EB-5 Immigrant Investor Program and New Market Tax Credits. CREW ORLANDO July 17, 2013

Transcription

1 EB-5 Immigrant Investor Program and New Market Tax Credits CREW ORLANDO July 17, 2013

2 What is the EB-5 Immigrant Investor Program? The EB-5 visa category allows a foreign national to invest $1 million in a new commercial enterprise that will benefit the U.S. economy and create at least 10 full time jobs. Amount of investment reduced to $500,000 if made in a rural area or a targeted employment area (TEA). First introduced by Congress in In 1992, the Regional Center PILOT Program was enacted, enabling the job requirement to be established through indirect as well as direct job creation. Program renewed by Congress in September 2012 until September 30, ,000 visas allocated to the EB-5 Program each year of which 3,000 are reserved for immigrants applying through regional centers. 1

3 What is a Regional Center? Defined A legal entity that seeks to promote economic growth by coordinating foreign investment into a contiguous geographic region, in compliance with the EB-5 statutory, regulatory and precedent decision framework. USCIS Adjudicates - Regional Center designations are issued by the U.S. Citizenship and Immigration Services (the "USCIS") after application and review. Not Exclusive - Regional Centers are not exclusive geographically i.e., there can be more that one Regional Center for the same geographic area. Same Investor Requirements The investor requirements under the EB-5 Pilot Program (for Regional Centers) are essentially the same as the basic EB-5 investor program, except for ability under the Regional Centers to establish "indirect" job creation. 2

4 What is a Regional Center? (Continued) 124 approved Regional Centers operating in 36 States, including District of Columbia and Guam. 124 applications pending for new Regional Centers and 30 applications to amend approved regional centers. 95% of all EB-5 application are made through a regional center; 3,200 immigrant investor applications so far this year; 6,000 pending currently. Formation time could be 6 to 9 months or it could take 2 years. Regional Centers can be public or private entities. Issues of Abuse Regional Centers must protect their representation in the market. 3

5 Where are people coming from? Top Twelve EB-5 Originating Countries (Federal Fiscal Year 2011) Source: U.S. Department of State China mainland born 2,408 South Korea 254 China Taiwan born 122 Iran 117 Great Britain 57 Mexico 53 Venezuela 46 India 37 Russia 30 Vietnam 26 Canada 26 Netherlands 26 4

6 EB-5 Basic Requirements Invest in a New Commercial Enterprise (formed after November 29, 1990) Do not have to establish the enterprise (rule change in 2003). Can invest in existing troubled businesses but rules get trickier. Engage in the enterprise: involved in the day-to-day managerial control (passive investment not allowed) BUT de facto passive investment allowed if investing in a Regional Center project. Investment of Personal Capital: what is not personal capital? Retained Earnings of a business owned by the petitioner Debt arrangement (bonds, redeemable stock, convertible debt, etc.) not guaranteed return!: Capital must be At-Risk. Creation of 10 full-time jobs: immediate family members & non-immigrant visas (ex. H-1B) do not count. 5

7 How Long Does it Take? (1) Regional Center identifies potential investor through marketing: 3-6 months Investor signs on and sends funds to escrow: 1 2 months Lawyers prepare documentation: 1 2 months I-526 Filed** Official Processing Time: 5 months USCIS Acknowledged Processing Time: 6 months Word of Mouth Processing Time: Up to 18 months. Once I-526 approved, funds are released to the Regional Center who then loans out to Developer. **Project site must be TEA at the time of I-526 filing, NOT I

8 How Long Does it Take? (2) For the Investor to Get Conditional Greencard OBTAINING A GREENCARD IS A TWO-STEP PROCESS PART 1: I-526 PART 2: Reg S Overseas Investors: Consular Processing Reg D Investors already in the US: I-485 Adjustment of Status Part 2 adds approximately 4-9 months to the process for the investor (Consular Processing takes longer) Child must be under 21 by the time the I-526 is filed: USCIS is now requiring re-filing (vs. amending) of I-526s if at the I-829 condition removal stage it is determined there has been a Material Change in the project. After 2 years Immigrant can file their I-829 for removal of conditions. 7

9 New Market Tax Credit Program $3.5 Billion allocated nationally 39% Total Tax Credits earned over 7 years Investment must be made in Low Income Community (LIC) Community Development Entity (CDE) makes the investment NMTC Investors fund the Qualified Investment Equity (QEI) QEI must be expended (85%) on a Qualified Active Low Income Community Business (QALICB) 8

10 New Market Tax Credit Program (Continued) Advantages: Can be added to Capital Stack with Private Equity, Public Financing Sources or EB5 Sale of NMTC results in free equity to project Disadvantages: Allocation is hard to find 7 year holding period Complications with other participants in the capital stack High Costs and complicated structures employed 9

11 Contact Information Steven P. Polivy, Esq. Akerman Senterfitt LLP 666 Fifth Avenue 20th Floor New York, New York (212) (Phone) (212) (Fax) ( ) 10