Katie Clark (far left), Executive Director of Minnesota Trade Office, with students from Carlson Consulting Enterprise from the Carlson School of Management at the University of Minnesota.By Greg Hugh, Staff Writer

The Minnesota Trade Office, supported by a grant from the McKnight Foundation, commissioned and guided a study by a team from the University of Minnesota’s Carlson Consulting Enterprise to determine how Minnesota can best benefit from an EB-5 program and to identify the best practices for establishing and operating EB-5 regional centers.

The EB-5 Immigrant Investor Program has been promoted as an economic development tool that offers U.S. residency in exchange for direct investment, often targeting rural and distressed areas.

The EB-5 visa for immigrant investors is a United States visa created by the Immigration Act of 1990. The Regional Center provision of the program is currently scheduled to end on Sept. 30, 2012.  This visa provides a method of obtaining a green card for foreign nationals who invest money in the United States.  To obtain the visa, individuals must invest US$1,000,000 (or a minimum of US$500,000 in a "Targeted Employment Area," i.e., a high unemployment or rural area), creating or preserving at least 10 jobs for U.S. workers excluding the investors and their immediate family.  Investments can be made directly in a job-generating commercial enterprise (new, or existing - "Troubled Business"), or into a "Regional Center" - a third-party-managed investment vehicle (private or public), which assumes the responsibility of creating the requisite jobs. Regional Centers may charge an administration fee for managing the investor's investment.

Insert photo, caption:  Katie Clark (far left), Executive Director of Minnesota Trade Office, with students from Carlson Consulting Enterprise from the Carlson School of Management at the University of Minnesota.

If the foreign national investor's petition is approved, the investor and dependents will be granted conditional permanent residency valid for two years. Within the 90-day period before the conditional permanent residence expires, the investor must submit evidence documenting that the full required investment has been made and that 10 jobs have been maintained, or 10 jobs have been created or will be created within a reasonable time period.

In 1992, Congress created a temporary pilot program designed to stimulate economic activity and job growth, while allowing eligible aliens the opportunity to become lawful permanent residents.  Under this pilot program, foreign nationals may invest in a pre-approved regional center, or "economic unit, public or private, which is involved with the promotion of economic growth, including increased export sales, improved regional productivity, job creation, or increased domestic capital investment". Investments within a regional center provide foreign nationals the added benefit of allowing them to count jobs created both directly and indirectly for purposes of meeting the 10 job creation requirement.

Stated in the Preface, the EB-5 Investor Program Study asks and responds to the primary question: How can Minnesota best leverage the federal Immigrant Investor Program (EB-5) to drive employment in the state and why did the State of Minnesota Department of Employment and Economic Development commission this study?

The answer provided in this White Paper is that the Minnesota Trade Office within the Department of Employment and Economic Development, is responsible for developing and supporting trade programs and services that help Minnesota companies compete globally. The EB-5 Immigrant Investor Program is a section of the immigration code that specifies one process and its requirements for achieving U.S. immigration authorization based on immigrant investment in local U.S. economies resulting in job creation.

It is noted in the study that Minnesota has not developed a clear strategy for if and/or how to leverage this element of the tax code to drive enhanced local investment. Developing and delivering a program would require coordination of diverse stakeholder groups and agencies. The Minnesota Trade Office requires a clear analysis of the current status of EB-5 efforts around the country and recommendations on whether and how to proceed.

This White Paper has been divided into three parts: Basics, Details, and Recommendations.

Basics
The basics of the EB-5 Immigrant Investor Program are that it is a federal program administered by the United States Citizenship and Immigration Services (USCIS), which is in the Department of Homeland Security, and it is designed to stimulate the economy through job creation and capital investment by foreign investors. In exchange for making a minimum at-risk equity or debt investment into a new (defined by the USCIS as having been established after Nov. 29, 1990) U.S. business which results in the creation of at least 10 jobs, foreign investors may secure a permanent green card for themselves and their families. Alternatively, investors may deposit their funds in a troubled business (having incurred a net loss of 20 percent of the businesses net worth) and qualify by preserving the ten jobs instead of creating them. Foreign investors can take advantage of more favorable terms by investing through an administrative Regional Center into a project located in a designated Targeted Employment Area (TEA). A Regional Center is defined as an economic entity, public or private, which is involved with the promotion of economic growth, improved regional productivity, job creation, and increased domestic capital investment. Foreign investors benefit from working with Regional Centers and investing in TEA-based projects in three main ways:
• The investment is pooled with that of other foreign and domestic investors and is managed by the Regional Center and the target business.
• Foreign investors get credit for the creation of both direct and indirect jobs, which are calculated via econometric modeling.
• The minimum investment is lowered from US$1,000,000 to US$500,000.

Because of these favorable terms, over 90 percent of all EB-5 investment is made through Regional Centers into TEA-based projects.

Details
The Details section of this White Paper provides a more in-depth look at the program including requirements, processes, costs, and expertise needed.  Also included in this section is a closer look at a variety of Regional Centers that operate with different business and ownership models to highlight the program’s flexibility and show how success can be achieved through a variety of methods. No business endeavor comes without risk, so this section also discusses some notable Regional Center failures.

Recommendations
The Carlson Consulting Enterprise (CCE)’s study’s recommendations for leveraging EB-5 in Minnesota are also in the White Paper.

In conclusion, this study explores options and makes recommendations about how the state of Minnesota could use the federal Immigrant Investor Program, known as EB-5, as a job-creation tool in the state. The study may guide state policies or actions surrounding EB-5 in the future, but no official positions have been proposed, adopted or programs implemented.

The Minnesota Trade Office also requested this study be made available to the public, to assist all public and private organizations and individuals interested in learning more about the EB-5 Immigrant Investor Program which can be obtained at http://www.positivelyminnesota.com/Data_Publications/Publications/Reports.

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