EB5 Investors Magazine Volume 1 Issue 2 | Page 12

Total Construction , Hotel & Restaurant Operations 2,181 $ 190.11 $ 26.97 $ 15.97

The Code of Federal Regulations states that an immigrant ’ s investment must create at least 10 jobs , so the results from Table 3 imply that up to 218 ( 2,180 / 10 ) immigrants can invest in the project , allowing the project to raise $ 109 million ( 218 *$ 500,000 ), assuming the project is located in a targeted employment area ( TEA ). In addition , depending upon which tranche or phase of the project the immigrant ’ s investment is

Table 4 . Impacts of an Immigrant ’ s $ 500,000 Investment by Industry Sector Employment

Activity Impact Type

( Jobs )

$ 500,000 Investment in Construction 2013

$ 500,000 Investment in Hotel Operations 2014

$ 500,000 Investment in Restaurant Operations 2014

Direct Effect Indirect Effect Induced Effect Total Effect

Direct Effect Indirect Effect Induced Effect Total Effect

Direct Effect Indirect Effect Induced Effect Total Effect placed in , the investor ’ s funds can support construction , hotel operations or restaurant operations . Each of these sectors will create a different jobs impact because the multipliers differ across industry sectors . Table 4 provides the results of an investment of $ 500,000 in each of the three activities associated with the hotel project and the average total effect across all industry sectors .

3 1 5 9

4 2 6 11

8 1 6 14

Contribution to GDP

$ 240,918 $ 116,150 455,523 812,591

$ 277,865 139,528 510,421 927,814

$ 275,877 124,122 503,522 903,521

Federal Taxes

State & Local Taxes

$ 115 , 624 $ 64,843

$ 128,741 $ 102,208

$ 127,412 $$ 96,144

The $ 500,000 investment creates nine total construction jobs , or 11 jobs in hotel operations , or 14 jobs in restaurant operations . On average , across all industry sectors , 11 jobs are created , with contributions to GDP totaling $. 881 million . Additionally $. 12 million and $. 087 million are collected in federal , and state and local tax revenues , respectively . Note that even though the program stipulates that 10 jobs must be created per $ 500,000 investment , and the multiplier for construction is 20.64 ( Table 1 ), implying 20.64 jobs are created per $ 1 million spent , due to the effects of the lower $ 500,000 investment and the deflators , only nine jobs are created in construction . If the construction timeline was less than 24 months , such that only indirect and induced jobs are counted , the $ 500,000 investment in construction would create only six jobs .

Household and Other Expenditure Effects In addition to the $ 500,000 investment , immigrant investors also stimulate the economy through household and other related expenditures . EB-5 investors must qualify as accredited investors , which federal securities laws define as : “ a natural person with income exceeding $ 200,000 in each of the two most recent years or joint income with a spouse exceeding $ 300,000 for those years ” ( Rule 501 of Regulation D ). Thus the $ 300,000 joint household income with a spouse is a minimum qualification . A recent study on the national impacts of the EB-5 program conducted by Kay ,

Thorvaldson , and Lindall ( 2013 ) assumed an average tax rate of 15 percent and a savings rate of 10 percent . Applying these tax and savings rates to the $ 300,000 income figure results in a net household income of $ 225,000 for this case study .

Kay , Thorvaldson , and Lindall ( 2013 ) also document other immigrant investor expenditures in 2011 related to moving to , and living in , the United States . Adjusting their 2011 figures for inflation to 2013 , and putting these expenditures on a household basis , results in the following dollar amounts : automobiles ($ 30,066 ), moving ($ 9,385 ), travel ($ 2,488 ), fees related to airports ($ 7 ), investments ($ 23,764 ), attorneys ($ 51,660 ), and government immigration fees ($ 11,324 ).

Examining the $ 225,000 net household expenditures , and other related moving expenses cited above , using the IMPLAN LA- CSA model , results in the estimates in Table 5 .

Literature and Information Sources Cited Kay , David , Jennifer Thorvaldson , and Scott Lindall . 2013 . Economic Impacts of the EB-5 Immigration Program ( 2010-2011 ), 3rd Annual IIUSA EB-5 International Investment & Economic Development Forum . Minnesota IMPLAN Group , Inc . ( MIG ). Impact Analysis for Planning ( IMPLAN ) , Version 3.0 , Economic impact modeling system and regional data , Stillwater , MN , October , 2010 , available at www . implan . com .

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