Ten Misconceptions about the EB-5 Program - EB5Investors.com

Ten Misconceptions about the EB-5 Program

Kate Kalmykov

by Kate Kalmykov and Dillon Colucci

This article will list and top ten most prevalent misconceptions about the EB-5 program. The EB-5 program is a program created by an act of Congress, which allows for foreign nationals who invest money in the United States to obtain conditional permanent residency and, hopefully, citizenship. Because of the recent attention to the EB-5 program, there have been a number of misconceptions that this article seeks to correct. In no particular order:


  1. This is a quick and easy way to obtain permanent residency. The EB-5 program is a complicated process which often involves providing U.S. Citizenship and Immigration Services (USCIS) with petitions of over 1,000 pages. The entire process can take months before filing, and involves a detailed review of your investment funds and the investment itself.
  2. Once I have invested, I can enter the United States immediately. No, in fact, for most individuals, they will have to wait more than 12-16 months to be able to enter the United States on their conditional permanent residency.[1]
  3. Investing in the EB-5 program is investing in government sponsored investments. Under the Regional Center Pilot Program, private entities can be set up to allow foreign nationals to pool their money and take advantage of indirect job creation through reasonable economic methodologies. While USCIS must approve these private entities, it is not an endorsement of their viability or of the veracity of their sponsoring investments.
  4. Prior project or regional center approvals mean future approvals. There is no guarantee regarding future projects or current projects. The adjudication of petitions under the EB-5 program is done through a combination of law, regulations and policy. USCIS has the right to reverse policy at any time, which may alter the way USCIS adjudicates petitions; even for petitions associated with projects that previously received approval.
  5. The EB-5 program is a property purchase program. Unlike some other countries, which have programs that enable foreigners to attain a level of residency based on the acquisition of property, the EB-5 program does not have this option.
  6. EB-5 investments are guaranteed regardless of whether an EB-5 petition succeeds. Once an investor’s I-526 petition is approved, all of that investor’s funds must be placed “at risk” by law. In order for an investment to be “at risk,” it must have been invested for the purpose of generating a return on that capital, and evidence of mere intent to invest, or arrangements which entail no present commitment, are not sufficient to show an investment was placed “at risk.” Investments which purport to be guaranteed, insured, secured by buy-back clauses or by any other mechanism for the return of an investor’s capital are impermissible and will lead to a denial by USCIS of that investor’s immigration benefits.
  7. Investments in a new commercial enterprise are safer than investments in a troubled business. Under the EB-5 program, an investor can also invest in an enterprise which is seeking to demonstrate the qualifying investment will save 10 full-time U.S. jobs. However, this investment is not any riskier or safer than investing in an entity which seeks to create 10 full-time jobs.
  8. You do not have to be involved in your investment. Current law and regulations require an investor to be involved in the management of their investment. However, case law has interpreted this to include that of a limited partner, as defined under the Uniform Limited Partnership Act, which typically means investors do not have to be involved day-to-day with their investment.
  9. Investing in companies which seek to loan money to qualifying investments is safer than investing directly in a business. A loan is not any safer than if an investor directly invests in the project company. Loans may be defaulted upon, and investors may never receive any of their investments. There is the same amount of risk involved in a typical EB-5 program loan investment as in an EB-5 program equity investment.
  10. A Targeted Employment Area designation is valid indefinitely. When an investor invests in a Targeted Employment Area (TEA), the threshold for a qualifying EB-5 program investment is lowered. However, investors and companies seeking investors under the EB-5 program should be aware that a TEA designation can change if the area in question is no longer considered a rural area, or if the unemployment level of the area dips below 150% of the national average.  This means that during a capital raise, a TEA could potentially change, and later investors may find that they must invest $1 million as opposed to $500,000, as the TEA is locked in at the time of filing the EB-5 petition.

[1] Based on current USCIS processing times for I-526 petitions

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