Paving the Road from E-2 to an EB-5 Visa -

Paving the road from E-2 to an EB-5 visa

By Natalia Polukhtin

The non-immigrant treaty investor visa E-2 is often times perceived as a “younger sibling” of the direct EB-5 program. Both E-2 and EB-5 allow for a benefit of a status based on the investment into a qualifying enterprise. Additionally, E-2 was historically viewed as a steppingstone to the green card – at a certain point, an investor’s business set up under E-2 may support transition to a permanent resident status through the EB-5 direct program. However, in rapidly transforming EB-5 environment, E-2 treaty investor visa holders may become more attracted to placing their capital with Regional Centers, thus creating a subset of the prospective marketing opportunity for Regional Centers administrators.

Let’s examine aspects of the E-2 treaty investor status that make non-immigrant investors attractive candidates for Regional Center offerings.


E-2 is a temporary non-immigrant visa based on a reciprocal treaty between the United States and the individual’s country of nationality. It allows a citizen of an E-2 treaty country to be admitted to the U.S. “to develop and direct the operations of an enterprise in which the applicant has invested a substantial amount of capital.”[1]

The basis for issuance of the E-2 visa – investment of personal capital – is very similar to the definition found in EB-5 regulations. For the purpose of E-2, the term “investment” is defined as the placement of the capital, including funds and assets, by the investor into the commercial enterprise at risk and with the goal of generating profits.[2] However, compared to the EB-5 category, regulations governing E-2 visas do not prescribe a minimal amount of investment capital and do not have a distinct job-creation requirement, making this visa an attractive option for small businesses or foreign investors willing to “test” the U.S. business environment without accepting full tax liabilities of a permanent resident status.

Unlike L and H visas, E visas do not have a limitation on how many times they may be renewed. Thus, it is not uncommon for E-2 holders to start considering immigrant options after years, even decades, of staying in the U.S. in a non-immigrant status. For many long-time E-2 visa holders, EB-5 has been proven to be a viable (and sometimes the only available) option to convert their status into a green card.

In many cases, the E-2 visa holders start inquiring about the possibility of converting their temporary stay in the U.S. into a permanent status when some external factor comes into play. It may be an investor’s child coming to the age when the child cannot stay in the U.S. as a minor dependent of the primary visa holder. It may be when the investor disposed of the assets and liquidated a business abroad and is ready to establish a tax resident status in the U.S. Recent massive disruption in operation of consular posts abroad during the COVID-19 pandemic generated a wave of inquiries from the E-2 investors stuck without the ability to renew their visas abroad. Many of those E-2 visa holders realized the convenience of the permanent resident status not dependent on uncertainties of visa processing and travel restrictions. Unfortunately for many successful entrepreneurs, not every E-2 enterprise can be easily converted into EB-5.


One of the factors making transitioning from E-2 to the permanent resident status difficult is the lack of proper planning of the source of funds documentation at the inception of the E-2 enterprise. The major condition imposed on the EB-5 petitioners is the requirement that the investment capital be obtained lawfully and clearly attributed to the investor.[3] Because E-2 is much more forgiving on the source of funds requirements than EB-5, the visa application is not intended to provide in-depth analysis of the source and trace of funds, generally limiting the scope of documentation to the bare demonstration of legitimacy of the capital and cognizable path of the money to the investment enterprise. Further, since EB-5 comes into place after the E-2 investor has spent several years running the business in the U.S., many documents become unavailable or difficult to obtain with the passage of time.

Another important consideration in planning a move from E-2 to EB-5 is the capacity of the business to generate requisite places of employment. Unlike E-2 that does not prescribe how many employees should be hired, EB-5 is very particular on job creation requirements. It is not uncommon for E-2 businesses to manage their payroll liability by hiring people part-time or engaging independent contractors for certain duties – all practices non-acceptable for EB-5. Hiring 10 or more permanent full-time workers may be commercially non-feasible for a small business or even not consistent with the practice of a particular trade if the industry is susceptible to seasonal fluctuations in the workforce.

Finally, in contemplating the transition from E-2 to EB-5 direct, business owners rarely take into consideration implications of extracting the capital from the fully operational business for the purpose of reinvesting it back to preserve the compliance with EB-5 regulations. Many E-2 visa holders tend to overlook one crucial detail of the EB-5 program – the requirement to invest the personal capital of the investor and place it at risk, which effectively precludes counting retained earnings of the E-2 business toward the EB-5 investment amount. As a result, before the invested amount can be considered a qualified investment, the E-2 visa holder has to make a distribution of profits or dividends payment (incurring respective tax liability) just to return that same capital to the operational budget of his enterprise. This route may be not only costly, but also risky for the operational status of the business and the potentially non-immigrant status that depends on uninterrupted functioning of the enterprise.

Solution? Use the income of the E-2 enterprise as a source of funds and invest in a qualified Regional Center project.


The obvious advantage of using Regional Center for EB-5 filing as opposed to converting E-2 into the direct placement of capital is the lower amount of the required capital. Even though the EB-5 Reform and Integrity Act of 2022 made a difference in the amount of investment, which went to $800,000 in TEAs to $1,050 million elsewhere, there is still an additional of $250,000  that needs to be realized to qualify for the approval of I-526. For a small business, this amount may be significant. Also, the cost of a payroll that the investor needs to maintain to create ten direct places of employment makes the entire endeavor even more costly.

Another benefit of relying on an E-2 enterprise to derive the funds for investment into the Regional Center, is the established history of the business dealing of the E-2 visa holder in the U.S. USCIS historically operates on requirements that serve valid government interests – preserving the integrity of the EB-5 program by confirming that the funds utilized are not of suspect origin.[4] This interest is easily served by a source of funds documented with the extensive evidence of the operational activity of E-2 business in the U.S., and reflected in the tax returns of the E-2 company or corporation.

However, probably the most significant advantage of the transition from E-2 to EB-5 through the investment into the Regional Center is the possibility of using the assets of the E-2 enterprise to collateralize the loan that may serve as a source of funds for the EB-5 investment. USCIS no longer follows its interpretation of indebtedness as including the investment of loan proceeds as of Nov. 30, 2018, the date of the district court decision in Zhang v. USCIS et al.[5] Nevertheless, the principle governing loans in EB-5 context remains intact – assets of the new commercial enterprise cannot be used to secure any of the indebtedness.[6] Accordingly, even if the investor accumulated significant assets in his E-2 enterprise, a loan obtained with the use of those assets as a collateral cannot be used for re-investment into the same enterprise for the purpose of expansion and further conversion into EB-5 direct. At the same time, the same loan proceeds, as long as they are properly secured[7], can be used for the investment into a Regional Center. In Zhang, the court remarkably emphasized that “bona fides of a loan tend to show that its proceeds were lawfully acquired,”[8] thus, making use of this loan proceeds even more feasible in the EB-5 process.

Finally, even though the complexities of the securities offerings cannot be fully analyzed within the scope of this article, it is hard to disregard the fact that for the purpose of compliance with securities laws, E-2 visa holders are very desirable candidates for Regional Centers marketing efforts, even despite their presence in the United States. Typically, EB-5 securities offerings solicit individuals outside the United States, with issuers invoking Regulation S exemption to the registration requirements[9]. When making an offering within the U.S., EB-5 issuers usually rely on Regulation D[10].

Under Regulation D, Rule 506(c), companies can broadly solicit and generally advertise the offering and still be deemed to follow the exemption’s requirements if the investors in the offering are all accredited investors; and the company takes reasonable steps to verify that the investors are “accredited,” which could include reviewing documentation (such as W-2s, tax returns, bank and brokerage statements, credit reports and the like). This exemption may be more available in the offering concerning E-2 visa holders than any other non-immigrant in the U.S.

Rule 506(c) does not propose a comprehensive list of methods for verification methods that would be deemed as “reasonable” but rather implies factual inquiry into purchasers of securities financial affairs. The documents that under standard scrutiny would provide necessary information regarding the purchaser’s financial standing – W2s, tax returns, bank statement, stock ledgers, etc – are usually readily available in E-2 context simply as being incidental to the visa status of the purchaser. Moreover, unlike, for example, F-1 students who invest the capital provided by the parents and rarely qualify for themselves, E-2 visa holders are generally established business owners and entrepreneurs who can be classified as “accredited investors” under the Rule 506(c) based on level of income or net worth.

The EB-5 Reform and Integrity Act of 2022 reshapes the EB-5 industry by attracting different demographics of investors and pushing Regional Centers to look beyond the traditional pool of prospective purchasers. E-2 visa holders with a proven track of entrepreneurship, clear source of funds and available capital cannot be disregarded in the search for qualified investors.

[1] INA §101(a)(15)(E)

[2] 22 CFR §41.51(b)(7)

[3] 8 CFR §204.6(j)(3)

[4] Spencer Enterprise Inc v. U.S., 229 F. Supp. 2d 1025, 1040 (E.D. Calif. 2001) aff’d 345 F.3d 683 (9th Cir. 2003).

[5] Zhang v. USCIS et al, 978 F.3d 1314 (D.C. Cir. 2020)

[6] 8 CFR 204.6(e)

[7]  Matter of Hsiung, 22 I&N Dec. 201, 202-03 (Assoc. Comm. 1998)

[8] Zhang, at 13.

[9] Regulation S of the Securities Act (1933) provides exemption from registration requirements based on two factors (1) the offer must be made outside the United States; and (2) neither the issuer nor the person acting on behalf of the issuer conducted “direct selling efforts” on behalf of the United States.

[10] Regulation D provides exemption from registration requirement under the Rule 506(b) allowing private offerings without use of general solicitation and advertising and to the accredited investors only; and Rule 506(c) limiting the purchasers to those who qualify as “accredited investors”.

Natalia Polukhtin

Natalia Polukhtin

Natalia Polukhtin, attorney at Global Practice, specializes in investment immigrant and non-immigrant visa categories. Native to Russia, Polukhtin earned her graduate and undergraduate degrees from Moscow State University before obtaining a law degree from Mercer University School of Law. She developed unique expertise in documenting source of funds originated from CIS-countries and published several articles on integration of non-traditional sources of funds, such as cryptocurrency, into the EB-5 process. She is a recipient of multiple professional awards, including Top 25 EB-5 Attorneys by EB5 Investors Magazine and recognition from IIUSA. She is a member of the Executive Council of the Immigration Law Section of the State Bar, and an author of a comprehensive guide written in Russian to business immigration to the U.S.

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