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EB-5 BASICS

Becoming and Operating a Regional Center

Updated By David Hirson and Nima Korpivaara on November 27, 2019

Why become an EB-5 Regional Center?

What are EB-5 Regional Centers

There are many advantages to receiving EB-5 Regional Center designation from USCIS for your business. Becoming a regional center is an attractive way for a business project to raise low interest debt, and, in some situations, equity. Raising capital via the EB-5 Immigrant Investor Program is quite unique compared to traditional sources of funding and EB-5 is an exciting and ever-evolving industry.

The EB-5 program became more popular beginning in 2007 as traditional lending became tougher to obtain during the Great Recession. There are two ways of funding a project with EB-5 capital: through a direct investment or through a regional center. The regional center option can be more attractive to both project developers and investors, as the designation makes some USCIS requirements less stringent for EB-5 visa applicants. Regional centers are held to more favorable job creation requirements than direct EB-5 investment, which focuses on direct job creation. Rather than being required to create 10 direct full-time jobs, regional centers can satisfy EB-5 job creation requirements by creating 10 direct, indirect, or induced full-time jobs. The regional center is afforded the benefit of using economic multipliers to demonstrate the creation of these jobs. However, a particular organization’s specific needs will always determine whether or not regional center designation is most advantageous.

During the last decade, many larger U.S. developers have utilized EB-5 financing as part of their projects' capital stacks.

As of November 2019, there are 811 USCIS-designated EB-5 Regional Centers.[1]

How to become an EB-5 Regional Center

Nearly anyone can apply for regional center designation—no special licenses are required. The term regional center refers to 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 within the EB-5 program. The business models that are eligible to become EB-5 Regional Centers include governmental agencies, partnerships, corporations and any other existing U.S. commercial entity.

Each regional center must obtain its designation from USCIS. USCIS regional center designation entails a multi-step process that requires the input of various experts. The cost of obtaining regional center approval is highly variable. The actual application itself, called Form I-924, Application for Regional Center Under the Immigrant Investor Program petition, costs $17,795 to file with USCIS. However, the overall approval cost is often far more and largely dependent on the fees charged by various EB-5 experts.

Steps to Become an EB-5 Regional Center

Regional Center Formation

There are several steps that an organization must take in order to obtain EB-5 Regional Center approval from USCIS. The costs involved and the documents that need to be produced will depend on the readiness of the project. Each regional center filing must be accompanied by a project, the readiness of the project falls into three USCIS categories: hypothetical, actual, and exemplar.

  • Hypothetical project refers to a project proposal that is not supported by a comprehensive, Matter of Ho compliant business plan. A sample project containing general proposals and general predictions may be sufficient to determine that the proposed regional center will more likely than not promote economic growth.

  • Actual projects require more detail than a hypothetical project in order to conclude that the proposal contains verifiable details and is supported by economically or statistically sound forecasting tools. This generally means a comprehensive, Matter of Ho compliant, business plan and an economic report that accurately describes the project, investment, job creation, and other Matter of Ho requirements.

  • Exemplar refers to a Form I-526 petition, filed with a Form I-924 actual project proposal that contains copies of the commercial enterprise’s organizational and transactional documents, which USCIS will review to determine if they are in compliance with established EB-5 eligibility requirements. Below we will discuss the steps and additional documents required for each category. Only shovel-ready projects qualify in this category.

    Below, we discuss the steps and additional documents required for each category.

  1. Determine the Scope of the Regional Center

    Perhaps the most important step of the regional center approval process is for the business organization to determine the geographic scope and economic benefit of the projects for which the business organization is planning to use EB-5 financing. This includes determining the regional center geographic umbrella, business industry focus, corporate structure, operational business model, and required investment amount for the potential projects.

  2. Acquire the Services of Professionals Who Will be Integral to Producing the Documents Required For Regional Center Filing

    At a minimum the following documents are required:

    • Hypothetical Project: Regional center Operational Business Plan, Corporate Structure agreements for ownership of the regional center, (a) sample project business plan, (b) economist report for the project, and sample management agreement between the regional center and the project.

    • Actual Project: The documents listed above with the addition of a comprehensive project business plan, and sample (c) transactional documents (typically an investor subscription agreement and private placement memorandum).

    • Exemplar Project: The documents list above with the addition of final transactional documents, as well as a sample Form I-526 Immigration Petition by Alien Entrepreneur, completed except for details about the EB-5 petitioner.

      • (a) A business plan writer with expertise in producing EB-5 compliant business plans should be consulted, as the business plan is one of the most important documents required for regional center filing. The AAO precedent decision Matter of Ho has articulated the standards by which USCIS will review a business plan: The plan should contain a market analysis, including the names of competing businesses and their relative strengths and weaknesses, a comparison of the competition’s products and pricing structures, and a description of the target market/prospective customers of the new commercial enterprise. The plan should list the required permits and licenses obtained. If applicable, it should describe the manufacturing or production process, the materials required, and the supply sources.The plan should detail any contracts executed for the supply of materials and/or the distribution of products. It should discuss the marketing strategy of the business, including pricing, advertising, and servicing. The plan should set forth the business’s organizational structure and its personnel’s experience. It should explain the business’s staffing requirements and contain a timetable for hiring, as well as job descriptions for all positions. It should contain sales, cost, and income projections and detail the bases therefore. Most importantly, the business plan must be credible.

      • (b) An economist must be hired to prepare an economic impact and job creation report for each project. This is especially important for a regional center project, as regional centers are afforded the ability to use indirect and induced job creation numbers. Indirect jobs can qualify and be counted as jobs attributable to a regional center project, based on reasonable economic methodologies, even if they are located outside of the geographical boundaries of a regional center. For purposes of demonstrating indirect job creation, petitioners must employ reasonable economic methodologies to establish by a preponderance of the evidence that the required infusion of capital or creation of direct jobs will result in a certain number of indirect jobs. The economist must also determine whether or not the regional center will be located in a targeted employment area (TEA) and prepare the necessary unemployment data report to prove to USCIS that the project meets the rules for TEA designation. These steps are critical because with all things USCIS, the more dubious the standard, the better the expert in the field must be.

      • (c) Securities counsel with relevant experience in producing EB-5 compliant subscription agreements and private placement memorandums must be consulted. These documents must not only comply with federal and state securities laws and regulations, but also USCIS regulations, the most important of which being the “at risk” requirement: in order to qualify as an investment in the EB-5 Program, the immigrant investor must actually place his or her capital “at risk” for the purpose of generating a return, and the mere intent to invest is not sufficient. The alien must show actual commitment of the required amount of capital. This means that any clause providing a put, call, or redemption of investment funds prior to final adjudication of Form I-829 Petition by Entrepreneur to Remove Conditions, will result in possible denial of the investors application. There must be no guarantee of return of the investment. Good EB-5 securities counsel should also be comfortable with guiding clients on matters of redeployment, among other potential issues.

  3. Submit Form I-924 Petition

    Finally, with all these documents in place, the regional center can now submit the Form I-924 petition to USCIS. The regulations provide that once the initial Form I-924 is filed with USCIS, the regional center can go to market and advertise its’ project(s). Please note however, the regional center cannot accept any investment from qualified investors, until, and only until the regional center is approved. (This also includes not allowing any individual investor to file a Form I-526 petition for any of the regional center's projects.)

  4. Submit Form I-526 Petitions

    Once the Form I-924 is approved, the regional center can now submit the EB-5 investors' Form I-526 petitions to USCIS: Form I-526 applications will outline the specific EB-5 projects that the regional center will be conducting, and will include either the documents outlined above in the actual or exemplar filing. While Form I-526 is a self-petition by an individual investor, it is critical to employ the services of experienced immigration counsel. Immigration counsel will shepherd and review the regional center, project, and investor through each USCIS step of compliance. Approval of Form I-526 petitions enable individual EB-5 investors to start the process of obtaining their conditional green card so that they can live in to the United States for two years.

  5. Administer Projects and Maintain USCIS Compliance

    The regional center must monitor its investors and track the job creation requirements for its projects. The regional center must also file and pay the fees for an annual compliance report, Form I-924A, with USCIS. Additionally, the regional center must also be sure to comply with all applicable reporting for Securities and Exchange Commission and other state and local agencies that regulate securities. 

    As part of the U.S. government’s efforts to combat fraud and ensure program integrity, USCIS also conducts site visits of EB-5 regional centers and EB-5-funded projects/businesses. Each regional center is responsible to provide all requested documentation and other information as requested by USCIS for each of these site visits.

  6. EB-5 Visa Applicants File I-829 Petitions

    The final step of the EB-5 visa process for individual investor applicants is to file the Form I-829 Petition by Entrepreneur to Remove Conditions. This application demonstrates that the project and investor have met all the requirements of the EB-5 program. Once approved, Form I-829 enables the investors to obtain their lawful permanent resident status (permanent green card). Although the application is filed by the individual EB-5 visa applicants, the regional center and projects must provide evidence of meeting the job creation requirements as well as keeping the investor's funds "at risk" for the requisite time period. 

    Conclusion

    Obtaining EB-5 regional center designation can be a daunting process spanning a couple of years, but there are qualified and experienced EB-5 professionals who can help you from a through z. They can and will advise you on your road to EB-5 success.

Sources:

[1] https://www.uscis.gov/working-united-states/permanent-workers/employment-based-immigration-fifth-preference-eb-5/immigrant-investor-regional-centers

EB5Investors.com can introduce you to professionals who will assist you in starting your own regional center. We know that the process is quite difficult without the right people to guide you. We are constantly adding service providers to our network in order to give you access to various economists, business plan writers, securities attorneys, and immigration attorneys to help with your regional center application (I-924 Petition). You can also call us at 1(800) 997-1228 or fill out the form below so we can get you started in the right direction.