A Regional Center is defined as any economic entity, public or private, which is involved in the advancement of economic growth, improved regional productivity, job creation, and increased domestic capital investment. An entity seeking the “Regional Center” designation must submit a Regional Center proposal to the U.S. Citizenship and Immigration Services (USCIS). Upon approval of such designation, it is deemed to be a “Regional Center.”
The Regional Center sets up an investment fund for the benefit of the EB-5 investors. Investors purchase equity stakes in the investment fund. Then, the fund either purchases equity in the job creating entity (the equity model) or loans the job creating entity money (the loan model). The job creating entity then uses the investment from the fund in the project to create jobs indirectly.
EB5 Regional Center Investment
The main advantage for a Regional Center is that USCIS will allow the project to count indirect and induced jobs in addition to direct jobs towards the job creation requirement.
Direct jobs are actual identifiable jobs for qualified employees employed by the commercial enterprise into which the EB-5 investor has directly invested his or her capital (the fund).
Indirect jobs are those jobs shown to have been created collaterally near the project as a result of capital invested in a commercial enterprise affiliated with a regional center by an EB-5 investor.
Induced jobs are new jobs that are created within the community where a regional center is located as a result of income being spent by EB-5 project workers.
The number of indirect jobs created through an EB-5 investor’s capital investment is based upon a business plan and a detailed economic analysis, which is evaluated and approved by USCIS during the approval and designation of a regional center for participation the Immigrant Investor Pilot Program.
Furthermore, those investors investing through Regional Centers need not be involved in the day-to-day management of the business. Instead, investors can be involved in the policy formation of the fund. Usually, the fund (or new commercial enterprise) is organized as a limited partnership or limited liability company. The investor can become a limited partner or member, respectively, and receive all of the benefits of the State’s Uniform Limited Partnership Act or Limited Liability Company Act. Those rights are sufficient involvement for the investor to qualify for an EB-5 visa in the regional center context. The investor need not commit to a certain amount of time directing the business.
Many investors find the regional center investment model attractive because the investor can live anywhere in the United States. He or she does not need to live by the project. Additionally, he or she can work anywhere because employment is not tied to the new commercial enterprise or the project.