A frequently asked question by potential EB-5 investors is whether they have to invest the full minimum investment amount at once (of $500,000 if in a TEA-based project), or if they can invest over time. The typical answer is that the investor has to put the full amount of the investment into the subject company all at once (or in escrow), in order to perfect the petition for conditional lawful permanent residency on Form I-526 under EB-5 rules and regulations. This is actually false.
The rule governing the qualification is found in 8 CFR § 204.6(g):
(1) General. The establishment of a new commercial enterprise may be used as the basis of a petition for classification as an alien entrepreneur by more than one investor, provided each petitioning investor has invested or is actively in the process of investing the required amount for the area in which the new commercial enterprise is principally doing business, and provided each individual investment results in the creation of at least ten full-time positions for qualifying employees. [emphasis added]
The regulation cited above used the progressive tense ‘in the process of investing’. That means that an investor can file an I-526 petition prior to having invested the full amount (or having ‘invested’). The regulation, by saying “has invested or” used the past tense ‘invested’ followed by ‘or’. This clearly shows that there are two paths to satisfying the regulation.
A couple of important points on this. The subheading of Section G is ‘Multiple Investors’. While it makes absolutely no sense from a policy perspective why a single investor project should not be allowed to file prior to effecting the full investment, given the title and the structure of the first sentence, it would be advisable to only use this in pooled projects. Keep in mind, pooling of investment capital is perfectly legal for both the Regional Center context and also non-Regional Center or Direct EB-5 projects.
As a practical matter, filing the I-526 petition prior to having effected the full investment will almost surely elicit a request for evidence from USCIS, who rightfully will want to see the full investment consummated. Investors and counsel should keep in mind the pros and cons associated with this strategy. The RFE process will take time and add to the delay prior to the investor obtaining the green card. For certain investors from countries that are in (or likely to come into) retrogression, investing prior to having the full investment amount available will allow them to save a great deal time by having an earlier priority date. Currently, this is most critical to those from India. Finally, this may be saving strategy for those who simply need time to beat the new regulations that are soon to raise the minimum (TEA-based) investment amount to $1.35 million or the rumored potential new legislation that would also have the effect of greatly increasing the minimum investment amount.
Investors and counsel should also be mindful of that the amount and pace of investment satisfies the ‘actively in the process’ standard of subclause (g). There is no firm guidance on what this means. To be conservative, the investor should initially invest as much as possible to thwart any claim that the initial investment amount was immaterial (thus producing a denial from USCIS). How much is hard to say. It would be difficult for USCIS to claim immateriality if greater than 50% of the investment was invested at the outset. Thereafter, it is paramount that the balance is funded to the NCE prior to the adjudication of the I-526. While that is presently two years, again, to be conservative, no more than 12 months would be advisable.
In summary, the ‘in the process of’ investment strategy has been legal all along for allowing investors to invest in a project over time. Investors should consider this strategy to accelerate the timing of the filing of their I-526 petitions given the potential for a large increase in the investment amount and significant delays from retrogression for Indians and Vietnamese as sooner may provide investors with significant benefits compared to later.
Matt Gordon is a noted policy expert in the visa-based investments field and is an authority on structuring visa-based investments. Mr. Gordon’s career spans business operations, finance and law. He is the editor of the EB-5 Book, the legal treatise on the EB-5 program and a frequent lecturer to immigration attorneys. Mr. Gordon has participated in policy events, including those hosted by the White House and Harvard University’s Kennedy School of Government. Prior to founding E3iG, Mr. Gordon was an investment banker for a decade and ran the US division of a Swiss multi-national corporation. Mr. Gordon is a licensed attorney, having practiced mergers and acquisitions law at the beginning of his career with the largest and most reputable Wall Street firms including Fried Frank and Sullivan & Cromwell. Mr. Gordon received his B.S. in Policy Analysis from Cornell University and his J.D., cum laude, from the University of Pennsylvania School of Law.