-year period of conditional residence, the alien-investor must
demonstrate with his/her I-829 petition that he or she has either “created or can be expected to
create within a reasonable period of time” the necessary jobs, in order to have the conditions
removed and full residence granted.61
Thus, USCIS decided to fix the start of the two-year period
with respect to the petitioner’s job creation obligation since “the officer adjudicating Form I-526
cannot be certain when the period of conditional residence will in fact commence,” 62 among
others. In particular,

USCIS has determined that the average processing times for EB-5 petitioners filing for
immigrant visas via consular processing and EB-5 petitioners filing for adjustment of
status [to obtain conditional resident status] is approximately six months. Accordingly, in
order to best approximate the two-year period of conditional residence the two-year period
described in 8 C.F.R. §204.6(j)(4)(i)(B) will be deemed to commence six months after the
adjudication of Form I-526. USCIS officers should ensure that the business plan filed
along with Form I-526 reasonably demonstrates that the requisite number of jobs will be
created by the alien’s investment by the end of the two-year period that commences six
months after the adjudication of the petition.
Emphasis added.
In essence, USCIS has extended the timing of job creation from two years to two years and six
months, which, in turn, means that an I-526 petitioner must produce a business plan detailing how
and when the required number of qualifying (full-time64) jobs will be created within 2.5 years of I-
526 approval. USCIS assumes, however that an investor will require, “on average,” 6 months to
receive conditional permanent residence either via consular processing or adjustment of status. If
either one of these processes takes more than six months (which is not unusual), will the alien still
have to meet the job creation requirement “by the end of the two-year period that commences six
months after the adjudication of the petition”? Thus, fixing the start of the job creation period,
while adding some certainly to USCIS adjudications, may end up creating a more uncertainly for
EB-5 petitioners. It might additionally have the effect of ruling out EB-5 projects that take longer
than 2.5 years to create requisite jobs.65
Although the USCIS has the discretion to approve major
projects that are delayed because of circumstances beyond the applicant’s control, such as delays
in issuing building permits, or where there are less than 10 jobs because an employer unknowingly
hires an undocumented worker, but regrettably, we have not seen much favorable exercise of
discretion for substantial good faith compliance.

Initial Review of Form I-829 Petitions Where Jobs Have Not Been Created

The Neufeld memo states that I-829 petitions are “intended to examine whether the alien
entrepreneur has satisfied the conditions of his or her admission to the United States.”66
must determine “whether the alien has invested the requisite capital and created the requisite jobs
through that investment.”67
Because USCIS regulations provide that I-829 petitions must be
accompanied by evidence that “the alien created or can be expected to create within a reasonable
time ten full-time jobs for qualifying employees,”68 the memo advises that,

In making the “reasonable time” determination, officers should consider the evidence
submitted along with the petition that demonstrates when the jobs are expected to be
created, the reasons that the jobs were not created as predicted in Form I-526, the nature of
the industry or industries in which the jobs are to be created, and any other evidence
submitted by the petitioner. If after considering the evidence, the officer determines that
the jobs are more likely to be created within a reasonable time, Form I-829 should be
approved consistent with 8 C.F.R. §2166(d)(1) if the petitioner is otherwise eligible to
have his or her conditions removed. If, however, the officer determines that the jobs will
not be created within a reasonable period of time, Form I-829 should be denied consistent
with 8 C.F.R. §216.6(d)(2).69
This portion of the Neufeld memo provides needed flexibility in I-829 adjudications for
investments where jobs have not yet been created and directs adjudicating officers to consider
various factors in determining whether the required job creation may be shown “within a
reasonable period of time.”

TEA Designations

Another area of concern is that the USCIS continues its position of requiring different investment
levels ($500,000 v. $1,000,000) in multi-year projects located within designated “targeted
employment areas” (TEA) where the area’s TEA designation is withdrawn but the project is
ongoing and requires further investments. USCIS’ position is that once the TEA designation is
lost, the amount of investment in this same project is $1,000,000. This timing issue was addressed
in the December 11, 2009 memorandum,70 which stated that “a TEA is either a rural area or an area
experiencing a high unemployment rate at the time of the capital investment or the time of filing of the
Form I-526 petition, whichever occurs first.” This memorandum also confirmed that “each alien must
establish that his or her capital investment qualifies for the reduced investment threshold, and cannot
rely on previous TEA determinations made based on facts that have subsequently changed.”
Although extremely unfair to EB-5 investors who come to the project perhaps a year later from
their predecessors, this implies USCIS’ respect for TEA designations by state governments. In
fact, adjudicators often question such designations, creating more uncertainty for the program and
inconsistency in both regional center and individual petition adjudications. USCIS has finally
recognized this concern and appears willing to issue a memo “instructing adjudicators not to
question TEA designations.”71
The agency stated that it was not “in the business of questioning
the governors or the state designation in this regard.”72
In the recent EB-5 immigrant investor program quarterly stakeholder engagement, USCIS
confirmed that a qualifying census tract with unemployment at 150% of the national rate can be
certified as a TEA but designation will depend on the quality and timeliness of the data used to

support the claim.73 Acceptable data sources include Local Area Unemployment Statistics
produced by a government agency, U.S. Census Bureau data, and data from the American
Community Survey.
A larger issue underlying TEA designations is that robust regional center investments and the
resulting job growth in a targeted employment may lead to the loss of the area’s TEA
Basically, the commercial success of a regional center may be fatal to its very
existence if the area in which it is located has seen improved economic activity and significant
reduction in unemployment rates thanks to EB-5 investments.

EB-5 Program – Still the best choice for investors and entrepreneurs?

Despite the EB-5 Program’s turbulent history, it has many advantages over other employmentbased
immigrant visa classifications. First, it does not require an offer of employment and
approved labor certification application. Second, as a historically underutilized program,
presently prospective investors will have immigrant visas immediately available to them and need
not wait years for a visa number.
75 However with increasing petitions being filed and no
corresponding increase in the available quotas for employment-based immigrant visas, this may
become backlogged in the near future. While USCIS confirmed that the regional center program
can exceed 3,000 visas, it remains up to Congress to increase the 10,000 visa cap for the EB-5
category and avoid potential retrogression in this area.76
Since the EB-5 Program most closely parallels the EB-1C classification for multinational
executives and managers, it is worthwhile to compare the attributes and nuances of the two visa
categories. Practitioners should consider the EB-1C classification first, as it does not require a
two-year conditional residence period. If the investor is qualified and if the investment can be
structured to meet the requirements for EB-1C classification, then the practitioner should prepare
and file the Form I-140 petition based on the EB-1C classification and avoid conditional
If EB-1C classification is not available, then consider the EB-5 classification.78


The investor applying for permanent residence based on the EB-5 classification need not have a
particular background or any experience at all. Regulations for the EB-5 classification are silent
on characteristics of the investor. Successful petitioners have included students, relatively young
adults, retirees, petitioners with limited English language ability and no prior investment,
managerial or entrepreneurial skills or experience, and investors with no management experience
or entrepreneur skills.79
Not only is the EB-5 petitioner excused from presenting evidence of past experience, but the EB-5
classification, in essence, minimizes the significance of what the investor actually will do in the
U.S. enterprise. The EB-5 classification mandates only that the investor will be “engaged” in the
enterprise, which can be as minimal as having a role in policy formulation.80 The investor does not
have to be a manager, executive, or even an employee in the business, and does not have to direct
and control the business. The EB-5 regulation requires some participation in the management of the
enterprise, either day-to-day managerial control or a role in policy formulation.81 Presumably, an
officer or director position would satisfy the requirement to be engaged in the enterprise.


The EB-5 Program stresses the employment consequences of the investment and, thus, is named
the “employment creation” visa category. As noted above, the investment must lead to the
creation of at least 10 jobs.82 The jobs filled by the investor or the investor’s immediate family do
not count toward meeting the requirement.83 The jobs must be full-time (i.e., at least 35 hours
weekly), although part-time positions can be combined in cases of job sharing.84 The I-526
petition must demonstrate either that at the time of filing the petition the investment already has
created the requisite 10 full-time jobs, or the petition may include as evidence of a comprehensive
business plan that provides details on how the jobs will be created during the investor’s
conditional residence period.85
In contrast, the EB-1C regulations, for instance, do not prescribe
the number of employees an enterprise must have to qualify an applicant as “manager,” but
experienced practitioners know well that USCIS examiners look for depth in company
organization charts and are more favorable towards businesses that employ numerous U.S.
For those clients who have sufficient funds to invest, but who do not maintain a multinational
business with offices abroad and in the United States, the EB-5 permanent residence classification
can be an attractive vehicle to achieve U.S. permanent residence.

Be Encouraged But Proceed with Caution

Following a decade of turbulence, there have been positive developments for investors who are
able to demonstrate the lawful source of funds used for investment in designated regional centers
under the program. Moreover, Congress has historically expressed support for the EB-5 program.
Whenever legacy INS interpreted the regulations restrictively, Congress took action and passed
new laws, attempting to soften the blow on immigrant investors. Congress’s continuous extension
of the program reiterates the government’s commitment to the EB-5 program. Regrettably, USCIS
continues to delay the issuance of final enabling regulations that may help those lost in the
labyrinth of restrictive adjudication, leaving previous investors without clear directions as to how
to emerge from the quagmire. Hopefully, USCIS will recognize the clear congressional intent and
draft regulations that will stabilize and energize a program that has the potential to reduce
unemployment and revive the economy.
The Regional Center Program appears to be the best option for many prospective investors. It
now appears that approximately 90 percent of all EB-5 petitions are filed through the Regional
By investing in commercial enterprises located within a designated regional center
located in a targeted employment area, the investment amount is reduced to $500,000 and the
investor does not have to directly prove job creation but can do so through a combination of direct
and indirect jobs. The USCIS therefore appears to continue to show preference for these types of
cases. There have also been several reports of expeditious approvals, and a higher rate of approval
for investments made under the Regional Center Program. This positive development provides
greater certainty for some investors seeking to obtain permanent residence status.

The following checklist may be handy in determining whether an investment will qualify for the
EB-5 classification.
(1) The investment must be made after November 29, 1990, the effective date of the enabling
(2) Only an individual can make the investment. Allowing for the possible exception where the
petitioner owns 100 percent of the investing entity, in most instances, if an entity makes the
investment, the immigration benefits will be limited to the L-1 and E-2 visa categories and
the EB-1C immigrant classification.
(3) The investment must be for a for-profit commercial enterprise formed for the ongoing
conduct of lawful business.
(4) Location of the investment is pivotal for the requisite amount of capital and if the investment
is in a Regional Center, the task of proving job creation is simplified. In contrast, investment
location is irrelevant for seeking EB-1C classification.
(5) The EB-5 classification stipulates a minimum capital investment of $1 million. As indicated
above, if the investment is in a “targeted employment area,” the minimum capital that must
be invested is reduced to $500,000. Capital that is not cash, such as equipment or inventory,
is credited in the amount of its fair market value. Regulations for the EB-5 permanent
residence classification do not require considerations of substantiality, proportionality, or
marginality, as in E-2 visa practice.
(6) The petitioner demonstrate that the invested capital was “obtained through lawful
(7) The investment capital be at risk. The invested funds may be escrowed pending the
approvals of the I-526 petition and immigrant visa, as in E-2 visa practice, to protect the
investor. But adjudicators are likely to require firm and detailed evidence of how the
escrowed funds will be expended by the enterprise immediately after approval of the I-526
petition and visa issuance.88


Copyright © 2012 Bernard P. Wolfsdorf, A Professional Law Corporation/Wolfsdorf Immigration Law Group (all
rights reserved).
Bernard P. Wolfsdorf is a past President of the American Immigration Lawyers Association (AILA) and is Managing Partner of
the top-rated Wolfsdorf Immigration Law Group (www.wolfsdorf.com) a full-service 17 lawyer firm with offices in Los Angeles
and New York providing global immigration visa services. He has been selected as “Global Corporate Immigration Lawyer of the
Year for 2012” by the International Who’s Who of Business Lawyers, for the third successive year. Best Lawyers in America
selected Mr. Wolfsdorf as its “2012 Lawyer of the Year for Los Angeles.” The Martindale-Hubbell ratings have consistently given
Mr. Wolfsdorf an “AV” Preeminent rating, the highest possible in ethics and competence. Chambers USA America’s Leading
Lawyers describes him as “[o]ne of the hardest-working immigration lawyers around” and awarded him a “star” rating, an honor
which only three attorneys in California were accorded. He has been recognized as one of the nation’s top immigration lawyers by
Human Resource Executive magazine. Mr. Wolfsdorf can be reached at Bernard@Wolfsdorf.com
Naveen R. Bhora is the managing attorney of Wolfsdorf Immigration Law Group’s New York Office and has been with the firm
since 1999. She represents a wide range of clients in U.S. immigration matters, from individuals and small and emerging
businesses to major hospitals and universities. Ms. Bhora has developed a particular expertise in extraordinary/exceptional ability
and outstanding researcher/professor matters, and represents physicians, registered nurses and allied healthcare workers, among
others. Ms. Bhora is an active member of the California Bar, the American Immigration Lawyers Association (AILA) and the
International Medical Graduate Taskforce. She is the former Treasurer of the Southern California Chapter of the AILA and served
two terms on AILA’s Vermont Service Center Liaison Committee. Ms. Bhora has written extensively on various advanced
immigration law topics and continues to present to local and national audiences, including physician groups and universities. Ms.
Bhora can be contacted at nbhora@wolfsdorf.com.
Richard Yemm is admitted to practice in both California and New York and graduated with honors from the University of
Exeter School of Law in the United Kingdom. He prepares and assists clients with a wide range of entertainment, investor,
business and marriage/family-based non-immigrant and immigrant visa petitions, in addition to applications for U.S. citizenship
and assisting with corporate I-9 compliance audits. Mr. Yemm’s practice also focuses on analysis of immigration consequences of
U.S. and foreign criminal convictions and immigrant and non-immigrant waivers of inadmissibility, where he has successfully
overturned grounds of inadmissibility at numerous embassies and consulates around the world. In addition, He has successfully
represented clients in removal proceedings in both the Los Angeles and San Diego immigration courts and is currently serving as
the CBP Liaison for the Southern California Chapter of AILA. Mr. Yemm can be contacted at richard@wolfsdorf.com.
1 INA §203(b)(5).
2 “Immigrant Investors: Small Number of Participants Attributed to Pending Regulations and Other Factors,” GAO-05-256 (Apr. 2005), published on AILA InfoNet at Doc. No. 05040475 (posted Apr. 4, 2005) (GAO Report).
3 USCIS Form I-526 Immigrant Petition by Alien Entrepreneur and Form I-829 Petition by Entrepreneur to Remove
Conditions Performance Data (FY2012, 3rd Quarter), posted at:
4 H.R. Rep. No. 723, 101st Cong., 2d Sess., pt. 1, at 41 (1990).
5 L. C. Lee, “The ‘Immigrant Entrepreneur’ Provision of the Immigration Act of 1990: Is a Single Entrepreneur
Category Sufficient?” 12 J.L. & Com. 147, 149 (1992).
6 See S. Rep. No. 55 (1989).
7 INA 203(b)(5)(A); 8 CFR §204.6.
8 8 CFR §204.6(j)(4)(iii).
9 8 CFR §204.6(e).
10 8 CFR §204.6(f)(2).
11 INA §203(b)(5)(B); 8 CFR §204.6(e).
12 Pub. L. No. 106-396, §402(a), 114 Stat. 1637, 1647 (2000).
13 President George W. Bush extended the Pilot Program until September 30, 2008, when he signed Senate bill 1685
into law on December 3, 2003.
14 H.R. 2638 / Public Law 110-329 Consolidated Security, Disaster Assistance, and Continuing Appropriations Act,
2009 (Sept. 30, 2008; 122 Stat. 3574; 143 pages).
15 H.R. 1105 / Public Law No: 111-8 Omnibus Appropriations Act, 2009.
16 H.R. 2892/Public Law No: P.L.111-83.
17 S. 3245 http://www.govtrack.us/congress/bills/112/s3245
18 8 CFR §204.6. However, the establishment requirement was later eliminated through the 21st Century Department
of Justice Appropriations Authorization Act (“DOJ Amendments”), signed into law on November 2, 2002. See supra
note 33.
19 8 CFR §204.6(a).
20 As of the date of this article, the USCIS does not permit concurrent filing of the application to adjust of status with the I-526 petition.
21 8 CFR §216.6.
22 8 CFR §204.6(j)(5)
23 8 CFR §204.6(h)(3).
24 D. Hirson and C. I. Mayou, “The Sinking of the Titanic, or the Rising of the Phoenix? An Update on Immigrant
Investor Visas,” 98-09 Immigration Briefings (Sept. 1998).
25 12 Interpreter Releases 332 (Mar. 9, 1998).
26 8 CFR §204.6(j)(2).
27 Matter of Soffici, 22 I&N Dec. 158, 19 Immigr. Rep. B2-25 (Int. Dec. 3359, AAO June 25, 1998); Matter of Izumii, 22 I&N Dec. 169, 19 Immigr. Rep. B2-32 (Int. Dec. 3360, AAO June 13, 1998); Matter of Hsiung, 22 I&N Dec. 201, 19 Immigr. Rep. B2-106 (Int. Dec. 3361, AAO July 31, 1998); and Matter of Ho, 22 I&N Dec. 206, 19 Immigr. Rep. B2-99 (Int. Dec. 3362, AAO July 31, 1998).
28 S. W. Yale-Loehr, “EB-5 Immigrant Investors: An Overview,” Immigration Options for Investors 51(AILA 2006) at 62.
29 Chang v. United States, No. CV-99-10518-GHK (AJWx) (C.D. Cal. May 3, 2001).
30 Chang v. United States, 327 F.3d 911 (9th Cir. 2003)
31 Chang v. United States, 327 F.3d 911 (9th Cir. 2003) at 925.
32 Id at 929.
33 21st Century Department of Justice Appropriations Authorization Act, Pub. L. No. 107-273, 116 Stat. 1758 (2002)
34 Id §§11031–32.
35 Id §11031(b).
36 Id §11032(c)(2)(B).
37 Supra n. 12 at 53.
38 8 CFR §204.6(h)(3).
39 USCIS Memorandum, William R. Yates, “Amendments Affecting Adjudication of Petitions for Alien
Entrepreneur” (June 10, 2003), 8 Bender’s Immigr. Bull. 1306 (Aug. 1, 2003), published on AILA InfoNet at Doc.
No. 03061744 (posted June 17, 2003).
40 Citizenship and Immigration Services Ombudsman “Annual Report 2009” (June 30, 2009), published on AILA
InfoNet at Doc. No. 09063065 (posted June 30, 2009).
41 The Basic Pilot Program Extension and Expansion Act of 2003, Pub. L. No. 108-156, §5, 117 Stat. 1944.
42 GAO Report, supra note 2.
43 8 CFR §204.6(j)(2); 8 CFR §§216.6(a)(4)(ii), 1216.6(a)(4)(ii).
44 See Matter of M–, I&N Dec. 24, 50 (BIA 1958, A.G. 1958).
45 8 CFR §204.6(j)(3).
46 See Memorandum from Donald Neufeld, Acting Associate Director, Domestic Operations, to Field Leadership,
“Adjudication of EB-5 Regional Center Proposals and Affiliated Form I-526 and Form I-829Petitions; Adjudicators
Field Manual (AFM) Update to Chapters 22.4 and 25.2” (December 11, 2009),
47 See “Message from the Director: New EB-5 Program Office,” published by AILA InfoNet at AILA InfoNet at Doc.
No. 12071846 (posted 07/18/12).
48 The list is posted at:
49 See Memorandum from Michael Aytes, Acting Deputy Director, USCIS, to Richard Flowers, Acting Ombudsman,
USCIS, “Response to Recommendation 40, Employment Creation Immigrant Visa (EB-5) Program
Recommendations” (June 12, 2009), published by AILA InfoNet at Doc 090661770 (posted 06/17/09) (hereinafter
Aytes memo).
50 Id. at 2.
51 Id.
52 Supra note 40 (Q and A no. 12).
53 Id.
54 See Revised Draft Policy Memorandum Guiding EB-5 Adjudications, (posted 01/11/12) – http://www.uscis.gov/USCIS/Outreach/Feedback%20Opportunities/Draft%20Memorandum%20for%20Comment/EB5_memo_2ndpost_with_changes.pdf
55 See Operational Guidance – “Guidance on EB-5 Adjudications Involving the Tenant-Occupancy Methodology,”
published by AILA InfoNet at Doc. No. 12051148 (posted 05/11/12).
56 Memorandum from Donald Neufeld, Acting Associate Director, USCIS Domestics Operations, “EB-5
Entrepreneurs – Job Creation and Full-Time Positions (AFM Update AD 09-04)” (June 17, 2009), published by AILA
InfoNet at Doc. No. 09061964 (posted 06/19/09) (hereinafter Neufeld memo).
57 8 C.F.R. §204.6(j)(4)(i)(B).
58 Supra note 49, at 1.
59 Id. at 3.
60 Id.
61 8 C.F.R. §216.6(c)(1)(iv).
62 Supra note 49, at 3.
63 Id. at 3-4.
64 The Neufeld Memo clarified that “direct and indirect construction jobs that are created by the petitioner’s
investment and that are exacted to last at least 2 years, inclusive of when the petitioner’s I-829 is filed, may now
count” as “full-time” jobs. Id. at 5.
65 See Stephen Yale-Loehr, “USCIS Clarifies Key Aspects of EB-5 Program” posted at
(last accessed Sep. 11, 2009).
66 Supra note 49, at 6.
67 Id.
68 See 8 C.F.R §§ 216.6(4)(iv) and 216.6(c)(1)(iv).
69 Supra note 49, at 6, 7.
70 Supra note 46, at 16.
71 Supra note 40 (Follow up Q and A).
72 Id.
73 EB-5 Immigrant Investor Program Quarterly Stakeholder Engagement (May 1, 2012), published on AILA InfoNet
at Doc. No. 12041241 (posted July 18, 2012).
74 8 CFR §204.6(m)(6).
75 Visa retrogression is of particular concern for Indian and Chinese-born nationals who are currently subject to five and nine-year waits in the EB-2 and EB-3 categories, respectively. Visa Bulletin for May 2012.
76 Supra note 73
77 An added benefit is that the I-140 petition, unlike the I-526 petition, can be concurrently processed with an I-485
application for adjustment of status. Interim Rule, 67 Fed. Reg. 49561 (July 31, 2002), published on AILA InfoNet at
Doc. No. 02073171 (posted Jul. 31, 2002).
78 For an in-depth analysis of the EB-5 classification as it compares to other visa classifications, see Stone, L, “A
Comparison of the EB-5 Category with Alternative Immigration Strategies” Immigration Options for Investors and
Entrepreneurs (2006-07 Edition). See also Exhibit I, a checklist to help determine if an investment would qualify for
EB-5 classification.
79 Holders of the EB-1C classification, on the other hand, must have worked as an executive, manager, or specialized
knowledge employee for an affiliated business.
80 INA §203(b)(5)(A); 8 CFR §204.6(j)(5).
81 8 CFR §204.6(j)(5).
82 8 CFR §204.6(j)(4)(i).
83 8 CFR §204.6(e), defining “Qualifying employee.”
84 8 CFR §204.6(e), defining “Full-time employment.”
85 8 CFR §204.6(j)(4).
86 “USCIS Q & A from Stakeholder Session with AILA EB-5 Committee and Invest in the USA,” published on AILA
Infonet at Doc. No. 10010462 (posted January 4, 2010).
87 8 CFR §204.6(j)(3).
88 INS Memorandum, Robert L. Bach, Executive Associate Commissioner (Aug. 28, 1998), HQ 40/6.1.3, published on AILA InfoNet at Doc. No. 98083198 (posted Aug. 31, 1998); see also 22 CFR §41.51(b)(7); 8 CFR §214.2(e)(12).

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