Telephone: (334)
832-9090
E-mail: usvisa@visaus.com
U.S. 'employment-creation'
visa program has
changed,
but still needs vast improvements
By BOYD F. CAMPBELL
Attorney at Law and Civil Law Notary
The
ice at the Immigration and Naturalization Service of the U.S. Department
of Justice broke in a big way a few years ago. Many less wealthy foreign
nationals were able to file for "employment-creation" visas, and visa and
investment consulting firms fed the hype and hoopla by signing up hundreds
of foreign national investors to "limited partnership" arrangements.
This
was not what Congress had in mind, and the enthusiasm for these arrangements
died quickly. The visa petitions based upon these "limited partnership"
arrangements ran into trouble in Washington because they used primarily
U.S. debt rather than foreign capital, and there were complexities in the
partnerships that masked the fact that the jobs required to be saved or
"preserved" under the regulations were probably never there. These
"funny money" schemes began to get bureaucrats' serious attention as 1997
dawned.
I
advise my clients to make only "direct investments" in pursuing "employment-creation"
immigrant visas, and will continue to so advise them for reasons that follow.
I also advise my clients to consider other visa categories, such as EB-1
(multinational executives) and EB-2 (aliens of extraordinary ability),
as well as E-1 (treaty trader) and E-2 (treaty trader) visas.
Background
The
"employment-creation" immigrant visa program was one of the "ugly ducklings"
of the U.S. Immigration Act of 1990. There were few takers. Canada's investment
visa programs were much more favorable, relatively risk-free. Canada's
visa programs ate our lunch. Vancouver might as well be called "Little
Hong Kong" due to the large number of Chinese investors who fled there
from Hong Kong and mainland China.
Despite
the apparent weaknesses in the visa program, Congress renewed it 1994,
and again in 1997. Nobody was really sure why. But consulting firms, backed
by persuasive business immigration lawyers, literally re-made the program,
changing federal regulations by careful negotiation with INS as they went.
The
immigrant investor visa category is for prospective immigrant investors
who hire (or show proof of plans to hire) at least 10 U.S. workers. The
business must have been established (i.e., the investment must be made)
after November 29, 1990.
The
first step is for the prospective immigrant investor to file a petition,
requesting that the INS make a determination that the petitioner has invested
(or is actively in the process of investing) lawfully obtained capital
in a new commercial enterprise in the United States which will create full-time
positions for not fewer than 10 qualifying employees.
For
establishment of a "new" commercial enterprise in a "targeted employment
area," the amount of capital necessary is a minimum US$500,000. The
timetable depends upon the individual petitioner and the backlogs experienced
by the INS. The INS service centers have been giving hundreds of these
visa petitions careful scrutiny. Guidance from INS is confusing. Some of
these "partnership" arrangements turned out to be high risk ventures for
many unfortunate people.
The
original 45- to 90-day timetable for approval of these visas stretched
to six months, then to nine, then to more than a year. Who knows when some
of these petitions based upon shaky financial schemes, will be approved?
Also, INS processing delays have become the number one problem in that
federal bureaucracy.
What is required
The
administrative requirements concern the documentation (articles of incorporation,
certificate of merger or consolidation, partnership agreement, certified
financial reports or audits, stock purchase agreements, payroll records,
etc.) that would support a petition to be classified as an "alien entrepreneur"
and possible examination of investment income sources by the Internal Revenue
Service. It is possible to help this process along by calling on congressional
support from Washington, D.C., particularly if new jobs are involved for
the congressman's district.
Approval
of the investor immigrant visa entitles the holder of an immigrant visa
to conditional permanent resident alien ("green card" holder) status for
him and each member of his immediate family, including children younger
than 21 years old.
The
rule is that the investor must show that he has invested or is "actively
in the process" of investing the required amount (minimum US$500,000 capital
for targeted employment areas, or US$1 million elsewhere). The INS defines
"invest" as contributing capital.
"A
contribution of capital in exchange for a note, bond, convertible debt,
obligation, or any other debt arrangement between the alien entrepreneur
and the new commercial enterprise does not constitute a contribution of
capital." The petitioner must show that the new commercial enterprise has
been established, and that the required amount of capital has been transferred,
and that the investment has resulted in a substantial increase in the net
worth or number of employees of the business (minimum
10 U.S. workers employed).
There
are many ways to document what the INS wants, but the rules say that the
visa petitioner must provide documentary evidence that the required amount
of capital has been placed "at risk" for the purpose of generating a return
on the capital.
"Evidence
of mere intent to invest, or of prospective investment arrangements entailing
no present commitment will not suffice to show that the petitioner is actively
in the process of investing. The alien must show actual commitment of the
required amount of capital."
And
that was always the biggest problem with the employment-creation visa program:
Prospective investors (whether large or small) wanted to know what they
were getting for their money, and a "green card" was actually secondary
to preserving their investment. Speculators and entrepreneurs are used
to taking risks, but not "mom-and-pop"operations, which, it turned out,
were the most likely investors, if for the only reason that they wanted
to move to the United States to put their children in school here.
The
establishment of a new commercial enterprise may be used as the basis of
a petition for classification as an alien entrepreneur by more than one
investor, providing that each petitioning investor has invested or is actively
in the process of investing the required amount for the area in which the
new commercial enterprise is principally doing business, and provided that
each individual investment results in the creation of at least 10 full-time
positions for qualifying employees.
Establishment
of a new commercial enterprise may consist of (1) the creation of an original
business, (2) the purchase of an existing business and simultaneous or
subsequent restructuring or reorganization such that a new commercial enterprise
results, or (3) the expansion of an existing business through the investment
of the required amount, so that a substantial change in the net worth or
number of employees results form the investment of capital.
"Substantial
change" has been defined as a 40 percent increase either in the net worth,
or in the number of employees, so that the new net worth or number of employees
amounts to at least 140 percent of the pre-expansion net worth or number
of employees. Other, less stringent, criteria apply to an investor who
attempts to rescue a business that is in financial trouble.
The
lower investment threshold of US$500,000 to US$1million is not available
in many states, but it became available in Alabama on July 6, 1995, when
Governor Fob James, Jr., notified the INS of Alabama's designation of the
Alabama Department of Economic and Community Affairs to make determinations
of "high unemployment areas" for such investments.
I
was pleased to have played a role in obtaining that approval from the Governor,
and to get the cooperation of the Alabama Development Office in doing so.
I wish I could report that the visa program is being widely used in Alabama,
but that is not the case. Alabama is a poor state and cannot afford to
ignore foreign investment, whether it's from Missoula or Marrakesh.
I will continue to work with any and all Alabama economic development officials
to enable the state to take advantage of this investor visa program.
Reversal of fortune
Immigration
lawyers are nothing if not patient. Nearly five years after the "employment-creation"
visa program was signed into law, the INS began approving some limited
partnerships that protected petitioners' investment capital while placing
much less of it at risk. These limited partnerships could show that
the entire minimum amount (US$500,000) had been put up by structuring the
deal with credit from U.S. banks. In some of these kooky arrangements,
as little as US$100,000 was put into a U.S. business. Almost as much,
or more, went into investment setup costs, and fees to the brokers and
lawyers and bankers. The rest was placed in irrevocable trusts and invested
corporate bonds and commercial paper.
Overnight,
it seemed, immigration consultants and financial counselors were scouring
the planet, looking for foreign investors, and not necessarily the entrepreneurs
Congress envisioned when it passed the "employment-creation" visa program.
Instead of wealthy entrepreneurs, these new structured arrangements were
creating demand for the 10,000 annually allocated visas among "mom and
pop" investors who signed up with the consultants and brokers in greater
numbers.
But
it was too good to last. Eventually, the bureaucrats at INS began
asking questions about the limited partnership arrangements, and hundreds
of "employment-creation" visa petitions were held up. Former INS
Commissioner Doris Meissner assigned "tiger teams" to examine the EB-5
cases when the EB-5 program nearly ground to a halt. The risk for
these unlucky petitioners, it turned out, was not in placing their foreign
capital in the hands of the immigration consultants and brokers, but in
believing that the consultants and brokers knew what they were doing and
could deliver on their promises.
The
advice my clients receive from me is based upon sound legal principles
and careful regulatory analysis, with one trained eye on the federal bureaucracies
and with an index finger aloft, testing the political winds. I never
advise my clients to take a risk that is not based upon a fair likelihood
of success. For information about investing in Alabama, or for a
list of regional centers that the INS has designated for approved investing
opportunities in the lower category of US$500,000, rather than US$1 million,
please call (334) 832-9090. This immigrant visa procedure still has
mountains of problems, but it is still possible to use it if the investment
can be properly documented.
I
prefer to use the EB-2 immigrant visa category for aliens of exceptional
ability, and the EB-1 category for multinational executives, and will continue
to warn those who consult me about the "employment-creation" visa program.
WARNING: Your friends, family, fellow employees, and business associates are good sources of bad information about U.S. immigration law and procedures. You should find and hire a qualified immigration lawyer to guide you and help you with a change in visa status or immigrant visa. If you do not know a qualified immigration lawyer, call the American Immigration Lawyers Association (AILA) in Washington, D.C., at (202) 216-2400.
Boyd F. Campbell is a member of the American Bar Association (ABA) and of American Immigration Lawyers Association (AILA). He is former Chair of the Immigration Law Committee of the ABA's General Practice, Solo & Small Firm Lawyers Section and served as Co-Chair of the Immigration Law Committee of the ABA's Labor and Employment Law Section. He was a member of the ABA's Coordinating Committee on Immigration Law from 1994 to 1998, and served as Chair of the International Law Section of the Alabama State Bar from 2000 to 2002. He has practiced private international law, international labor and employment law, and immigration and nationality law in Montgomery, Alabama, since 1988. Mr. Campbell is listed in The Best Lawyers in America Consumer Guide. This is a subscription-only service available on the World Wide Web: CLICK HERE. In August, 2001, Mr. Campbell was appointed Alabama's first practicing civil law notary by the Alabama Secretary of State. For more information about Mr. Campbell, CLICK HERE
Questions and comments about this
article may be directed to:
Immigration
Law Center, L.L.C.
P.O. Box 11032
Montgomery, Alabama 36111-0032
USA
Telephone: (334)
832-9090
E-mail: usvisa@visaus.com
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