A frenzy of excitement regarding investor visas like EB-5 (a/k/a employment creation visas) has been gripping the nation. EB-5 "green cards" are available to investors who may invest between $500,000.00 to $1,000,000.00 and create 10 jobs or more for US Workers. The advisability of these investments is currently undergoing careful scrutiny by attorneys, as a large number of new investment opportunities called Regional Centers have appeared on the horizon, some of which may not be as good as others.
Questions also abound as to whether an EB-5 passive investment in a Regional Center will or will not ultimately produce a green card for the investor and his family, as well as whether an investment in an individual EB-5 business opportunity (active investment) will be successful. For those who do not understand, the Regional Centers require only an investment, with job creation usually depending on an impact on the community, while individually owned investments depend on actually hiring 10 US workers for at least a specific period of time, currently understood to be no less than 2.5 years, but possibly for a longer period of time.
Ronald Klasko and Tammy Fox, immigration attorneys based in Philadelphia and Miami respectively, have been going around the country giving lessons to immigration lawyers and investors, but right now, the issues they raise are open to widely divergent individual interpretations and opinions.
The problem is that the green card is given to investors in two parts, first a conditional residency, and after that permanent residency. Historically, some green card holders have had their residency revoked, after the government revisited the details of the investments.
Much like tax laws, the rules and regulations for investors are not constant, but constantly changing!
One of the reasons that investors are driven to invest their money (for better or worse) in expensive EB-5 investments is because their right to petition in other employment based categories through their own investment driven enterprises is limited by the Department of Labor's jurisprudence on this subject.
Basically, it is the opinion and policy of the DOL that investors either do not need to work or do not deserve to work in the U.S., if the position they will occupy requires an approved labor certification to obtain permanent residency in the U.S.
The DOL argument is that the investors, if they choose to work in their companies, would be taking jobs away from American workers. This argument seems illogical, since the jobs would not exist if the investors did not create them and they investments themselves should be good for the overall economy.
When asked why jobs that do not require a search for American workers may also be not certified, the answer from DOL is the same. (A search for American workers is not required with certain types of immigrant visas including Schedule A precertified 2nd and 3rd preference applications).
The topic is amply discussed in The PERM Book published by ILW.COM, as well as in many publications from AILA and others. In the PERM Book, I recommend Robert Banta's clever article entitled, "As If You Owned the Place."
Internet articles are also available. Some of them are highly informative and reliable. I just reviewed the site of Sheila Murthy, one of my favorite on-line sources of information, and I recommend you read her article, "Perm Safeguards against Improper Employee Influence," posted January 9, 2009.
The general rule is that an investor cannot be the beneficiary of the alien labor certification because the labor certification process requires a search of the job market, and the job market search would lack impartiality if the owner of the company were applying for himself and interviewing US workers at the same time.
The prohibition extends to persons who own companies, their relatives, and even to non-family related key employees who make hiring and firing decisions.
As Sheila Murthy correctly states, the PERM application has a question on the form which asks if the employer is a closely-held corporation, partnership, or sole proprietorship, in which the alien has an ownership interest, or whether there is a familial relationship between the owners, stockholders, partners, corporate offices, or incorporators, and the foreign national.
While the regulations are not clear on this point, the definition of closely held might apply if at least half of the stock is owned by no more than five individuals.
If the sponsoring employer is a publicly-traded employee, or otherwise does not fit within the definition of closely-held corporation, then the question on the PERM application may be answered "no."
Where the alien owns the company, the DOL would be more likely to deny an application for certification on behalf of the same alien, although issues of stock options, ownership and other corporate relationships would need to be addressed.
One point that might be used, to overcome the denial of labor certification for investors, would be if the ability to control the hiring and firing were not up to the investor-owner who will also be the beneficiary of the application, but were only within the authority of a neutral body or process.
Some persons have suggested that hiring and firing could be delegated to an outside, impartial entity or otherwise disposed of through by-laws which would delegate the decision to hire and fare to persons who do not own the company.
Another question would be whether the employment entity is a non-profit organization, in which the alien has donated money to create the organization and wishes to hold a position, without being an owner the company.
While the path to PERM certification by owners-investors is certainly not an easy one, it should be revisited as an option to EB-5 investments, or possibly a parallel process to persons applying for EB-5. (There is no rule preventing an EB-5 petitioner from applying simultaneously for PERM certification.)
In an EB-5 petition, the investor does not have to establish that he will work in the investing company -- only that the company will hire US workers. And so I pose the question, why the DOL could not certify a PERM application for an EB-5 investor who also wishes to work in the business in which he will create 10 or more jobs for US workers, plus one for himself?
The plight of foreign investors might ironically be resolved by allowing them to apply for PERM, not only as EB-5 investors, but also as Treaty E-2 investors. A similar reasoning applies for E-2's, except that the E-2 Treaties to not require the investor to create jobs for specific numbers of US workers. What if the applicant could document job creation for US workers in connection with E-2 treaty investments? Might the investor then be eligible to receive a green card to oversee the company as well?
EB-5 investors may proceed with caution, but sometimes with a certain level of optimism. Some individual investments (about 5% of the total EB-5 investments) and some of the Regional Centers are well conceived and likely to produce good results.
Persons interested in an EB-5 investment should seek counsel who can advise on the plethora of Regional Centers currently available. Counsel should advise on the positive and negative factors regarding the Centers, so that the investor can make an educated judgment.
Mr. William Flynn, Esq., head of the Immigration Department at the Florida based firm of Fowler White Boggs, P.A., has created a special EB-5 unit, complete with corporate and tax specialists, which has recently "vetted" the best EB-5 projects available. Mr. Flynn has also put together a comprehensive presentation on EB-5 which he is putting on around the state of Florida.
From an objective point of view, one can only wonder why a country in the throws of economic hardship would not welcome wealthy investors who still believe in the future of the U.S. Many of them go on to invest in other countries, including Canada, due to the difficulties of investing and receiving residency in the U.S.
Meanwhile, as to EB-5's, "Caveat Emptor!"