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Entrepreneurs and Investors Are Not the Same Things!

by Joseph P. Whalen

We can all learn from history if we bother to have a look back over our shoulder. Let's take a look, OK? Back in the early days of America, this land was mostly agrarian. That economy relied on manual labor. I will not include a long look back on the period of "slavery" but I don't want anyone to think that it is not worth talking about. It is, has been, and always will be; but is outside the context of this discussion. Instead, this essay is about the evolution of the "labor certification process" within the immigration context and how that spawned the inevitable concept of "exceptions" to it.

At first, America merely needed bodies (the more, the merrier) but eventually began to narrow the search for "able-bodies". The initial "immigration" system consisted of head-taxes on boatloads of "colonists". Slowly the concept of "exclusion" began to take shape. At first, America sought to exclude the mentally and physically incapable (idiots and those with communicable diseases) but that did not go far enough, so, the concept of the "public charge" was born. As the control of immigration continued to develop, a primary concern was protecting the workforce already present in America from new arrivals who would work cheaper. The earlier immigration agencies were in the Labor and Commerce Department, then just the Labor Department. The first "Board" of Special Inquiry began at Ellis Island and continued under the Labor Secretary during early reorganizations. The BIA as we know it was really created under the Secretary of Labor and adopted by the Attorney General later.

Eventually, the Industrial Revolution began to reach America and had an ever expanding influence on the economy. New skill sets began to take shape and new considerations in the labor market and workforce emerged. New grounds for exclusion sprung up and eventually included among them was the need to obtain permission from the Secretary of Labor to import laborers. In case folks have not been paying attention, they will be fairly aware that where there is a rule, there is usually at least one exception. Most immigration rules have exceptions and a growing list of exceptions to the labor certification process began to take shape. In 1965, Congress amended the law and included an undefined labor certification exception. It was merely tossed in there as "other qualified immigrants". INS defined it via regulations that they began to promulgate in the Federal Register in 1966, and included the first finalized version in the CFR published in 1967.

The former "Special Immigrant" Nonquota/Nonpreference Visa was issued pursuant to former INA 101(a)(27) [8 USC 1101(a)(27)] as a Regulatorily Defined Labor Certification Exemption for an "Investor" as an Interpretation of the "Other Qualified Immigrant" found in former INA 203(a)(8) [8 USC 1153(a)(8)]. Legacy INS promulgated 8 CFR 212.8(b)(4) in the Federal Register in 1966. This immigration benefit first appeared in the Code of Federal Regulation in 1967. This visa was made statutory by Congress in the Immigration Act of 1990 (IMMACT90), at INA 203(b)(5) as employment-based 5th preference: EB-5.

The original version of 8 CFR 212.8 stated, in pertinent part:

  • (b) Aliens not required to obtain labor certifications. The following members are not considered to be within the purview of section 212(a)(14) of the Act and do not require a labor certification: ....... *****
  • (4) an alien who will engage in a commercial or agricultural enterprise in which he had invested or is actively in the process of investing a substantial amount of capital.

The regulation went through changes and challenges for over a decade. It then became very elusive and the investor exemption was nearly forgotten forever because the "nonpreference visas" dried up. The earliest investors, however, were seen as true entrepreneurs and that concept evolved under subsequent regulatory changes by adding at minimum amount of money invested. There was an early attempt to incorporate a job creation element that was fought and defeated. Later, the alien had to be qualified to run the business, manage it, and hire at least one U.S. worker (other than himself, spouse, or kids). In 1990, again, Congress addressed the true entrepreneurs rather than merely investors. The later addition of the Pilot Program with its Regional Centers is where the investor visa really came to be. A few minor amendments transformed true entrepreneurs into immigrant investors.

The current EB-5 visa is available to either a true entrepreneur or an investor. EB-5 visas are not geared towards the small time mom-n-pop operations that are often associated with immigrants of yesteryear. Such hardworking industrious immigrants are still very frequently found "among the masses" of family sponsored immigrants who far outweigh everyone else under the U.S. immigration visa allocation scheme. The EB-5 visa demands job creation results with a strict minimum in a preferred timeframe as well as a strictly controlled, highly regulated, minimum investment amount. The EB-5 alien can go it alone as a true entrepreneur, join with others but still as a true entrepreneur, or seek help and seeming safety by investing through a Regional Center.

Although, in reality these pathways are vastly different, they are lumped together under the EB-5 law. This reality has made the implementation of the EB-5 program difficult. In that the government agency responsible for EB-5 finds it difficult to implement, the private sector players find it even more difficult because of the underlying uncertainties involved. The actual aliens seeking visas, the Regional Center sponsors, and all the various "practitioners" (attorneys, business analysts, economists, State governments) are faced with many challenges not faced in any other area of immigration law and practice. Due to the difficulties inherent in EB-5, it is not to be entered into lightly. Numerous well-meaning but ill-prepared have sought to break into EB-5 and failed. It is inevitable that more will follow that dismal path to failure. The few players who truly grasp the realities and embrace the challenge shall continue to rise to the top. I hope that Congress revisits EB-5 soon and makes some changes. I will not write here about what changes I'd like to see because I have already done so elsewhere. I encourage those who see value in EB-5 to speak up and offer their suggestions to USCIS on how to best implement the program under existing law and write to Congress with ways to make it better through further amendments.

About The Author

Joseph P. Whalen Is not an attorney. He is a former government employee who is familiar with the INA. His education is in Anthroplogy with a concentration in Archaeology and has both a BA (from SUNY Buffalo) and an MA (from San Francisco State University) in Anthroplogogy. He previously worked as an Archaeologist for the U.S. Forest Service before becoming an Adjudicator with INS which became USCIS.

The opinions expressed in this article do not necessarily reflect the opinion of ILW.COM.