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Friday, November 2, 2012

EB-5 reform could help the U.S. economy

By EB5 Investors

The EB-5 visa program has been a successful pathway to permanent residency for thousands of foreign investors for over twenty years. It has also been an important source of financing for many commercial enterprises in the United States during that time, especially over the last several years as the country has endured one of the worst recessions in history.

The EB-5 program, which is formally known as the Immigrant Investor Program, gives foreign entrepreneurs the opportunity to obtain green cards in exchange for investment in commercial enterprises in the United States. The green card that is awarded to investors who meet the requirements of the program is called an EB-5 visa, for the employment-based visa category it represents. The U.S. government established the EB-5 program to spur economic growth and the creation of lucrative jobs and other employment at home by attracting commercial investment from abroad.

An immigrant entrepreneur who invests either $500,000 or $1,000,000 in a commercial enterprise in the United States is eligible to receive an EB-5 visa if their investment leads to the creation or preservation of 10 permanent full-time jobs within two years. The lower investment amount, $500,000, can be made in a commercial enterprise that is located in a rural or struggling economy (Targeted Employment Areas), while a $1,000,000 investment can be made in a commercial development within any location in the United States. The same “10-jobs-created-or-preserved” requirements apply to both investments.

A growing number of foreign entrepreneurs use Regional Centers to manage their commercial investments. Regional Centers are federally-designated investment and development entities that (in the context of the EB-5 program) can accept money from multiple foreign investors and channel it into one or more commercial enterprises. Regional Centers can be government-sponsored agencies, public-private partnerships, or privately-held companies that identify areas for EB-5 investment, develop business plans, and manage EB-5 projects. This approach increases the likelihood of a successful EB-5 commercial enterprise, since most Regional Centers are led by experienced U.S.-based developers and business executives.

However, some modest reforms to the EB-5 visa program could help encourage further growth and development in the United States, while offering talented and entrepreneurial immigrants the opportunity to obtain permanent residency visas. For example, while Canada took in over 180,000 “economic immigrants” in 2010, the U.S. government has set the ceiling for employment-based visas at 140,000 per year. Canada’s population is a fraction of the United States’ population, and they are certainly not experiencing the same level of economic hardship as their neighbor to the south. There may not be a direct correlation between Canada’s immigration policies and their relatively stronger economic position, but the fact that they welcome substantially more immigrants relative to their overall population most likely has some positive economic impact.

Moreover, the U.S. government has set quotas on the number of visas issued to citizens of various countries, including China and India, which has the effect of shutting out hundreds or thousands of qualified and talented immigrants, and depriving the U.S. of their potential contributions. Student visas are typically revoked as soon as an immigrant has completed his or her studies, effectively forcing highly-educated individuals to return to their home countries with skills they have mastered in the United States, rather than encouraging them to remain here to apply those skills for the benefit of their adopted home. Why not grant permanent residency to student-visa holders who meet the requirements of this program?

Although up to 10,000 EB-5 visas are available each year, a maximum of roughly 6,000 have ever been issued in any given year. Since there are thousands of EB-5 applications out there, this suggests the U.S. government and its responsible agencies could do a better job of efficiently administering the application process so that more EB-5 projects are approved.

Finally, the government could consider increasing the number of employment based visas to 300,000 and designing the application process in such a way that the quality and number of immigrants from various countries is taken into account, so that otherwise qualified and talented individuals are not artificially eliminated from consideration. Perhaps it is also worth considering lowering the investment requirements for the EB-5 visa and engaging in an aggressive educational campaign throughout the world to increase the visibility of the EB-5 program and make foreign entrepreneurs aware of its benefits.