Continued from page 29
Year 1
Year 2
Year 3
Year 4
2nd Half
1st Half
2nd Half
1st Half
2nd Half
1st Half
2nd Half
400
400
600
600
750
750
1000
1000
Aggregate
Amount of
Jobs Created
400
800
1400
2000
2750
3500
4500
5500
275
350
450
550
}
1st Half
Jobs
Created
2.5 years
Maximum
I-526 Filings
important to note that USCIS does not typically consider taxes,
construction contingencies, permit filing fees, insurance, and
financing costs to be job creating expenses. The contingencies
are usually found in the hard costs section while permit filing
fees, insurance, and financing costs are generally found in the
soft costs section. If such non-qualified costs are included in
the job creation estimate the number of jobs actually created by
the project may be dramatically reduced. Due diligence requires
careful attention to the construction budget in the economic
impact study to ensure that non-qualified costs such as permit
filing fees, insurance, financing costs, and contingencies were
not included in the job creation calculation. Mo st experienced
economists specifically exclude such items to avoid confusion.
Job Creation Timeline vs. I-526 Filing Date
USCIS has established an internal policy that each investor’s
10 jobs must be created within 2.5 years of filing the I-526
application. This is slightly at odds with EB-5 regulations and
statutes, because according to EB-5 regulations, each investor’s
investment must create the requisite jobs before the I-829
application becomes due. Given current processing times and
retrogression for Chinese investors, it is extremely unlikely that
any investor’s I-829 application will become due within 2.5
years of filing their I-526. Nevertheless, USCIS has been firm
in its assertion that the requisite jobs be created within 2.5 years
of filing an investor’s individual I-526.
Timely job creation is relatively straight forward for smaller
developments where construction is less than two-years. With
respect to the construction jobs, it is merely necessary to ensure that construction will be complete within 2.5 years after
submitting the I-526 applications. For operations jobs, it is
necessary to carefully evaluate the date used to establish revenue
for calculating the operations jobs. That date, too, must be
within 2.5 years of filing the I-526.
For larger projects where construction lasts more than twoyears, it is necessary to analyze the timing of job creation to
ensure each applicant will be credited with creating the necessary number of jobs. The economic report should break down
the number of jobs created every six months or year over the
entire construction period. Based on the economic report’s job
creation timeline, the business plan should provide an I-526
30
filing timeline showing the maximum number of investors that
can file their I-526 applications every six months or one year.
This is typically done using a table like the sample below:
The table above shows a project seeking 550 EB-5 investors.
Construction lasts four years and creates 5,500 jobs. It is not
possible to file 550 applicants in year one, because not all 5,500
jobs will be created within 2.5 years of the I-526 filing date. You
can see that in the first half of Year 1 a maximum of 275 investors
can file their I-526, because only 2,750 jobs will be created within
2.5 years. Similarly, a maximum of 350 investors can be filed in
the second half of Year 1, because the project should create 3,500
jobs within 2.5 years.
Due diligence requires an in-depth analysis of the job creating timeline and inquiry into the number of investors that have
already filed their I-526 applications. It is necessary to verify
that the project has not filed more I-526 applications than can
be supported by the number of jobs created within 2.5 years
after filing a particular investor’s I-526. If the project has already filed enough investors to account for the jobs created for
the next 2.5 years it is best for the investor to postpone filing
until they can be assured the requisite number of unallocated
jobs is available.
Conclusion
Due diligence of an EB-5 project requires the ability to
understand and ask critical questions about the project’s job
creation. This article should be used as a guideline to critically
analyze EB-5 projects from a job creation perspective.
★
Michael Streit is the founder of Streit & Su.
During his youth, Mr. Streit lived and worked in
Changchun, China where he became fluent in
Mandarin Chinese. His practice is focused solely
on advising EB-5 eligible projects, obtaining
regional center designation, and filing individual
EB-5 immigration applications on behalf of
foreign investors. Over the years, Mr. Streit has
advised many EB-5 eligible projects in various
industries across the United States. Mr. Streit has
a team across North America and China to help
process individual EB-5 applications.
Michael Streit
EB5 INVESTORS MAGAZINE