The EB-5 program is a way for foreigners to obtain legal permanent residency in the US through investment. In theory it is fairly simple, especially when the foreign investor is directly investing in a business. The foreign investor must invest $1,000,000 in capital to start a business in the US that will create 10 full-time jobs for US citizens or legal permanent residents within two years. The foreign investor will submit a business plan to the US Citizenship and Immigration Services (USCIS) along with details evidencing the source of the money being invested.

If the business is being created in an area designated by USCIS as a low-employment area then the investor need only invest $500,000. USCIS refers to these areas as Targeted Employment Areas or TEA. This is to create an incentive for foreign investors to create jobs in areas that need them most. These low employment areas are less attractive locations for investors but the EB-5 program makes these areas attractive to foreign investors seeking a green card. Since TEA allows investors to gain the same benefit at half the price it is very popular and many of EB-5 investors take advantage of this. The majority of EB-5 visas are based on TEA investments of $500,000.

The investor must account for every dollar that is being invested using wire transfer records and bank statements. The money being invested must, of course, be from a legitimate source. The US Government does not want this program to be used by drug kingpins or other criminals to purchase a visa with money from illicit sources. This is a tedious task that requires an immigration lawyer well versed in the EB-5 source of funds requirements.

If USCIS approves the application the foreign investor (along with the investor's spouse and children) will receive a conditional green card. The conditions of the green card are that the investor actually creates the 10 new full-time jobs and that the full $1,000,000 is invested. After two years the investor must submit proof of job creation to USCIS in order to have the conditions removed from their green card and to become a legal permanent resident.

Proof of job creation is provided in the form of tax returns, payroll records, W2 forms, and other accounting documents. The 10 full-time jobs created must be for salaried employees. The investor's immediate family may work at the business but they will not count towards the 10 employee requirement.

The direct investment process described above accounts for merely 2% of EB-5 visas. That is because the vast majority of foreign investors choose to use a Regional Center.

A Regional Center is a company, which must be approved by USCIS, that pools money from investors to be put into a large-scale business venture. Regional Centers are so popular because

the foreign investor needs only to have the money to invest. The investor does not need their own business proposal or job creation data, as the Regional Center will take care of that. Regional Centers will also take care of finding local contractors and setting up the management structure of the business. It makes sense for foreign investors to use these regional centers since they presumably have no first-hand knowledge of the US market and no experience managing a US business.

There are roughly 400 approved Regional Centers today and more in the works. Most Regional Centers are privately owned and operated. The majority are opened by lawyers or US investment firms. There are some Regional Centers that are affiliated with the Federal Government and a handful that are part of a State Government project.

There is one other major advantage to investing with a Regional Center. A Regional Center that is pooling money from 1000 investors to build a 50 million dollar hotel does not prove job creation by merely counting the number of people employed by the hotel once created. A Regional Center is permitted to count indirect job creation (90% of indirect jobs) towards the job creation requirement. This means that the construction workers or other contractors that build the actual structure count as jobs created by the business.

The job creation criterion is also more generous for Regional Center projects. The foreign investor does not do a headcount of every person that works on the project. Instead there is a projection made based on a mathematical formula as to how many jobs are theoretically created by the expending of $50,000,000 on the building of a hotel. If spending the $50,000,000 would create the necessary number of jobs under this formula than the Regional Center must only prove that this money was spent. The Regional Center will submit invoices and contracts to evidence this.

The EB-5 program began in the early 90’s. It was initially a flop, failing to achieve its intended goal of creating jobs and bringing foreign capital into the US. In 2001 there were less than 200 EB-5 visas issued but in 2014 there were nearly 10,000 issued.

The EB-5 program took off thanks to the 2008 financial crisis. Banks that were dolling out money to anyone who asked were suddenly tightening the purse strings and refusing loans. The EB-5 program became the best way for a startup to get capital.

Today the program brings almost $2 billion dollars into the US annually. While slow to start, the EB-5 program is largely considered a great success. The $2 billion in investment capital does not even account for indirect money the program brings into the US economy. The foreign investors who enter the US with an EB-5 visa are not living in a vacuum. These individuals are spending

money in US stores, they are buying or renting homes, they are paying for services from US companies, and they are paying taxes to local, state, and federal government. The program injects an extraordinary amount of money into the US economy.

However, critics of the program do not attack it for lack of success.

Many have become critical of the concept of selling immigrant visas to the highest bidder through an investment scheme that is practically unregulated and operates through fast-talking scammers. The proposed changes to the program may be the answer that these critics are looking for.

The primary changes being proposed to the program will put an end to the unregulated investment of billions of dollars. Currently the SEC can step in when there are issues of fraud in an EB-5 investment but by the time the fraud is discovered there is really nothing left for the SEC to do but clean up the mess. New regulations would allow the SEC to regulate the investment process so they may actually prevent the mess from occurring in the first place.

Regional Centers will be required to comply with securities laws. This will end the process of regional centers opening a business with foreign capital and simply giving the project over to local developers. These regional centers will now be responsible for their own financial disclosures. Lawmakers intend for this to put an end to localized corruption schemes and false investment numbers.

Of course one of the major changes being discussed is the increase to the amount of capital investment that will be required for an EB-5. The TEA minimum investment amount may be raised from $500,000 to $800,000 and the non-TEA projects from $1,000,000 to $1,200,000. This is unlikely to affect the number of immigrants that are willing to invest since the majority of EB-5 projects have investment returns that are half of what the market would pay.

While the proposed changes will make the EB-5 program much more transparent it will not change one of the program’s most glaring criticisms. The EB-5 program allows the wealthy to buy their spot at the front of the line. Many argue that the program allows those least in need of a visa the opportunity to leapfrog over those who need it most.

It is true that the EB-5 program allows wealthy immigrants a faster route to legal status in the US. However, it is misleading to say that these foreign investors are cutting the line for a visa. The EB-5 program has visas set aside for these investors so they are not actually taking away a visa from someone else that is already waiting.

It is perplexing that some people are shocked and appalled when they find out that a visa can be purchased with money. It is as if these critics have been living in a self-sustaining commune in the wilderness. The exchange of currency for goods or services is the backbone of the global economy. The idea that a person with money can trade that money for a green card is consistent with American values of capitalism.

It may seem unfair that the EB-5 program discriminates against the poor who cannot afford to participate. However, the immigration policies of the US have always been inherently unfair ever since the US first entered the business of controlling the movement of people. The entire concept of citizenship and the foundation of US immigration policy are rooted in the discrimination against people born in certain geographical locations. There is nothing “fair” about immigration laws.

At least the EB-5 program employs a logical system for determining who will be permitted to enter the US. All other paths to citizenship in the US are based on completely arbitrary factors like whether you have a family member in the US, whether you filed a document before a particular date, whether you happen to fall in love with a US citizen, and in many cases what Immigration Judge gets assigned to your case.

The EB-5 program should be the least offensive immigration policy of the US. US immigration policy costs the taxpayers billions of dollars in enforcement costs. The EB-5 program is actually generating revenue rather than creating debt. Moreover, opponents of opening US borders to immigrants by and large base their opposition on how doing so floods the labor market and potentially lowers wages and takes jobs away from US citizens. The EB-5 program is doing the exact opposite by creating jobs for US citizens. It seems as though even the most xenophobic Americans would support this program.

US immigration policy is deserving of criticism. The US immigration system is a disaster. However, the EB-5 program is one of the very few examples of a time when Congress got it right.

The proposed changes to the EB-5 program address the primary concern of critics. The changes will require compliance with security laws and eliminate the insider dealings and corruption that come with the transfer of large amounts of unregulated money. With the new rules in place the EB-5 program should become the least controversial immigration policy in the US and the most successful.