EB-5 Investment at Risk Requirement

Matter of Izummi remains a central precedent concerning the requirement that EB-5 capital be placed at risk for the purpose of generating a return.

Transaction documents should not eliminate the investor's genuine economic exposure.

EB-5 requires a genuine investment with real economic exposure rather than a transaction designed to guarantee the investor's capital. Matter of Izummi remains an important precedent for the at risk concept, while current statute expressly excludes several arrangements that eliminate qualifying investment risk. The analysis should examine the complete transaction, not just whether the investor wired the required amount. Subscription agreements, operating agreements, redemption provisions, side letters, loan documents, and offering disclosures should be reviewed together to determine whether the investor has a genuine opportunity for gain and a risk of loss consistent with EB-5 requirements.

Current Forms I-526 and I-526E instructions expressly exclude capital invested with a guaranteed rate or return.

Current INA section 203(b)(5)(D) excludes capital invested with a guaranteed rate of return. A project can describe a targeted, preferred, or projected return, but the transaction should not obligate the NCE to provide a guaranteed economic return in a manner prohibited by the statute. The immigration analysis should distinguish projections from enforceable guarantees. Offering documents, distribution provisions, side agreements, and marketing materials should be consistent on this point. A promise that appears only outside the formal subscription documents can still create a problem if it forms part of the actual investment arrangement.

A contractual right requiring the NCE to repay the investor can undermine the investment element.

Redemption provisions should be reviewed carefully before subscription.

The statute also excludes capital subject to an agreement giving the investor a contractual right to repayment, such as mandatory redemption or an investor held put or sell back option, subject to the statutory exceptions. The key concern is investor controlled repayment rather than every possible future distribution. A buyback option exercisable solely at the NCE's discretion is treated differently under the statute. Counsel should review maturity language, redemption rights, withdrawal provisions, side letters, and distribution terms before filing. The documents should not create a concealed obligation that effectively guarantees return of principal to the investor.

Current USCIS instructions specifically exclude certain notes, bonds, convertible debt, obligations, or other debt arrangements between the investor and the NCE from the definition of qualifying capital.

Qualifying EB-5 capital generally cannot consist of an investment made in exchange for a note, bond, convertible debt, obligation, or other debt arrangement between the investor and the new commercial enterprise. This rule concerns the investor's relationship with the NCE and is distinct from the investor lawfully borrowing money from an outside lender as a source of funds. The filing should therefore examine what the investor receives from the NCE. Equity or partnership interests should not be contradicted by side agreements that transform the investor into a creditor entitled to repayment of the contributed capital.

INA §203(b)(5)(A) states that invested capital is expected to remain invested for not less than two years.

The exact timing of the sustainment period should be evaluated under current USCIS policy for the investor's filing date and facts.

At risk and sustainment are related but distinct. The current statute states that qualifying capital is expected to remain invested for not less than two years, while USCIS applies different sustainment frameworks depending on the petition filing date. A post RIA investor may complete the applicable investment period before the I-829 filing date, but that does not retroactively validate a prohibited guarantee or repayment right in the original investment. Counsel should separately analyze whether the capital qualified when invested, whether it remained at risk for the required period, and whether any later repayment or distribution occurred under permissible terms.

• Subscription agreement
• Operating or partnership agreement
• Private placement memorandum
• Redemption provisions
• Promissory instruments
• Escrow agreement
• NCE bank statements
• Capital deployment records

At risk analysis should be based on the entire investment package and actual conduct. Relevant evidence can include the private placement memorandum, subscription agreement, operating or partnership agreement, side letters, escrow agreement, promissory instruments, redemption provisions, distribution records, NCE bank statements, and capital deployment documents. The filing should identify any provision governing repayment, withdrawal, buyback, return, or guaranteed yield. If project documents were amended, preserve each version and effective date. A concise legal review of those provisions can help determine whether the investor made qualifying capital available for job creating activity without retaining impermissible repayment protection.