Talking Points from EB-5 Interactive Series: Expenses that are Includable (or Excludable) for Job Creation (June 4, 2015) - USCIS
Eligible Hard Construction Expenditures, Soft Costs, and Transfers Hard Cost Construction Expenditures
• USCIS economists will typically ask for itemized information to ensure that only eligible costs are input into an accepted economic model or other methodology.
• Simply stated, total aggregate hard costs will likely be insufficient to demonstrate eligibility. Rather, costs should be broken down into specific expenditure categories (such as masonry work, plumbing, flooring, hardscaping, softscaping, etc.), so that USCIS economists can assess whether these costs are reasonable inputs.
• Certain types of evidence may strengthen the credibility of a filing. For example: If the assumptions are accompanied by a third-party market feasibility report, or if a developer shows a successful track record in completing similar projects. The important thing to remember is that the burden is on the petitioner to provide sufficient evidence.
Assessing Contingencies at the Form I-526 and I-829 Stages
• Generally speaking, USCIS considers contingency and reserve funds that adhere to acceptable industry practices to be permissible inputs into an economic model for estimating job creation.
• At the Form I-829 stage, USCIS will review whether contingency and reserve funds have actually been spent on eligible expenses.
Furniture, Fixtures and Equipment
• Furniture, fixtures, and equipment may be eligible expenditures as an input into an economic model.
• The applicable multiplier depends on the specific project type (for example, constructing a building vs. a ship).
Soft Cost Construction Expenditures
A number of soft costs may be ineligible.
- For example, a stock market transaction that involves the exchange of two paper assets (i.e., money for shares of stock) creates no economic impact. Similarly, there are some transactional costs, such as brokerage fees for services related to the transfer payment transaction, that may not be eligible. Most petitioners do not request job creation from these categories.
- With respect to land purchases, there are some closing costs that may be eligible; however, the actual purchase of a title from the previous land owner does not create any economic activity, and is thus ineligible. Some transactional costs, such as realtor and title policy expenses, appraisals, site inspections and site clean-up, may be ineligible if they were incurred before the immigrant investor capital was placed at risk.
In terms of using funds from EB-5 investors to acquire real estate, Matter of Izummi requires that the “full amount of money must be made available to the business(es) most closely responsible for creating the employment upon which the petition is based.”
For example, a job-creating entity may propose to allocate some EB-5 funds to purchasing land and other EB-5 funds to developing and operating a business on the purchased land. The jobs created by the enterprise can be apportioned among all the EB-5 investors. It is important to note, however, that real estate acquisition is not recognized as a job- creating activity in and of itself.
Thus, it is not generally reasonable to treat funds spent on real estate acquisition as inputs to an employment impact model. Where some EB-5 funds will be used for real estate acquisition, such apportionment should be detailed in the business plan.
Note: USCIS does recognize that certain soft costs directly related to real estate transactions may reasonably be counted as valid job-creating expenditures and inputs to regional input/output models. In addition, soft costs related to the development and construction of EB-5-supported projects on designated land parcels may be considered on a case-by-case basis.
Economic Model Inputs
If developer costs are used as a job creating input in an economic model, they should provide adequate detail to ensure that they are actually expenses that create jobs and not a return of a developer’s capital that will not create jobs within the project in review.
If the input/output model used in the economic impact analysis provides specific categories for the soft costs, the multiplier categories specific to these costs should be used instead of bundling such costs under general construction expenditures.
Generally, USCIS finds it permissible to include architectural/engineering expenditures as an input into the economic model.