Why EB-1 and EB-3 might not work as EB-5 substitutes

By Matthew Galati and Walter Gindin

USCIS’ Annual Report to Congress, published in June 2017, sent a shock through the EB-5 industry as the agency projected that investors with cases “at the end of the Form I-526 adjudication queue may have to wait 10 years or longer for immigrant visas under the EB-5 program.” While one can’t confirm whether this projection is fully accurate, the EB-5 quota backlog has Chinese investors eyeing possible alternatives.

Two alternatives have piqued investors’ interests. The first option is to immigrate to the U.S. through the Multinational Manager or Executive EB-1C Visa. Even though the EB-1C has been slightly backlogged, it becomes “current” in October. The second option is the EB-3 Professionals / Skilled Workers classification. EB-3 China natives face a backlog in this classification as well, although it is less than the projected EB-5 backlog.

Neither of these two alternatives presents a perfect substitution for EB-5. In fact, investors and agents should be aware of key distinguishing characteristics of EB-1C and EB-3 prior to embarking upon either immigration route. If not approached properly by prospective U.S. employers, attorneys and investors could find themselves facing denials or inadmissibility findings.

The true remedy to the EB-5 backlog is reform, preferably through Congress. Barring that, the Department of State could amend its regulations to alter the way it allocates visas among principal and derivative applicants.


The EB-1C Multinational Manager or Executive classification is receiving more attention from certain prospective EB-5 investors from China. To qualify for this visa, an immigrant needs to have a permanent job offer from a U.S. petitioner that is executive or managerial in nature. Many immigrants also leverage the L-1A intracompany transferee visa as part of this process given its relatively similar requirements. Unlike the EB-3 discussed below, there is no labor market testing or prevailing wage requirement in the EB-1C context, and the lines between employer and employee can be blurred.

Unlike EB-5, however, the EB-1C is an employment visa, not an investor visa. There must be a permanent, bona fide, executive or managerial position for the immigrant to fill in the U.S. Prior to transfer to the U.S. employer, the immigrant must have been employed abroad full-time, in a managerial or executive capacity for at least one continuous year out of the previous three. Importantly, employment abroad must have been for the multinational petitioner, or a qualifying entity. A foreign qualifying entity must be commonly controlled with the U.S. petitioner, in essence having common ownership. Transfers between the parent to subsidiary companies or between affiliates are very common.

Many entrepreneurially minded clients have used the EB-1C instead of EB-5 for decades. Unlike EB-5, there are no requirements for personal investment, the source of funds analysis is minimal, and there is no conditional residency period. It may or may not be cheaper than EB-5 in this regard, although the opportunity for gain on the investment is generally larger and capital can be used more freely. EB-1C, accordingly, may be the right solution for certain immigrants who possess qualifying experience abroad and the means to open an affiliated entity in the United States that they will manage.


However, EB-1C is far from a substitute for EB-5. As discussed above, the requirements for the EB-1C will disqualify large amounts of potential EB-5 investors. For example, college students-turned-EB-5-petitioners generally would not qualify for EB-1C because they have no professional working experience. Instead, they would need to return home and work for their parents’ businesses for a year first. Similarly, non-working spouses are commonly EB-5 petitioners, enabling the family’s breadwinner to remain in China while the spouse and children immigrate to the U.S. Without qualifying experience, the non-working spouse will not qualify for the EB-1C.

Even more challenging is that the EB-1C is extremely difficult to scale. Unlike an EB-5 project, which could pool investments from thousands of investors from disparate backgrounds, there is a functional limit to the number of EB-1C immigrants that could fit into a single venture. For example, if a new U.S. entity were to be established for facilitating EB-1C immigration, it would need to have common control with any potential immigrants’ employers abroad. This would quickly become a practical (and taxable) nightmare. Would the U.S. entity buy a majority stake in the foreign entities? Further, how would the entities all be tied together to provide an overall functional business? It would make little sense for a U.S. parent to control a textile manufacturing company in China while simultaneously owning a restaurant chain in Mexico. Imagine 100 other immigrants’ overseas businesses in the mix. What would be the function of the EB-1C petitioning entity in such circumstances?

Beyond these practical concerns, the law will place a functional limit on the number of EB-1C beneficiaries. Under the case law, USCIS must look to immigrants’ job duties to make sure they are primarily managerial or executive in nature.

The EB-1C is clearly not for everyone, and EB-5 project principals will likely not be able to find a solution to their fundraising woes in China by taking up this route. Nevertheless, it will likely grow in popularity as EB-5 backlogs continue. Independent of the EB-1C, the nonimmigrant analogue L-1A visa can be used for U.S. startups, known as “new office” petitions. Thus, while EB-1C remains a viable option for entrepreneurs seeking to expand their overseas businesses into the U.S., it will never fully supplant EB-5 given its inherent limitations and the need for bona fide U.S. employment.


The EB-3 category is reserved for Professionals (requiring a Bachelor’s Degree), Skilled (requiring two years of training or experience), and “Other” (less than two years of training or experience) workers. Unlike EB-1, the EB-3 category requires a labor certification (“LC”) to be filed with the U.S. Department of Labor (“DOL”). During this process, a U.S. employer must – in good faith – test whether there are insufficient U.S. workers who are able, willing, qualified, and available for a qualifying position in the U.S. The bona fide employer must be offering the EB-3 immigrant a full-time, permanent position at or above a set prevailing wage determined by DOL. This process also involves multiple recruitment activities where the employer must vet any potential U.S. worker candidates. If no such candidates qualify for the position, the employer may file the LC application with the DOL through a process called “PERM”. After several months, DOL will either certify the LC or trigger an audit where it will more closely examine the recruitment techniques. During an audit, DOL will review, among other things, whether there were in fact qualified U.S. workers that applied for the position. Denials after audit are fairly common.

After approval of the LC, the employer must then file a petition with USCIS where the agency will verify that the position and the employee’s experience are qualifying. The employer must also submit evidence that it is able to pay the prevailing wage. Upon approval, the immigrant may process through the consulate abroad once his or her priority date is current.

The program does not cater to investors. EB-3 is perhaps the most heavily regulated visa classification and thus it has major limitations. Perhaps the most significant obstacle is that immigrants generally cannot form their own company and sponsor themselves for a labor certification, as DOL is highly likely to deny this type of job offer as not being bona fide. Such applicants might be better served in EB-1C, as discussed above. Further, the PERM requirements are very technical, and the case law describing what is and what is not permitted is incredibly complex. EB-3 approvals are certainly not guaranteed.

Beyond this – and what investors and agents should be aware of – is that the relevant DOL regulation declares that LCs are “not articles of commerce. They shall not be offered for sale, barter or purchase by individuals or entities.”
Despite this, EB-3 can be a route to a Green Card for the right kinds of immigrants. For example, students graduating from U.S. universities might find themselves lucky enough to receive a permanent offer of employment in the U.S. and Green Card sponsorship. Even high net worth individuals can validly be hired by U.S. businesses and sponsored. LCs are very popular: U.S. law firms have entire teams dedicated to managing the LC process and it allows thousands of individuals and their families entry in the U.S. However, EB-3 needs to be done the right way, and selling “EB-3 projects” to investors to obtain Green Cards will almost certainly violate the law.


As shown, the EB-1C and EB-3 visas are not adequate substitutes to the EB-5 visa for many applicants. The specific qualification requirements imposed by the former – particularly with respect to employment – are less “flexible” than the EB-5 visas where investors (particularly in pooled regional center projects) may work for any employer and live anywhere in the U.S. The EB-1C and EB-3 have relatively localized impacts, as they affect single immigrants and single employers, but the EB-5 visa has the vast potential to spur economic development in targeted regions on a much broader scale. So there are very important reasons to encourage and sustain a high level of EB-5-based investment. To accomplish this goal, it is critical to resolve the EB-5 visa backlog through either legislative or administrative action.

Legislatively, congress could as part of any reforms to the EB-5 Program make clear that derivatives of the principal investor are not counted against the annual quota of 10,000 visas. It is encouraging that at least one of the proposed EB-5 reform bills (introduced by Senator Cornyn) contains a provision explicitly exempting derivatives. A question remains whether legislators will be willing to limit this “fix” only to the EB-5 visa category; as it might be politically difficult to justify. As such, there should be broader push on the part of congress to clarify that the operative provision in the Immigration and Nationality Act (“INA”) – § 203(d) – does not by its plain language require that derivatives be counted against either the family based or employment based preference quotas. Rather, there should be an explicit clarification that INA § 203(d) merely provides that derivatives retain the same status as the principal immigrant, not that they are required to be allocated their own visa number. 

In this regard, there is no express statutory or regulatory basis for counting derivatives against the immigrant visa quote, and the lack of an explicit statement in INA § 203(d) that requires the counting of derivatives is indicative of Congress’s true intent on the subject. Barring legislative action, the Department of State can accomplish the same result by amending the governing regulations at 22 CFR §42.32 to exempt derivatives. If the agency will not do this on its own accord, anyone could write the regulation and petition the government to implement it. It is probably easier to accomplish regulatory reform this way than by suing the government outright. 

The political likelihood of regulatory change is unclear.  The Department of State is an arm of the Executive Branch – which has sent mixed signals on reforms to the existing immigration system.  The Trump Administration has proposed to limit the number of Green Cards awarded, yet also has increased caps on some temporary workers. Without taking a position on the wisdom of such actions, a bipartisan legislative action remains the best option for pushing forward meaningful reforms that benefit EB-5 and other immigration categories. 

Matthew T Galati

Matthew T Galati

Matthew T. Galati is an EB-5 immigration attorney in the Philadelphia office of Greenberg Traurig, LLP. He has experience with nearly every aspect of immigration law and is well-versed in EB-5-related matters. Attorney Galati is a member of the firm’s EB-5 investor attorney team and focuses much of his practice on the preparation of Form I-526 and Form I-829 petitions in unusual or complicated cases.


Add your comment

Use a Facebook account to add a comment, subject to Facebook's Terms of Service and Privacy Policy. Your Facebook name, photo & other personal information you make public on Facebook will appear with your comment.