High net worth individuals from across the globe are increasingly taking advantage of the United States’ EB-5 investor program, which offers permanent residence in the U.S. in exchange for an investment of either $500,000 or $1,000,000 USD.
Unfortunately, a lot of misinformation and misconceptions have accompanied the EB-5 program’s rise in popularity. To help set the record straight, here are the top 5 misconceptions about the EB-5 program, and the corresponding facts that high net worth investors should know to help guide their long term planning.
- You must invest at least $1,000,000 USD.
Not necessarily. If you invest in a qualified rural area, or a designated area of high unemployment, the investment requirement drops to $500,000.
- You have to start your own company.
Not so! While you certainly can start your own company as your EB-5 investment vehicle, the government also permits investors to investor through designated EB-5 “regional centers.” These regional centers are public or private institutions that have been authorized to pool money from multiple EB-5 investors to invest into larger projects like hotels and other major real estate development projects.
- You get the green card as soon as you make the investment.
This is only partially true. Upon making the investment and filing the necessary paperwork, investors will first receive a two year “conditional” green card. At the end of the two years, the investor must apply to have the conditions removed, which depends on the investor demonstrating that the full investment amount has been made, and that he or she has created at least ten full-time jobs.
- Becoming a permanent resident through EB-5 doesn’t affect your sources of foreign income.
Better not say this to the IRS! When you become a permanent resident, U.S. law generally subjects ALL of your income to U.S. taxes, regardless of what country the income arises in. This doctrine of “worldwide taxation” is a big consideration for wealthy investors with sources of income all across the world, and should be discussed with a tax professional before procuring EB-5 permanent residence.
- Congress is going to shut down the EB-5 program because of problems with fraud and money laundering.
Not likely. While it’s true a few bad apples have tried to use the program to launder illicit funds or solicit money in scam investments, the program has been quite successful for the most part. The U.S. Citizenship and Immigration Service has some pretty robust requirements for proving up the source of EB-5 investment funds, such as to avoid money laundering problems. Additionally, as long as investors do their homework and utilize reliable immigration counsel, avoiding scam investments is not especially difficult. Congress is well aware of the billions of dollars and thousands of jobs that the EB-5 program has generated. They may tweak the program, but you can bet EB-5 is here to stay.
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