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Today s Instructors: Play-by-play Wayne Michael, CPA

Novogradac & Company LLP wayne.michael@novoco.

Partner Portland Office Novogradac & Company LLP

1 Today s Instructors: Play-by-play Wayne Michael, CPA Director of Education and Business Development Novogradac & Company LLP wayne.michael@novoco.com Color commentary/analysis Nicolo Pinoli, CPA Partner Portland Office Novogradac & Company LLP nicolo.pinoli@novoco.com nicolo.pinoli@novoco.com or wayne.michael@novoco.com 1

Est. 1990 EB-5 Foreign Jobs Low-Income Community

2008 2009 2010 2011 Low-Income Community Affordable

2 Est EB-5 Foreign Jobs Low-Income Community Businesses Historic Preservation Renewable Energy Affordable Housing Est EB-5 Limit: 10k / yr Foreign Jobs Low-Income Community Businesses Historic Preservation Renewable Energy Affordable Housing nicolo.pinoli@novoco.com or wayne.michael@novoco.com 2

3 Wayne Michael, CPA Novogradac & Company LLP Nicolo Pinoli, CPA Novogradac & Company LLP Overview Combining EB-5 w/ Tax Credit Projects Wayne Michael, CPA Novogradac & Company LLP Nicolo Pinoli, CPA Novogradac & Company LLP Overview Combining EB-5 w/ Tax Credit Projects CPE Credit for CPAs: 5 Polling Questions nicolo.pinoli@novoco.com or wayne.michael@novoco.com 3

4 Wayne Michael, CPA Novogradac & Company LLP Nicolo Pinoli, CPA Novogradac & Company LLP Overview Combining EB-5 w/ Tax Credit Projects Which of the following federal programs was enacted most recently? a. The Low-Income Housing Tax Credit (LIHTC) b. The New Markets Tax Credit (NMTC) c. The Immigrant Investor (EB-5) Program or 4

For-profit new commercial enterprise Active involvement in management (or making policy) Have invested (or in process) I-526 Petition Foreign Investor U.S.

5 For-profit new commercial enterprise Active involvement in management (or making policy) Have invested (or in process) I-526 Petition Foreign Investor U.S. Citizenship and Immigration Services For-Profit New Commercial Enterprise 1. Creation of new business 2. Purchase of existing business and reorganization to new enterprise 3. 40% expansion of existing business For-profit new commercial enterprise Active involvement in management (or making policy) Have invested (or in process) Funds lawfully obtained Create or save 10 full-time jobs (35 hrs/wk) I-526 Petition Foreign Investor U.S. Citizenship and Immigration Services For-Profit New Commercial Enterprise Full-Time Jobs Qualified employees: U.S. Citizen Permanent Resident Other immigrant authorized to work in the U.S. Targeted Employment Area ( TEA ) Unemployment > AVG x 1.5 OR Rural = Not within a MSA or City w/ pop > 20k nicolo.pinoli@novoco.com or wayne.michael@novoco.com 5

6 47% 44% Approved Denied 9% I-526 Actions 2011 (3,200+) Request for Evidence (RFE) Source: USCIS EB-5 Immigrant Investor Program Stakeholder Meeting, Jan. 23, 2013 I-526 Petition I-485 Application (or Form DS-230) or 6

I-829 Petition Permanent Evidence of sustained investment during 2

Permanent Residency I-829 Petition 90 Days X 4 Foreign Investor 2 Years

Enterprise Full-Time Jobs Targeted Employment Area ( TEA ) 20% 3% 77%

Source: USCIS EB-5 Immigrant Investor Program Stakeholder Meeting, Jan.

7 I-829 Petition Permanent Evidence of sustained investment during 2 years Evidence 10 full-time jobs created or saved Obtaining Conditional Permanent Residency I-829 Petition 90 Days X 4 Foreign Investor 2 Years U.S. Citizenship and Immigration Services For-Profit New Commercial Enterprise Full-Time Jobs Targeted Employment Area ( TEA ) 20% 3% 77% I-829 Actions 2011 (1,300+) Approved Denied Request for Evidence (RFE) Source: USCIS EB-5 Immigrant Investor Program Stakeholder Meeting, Jan. 23, 2013 I-829 Petition nicolo.pinoli@novoco.com or wayne.michael@novoco.com 7

Which of the following is true about Targeted Employment Areas (TEAs)? a. Investment in TEAs allows the required investment amount to be only $500 thousand instead of $1 million b.

8 Which of the following is true about Targeted Employment Areas (TEAs)? a. Investment in TEAs allows the required investment amount to be only $500 thousand instead of $1 million b. A TEA has an unemployment rate that is at least twice the national average c. An area with within a Metropolitan Statistical Area (MSA) will automatically be a TEA independent of unemployment data Pilot Program I-526 Petition Foreign Investor U.S. Citizenship and Immigration Services I-924 Petition Regional Center Business plan Detailed economic analysis Fund (Less perceived risk through RC) For-Profit New Commercial Enterprise Full-Time Jobs Direct AND Indirect Targeted Employment Area ( TEA ) nicolo.pinoli@novoco.com or wayne.michael@novoco.com 8

9 Pilot Program Under Public Law No , priority must be given to Regional-Center-affiliated individual petitions. Which means Pilot Program Approved Regional Centers or 9

10 Pilot Program Pilot Program or 10

Which type of investor received the highest number of EB-5 visas in 2011? a. Regular program investors creating new businesses b. Regular program investors creating new businesses in TEAs c.

11 Which type of investor received the highest number of EB-5 visas in 2011? a. Regular program investors creating new businesses b. Regular program investors creating new businesses in TEAs c. Pilot Program investors in Regional Centers d. Pilot Program investors in Regional Centers in TEAs Combining EB-5 Investment With Tax Credit Projects or 11

LIHTC and Renewable Energy Credits Difficult to use very much EB-5 because of jobs requirement How many full-time employees are at a typical (or even large) apartment complex?

12 LIHTC and Renewable Energy Credits Difficult to use very much EB-5 because of jobs requirement How many full-time employees are at a typical (or even large) apartment complex? Generally other sources of capital are relatively abundant and cheap, which tends to make EB-5 less attractive More likely to be used in biomass or trash-to-gas facilities with lots of jobs Can also be theoretically trebled with NMTC for these types of projects New Markets Tax Credits RC Foreign EB-5 Fund Lender Leverage Loan Tax Credit Fund Equity Can be used with EB-5 Structuring the EB-5 as a leverage loan is challenging Hotels can get extra exciting CDE QEI QLICI Full-Time Jobs nicolo.pinoli@novoco.com or wayne.michael@novoco.com 12

13 Historic Rehabilitation Credits Can be used with EB-5 Structuring is a lot less challenging just use the EB-5 funds as permanent financing EB-5 can most easily be combined with which tax credits? a. Low-income housing tax credits b. Renewable energy tax credits c. Historic rehabilitation tax credits nicolo.pinoli@novoco.com or wayne.michael@novoco.com 13

) Historic Rehabilitation Credits $80M Alaska Building Rehabilitation Seattle, Wash.

14 Historic Rehabilitation Credits Can be used with EB-5 Structuring is a lot less challenging just use the EB-5 funds as permanent financing Hotels can get extra exciting (Pssssst. Hotels generally have LOTS of employees.) Historic Rehabilitation Credits $80M Alaska Building Rehabilitation Seattle, Wash. EB-5 Funds (160 investors x $500k) $80mil $60M $40M $20M HTC Equity $0M Sources QREs $40 mil Uses QREs Credit % HTCs Pricing $ x $ x 40mil 20% 8mil X.XX HTC Equity $ X.Xmil Rehab costs Acq costs $47mil $38mil $85mil nicolo.pinoli@novoco.com or wayne.michael@novoco.com 14

15 February 17, 2012 Tenant-Occupancy Memo Look! Jobs! Regional Center Fund Another Company Lease Agreement Full-Time Jobs Full-Time Jobs February 17, 2012 Tenant-Occupancy Memo USCIS has concerns that the attribution of certain direct jobs to the EB-5 investment may not be based on reasonable economic methodologies, and therefore do not demonstrate in verifiable detail that the requisite jobs will be created. Rather, contemporary economic methodologies appear to indicate that such jobs would more appropriately be attributed to the tenants themselves and not to the regional center because the demand for labor precedes the decision about where to house that labor as a general economic principle. nicolo.pinoli@novoco.com or wayne.michael@novoco.com 15

solely by hotel owner The hotel owner is always solely responsible for all employee salaries and costs Employees tend to stay with

16 February 17, 2012 Tenant-Occupancy Memo Look! Jobs! Regional Center Fund and this is a management agreement? Another Company Lease Agreement Full-Time Jobs February 17, 2012 Tenant-Occupancy Memo Difference with hotels: Risk of losses born solely by hotel owner The hotel owner is always solely responsible for all employee salaries and costs Employees tend to stay with the same hotel, even if the hotel operator/manager changes - Catherine Holmes and Victor Shum JMBM Law Blog nicolo.pinoli@novoco.com or wayne.michael@novoco.com 16

According to USCIS Tenant Occupancy methodology, If a Regional Center develops office space and a business with several employees leases the space, who is most responsible for

17 According to USCIS Tenant Occupancy methodology, If a Regional Center develops office space and a business with several employees leases the space, who is most responsible for the jobs? a. The lessee company b. The Regional Center c. USCIS d. The city in which the building is located FINAL QUESTIONS nicolo.pinoli@novoco.com or wayne.michael@novoco.com 17

18 Appendix (Bullet-Point Slide Material) Created by Congress in 1990 to stimulate the U.S. economy through job creation and capital investment by foreign investors Administered by the U.S. Citizenship and Immigration Services (under the Department of Homeland Security) President Obama signed Public Law on Sept 28, 2012, which extends EB-5 until Sept. 30, 2015 See or 18

19 Job Creation Requirements Capital investment must create or preserve at least 10 full-time jobs for qualifying U.S. workers within two years (or under certain circumstances, within a reasonable time after the two-year period) of the immigrant investor s admission to the United States as a Conditional Permanent Resident. See Employee Parameters Qualified Employee U.S. citizen, permanent resident or other immigrant authorized to work in the United States. The individual may be a conditional resident, an asylee, a refugee, or a person residing in the United States under suspension of deportation. Does not include the immigrant investor; his or her spouse, sons, or daughters; or any foreign national in any nonimmigrant status (such as an H-1B visa holder) or who is not authorized to work in the United States Full-time employment A position that requires a minimum of 35 working hours per week. Job-sharing arrangement - Whereby two or more qualifying employees share a full-time position will count as full-time employment provided the hourly requirement per week is met. Does not include combinations of part-time positions or full-time equivalents even if, when combined, the positions meet the hourly requirement per week. The position must be permanent, full-time and constant. The two qualified employees sharing the job must be permanent and share the associated benefits normally related to any permanent, full-time position, including payment of both workman s compensation and unemployment premiums for the position by the employer. See nicolo.pinoli@novoco.com or wayne.michael@novoco.com 19

20 Capital Investment Requirements Capital Cash, equipment, inventory, other tangible property, etc. Cannot be acquired by unlawful means Cannot be borrowed Minimum investments: $1 million OR $500 thousand if made within a Targeted Employment Area (TEA) High Unemployment Area an area that, at the time of investment, is a rural area or an area experiencing unemployment of at least 150 percent of the national average rate Rural Area any area outside a metropolitan statistical area (as designated by the Office of Management and Budget) or outside the boundary of any city or town having a population of 20,000 or more according to the decennial census See Application Process 1. File a Form I-526, Petition by Alien Entrepreneur 2. Upon approval of the Form I-526 petition, either: 1.File a Form I-485, Application to Register Permanent Residence or Adjust Status, with USCIS to adjust status to conditional permanent resident within the United States, or 2.File a DS-230, Application for Immigrant Visa and Alien Registration, with the Department of State to obtain an EB-5 visa for admission to the United States. See nicolo.pinoli@novoco.com or wayne.michael@novoco.com 20

21 Application Process The EB-5 investor (and his or her derivative family members) is granted conditional permanent residence for a two-year period upon the approval of the I-485 application or upon entry into the United States with an EB-5 immigrant visa. 1. File Form I-829, Petition by Entrepreneur to Remove Conditions, 90 days prior to the two-year anniversary of the granting of the EB-5 investor s conditional resident status (Green Card). If USCIS approves this petition, the conditions are removed from the EB-5 applicant s status and the EB-5 investor and derivative family members will be allowed to permanently live and work in the United States. See EB-5 Visas Issued in 2011 Total immigrant visas issued: 360,344 Total employment-preference visas issued: 139,302 Total EB-5 visas issued: 3,463 Top nine countries China: 2,408 South Korea: 254 Taiwan: 122 Iran: 117 Great Britain and Northern Ireland: 57 Mexico: 53 Venezuela: 46 India: 37 Russia: 30 See nicolo.pinoli@novoco.com or wayne.michael@novoco.com 21

22 Regional Centers Regional centers are associated with the EB-5 Pilot Program, which was created in 1992 Investment requirements are the same in the pilot program, except that investments affiliated with Regional Centers allow for less restrictive job creation requirements Direct vs. Indirect job creation See Regional Centers Direct jobs are actual identifiable jobs for qualified employees located within the commercial enterprise into which the EB-5 investor has directly invested his or her capital. Indirect jobs are those jobs shown to have been created collaterally or as a result of capital invested in a commercial enterprise affiliated with a regional center by an EB-5 investor. A foreign investor may only use the indirect job calculation if affiliated with a regional center. The number of indirect jobs created through an EB-5 investor s capital investment is based upon a business paly and a detailed economic analysis, which is evaluated and approved by USCIS during the application and review process of the Regional Center being designated as such for participation in the pilot program See nicolo.pinoli@novoco.com or wayne.michael@novoco.com 22

23 Regional Centers A Regional Center is not merely a defined geographical area but rather is a business entity that coordinates foreign investment within the area Regional Centers do NOT hold sole jurisdiction over their geographic region Must focus on a contiguous geographical region of the United States Must focus on economic growth through Increased export sales (if any) Improved regional productivity Job creation Increased domestic capital investment See Regional Centers Must demonstrate in verifiable detail how jobs will be created, either directly or indirectly Must commit sufficient funds to promote and oversee capital investment opportunities in the Regional Center Under Public Law No , priority must be given to Regional-Center-affiliated individual petitions (but no criteria for USCIS to prioritize amongst those petitions) See nicolo.pinoli@novoco.com or wayne.michael@novoco.com 23

THE PATH TO U.S. CITIZENSHIP THROUGH EB-5 REGIONAL CENTER INVESTMENT. Prepared by USVisa-India.com

THE PATH TO U.S. CITIZENSHIP THROUGH EB-5 REGIONAL CENTER INVESTMENT What is the EB-5 program? The EB-5 visa, employment-based fifth preference category USCIS administers the EB-5 program, created by Congress