Why the EB-5 Program Is More Than Just an Immigration Program
If the popularity of the EB-5 Immigrant Investor Program is anything to go by, it offers important benefits to foreign nationals who choose to embark on an EB-5 investment journey. Throughout the program’s three-decade history, it has helped hundreds of thousands of investors settle into their new, permanent lives in the United States, all the while pumping billions into the U.S. economy and generating hundreds of thousands of jobs for U.S. workers. Though it may be undeservedly branded a “pay-for-residency scheme” by critics (despite subjecting investors to rigorous job creation requirements), it offers some important benefits that render it more than a simple immigration program for foreign investors.
As of February 2021, the EB-5 program has been experiencing ever-longer processing times since 2019. With uncertainty building for those with EB5 investments—particularly those from backlogged China and Vietnam—some foreign investors have opted to pursue residency in Canada or Australia instead of undertaking an EB-5 investment in the United States. However, the EB-5 program offers two important benefits that drive many applicants to ultimately opt for an EB5 investment.
Green Cards for Dependents
No matter how much an investor may wish to relocate to the United States, staying together with their immediate family members is more important to most. A U.S. green card may be essentially useless for an investor if their spouse and dependent children cannot enter the United States with them. EB-5 investment participants with families need not worry—spouses and unmarried children younger than 21 are equally eligible for permanent resident status under the principal applicant’s EB5 investment. This distinguishes the EB-5 program from some other U.S. visa categories, which allow underage children to accompany their parents to the United States but require them to apply for their own permanent residency rights when they turn 18.
Relocating to the United States with one’s children opens the door to a myriad of valuable educational opportunities. With a green card, not only can a dependent child participate in the U.S. public education system, which offers a high-quality, well-rounded education as well as immersion in English and American culture, but they may also be eligible for in-state tuition savings when it comes time to apply to universities. Permanent residents are also put into the same pool as citizens, not international students, when applying to colleges, increasing their chances of admission.
The Opportunity for Passive Income
One of the EB-5 program requirements is that EB5 investment capital remain “at risk” throughout the duration of the investment period. This does not mean the investment itself must be risky but rather that the capital must incur both the possibility of increase as well as the risk of loss. Given that it is an investment, the chance of high returns is inherent and obvious. However, depending on the type of EB-5 investment an applicant engages in, they may be able to earn the returns passively.
Investors must choose between investing directly in an EB-5 project or working with an EB-5 regional center to invest in a project. Direct investors are generally required to engage in substantial, in-person managerial labor. Regional center investors, conversely, usually sign on as limited partners, reducing their managerial responsibilities to voting on pertinent business matters, which can be conducted remotely.
In this way, investors can earn passive returns on their EB5 investment while enjoying their new life in the United States—even in a state far away from their EB-5 project. This opportunity for passive income is unique to the EB-5 program—employment-based immigration programs are abundant, but the EB-5 program is the only one to offer residency rights for a passive investment.
The November 2019 enactment of the Modernization Rule may also financially benefit those who engage in EB-5 investments in 2020 and beyond. The Modernization Rule raised the minimum investment amounts from $1 million ($500,000 for targeted employment areas, or TEAs) to $1.8 million ($900,000 for TEAs), which, in conjunction with the debilitating effects of the COVID-19 pandemic, all but halted new EB-5 applicants. Diminished EB-5 demand could result in higher interest rates as an incentive to attract more investors, which could mean investors earn more competitive returns on their EB5 investments.