Maryland Bar Bulletin
Publications : Bar Bulletin : August 2009


Foreign direct investors outlaid $260.4 billion to acquire or establish U.S. businesses in 2008. U.S. immigration laws provide options for investors to manage their investments while living here. This article introduces the permanent “EB-5” investor category and two temporary (nonimmigrant) options, the E-2 investor and H-1B specialty occupation categories.

The permanent investor category seems like a “no-brainer”. Invest $1 million, or $500,000, if investing in certain designated areas, create 10 full-time jobs for U.S. citizens or immigrants and get a “green card”. But meeting the U.S. Citizenship and Immigration Services’ (USCIS) requirements can be challenging. An investor must prove that his funds came from a legitimate source. When the money is from a source other than the investor’s earnings, tracing the funds can be difficult. The investor also must prove that he has invested or is actively in the process of investing in a “new commercial enterprise.” (“New” means after November 29, 1990.) He can start a business, expand a business he already owns by investing new capital or purchase and restructure or reorganize a business. An investor may be stymied when immigration requirements clash with reasonable business practices. For example, USCIS rejected an investor’s petition as not qualifying as restructuring when he changed hotel affiliation and modified the décor.

must prove that his funds came from a legitimate source.

Investors even face uncertainty when they invest in USCIS-approved Regional Centers. Congress only authorizes this program in six-month increments. The current authorization will end on September 30, 2009, unless extended again or if a Senate proposal to make this option permanent becomes law. USCIS also insists on evidence from investors that duplicates proof the centers submitted to obtain their own USCIS approval.

USCIS takes approximately six months to adjudicate the investor petition; approval is conditional. Approximately 21 months later, the investor must submit proof to USCIS that he has sustained his financial investment and the business; business income (loss); any changes in ownership, investment or operations; and that the 10 full-time jobs have been created (or maintained, if applicable).

For investors who do not want to become U.S. residents, the E-2 visa is the usual alternative. Unlike most visa classifications, which require USCIS approval, the investor submits his application directly to a U.S. Embassy or Consulate. The visa is usually valid for five years and the investor may be admitted to the U.S. for up to two years per entry. While there is no time limit on renewing or extending E-2 status, the investor must intend to return to his home country when his E-2 status ends.

Before the investment can be considered, the investor must meet two requirements. First, a treaty authorizing this visa category must exist between the U.S. and the investor’s country of citizenship. Second, the investor and the entity in which he is investing must have the same citizenship. Entity citizenship is determined by ultimate ownership. For example, a business incorporated in Maryland is Japanese for E-2 purposes if at least 50 percent of its shareholders are Japanese citizens.

The investor also must establish that he has the knowledge and the skills to develop and direct a viable business. Like the immigrant investor, he must prove that he legitimately acquired his investment funds. The investment must be active; uncommitted funds “parked” in a bank account do not qualify. A detailed business plan is a “must”.

Unlike the immigrant investor visa, the investment dollar amount is not fixed. The E-2 investment must be substantial in proportion to the dollar amount required to start or purchase that type of business. For example, it might cost $1 million to set up a manufacturing plant with specialized equipment, while it might cost $250,000 to purchase a restaurant.

An investor cannot “sink” all of his money into his investment. If the business will barely generate enough to support him, the application will be denied. The investor is expected to generate jobs for U.S. workers.

For investors who need an E-2 alternative, the H-1B can be faster and less expensive. The investor can establish a separate U.S. entity, which then can file a petition with USCIS to obtain the H-1B classification for the investor. The job offered must be in a specialty occupation for which the investor qualifies. A specialty occupation requires at the entry level at least a U.S. bachelor’s degree in a particular field or the equivalent in education and/or experience. The investor also must show USCIS that the new entity is viable, including information about its financial status and business prospects.

The H-1B is less flexible than the E-2 because of its 65,000 annual “cap” and its six-year limit. An investor who wants to stay indefinitely would have to qualify for an immigrant visa classification that does not require him to test the U.S. labor market.

To attract greater foreign investment, the U.S. should simplify visa requirements.

Leslie K. Dellon is an attorney with Hammond Immigration Law, P.C., in Rockville, Maryland, and Washington, D.C.

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Publications : Bar Bulletin: July 2009

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