EB-5 FOREIGN INVESTOR VISA PROGRAM

1. EB-5 FOREIGN INVESTOR VISA PROGRAM By Gary J. McRay Foster, Swift, Collins & Smith, P.C. 313 S. Washington Square Lansing, MI 48933-2193 517.371.8285

2. Goal of the Program • Encourage capital investment. • Create domestic jobs.

3. History of the EB-5 Visa Category • EB-5 Visa category started in 1991. • Regional Centers started in 1993.

4. History of the EB-5 Visa Category (cont’d) • The EB-5 program was effectively placed on hold between 1998 and 2002. • In August of 2003, INS began approving Regional Center petitions for the first time since 1998. • In January 2005, USCIS established Investor and Regional Center Unit (IRCU). • Unit accepts Regional Center applications to improve and expedite the EB-5 Regional Center applications. • 389 applied in 2006. • 779 people had applied for this EB-5 visa program in 2007.

5. History of the EB-5 Visa Category (cont’d) • Investors through EB-5 visas put $500 million into the U.S. in 2006. • $800 million into the U.S. economy in 2007 • $1 billion in 2008.

6. Examples of EB-5 Center Investments • Examples of EB-5 Center investments. • •Industrial properties. • • Office space, retail shops and storage space. • • Hospitality and tourism. • • 80-acre almond farm. • • Dairy farms. • • Machine equipment. • • Ski resort/hotel for 1800 guests. • • City of New Orleans – buildings, hotels, restaurants, medical clinics. • • Nut farm in California. • • Ethanol plants in Texas. • • Health care facilities in Alabama.

7. Should We Have Foreign Investment in the United States? • • Economist Mack Ott. • • Canada realizes the importance of foreign investment. • • Senator Patrick Leahy (D-VT) is championing the cause of the EB-5 Investor Program. • • It is a good idea, especially in a declining capital market.

8. Original EB-5 Investor Program • $1 Million in a new commercial enterprise. • That employs directly at least ten U.S. workers. • $500,000 for investments in any Targeted Employment Area defined as (i) rural areas or (ii) areas in which unemployment is at least 150% of the national average unemployment rate. • Active management role.

9. Regional Center Pilot Program • In 1993, the INS (now called, U.S. Citizenship and Immigration Service, USCIS), offered a second option known as the Immigrant Investor Pilot Program or the Regional Center Pilot Program. • Investor does not invest directly in his own business but rather in a Regional Center’s proposed investment, previously approved by U.S. government, located in a Targeted Employment Area. • Required investment: $500,000 from verifiable sources in a new commercial enterprise. • Investment creates, directly or indirectly, 10 U.S. jobs. • No active day-to-day management role. Rights of limited partners suffice.

10. Target Employment Area • Rural area. • Area has unemployment equal to at least 150% of the average national employment rate.

11. Rural Area • Not located within any standard metropolitan statistical area. • Not located within any city or town having a population of 20,000 or more.

12. Regional Center • Has been approved as such by USCIS. • Focuses on specific geographic area within the state. • Seeks to promote economic growth.

13. Requirements of the Program • Create a new Commercial Enterprise. • Located within the approved regional geographic area. • Investment of $500,000 from verifiable sources. • Investment must directly or indirectly create ten U.S. jobs.

14. A new Commercial Enterprise may consist of: • Creation of an original business. • Purchase of an existing business, plus restructuring so a new commercial enterprise results. • The expansion of an existing business so that there is a substantial change in the net worth of the business or the number of employees. • Investment in a troubled business and employees in the troubled business stay the same as before the investment.

15. Substantial Change in an Existing Business • A 40% increase in net worth, or • A 40% increase in the number of employees.

16. Troubled Business • An entity in existence for at least two years. • A net loss during the prior 12 or 24 months. • Loss is equal to 20% of the entity's net worth prior to loss.

17. Creation of Jobs • Jobs have to be created within two years. • Full time jobs -- minimum of 35 hours per week. • Direct jobs – easy to count. • Indirect jobs may be shown by reasonable methodologies (hire economist).

18. Active Requirement by the Immigrant • Immigrant is not required to live in the same city or state where the Regional Center is located, can reside anywhere in the U.S., and is not required to manage or conduct the business on a day-to-day basis, but still must have a minimal active role in determining policy and operations of the investment project.

19. Family Requirements • Qualifying immigrant investor is eligible to sponsor his or her immediate family, which includes a spouse and all unmarried children under the age of 21 years.

20. Travel Restrictions • If an investor obtains a green card, the investor has to live in the U.S., must intend to emigrate to the U.S. and maintain as his primary residence a home in the U.S. Provided that “intent” requirements are maintained, a conditional or permanent resident is entitled to travel for less than six months at a time outside the U.S.

21. Taxation • The U.S. charges income tax on all U.S. citizens and permanent residents based upon worldwide income.

22. Annual Quota • Annual maximum of 10,000 visas issued per year with 3,000 of the visas reserved for the Regional Center pilot program.

23. Regional Centers • U.S. business persons. • Local government agencies. • Lansing EDC has filed a request for a Regional Center for the City of Lansing. • Skye Suh and I applied for a Regional Center which includes parts of Michigan that are rural or high unemployment areas outside of certain cities. • Approximately 45 active centers throughout the U.S. (only about 19 states, none in Michigan).

24. Process to Obtain Permanent Residency • Investor selects Regional Center. • Regional Center presents specific investment proposal - investor accepts. • Investor signs a subscription form and deposits $525,000 into escrow account. • Alien/Investor submits the I-526 immigration petition and obtains approval. • After approval, the Center's escrow agent releases subscription balance to the investment partnership or LLC.

25. Process to Obtain Permanent Residency (continued) • If the alien/investor is lawfully in the U.S., he submits the I-485 application in the U.S. to adjust investor's status to conditional permanent residence. If the investor is not in the U.S., the investor will process his actual green card through the U.S. consulate in his home country. • After approval of the I-485 or consular processing, as the case may be, the investor receives a two-year conditional green card. • Ninety days before the end of the two years, attorney submits I-829 Petition by Entrepreneur to Remove Conditions. • Investor receives 10-year green card.

26. Form of the Investment • It appears that the investment must be in the form of ownership - some form of equity. The Service believes that redemption agreements are unacceptable, since capital is not at risk. • Often the investment may show a modest rate of return. • This is a good alternative to normal debt financing since the present U.S. capital market is (i) not functioning, or (ii) is demanding unreasonable conditions.

27. Permanency of the Law • The pilot program is not permanent in U.S. immigration law, but must be reauthorized every five years by the U.S. government. Recent legislation caused a six-month extension to September 30, 2009 as part of the Fiscal 2009 Omnibus Appropriations Bill. See HR 1105 (Public Law 110-329).