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EB-5 Planning Steps for Indian Families (1 of 2)

Hello EB-5 investors. This is Floyd Mitchell with the EB-5 Investor Portal; the leading resource for information regarding the EB-5 visa. I publish articles based upon my interviews with leading US immigration attorneys and other EB-5 professionals which are produced as podcasts to educate EB-5 investors. Our podcasts are syndicated around the world on search engines, social media, YouTube, Google Podcasts and our own Apple News Channel – “EB5 Investor Portal”.

So, this is not a forum, or a blog post based upon personal opinions or experiences. It is information taken from my many, many hours of interviews with licensed immigration and securities attorneys, securities professionals and others.

Today’s episode is titled EB-5 planning steps for Indian families. Our special guest is Poorvi Chothani. Poorvi is the managing partner of LawQuest, Mumbai and the law office of Poorvi Chothani PLLC Florida is a prominent immigration attorney with a successful immigration practice in Mumbai, India. LawQuest is a global immigration firm that offers citizenship and residence by investment options to its clients. Over the past two years, Poorvi has assisted several Indians with EB-5 advice and I-526 petitions. Poorvi is an active member of AILA, founder and past chair of The Global Migration Section, the ABA, Immigration Committee vice-chair and diversity as well as the International Bar Association where she is an office bearer in the Immigration Committee. Poorvi is also going to take over as the president of the Indo-American Chamber of Commerce.

This article is one in a series from Poorvi.

I understand that there are Indian families with teenage children or younger that might be considering the EB-5 investment route. I asked Poorvi to give them some preliminary guidance.

The Indian market is fragmented into three large groups in our experience and opinion. The first group is, of course, Indians from India. Then we have Indians living in the United States in some visa status that is very often backlogged by visa wait times. The third category of Indian nationals are the ones living anywhere in the world, so we call them the Indian diaspora outside the United States.

These three are the largest groups of Indians that are looking into an EB-5 option for them and their children and their families. In India it is a mixed group of people. It is usually, like you said, people with young children. What they desire to do is get a green card and get established in America before the children go into the college
admissions process. Many of them believe that this is going to make a huge difference to their fees. There are a few misconceptions about this in the market but when we have a chance we tell clients that yes, you could get a fee reduction if you were a resident in a particular state, provided you were sending them to the state universities.

I wanted to hear more about the three groups of Indians who are interested in EB5.

The diaspora is interested in the EB-5 opportunity because they have gotten used to a certain lifestyle outside of India which they cannot maintain should they come back to India at the end of their foreign assignment, so they are looking at other opportunities where they could continue maintaining a good lifestyle and have a more permanent base. Many of these people are based in countries like Dubai and Saudi Arabia who do not offer. These countries do not offer any track to permanent residence, so they’re usually in limbo and that’s why they’re looking at more permanent options outside India.

Then, of course, the category that is within the United States, these are people that are either worried that they won’t get an H1B or they’re already on H1B with an approved EB-2 or EB-3 which is backlogged by several years and they want to secure their positions.

The category of people that are really stuck in the visa wait times are the most vulnerable because many of their children have finished high school, they are halfway through college and they will soon hit the 21-year-old mark. When that happens they won’t be eligible for dependent beneficiary status and hence they are more eager to get a permanent solution to their visa dilemmas.

Some people may not be familiar with the EB-5 program. I asked her if she could you describe it in a brief, in a nutshell so to speak.

The EB-5 program, and I do a lot of this in my preliminary discussions with clients. The EB-5 program is actually a job creation program instituted by the United States a few decades ago. What this allows you to do, or this is an opportunity where an investor can invest a million dollars in a new business subject to certain criteria and avail of a green card for him or herself, spouse and all minor children before the age of 21.

If the investment is to be in rural areas which are considered targeted employment areas, they could then invest only half a million dollars. The third option is they can invest half a million dollars in any project that is being offered by an approved regional center and which has been considered to be in a targeted employment area. This could be a targeted employment area in the heart of Manhattan, but because of the nature of the project and the economic impact in that area, it is considered to be a targeted employment area. This is just broadly speaking.
In addition to the investment, they also have to create ten jobs for American workers. That can include everybody, but it cannot have ten people on an H1B and qualify, it has to be ten American workers, so those are generally people on a green card or citizens.

Once they meet this criteria they fulfill the EB-5 requirements. Generally the process is this, that you make the investment and within two years of when you’re granted a green card, which is valid for two years, which is called a conditional green card, and before the end of two years you’ve got to apply to remove the conditions. It is at that time that you’ve got to prove that your investment has been made in a qualifying entity or in a qualifying business, the investment is at risk and that you have created ten jobs.

Once this is approved, that is the conditions have been removed, then you get a permanent green card. After a total of five years of being in a green card status you could apply for US citizenship. This is, broadly speaking, the EB-5 opportunity toward citizenship.

Developing an immigration plan can be really important, especially this area of what is referred to as aging out for the children. I wanted Poorvi to discuss aging out and an immigration plan.

If children are below the age of 21 they can be included in the EB-5 petition. But children above the age of 21 cannot be included in an EB-5 petition as a beneficiary, then they would require their own EB-5 investment and petition. The timing of doing this is critical. If you’ve got young children who are about to reach college-going education, the time to start the EB-5 process is now because you want to be sure that you’re approved and in the United States when they do need to get into college.

What this means in practical terms is, current processing time takes about 14 to 20 months and sometimes longer. Recently we’ve seen some being approved even within 14 months, but let’s go with the highest number we have at hand, 20 months. If it’s going to take 20 months to process and then another two or three months to get the visa stamp in the home country, then you’re really looking at two years before you can reach the United States.

You can also get delayed if there is a visa wait line or retrogression. China is retrogressed by several years. India is not retrogressed as yet, but we are at risk of being retrogressed soon. What does this mean? This means that only 10,000 EB-5 visas are issued each year, out of which only 700 can be attributed to any one country. Any balance that is left over is then redistributed as per the priority date, that is the date on which the petition was filed or receipted, and then you are set up in a queue. At the moment, Indian nationals are not subject to a queue and the queue is determined based on country of birth, so you’re not … Indians can be based anywhere but yet could be subject to retrogression, but as of now we’re not retrogressed.

What this means is careful planning, but the good part, there is one good element is that the date on which the petition, the priority date is determined, that date, the priority date, will then lock in the age of the beneficiaries. Let’s say somebody is 18 years old and you’ve got a priority date of some date in January, 2019, then the child age is locked at 18 years and four months and then even if the petition takes two years or more to get approved, the child will still be considered to be a qualifying dependent. There is a good bit to it, but you’ve got to still calibrate it carefully.

China is retrogressed and there’s a possibility that India may be retrogressed as well. I wanted to know if she had any idea when that might be or how likely it is that India … Is there a sense of urgency here with Indians?

Yes. There is a sense of urgency. The US government has in public forum announced that there is likely to be retrogression for Indians from mid-2019. They say likely to be then but it could be earlier, it could be later, it could be never. But the way we are seeing the market develop in India I think is going to be sooner rather than later. Retrogression is coming but we don’t know when. My advice to clients when they come to me is: File today if you can. File now if you can because there’s another reason why there is urgency and that is because the US government is considering revising this program. There’s a potential that it could be scrapped completely but I doubt that will happen.

The other thing that is on the table is an increase in the investment, so the half a million dollar investment amount is likely to increase to 1.3 million and there’s talk that the one million investment amount could increase to 1.8 million. The investment for the half a million dollar category is more than double, which that’s much more expensive and risky for the investors. Again with that, the sooner they can do it the better. We have no idea, it could come any time from now until kingdom come, we don’t know.

There are no backlogs for India, is this correct?

Yes. Currently, to the best of my knowledge and experience, there are no backlogs, there’s nobody waiting in queue at the moment.

There’s an area in the EB-5 program which primarily, from my understanding, is something that the immigration like yourself will work with your clients and it’s called Source of Funds, also referred to as Origin of Funds. I wanted to know what Source of Funds is and then did she have some advice about moving money around from one account to the other in preparation or anything that the audience might want to learn about preparing for that process? What is Source of Funds for Indian investors?

One of the major components of qualifying for the EB-5 visa or investor category is that the source of funds that are invested in the EB-5 project or the EB-5 business should be from lawful sources. What does this mean in practical terms?

You’ve got to show you earned the money legally and not only that, once you’ve earned the money, where did you park it before you used it to make the investment in the EB-5 business? This means you’ve got to not only trace the source of the funds, but you’ve also got to track the path of the funds.

This becomes interesting with Indian nationals because most of them have got a high business acumen and what this means is they hate their money sitting idle anywhere, so the moment they earn it they will invest it in X opportunity then two years down the road they’ll think Y is better so they’ll move it there, then they’ll give a gift to the wife, then the wife may give a gift back to the husband, another gift to the husband and so on and so forth. With all these transactions going back and forth, it is very important to trace the source of funds and the path of funds carefully for an EB-5 petition.

This gets even more interesting for Indian nationals because in India agricultural income, so income from the agricultural industry, so that’s farming or related industry, is not subject to income tax, it’s tax-free. What this means is that a rich farmer sitting on a large parcel of land could be earning millions of rupees but does not have to file income tax, so he could be having stashes of cash at home and that’s fine, that’s legal. But, to prove source and path of funds for those people is immensely challenging, it’s immensely challenging, so we’ve got to be careful about that.

The other category that faces some difficulty is, again, farming land purchased long ago for a very small, paltry amount and now the value of that land is exponential. Why? Because the urban sprawl is eating into their space. You’ve got to show that … They now can sell this land for a huge amount of profit, but the challenge is that the profit may come in from lawful channels, so you’ll get a check to buy your farmland, but the original money that was invested in the property may have been a cash amount that is literally bank notes. How do you trace that? How do you justify that? But the farmer was allowed to have those cash notes. These are some of the practical challenges we see in India.

A typical salaried employee does not pose much of a problem because they get their salary, they invest it. They may have their investments going zigzag around the place, but still it’s possible to map it easily. The others are daunting.

The EB5 investment amount is $500,000. Are there any restrictions with the Indian government or the US government on fund transfers? I also wanted to know about Foreign Exchange Act or FEMA.

Sure. There are restrictions with the Indian government. The Indian government has got strict foreign exchange controls in place under what is known as the Foreign Exchange Management Act. Under this act the Reserve Bank of India, which is equivalent to your federal bank, periodically announces schemes in which foreign exchange can be transacted. According to the latest liberalized remittance scheme, which affects the movement of US dollars or foreign exchange out of the country, the amount that an individual can transfer in any financial year is $250,000.

When I mean individual I mean resident in India, so a person resident in India and that’s a tax resident, can transfer $250,000 in each financial year. Our financial year runs from April 1st of one year through March 31st of the following year. To make an investment of half a million dollars today, if the investor had only one individual who was a tax resident and could move $250,000 out, he could not meet the half a million dollar requirement. But, a couple, a husband and a wife, could each move out $250,000 and meet that amount of $500,000 but this has to be calibrated carefully because the liberalized remittance scheme, or the LRS as it’s known, briefly has restrictions on the use of these monies for immigration purposes.

Can you pool the investment amount?

You’re allowed to make investments but you’re not allowed to pool those monies to get immigration benefits, et cetera, et cetera, so the fine print can get complicated. But broadly speaking, even that movement of money from a family has to be carefully calibrated and moved through correct banking channels so that they don’t run into FEMA violations, that’s the Foreign Exchange Act violations, so that is a challenge.

We also have the component of administrative fee because regional centers charge anything from 25 to 75 thousand dollars as an administrative fee. That money also has to arrive in the account of the regional center, we are talking about regional center investment opportunity. When that happens you’ve got to get another amount out and you’re still subject to the same rules so you need to now get a third person to move that money out, which could be your minor children. Each minor child is also considered a tax resident if the parent is a resident and he is physically present there and he or she is allowed to move an equal $250,000, so there would be three people moving the money out.

Now when we spoke about the single tax resident in India moving $250,000 this year, the way they generally will do it because they don’t have a second family member to move the money out, what they do is they make a transfer now in this financial year and then in the first week of April they make another transaction. A person who has got no other tax residents to help with the remittance could qualify in April after having made two tranches of $250,000 each. That’s another way in which we do it, but again with the risk of the amount going up and with the risk of retrogression, people are eager to file as soon as possible, so that April option doesn’t sound attractive to many.

Well, we thoroughly covered a range of topics! I am happy I was able to share to share what I think is great advice, guidance and strategies for EB-5 investors. You can hear the full podcast by clicking on the following link which features the podcast series on the EB-5 Investor Portal

Make sure you watch for additional articles as this is a series of articles from Poorvi Chothani.

Please remember that the information in this article and the podcast series is for informational purposes only and should not be used as a substitute for individualized advice from qualified immigration counsel.

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