Regional Center
Attractiveness vs.
Responsibilities
by Elizabeth Krukova
Nowadays, many businessmen are seeking funds
to support implementation of their investment
projects.The question is, is worth it to obtain
a Regional Center designation in order for an
ordinary business to attract foreign investors’
capital under the EB-5 Program?
Elizabeth Krukova
The EB-5 Immigrant Investor Pilot
Program, established in 1992, has not
only opened an easier path to U.S.
residency for foreign nationals but
also allowed business entities to attract
investors who would contribute funds
for business projects while not hunting
for guaranteed high rates of return. This
is why passive EB-5 investment through
Regional Centers has become the most
common choice for foreign investors.
In our practice, we have seen many
entrepreneurs who were ready to
seek Regional Center designation
without a clear understanding of the
legal consequences of their decision.
Under the pilot program, a Regional Center can accumulate
funds, from foreign citizens interested in permanent residency
in the United States, to finance investment projects and use
direct and indirect job count to comply with the EB-5 Program
job creation requirement. Obviously, this unique opportunity
to attract less costly financing for business development, and to
avoid high cost bank loans, makes many business owners think
that it is absolutely necessary to become a Regional Center in
order to raise funds from foreign investors. In our practice, we
have seen many entrepreneurs who were ready to seek Regional
Center designation without a clear understanding of the legal
consequences of their decision. The purpose of our article is to
take a closer look at various aspects of the economic and legal
environment in which each Regional Center has to operate and
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determine when it is reasonable to establish a Regional Center
for EB-5 investment.
USCIS defines a Regional Center as, “any economic entity,
public or private, which is involved with the promotion of
economic growth, improved regional productivity, job creation
and increased domestic capital investment.” In order to obtain
the Regional Center designation from USCIS, a business entity
must submit a proposal, supported by economic and statistic
reports, showing:
• A specific geographical region within the United States
where a Regional Center will promote economic growth
by implementation of a certain investment project
• Economic models verifying the number of
new jobs to be created, directly or indirectly,
through capital investments made in accordance
with the Regional Center’s business plan
• The promotional efforts made and
planned for the business project
• A positive impact on the regional or national economy
as result of investment project implementation.1
At first glance, complying with these
four requirements may not seem that
difficult. However, each of them is hiding
a lot more requirements to meet.
At first glance, complying with these four requirements may
not seem that difficult. However, each of them is hiding a lot
more requirements to meet. Let’s take a closer look at what is
required to obtain a Regional Center designation. First, a certain geographical region should be selected in order to consider
its current economic conditions and to determine whether the
investment project is to take place in a Targeted Employment
Area. The foreign investor’s qualification for a $500,000 investment depends on operating the Regional Center in a TEA.
Therefore, due diligence is important to obtain designation
within a TEA, as it will affect the attractiveness of a project for
potential investors.
E B 5 I n v e s to r s M ag a z i n e