EB-5 projects Direct and Indirect jobs
EB5 Visa Job Creation Requirement

by | Jan 8, 2021 | blogs | 0 comments

Differences Between Direct and Regional Center Projects

By Marisa Marconi, Pinnacle Plan Writing, LLC

EB-5 investors have two routes in their pursuit of an EB-5 visa:  they can directly invest in a new commercial enterprise, or they can invest in a project sponsored by a Regional Center. Historically, different types of projects are associated with each investment route. The Regional Center route is commonly used for large projects that pool multiple investors to fund a portion of the project costs. New multi-family buildings, large hotels, mixed-use developments, and new manufacturing facilities are all examples of projects that are funded by EB-5 investment through Regional Centers. Conversely, investors that are contributing capital through direct EB-5 investment are typically investing in operations-based – rather than real estate-based – businesses. 

The reason that Regional Center projects are historically related to real estate and direct EB-5 investments are related to operations-based businesses is due to different job creation requirements within the EB-5 program.

Background of Direct Vs. Regional Center Investment 

The EB-5 Visa Program was enacted in 1990 by congress and was originally intended as an opportunity for foreign investors who would also actively engage in the management of the new business. The Regional Center program did not come into play until 1993, when congress enacted the Pilot Immigration Program, which created the framework and regulations for Regional Centers and was intended to attract more foreign investment by making the requirements less stringent. The Regional Center program not only made it easier for investors to pool their capital in a more passive framework for investment, but also allowed for indirect and induced jobs to be counted toward the job creation minimum, not just direct jobs. 

Direct Investment & Job Creation

In the EB-5 Direct model, an investor invests directly in a new commercial enterprise, and direct jobs are defined as jobs that are created by, and paid through, that operational entity. For example, if an EB-5 investor’s capital is used to open a restaurant, the servers, cooks, hostesses, and managers that work for the restaurant are all direct jobs. The litmus for determining whether a job is a direct job in these cases is whether the employee is issued a form W-2 for tax filing purposes from the new commercial enterprise. Provided that each position works 35 hours or more per week (full-time), and provided these jobs were created after the EB-5 investor contributed capital, all of these jobs can be counted toward the 10-job minimum requirement. Indirect positions, such as jobs created by subcontractors that provide maintenance or renovation services, contracted bookkeepers, suppliers, and related service providers cannot be counted.  

To prove job creation for new businesses under the EB-5 direct model, investors must submit a comprehensive business plan with their I-526 application that shows that the proposed business not only requires but will support a minimum of 10 full time jobs within 2.5 years. During the I-829 stage, investors submit W-2’s, I-9 forms, and other documentation proving that the requisite jobs were created. 

Because of the limited definition of direct jobs under the direct investment model, this type of investment fits best with businesses that are large enough to require the minimum investment amount and will also have an operational model that supports the requisite job creation.  For example, a new restaurant in a TEA that costs $2.5 million to launch and requires 22 full-time staff is a good fit for investment from two EB-5 investors. Passive investments, on the other hand, are not a good fit: an apartment building, though requiring $900,000 or more in investment, would not support 10 direct operations jobs. 

Direct, Indirect, and Induced Jobs via Regional Center Investment 

Under the Regional Center regulations, an EB-5 investor can meet the job creation requirements by contributing to a project, through a Regional Center, that creates a minimum of 10 direct, indirect, or induced jobs.  For Regional Center projects, direct jobs are defined as those created directly through either construction (as long as construction lasts two years or more) or through operations. In addition to direct jobs, the Regional Center program also allows for indirect and induced jobs to be counted toward the job creation minimum. Indirect jobs are those created through spending on services or goods and induced jobs are those created as a result of employee spending in the area. 

The Regional Center program aligns well with real estate development because larger construction projects naturally create an abundance of direct, indirect, and induced jobs. For example, the developer of the project will directly hire construction workers (direct jobs), but will also buy supplies and materials for construction, creating indirect jobs.  And by virtue of being onsite, construction workers will spend money on food, goods, and services in the area, creating induced jobs. The developer functions as the job creating enterprise, and EB-5 investors can pool their money into a financing vehicle to pay for part of the project’s development costs. Even though the EB-5 investors are not directly contributing money to the developer, all of the jobs created by the new development can be counted toward the job creation minimum.  As long as the total jobs created, divided by the number of investors, equals 10, the project meets the requirements of the EB-5 program.  

Projecting and tracking the jobs created by these larger projects is more complicated than a direct investment. Rather than simply collecting W-2s or projecting job needs based on industry benchmarks, job creation is calculated using economic models that apply multipliers to spending on goods and services as well as operations revenue.  Typically, an economist will create an economic analysis to illustrate that the project meets minimum job creation requirements. The economic analysis, in conjunction with the business plan, is submitted with investors’ I-526 applications. Over the life of the project, the Regional Center is tasked with tracking actual spending and job creation so that a new economic analysis can be completed and submitted during the I-829 phase to show that the requisite jobs were indeed created as a result of the project’s spending and activities. 


Foreign investors that are pursuing an EB-5 visa should be well informed about not only the project or business into which they are investing, but also the underlying regulations related to job creation. Working with an experienced team in the EB-5 industry can elucidate many of the complicated regulations and pathways of the EB-5 program, reduce risk, and ensure that investors are choosing the right investment – and investment path – for their risk tolerance and long-term objectives.  

Written by eb5_ash



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