Eb 5 program legal issues

EB-5 Legal Issues

William A. Price, [email protected]

EB-5 Program• 10,000 visas per year available

without reference to national quotas• Minimum investment required is $1

million if not through a regional center serving an economically depressed population/$500,000 if through a center

• Decision Times Are Long: 16 months as of September 2013

EB-5 Statistics, 2005-12

2005 2012Applications 322 6041

Approvals 179 3677

EB-5 Benefits

• Conditional Visa On Initial Approval And Investment

• Permanent visa for self, spouse, and children under 21 if job and other conditions still in place after 2 years

• Return On Investments If Investment Produces Profits

• US Citizen if permanent resident 5 years

EB-5 Requirements• Basic Program: $1 million minimum

investment, 10 jobs directly created• Regional Center “Pilot” Program:

$500,000 minimum investment in “Targeted Employment Area”, 10 jobs directly or indirectly created (e.g., each mfg. job may result in 3 more community jobs)

EB-5 Process

• Initial application with I-526: 16 month wait for decision even after package complete, conditional visa if approved

• Permanent visas if jobs and investment happened per approved I-526, I-829 application possible after 2 years

• I-924 is application to become a regional center

EB-5 Fees• I-526: Lawyer time, economic impact

study (with business plan), realtor and other professionals, and Department of State application fee of $1,500

• I-829: Lawyer and certifying accountant or other professional fee plus Department of State application fee of $3,750 plus $85 biometric

Follow-On Employment

• Note that EB-5 investment creates an employer, which can apply for admission of additional persons under employment categories (H1-B or L1) or business visitor categories (Miscellaneous, includes B-1 business visitor, F1-OPT Optional Practical Training, 01-A Extraordinary Ability/Achievement)

Securities Law Issues• Full Investor Disclosure, Updated:

“All Issues Material To Investment”, Or Securities Fraud (10b-5 or state)

• Limited Exceptions To Public Offering Registration: Accredited Investors, Regulation D and JOBS Act apply

• Persons Selling Must Be Broker-Dealers if receive contingent compensation, or officers of company

Securities Documentation

• Accredited Investor Questionnaire (and proof funds are legally gained, investment suitable for investor(s))

• Subscription Agreement (control, reporting, and return rights of investors and promoters, Reg D reports after sale)

• Disclosure Documentation: financial, legal PPM or Prospectus

Company Documents• Articles of Organization (create

entity)• Bylaws, Operating Agreement, Other

Internal Agreements ($$ contributions, management rights , tax duties, agency authority)

• Membership Interests/Shares

Other Necessary Deals

• Franchisor/Franchisee disclosures and agreements/conditions, if applicable

• Real estate ownership or leasing documentation, including building/zoning

• Supplier and Customer contracts, credit terms

• Loans or other financing, if appropriate

EB-5 Taxation Questions• US Residents taxed worldwide on all

income, whatever source, applies to all conditional and permanent residents

• Entity level tax is possible• If bank accounts and other corporate

interests outside US, reporting to IRS• Tax Treaties May Reduce entity taxes,

specify where taxed

EB-5 Problems

• Deceptive Promoters: Note recent Cook County economic development where centers never built

• Problem locations: TSA’s not high job creation places, market risk for all products and services

• People: Operators need supervision, reporting, and encouragement/training, or replacement

ANY QUESTIONS?

William A. Price

Attorney at Law

www.growthlaw.com

[email protected]

Tel/Fax 1-800-630-4780