Definition of “At Risk” as per Matter of Izumi
In order to qualify as an investment in the EB-5 Program, the immigrant investor’s capital must actually be placed “at risk” for the purpose of generating a return and evidence of such risk must accompany the EB-5 petition. The mere intent to invest is not sufficient and prospective investment arrangements entailing no present commitment will not suffice to show that the applicant is actively in the process of investing. While the law does not specify what the degree of risk must be, the entire amount of capital must be at risk to some degree. According to Matter of Izummi, a decision issued by the Administrative Appeals Office (AAO) of USCIS, if the immigrant investor is guaranteed the return of a portion of his or her investment or is guaranteed a rate of return on a portion of his or her investment, then the portion of the capital is not at risk. For the capital to be considered “at risk” there must be a risk of loss and a chance for gain. In Matter of Izummi, the immigrant investor’s capital was deemed not to be “at risk” because the investment included a redemption agreement that protected against the risk of loss of the capital and constituted an impermissible debt arrangement under 8 C.F.R. § 204.6(e) because it was no different from the risk any business creditor incurs. In addition, an investment with a promise to return any portion of the immigrant investor’s minimum required capital would also not be considered “at risk” capital. If an agreement between the new commercial enterprise and the immigrant investor, such as that of a limited partnership agreement or operating agreement, states that the investor may demand return of or redeem some portion of capital after obtaining conditional lawful permanent residence status, that portion of capital is also not at risk.
Additionally, if the investor is individually guaranteed the right to eventual ownership or use of a particular asset in consideration of the investor’s contribution of capital into the new commercial enterprise (such as a home or other real estate interest or item of personal property), the expected present value of the guaranteed ownership or use of such asset does not count toward the total amount of the investor’s capital contribution in deciding how much money was placed at risk. However, during or after the conditional residency period, an investor is not prohibited from receiving a return on his or her capital, as long as, prior to or during this period and before the requisite jobs have been created, the return is not a portion of the investor’s principal investment and was not guaranteed to the investor.
It is important to note that an investor’s money can be held in escrow until the investor has obtained conditional lawful permanent residence status if the immediate and irrevocable release of the escrowed funds is contingent only upon approval of the investor’s Form I-526 and subsequent visa issuance and admission to the U.S. as a conditional permanent resident or, in the case of adjustment of status, approval of the investor’s Form I-485. Funds may be held in escrow within the U.S. or in foreign escrow accounts as long as the petition establishes that it is more likely than not that the minimum qualifying capital investment will be transferred to the new commercial enterprise in the U.S. upon the investor obtaining lawful permanent resident status.