Differences Between The EB-5 Direct Investment Program And The Regional Center Program
The EB-5 Immigrant Investor Program, also called the EB-5 Direct Investment Program, was created by Congress, in 1990, to provide a method for foreign nationals to become lawful permanent residents through capital investment and job creation.
More specifically, EB-5 investors, their spouses, and their unmarried children under the age of 21 could all qualify for green cards if the principal applicant successfully invested in a US new commercial enterprise that created 10 full-time jobs for US workers.
1992, Congress created the EB-5 Regional Center Program, which allows foreign nationals to invest in designated regional centers that sponsor projects that promote US economic growth.
Although these two programs, the Direct Investment Program and the Regional Center Program are very similar, there are a few key differences.
For starters, the Direct Investment Program is a permanent program while the Regional Center Program must be continuously reauthorized by Congress. In fact, the EB-5 Regional Center Program is coming up for reauthorization at the end of this month. Don’t worry though, because it’s expected to be reauthorized, at least for a short period of time.
Getting back to the key differences–the main two differences between the programs revolve around job creation and management. When an investor selects the EB-5 Direct Investment Program the new commercial enterprise they made a direct investment into must directly create 10 full-time jobs for US workers. Whereas, investors in the Regional Center Program can not only count direct jobs created, but they also benefit from being able to count indirect and induced job creation.
You may be wondering what the difference between direct, indirect and induced job creation is and why it would be helpful to be able to count indirect and induced job creation toward the requirement?
Simply put, direct job creates identifiable positions. For instance, if the EB-5 business is a hotel, an example of a direct job is a concierge employee.
Indirect jobs are created when the businesses’ expansion necessitates working with vendors to purchase goods or services. For example, back to the hotel project, an indirect job could be a contracted cleaning service.
Lastly, induced jobs are created when the business expands and its workers spend money locally on goods and services. This type of job creation counts because it boosts the local economy.
Going back to the main differences between the two programs, the second main difference besides job creation is the management requirement.
When EB-5 applicants invest in the Direct Investment Program they must commit more to the management of their new commercial enterprise than an applicant who invests in the Regional Center Program. US Citizenship and Immigration Services requires that direct investors take a more active role in the business operations of their investment. Investors in regional center projects, however, are allowed to take a much more passive role. For instance, they can be a limited partner or a policymaker. They do not have to be involved in the day-to-day management of the businesses’ operations.
For investors whose sole focus is obtaining lawful permanent residency for themselves and their immediate family, going with a regional center investment is less work and less risk. Some investors, however, have a higher risk tolerance and want to be more actively involved in the business because they are looking to make a higher return on their investment in addition to obtaining a green card, and in their case, the Direct Investment Program makes more sense.
Now there’s a common misconception about the minimum investment amount requirements when it comes to the two programs. Many people wrongly assume that the lower minimum investment amount of $500,000 is linked to the Regional Center Program and the $1 million investment is linked to the Direct Investment Program. Either program can be either amount and here’s why. The minimum investment amount is reduced to $500,000 for targeted employment area investments. A targeted employment area is an area that is either rural or has a high unemployment rate. Either program can take advantage of targeted employment area designations, but Regional Center’s take advantage of it more often.
Speaking of minimum investment amounts and targeted employment areas, in about two months' time, a new EB-5 regulation is going into effect that will change both of these. The EB-5 modernization regulation, which goes into effect on November 21st, will increase the targeted employment area minimum investment amount from $500,000 to $900,000 and it will increase the non- targeted employment area investment from $1 million to $1.8 million. Not only that but, it will also change who can designate targeted employment areas. Right now states can designate targeted employment areas, but under the new regulation, it will become the sole job and authority of the Department of Homeland Security.
It’s not too late though, you can still apply for the EB-5 Program under the current rules. You can take advantage of the lower minimum investment amount and the less stringent targeted employment area options by filing your EB-5 petition now. Want to get started? Fill out our free EB-5 investor evaluation below and learn more about your eligibility.
- New York
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