It’s known as the “million dollar green card,” a visa program that gives wealthy people the ability to move to the United States by creating economic opportunities and employment there.
The EB-5 investor visa offers permanent U.S. residency and eventually citizenship when a person invests between US$500,000 and US$1-million in a new commercial enterprise that produces at least 10 full-time jobs.
The program is becoming popular among Canadians with financial means, experts say, from retirees who want to live for extended periods south of the border to families that eventually want their children to be able to study and work there.
But it’s important to understand the program’s rules, costs and timing, they warn, as well as to seek qualified advice about issues such as health care, estate and tax planning as well as payments associated with the Canadian exit and U.S. entry.
“You need to ask questions,” says Joe Kirkwood, a dual Canadian-U.S. citizen who is an immigration attorney and partner at Leibl & Kirkwood, a private law firm in San Diego that specializes in U.S. immigration law. Three-quarters of the firm’s clients are Canadian, he says, and about 10 per cent are getting EB-5 visas, an overall number that is “increasing for sure,” especially as retiring baby boomers often don’t have other ways to become U.S. residents. “You’re buying green card status.”
The U.S. Congress created the EB-5 Immigrant Investor Program in 1990 to help stimulate the country’s economy by attracting new business investment from abroad. It is administered by U.S. Citizenship and Immigration Services, a division of the Department of Homeland Security.
Up to 10,000 EB-5 visas are issued each year. Chinese nationals typically account for three-quarters of them, but Canada consistently ranks among the top 20 source countries. In 2017, according to U.S. State Department statistics, 55 EB-5 visas were issued to Canadian investors and family members.
Applicants have a number of options. They can, for example, “fly solo,” Mr. Kirkwood says, making a direct investment of US$1-million in an eligible small business that creates at least 10 jobs and then actively managing it. Or they can passively invest US$500,000 in one of about 900 EB-5 regional centres, approved organizations designed to manage EB-5 investor funds and the immigration approval process. These centres finance or buy equity in job-creating capital projects in certain areas, typically smaller communities with high jobless rates. (A solo applicant can also directly invest $500,000 in such an area.)
For the first two years, EB-5 visa holders are granted conditional permanent-resident status in the United States. After 24 months of compliance with the program, they can apply to have the conditions removed. Dependent children under 21 and spouses get the same visa status as the primary EB-5 investor and receive their own green cards. All are eligible for U.S. citizenship five years after initial approval.
EB-5 funds have been used to build office towers, shopping malls, ski resorts, hospitals and film studios.
One of the bigger downsides for participants in the program is that their cash is locked up for a good long time, including the five-year investment period as well as a lengthy processing period, says Terry Ritchie, director of cross-border wealth services for Cardinal Point Capital Management Inc., a firm with offices in Canada and the United States that specializes in wealth management for people in both countries.
Mr. Ritchie says it’s critical for would-be EB-5 investors to look at their tax and estate planning structures, their other investments and the tax implications of leaving Canada.
He cautions that the program comes with a “a nuisance factor because you’re dealing with government.” For example there’s a lot of poking and prodding through your personal information and tax returns. “You’re laying bare your financials,” he says.
The visa applicant must also show evidence that the investment is being made with capital acquired lawfully, for example earnings from employment, private businesses, real estate, stocks and bonds, an inheritance or a gift.
It typically takes 18 to 20 months – and then some – for applications to be adjudicated and processed, Mr. Kirkwood says. The filing fee is US$3,675. Plans to update the program and increase the minimum investments required have been reported but not implemented. There have also been warnings that the program might be cancelled altogether.
Mr. Kirkwood suggests that Canadians exhaust other options for U.S. residency, such as family sponsorship or sponsorship by an employer, as it can take a significant amount of time and money to go the EB-5 route. Administrative fees for the EB-5 program can range from $30,000 to $50,000, with legal costs of around $25,000, he says, plus the cost of other professional and financial planning advice.
Entrepreneurs looking to live full-time in the United States, he notes, have other options, such as the E-2 investor visa, which requires a smaller investment in a business – say an outlay of US$150,000 to start a yogurt shop in Florida, for instance – but does not come with a green card and must be renewed periodically.
The principal residence of EB-5 visa holders must be in the United States, Mr. Kirkwood notes. Direct investors are expected to live in the same area as their project, in order to develop and manage the business, while passive investors can live anywhere in the country.
Another motivation for EB-5 investors is attendance at elite universities. For example, it may be easier for the children of EB-5 visa holders to ultimately get into an Ivy League school as a green card holder or dual citizen rather than an international student, and they might qualify for in-state tuition at universities. But Mr. Kirkwood warns that dependent children must be younger than 21 upon the initial program approval to qualify for green cards.