Hotel Owners and Investors: 'Checking In' on the EB-5 Program

By Michael Wildes Partner , Wildes & Weinberg | October 16, 2011

As America's markets struggle to regain their footing, the hospitality industry has actually seen a spike in profits and economic growth. This refreshing change of pace is largely attributed to the steady stream of international tourism that has kept many hotels, restaurants and other tourist attractions thriving despite current economic conditions. Hotel owners have taken notice of this dichotomy, and are now seeking ways to perpetuate their surge in profits. Fortunately, Congress has created provisions within our American immigration laws that would help keep the hotel business booming, while simultaneously infusing money into our economy and creating more job opportunities as well.

The EB-5 visa program was incorporated into the Immigration and Nationality Act (INA) to encourage foreign businesspersons to invest their resources in American markets. The preferential treatment and limitless renewals that E-visa holders would enjoy upon approval encourages foreign investors to participate in U.S. businesses. Moreover, American entrepreneurs are have incentive to persuade wealthy persons abroad to help fund their projects with the promise of a relatively unconstrained stay in the U.S. for themselves and their families. Since its inception, the amount of EB-5 programs has exponentially increased, accounting for over a billion dollars of revenue, especially in tourist friendly regions with international acclaim.

About the EB-5 Visa:

First enacted in 1992, Congress enacted the EB-5 visa program to encourage foreigners to participate in new commercial enterprises. The new laws were aimed at stimulating economic activity and job growth, while allowing eligible aliens the opportunity to become lawful permanent residents. To qualify, the investor must either have established the business, or, re-established an existing one. The projects can be any kind of "commercial enterprise" such as hotels, resorts, and any of its wholly owned subsidiaries that add to the business's profits.

To ensure that the investment will expand past its initial phases, the EB-5 visa also carries a "job requirement" mechanism within its terms and conditions. The investor has a duty to create or preserve at least 10 full-time jobs for qualifying U.S. workers within approximately two years of the immigrant investor's presumed admission to the United States as a Conditional Permanent Resident. Given the manpower it takes to run virtually all avenues of the hospitality business, recruiting 10 employees to work in destination hot spots makes this process much less strenuous on the employer. And, for the more adventurous entrepreneur, the minimum cost of investing either within a high-unemployment, or rural area in the United States is $500,000-rather than the $1,000,000 markup to get the more popular real estate.

During its development phases, lawmakers needed to create a proper avenue to handle the intake of capital and investment schemes from those who had the qualifying resources to come into America under the EB-5. As a result, the USCIS created Regional Centers to receive immigrant investor capital. Simply stated, regional centers are areas designated by the United States Customs and Immigration Services (USCIS) as eligible to receive immigrant investor capital after the organizers have made a satisfactory showing that their business plan(s) will be both lucrative, sustainable, and promote job opportunities. These centers are especially attractive because they remove the burden on foreign investors to manage and direct the proposed operations. Now, investors have the liberty and discretion to choose from a variety of business proposals, without having to perform the added legwork.

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