EB5 INVESTORS M AGAZINE
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historical evidence of other investors being paid back
associated with the regional center, do not believe
that misconception.
MISCONCEPTION 4:
ALL JOBS ARE CREATED EQUAL
Since there are two basic issues in EB-5 — capital
at-risk and job creation — it is prudent to turn the
discussion to job creation. It is normally stated that
a project has a certain job cushion. This is to entice
investors to invest based on potentially a very large
job cushion. This gives the illusion that all jobs are
created equal (and the corollar y that a large job
cushion ensures a margin of error). The problem with
this analysis is that it assumes all jobs are created
equal. They are not.
As most know, there are direct jobs (I-9, payroll jobs)
and model-derived jobs (direct construction jobs,
indirect construction jobs and operational jobs). For
direct jobs, these are shown through payroll evidence
and I-9s at the I-829 phase. Clearly, the challenge with
these jobs is that the position must be in existence
for at least two years and the evidence must be able to
demonstrate this.
Now, contrast this with model-derived jobs, which
are considered to be created if based on reasonable
methodologies. The models used are called input/
output models. Thus, models can have many types of
inputs to give the outputs (the jobs created). Normally,
construction expenditures are used as an input to
demonstrate the jobs that have been created. Note that
USCIS requires that construction last at least two years to
be able to count model-derived direct construction jobs.
While this seems straightforward, there could be some
challenges at the I-829 phase when jobs have to be
proven. For example, let’s assume that a project stalls and
the three-year projected construction timeline approved
at the I-526 phase is actually one continuous year, then
stops and starts for two years before finally ending. I
assume USCIS could argue that the model-derived direct
construction jobs do not count. This is where model-
derived, direct construction jobs could be a little risky.
Operational jobs only exist if the business opens. If the
business does not open, very few operational jobs are
created. Therefore, these are the riskiest jobs.
When analyzing jobs for the purposes of job creation it
is best to rely on model-derived indirect construction
expenditure jobs first. Second, an investor could count