US Green Card: Understand the nitty-gritty of EB-5 visa program before investing for American citizenship

By Sumi Rengaraj

For foreign nationals seeking permanent residency in the USA, opting to invest through the EB-5 visa program has become a lucrative option. Under the umbrella of the EB-5 program, the real estate sector has become of prime interest to investors because of the lucrative returns and added benefits.

Despite its attractive nature, investing in EB-5 real estate is often challenging to many since it requires an extensive knowledge of the capital stack, economic structure, and the financial threats it presents.

For making an informed decision over an EB-5 real estate investment, investors need to consider both legal and financial elements to evaluate the critical elements associated with the model.

Legal considerations

The foremost legal consideration for foreign nationals seeking to make an EB-5 real estate investment is to corroborate with the existing immigration laws in the USA.

The laws stipulate the investors to contribute at least $1.8 million (or $900,000 in selected areas), and generate at a minimum of 10 permanent jobs for Americans. It also requires the investor to ensure whether the source of the funds are legally secured. To prove the lawful sources of the fund, investors need to submit specific documents such as bank statements and tax returns.

Investing in the EB-5 program is deemed a securities transaction under US jurisdiction, which demands the complete corroboration of Securities and Exchange Commission (SEC) regulations.

This remains a crucial part of the legalities since it consists of sharing precise information with the investors and circumventing duplicitous practices.

Individuals seeking to invest in the EB-5 programs are encouraged to conduct prior research on the project of their choice as well as the regional center behind it. Assessing the business proposal, financial history, projections, and job creation plans is of paramount importance to avoid any legal trouble later on.

One could hire a competent immigration attorney to file the necessary forms, such as I-526, I-485, DS-260 and I-829. The attorney also assists the investors by understanding their goals and propelling them towards the right direction. An immigration attorney also ensures that the investment of choice is compliant with the stipulations of the EB-5 program.

Another crucial legal aspect is the eligibility of the investor’s family to receive permanent residency in the USA. As per the EB-5 program, the spouse of an investor and unmarried children under 21 years old are eligible to receive permanent residency.

However, the benefit does not extend to extended family members, such as parents or others. The validity of the visa also plays a part here, as, after the issuing of the EB-5 visa by the overseas consulate, an investor must enter the USA within six months, or miss out on the opportunity altogether.

Financial consideration

Similar to other investments, the EB-5 program comes with the risk of losing capital in the course of the investment. They must acknowledge the EB-5 real estate project’s return on investment (ROI) in comparison with similar investment avenues. These projects do not always assure high returns, since the primary objective of the EB-5 projects is to generate jobs, not lucrative returns.
The EB-5 investments usually remain of an illiquid nature, which insists that investors must contemplate their need for liquidity ahead of going through with them. These projects can usually run up to five years, but there have been exceptions.

While doing so, investors must also acknowledge the US tax indications on their investment. Income tax is deducted on any profit margins, as well as estate tax considerations. The US taxation system applies globally, meaning the EB-5 benefactors might be subjected to American taxation based on their worldwide income.

Investors must seek out completely financed projects that do not depend on EB-5 support. It is also preferable to invest in projects which have already begun. This helps in decreasing project guarantee risks, while also authorizing previously created jobs to be counted as EB-5 financed jobs. The investors must also look for projects that lay down a transparent exit strategy upon the maturation of the investment.

A crucial financial consideration must be on the location of the preferred project, as projects in rural and high-unemployment areas often become eligible for reserve visas. These are often useful to investors from India and China. The projects in rural and high-unemployment areas also offer substantially low investment amounts ($800,000) that enable more investors from developing countries.

For EB-5 real estate investment, all considerations come down to one subtle point – prior due diligence. While the program offers a unique avenue for foreign nationals to invest and receive permanent residency, it remains a form of any similar investments that comes with its own set of challenges. The dynamic nature of the legal and financial challenges often evolves due to policy changes at the highest levels, which makes it a continuous process that can be charted only through a sustained search for relevant information and knowledge.

(Author is Co founder of Ashton Gray)