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The U.S. Immigrant Investor Program: New American Investors Making a Difference in the Economy

Executive Summary

The Immigrant Investor Program, also known as “EB-5,” has become an increasingly important source of investment for development projects in the United States, attracting billions of dollars to the U.S. economy and creating tens of thousands of jobs. However, the program is unlike any other managed by U.S. Citizenship and Immigration Services (USCIS) in that it is the only visa program whose stated purpose is to create jobs and growth. This mandate creates special challenges and opportunities.

This report discusses how the EB-5 program works, how it has evolved, the problems it has faced, the benefits it has provided, and its future as an important source of economic growth. Through interviews with industry experts and examples of successful models for managing and structuring regional centers and their projects we hope to foster a productive discussion of best practices in the regulation and management of the program and its benefits.

The history of the EB-5 Immigrant Investor Program dates to 1990 when it was created to stimulate job growth and capital investment. It is the only visa program for investors that leads to permanent residence. An underused program in its earlier years, recently it has grown dramatically, contributing $2.6 billion to GDP, supporting 33 thousand jobs, and generating $346 million in federal tax revenue between 2010 and 2011.1

The program requires that applicants invest $1 million (or $500,000 if the investment is in a rural or high-unemployment area) and create at least 10 jobs. Foreign investors can invest directly in a job-creating business or through “regional centers” designed to promote economic growth in designated areas. As of November 1, 2013, USCIS has approved approximately 400 regional centers,2 which have become the predominant vehicle for EB-5 investment.

The EB-5 program is complex and initially suffered from lax oversight. Over the years, USCIS has tightened requirements for establishing the legitimacy of investments, the sources of investment funds, and how funds may be used.3 Funds must now be “at risk,” a return on investment cannot be guaranteed, and all required funds must be invested into the job-creating enterprise.4 USCIS has centralized processing in Washington, DC and hired experts to oversee specialized aspects such as economics, financial transactions, fraud, and national security. 5

Regional centers in Vermont, California, and Pennsylvania provide examples of how economic growth can be promoted successfully through partnerships with state and local agencies. Regional centers may benefit from cooperation with economic development agencies that have expertise in identifying appropriate projects and tracking job creation.6 The involvement of state and non- profit agencies may also encourage more objective analysis of proposed projects and a focus on higher-quality, long-term economic development.

The EB-5 program is an effective tool for economic development, attracting, at minimum, $5 billion in direct investment and 85,500 directly-created full-time jobs,7 principally during the later years of the program’s history. In Vermont and Pennsylvania EB-5 became an important alternative source of financing during the financial crisis, providing “patient capital” at low-interest rates when conventional credit sources dried up. In Vermont, it promotes economic diversification and modernization as part of a long-term development plan. In Washington, DC it is creating nearly two thousand jobs in the most economically depressed areas of the city.

The EB-5 program has become a more reliable manner for foreign investors to obtain U.S. residency as application approval rates have improved. As USICS has clarified legal requirements initial application approval rates have improved from 53% in 2005 to 79% in 2012.8 The rates of return on investment for the investors remain modest, under 5% for the development projects cited in this report.

As the EB-5 program continues to grow, legislative reform is needed to strengthen, expand, and permanently authorize what remains a provisional program that expires in 2015.9 Proposed reforms, like those in the 2013 Senate immigration bill, should make the program permanent, further improve fraud prevention and oversight, and ensure that foreign investors can continue to contribute to jobs and growth in their new adopted country. 

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