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Proving the investment is in a tea may 17, 2011
 

Proving the investment is in a tea may 17, 2011

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Specific evidence considerations for TEAs. Links to useful data for TEAs.

Specific evidence considerations for TEAs. Links to useful data for TEAs.

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    Proving the investment is in a tea may 17, 2011 Proving the investment is in a tea may 17, 2011 Document Transcript

    • Proving the Investment is in a Targeted Employment Area (TEA) I. What is a TEA?8 CFR § 204.6 Petitions for employment creation aliens.(e) Definitions. As used in this section:Targeted employment area means an area which, at the time of investment, is a rural area or anarea which has experienced unemployment of at least 150 percent of the national average rate. USCIS has interpreted that an alien investor may prove that their investment is in a TEA either at the actual time that the investment was made prior to filing their petition or may show that the area of intended investment will be in a TEA and currently qualifies as a TEA at the time of filing their petition. In either case, the burden of proof is on the alien investor. An investor affiliated with a Regional Center (RC) is dependent on the RC to take this into account when developing its investment strategy. If during the planning stage, the RC finds a suitable investment in a current TEA based on high unemployment, then they must determine if they can get together all the supporting paperwork to submit with the petition before the State or Federal government issues a new set of unemployment figures. Is it better to get the money dedicated to the actual project quickly before starting the USCIS paperwork just to lock in eligibility for the alien investor at the lower rate? In this scenario, skip escrow or it may require the alien to put up a full million instead and if (s)he cannot, (s)he will back out. Even if (s)he can afford it, (s)he may lose confidence in your RC and find a different RC project, most assuredly in a different RC. However, if the petition can be filed quickly and there is time to spare an escrow arrangement does often serve to pacify and placate alien investors when their money is locked in at the lower amount but can be returned if their petition is denied by USCIS. If there is time to spare before the funds actually need to be released to pay for the project phase, then the RC can go easy on the financial due diligence and let USCIS comb through the foreign financial documentation to satisfy that it is “lawful” funds.Rural area means any area not within either a metropolitan statistical area (as designated by theOffice of Management and Budget) or the outer boundary of any city or town having apopulation of 20,000 or more.Discussion of Targeted Employment Areas (TEAs) in the EB-5 Context Page 1
    • II. What is the difference between a Metropolitan Statistical Area (MSA) and a Rural Area? Do not fool yourself, numerous small communities are found inside a metropolitan statistical area (MSA). A Rural Area for EB-5 purpose is outside a Metropolitan Statistical Area and is outside of any community that has a population of 20,000 or more. These are two criteria that must be met. Some States have this information readily available for their own statistical and planning purposes and most of it is out there on the internet at the various government websites. III. Finding a TEA. As mentioned above, there is information out there already but it is up to you to find it for your specific State and locality within the State. Some States have higher unemployment and have made an effort to attract EB-5 investors and Regional Centers. Not all States are providing the same level of help as one might like but they may welcome help from individuals interested in starting a Regional Center and attracting immigrant investors. For example: http://business.ca.gov/MoreResources/EB5Program.aspx and http://business.ca.gov/MoreResources/EB5Program/TargetedEmploymentArea.aspx California is the leader in innovating and in aiding EB-5 investors and Regional Centers get the needed information. I strongly urge anyone seeking the best instructions available to visit the California website linked above. Even if you are in another State, these instructions will guide you in the process. You can always lobby your State officials to adopt and mimic these “best practices” developed by California. Here is a just a very small excerpt from the above link: “The Secretary of the Business, Transportation and Housing Agency, or the Secretary’s designee, may provide certifications for applicants that a proposed new business falls into an area (MSA, county, CDP, or city) that qualifies as a High Unemployment Area (HUA). In order to be classified as a High Unemployment Area, the MSA, county, CDP, or city must have experienced an unemployment rate that was equal to or exceeded 150% of the 2010 national employment rate. In 2010, 150% of the 9.6% average national unemployment rate was equal to 14.40%. (Requesting such a certification letter may not be necessary as the web site publishing this information contains a self certification option.)” (emphasis added) Compare the New York website: http://www.labor.ny.gov/stats/immigration_act.shtm Of course one may have to start from scratch and build their data by consulting the Bureau of labor statistics. See: http://www.bls.gov/bls/unemployment.htm This data can be combinedDiscussion of Targeted Employment Areas (TEAs) in the EB-5 Context Page 2
    • with further information obtained at various other sites such as the Census Bureau as mentioned. Find out more about MSAs at the Census website with further links to OMB: “...The standards for defining the areas are reviewed and revised once every ten years, prior to each decennial census. Generally, the areas are redefined using the most recent set of standards following each decennial census. Between censuses, the definitions are updated annually to reflect the most recent Census Bureau population estimates. Areas based on the 2000 standards and Census 2000 data were defined in June of 2003. The current definitions are as of December 2009.” Above from: http://www.census.gov/population/www/metroareas/metrodef.html . The above website includes a link to OMB BULLETIN NO. 10-02 dated December 1, 2009, which states in part: “Purpose: This bulletin, which includes an attachment and an appendix, updates and supersedes OMB Bulletin No. 09-01, issued on November 20, 2008. The attachment to the bulletin provides detailed information on the update of statistical areas since that time. The bulletin also provides guidance to Federal agencies that use the definitions of these statistical areas for program administrative and fund allocation purposes.” (emphasis added) IV. Considering Evidentiary Requirements for the TEA in the I-526 Petition.8 CFR § 204.6 Petitions for employment creation aliens.(j) Initial evidence to accompany petition. A petition submitted for classification as an alienentrepreneur must be accompanied by evidence that the alien has invested or is actively in theprocess of investing lawfully obtained capital in a new commercial enterprise in the UnitedStates which will create full-time positions for not fewer than 10 qualifying employees. In thecase of petitions submitted under the Immigrant Investor Pilot Program, a petition must beaccompanied by evidence that the alien has invested, or is actively in the process of investing,capital obtained through lawful means within a regional center designated by the Service inaccordance with paragraph (m)(4) of this section. The petitioner may be required to submitinformation or documentation that the Service deems appropriate in addition to that listed below.******(6) If applicable, to show that the new commercial enterprise has created or will createemployment in a targeted employment area, the petition must be accompanied by: (i) In the case of a rural area, evidence that the new commercial enterprise is principally doing business within a civil jurisdiction not located within any standard metropolitan statistical area as designated by the Office of Management and Budget, or within any cityDiscussion of Targeted Employment Areas (TEAs) in the EB-5 Context Page 3
    • or town having a population of 20,000 or more as based on the most recent decennial census of the United States; or (ii) In the case of a high unemployment area: (A) Evidence that the metropolitan statistical area, the specific county within a metropolitan statistical area, or the county in which a city or town with a population of 20,000 or more is located, in which the new commercial enterprise is principally doing business has experienced an average unemployment rate of 150 percent of the national average rate; or (B) A letter from an authorized body of the government of the state in which the new commercial enterprise is located which certifies that the geographic or political subdivision of the metropolitan statistical area or of the city or town with a population of 20,000 or more in which the enterprise is principally doing business has been designated a high unemployment area. The letter must meet the requirements of 8 CFR 204.6(i).It is generally easier and less expensive to get an official letter from the State (or printouts fromtheir website) but any such letter must conform to the regulatory requirements as stated in 8 CFR§ 204.6(i). While it is critical for planning and promotional purposes to identify TEAs, obtainingactual Official Letters id not required for the Regional Center application (I-924) itself.8 CFR § 204.6 Petitions for employment creation aliens.(i) State designation of a high unemployment area. The state government of any state of theUnited States may designate a particular geographic or political subdivision located within ametropolitan statistical area or within a city or town having a population of 20,000 or morewithin such state as an area of high unemployment (at least 150 percent of the national averagerate). Evidence of such designation, including a description of the boundaries of the geographicor political subdivision and the method or methods by which the unemployment statistics wereobtained, may be provided to a prospective alien entrepreneur for submission with Form I–526.Before any such designation is made, an official of the state must notify the AssociateCommissioner for Examinations of the agency, board, or other appropriate governmental body ofthe state which shall be delegated the authority to certify that the geographic or politicalsubdivision is a high unemployment area.Do you know what you just read? Are you sure what 8 CFR 204.6(i) means? Continuereading this next section and then go back and read it again....Here is a good point to stop and reassess something very fundamental. How do you read a statuteof regulation? I would answer: “Slowly, painstakingly, and repeatedly.” The first consideration isyou basic grammar skills. When you read it remember that it was “word-smithed” very carefullyso to give meaning to every little bit. It was written and re-written countless times and theoriginal author may end up saying in regard to what is left from his/her first draft: “Well, theyDiscussion of Targeted Employment Areas (TEAs) in the EB-5 Context Page 4
    • kept “the: and “and”.” I am not kidding about that because that is often the case. The finalresulting text may look almost nothing like it was initially written. “In English, knowing when to use a or the can be difficult. Fortunately, there are rules to help you, but you need to know what type of noun you are using. Grammar rule 1 When you have a single, countable English noun, you must always have an article before it. We cannot say "please pass me pen", we must say "please pass me the pen" or "please pass me a pen" or "please pass me your pen". Nouns in English can also be uncountable. Uncountable nouns can be concepts, such as life, happiness and so on, or materials and substances, such as coffee, or wood. Grammar rule 2 Uncountable nouns dont use a or an. This is because you cant count them. For example, advice is an uncountable noun. You cant say "he gave me an advice", but you can say "he gave me some advice", or "he gave me a piece of advice". Some nouns can be both countable and uncountable. For example, we say "coffee" meaning the product, but we say "a coffee" when asking for one cup of coffee. Grammar rule 3 You can use the to make general things specific. You can use the with any type of noun – plural or singular, countable or uncountable. "Please pass me a pen" – any pen. "Please pass me the pen" – the one that we can both see. "Children grow up quickly" – children in general. "The children I know grow up quickly" – not all children, just the ones I know. "Poetry can be beautiful"- poetry in general. "The poetry of Hopkins is beautiful" – Im only talking about the poetry Hopkins wrote.”1STOP! Scroll back up and read it again, just try it, please.1 http://www.english-at-home.com/grammar/articles/Discussion of Targeted Employment Areas (TEAs) in the EB-5 Context Page 5
    • 8 CFR § 204.6 Petitions for employment creation aliens.(i) State designation of a high unemployment area. The state government of any state of theUnited States may designate a particular geographic or political subdivision located within ametropolitan statistical area or within a city or town having a population of 20,000 or morewithin such state as an area of high unemployment (at least 150 percent of the national averagerate). Evidence of such designation, including a description of the boundaries of thegeographic or political subdivision and the method or methods by which the unemploymentstatistics were obtained, may be provided to a prospective alien entrepreneur for submissionwith Form I–526. Before any such designation is made, an official of the state must notify theAssociate Commissioner for Examinations of the agency, board, or other appropriategovernmental body of the state which shall be delegated the authority to certify that thegeographic or political subdivision is a high unemployment area. (emphases added)Do you NOW know what you just read? Are you sure what 8 CFR 204.6(i) means? Whatdoes State mean? What does the United States mean, geographically speaking? Read on...INA § 101(a) Definitions: (38) The term "United States", except as otherwise specifically herein provided, when used in a geographical sense, means the continental United States, Alaska, Hawaii, Puerto Rico, Guam, the Virgin Islands of the United States, and the Commonwealth of the Northern Mariana Islands. (36) The term "State" includes the District of Columbia, Puerto Rico, Guam, the Virgin Islands of the United States, and the Commonwealth of the Northern Mariana Islands . V. What is a particular geographic or political subdivision?Borrowing from California again and their answer to that question is:“In order to consider special area designations, applicants for such designation must observe thefollowing criteria: A) The entrepreneur asking for designation should include a description of the boundaries of the geographic or political subdivision: a. A geographic subdivision would be an area carved out based on the physical features of the Earth’s surface. (Good examples would be XYZ Valley, XYZ Bay, etc.)Discussion of Targeted Employment Areas (TEAs) in the EB-5 Context Page 6
    • b. A political subdivision would be a division of a state that exists primarily to discharge some function of local government, such as a civil administrative unit of a county or city. (Administrative units of the federal or state government do not qualify for special designation.) B) The proposed area must have an unemployment rate equal to or exceeding 150% of the national unemployment average based on the weighted average of the unemployment rate of the contiguous census tracts comprising of the desired area.”Accordingly, at least in California, a Congressional District or even a State Legislative Districtwould be out of the running but a much smaller ward, district, or neighborhood represented by analderman or a city or county council-member would be acceptable. VI. Show me the money! INA § 203(b)(5) (C) Amount of capital required. - (i) In general. - Except as otherwise provided in this subparagraph, the amount of capital required under subparagraph (A) shall be $1,000,000. The [Secretary of Homeland Security], in consultation with the Secretary of Labor and the Secretary of State, may from time to time prescribe regulations increasing the dollar amount specified under the previous sentence. (ii) Adjustment for targeted employment areas.- The [Secretary of Homeland Security] may, in the case of investment made in a targeted employment area, specify an amount of capital required under subparagraph (A) that is less than (but not less than 1/2 of) the amount specified in clause (i). (iii) Adjustment for high employment areas.-In the case of an investment made in a part of a metropolitan statistical area that at the time of the investment – [To date, this clause has never been given any effect.] (I) is not a targeted employment area, and (II) is an area with an unemployment rate significantly below the national average unemployment rate, the Attorney General may specify an amount of capital required under subparagraph (A) that is greater than (but not greater than 3 times) the amount specified in clause (I).Discussion of Targeted Employment Areas (TEAs) in the EB-5 Context Page 7
    • 8 CFR § 204.6 Petitions for employment creation aliens.(f) Required amounts of capital. ......(2) Targeted employment area. The amount of capital necessary to make a qualifying investmentin a targeted employment area within the United States is five hundred thousand United Statesdollars ($500,000). VII. Who counts as an employee and who does not?Discussion on “employees”.The jobs that are predicated through the for-profit business activities of the new commercialenterprise must eventually be backed up with verifiable evidence. When dealing with theevidence to be produced to back up and prove the predictions about job creation, consider thenature of the investment scheme and the ease or difficulty of producing the required evidence.If one predicts “indirect jobs” (which in the lingo of economic models will be labeled as bothindirect and induced but for EB-5 these are “indirect jobs”) based on “direct jobs”, considerwhether the “direct jobs” in the model are also “indirect jobs” in relation to the alien investor. Ifthey are then that MUST be explained up front in the Regional Center plans.One might build a retail store and lease it out but that person won’t be hiring the store cashiers,stock clerks, delivery drivers, secretaries, personnel specialists, buyers, accountants, and janitors.The developer of the mall won’t be signing the paychecks for the guy selling pizza andmilkshakes in the food court, selling movie tickets, or plowing the snow or painting the lines inthe parking lot. All of those folks may be “indirect” in relation to the alien investor.When the Economic Analysis bases and ties its projection as to indirect job creation on a baselevel of newly created jobs attributable to the alien’s investment in a particular commercialenterprise rather than simply to the dollar amount of the investment, it is critical todifferentiate between “direct employees” on the alien’s payroll vs. “direct employees” of athird party who are “indirect employees” for EB-5 purposes. Third party direct employees usedas “direct jobs” in terms of input into the Economic Model may be termed as “hypothetical” or“base jobs” or some other terminology that clearly distinguishes them as not on the alien’spayroll. This is critical at the I-829 stage as to the evidence that will be required to lift conditionson residence. The classic and easiest example that illustrates this is “mall tenants’ employees”while another could be “factory workers” when the alien is loaning money to an industrialist inorder to let that other person or entity build, convert, or expand a factory.Exactly what will be found acceptable as proof of third party direct or base jobs as used in aneconomic model to formulate the job projections is an issue with no clear answer. Some folkshave obtained I-9s and W-2s from those third parties. Some third parties refuse to divulgepersonally identifying information. Some developers have created an in-house form for reportingnumbers of full-time employees by the third parties. Yet another approach is to show executedleases, such as for retail, entertainment, or food service establishments that match the squareDiscussion of Targeted Employment Areas (TEAs) in the EB-5 Context Page 8
    • footage used to base job predictions by specific type of business at X number of employees peramount of space in a particular locality. Whatever variables were used in the assumptions, it willeventually fall on the investor (supported by the Regional Center as a coordinator of suchinformation) to provide credible evidence demonstrating the underlying fulfillment requirements.At the I-829 stage, you want it to be that USCIS is only to do a straight forward fact-check to seethat the credible comprehensive business plan has come to fruition or is on the cusp of achievingthe goals. USCIS is not required to perform an ab initio investigation into a totally new orsubstantially altered [materially changed] comprehensive business plan and the accompanyingeconomic model and job prediction forecast. That is last thing you should want. The originalplan needs to be followed and achieved in order to get the conditions lifted from the investor’sstatus.Another approach to consider is strictly looking at the capital investment in the aggregate. Ifa project is going to cost 20 million to complete and the aliens are each investing ½ million andthe project only uses alien investors then that’s 40 aliens at 10 jobs each for a total minimum of400 jobs. Will the particular project in that industry which is doable and is feasible on thatinvestment capital amount really create enough jobs to go around? Start with the completedproject and do a simple calculation of a job multiplier associated with that industry in thatlocality in the current economy for a project of that size to see what you come up with in termsof jobs in the aggregate. If there are not enough jobs to go around then you need fewer alieninvestors than you might be able to get. You need some domestic capital also. That is NOT a badthing. It is a selling point to play up to USCIS because it is one of the basic requirements.Besides, any day now there may be 300 Regional Centers and more after that. Some will fail andmore may spring up. The bottom line is you need to utilize more domestic investors overall. Thealiens are in it for a green-card and will join in even if it is not going too well in garneringdomestic investors. The Regional Center should look to leveraging the foreign investment dollarsto attract domestic dollars to the project. Yes, Mr. Texas oil millionaire, we’ve already got 5million dollars from 10 alien investors, come join us. The domestic investors are not aconsideration for allocation of jobs for the immigrant investors but the jobs created by domesticinvestments in the same project can be allocated to the aliens in order to lift conditions on theirgreen-cards. Of course the domestic investment must also be vetted as to it being “lawful”. Theten jobs will lift the conditions on the investor and his/her entire immediate family (spouse andchildren that accompanied or followed to join). Ten jobs can lift the conditions on one to perhapsfive or more people (even abroad investors are not likely to have more than three kids these daysbut you never know in advance).8 CFR § 204.6 Petitions for employment creation aliens.(e) Definitions. As used in this section:Qualifying employee means a United States citizen, a lawfully admitted permanent resident, orother immigrant lawfully authorized to be employed in the United States including, but notlimited to, a conditional resident, a temporary resident, an asylee, a refugee, or an alienremaining in the United States under suspension of deportation. This definition does not includeDiscussion of Targeted Employment Areas (TEAs) in the EB-5 Context Page 9
    • the alien entrepreneur, the alien entrepreneurs spouse, sons, or daughters, or any nonimmigrantalien.Full-time employment means employment of a qualifying employee by the new commercialenterprise in a position that requires a minimum of 35 working hours per week. In the case of theImmigrant Investor Pilot Program, “full-time employment” also means employment of aqualifying employee in a position that has been created indirectly through revenues generatedfrom increased exports resulting from the Pilot Program that requires a minimum of 35 workinghours per week. A job-sharing arrangement whereby two or more qualifying employees share afull-time position shall count as full-time employment provided the hourly requirement per weekis met. This definition shall not include combinations of part-time positions even if, whencombined, such positions meet the hourly requirement per week.Employee means an individual who provides services or labor for the new commercial enterpriseand who receives wages or other remuneration directly from the new commercial enterprise. Inthe case of the Immigrant Investor Pilot Program, “employee” also means an individual whoprovides services or labor in a job which has been created indirectly through investment in thenew commercial enterprise. This definition shall not include independent contractors.INA § 203(b)(5) (D) Full-time employment defined.--In this paragraph, the term `full-time employment means employment in a position that requires at least 35 hours of service per week at any time, regardless of who fills the position2.Best of luck!2 See Memo at: http://www.uscis.gov/USCIS/Laws/Memoranda/Static_Files_Memoranda/2009/eb5_17jun09.pdfDiscussion of Targeted Employment Areas (TEAs) in the EB-5 Context Page 10