In recent years, the immigrant investor program (also called the EB-5 program) has gained popularity and media attention as a viable option for those of means to obtain lawful resident status. Even those traditionally less-well-off financially have considered the program in light of ever growing immigrant visa backlogs and the devaluation of the dollar (which means fewer and fewer euros and yen are needed to meet the $1 million investment requirement (or $500,000 in certain cases)). Nevertheless, various issues have deterred would-be eligible applicants from applying for an investor green card including the uncertainly of USCIS interpretations of program requirements, and, more recently, USCIS’ fixation on the source and chain of custody of funds used for the investment.
Naturally, U.S. law requires that the funds used for investment in an American enterprise be legitimate. But, in the EB-5 context, proving legitimacy may not always be straightforward. For example, gift or inheritance capital may have been omitted from tax records and may be hard to trace; other funds, especially when commingled with old money, may be difficult to segregate and hard to document. Another deterrent for EB-5 applicants is the requirement that once becoming permanent residents, immigrant investors become subject to U.S. taxation on their worldwide income.
In light of these and other issues, potential immigrant investors may want to consider the E-2 treaty investor classification instead. E-2 nonimmigrant status resembles green card status in many ways. E-2 nonimmigrant investors may remain in the United States indefinitely (with appropriate extensions), are not required to maintain ties abroad, can be engaged in self-employment if in furtherance of the investment, and their spouses can obtain work authorization.
Who is eligible for E-2 status? Treaty investor status is available to certain nationals where a "Treaty of Freedom, Commerce and Navigation" exists between the U.S. and the country of the applicant’s nationality. (Certain bilateral investment treaties also may confer eligibility.) For an eligible individual to qualify for E-2 visa status, he or she must meet a number of requirements, including issues governing ownership and control of the investment, the individual’s duties associated with the investment, and the investment itself (it must be active and "at risk"). Significantly, however, there is no specific amount of capital that must be invested in a business; instead, the rules require that the investment be substantial and "proportional" to the overall capitalization of the enterprise. In practical terms, this means that an investment for a small business can be as little as $100,000, or even less, depending on the particular business and its location. E-2 nonimmigrant status may be worth considering for would-be EB-5 investors who are eligible.
Allen and Pinnix attorneys urge investors to consider not only the business consequences of their decisions, but how their choices may affect family members, especially minor children who cannot maintain derivative E-2 status once they turn 21.