completing form i-526, immigrant petition by alien ... · elsie hui arias ([email protected]) is a...

1 Copyright © 2013, American Immigration Lawyers Association (AILA)

NOTE: Always check the website for the most recent version of this form and current filing fees!

INITIAL CASE ASSESSMENT FOR I-526 IMMIGRANT PETITION BY ALIEN ENTREPRENEUR Conduct due diligence—consider issues of inadmissibility grounds, age-out of dependents, source and

tracing documentation, etc. Examine key legal issues—New or “existing” business, amount of capital required, job creation, lawful

source of funds, etc. Review legal requirements—INA §203(b)(5) and 8 CFR §204.6, recent U.S. Citizenship and Immigration

Services (USCIS) memoranda, and precedent decisions of the Administrative Appeals Office (AAO). Analyze Form I-526—Prepare detailed memorandum and organize supporting documents. As of date of

this writing, filing to be made with USCIS, California Service Center, with $1,500 filing fee. Changes to filing procedures are anticipated; review updated guidance on USCIS website.

WHAT CONSTITUTES INVESTMENT OF CAPITAL? Law requires an investor to have invested or be in the process of investing the required capital.

Evidence of investment—e.g., wire transfer of cash funds to EB-5 business, or transfer of inventory or equipment to EB-5 business.

Amount of Capital Required capital is $1 million—provide evidence of investment amount in petition. Required capital is reduced to $500,000 if investment is located in a “Targeted Employment Area” (TEA),

which is an area of high unemployment (at least 150 percent of national average rate) or can be characterized as rural (enterprise is located in a city or town outside a metropolitan statistical area (MSA) and has a popula-tion of no more than 20,000). State designation of TEA area describing the basis for its designation, e.g., letter from State of Washing-

ton—Employment Security Department; or Statistical evidence of TEA qualification, e.g., for high unemployment area, compare national average un-

employment rate through U.S. Department of Labor (www.dol.gov) and local area in which enterprise is located, e.g., research statistics published by state workforce agency; or

Articles do not necessarily reflect the views of the American Immigration Lawyers Association. * Susan L. Pilcher ([email protected]) is Of Counsel to the firm of Carroll & Associates, PC (formerly Carroll & Scribner, P.C.) in Burlington, Vermont, where her general immigration practice includes a substantial focus on EB-5 and investment-related matters. Ms. Pilcher’s professional background includes nearly a decade of full-time law teaching, commercial law practice, and many years of diverse and rewarding experience representing clients in virtually all types of immigration-related matters. She obtained her J.D. with distinction from Stanford Law School, where she served as Managing Editor of the Stan-ford Law Review. Elsie Hui Arias ([email protected]) is a partner of Stone & Grzegorek LLP, in Los Angeles, and is certified as a specialist in immigration and nationality law by the California State Bar. Ms. Arias practices all areas of immigration law, with a current emphasis on EB-5 immigration.. She is a graduate of the University of California at Berkeley and the University of California at Davis School of Law.

COMPLETING FORM I-526, IMMIGRANT PETITION BY ALIEN ENTREPRENEUR

by Susan L. Pilcher and Elsie Hui Arias*

http://www.uscis.gov/portal/site/uscis/menuitem.5af9bb95919f35e66f614176543f6d1a/?vgnextoid=79a7105b5904d010VgnVCM10000048f3d6a1RCRD

2 AILA’S IMMIGRATION FORMS TOOLBOX

Copyright © 2013, American Immigration Lawyers Association (AILA)

Population data, county identification, and information on MSA affiliation (from U.S. Census Bureau) to establish “rural” area.

Equity Capital/Type of Capital Investment = contribution of equity capital. Loans of capital to enterprise do not count. Investor cannot re-

ceive any bond, note, or other debt arrangement from enterprise in exchange for contribution of capital. Also, investor’s personal guarantee of a loan that is primary obligation of enterprise does not constitute equity in-vestment capital.

Capital can include cash and cash equivalents, equipment, inventory, other tangible property, and debts. All capital shall be valued at fair market value at time of investment.

Escrow can be used, but escrow agreement should reflect that sole condition for release of funds is ap-proval of I-526 petition or conditional resident status. Escrow must release funds directly into commercial enterprise’s account for “job-creation purposes.” Investment Capital Must Be “At Risk”

Simply transferring funds into account of enterprise does not meet “at risk” requirement. USCIS focuses on actual and intended uses of capital to confirm that it will be used for job creation and profit-generating ac-tivity (for example, capital used for partnership expenses and reserve accounts does not count for EB-5 pur-poses). Evidence that investment capital is at risk may include: Details of how capital has been or will be utilized, e.g., purchase agreements, receipts, invoices, bank

statements reflecting withdrawals of funds, etc. Comprehensive business plan: description of business, products, and services; marketing analysis, including

review of competition; marketing strategy; organizational chart, hiring plan/timeline for employees; and five-year pro forma.

Financial documents, e.g., income tax returns, financial statements, federal and state quarterly income tax filings.

Business operation documents, e.g., business license. Sample business transaction details, e.g., customer invoices, office improvements, utility bills, lease

agreement, recent bank statements, marketing materials, website. Practice tip: Substantial evidence should demonstrate that new commercial enterprise is – in conformance with Matter of Ho – engaged in “meaningful concrete business activity.” Petitioner should show that EB-5 funds “will in fact be used to carry out the business of the commercial enterprise.”

INVESTMENT MUST BE MADE IN A “NEW” COMMERCIAL ENTERPRISE Enterprise is “new” if formed after November 29, 1990 (Immigration Act of 1990’s (IMMACT90) date of passage). Evidence that enterprise was formed after November 29, 1990, such as articles of incorporation If investor contributes capital to an “existing” business, i.e., formed prior to November 29, 1990, investment may count as “new” for EB-5 purposes in two separate situations:

1. Investor substantially reorganizes or restructures existing business. Evidence that enterprise was formed before November 29, 1990, such as articles of incorporation. Evidence that required capital was invested into business after November 29, 1990. Evidence of substantial reorganization or restructuring. Mere change of ownership or form of entity

(e.g., corporation, LLC, limited partnership), cosmetic changes to business site, and implementation of new marketing strategy are insufficient alone to constitute reorganization into a “new” commer-cial enterprise.

Or

COMPLETING FORM I-526, IMMIGRANT PETITION BY ALIEN ENTREPRENEUR 3


2. Investor expands existing business, resulting in either: (a) increase of at least 40 percent in net worth of business or (b) increase of at least 40 percent in number of employees. Evidence that enterprise was formed before November 29, 1990, such as articles of incorporation. Evidence that required capital was invested into business after November 29, 1990. Evidence that subsequent to investment, existing business has increased its net worth or number of

employees by 40 percent, such as income tax returns, audited financial statements, and employment tax filings.

Commercial Enterprise For-profit enterprise can be structured as sole proprietorship, partnership (limited or general), holding

company (including its wholly owned subsidiaries), joint venture, corporation, or other entities privately and/or publicly owned. Documents required depend on structure, for example: Corporation—articles of incorporation, bylaws, shareholder list, stock certificate. Limited partnership—partnership agreement, list of limited partners, limited partner certificate. Limited liability company—articles of organization, operating agreement, member schedule and certifi-

cate. Practice tip: In forming or investing in a commercial enterprise, EB-5 client should be advised to consult

with a business attorney regarding appropriate business structure for enterprise. Issues that the EB-5 investor should be aware of include liability, taxation, complexity of creation and termination, and management capa-bility and control.

DOCUMENTING SOURCE AND TRACING OF INVESTMENT FUNDS EB-5 law requires that source of investment capital is lawful, and that capital originated from investor’s

personal funds. Background of investor: last five years of income tax returns (personal and business); curriculum vitae; if

applicable, certified copies of judgments or evidence of pending civil or criminal actions involving mone-tary judgments against petitioner.

Detailed explanation and documentation regarding actual source of investment capital, e.g., employment earnings, stock sale, gift, loan proceeds, sale of real property or business, inheritance. – Where funds originated from a gift or a loan, provide background documentation of donor or lender to

verify lawfulness of source of funds, e.g., income tax returns (if source not evident from returns alone, may need additional tracing of donor’s or lender’s source).

– Evidence reflecting path of investment funds from source to investor, e.g., investor’s bank statement reflecting deposit of real estate sale proceeds, is required.

Detailed documentation tracing investment capital from investor to EB-5 commercial enterprise, e.g., bank statements reflecting outgoing transfers and corresponding deposits of investment funds. – Practice tip: If petitioner sold or mortgaged personal asset, and uses proceeds of transaction for EB-5

source of funds, then petitioner will need to provide evidence demonstrating that asset was purchased with lawfully-obtained funds.

EMPLOYMENT CREATION: CREATING (OR SAVING) JOBS Jobs must be created for at least 10 employees (not independent contractors), on a full-time basis (minimum 35

hours per week). Neither the investor nor his or her spouse or children count toward the 10-employee minimum. Qualifying U.S. workers include U.S. citizens, lawful and conditional permanent resi-dents, asylees, and refugees, but do not include nonimmigrant workers. Job-sharing arrangements of full-time posi-tions are permissible, but combinations of part-time positions do not count. Commercial enterprises affiliated with a USCIS-designated Regional Center may rely on indirect employment creation.



If EB-5 investment has created jobs for 10 full-time U.S. workers at time of I-526 filing: payroll records, W-2 forms, I-9 forms, organizational chart, detailed list of employees/job descriptions, etc.

If requisite employees not hired at time of I-526 filing: comprehensive business plan reflecting hiring plan/timeline for employees within two years, proposed organizational chart, detailed list of employ-ees/job descriptions.

If “troubled business”: Provide evidence that number of existing employees will be maintained at no less than pre-investment level for a period of at least two years, e.g., payroll records, W-2 forms, I-9 forms of employees, business plan, etc. Evidence of “troubled business” will require credible financial statement and tax returns.

If regional center: Business plan and economist report discussing creation of employment—directly and/or in-directly—resulting from investment. Practice tip: If investment funds are pooled together with other EB-5 investors, employment creation

must be sufficient to support all EB-5 investors cumulatively (e.g., creation of 20 jobs could support petitions filed by two EB-5 investors). The I-526 petition should also include agreement regarding job credit alloca-tion.

MANAGEMENT RESPONSIBILITIES OF EB-5 INVESTOR Law requires investor to “engage” in management of enterprise. Role in enterprise must be active, not

passive—can consist of day-to-day management or policy formulation. Evidence may include: Formal agreement, e.g., limited partnership agreement, shareholder agreement, operating agreement, cor-

porate resolution. Declaration (if sole proprietor).

ADDITIONAL REQUIREMENTS: WHERE I-526 PETITION IS BASED ON INVESTMENT IN USCIS-DESIGNATED REGIONAL CENTER

Above legal and regulatory requirements must be met. Must also include: Legacy Immigration and Naturalization Service (INS) or USCIS letter designating regional center. Documentation to establish that new commercial enterprise is located geographically within boundaries of

designated regional center territory as defined in designation letter. Documentation to show that new commercial enterprise is within scope of target industries or activities

approved by USCIS in regional center designation (i.e., consistent with the regional center’s business plan).

If applicable, economist report detailing proof of indirect job creation based on reasonable methodologies (i.e., report that discusses accepted statistical or economic models, how new commercial enterprise will create direct and/or indirect employment within a particular period of time).

ANALYZING AND DRAFTING FORM I-526, IMMIGRANT PETITION BY ALIEN ENTREPRENEUR

The following is practical guidance to completing Form I-526, Immigrant Petition by Alien Entrepreneur, which is required of EB-5 petitioners. The reproduced exemplar of Form I-526 (rev. 05/10/12),1 found at the end of this article, is annotated by letters (A-Z), which are cross-referenced to comments in the accompanying text below. The comments are designed to alert the practitioner to legal issues implicated by each of the fields and/or sections on the USCIS form, excepting those that are self-explanatory.

1 The USCIS website states that a new version of the form is coming soon (last visited on 6/20/13).

http://www.uscis.gov/portal/site/uscis/menuitem.5af9bb95919f35e66f614176543f6d1a/?vgnextoid=79a7105b5904d010VgnVCM10000048f3d6a1RCRD



Part 1. Information About You A - Petitioner’s current status and entry information: Being out of status does not preclude I-526 approval

or subsequent lawful admission if otherwise eligible. The timing of investment and I-526 filing relative to date and class of admission may implicate issues of immigrant or preconceived intent. Part 2. Application Type

B - Box “a” should be checked if the petitioner’s investment qualifies for a minimum $500,000 invest-ment because the enterprise is located in a TEA, i.e., a rural area or designated area of high unemployment. The petition must be supported by evidence that the qualifying TEA or rural area satisfies the criteria in 8 CFR §204.6(i) and recent USCIS guidance.

C - Box “b” should not, at present, be checked for any petition. Under INA §203(b)(5)(C)(iii), USCIS has the authority to require up to three times the standard amount of required capital for certain MSAs with low unemployment rates. However, to date, USCIS has not adjusted the required capital investment upward in any geographic area.

D - Box “c” should be checked if the petitioner’s investment is not within an area of high unemployment or a rural area meeting TEA requirements, and is thus subject to the minimum investment amount of $1 mil-lion. Part 3. Information About Your Investment

E - Street Address: Where eligibility for reduced capital investment depends on the location of the enter-prise in an area meeting TEA requirements, USCIS will request evidence that the enterprise is geographically located within the qualifying area. Any discrepancy between this address and the qualifying area as described in the petition should be fully documented and explained in the support letter.

F - Date established: This date is relevant to whether the enterprise is “new,” i.e., created after November 29, 1990, or if special requirements regarding “existing business” should apply (i.e., substantially restructur-ing or reorganization, or 40 percent expansion in net worth or employees).

G - IRS Tax #: This field refers to the IRS-issued Federal Employer Identification Number (FEIN) appli-cable to the enterprise. The FEIN may be used to identify the employer for purposes of evaluating the crea-tion of “direct” jobs resulting from the petitioner’s capital investment.

H - Total capital investment to date. This amount should in most cases meet or exceed the required mini-mum capital investment amount of $500,000 or $1 million, as applicable.

I - Names and immigration plans of other investors. This information is not specifically required under the law or regulation but may relate to sharing credit for employment creation. Disclosure of ownership of EB-5-funded enterprises also furthers anti-fraud objectives. To the extent the requested information is known or readily available, it should be provided with Form I-526.

J - County and State. Complete if you checked Box “a” or Box “b” in Part 2. The data in these fields must be consistent with the basis for the reduced or increased amount of the required capital investment. Part 4. Additional Information About the Enterprise

K - “Creation of a new business” box should be checked if the investor created the enterprise after No-vember 29, 1990 (i.e., eligibility rests on 8 CFR §204.6(h)(1)).

L - “Purchase of an existing business” box should be checked where eligibility rests on 8 CFR §204.6(h)(2). Checking this box will require supporting documentation of simultaneous or subsequent restruc-turing or reorganization of the enterprise.

M - “Capital investment in an existing business” box should be checked where eligibility rests on 8 CFR §204.6(h)(3). Checking this box will require supporting documentation of expansion of the net worth or num-ber of employees by at least 40 percent as a result of the contribution of capital.

N - Composition of the petitioner’s investment. Figures in these fields relate only to the makeup of the in-vestor’s contributed capital as of the time of filing the I-526 petition; for each type of capital contributed, the



regulations prescribe required supporting evidence (8 CFR §204.6(j)). These entries also define the nature of the capital investment for purposes of showing at the removal of conditions stage that the investment has been sustained.

O - Income. This question relates to the income of the enterprise, not of the investor. P - Net worth. These are the fields in which to assert a 40 percent expansion in the net worth of the busi-

ness, if applicable, to show a qualifying “capital investment in an existing business” (see field “M” above). May enter “N/A” in other circumstances. Part 5. Employment Creation Information

Q - Difference in Number of Employees. This field, resulting from comparison of data in the preceding two fields, is used to assert expansion of the number of employees by 40 percent, if applicable, to show a qualifying “capital investment in an existing business” (see field “M” above). Alternatively, this field is used to establish a baseline for assessing the required creation of 10 jobs per qualifying investment. If the enter-prise qualifies as a “troubled business,” this will be the baseline for determining whether existing direct jobs are maintained throughout the conditional residence period.

R - Number of new jobs created by your investment. This field is for designating how many of the jobs in the “difference” field above are attributable to the particular investment outlined in this petition. Where there are multiple investors in an enterprise, this is where specific job numbers could be assigned to each investor.

S - Additional new jobs to be created by additional investment. Although this field implies it should be used only when the investor’s capital contribution has not yet been completed, this field may be used to pro-ject additional direct—and if applicable, indirect job creation—that will be attributable to the investor’s capi-tal contribution. Ensure the total of this field and the previous field totals at least the minimum required for approval (in some cases, such as with troubled businesses, an annotation is advised—“saving jobs”).

T - Position, office, or title. Although the investor need not be an employee of the enterprise, entries in this field should reflect that the investor is engaged in the management of the business, either as an employee, officer, director, member or partner.

U - Duties, activities, responsibilities. Entries in this field must reflect an “active” role in the management of the enterprise, via day-to-day control or policy formulation. Limited partners should include evidence of the right to participate in policymaking and certain key decision-making to the extent normally permitted by the Uniform Limited Partnership Act.

V - Salary and benefits. The regulations do not require that the investor be salaried, but data in these fields should be consistent with entries in the previous two fields. Part 6. Processing Information

W - Applicant intending to adjust status. Concurrent filing of the I-485 application is not presently per-mitted. If this box is checked, USCIS will retain the petition instead of forwarding it to the National Visa Center.

Practice tip: Checking this box is not recommended unless the investor is certain that he or she will utilize the adjustment of status process, as changing procedures after approval of the I-526 petition may require a Form I-824 (Application for Action on an Approved Application or Petition), resulting in significant delay.

X - Applicant intending to consular process. Checking this box will result in USCIS forwarding the ap-proved petition to the National Visa Center for consular processing of the immigrant visas. Entries in the fields will be used by the National Visa Center to make an initial determination of consular jurisdiction.

Practice tip: Although there is no place on the I-526 form to name derivative beneficiaries of the petition, in practice if you identify them and document their identities and relationships to the petitioner (i.e., name, birthdate, passport identification, and birth and/or marriage certificate), the National Visa Center will open visa cases for all family members upon receipt of the petition from USCIS. Also, unlike with the preceding field, a subsequent change from consular processing to adjustment of status should not entail a delay, as



USCIS will simply recall the petition from the National Visa Center upon receipt of a Form I-485 adjustment application.

Y - Deportation or removal proceedings. Being in removal proceedings should not disqualify an investor from I-526 approval. It is possible for an I-526 investor—if otherwise eligible—to adjust status in immigra-tion court.

Z - Work in the United States without permission. Having worked in the United States without permis-sion does not disqualify an investor from I-526 approval. However, it may be considered in reviewing the lawfulness of the investor’s source of funds, and it may affect the investor’s eligibility for adjustment of sta-tus and/or admissibility.



Sample Form I-526, Immigrant Petition by Alien Entrepreneur