E B - 5
B A S I C S
Why Does EB-5
by Daniel B. Lundy
With all the regulations, policies, and nuances in the EB-5
program, almost all new regional centers and first-time EB-5
project sponsors experience some growing pains while they learn
the ropes. Many go on to be well-oiled and highly professional
operators, but there is a lot to figure out at first. Probably the
first thing that everyone who enters this industry learns is that
there is a lot of paperwork, including forms for projects and
individual investors. EB-5 is a unique mixture of private equity
and development rolled up into an immigration program. As
such, there are many rules to comply with, and many documents to collect to demonstrate compliance with those rules.
When should you start an EB-5
Ideally from the very beginning. Regional centers should start
an EB-5 compliance program as soon as their regional center is
approved, if not earlier. Project developers or sponsors should
ideally have a plan for compliance before they go to market
with a project. Investors investing directly in a business and
not through a regional center should have a compliance plan
from the time they choose and make the investment. If you are
already past these points, the answer is as soon as possible.
While there are clearly securities laws and regulations that
project sponsors and regional centers need to comply with,
the focus of this article is immigration compliance. After all,
the driving force for EB-5 investors is the immigration benefit
they receive from participating in the program, and as such, the
immigration rules are of paramount importance. There are two
main measures of compliance for a regional center or an EB-5
project, and those are the Form I-829, which is used to demonstrate that the investors have met the requirements to have
the conditions on their residence removed so they can obtain
permanent green cards, and the Form I-924A annual reporting
form, which must be filed each year by regional centers wishing
to maintain their approval with USCIS. We refer to the practice
of meeting these requirements as part of EB-5 compliance.
How do you start?
Make a plan. Sit down with your team of professionals,
including your immigration attorney, economist, securities
attorney and accounting professionals, and figure out what information and documents you will need. Once you know what
you will need, establish a system for collecting, organizing, and
storing documents. There are various software solutions and
service providers on the market that offer fund administration
and accounting solutions, but your system can be as simple
as maintaining spreadsheets, logs, and file folders (physical
or digital, and have a backup in case of fire or other disaster).
Establishing a procedure then sticking to it goes a long way.
What is EB-5 compliance?
At its most basic level, EB-5 compliance is simply a system or
set of procedures for collecting and preserving documentation
evidencing compliance with the EB-5 program rules and policies, both in general and for reporting purposes. This includes
tracking the offering process, the flow of investor funds, the
deployment of EB-5 capital into projects, tracking domestic investment in EB-5 projects, and ultimately proving job creation.
Compliance is more than just preparing an I-829 or I-924A,
however, and should be performed on an ongoing basis. While
it is entirely possible hold off on assembling the necessary
documents to prove investment and job creation until 90 days
before the first I-829 needs to be filed, it is also an extremely
stressful and unpleasant experience for you and your investors,
and is likely to lead to requests for evidence and delays. Quality
EB-5 compliance, on the other hand, means documenting as
you go. Such a practice allows you to maintain vigilance over
the progress of a project and spot trouble early on. It also gives
your investors a measure of confidence that they will get their
conditions removed because of this extra layer of scrutiny. And,
not least of all, it allows you to avoid expending excess time,
effort, and money in the immediate lead up to filing.
What do you need to collect and maintain?1 Fortunately,
the information needed for the I-829 petitions and the I-924A
filing is essentially the same (although the information on the
I-924A is limited to a specific fiscal year rather than the life of
a project). The types of information required can be separated
into a few broad categories.
There is a fair amount of information pertaining to the
investors and their family members that needs to be collected
and maintained. Typically this includes, but is not limited to
Passports, conditional residence cards,
approval notices, receipt notices and copies
of filings for investors and their families;
The contact information for investors
and their spouses; and
Notices, status reports, or other
communications with investors.
Flow of Funds:
At the I-829 stage, the investor must show that he or sh B