EB5 Investors Magazine Volume 7, Issue 1 - Page 80

EB5 INVESTORS M AGAZINE 78 historical evidence of other investors being paid back associated with the regional center, do not believe that misconception. MISCONCEPTION 4: ALL JOBS ARE CREATED EQUAL Since there are two basic issues in EB-5 — capital at-risk and job creation — it is prudent to turn the discussion to job creation. It is normally stated that a project has a certain job cushion. This is to entice investors to invest based on potentially a very large job cushion. This gives the illusion that all jobs are created equal (and the corollar y that a large job cushion ensures a margin of error). The problem with this analysis is that it assumes all jobs are created equal. They are not. As most know, there are direct jobs (I-9, payroll jobs) and model-derived jobs (direct construction jobs, indirect construction jobs and operational jobs). For direct jobs, these are shown through payroll evidence and I-9s at the I-829 phase. Clearly, the challenge with these jobs is that the position must be in existence for at least two years and the evidence must be able to demonstrate this. Now, contrast this with model-derived jobs, which are considered to be created if based on reasonable methodologies. The models used are called input/ output models. Thus, models can have many types of inputs to give the outputs (the jobs created). Normally, construction expenditures are used as an input to demonstrate the jobs that have been created. Note that USCIS requires that construction last at least two years to be able to count model-derived direct construction jobs. While this seems straightforward, there could be some challenges at the I-829 phase when jobs have to be proven. For example, let’s assume that a project stalls and the three-year projected construction timeline approved at the I-526 phase is actually one continuous year, then stops and starts for two years before finally ending. I assume USCIS could argue that the model-derived direct construction jobs do not count. This is where model- derived, direct construction jobs could be a little risky. Operational jobs only exist if the business opens. If the business does not open, very few operational jobs are created. Therefore, these are the riskiest jobs. When analyzing jobs for the purposes of job creation it is best to rely on model-derived indirect construction expenditure jobs first. Second, an investor could count