Baker Tilly refers to Baker Tilly Virchow Krause, LLP,
an independently owned and managed member of Baker Tilly International.
The EB-5 Program
Investor Immigration to the United States:
General Description and Current Trends
September, 2016
Agenda
> What is EB-5?
> What is a Regional Center?
> Understanding the immigration process
> Understanding the investment process
> Typical cost
> Tax Planning: before, during and after
> About Baker Tilly Capital
What is EB-5?
> Created in 1990 by Congress to benefit U.S. economy by
attracting investments from qualified foreign investors
> U.S. Citizenship and Immigration Service (USCIS)
> Investment minimum is USD $1 million; reduced to USD
$500.000 if invested in Targeted Employment Areas (high-
unemployment or rural). Investment in a New Commercial
Enterprise
> At least 10 new full-time jobs must be created or saved per
one investor. USCIS verifies jobs creation
> Investment funds must be from a legal source
> EB-5 investments must be “at risk” (both as a financial
investment and in terms of the investor’s immigration status).
There can be no guarantees of return of capital or any
financial return
Increasing popularity of EB-5
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
110%
0
1 000
2 000
3 000
4 000
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8 000
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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Number of EB-5 Visa Issued by US Department of State
Number of EB-5 Visa Issued % of the EB-5 Visa Quota Used
In 2015, 9,764 EB-5 visas were issued. 14,373 EB-5 petitions were submitted in
2015. It is likely that 80%-90% of these were submitted by Chinese investors.
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EB-5 Visa Statistics by Immigrant
Origin, FY 2015
Country Visas for Direct Visas for RC % of Total Δ from 2014
China
(mainland)
99 8 057 83,5% (972)
Vietnam 8 272 2,9% 159
China (Taiwan) 1 138 1,4% 13
South Korea 2 114 1,2% (109)
India 9 102 1,1% 15
Russia 4 84 0,9% (12)
Ukraine 0 18 0,2% 11
All other
countries
33 901 8,8% (17)
Adapted from US State Department Report of the Visa Office 2015
Why EB-5?
> Permanent U.S. Resident status (“green card”) to the investor, the
spouse, and their unmarried children under the age of 21
> EB-5 may be a more rapid path to a “green card” than most other
avenues. Average processing time of the immigrant investor 1st
petition by USCIS is 12-18 months* (immigrant applicants who were
born in mainland China may have to wait longer to obtain visa)
> Benefits of a Permanent U.S. Resident – almost everything that U.S.
citizens can do (one exception - the right to vote)
> There are no requirements to live permanently in the U.S. OR
participate in the business that is financed with EB-5 money
> After 5 years of holding a “green card” it is generally possible to
apply for U.S. citizenship
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Why EB-5?
> Compared to EB-5, other traditional avenues to immigrate to the
U.S. are slow, inconvenient, and uncertain
> For an individual of modest wealth, EB-5 creates an opportunity
to avoid inconvenient political or economic circumstances by
relocating themselves or their families to a very stable
alternative country
> Many people seek to educate their children in U.S. universities;
this is much more easily accomplished for permanent residents
who will generally be able to obtain financial assistance
> Many professional programs (e.g. medical schools) in the U.S.
admit almost exclusively U.S. residents because their costs are
heavily subsidized by the government; a green card can be the
ticket to a secure economic future for the investor’s children
What is an EB-5
Regional Center?
> In 1992, Congress enhanced the economic impact of the
Program by permitting Regional Centers (RC) which simplify
the investment process
> RCs pool EB-5 capital from multiple investors and invest it in
economic development projects approved by USCIS within a
defined Targeted Employment Area
> Today, about 95% of all EB-5 capital is raised and invested by
the approximately 850 RCs operating now.
> RCs identify investment opportunities that will create jobs and
assist in marketing those investments to investors from
around the world
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Understanding the Immigration
Process
Escrow Source of
funds verification
I-526 Petition
Consular processing
Conditional “green card”
I-829 Petition
Permanent “green card”
Investment returned
(subject to risk)
Citizenship (optional)
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Current Trends in Immigration
Process
Increasing wait times for I-526 approvals due to
backlog (approximately 22 000 petitions):
• Consequences to investors (planning issues)
• Consequences for businesses (need to plan for
longer use of money and different exit
strategies)
Strong movement to reform the program to ensure
that investors are able to immigrate in a
reasonable amount of time
Understanding the Investment
Process
> EB-5 investments that are affiliated with Regional Centers are
issued as private placements (Private Placement Memorandum or
PPM)
> US federal and state securities laws and SEC regulations apply
> Read the PPM and the Subscription Agreement
– How is the project funded?
– Disclosures of risks and material information
– Economics of the expected job creation
– Risks (again!): project risk, immigration risk, etc. No guarantees of
return on investment or return of the investment capital
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Current Trends in Investment
Process
Increased oversight from the SEC:
• Lawyers acting as unregistered brokers
• Greater oversight of Regional Centers
• FINRA requires specific EB-5 approval even for
registered brokers
Strong movement to reform the program to ensure
professionalism and integrity
Typical Costs
> Investment - $500.000 if within a TEA, otherwise $1.000.000:
– There is no guarantee that the capital will be returned but the
investment is designed to eventually return the invested capital
– Likely to increase with new legislation, likely to $800.000 and
$1,2 million respectively – potentially as soon as October 2016
> Administrative Fee – approximately $40.000 to $60.000:
– Used by Regional Center and issuer to pay placement fees, and
recover costs to issue and sell the EB-5 securities
> Immigration Attorney – approximately $10.000 to $15.000
> Tax Planning – cost varies based on the investor’s finances:
– First 10 hours are included for investments made through Baker Tilly
Capital
> Travel to U.S. or U.S. Consulate for immigrant visa interview.
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Tax Planning
> When an immigration visa is issued, the investor is subject to
global U.S. taxation (subject to tax treaties & credits):
– Complex federal and state tax laws
– Includes income, capital gain, estate and gift taxes
– Extensive reporting on all holdings
– Steep penalties for non-compliance
> Tax planning should take place before the conditional visa is
issued :
– Title of assets retained in home country
– Capital gains includes pre-immigration unrealized appreciation
– Accelerate recognition of income / gains, and defer losses / expenses
– Consider gifting before immigrating
– All assets, anywhere in the world, are subject to federal estate tax
– Consider offshore irrevocable trusts as a planning tool
> Failing to plan ahead can be costly
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About Baker Tilly Capital
> Registered with the U.S. Securities & Exchange Commission (SEC)
> Member of FINRA since 2001:
– Specific approval to offer EB-5 investments
> Services to EB-5 investors: recommendation of investment
opportunities; due diligence on RC’s and projects; coordination of
the investment process
> Wholly owned by Baker Tilly Virchow Krause (established 1931):
– Top 15 accounting and advisory firm in the US
– Major offices in Chicago, Detroit, Minneapolis, Philadelphia, Pittsburgh,
New York, Washington DC, Wisconsin
– Largest member worldwide of Baker Tilly International network
– Able to offer international tax advice to EB-5 investors
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Contact Information for our
EB-5 Team
Michael Fitzpatrick
Partner
+1 608 240 2609
Tom Holter
Vice President
+1 608 240 6782
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Anna Ferinde
Manager – Tax
+1 212 792 4906
Pietro Stuardi
Senior Manager - Tax
+1 212 792 4827
Disclosures
This information is not an offer to sell, or solicitation of an offer to buy a
particular security. An actual offer or solicitation can be made only with an
offering document, such as a Private Placement Memorandum, or a similar
issuers’ document. Investors should always read such offering documents very
carefully before making a decision to invest. Investors must understand the
offering documents completely; including understanding of all risks involved,
and may be required to meet certain qualifications to be permitted to purchase
these securities.
Due to unique requirements of the United States’ EB-5 visa program, investors
should always seek advice of their own legal counsel in order to understand the
specifics of the program. This material is not intended to provide any information,
advice or recommendation about the EB-5 visa program, or any other legal,
accounting or investment advice.
Securities, when offered, are offered through Baker Tilly Capital, LLC, Member
FINRA and SIPC; Office of Supervisory Jurisdiction located at Ten Terrace Court,
Madison, WI 53718, U.S.A.; phone +1 608 240 2541. Baker Tilly Capital, LLC is a
wholly-owned subsidiary of Baker Tilly Virchow Krause, LLP, an accounting firm.
Baker Tilly Virchow Krause, LLP is an independently owned and managed
Member of Baker Tilly International.