By Joey Barnett
One of the most frequently misunderstood elements of the EB-5 immigrant investor program is the requirement that an investor’s funds be placed “at risk” in accordance with 8 C.F.R. 204.6(j)(2), and for how long in accordance with 8 C.F.R. 216.6(c)(1)(iii).
Changes in EB-5 law and the United States Citizenship and Immigration Service (USCIS) own internal guidance have put answers to these questions in flux over the past 10 years, leading EB-5 investors and Regional Centers scrambling to understand the legal requirement of how long EB-5 capital must be “at risk”.
While the concept sounds straightforward, the details often get blurred, particularly when it comes to whether the “at risk” requirement applies at the level of the new commercial enterprise (NCE) or the job-creating enterprise (JCE). Understanding this distinction is crucial because while immigration law is concerned with the NCE, the actual financial exposure of EB-5 investors depends heavily on the “capital stack” of the JCE.
What “at risk” means in EB-5 regulation?
The governing regulation requires that EB-5 petitioners show their capital is “at risk for the purpose of generating a return on the capital placed at risk” (8 C.F.R. § 204.6(j)(2)). The definition of “capital” at 8 C.F.R. § 204.6(e) likewise requires the contribution to be subject to risk of loss and gain.
The Board of Immigration Appeals in Matter of Izummi made clear that arrangements containing redemption rights or guaranteed repayment are impermissible because they negate the “at risk” requirement (22 I&N Dec. 169, 179 (Assoc. Comm’r 1998)). In other words, USCIS examines whether the investment in the NCE genuinely exposes the investor to both profit and loss.
The “at risk” analysis for immigration purposes stops at the NCE. The regulations do not require USCIS to evaluate the financial structure of the JCE (or the NCE’s level of risk within the JCE’s capital stack). Provided the NCE’s deployment of capital does not involve guarantees or redemption clauses, the “at risk” element is satisfied for immigration purposes.
A key case, Matter of Soffici, underscored that a promise to return investor funds would disqualify the investment, regardless of how the JCE is structured (22 I&N Dec. 158, 162 (Assoc. Comm’r 1998)). Additionally, as Matter of Ho emphasized, what matters for job creation purposes is the credibility of the NCE’s business plan, not whether the JCE is profitable in the long run (22 I&N Dec. 206, 210 (Assoc. Comm’r 1998)).
This supports my position that there is no immigration requirement to receive the EB-5 capital investment back; repayment is independent from immigration requirements (and the immigration process, for post-RIA investors who filed after March 2022) and is based on the success of the EB-5 project.
Immigration attorneys can help evaluate immigration risks and EB-5 compliance on a project, but are not qualified to provide financial/investment advice unless otherwise licensed.
Balancing risk and expected returns in an EB-5 investment
However, from a financial perspective, what determines an EB-5 investor’s repayment is the JCE’s capital stack, a layered structure of debt and equity used to finance a real estate or other investment, organized by priority, with lower layers (e.g., senior debt) having less risk and lower returns but higher priority in repayment, and higher layers (e.g., common equity) taking on more risk for higher potential returns. Understanding the capital stack is crucial for investors to assess risk effectively.
If the NCE loans its capital to the JCE as subordinated or mezzanine debt, the EB-5 investors stand behind senior secured lenders in the repayment queue. If the project falters, the NCE’s ability to repay investors depends entirely on whether anything is left after senior lenders are paid when the NCE takes an equity position in the JCE – whether as preferred equity with a fixed distribution priority or as common equity with residual upside but last repayment priority – the risks and repayment prospects shift accordingly. Thus, while immigration law tests “at risk” at the NCE, investors’ true financial exposure hinges on the EB-5 capital’s placement in the JCE structure.
This framework creates a mismatch between risk and return. In most markets, higher-risk investments carry higher expected returns. However, EB-5 offerings often yield nominal interest rates or minimal preferred returns – typically less than one percent annually – while exposing investors to risks associated with construction, market fluctuations, and immigration. In effect, the EB-5 investor assumes the profile of a mezzanine lender but with the payoff of a low-balance savings account. The reality is that the “true” return for most investors is the immigration benefit, not a financial profit.
Key legal considerations about the EB-5 redeployment and the sustainment period
Redeployment poses one of the trickiest legal issues for EB-5 projects, because when the NCE is repaid by the JCE (for example, upon loan maturity or early repayment), the funds must remain “at risk” until the end of the investor’s sustainment period.
Under current USCIS policy, redeployment is allowed (so long as the reinvestment is within the “scope of the NCE’s business” and “in commerce”) and must occur within a “reasonable time” after repayment—frequently interpreted as about 12 months. But that policy guardrail is loosely defined, and because redeployment effectively extends the period in which an investor’s capital remains tied up, it raises acute tension between liquidity and EB-5 compliance.
Litigation challenged the October 2023 USCIS guidance (which fixed the sustainment period at two years from the date of investment), arguing the guidance was issued without proper notice-and-comment rulemaking and unfairly constrains regional centers and investors. In response, a federal judge declined to invalidate the two-year sustainment rule outlined in the RIA before USCIS issues a formal Notice of Proposed Rulemaking (NPRM).
USCIS has committed to publishing an NPRM (expected by November 2025) to implement the EB-5 Reform and Integrity Act’s sustainment provisions. The outcome of that NPRM will likely settle key questions: how strictly redeployment limits will be codified, whether redeployment time must mirror “at risk” definitions, and how long investors’ capital may remain bound in reinvestments. Market participants anticipate that USCIS will largely embed existing policy into regulation. However, there is a significant risk that more restrictive redeployment constraints or longer hold periods could be imposed.
In conclusion, the “at risk” requirement applies at the level of the NCE, but the JCE’s capital stack dictates an investor’s actual financial exposure. Immigration law does not require that investors recover their money; it only requires that they sustain the investment and create jobs.
DISCLAIMER: The views expressed in this article are solely the views of the author and do not necessarily represent the views of the publisher, its employees. or its affiliates. The information found on this website is intended to be general information; it is not legal or financial advice. Specific legal or financial advice can only be given by a licensed professional with full knowledge of all the facts and circumstances of your particular situation. You should seek consultation with legal, immigration, and financial experts prior to participating in the EB-5 program Posting a question on this website does not create an attorney-client relationship. All questions you post will be available to the public; do not include confidential information in your question.
