by Audrey Sun
Nowadays, it is hard to open a newspaper or turn on the television without receiving a crash course on geo-politics and immigration policy. Whether it be President Trump’s wall or the associated government shut down, immigration related issues have received a lot of attention lately. Likewise, President Trump has voiced concerns related to the H-1B skill-based visa program, which could limit immigrants from coming into the country. Those immigrants are, by definition, highly-skilled workers, and a significant driving force of the Silicon Valley economy.
Just as the purpose of the H-1B visa program is to boost the U.S. economy by attracting highly skilled workers, the EB-5 visa program goal is to attract foreign capital into the U.S. by allowing wealthy individuals to invest a certain amount of capital and, in return, gain residency in the U.S. On January 25, 2019, President Trump signed a law extending the EB-5 Immigrant Investor Program to February 15, 2019 with the same requirements.
What is EB-5 Visa?
The EB-5 visa program, also known as The Immigrant Investor Program, was created under the Immigration Act of 1990. This visa gives foreigners the chance to permanently work and live in the U.S., in return for investing and creating new businesses and jobs. All EB-5 investors must invest in a new commercial enterprise, which “means any for profit activity formed for the ongoing conduct of lawful business,” according to the U.S. Citizenship and Immigration Services (USCIS). Those businesses include a sole proprietorship, partnership (both limited and general), holding company, joint venture, corporation, business trust, or any other entity, which can be privately or publicly owned.
Once an EB-5 visa is issued, investors will receive a conditional green card valid for two years. After that, investors can apply for the removal of that condition and be qualified for permanent residency through a green card. Our government currently caps the number of green cards under the program at 10,000 per fiscal year. To even out the ratio of incoming immigrants, the program also caps each country at no more than 7% of the total visas granted.
What are the job creation requirements?
Under the EB-5 visa requirements, investors must create at least 10 full-time jobs for qualified U.S. employees. An employee is defined as a person who will provide services or labor in exchange for payment from the employer. Qualified U.S. employees include U.S. citizens, permanent residents, asylumees, and refugees. These jobs cannot be occupied by EB-5 investors or their relatives. These jobs must be created within two years of the investor obtaining the visa.
What are the capital investment requirements?
Foreign investors who would like to apply for EB-5 visas must make either a $500,000 or $1 million capital investment amount into a commercial enterprise. The specific amount varies based on location and other factors. The investment can be taken “in the form of cash, inventory, equipment, secured indebtedness, tangible property, or cash equivalent, and is valued based on the U.S. dollar fair-market value,” according to www.EB5investors.com.
As a general rule, investors must invest at least $1 million into the U.S. unless the investment is made in a company that is located in a Targeted Employment Area (“TEA”), then the amount shall be $500,000. Targeted employment areas include areas such as rural areas that are not within metropolitan areas with low employment rate and also must not be on the border of a town or city with population of 20,000 people or more. Rural areas may also be defined as areas that have an unemployment rate of at least 150% of the national average.
How does this visa effect Silicon Valley real estate?
Every year, Michael Repka and I, along with a few other DeLeon Realty colleagues, attend the annual Luxury Property Showcase in Shanghai, China. During our last visit in December 2018, we encountered many questions from local Chinese investors related to EB-5 visas. Next to the H-1B visa, the EB-5 visa still remains the most popular visa amongst Chinese citizens.
Since the economy and political environment is volatile in China, Chinese investors are looking to use their capital to invest in the U.S., which is particularly attractive when coupled with a desire to eventually move their family to Silicon Valley. Capital flows where the business environment is strong, as do entrepreneurs and workers. Building a new commercial enterprise will require commercial space for operations and workers will need housing. High net-worth investors particularly love Silicon Valley’s high-tech environment, and seek locations like the Bay Area where there is a larger pool of qualified and skilled workers.