Pursuant to the Immigration and Nationality Act (“INA”), immigrant investors who contribute to the economic growth of the U.S. by investing in U.S. businesses and by creating U.S. jobs qualify for a U.S. permanent visa. Under the act 10,000 visas are allocated to the EB-5 immigrant investor program every fiscal year. Under the requirements for the EB-5 program the capital investment is set at $1,800,000 for direct investment or investments in non-targeted employment areas and $900,000 to rural areas and or targeted areas of employment.
Targeted Employment Areas (TEA).
At the establishment of the EB-5 immigrant investor program, Congress provided that investments in new commercial enterprises that are situated in a TEA are set at a reduced amount of $500,000 which has subsequently increased to $900,000. These TEA’s are defined as rural areas or areas with a high unemployment rate. If a project is given TEA status because it is in a high unemployment area it must present evidence that the area has experienced unemployment of at least 150 percent of the national average rate.
However if TEA status is given to projects in unemployment areas how are certain projects found in affluent parts of the country? This gives rise to questions regarding the manner in which these projects are granted the evidence needed to obtain TEA status. According to the United States Citizenship and Immigration Services (“USCIS”), a new commercial enterprise must principally conduct business in the location where it will systematically and continuously provide services that will support job creation. It can be assumed that the location of the project will be evaluated based on the entire area. Its location will be a culmination of all areas including the less affluent parts. Therefore, making it more feasible to attain TEA status.
While this route of selective use of census data so as to reflect the project location as a high unemployment area, can be seen as conduct that is not within the spirit of Congress and the TEA designation system. With the miscalculations of statistical data and approving projects that are not truly located in high unemployed areas, are the unemployed in the real high unemployment areas really being employed and benefiting from this true intention of the law and program? Albeit the EB-5 investor does not lose when they invest in a project that has questionable TEA status, it is the principle of the matter relating to the EB-5 program that is the issue here.
USCIS strictly states that for a project to obtain TEA status it must meet the statutory regulations and submit the following as evidence:
- Evidence that the area is not located within any Metropolitan Statistical Area as designated by the office of Management and Budget, nor within any city or town having a population of 20,000 or more as based in the most recent decennial census of the U.S.
- Relevant unemployment data.
- Demonstration of the boundaries and unemployment statistics that the unemployment rate is per the set average of 150% of the national rate.
Non-targeted employment areas.
Congress mandated that investors that wish to invest in projects that are not in TEA’s and are securely situated in affluent areas must inject $1,800,000 as capital investment. As this is an at risk investment it can be assumed that that as with any commercial real estate investment, location matters. This means that the better the location the higher the chances of the investment being successful and the investor obtaining their return on investment. Additionally, investors who wish to go through what is called the direct investment route, investing in their own business, will be required to invest $1,800,000.
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