How does the USCIS know that an EB-5 investment has created the required number of qualifying jobs?
I am interested in investing through an EB-5 regional center, but I am confused about the difference between direct, indirect, and induced jobs. How will the USCIS even know that these jobs have been created and preserved after two years? Is there any type of job which does not qualify for the EB-5 job creation requirement?
Only full-time permanent jobs count toward job-creation requirement. Construction jobs lasting over two years count. The advantage of an EB-5 investment through a project within a USCIS-approved regional center is indirect/induced job creation. Regional centers will supply you with a job impact/economic report that will outline and estimate job creation per each investor in a particular project. At the I-829 stage (removal of conditions), documents are submitted to attest to job creation during an investor''s conditional residency and USCIS will review whether the job creation methodology was followed.
If you are investing in a regional center project, you will be submitting an economic report estimating the jobs to be created based on expenditures and other complicated math things that are best left to experienced economists. At the I-829 stage, you will show that those expenditures were indeed made. Only permanent, full time jobs will count for EB-5 purposes.
The general rule is that all the information regarding the jobs created and preserved as a result of any investment must be disclosed by the investor. So, as an investor before you are granted a permanent green card you are required to disclose the number of jobs created as a result of your investment. Advisably, consult an EB-5 attorney on how to sort out the issues of how many jobs are created, how to categorize the jobs and what types of jobs will qualify for the EB-5 job creation.
Dale Schwartz
Immigration Attorney
Answered on
For direct jobs, we usually provide copies of W-2 forms and Quarterly Employee Wage Statements. For indirect jobs, we rely on the economist''s report that the jobs will be created, plus provide any additional information we can garner. I am not aware of any type of job that does not qualify, as long as it is full-time employment.
Jinhee Wilde
Immigration Attorney
Answered on
If you are interested in the regional center, they could count the indirect jobs based on the economic models that USCIS approved. The job creation is supposed to be permanent and full-time positions. Direct jobs are jobs that the business entity in which you invested will actually hire, which could be evidenced by I-9s and W-2s. One of the ways that regional center indirect jobs are counted are construction jobs lasting more than two years. The USCIS will review the report from the regional center on the I-829 application stage to see if the job creation methodology that they approved at I-526 stage was followed.
The burden of proof is with the investor applicant when he/she files to remove the condition on permanent residence. Generally, proof of employment creation can be demonstrated through copies of I-9s, tax records for employees who were previously hired, business payroll records and other relevant tax documents. A copy of a comprehensive business plan showing that the planned commercial enterprise will need at least (10) qualifying employees within the two years, and when such employees may be hired is also acceptable in the early process of the EB-5 petition. Direct jobs are those where you directly hire the employee(s) on a full-time, permanent basis. Indirect or "induced" jobs are essentially the jobs the invested commercial enterprise/project created, but does not directly employ.
Great question, as indirect and induced job creation can certainly be complex. As you may have read, when job creation has not actually occurred (i.e. 10 jobs per investor) at the time of a particular investor''s petition, then the EB-5 projects are required to demonstrate through a comprehensive business plan that the business will require 10 qualifying employees within the next two years (or 2.5 years from the approval of the petition, as per USCIS policy). The business plan is thus critical to explain how the jobs will be projected to occur through credible, transparent, and reasonable job methodologies. In terms of indirect and induced jobs, the business plan will need to be supported by an economic impact study that shows how it will be reasonable that jobs will occur indirectly as a result of the expenditures and/or revenues from the construction, operations or other qualifying activities of the business. Induced jobs can be forecasted by an economic impact study that considers the effect spending by employees will have in the local economy. In terms of direct jobs, the business plan will need to disseminate the detailed hiring schedule of the workers over the next two years, as well as other factors that will show that the jobs will really occur. I would also like to note that an economic impact study is not needed for proving direct jobs only; so most regional centers will usually include a mix of direct, indirect and induced job creation. It is also important to point out that only regional centers can utilize indirect and/or induced jobs. Finally, in terms of how USCIS validating that these jobs will occur, USCIS is now requiring very detailed, sourced and transparent data that illustrates how the jobs will be created. One major, potential concern, as a result of the USCIS''s two year rule (which is not in the regulations or statutes) is being able to prove that revenues (if utilized for indirect jobs) will occur within two years of each investor''s petition (called the I-526). Revenues can be an uncertainty, as it may depend on the project''s sales success. Hence, projects which can rely solely on the expenditure-based approach may be the wiser project to pursue for an EB-5 investor such as yourself.
I apologize in advance for the long reply. The EB-5 statutes and regulations allow investors in a regional center project to count indirect jobs, and to use "reasonable methodologies," such as economic models or input/output tables, such as RIMS II and IMPLAN, to predict the number of jobs that will be created as a result of the investment into that project. These models are based on government and private data, and have been in use for many years, and are accepted as valid forecasting tools. Please keep in mind that the terms direct and indirect jobs are used in two different contexts. In the EB-5 context, "indirect jobs" are jobs that are created outside of the New Commercial Enterprise into which the investors have invested. "Direct jobs" in this context, are jobs created by and at the investment company itself- i.e. they are W-2 employees of the company into which the investors have made their investment. Because a regional center project can count indirect jobs, it means that the New Commercial Enterprise can lend or invest money into another entity, and does not have to be the employer of the qualifying workers. This allows a regional center project to claim credit for more jobs than a non-regional center project, and also provides significant flexibility in the way that the EB-5 capital can be deployed into the job creating project. In economic terms, direct jobs are jobs created at the project location by the investment activity, regardless of who the employer is. In other words, if the EB-5 company lends money to a developer to build a hotel, jobs created at the whole site can be counted, including contractors and subcontractors. In a non-regional center project, most construction jobs cannot be counted because most of the workers on the site are employed by contractors and not by the New Commercial Enterprise itself (they are also not "permanent jobs" for the purposes of the program). Indirect jobs are jobs created up the supply chain. For instance, in our hotel example, if the hotel project needs to purchase doors and windows, the jobs created at the door and window manufacturer as a result of the increase in orders for windows and doors that results from the project would be indirect jobs. So would the drivers hired to ship the windows and doors to the project, and the people hired to make the glass that is used in the windows. Induced jobs, on the other hand, are jobs created when the people who earn money working at the hotel site (direct jobs) go out and spend their earnings in the community. For instance, the local coffee shop near the construction site would have increased business as a result of all the workers on the site, and would have to hire additional staff to serve the additional customers. As you can imagine, counting the indirect and induced jobs would be nearly impossible, so regional center projects can use established economic models to predict these jobs instead of trying to count them. The way they work is extraordinarily complex, but the general concept is simple. For every industry there is a multiplier whereby one unit of input equals x number of jobs created. The input can be expenditures, revenue, or sometimes direct jobs. For construction, we generally use construction expenditures as an input. For every $1 million spent on construction, x number of jobs are created, according to the model. The multiplier is different for every location, but an average multiplier for construction is 12 jobs for every $1 million spent. If the construction costs are $30 million and the multiplier is 12, then 360 jobs would be created. With construction, the matter is complicated further because if the construction lasts less than two years, the jobs are not considered to be permanent and cannot be counted. This only applies to the direct jobs though. Under USCIS policy, indirect and induced jobs can still be counted. The multiplier for indirect and induced construction jobs is about half of the multiplier if direct jobs are included. As a result, if the construction lasts less than two years, the multiplier would be six or seven jobs per million dollars spent (assuming the multiplier including direct jobs is 12). How does USCIS know the jobs are created? At the time the I-829 is filed, an investor needs to submit evidence that the input to the model was achieved. For example, if the basis for the job creation was $30 million of construction expenditures, the investor needs to prove that $30 million of construction expenditures were, in fact, made. If they were, then the investor has proven out the model, and the jobs have been created. If the input was revenue from hotel operations, the investor needs to prove that the hotel earned the projected revenue.
If the EB-5 investment is placed through an EB-5 regional center, then it is not necessary to show at least 10 direct jobs per investor; you can show a combination of direct, indirect and induced jobs. This is accomplished through an Economic Impact Report (EIR). Some EIRs calculate the number of indirect and induced jobs based on a the number of direct full time jobs. With this kind of EIR it is essential that the regional center project create the specific number of direct jobs. Many EIRs calculate the number of indirect and induced jobs based on the start-up costs and operating costs of the project. With this type of EIR, it is not necessary to show any direct full time jobs. If the EB-5 investment is NOT placed through an EB-5 regional center, it IS necessary to show at least 10 direct jobs per investor. These jobs must be full time (cannot combine part-time jobs), regular employees (W-2 not 1099), and directly paid under the federal employer identification number of the EB-5 entity in which the investor placed funds. This is shown through payroll records starting at least six months before the I-829 is filed. If the EB-5 investment is placed in a "troubled business" the investor gets credit for any newly created full time jobs plus any full time, regular, direct jobs that existed before investment, as long as the preserved jobs are maintained for the entire conditional residence period. This is shown through payroll records.
If the investment is made in a project under the regional center program, then the job creation is determined on the basis of the economic methodology. These econometric studies and reports calculate job creation on the basis of various factors - for example, some are based on expenditures and others on operational income. It is important to work with immigration counsel and your business/investment advisers to conduct due diligence on the project prior to investing so it is clear how your investment will be used, how the jobs are created and how they are allocated.
