CHAPTER 1

The Program:What Is EB-5 Immigrant Investment?

US investment-visa programs have been around for a long time.Even the EB-5 program is more than twenty years old, and yetthese programs have existed in relative obscurity in the UnitedStates until only recently. On a global basis, there is even lessawareness. In this first chapter, we'll take a look at the beginningsof the EB-5 program, see how it has grown, and check in on someof the program's recent developments.

Early History

The US Congress established the EB-5 (Employment-Based, FifthPreference) Immigrant Investor Program in 1990. It is widelybelieved that the program came about as a result of Canada'ssuccess at attracting Hong Kongers—fearful of Chinese CentralGovernment oppression, persecution, and nationalization ofassets—when Hong Kong reverted to Chinese control in 1999.While Congress had previously attempted to create immigrantinvestment programs, the Immigration Act of 1990 was the billthat successfully passed both houses of Congress and earnedPresident George H. W. Bush's signature into law.

The mass exodus from Hong Kong—primarily to majorcities like Vancouver and Toronto—created a massive economicboom in those cities and throughout Canada. The expatriatedHong Kongers brought more than just the CN$250,000 requiredfor their visas. They brought the rest of their economy as well.Skyscrapers, luxury homes, and all of the infrastructure neededto support such growth went up seemingly overnight. Americanleadership felt that the United States should do something toparticipate in attracting these wealthy investors too.

So in the Immigration Act of 1990, Congress devised aprogram that would be administered by the Immigration andNaturalization Service—the predecessor of today's US Citizenshipand Immigration Services (USCIS)—which would permit a foreigncitizen from any country to invest a minimum of US$1 million ina US business, leave that investment fully at risk for at least twoyears, and create ten permanent full-time jobs for authorized USworkers in exchange for permanent resident visas for the investorand the investor's immediate family. Ten thousand visas wereset aside each year for the program. The Immigration Act alsoincluded a provision to permit a lower investment threshold—US$500,000—inrural areas or preidentified areas with highunemployment called Targeted Employment Areas or TEAs, andthree thousand visas were set aside for those investments. TheEB-5 Immigrant Investor Program was born.

In 1993, Congress further modified the program byestablishing the EB-5 Immigrant Investment Regional Center PilotProgram—which enabled the pooling of many EB-5 investmentsin regional centers for much larger development projects. Regionalcenters have the dual benefit of preapproved projects and easiersatisfaction of job-creation requirements through the ability tocount direct, indirect, and induced job creation using preliminaryeconomic analysis. Congress allocated three thousand visas toinvestments through regional centers annually.

The EB-5 programs experienced fits and starts in the earlyyears for several reasons. Typically poor marketing and publicity bythe US government, along with less-expensive and less-regulatedprograms in other countries, seemed to limit the US programs'attractiveness. The regional center pilot program even experienceda brief suspension in the late '90s. Still, several million dollarsof investment were attracted to early regional centers in Seattleand Los Angeles from Hong Kong, Taiwan, South Korea, andJapan.

The pivotal shot in the arm for the EB-5 program came in2003 when—to everyone's amazement—the Chinese CentralGovernment announced that it had no objection to its citizensparticipating in investment-visa and other immigration programs.This announcement sent a wave of enthusiasm and growththrough immigrant investment programs all around the globe,but particularly the EB-5 program. China and the US immigrantinvestment program got up to speed and fully into alignment justin time for the US economic meltdown of 2008.

Rapid Growth

In late 2007, when I began to study the EB-5 program whileworking for the Idaho Department of Commerce, the USCISwebsite was only acknowledging the existence of nineteen regionalcenters nationwide. Of those, perhaps only twelve had been activein the marketplace and had attracted any investment, and onlyperhaps four of those could be considered truly "successful"—attractingUS$10 million or more. During 2008 and 2009, whenI was preparing Idaho's first regional-center application andconsulting/advising on three...