Each Regional Center designates a geographic area for its investment projects. The region must be contiguous and may involve many counties or a whole state, as long as the economic impact of the regional center extends throughout the area. There can be more than one Regional Center in the same area. A person (or group) may set up more than one Regional Center, or expand the jurisdiction of an existing Regional Center by requesting an amendment to USCIS’s Regional Center designation.
A Regional Center must designate the type(s) of economic activity(ies) to be funded, such as real estate, hotel, wind power, etc. The regional center application can be amended at a later time to include additional economic activities. Regional center applications must be supported by an economic analysis demonstrating the economic benefit and job creation for each economic activity.
Two models – loan and equity
Generally, there are two regional center models. One takes in investors’ capital and loans it out to a job-creating project. The other model involves developing from the ground up or purchasing an investment project, and expanding or rehabilitating it with investors’ capital. A regional center may do both. Some regional centers offer investments in multiple businesses, similar to venture capital funding. This involves complex tracing of the capital and jobs.
Amount of investor capital – TEA
If the investment project is in a targeted employment area (TEA), the EB-5 immigrant’s investment is $500,000 (plus the regional center’s subscription fee that is usually $30,000 to $50,000). A project outside a TEA requires an investment of at least $1 million. Regional Centers can fund projects in TEAs and other areas. A TEA is defined as either a high unemployment area (150% above the national rate) or a rural area (outside a town of 20,000 and outside a metropolitan statistical area). Since most Regional Center projects are in TEAs, it is difficult to compete with them by offering a $1 million investment project.
In some cases, states will allow the combining of census tracts to show an area is a TEA.
Details about TEAs
An upcoming change in the data used to determine the unemployment rate for certification of targeted employment areas (TEAs) may have consequences for funding current and future projects.
The project must principally do business in a TEA at the time of the immigrant’s investment for the minimum amount to be $500,000. Whether the area later loses TEA status is not relevant.
Certification of TEAs is based on high unemployment, and is left to the states. To determine whether census tracts (CTs) have high unemployment, most states use the “census share” technique. Those that rely on the 2010 census tract boundaries must use the most recent labor force data available. However, some states – including California, Arizona, Illinois, New Jersey, New York, and Massachusetts – have been relying on decennial census 2000 and older labor force data.
Changes in the labor force since 2000 can mean a substantial difference in the unemployment rate when recalculated using current data. Thus, areas that qualify as TEAs now may not qualify in a few months (or vice-versa) if states switch over to using the 2010 census data. California, Illinois and Arizona will switch in 2014; Massachusetts will not. Other states using old data have not confirmed when they will make the switch.
If you are thinking of capitalizing a project in a particular area based on a single CT or group of CTs in a state that is still using 2000 data, it is best to double-check the unemployment rate using 2010 data to make sure the project remains in a TEA when the state switches over
Capital for Setting Up the Regional Center
USCIS requires a Regional Center to be adequately capitalized with about $100,000. An explanation regarding the sources of these funds must also be provided.
USCIS says Regional Center Applications are decided in about seven to 12 months. Some take longer.
For legal assistance with the complex process of setting up an
EB-5 Regional Center…