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Journey To The West

For those looking to enter America investment visas provide a simple and intriguing option

By Rose Scobie

It has never been easy to migrate from China to the US. In the 19th century the success of Chinese migrants in industries such as mining, fisheries, agriculture and the railroads was met with fierce resistance by white Americans who pressured governments in Western states to apply unfair taxation and legal discrimination against Chinese immigrants.

Now, Chinese immigrants deal with the same legal framework as migrants from other countries, with the exception that there are a lot more of them. In the fiscal year 2009 there were 64,238 immigrants from China, second only to the number coming from Mexico. This matters, since individual countries only receive a limited number of employment and investment visas. Individual applicants can literally get lost in the crowd. For example there are 2,987 employment based 2nd preference visa category (EB2), for members of professions or those holding advanced degrees, available per country of origin each year. Plenty for a small European country, not nearly enough for China or India. Some visa categories have waits of up to 10 years.

However for high-net worth individuals there is a convenient and relatively uncontroversial path to a green card that until recently has been underused. In the 1990 Immigration Act the employmentbased preference 5 (EB5) nvestment Visawas introduced to encourage investment in the US using the allure of the green card as encouragement.

Anyone able to make an investment of $500,000, or $1 million depending on the area of the investment can get green cards for themselves and their immediate family. There are two main pathways, depending on your situation.

Investing in a Company

For those al ready considering investing in a business, they can qualify for the EB5 visa with an investment of $1 million anywhere in the country, or an investment of $500,000 in rural areas, or areas where the unemployment rate has consistently been 150% of the national average. The investment should be made in a new company, formed since 1990 when the visa was first created, or it should substantially restructure a previously existing company, or rescue a failing company, which made a loss over the previous 12-24 months equal to 20% of its pre-loss worth. The investor has to be personally involved in the day-to-day running of the company, or involved at a strategic level as a corporate officer, or board member, for example.

Regional Centers

Obviously for those that are not intending to invest in, or work with, a particular company these requirements are quite demanding. This led to very disappointing take up of the original investment visa program in the 1990s and as early as 1993 a pilot program was launched to provide a more convenient avenue for investments in egional Centersapproved by the US Citizen and Immigration Services.

The Regional Centers can be for profit organizations or not, they are intended to channel investment into certain areas in the US. Investing with these organizations means that only minimal involvement with the business venture is permissible and the investment only has to be worth $500,000.

Required Achievements

Whichever path you are using the money is held in escrow until a conditional green card is issued, when it is released for use by the US company invested in. After 2 years the investment has to satisfy various criteria for the conditions to be removed from the green card allowing for permanent residence. If you invested in a new company 10 people have to be employed, due to the investment, at the end of the two-year period. If it was an older failing company then the number of employees at the company has to have remained the same, or grown, in those two years.

Again to encourage investment in speci f ic areas, the rules for the Regional Centers are relaxed a little. The requirement to employ 10 staff can be met both directly and indirectly. So if other firms in the area hire due to the increased business created by the investment, that can count towards satisfying the requirements.

Attracting investment

Many Regional Centers focus on property, because it has been a fairly predictable earner and quickly meets the requirements for employment generation.Seattle-based real estate company American Life early on recognized the potential of the investment visa program and has registered Regional Centers in 10 locations in the US in five different states. The company offers 70% of the rents paid and capital gain from the properties they invest in, which means a successful property can give investors a substantial return on their investment. So far they have had over 300 foreign investors.

However in the current climate, with market trackers such as Zillow saying property has fallen $1.7 trillion during 2010, property investments could be a far more volatile proposition. There are Regional centers focusing on all areas of the American economy, especially those where securing lines to cheap capital can make all the difference and serious investors might like to look in to other areas.

There are companies involved in financing movies and television, agriculture, hospitality and all sorts of manufacturing. One example is the Natural Econometric Incorporated, which is investing in troubled wineries in the famous Napa and Sonoma counties of California. Run by Christina Lau, the company hopes to use their own cross cultural experiences in America and China, as well as their business experience in the wine trade, to seek out Chinese investors.

In many ways the investment visa program seems to perfectly align the aims of those seeking to live in the US with American companies hungry for a source of capital. The number of organizations registering as Regional Centers seems to attest to the attraction of the program: at the beginning of 2008 there were only 27 registered Regional Centers, now there are more than 130. It is estimated that between October 2006 and late 2010 US companies raised more than US$ 1 billion and created over 20,000 jobs through the investment visa program, so from the point of view of the businesses, government and immigrants it appears to be working.

Risk included

The risk for serious investors is that companies use these investments as interest free loans, assuming that the attraction of a green card is so high that most foreign investors will be happy just to get their money back. Eric Canal-Forgues a law professor and businessman from France admitted to The Washington Post that he invested in a Regional Center, in the Washington area, not expecting to make more than 1% a year on his investment. That would not even cover the roughly $50,000 spent on administration fees, let alone the cost of inflation, while his money worked for someone else.

Other organizations such as The Green Card Fund simply offer to return the original investment, although this project cannot be guaranteed as the rules stipulate that all investments for the EB5 visa must be t riskto qualify.

The hottest thing in immigration

In previous years the EB5 visa has been undersubscribed with only 806 being issued in 2007 and 1,360 in 2008 out of a possible total of 9,800. This means that they have been easily available to all qualifying investors. However in 2009 there was a sharp upswing with 3,688 EB5 visas issued. Given that within the EB5 cap only 3,000 visas are set aside for Regional Center investors, it could get increasingly hard to get hold of this kind of visa.

There are several factors driving the growing popularity of the EB5 program, in 2003 American Life successfully concluded a legal case which clearly defined eligibility for permanent residence after first two years. This stability has made it a much more attractive option for immigration . Heavy marketing campaigns by Regional Centers and immigration law firms in China, South Korea and the Middle East have also helped buoy numbers of applicants. In fiscal year 2009 alone around 1,800 recipients of investment green cards were from Mainland China while another 903 went to South Korean Investors. As H. Ronald Klasko from Klasko, Rulon, Stock & Seltzer puts it the EB5 visa is simply the ottest thing going on right now in immigration

There are other problems on the horizon. Political antagonism towards immigrants has had a serious impact on people using the E2 investment visa, which has to be renewed every two years, but can be issued for investments of only around US$ 100,000. Many people are finding that they no longer qualify for the E2 even having lived in the US for many years. Given the overlap with the EB5 many E2 investors who have previously lived in the US are looking to switch to the more secure program.

On top of all this, next year the investment requirement for a program in Canada similar to the EB5 visa will be doubled from $400,000 to $800,000, which many commentators see pushing up the number of applications for the EB5 visa.

Finally the EB5 is still legally a temporary program. Last extended in 2009 by President Obama, it is currently set to run until September 2012, a presidential election year, when hot button issues can be easily politicized.

There are also plans for an EB6 visa, this is intended for foreign entrepreneurs who could seek investment for their startup companies from approved venture capital firms. Although this means there might be more avenues for foreign nationals to take their business and their lives to America, the EB6 may also share a visa cap with the EB5.

To sum up

For those with $500,000 to invest and a desire to live in America with their family, the EB5 visa is a perfect option. There are some pitfalls, given that so many of the companies involved in the Regional Center program only aim to return the original investment, but as the number of regional centers grows so will the number of investment options and as investors become more familiar with the possibilities of the program competition should develop in the returns offered to investors, although the green card will always remain a consideration for most of those using the Regional Center scheme. The bolder may still choose to go their own way favoring an economically motivated investment of $1million over a smaller investment motivated purely by the desire to migrate.

Given the huge growth of EB5 applications, the problems the visa faces and the vulnerable position it is in until it becomes permanent, Chinese investors who have the capital and inclination should certainly be looking to make their investment as soon as possible be seeking advice on possible investments as soon as possible.

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