By Jennifer Hermansky
The I-526 Petition Requirements
For investors seeking lawful permanent residence through the EB-5 program, the first step in the process is to file Form I-526, Immigration Petition for Alien Entrepreneur, together with accompanying evidence in support of the program’s requirements with the USCIS. The USCIS evaluates and adjudicates I‑526 petitions by reviewing these criteria:
A. A New Commercial Enterprise Has Been Established
An EB-5 investor must invest into a new business. Under the law, this means a business formed in the U.S., including any for-profit activity established after Nov. 29, 1990, that engages in lawful business. There are generally two types of EB-5 cases: “direct” cases, where the investor opens and operates their own business, and hires at least 10 full-time workers, and then the “regional center” cases, where the investor invests into a fund with other EB-5 investors, and then the fund makes a loan or an equity investment into a project, which then creates the jobs on behalf of the investor.
In the regional center context, the new commercial enterprise is the fund where the alien invests – it’s like a mutual fund pooling investment, except that the investment made is not diversified and all funds are generally loaned or invested into one project for the purpose of creating jobs. Usually, the fund takes the form of a Limited Partnership or Limited Liability Company, which lends or invests the EB-5 proceeds into another legal entity (the “job creating entity” or “JCE”). In the direct, non-regional center context, the new commercial enterprise is the business where the applicant invests and the business that creates the jobs for U.S. workers.
B. EB-5 Investment of the Requisite Amount of Capital
An EB-5 petition must be supported by evidence that the petitioner has invested the minimum required capital. There are several requirements packed into this: (1) the amount of funds invested; and (2) what constitutes “capital”.
1. How much money must be invested?
On Nov. 21, 2019, the USCIS enacted new rules increasing the minimum amount of investment required to qualify for an EB-5 green card. In the regional center context, if the project creating the jobs is in a “targeted employment area” then the minimum amount of investment is $900,000. In the direct investment context, if the new commercial enterprise, the business itself, is in a “targeted employment area” then the minimum amount of investment is $900,000.
A “targeted employment area” is either: (1) an area of high unemployment that has at least 150% of the national unemployment rate; or (2) a rural area. For I-526 petitions filed on or after Nov. 21, 2019 (moving forward, no petitions will benefit from the old rules), an EB-5 petitioner must show either:
- Rural TEA - Unemployment data for the relevant Metropolitan Statistical Area (MSA), specific county within an MSA, county in which a city or town with a population of 20,000 or more is located, or the city or town with a population of 20,000 or more which is outside an MSA;or
- An Area of High Unemployment (most common) – A grouping of census tracts that have an unemployment rate of at least 150% of the national unemployment rate.The area must consist of the census tract or contiguous census tract(s) in which the new commercial enterprise is principally doing business, and may also include any or all census tracts directly adjacent to such census tract(s). The weighted average of the unemployment rate for the group of census tracts, based on the labor force employment measure for each census tract, is at least 150 percent of the national average unemployment rate.
The new final regulations, applied to all I-526 petitions filed with the USCIS on or after Nov, 21, 2019, have changed several aspects of the TEAs: (1) it changed the definition of what qualifies as “rural”; (2) it changed the amount of census tracts that can be included in a high unemployment area TEA because only the census tract of the project and the directly adjacent tracts can be included; and (3) states can no longer designate high-unemployment areas. Instead, the USCIS now makes all TEA determinations as part of the I-526 petition designation.
If the new commercial enterprise (in the direct context) or project (in the regional center context) is located outside of a targeted employment area, then the minimum amount of investment is $1,800,000.
2. What is EB-5 Capital? Is it Just Cash?
According to the USCIS, EB-5 “capital” includes cash, equipment, inventory, other tangible property, cash equivalents, and indebtedness secured by assets owned by the immigrant investor, provided the immigrant investor is personally and primarily liable, and that the assets of the new commercial enterprise upon which the petition is based are not used to secure any of the indebtedness.  All capital must be valued at fair market value in U.S. dollars.
For most EB-5 investors, they invest cash into the new commercial enterprise. For all regional center petitions, generally the EB-5 investors transfer cash – derived from a lawful source – to the account of the new commercial enterprise (and often times an escrow account to be held until the I-526 petition is filed with the USCIS). However, in the direct context, it is possible to invest other types of capital, such as real property or equipment transferred into the name of the new commercial enterprise. In this example, the investor has the burden to show the fair market value of the asset contributed to the new commercial enterprise, but those transfers can be considered capital. For example, $1,000,000 in real estate transferred to the new commercial enterprise plus $800,000 in cash together could constitute a $1,800,000 investment to meet the EB-5 rules.
In another common example, investors often don’t want to use all their cash to make the EB-5 investment. Sometimes, they wish to monetize the value of real property abroad by taking out a loan and using the loan proceeds to do the EB-5 investment. This is permissible, so long as it is done correctly. An investor can take out a loan and use the proceeds for the EB-5 investment, but the immigrant investor must demonstrate:
- Personal and primary liability for the debt;
- The indebtedness is secured by assets the immigrant investor owns; and
- The assets of the new commercial enterprise are not used to secure any of the indebtedness.
Generally, what this means for investors is that: (1) you can take a loan for the EB-5 investment and then transfer the cash proceeds from the loan; (2) the loan must be a fully secured loan by the assets of the investor, so there must be a clearly registered mortgage as a result of the loan, even if the loan is taken abroad; (3) the investor must show the value of the real estate through an appraisal to show that the value of the property is greater than the value of the loan. The investor must demonstrate that his or her own collateral secures the debt; however, it is OK if the property is jointly owned with a spouse. If the property is jointly owned with another party in equal shares, such as the investor and their parent, then the value of the parent’s portion of the property cannot be used to secure the loan (only the investor’s portion can be used) under the current USCIS policy. While there was a lawsuit over this “secured” loan policy, this policy still appears in the USCIS policy manual, and therefore, it is likely the USCIS still will apply this standard to new cases. Essentially, loan proceeds can be used for the investment, but the loan must be fully secured by investor’s own assets (not the asset in the name of a third party) and the petitioner has the burden to show the fair market value of the asset securing the loan.
3. What is an “At Risk” Investment?
The USCIS expects the investor’s funds to be irrevocably committed to the enterprise. The funds must be “at risk” and used by the new commercial enterprise to create employment. So, what is the “at risk” investment requirement?
The EB-5 statute and regulations require the investor to make an “at risk” investment. Generally, the law requires the investor to “sustain the capital investment requirement and continuously maintain it over the two years of conditional permanent residence.” Thus, the investor cannot be repaid his or her $900,000 or $1,800,000 investment by the new commercial enterprise during the two years of conditional permanent residence.
In an important EB-5 case decision, Matter of Izummi, the government elaborated further on the “at risk” requirement, outlining the following rules, among others:
- If the new commercial enterprise is a holding company, the full requisite amount of capital must be made available to the business(es) most closely responsible for creating the employment on which the petition is based.
- Reserve funds that are not made available for purposes of job creation cannot be considered capital placed at risk for the purpose of generating a return on the capital being placed at risk.
These Matter of Izummi rules explain that in the regional center investment model, the full amount of the investment ($900,000 or $1,800,000) must be disbursed under the loan or the investment agreement from the new commercial enterprise to the project for use in the EB-5 project, and funds reserved within the new commercial enterprise will not be considered “at risk”. Administrative fees paid are not considered capital.
Also, USCIS recently issued new guidance that when an EB-5 loan matures and is repaid to the new commercial enterprise, the EB-5 funds must be “redeployed” into a new project in furtherance of commercial activity within the boundaries of the regional center if investors have not reached the end of their two-year conditional green card. As such, upon the maturity of the initial investment and after all jobs have been created by the first project, the new commercial enterprise may be forced to make additional investments into new projects. EB-5 investors should discuss with their lawyers how redeployment may affect their investment timeline.
C. Lawful Source of EB-5 Capital
“Lawful source of funds” is a very important requirement for the I-526 petition. Funds used for the EB-5 investment must be earned lawfully, either in the U.S. or abroad. The investor must show the full source of the $900,000 or $1,800,000 investment (commonly referred to as the “source of funds”) and then trace those funds from the investor abroad into the new commercial enterprise (commonly referred to as the “path of funds”).
Source of Funds Requirements
Common sources of funds are salary earnings, distributions from businesses or investments, sale of property, mortgage of personal assets owned by the investor, or gifts from third parties. If the investor receives a gift as the source of funds, the person who gives the gift must fully trace their funds that ultimately became the investment. Funds earned or obtained in the United States while the investor was out of status are not deemed to be lawfully acquired.
The USCIS generally requires the investor to document the lawful source of the investment capital and also any administrative fee charged by the EB-5 project beyond the $900,000 or $1,800,000 investment. Although the administrative fee is not capital as defined by the 8 CFR §204.6(e), the USCIS routinely requests documentation as to its lawful source.
Generally, extreme detail on the source of funds is needed. The lawyer and the investor must develop a comprehensive narrative with tabbed exhibits to explain to the USCIS exactly how the funds were lawfully obtained. Below are some important points for common sources of funds:
- The regulations require proof of five years of tax returns under the 8 CFR §204.6(j)(3)(ii). It is a best practice to obtain proof of the income tax filings from all jurisdictions where the investor was subject to taxes. If the investor did not file income taxes, then obtain proof why filing was not required. Even though the regulation says to provide only five years of tax returns, the USCIS routinely requests tax returns from much further in the past, depending on the source of funds presented.
- If the investor sells a piece of property or an asset for the investment (real or otherwise) or the investor obtains a loan secured by his or her real property, the investor must document how the investor obtained the property or asset. The investor and the attorney will have to reach back to where the investor obtained the funds to purchase the property or asset.
- If the investor’s source of funds is from savings over time, the best practice is to provide at least five years of bank statements, showing the accumulation of wealth over time. Couple this with documentation of how the investor accumulated the wealth, like paystubs, proof of bonuses, proof of rental income, etc.
- If the investor’s source of funds is from his or her business, document where the business is located, what it does, file copies of its tax returns, and show the USCIS that the investor owns a viable and operating business. The USCIS often asks how much the investor used to first establish the business, and for evidence on the source of the funds used to start the company, even if that company was started a while ago.
- If the investor takes a loan against his or her house or other property for the source of the investment, make sure the loan is collateralized with the investor’s personal property as described above. This is most common when the investor takes a mortgage on his or her residence for the investment. The applicant should present evidence that the loan is collateralized by the investor’s ownership interest in the home. The USCIS has a pattern of denying loans that are unsecured because it believes that such loans do not create “primary and personal liability” for the investor and thus, such a loan is not considered “capital.”
- If the investor receives a gift from a friend or family member for the EB-5 investment, then the applicant must document the source of the gift to the same level of detail as if it was coming directly from the investor. If a gift tax was levied, provide evidence of how it was paid.
Path of Funds Requirement
In addition to the source of funds, the investor must establish that he or she is the “legal owner” of the capital invested. Generally, this means that the investor must document the “path of the funds” using bank statements to establish that the investment was made with the immigrant investor’s own funds. If there is any question to the owner of the funds that was transferred for the investment, the USCIS will issue a request for evidence inquiring about the legal owner of the funds.
There are several important points:
- If the investor is transferring their lawfully sourced funds into or from a bank account where there is also a third party listed on the account, generally, the other party must confirm that all of the funds being used are from the investor;
- If a gift is the source of the funds, there must always be a gift affidavit to show that the person who have gave the gift gave the funds freely to the investor for the investor to use, otherwise, the USCIS could claim that the funds are not the legal property of the investor.
To trace the investment funds from the investor to the new commercial enterprise (or escrow account if applicable), the investor must document every wire transfer, cash withdrawal, and check that was part of the transaction, especially if the funds flowed through several accounts on the way to the U.S. account of the new commercial enterprise. The USCIS frequently asks for proof that the $900,000 or $1,800,000 that was sourced was the exact money that made it into the account of the escrow agent or the new commercial enterprise.
In many countries, there are local laws prohibiting the purchase of U.S. dollars, restricting the amount of purchase of U.S. dollars, or requiring special licenses to be acquired before the purchase of U.S. dollars and then transfer out of the country and into the U.S. can occur. These currency restrictions are common in countries where the local currency is unstable to prevent further instability of the local currency. If the investor is from a country where currency restrictions exist, the immigrant investor will have additional challenges with the USCIS.
If the local rules require government approval before U.S. dollars can be purchased and then transferred to the U.S., such as in South Africa, then the investor should obtain this approval in advance and include that approval in the I-526 petition.
Beyond government approval, some countries restrict the amount of U.S. dollars that can be exchanged and then transferred each year. China, Vietnam, Nigeria and India, all countries having a high number of EB-5 applicants, have restrictions on the amount of U.S. dollars that can be purchased per year. For countries where it may be impossible or impractical to purchase U.S. dollars and then transfer those funds to the U.S. through normal banking channels, the investor should seek the advice of their immigration attorney prior to making any transfers to be sure that adequate documentation can be provided to satisfy the USCIS requirements.
In these countries, it is common for some EB-5 investors to enter into a currency exchange with a third party to purchase U.S. dollars for the investment. This third party may or may not be a licensed money exchanger; these are commonly referred to as “currency swaps.” And while these are common methods of transfer around the world, they aren’t always accepted by the USCIS in the context of I-526 petitions.
In the typical EB-5 currency swap, an individual will transfer funds in a local currency to a third party (an entity or a natural person). The third party then will transfer to an account of the investor an equivalent amount of funds in U.S. dollars. The investor will take those U.S. dollars and use them to make an EB-5 investment. Until recently, the USCIS did not question the source of funds of the third party assisting in the currency swap, nor did they question whether the third party was a licensed currency transfer agent. However, the USCIS has shifted their policy and routinely requests evidence for each case where a third party assisted in the exchange.
In cases where a currency swap was utilized, the I-526 petition should include the following documentation:
- There should be a written agreement between the parties outlining the terms of the exchange, or a signed letter by the parties outlining the exchange, and the third party should confirm the funds are the property of the investor and not the exchanger;
- For cases where the exchanger is a person, the I-526 petition must include evidence of the exchanger’s source of the U.S. dollars, including income certificates, tax returns, and bank statements to show how he or she earned lawfully the U.S. dollars used in the exchange. In these cases, the applicant is essentially proving two separate sources of funds, so much more documentation is required, and the third party must be willing to turn over this additional information to the USCIS for the investor;
- For cases where the exchanger is a company, but it is not a registered or licensed money exchanger, the I-526 petition should include corporate registration documents, tax returns, bank statements, and evidence of what the company does. Again, the applicant is essentially proving two separate sources of funds and the company must be willing to turn over this additional information to the USCIS for the investor;
- For cases where the exchanger is a licensed money agent or foreign exchange agent (inside or outside the country where the investor’s funds originate), the I-526 petition should include the license by the appropriate jurisdiction and wire transfer records and receipts to document the transaction.
Generally, for cases where the exchanger is a licensed money agent or foreign exchange agent, a copy of the written agreement for the exchange and a copy of the exchanger’s license are sufficient. The USCIS has been approving cases where the investor can show a licensed exchanger was involved (even if that occurred in a separate country), and the USCIS seems to accept that such U.S. dollars coming from a licensed exchanger is “lawful.” Thus, the license constitutes sufficient evidence that the U.S. dollars were “lawful” from the exchanger. However, when the exchanger is an individual or a business not registered as a foreign exchange agent, that person or company must provide evidence of the source of the U.S. dollars used in the exchange. Moreover, the third party must understand that their information will be turned over to the U.S. government in the I-526 petition. It is best for the investor to collect all the documentation up front from the third party to avoid a situation where the USCIS sends a request for additional evidence on the exchange, but then the exchanger refuses to provide documentation on the source of the U.S. dollars used in the exchange.
D. EB-5 Employment Creation
The final, and one of the most important criteria for the I-526 petition is the job creation requirement. The new commercial enterprise must create not fewer than 10 full-time positions for qualifying employees for each EB-5 investor.
There are two different forms of job creation depending on whether the investor is doing the “direct” EB-5 investment or a regional center fund investment. In the direct investment context with no regional center sponsorship, the 10 jobs created must be full time (35+ hours per week), permanent, and for W-2 employees of the new commercial enterprise. Independent contractors do not count. Additionally, the positions must be filled by qualifying employees, meaning a United States’ citizen, a lawfully admitted permanent resident, or other immigrant lawfully authorized to be employed in the United States including, but not limited to, a conditional resident, a temporary resident, an asylee, a refugee, or an applicant remaining in the United States under suspension of deportation. The business plan submitted with the I-526 petition must describe the positions that will be created and when they will be created. Jobs can be created throughout the investor’s two-year conditional green card; they don’t need to be created all at one time or before the I-526 petition is filed or approved. This type of job creation is sometimes difficult for small or new businesses; 10 full-time jobs create a large payroll for a new business, so investors doing the “direct” investment should speak with an attorney regarding the burden to create these jobs.
If the investor makes a regional center investment, the I-526 petition must be accompanied by evidence that the investment will create full-time positions for not fewer than 10 persons, either directly or indirectly, through revenues generated from increased exports. Under the USCIS rules, indirect jobs are those jobs shown to have been created by the project because of capital invested in a commercial enterprise affiliated with a regional center. These indirect jobs are often created through the construction of the project, and then through the ongoing operations of the project. The number of indirect jobs created through an EB-5 investor’s capital investment is based upon a business plan and a detailed economic analysis. The EB-5 petition contains an economic report prepared by a professional economist to show that 10 indirect jobs will be created for each investor in the project.
Filing the Petition with USCIS
The applicant should have an attorney help them to prepare the I-526 petition for filing with the USCIS. I-526 petitions are complicated filings requiring the submission of voluminous evidence. In the context of a regional center EB-5 investment, most of the documents, including the above-mentioned business plan and economic report, will be prepared by the project and then given to the investor to file with the USCIS. However, investors still must review all materials with their lawyer to understand the project and the application contents. For investors filing a “direct” EB-5 petition, preparing the business plan and supporting business documents falls squarely on the investor and his or her attorney, so working with a competent lawyer with EB-5 experience is important.
In summary, the I-526 petition must contain: (1) the appropriate filing fee; (2) the completed form I-526 with required signatures; (3) all EB-5 project related exhibits; and (4) the client’s full source and path of funds. The petition also should include a detailed cover letter explaining all eligibility.
The I-526 petition must contain evidence the investor wired the funds to the new commercial enterprise or its irrevocable escrow account. This means that the petition must contain the actual wires of the investment.
- I-526 Petition Processing
If these requirements are met, the I-526 petition should be approved. If the investor and his family are abroad, they will apply for immigrant visas at a U.S. Consulate abroad. When they enter the U.S. on the visas, they will become conditional permanent residents of the United States. If the investor and his family are in the U.S., they may be eligible to adjust their status to conditional permanent residents using Form I-485 and filing it directly with the USCIS.
Conditional permanent residence is granted for two years, and at the end of two years, the investor and his family must file Form I-829 to remove those conditions. At that time, the investor must show the new commercial enterprise was sustained during the period of conditional permanent residence, their investment was sustained during the period of conditional permanent residence, and the 10 jobs were created.
Processing time for the first stage in the process, the I-526 Petition, varies widely. At present, the average processing times for I-526 petition is between 24 to 36 months. However, actual processing times can be tracked on the USCIS website at: https://egov.uscis.gov/processing-times/.
On Jan 29, 2020, the USCIS announced that it would be making a significant change to the processing of I-526 petitions. The USCIS previously had a policy to adjudicate EB-5 petitions on a “first-in, first-out” basis. This meant that the USCIS was to review and decide EB-5 petitions based solely on the date the petition was filed with the USCIS. The USCIS ended this policy and now decides EB-5 petitions using the “visa availability” approach. The “visa availability” approach outlined by the USCIS would prioritize EB-5 petitions for decisions based on whether a visa number is available to the investor. This ties the timing of the decision on the EB-5 petition to whether the investor is subject to visa retrogression based on their country of birth.
Currently, investors who were born in mainland China and Vietnam are subject to visa retrogression due to the higher demand for EB-5 visas for investors and family members born in those countries. As a result of this change in policy at the USCIS, investors who were born in mainland China or Vietnam, who are subject to the visa retrogression with priority dates that are not yet “current” on the visa bulletin, can expect to wait longer for their EB-5 petition to be approved by the USCIS.
In conclusion, the I-526 petition can be complicated, so it is important to work with an experienced EB-5 lawyer on the preparation and filing of the petition with the USCIS. However, I-526 petitions have many advantages. The investor can “self-sponsor,” meaning that you do not need to rely upon a U.S. employer or U.S. citizen or permanent resident family member to sponsor you for permanent residence to the U.S. Additionally, the EB-5 path leads to permanent residence in the U.S. for the investor and his or her spouse and unmarried children under the age of 21. As permanent residents, the investor, spouse and children can work in the U.S., study in the U.S. and live permanently in the U.S. It also can lead to U.S. citizenship if the investor and family members later choose to naturalize. The upsides to permanent residence in the U.S. are great, which is why so many investors and their families have used this advantageous program to achieve their American dream.
Read about the next step in the EB-5 process: 2-year conditional permanent residency
 See 84 FR 35750, 35808 (PDF) (July 24, 2019) (to be codified at 8 CFR 204.6(f)).
 See 84 FR 35750, 35809 (PDF) (July 24, 2019) (to be codified at 8 CFR 204.6(j)(6)(ii)(A)).
 USCIS makes designations as part of the petition adjudication and does not issue separate designation notices. See 84 FR 35750, 35809 (PDF) (July 24, 2019) (to be codified at 8 CFR 204.6(j)(6)(ii)(A)).
 See 84 FR 35750, 35809 (PDF) (July 24, 2019) (to be codified at 8 CFR 204.6(i)). See 84 FR 35750, 35809 (PDF) (July 24, 2019) (to be codified at 8 CFR 204.6(j)(6(ii)(B)).
 See 84 FR 35750, 35809 (PDF) (July 24, 2019) (to be codified at 8 CFR 204.6(i)).
 See 8 CFR 204.6(e). See also USCIS Policy Manual, Volume 6, Part G, Chapter 2, Section A.
 INA §203(b)(5)(A) and 8 CFR §204.6(e), 8 CFR 216.6(a)(4)(iii).
 Matter of Izummi, 22 I&N Dec. 169 (AAO 1998)
 See 8 CFR 204.6(e). See also USCIS Policy Manual, Volume 6, Part G, Chapter 2, Section A.2.
 See INA 203(b)(5). See 8 CFR 204.6(e).
 See Matter of Ho (PDF), 22 I&N Dec. 206 (Assoc. Comm. 1998).
 See Matter of Izummi (PDF), 22 I&N Dec. 169, 195 (Assoc. Comm. 1998).
 See 8 CFR 204.6(j)(4)(i).
 See INA 203(b)(5)(A)(ii).
 See 8 CFR 204.6(j)(4)(iii).