Wednesday, August 3, 2011

What is EB5 Regional Center?

We talked about EB5 in the previous blog. Notably, it is intimidating for a foreigner to invest in a country far from their home country,  a country they barely know anybody or anything. In most cases, language is the first factor to consider and the deal breaker.
In response to such concern, in 1992, U.S congress created Immigrant Investor Pilot Program and has extended it through Sept. 30, 2012. Pilot Program provides for investments that are affiliated with an economic unit known as a “Regional Center.” EB-5 requirements for an investor under the Pilot Program are essentially the same as in the standard EB-5 investor program, except the Job creation requirement of EB 5 program can be met through indirect jobs created by Regional Center. Thus this way, investors are not required to manage their new enterprises after they set up one, neither do they have the burden to provide, let alone manage, 10 US jobs.
Many investors tend to think that since Regional Center is designated by USCIS, investment in them must be safe. This assumption is far from truth.
The organizers of a regional center seeking the “Regional Center” designation from USCIS must submit a proposal, supported by economically or statistically valid forecasting tools, showing:
How the regional center plans to focus on a geographical region within the United States. The proposal must explain how the regional center will promote economic growth in that region.
How, in verifiable detail (using economic models in some instances), jobs will be created directly or indirectly through capital investments made in accordance with the regional center’s business plan.
The amount and source of capital committed to the regional center and the promotional efforts made and planned for the business project.
How the regional center will have a positive impact on the regional or national economy.

Standard of Approval
The approval of a regional center means USCIS recognizes the economic entity as a designated participant in the EB-5 Pilot Program. A regional center will be approved if  the econometric models and business plans appear to be feasible and that jobs should be directly or indirectly created through investment in the approved industry categories.
Regional Center Termination
If a regional center designated for participation in the EB-5 pilot program no longer serves the purpose of promoting economic growth, improved regional productivity, job creation and increased domestic capital investment, USCIS can terminate the Regional Center designation.
Consumer/Investor Protection
To address the previous assumption, the Regional Center designation does not mean that the regional center’s capital investment projects are backed or guaranteed by the government. Further, there are no guarantees that an investor may ultimately be granted unconditional permanent resident status through an EB-5 investment. For example, if it is determined that the investor’s money is not truly at risk or that insufficient jobs were created through the investment, then the investor’s petition may be denied. Investors should exercise due diligence when making an EB-5 investment.