Permanent resident status confers on foreign nationals the right to live and work in the United States without time limitations. The two most common ways of becoming a permanent resident are (1) through close family ties to a U.S. citizen or permanent residence; or (2) through employment in the United States, usually based on a job offer from a U.S. employer. However, a lesser-known avenue to permanent residency in the United States is available to immigrant investors who invest a specific minimum amount of capital in a new commercial enterprise which will create employment for a specific minimum number of U.S workers. This avenue, known as the fifth employment-based preference classification, (the “EB-5 Classification”) is allotted ten thousand (10,000) annual visas.
In the past, few foreign investors have found the EB-5 Classification attractive, due to the tax consequences on the investor’s worldwide income upon moving to the United States. Puerto Rico’s recently approved “Act to Promote the Transfer of Investors to Puerto Rico”, Act 22 of January 17, 2012, which provides tax exemption on the investment income of non-resident individuals, coupled with the authority of Puerto Rico’s Economic Development Administration to designate “targeted employment areas”, in which the EB-5 Classification minimum investment is lowered considerably, could make the historically underused EB-5 classification appealing to foreign investors.
The law gives the United States [____] (the “USCIS”) discretion to raise the $1,000,000 minimum investment to as high as $3,000,000 in “high employment areas” (defined as metropolitan areas and areas experiencing below-average unemployment rates), and to lower the figure to as low as $500,000 for “targeted employment areas”. A “targeted employment area” is defined to include rural areas (areas outside of a metropolitan statistical area or outside of a city or town with 20,000 or more people), or areas experiencing unemployment of at least 150% the national average rate. As previously mentioned, under the USCIS rules, the Economic Development Administration of the Commonwealth of Puerto Rico has been designated as a state agency approved to designate high unemployment areas in Puerto Rico. This means a foreign investor who is interested in making a qualifying investment in Puerto Rico can apply to have the geographical area he or she is investing in designated as a “targeted employment area”, and thus lower the amount of capital he is required to commit by 50%.
To qualify for an EB-5 investor visa, the foreign investor must meet the following requirements:
- The investor must invest or be actively in the process of investing at least $1,000,000.00, or $500,000, if applicable, in the enterprise.
- The investment must take the form of a contribution of capital that has been placed at risk for the purpose of generating a return on the capital.
- The capital invested must have been obtained through lawful means.
- The enterprise must benefit the U.S. economy, and must create full-time employment for not less than ten (10) U.S. workers.
- The investment must be made in a “new commercial enterprise” or a “troubled business”.
- The investor must be engaged in the management of the enterprise, either through day-to-day managerial control or through policy formulation.
If all of the foregoing requirements are met, an immigrant investor may file a petition for an immigrant visa with the USCIS. Once the petition is approved, the immigrant investor may apply for permanent residence. It is also worth noting that an immigrant investor that becomes a United States citizen upon naturalization in Puerto Rico after residing in Puerto Rico for the required time period will be treated as nonresident aliens for United States estate and gift tax purposes. Consequently, such investor will enjoy the Puerto Rico income tax exemptions on his or her investment income and will not be subject to United States estate or gift tax, unless he invests in property located in the United States.
Should you have any questions or comments relative to the foregoing, or if we may be of further assistance in this matter, please contact Mariel Y. Haack, Esq., at (787) 281-1951 or This email address is being protected from spambots. You need JavaScript enabled to view it..
