Key Takeaways
- Troubled businesses must exist for two years, incur a 20% net loss, and meet EB-5 job preservation exemptions.
- Investments in troubled businesses require preserving 10 jobs for two years; each investor must independently meet job requirements.
- New EB-5 minimum investment amounts are $1,050,000 or $800,000 for TEA; rural areas receive 20% visa set-asides.
The EB-5 Immigrant Investor Program is a U.S. visa initiative that requires foreign investors to contribute a specific capital investment into a U.S. business, along with creating or preserving 10 full-time jobs for U.S. workers. However, certain accommodations exist for investments in economically troubled businesses, allowing job preservation to fulfill the employment requirement instead of having to create entirely new jobs. This analysis provides an in-depth look at these exemptions, their requirements, and implications for EB-5 investors.
What Is a Troubled Business?
The United States Citizenship and Immigration Services (USCIS) has a clear definition for what qualifies as a troubled business. Under EB-5 rules, a troubled business must meet the following criteria:
- The business must have existed for at least two years prior to the EB-5 investor filing Form I-526 or I-526E.
- The enterprise must have incurred a net loss. This loss must have occurred during the last 12 to 24 months before the investor’s EB-5 petition.
- The incurred loss must be at least 20% of the business’s net worth at the start of the time when the loss was measured.
These criteria are crucial as they determine whether an enterprise qualifies for flexibility under the EB-5 Immigrant Investor Program. Without meeting these conditions, the investment cannot be considered as one involving a “troubled business.”
Exceptions to the Job Creation Rule: Job Preservation
For investments made into troubled businesses, the requirement to create 10 new full-time jobs shifts to preserving existing ones. Here are the key aspects of this exemption:
- Investors must meet the program’s standard requirement of preserving or creating at least 10 jobs.
- The number of employees working in the business before the EB-5 investor’s involvement must be maintained at these levels for at least two years after the investment.
- Each EB-5 investor in a troubled business must independently meet this requirement. That means if multiple investors are involved, each one must ensure that their portion of the investment protects or creates the mandated number of jobs.
This feature provides some flexibility for both the business and the immigrant investor, especially when substantial layoffs or closures would have occurred without the outside capital.
How the USCIS Calculates Job Preservation
USCIS uses detailed reviews to confirm whether jobs were indeed preserved in troubled businesses. This includes two fundamental assessments:
- Employment Data: Employment numbers must be documented, clearly showing that the pre-investment level of jobs was sustained. This documentation serves as evidence to USCIS when petitioning.
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Economic Analysis for Regional Center Projects: For investments made through an EB-5 Regional Center Program, an economic analysis can be used to establish if the capital added to the business benefited the region by indirectly supporting employment. For example, investments that boost ancillary industries or supply chains may also contribute to preserving jobs.
This dual approach ensures that the job preservation exemption adheres to the program’s objective of promoting meaningful employment in the U.S. workforce, even in cases where creating entirely new jobs may not be realistic.
Differences Between Direct Investments and Regional Center Investments
How job preservation is measured varies based on whether the EB-5 investment is direct (where the investor acts as a direct owner) or through a regional center (an entity pooling capital investments).
- Direct Investments: When investors fund businesses directly, only jobs that the company itself preserves (or creates) are considered.
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Regional Center Investments: For regional centers, the employment impact is broader because indirect and induced jobs can also be counted. These terms refer to employment that arises within related industries or as a consequence of economic activity the investment generates.
While regional center investments offer greater flexibility to meet job requirements, they also call for meticulous documentation and financial forecasting, especially when proving these indirect impacts.
Who Qualifies as an Employee?
For a job to count toward the preservation requirement under the EB-5 program, it must be held by a “qualified employee.” According to the USCIS, qualified employees include:
- U.S. citizens
- Individuals with lawful permanent residency (green card holders)
- Conditional residents
- Refugees or asylees
- Individuals protected by suspension of deportation or cancellation of removal
Significantly, EB-5 investors, their spouses, children, or individuals holding temporary visa statuses (e.g., H-1B workers) cannot fill these positions for them to count toward the EB-5 job requirement. This clause ensures the investment acts as a benefit to the broader workforce and not just to the investor’s immediate family or unrelated visa holders.
Timeline for Preserving Jobs
The responsibility for demonstrating job preservation spans several critical stages of the EB-5 application. These stages are aligned with the program’s overall timeline:
- Pre-Investment: At the start, the investor must ensure their capital is fully committed to the enterprise. The funds must be invested irreversibly before petitioning.
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Filing of Form I-526 or I-526E: The investor must submit a credible business plan along with economic projections. This plan must outline how the business will preserve the required jobs over the next two years. Without this foresight, the application is unlikely to succeed.
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Filing Form I-829: This occurs at the end of an investor’s two-year conditional residency. Here, they need to provide final proof that the targeted jobs have indeed been preserved during this period.
Adhering to this timeline and maintaining detailed records is crucial for an investor seeking U.S. permanent residency through a troubled business investment.
New Developments Under the Reform and Integrity Act of 2022
Recent updates to the EB-5 Immigrant Investor Program have reshaped certain elements of the landscape, making it important for both new and seasoned investors to understand changes in investment thresholds and set-aside allocations. Effective May 14, 2022:
- The minimum investment amounts have increased to $1,050,000 for standard applications and $800,000 for investments in designated Targeted Employment Areas (TEAs).
- Visa set-asides now exist to encourage investments in specific underserved areas. For example, 20% of visas are reserved for investments in rural areas, 10% for high-unemployment regions, and 2% for infrastructure projects.
While the new changes do not directly affect the rules for troubled business investments, they add strategies for investors to consider when deciding how to structure their capital and participation in the program.
Practical Tips and Considerations for Investors
Investing in a troubled business can offer advantages, but it also requires careful planning. Key considerations include the following:
- Simplifying Job Fulfillment: In some cases, preserving jobs may be less complex than creating new ones, especially in businesses that are already operating but struggling financially.
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Documentation Is Critical: USCIS requires detailed proof of job numbers, financial records, and projections to confirm compliance with rules.
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Regional Center Advantages: Investors using regional centers may find it easier to meet job requirements, as indirect employment also counts. However, this path often involves more complexities in economic analysis.
By focusing on these practical elements, EB-5 investors can navigate the requirements for troubled business exemptions effectively.
The Path Forward
Investing in a troubled business through the EB-5 Immigrant Investor Program opens opportunities for investors looking to serve U.S. economic needs while obtaining lawful permanent residency. However, this pathway also demands thorough preparation, compliance with U.S. law, and long-term commitment to maintaining job levels. As VisaVerge.com highlights, these exemptions also offer flexibility for investors seeking to avoid the challenges of entirely new job creation, making the program a viable option in times of economic uncertainty. For detailed guidelines and updates directly from the source, investors may visit the official USCIS EB-5 page.
Learn Today
EB-5 Immigrant Investor Program → A U.S. visa program requiring foreign investments that create or preserve 10 full-time jobs for U.S. workers.
Troubled Business → A business meeting criteria like sustained losses, operating for at least two years, and losing 20% of its net worth.
Form I-526/I-526E → Petitions filed by EB-5 investors detailing investment plans and proving job creation or preservation to qualify for the program.
Regional Center → An entity pooling EB-5 investments, allowing job impacts to include indirect and induced employment in addition to direct jobs.
Targeted Employment Areas (TEAs) → U.S. regions with high unemployment or rural areas, requiring lower EB-5 investment thresholds to encourage development.
This Article in a Nutshell
The EB-5 Immigrant Investor Program offers flexibility for investments in troubled businesses. Instead of creating ten new jobs, preserving existing ones fulfills the requirement. Qualifying businesses must show significant losses and meet strict criteria. For investors, this pathway balances economic revitalization with immigration goals, transforming challenges into opportunities for U.S. communities and global entrepreneurs.
— By VisaVerge.com
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