Some months ago, the Lansing Economic Development Corporation received designation from the United States Customs and Immigration Service (USCIS) as an EB-5 Regional Center for the city of  Lansing, Michigan. EB- Regional Centers are private or public entities that have received government approval to participate in the The Immigrant Investor (EB-5) Pilot Program. Regional Centers enable the amassing and pooling of capital for targeted investments in designated regions in the United States. As of this writing there are three other EB-5 Regional Centers in the state of Michigan: one for Detroit, one for Emmett County and one for the state of Michigan.

Regional Centers are geographically defined based on what are known as Targeted Employment Areas or TEAs. They are also defined by the purposes or businesses that each regional center is authorized to fund.

The EB-5 form of financing allows an immigrant to invest $500,000 through a Regional Center in an authorized business and, upon approval of that investment by USCIS, receive a temporary green card for the investor and the investor’s immediate family (including children under the age of 21). While the effect of the EB-5 program is to raise much needed capital, to the investor, it is most importantly a way to provide immediate immigration for the family.  The investment must be for a USCIS-approved business in the Regional Center’s area and must create 10 jobs either directly, indirectly or induced by way of each $500,000 invested.

The Immigrant investor initially places his funds in escrow, and files a Form I-526 with USCIS which triggers an investigation of both the project and the investor. The project must meet the requirements of EB-5 and the investor must pass muster on being granted the visa.

It is the responsibility of the Regional Center to supervise the investment from the standpoint of meeting the requirements of EB-5 law and reporting quarterly to USCIS that these requirements are being met.

The creation of a Regional Center is expensive and time consuming. As of this writing, there are 117 Regional Centers in the United States of which only 21 are producing investment funds. The Michigan statewide Regional Center is in the midst of funding its first project and is one of the 21 Regional Centers that are developing funding for their projects. Because the EB-5 law requires that these investments be at-risk, there can be no real or implied guarantees or return of principal. And the investor must have rights in the entity in which they are investing. For United States taxpayers, the EB-5 investment, however, is tax neutral in terms of financing the various business related incentives to commence business in Michigan. As the primary reason for the investment from the investor’s perspective is immigration or preserving current visa status, the rate of return is of secondary important to the investor.

While the EB-5 investment program is a critical element in promoting foreign investment in Michigan, the prize will be enticing direct foreign investment. In a recent trip to China, the delegation from the EB-5 Michigan Regional Center found many potential investors looking for investments in projects of 25 to 100 million dollars. One specific group from Inner Mongolia is very anxious to find investments in the United States; it is our push to make those investments in Michigan.

When a company seeks EB-5 financing, it must comply with both security and immigration laws. It should also understand that each step of the process is gated by USCIS.  Currently this governmental agency has announced that it will be 120 days before any action is taken on any matter upon which it must act. Each investment by the immigrant investor must be held in escrow until the temporary green card is issued. At that time, the monies invested by the immigrant are turned over to the project. At this rate it would take at least 15 months before the company has any cash released to it.

The single most critical issue for the foreign investor is job creation. The immigrant’s $500,000 investment will be lost and the immigrant and family will lose their temporary green cards  if the 10 jobs are not in place  two years after their investment has been approved. Many of the investments two years ago were in real estate, and the real estate market bust has resulted in approximately 42 percent of the temporary green cards issued have not resulted in maintenance of the 10-job requirement, which means that not only does the investor lose the investment but also must return to the country from which they came.

While a successful EB-5 program is a key component in bringing investment into Michigan, we feel it is critical to leverage the interest of wealthy Chinese to invest in Michigan without regard to the EB-5 Regional Center program. Along with Prima Civitas we are working on two initiatives to move this process along.

1. We plan to invite a delegation of investors and bankers to come and examine what is available here.

2. We are collaborating with one of the highest rated financial television production companies in the People’s Republic of China on a program series called “Invest Internationally and Live Globally.”  This program is aimed at the 125 million high networth investors in the PRC. The first program will air this coming January.

To be successful in bringing in EB-5 investment, direct investment and creating a Michigan focus will involve the active support of state and local government, economic development agencies and the private investment sector. Prima Civitas has been a key mover in these efforts.

		Robert L. Hood is of counsel with the law firm of Fixel Law Offices, PLLC practicing in the areas of corporate, business, tax and EB-5 financing.