EB-5 investors often ask about the possibility of recovering their investment funds after obtaining a permanent green card. However, the EB-5 visa program do not guarantee refunds.
Answering this question requires investors to understand how EB-5 capital flows through the distinct stages of the application process.
What is EB-5 capital?
It is the investment capital that EB-5 investors must place in a U.S. business to qualify for an EB-5 visa. This funding enables the EB-5 project to create full-time positions for at least 10 qualifying U.S. employees. If the investor takes a loan to fund this investment, that amount could also qualify as EB-5 capital.
The purpose of this capital differs from the administrative expenses and costs the applicant pays during the EB-5 visa process. The latter includes payment of USCIS application fees, legal advice, and other expenses related to the application.
The EB-5 money trail
The EB-5 capital invested in a USCIS-authorized project begins to flow before the EB-5 application is submitted and completes its purpose when the permanent green card is granted to the investor. The distinct stages the money goes through are:
- Before applying:
- Investment decision: Investors decide to commit capital to the EB-5 project. The money is still available in their financial institution or bank account.
- Capital transfer: Once they select the project, they must transfer their funds into an escrow account in the U.S. if they invest through a regional center by the time they apply.
- Application process:
- I-526 Petition Filing: Investors file Form I-526 with U.S. Citizenship and Immigration Services (USCIS), providing details of the investment and project. Submitting this form is the first step in the official EB-5 application process.
- Adjudication: USCIS reviews the I-526 petition to determine eligibility for the EB-5 program, including the lawful source of funds and the potential job creation impact of the investment.
At this stage, the New Commercial Enterprise (NCE) associated with the project receives the investment funds. Every EB-5 project requires an NCE, whether it’s a direct investment (standalone investor) or a regional center project. The NCE deploys the funds to create and sustain the required number of full-time jobs for qualified U.S. workers, which is a key EB-5 visa program requirement. The NCE does this by entirely investing the money in the Job-Creating Entity (JCE), which is the actual business responsible for creating the mandatory ten jobs.
- Conditional residency:
- Conditional green card: If the I-526 petition is approved, the investors and their family members apply for conditional green cards by filing form I-485 (or DS-260 if the investor is applying from their home country), allowing them to live and work in the U.S. on a conditional basis. Meanwhile:
- Investment Deployment: The EB-5 capital is deployed into the EB-5 project to create the required jobs.
- I-829 petition filing: After the two-year sustainment period, EB-5 investors with a conditional green card file Form I-829 to remove the conditions and obtain the permanent green card. During this process, USCIS verifies that the investment has been sustained and that the required number of jobs has been created.
So, will the investor get to see their money back?
It depends.
The project developer or regional center cannot return the invested funds during the two-year sustainment period because the money must remain “at risk.” After this period, the investor may be able to recover their EB-5 capital, provided that the project documents, like the investment agreement or the private placement memorandum (PPM), outline the process for returning the money in various scenarios, such as the investor deciding to exit the investment before or after the sustainment period, or if the EB-5 project fails.
EB-5 attorneys recommend that these documents specify the handling of investment funds and the potential for their return. It’s important to distinguish between the refund of the EB-5 capital and the return on investment, which refers to the profits generated by the project and is highly dependent on its success.
Redeployment of funds is another issue altogether. It is normal for EB-5 petitions filed before the RIA in 2022 that have yet to have their I-526 forms approved due to EB-5 processing backlogs. These pre-RIA investors must keep their investment at risk during the 2-year period of their conditional residency. Thus, if the project is completed before this period is over, the NCE must redeploy the funds into another project to comply with the at-risk requirement of the EB-5 program.
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