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In recent years demand for the EB-5 visa has far outweighed availability. This issue has resulted in the investors from visa backlogged countries needing EB-5 capital redeployment strategies.
Each year only 10,000 visas are available to EB-5 investors and their dependents. If each EB-5 investor has a spouse and a child, then roughly only 3,300 visas are available to principal investors. Additionally, there’s a per-country visa cap of 7% or roughly 700 visas annually (This is predicted to increase to 770 for FY 2020).
When a country goes over their annual visa cap then the U.S. Department of State may issue a cut-off date and that country may enter visa retrogression. Countries currently facing an EB-5 backlog include Mainland China, Vietnam and India.
These backlogs have created issues for new investors from Mainland China, Vietnam and India. Investors from these countries have a several year wait before they can apply and receive a visa if eligible. Processing times for the I-526 Immigrant Petition for Alien Entrepreneur have increased to 31.5 to 52 months. During that time, the investor’s original investment may be repaid by the EB-5 new commercial enterprise (NCE) before they finish (or even start) their two years of conditional residency. This then becomes a problem due to EB-5 Program rules.
The EB-5 Program requires investors to keep their investment “at-risk” during their two year conditional residency. If the EB-5 investor is still in the middle of their conditional residency at the time of repayment then the NCE must redeploy (reinvest) the capital to maintain the “at-risk” status.
Although there may be many investments that qualify, USCIS Policy Manual provided two examples that meet their redeployment criteria: Real Estate Assets and Municipal Bonds.
EB-5 investors must only create the required number of jobs once. They also do not have to redeploy their capital into another EB-5 investment. After job-creation success, according to the “EB-5 Capital Redeployment: Investors First!” article by Walter S. Gindin, the Policy Manual describes three “at-risk” requirements for an EB-5 investor’s capital redeployment investment:
1. The EB-5 investors must have placed the required amount of capital at risk for the purpose of generating a return on the capital,
2. There must be a risk of loss of chance of gain; and
3. Business activity must actually be undertaken.
Investor Due Diligence
Investors from backlogged countries must conduct extra due diligence when they begin the process of investing in the EB-5 Program to account for the need for redeployment of capital into future at-risk investments. Investors from backlogged countries will need to discuss their redeployment options with any regional center they select.
Regional Centers and EB-5 Capital Redeployment
Regional Centers will want to provide investors with options, but also ensure that any offering prioritizes their investor’s immigration goals and capital repayment. Each investor is different and depending on an investor’s risk tolerance some may prefer to invest in real estate offerings that offer higher returns rather than municipal bonds.
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