Presently there is a large interest by EB-5 investors in filing an I-526 Petition following the Behring federal court decision, which invalidated the 2019 EB-5 regulations. With the minimum investment amount decreased from $900,000 to $500,000 for targeted employment area investments, a window has opened for investors to potentially file an I-526 Petition at the $500,000 investment level. However, the EB-5 regional center program has lapsed and currently requires Congress to pass legislation reauthorizing it before new I-526 Petitions can be filed with USCIS.

In contrast, the “direct” EB-5 program is a permanent program that does not require reauthorization by Congress. As the program is permanent, I-526 Petitions based on a direct investment can be filed with USCIS. Following the Behring decision, a “direct” EB-5 Petition requires a minimum investment of at least $500,000, if the business will be located in a rural area or an area of high unemployment. The business must also create 10 new, permanent, and full-time positions for U.S. workers.

The job creation requirement in the “direct” EB-5 Petition context is much more narrow than in the regional center program context. Importantly, the investor makes the investment into a “new commercial enterprise” or NCE. In the direct EB-5 context, the NCE must be the same business entity employing the workers that will qualify for job creation purposes. Generally only the NCE or its wholly owned subsidiary can be the employer for job creation purposes in the direct EB-5 context. Jobs created at a separate entity are not allowable in the “direct” EB-5 Petition context; for this reason, construction jobs, which are frequently used for job creation purposes in the regional center context, are generally not allowable in the direct EB-5 context because those construction workers are employed by entities that are not the NCE. Likewise, “direct” employees working at a business – such as a hotel – may not be allowable in the direct EB-5 context if they are not W2 employees of the NCE or its wholly-owned subsidiary. Proper structuring for the direct context is critical to make sure the job creation comports with the EB-5 requirements.

Moreover, in the direct EB-5 context, the jobs created must be full-time, meaning each job will be at least 35 hours per week. The jobs also must be permanent, with an expectation that the job will last at least 24 months; seasonal or temporary jobs do not count for this purpose. The employees also must be W2 employees of the NCE; independent contractors or positions created by separate entities, as described above, will not be counted by USCIS. Finally, the positions must be filled by U.S. workers. A direct EB-5 petition must fully outline the jobs that will be created at the NCE, the positions to be created a filled, the timeline for creating those jobs, and the hours of employees.

Because the regional center EB-5 program is paused, until it is reauthorized by Congress, many investors are eager to pursue a “direct” EB-5 investment at the lower $500,000 amount. For those investors considering investing in their own start up business or a pre-packaged “direct” project, evaluation of the project structure and job creation is critical to approval. The limitations on job creation in the direct EB-5 context must be understood, and the investment structure must be developed properly to ensure USCIS will approve the job creation.