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EB-5 Program Provides Investors Fast Track to U.S. Citizenship

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A federal program that allows international investors to gain permanent residence in the United States is expected to continue growing as more international businesspeople take advantage of the financial and personal opportunities it presents. In fact, the success of the EB-5 program has sparked a proposal to grant temporary residential visas to certain investors who purchase homes in the country.

The Immigrant Investor Program, also called “EB-5”, is administered by the U.S. government’s Citizenship and Immigration Services (USCIS).  Created in 1990, the program aims to stimulate the national economy through job creation and capital investment by foreign investors. EB-5 began as a temporary program and has been extended several times. The next expiration date is September 9, 2012, although there is a movement underway to make it a permanent program.

In general, EB-5 investors must invest in a new commercial enterprise (defined as one established after Nov. 29, 1990), or substantially restructure an existing enterprise. A minimum $1 million investment is required, although the qualification threshold drops to $500,000 for projects located in rural areas or those with high unemployment rates. The projects must also “create or preserve at least 10 full-time jobs for qualifying U.S. workers within two years,” the agency states on its web site. EB-5 investors receive a temporary, conditional green card once approved. They can apply for permanent U.S. residency after a two-year waiting period -- assuming the project creates enough jobs and otherwise continues to meet eligibility requirements.

Investors can find their own projects for investment, or use an EB-5 regional center to find “shovel ready” projects. An EB-5 regional center is a public or private economic unit that focuses on economic development and job creation. The U.S. government has approved some 180 regional centers across the country, with applications for another 50 pending.

Georgia has six regional centers, including one for the entire state, plus others for specific counties. The Georgia Center for Foreign Investment and Development focuses on such industries as real estate construction, bio-science and technology, tourism and hospitality, manufacturing and trade, health services, education, transportation, and commercial office. Others have a narrower concentration: the Southeast Regional Center targets on the automotive and manufacturing sectors in Troup County, Georgia, and Chamber and Lee counties in Alabama.

According to government statistics, 2,608 petitions for EB-5 visas were filed during the first three quarters of 2011 – a sizeable increase over the 1,955 filed during fiscal 2010. About 82% of the petitions have been approved thus far this year, according to published reports. Mainland China is responsible for a large portion of the increase, with much of that effort fueled by parents who want to place their children in U.S. schools, officials say. While the program is projected to continue growing, there is still plenty of room for more applications: the government had never come close to its annual allotment of 10,000 EB-5 visas.

The Immigrant Investor Program has supported a number of successful U.S. projects, ranging from ski resorts in Maine and Vermont to a marina/entertainment center in Jupiter, Florida; revamping two Philadelphia hospitals; and redeveloping the downtown theater district in San Bernardino, California. Economists estimate EB-5 will create 25,000 jobs and bring $1.2 billion in new investment in 2011 – plus provide a fast track to U.S. residency for thousands of investors and their families.

However, as with any other investment, there are risks – even when using a certified regional center. USCIS decertified one regional center in California after complaints such as inadequate job creation. A group of South Korean investors reportedly lost millions on a financially troubled string of dairy farms in South Dakota. Middlemen eager to cash in on the EB-5 program have created web sites in several languages and launched hotel seminars designed to gain hefty fees from interested investors. Since there are so many new centers and so many pitchmen crowding the market, experts suggest doing careful research on a potential partner’s track record and their potential projects.

Residential Visas to Homebuyers?

Unlike EB-5, the proposed new residential visa law does not put participants on a fast track to U.S. citizenship. The program would grant a three-year residential visa to those who spent at least $500,000 to acquire residential real estate. However, participants must pay cash for the house and spend more than the current appraised value. They would also be required to live there for at least six months per year; pay federal and local taxes; and obtain a work visa if they have a job in the country.

The residential visa plan is part of the Visa Improvements to Stimulate International Tourism to the United States Act (VISA-USA), introduced in Congress in mid-October. Sen. Charles Schumer of New York, one of the bill’s co-sponsors, said the concept is modeled on the Canadian practice of providing visas to non-Canadians who purchase property in that country. Other VISA-USA provisions include loosening visa requirements for Chinese and Canadian citizens. For example, Chinese tourists now must apply for a new visit each year they want to visit the United States. The proposal would authorize five-year visas covering multiple visits.

Canada and China accounted for 32% of internationally oriented home sales in the 12 months ended March 2011, according to the National Association of Realtors (NAR). A recent NAR survey found foreign nationals bought $41 billion in U.S. homes, while recent immigrants and those with visa exceeding six months spent another $41 billion. Of the total $1.07 trillion U.S. market, NAR added, internationally oriented sales totaled $82 billion – 8% of the current total, and a significant increase over the $66 billion spent in 2010. Canadian citizens were the top buyers at 23%, with China second at 9%.

Florida had 31% of total international sales, followed by California at 12% and Texas at 9%. Georgia was tied for fifth place with 2% in 2011 – a significant drop from 5% in 2010, but equal to the state’s 2% average over the past five years.

NAR noted that foreign buyers primarily look for three factors when looking for U.S. property: proximity of their home country, convenient air transportation, and climate. Recently, the group noted, its members noticed additional factors in those decisions. “Many U.S. colleges and universities have a significant number of international students, and some foreign families are purchasing U.S. properties in college areas so their child has a place to live,” the group stated. Also, foreign executives on temporary assignment are increasingly deciding to purchase a home rather than renting a residence.

VISA-USA has bipartisan support in Congress, as well as backing from the U.S. Chamber of Commerce and such tourism trade groups as the U.S. Travel Association. While the main goal of the residential visa plan is boosting demand in the abysmal housing market, it is also drawing fire from groups opposed to national immigration policies. Others question whether a flood of wealthy buyers will drive up prices for U.S. residents. Some dismiss the plan as simply selling U.S. visas to the wealthy, allowing them to sidestep the normal citizenship requirements. Despite the criticisms, the legislation seems to have favorable prospects for passage.

Questons or comments? Please email Michael Fenton at mfenton@atlantapacificgroup.com