The Immigration Act of 1990 created the Investor Visa Category allowing qualified applicants to obtain Green Cards (lawful Permanent Resident Status) through investment in a U.S. enterprise. The Investor Visa Category has attracted the attention of many prospective immigrants because it allows the combination of immigration plans with new investment projects.
WHAT TYPE OF INVESTMENT QUALIFIES?
Ten thousand (10,000) Immigrant Visas ("Green Cards") are available each year for foreign investors establishing a "new commercial enterprise" in the U.S. The Investor must invest $1,000,000 in the enterprise (or $500,000 in certain "targeted employment areas"), and create at least 10 full-time jobs for U.S. citizens for permanent residents, excluding the investor's spouse and children.
An exception to the 10 direct job requirement is available through the State of Hawaii's Regional Center Authority. Under this program, direct job creation requirements are reduced for investments in export-related industries. Only 300 such visas will be issued nationwide each year, up to the period ending September 30, 1998.
(a) What is a "New Commercial Enterprise"?
A "new commercial enterprise" is any lawful, for-profit business established after November 29, 1990. Both the creation of a new business, and the purchase and re-capitalization or reorganization of an existing business, are allowed. The commercial enterprise maybe a sole proprietorship, limited or general partnership, joint venture, corporation, business trust, or any other publicly or privately owned business. In addition, a commercial enterprise can consist of a holding company and its wholly-owned subsidiaries, or any other entity which may be publicly or privately owned.
Under this broad definition, investment funds which pool investments into real estate or other for-profit projects qualify as "commercial enterprises". Non-commercial activities, such as owning/operating a personal residence, do not qualify for Investor Visas.
(b) What is a "Targeted Employment Area"?
"Targeted employment areas" are rural areas and areas where the unemployment rate is at least 1.5 times the national average. In these targeted employment areas, the Investor need only invest $500,000 when establishing a new commercial enterprise. However, 10 full-time jobs for U.S. workers must still be created. (See Regional Center Authority for relaxation of the 10 full-time job requirement).
In accordance with the INS regulations, the State has designated targeted employment areas which now cover most of the state's land areas. All the neighbor islands, several areas on Oahu (i.e. City and County of Honolulu), and parts of Hilo Town are targeted employment areas.
MAY BORROWED FUNDS BE USED IN INVESTMENT?
Yes. The $1,000,000 (or $500,000) invested may include legally obtained cash, equipment, inventory, or other tangible property, and cash equivalents, such as certificates of deposit, Treasury bonds, and other instruments which are easily convertible into cash. The amount invested may also include indebtedness secured by assets owned by the Investor. However, when the Investor finances a new commercial enterprise through borrowing, the Investor himself/herself must be personally and primarily liable for the debt. Furthermore, the assets of the enterprise itself may not be used to secure any of the indebtedness.
WHAT IS "FULL-TIME EMPLOYMENT"?
"Full-time employment" is defined as employment of a U.S. worker not related to the Investor, in a position requiring a minimum of thirty-five (35) working hours per week. Job sharing, (two or more employees sharing a full-time position) also constitutes a full-time employment. However, two or more distinct, part-time positions may not be combined to make a full-time position, even if the total hours worked by all part-time employees exceeds thirty-five hours per week.
WHAT EMPLOYEES QUALIFY UNDER THE INVESTOR VISA PROGRAM?
All U.S. citizens, permanent residents (Green Card holders), and other immigrants such as conditional residents, temporary residents, and refugees qualify under the Investor Visa Program. The Investor and his or her immediate family members, and nonimmigrants (e.g. E, H, L, F or J visa holders) may work at the enterprise, but do not count toward the required number of employees.
CAN THERE BE MORE THAN ONE INVESTOR?
Yes. In multiple investor cases, each Investor must meet the $1,000,000 or $500,000 requirement, as well as the job creation requirement. Also, one Investor may seek an Investor Visa even if some or all of the other Investors do not. In such case, the total number of jobs created will be allocated to the Investor seeking the Investor Visa; however, that Investor must himself/herself still invest in the required $1,000,000 or $500,000.
ARE THERE ANY EXCEPTIUONS TO THE $1,000,000 REQUIREMENT?
Yes, investment in targeted employment areas need only be $500,000. Also, investment in a "troubled business" does not require the creation of ten new jobs, only the preservation of ten or more existing jobs through investment of the required amount. A "troubled business" is defined as one which has been in business for at least two years, and has incurred a net loss of at least 20% of its own net worth during one of the two years prior to the Investor's application.
ARE THERE ANY EXCEPTION TO THE 10 U.S. WORKER REQUIREMENTS?
Yes. The Hawaii Regional Center Authority allows job creation in export-related industries to be used in lieu of direct job creation. Utilizing employment multipliers, both direct and indirect job creation will satisfy the ten job criterion.
WHEN SHOULD THE INVESTMENT BE MADE?
The Investor must either have invested the required amount after November 29, 1990, or be "actively in the process of investing" in the new commercial enterprise.
MUST ALL THE FUNDS BE INVESTED AT THE START UP OF THE BUSINESS?
No. The funds can be phased in over a two year period. However, the investor must commit (i.e. put at risk) the entire amount at the time of application. Having made the initial investment, the investor can commit to the balance through promissory notes or similar instruments.
CAN THE INVESTMENT BE CONDITIONAL?
No. Plans to invest in the future, or speculative investments lacking present financial commitment, do not qualify. The Investor must establish that he/she is in control of the capital by demonstrating that the funds or assets are subject to his/her personal risk in the commercial sense; i.e., the capital is committed to the commercial enterprise and is subject to total or partial loss.
The INS does not "preapprove" investment funds as qualifying investments under section 203(b)(5) of the Act.
WHAT PROOF IS REQUIRED TO SHOW THE AMOUNT OF THE INVESTMENT?
Evidence must be submitted to show the Investor has placed the required amount as risk. This evidence may include bank statements showing the amount deposited in the U.S. business accounts for the enterprise; evidence of assets which have been purchased in the U.S. for use in the U.S. enterprise; evidence of property transferred from abroad for use in the U.S. enterprise; or evidence of borrowing which is secured by assets of the Investor (assets of enterprise not included), for which the Investor is personally and primarily liable.
MUST THE INVESTOR REVEAL THE SOURCE OF THE CAPITAL?
No, but the Investor must submit evidence to show that the amount invested was obtained through lawful means. This evidence may include personal and other tax returns filed within five years; evidence of all pending civil or criminal actions; foreign business registration records; loan documents; and evidence identifying any other source of capital.
DOES THE INVESTOR HAVE TO BE EMPLOYED BY THE NEW COMMERCIAL ENTERPRISE?
No. However, the Investor must play an active role in the investment by engaging in the management of the new commercial enterprise. this may be done either through day-to-day managerial control, or through policy formulation (e.g., membership on a Board of Directors, limited partnership agreements assigning the Investor certain powers and duties, etc.).
WHAT HAPPENS WHEN THE APPLICATION IS APPROVED?
When the Investor Visa Application is approved, the Investor and his/her spouse and children under 21 years of age receive conditional Permanent Residence (Green Cards) for a two-year period. The Green Cards are obtained through application at a U.S. Consulate in the Investor's native country, or through application for adjustment of status to Permanent Resident while in the U.S. under a valid nonimmigrant visa category (e.g., E, H, L, etc.). The Investor and family members may then work and/or attend school in the United States, and travel at will on temporary visits abroad.
HOW LONG SHOULD THE COMMERCIAL ENTERPRISE REMAIN IN BUSINESS?
The commercial enterprise, including the 10 full-time jobs (less in the case of those applying under the Regional Center provisions), must be maintained for at least a two-year period. There is no requirement that the enterprise make a profit. If the enterprise is satisfactorily maintained for the two-year period, the Investor may seek removal of the conditional Green Card status. This must be done within the ninety days preceding the end of the Investor's second year as a Green Card holder. At this time, the Investor must have the intent to continue with the enterprise.
WHAT HAPPENS AFTER THE TWO-YEAR CONDITIONAL PERIOD?
The Investor is granted full Permanent Resident (Green Card) status at the end of the two-year conditional period. The Investor and family members may remain Permanent Residents of the United States, or later seek U.S. citizenship. As already mentioned, the Investor must have the intention to continue with the commercial enterprise after first two years, however, it is conceivable that the enterprise could alter terminate or be sold, due to changes in the business climate or changes in the Investor's plans and circumstances.
ARE THERE ANY AVENUES OF DISPOSITION AFTER THE CONDITIONAL PERIOD?
Yes. Under certain circumstances, arrangements such as redemption right, third-party purchase, or other disposition may satisfy the "at risk" requirement. The agreement for disposition must expressly provide, in writing, that the amount the alien investor receives shall not exceed the fair market value of the investment at time of disposition.
CAN THE INVESTMENT BE INTENDED SOLELY TO OBTAIN GREEN CARDS?
No. The U.S. Immigration and Naturalization Service (INS) has said that Investors who knowingly establish a commercial enterprise in order to evade U.S. immigration laws may be fined up to $250,000 and jailed up to five years. The INS can terminate the Investor's Green Card if it determines that the investment was fraudulent, the enterprise was not established, the required amount not investment, or the enterprise not sustained by the investor.
HAWAII REGIONAL CENTER AUTHORITY
The State of Hawaii in its entirety has been designated a Regional Center, established primarily to promote increased export sales, as provided under U.S. law. The State Department of Business, Economic Development & Tourism has been designated as the Regional Center Authority.
Only 300 visas per year for the period ending September 10, 1998 will be made available to Regional Center Authorities throughout the U.S. Immigrant investors, including their spouses and unmarried children under 21 years of age may qualify for these visas.
With the designation of the entire state as a Regional Center, the immigrant investor's petition may now contain evidence that the investment both directly and indirectly will create ten new jobs, using economically or statistically valid methodologies. Revenues generated by the qualifying commercial enterprise must result in exports, yet the commercial enterprise need not be engaged directly in generating exports of goods and services. To establish a relationship to exports, the applicant must demonstrate a reasonable connection between the commercial enterprise and the production of exports.
The State has prequalified twenty (20) industries which have been identified as export-related. Investors in these industries can demonstrate indirect job creation with relative ease, using the multipliers in Exhibit 1.
For example, Ocean Transportation (SIC 44) has a multiplier of 4.061 indicating that for every new job created in that industry, 4.061 jobs are created throughout the economy. Thus, in order to meet the 10-job requirement, the investor needs to create three direct jobs (10 w 4.061 when rounded up = 3).
The State of Hawaii Department of Business, Economic Development and Travel, as the Regional Center Authority, provides certifications to accompany investor petitions, indicating that the proposed number of direct jobs meet or exceed the Hawaii Regional Center job creation requirements.
STATE OF HAWAII PARTICIPATION IN LIMITED PARTNERSHIPS OPEN TO IMMIGRANT INVESTORS
The State of Hawaii's Strategic Development Corporation's (HSDC) Board of Directors authorizes and approves investment in limited partnerships.
HSDC works with Hawaii's private sector to form limited partnerships (or holding companies, managed by experienced general partners). HSDC may co-invest with foreign investors in two or more clearly identified projects or subsidiary operations. The State of Hawaii and the investors would be limited partners, while day-to-day operations would be managed by experienced general partners. As long as the flow of funds and the jobs created can be clearly traced to the foreign investor, such limited partnerships would satisfy the requirements for the Foreign Entrepreneur Visa Program.
Immigrant Investors are encouraged to work with private venture capital groups. the HSDC will provide a listing of these businesses to interested investors.
REQUIREMENTS FOR LIMITED PARTNERS
If the Immigrant Investor is a limited partner and the limited partnership agreement provides the petitioner with certain rights, powers, and duties normally granted to limited partners under the Uniform Land Partnership Act, the limited partner will be considered sufficiently engaged in the management of the new commercial enterprise.
To ensure that a limited partner seeking benefits under section 203(b)(5) of the Act is not maintaining a purely passive role in regard to the investment, but is actually engaged in direct management or policy-making activities, the alien must not only establish that the limited partnership agreement provides him or her with such rights, powers, and duties, but also that her or she: (1) actually has exercised, or is actively in the process of exercising, these rights and powers, and (2) actually has performed, or is actively in the process of performing, these duties.
REQUIREMENTS FOR IMMIGRANT VISA
(a) Investor establishes a "new commercial enterprise" on or after November 29, 1990. A "new commercial enterprise" may consist of:
(i) the creation of an original business
(ii) the purchase of an existing business and its simultaneous or subsequent restructuring or reorganization, such that a new commercial enterprise results
(iii) the expansion of an existing business through the investment of the required amount of capital, bring about a substantial change of at least 140% increase in the number of employees and/or net worth of the company
(iv) investment of the required amount of capital in a troubled business, such that the number of employees is maintained at the pre-investment level for a period of two (2) years.
(b) The commercial enterprise may take the form of any for-profit activity formed for the ongoing conduct of a lawful business, such as a corporation, limited or general partnership, sole proprietorship, joint venture, holding company (including wholly-owned subsidiaries), business trust, etc. Non-commercial activities, such as owning personal residence, do not apply.
(c) Investor invests or actively is in the process of investing U.S. $1,000,000 in the enterprise ($500,000 for rural and high unemployment areas). ("Troubled business" or "expansion of existing business" excepted).
(d) Enterprise creates at least 10 full-time jobs for U.S. citizens, permanent residents, exclusive of Investor's spouse and children. The Hawaii Regional Center Authority, allows utilization of an employment multiplier to show both direct and indirect job creation.
(e) Investment capital may consist of cash, equipment, inventory and other tangible property of indebtedness secured by business and personal assets of the Investor.
(f) Multiple investors are permissible, provided each Investor seeking a visa has invested the required amount and created the required number of full-time positions.
(g) Investor personally manages the investment either through exercising day-to-day managerial control or through policy formulation and direction.
VISA AND VALIDITY
(a) Immigrant visa will be issued to the Investor and his/her spouse and children.
(b) Visa and lawful permanent resident "Green Card" issued is conditional for a two-year period.
(c) Ninety days preceding the second anniversary of the conditional green card issuance, Investor must file necessary documentation (Form I-829) with the INS to document fulfillment of all investment requirements in order to remove the conditional status of permanent residency. Failing to do so could result in the automatic termination of the permanent resident status of the investor and his or her family. Deportation proceedings often following such terminations.