How to Evaluate an EB-5 Project’s Job Creation Potential

Evaluating the job creation potential of an EB-5 project is a critical step for immigrant investors. The U.S. Citizenship and Immigration Services (USCIS) requires evidence that the investment will create or preserve at least 10 full-time jobs for qualifying U.S. workers within two years of the immigrant investor’s capital being fully providentially deployed. A thorough evaluation goes beyond simple projections.

Understanding Job Creation Methodologies

EB-5 job creation can be calculated using three primary methodologies recognized by USCIS:

• Direct Job Creation: Jobs directly hired and managed by the New Commercial Enterprise (NCE) or the troubled business being reorganized.
• Indirect Job Creation: Jobs created in U.S. businesses that supply goods or services to the NCE (primarily applicable to investments in Regional Centers).
• Induced Job Creation: Jobs created when the employees of the NCE and its suppliers spend their earnings in the local economy (also primarily applicable to Regional Center investments).

The Importance of the Economic Impact Study

The economic impact study, often prepared by an economist, is the cornerstone of the job creation evidence. Investors must scrutinize its methodology and assumptions.

Key Components of a Reliable Study:

1. Input Data Verification: Ensuring the underlying financial projections (e.g., construction timelines, operational budgets) are realistic and supported by bids or established industry norms.
2. Model Selection: Confirming the economist uses recognized models, such as the RIMS II multiplier model provided by the Bureau of Economic Analysis (BEA), for indirect/induced calculations, or acceptable input-output models for direct projections.
3. Conservative Assumptions: Scrutinizing assumptions regarding employee wages, productivity rates, and the timeline for hiring. Overly optimistic hiring schedules often lead to Requests for Evidence (RFEs).

Analyzing Project Stage Feasibility

Job creation timing is as important as the total number. USCIS requires jobs to be created or preserved within the two-year period following capital deployment.

"A project projecting 100 jobs in year five, but only 5 jobs in year two, presents a significant risk to the investor's I-829 petition."

Investors should focus on the feasibility of job creation during the critical initial phase:

• Construction Phase Jobs: These are often the most immediate and verifiable jobs. Ensure the construction budget is sufficient to support the projected number of construction-related positions, as detailed in the project’s budget breakdown.
• Operational Phase Jobs: For long-term viability, operational jobs must be clearly defined. Review the organizational chart and anticipated staffing levels for the completed facility.

Evaluating Job Preservation (For Troubled Businesses)

If the investment involves purchasing or reorganizing a troubled business, the focus shifts to job preservation. The standard requires maintaining a minimum of pre-investment employment levels for at least two years.

Verification requires:

• Reviewing historical payroll records (W-2s, 1099s) for the 24 months prior to the investment.
• Confirming that the investment plan directly addresses the causes of the business's decline in a manner that stabilizes employment.

Conclusion and Due Diligence

Evaluating job creation potential demands more than accepting the highest number presented. It requires a deep dive into the economic methodology, the realism of the underlying operational plan, and the timing of job realization. Investors must ensure the projections are conservative, verifiable, and aligned with USCIS standards to secure eventual permanent residency.