In the 1990 Golden Globe winning film "Green Card," Frenchman (and recent Russian resident) Gerard Depardieu and American Andie McDowell enter into a farcical marriage of convenience so he can become a U.S. resident and she can qualify for a beautiful co-op in New York City. While this romantic comedy is purely fictional (one hopes), it does portray one of the better known, real life residency programs offered by the U.S. Citizen and Immigrations Services (USCIS). Unbeknownst to many, however, is another USCIS residency program that is spurring foreign investment into renewable energy projects in the United States: The Employment-Based 5th Preference (EB-5) visa.
How it Works
Established in 1990, the EB-5 visa was enacted to encourage foreign investment in the United States by offering temporary or possibly permanent U.S. residency. The program injects foreign capital into qualifying commercial enterprises located within the United States. These commercial enterprises can take any number of different ownership forms (e.g., sole proprietorship, partnership, or corporation), and qualifying investments can include starting a new business, buying into an existing business, or expanding a current operation.
If the foreign capital infusion creates or preserves at least 10 full-time job positions, then the investor, spouse, and children under 21 are awarded 2-year temporary visas. Eventually the 2-year temporary visa can be replaced with a permanent green card if qualifying criteria are met.
As shown in Figure 1 above, there has been significant annual increase in EB-5 visas issued in the last few years—from 1,360 visas in 2008 to 3,340 in 2011. This increase is still well below the annual EB-5 visa cap, which is currently set at 10,000 per year. According to Ajejandro Mayorkas, director of U.S. Citizenship and Immigration Services, "The EB-5 program has spurred the creation of tens of thousands of new jobs and the injection of billions of dollars into the U.S. economy since Congress created the program in 1990. Interest in the EB-5 program has grown exponentially in recent years…"
Two Program Pathways
There are two distinct ways in which an investor can participate in the EB-5 program.
Under the traditional EB-5 program path, investors channel their capital directly to a specific economic development project or company. Projects that are located in a designated high unemployment or rural area have a $500,000 minimum investment threshold, while all other projects require at least a $1,000,000 minimum investment. The key distinguishing feature of the traditional EB-5 program path is the restriction on the type of job that must be created or preserved. In this case, only direct jobs are counted toward the 10-job requirement to qualify for the residency incentive. It is also worth noting, however, that investors in the traditional EB-5 pathway are responsible for the day-to-day management control of their investment.
Under the alternative EB-5 model, investors channel their capital to a regional center intermediary and not to a specific business. These regional centers are defined as "any economic entity, public or private, which is involved with the promotion of economic growth, improved regional productivity, job creation, and increased domestic capital investment."
The regional center option has two key distinguishing features from the traditional program option. First, the regional center invests on behalf of the investor and assumes the day-to-day project management roles. Second, the job qualification criteria are broadened as direct, indirect, or induced jobs and counted toward the 10-job requirement. Nearly 90% of the EB-5 visas issued in 2011 came through the regional center option.
Renewable Energy Regional Centers
Some of the regional centers specialize in the development of renewable-energy-related ventures. These EB-5 regional centers pool capital from multiple EB-5 investors to partially finance a renewable energy project. The collective EB-5 capital in turn makes up a portion of the total funding for any given renewable energy project with one firm capping EB-5 investment at 20% of total project costs.
Table 1. Partial Listing of Alternative-Energy-Related Regional Centers
A partial listing of the alternative energy regional centers is listed in Table 1 above. With a few exceptions, the majority of renewable energy investment opportunities for EB-5 investors are for solar-related technologies in the western United States.
EB-5 Programmatic Support and Criticism
While the EB-5 program has been successful in raising funds for various investment opportunities, it is also a frequent target for criticism. Many opponents argue that the EB-5 program offers a loophole to investors interested in buying their way into the United States and that the job-creation claims are unverifiable. Supporters, on the other hand, claim that this program is necessary to compete with similar residency benefit programs offered in Australia and Canada .
In the end of the "Green Card" film, Andy McDowell's and Gerard Depardieu's love for one another emerges and triumphs over their comical marriage of convenience. Perhaps a renewable-energy-themed Green Card sequel may be coming soon to a theater near you.
This article was originally published on NREL Renewable Energy Finance and was republished with permission.