02 Jun Navigating the E-2 to EB-5 Transition
Some E-2 visa applicants make their investments with the intention of eventually transitioning to an EB-5 visa. This article will explore the reasons for converting from E-2 to EB-5 and the important factors that petitioners must contemplate when doing so.
Let us first consider the difference between the two visa categories. The E-2 is a non-immigrant visa that allows a national of a treaty country (a country with which the U.S. maintains a Treaty of Bilateral Investment) to be admitted to the U.S. to manage a business in which he has invested a “substantial” amount of capital. While it is renewable indefinitely for the life of the business, the E-2 visa is specifically designed not to lead directly to a green card. The E-2 visa must be renewed every few years (depending on the term granted), and is subject to nonrenewal in the event the business proves unsuccessful.[1] The E-2 visa has no minimum dollar investment requirement nor does it require the creation of a minimum number of jobs. Rather, it requires that the investment amount be substantial relative to startup costs of the business and that the business generate income sufficient to support more than just the investor and his family. A major downside of the visa – and a significant motivator for converting to the EB-5 visa – is the problem of children who age-out (ie: turn 21) and are no longer eligible to be dependents of their sponsoring parent’s visa.
immigration visa
Unlike the E-2 visa, the EB-5 Immigrant Investor Program offers foreign investors the opportunity to become U.S. lawful permanent residents. While a foreign national of any country can petition for an EB-5 visa, he/she is subject to the visa’s stricter investment and job creation thresholds. Basic requirements for an EB-5 visa are a $1,000,000 investment (or $500,000 in a Targeted Employment Area, or TEA[2]) in a new commercial enterprise and the creation of at least 10 full-time jobs within two years of being granted conditional permanent residency.
Why would an investor apply for an E-2 visa and later transition to an EB-5 visa? There are several reasons. First, some investors seeking residence in the U.S. do not have the $500,000 up front to apply for EB-5. The E-2 visa is a good option for such investors, as long as they are citizens of an E-2 Treaty Country. Second, though processing times for the I-526 petition used to qualify for an EB-5 visa can take well over 12 months, investors can typically obtain an E-2 visa (and the ability to live and work in the U.S.) much more quickly. If the treaty investor is currently in the U.S. in a lawful nonimmigrant status, he or she may file Form I-129 to request a change of status to the E-2 classification. As of this writing, USCIS processes most of these requests in under three months.[3] For an additional fee, USCIS can expedite the processing time to just fifteen calendar days.[4] If not residing in the U.S., a foreign national may obtain an E-2 visa by applying directly at a US consulate abroad. Depending on the consulate’s visa wait times, it may take 2-4 weeks to obtain an E-2 visa through consular processing.
As an investor’s business expands through additional capital injection, he/she may consider switching to EB-5 once his investment in the business has met the minimum threshold of $1 million (or $500,000 in a TEA). Importantly, while the E-2 capital investment may be counted towards the EB-5 requirement, retained earnings or revenue generated by the E-2 investment may not be counted toward EB-5 – that is, the capital must be drawn from the business and allocated directly to the investor/applicant in order to “count”. In addition, the enterprise must already have created the requisite ten jobs, or demonstrate that it will create the remaining jobs needed to meet the ten-job threshold within two years of the grant of conditional permanent residence. Once these conditions have been met, the investor may submit an I-526 Immigration Petition, using the original (or even a new) investment enterprise to fulfill the EB-5 investment and job requirements.
Let’s consider a real-world example: Maria, an Argentinian national, applies for an E-2 visa with an initial investment of $250,000 in a franchise location of Bob’s Burritos. She hires six employees to operate the restaurant. Over time the business proves successful. Maria decides to invest an additional $250,000 to purchase a second franchise location, for a total of $500,000 in outside capital. (Both restaurants are located in TEA’s). At this point, she can apply for an EB-5 visa, provided she can demonstrate that her business will generate a minimum of four additional jobs within two years of her obtaining conditional permanent residency.
Thus, while the E-2 to EB-5 switch is a doable process, it requires careful planning from the outset, particularly with respect to the investment and job-creation requirements. For instance, if the investor plans to switch eventually to an EB-5 visa, he/she should open the E-2 enterprise in a TEA to meet the EB-5 investment threshold more quickly. Additionally, the investor should plan to make incremental capital investments to grow the business and to create at least ten jobs over a specified period of time. Planning and navigating the switch from E-2 to EB-5 can be a complicated process. Investors interested in this option should seek advice from qualified immigration counsel experienced in handling both E-2 and EB-5 cases.
To inquire about our turnkey customized EB-5 services, such as our best-in-class Matter of Ho-compliant business plans, project assessment and ancillary services, please contact us at info@ecouncilinc.com.
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[1] http://www.dekirby.net/library/san-francisco-visa-lawyer-challenges-of-the-e-2-treaty-investor-visa.cfm
[2] A TEA is either a “high unemployment area” in an urban setting (i.e. part of a Metropolitan Statistical Area, or MSA) that has an unemployment rate of at least 150 percent of the national average or a “rural area”.
[3] The most current USCIS processing times can be found here: https://egov.uscis.gov/cris/processTimesDisplayInit.do
[4] http://www.uscis.gov/forms/how-do-i-use-premium-processing-service