EB5 Investors Magazine | Page 32

Continued from page 29 Year 1 Year 2 Year 3 Year 4 2nd Half 1st Half 2nd Half 1st Half 2nd Half 1st Half 2nd Half 400 400 600 600 750 750 1000 1000 Aggregate Amount of Jobs Created 400 800 1400 2000 2750 3500 4500 5500 275 350 450 550 } 1st Half Jobs Created 2.5 years Maximum I-526 Filings important to note that USCIS does not typically consider taxes, construction contingencies, permit filing fees, insurance, and financing costs to be job creating expenses. The contingencies are usually found in the hard costs section while permit filing fees, insurance, and financing costs are generally found in the soft costs section. If such non-qualified costs are included in the job creation estimate the number of jobs actually created by the project may be dramatically reduced. Due diligence requires careful attention to the construction budget in the economic impact study to ensure that non-qualified costs such as permit filing fees, insurance, financing costs, and contingencies were not included in the job creation calculation. Mo st experienced economists specifically exclude such items to avoid confusion. Job Creation Timeline vs. I-526 Filing Date USCIS has established an internal policy that each investor’s 10 jobs must be created within 2.5 years of filing the I-526 application. This is slightly at odds with EB-5 regulations and statutes, because according to EB-5 regulations, each investor’s investment must create the requisite jobs before the I-829 application becomes due. Given current processing times and retrogression for Chinese investors, it is extremely unlikely that any investor’s I-829 application will become due within 2.5 years of filing their I-526. Nevertheless, USCIS has been firm in its assertion that the requisite jobs be created within 2.5 years of filing an investor’s individual I-526. Timely job creation is relatively straight forward for smaller developments where construction is less than two-years. With respect to the construction jobs, it is merely necessary to ensure that construction will be complete within 2.5 years after submitting the I-526 applications. For operations jobs, it is necessary to carefully evaluate the date used to establish revenue for calculating the operations jobs. That date, too, must be within 2.5 years of filing the I-526. For larger projects where construction lasts more than twoyears, it is necessary to analyze the timing of job creation to ensure each applicant will be credited with creating the necessary number of jobs. The economic report should break down the number of jobs created every six months or year over the entire construction period. Based on the economic report’s job creation timeline, the business plan should provide an I-526 30 filing timeline showing the maximum number of investors that can file their I-526 applications every six months or one year. This is typically done using a table like the sample below: The table above shows a project seeking 550 EB-5 investors. Construction lasts four years and creates 5,500 jobs. It is not possible to file 550 applicants in year one, because not all 5,500 jobs will be created within 2.5 years of the I-526 filing date. You can see that in the first half of Year 1 a maximum of 275 investors can file their I-526, because only 2,750 jobs will be created within 2.5 years. Similarly, a maximum of 350 investors can be filed in the second half of Year 1, because the project should create 3,500 jobs within 2.5 years. Due diligence requires an in-depth analysis of the job creating timeline and inquiry into the number of investors that have already filed their I-526 applications. It is necessary to verify that the project has not filed more I-526 applications than can be supported by the number of jobs created within 2.5 years after filing a particular investor’s I-526. If the project has already filed enough investors to account for the jobs created for the next 2.5 years it is best for the investor to postpone filing until they can be assured the requisite number of unallocated jobs is available. Conclusion Due diligence of an EB-5 project requires the ability to understand and ask critical questions about the project’s job creation. This article should be used as a guideline to critically analyze EB-5 projects from a job creation perspective. ★ Michael Streit is the founder of Streit & Su. During his youth, Mr. Streit lived and worked in Changchun, China where he became fluent in Mandarin Chinese. His practice is focused solely on advising EB-5 eligible projects, obtaining regional center designation, and filing individual EB-5 immigration applications on behalf of foreign investors. Over the years, Mr. Streit has advised many EB-5 eligible projects in various industries across the United States. Mr. Streit has a team across North America and China to help process individual EB-5 applications. Michael Streit EB5 INVESTORS MAGAZINE