Immigration Insider

Venezuela: Daring to Disrupt

When you think about it, there are very rational reasons behind the truism that the squeaky wheel invariably gets the oil.  In fact, but for the acoustic disruption triggered by said wheel, the bearings would silently grind down and bring the whole movement to a standstill, without warning. The disruptive squeak serves as notice that something is amiss and permits the possibility of corrective action by an attentive listener.

Today, in Caracas, Venezuela's squeaking is loud and clear to me. As I meet with successful business person after successful business person to discuss investment-based immigration, the growing concern over the current political and economic climate becomes increasingly obvious. The underlying vibe of "let's see what happens" which permeated last year's EB 5 one-on-one meetings has gradually shifted toward a quiet murmur of deep concern.  And while as an immigration attorney this shift may well mean more business for me, I have known and loved Venezuela for many years, so I share their concern.

The irony is that my professional friends here are all quite busy and doing very well.  The island of Margarita is booming with new construction; industry is busy, and the malls are packed.  In fact, to the naked eye, the Venezuelan economy appears more robust than that of the US.  But no matter the riches of this lush and beautiful country, nor the diamonds and petroleum enriching its soil, the disruptions which lead to the squeaking of the wheel serve to undermine the perceived affluence of an economy, and the world's confidence in it.

Both the government and the private sector are populated by strong and charismatic leaders with a deep abiding pride in the historical entrepreneurship and democracy of Venezuela.  Disruption -be it via social reforms intended to spread a nation's wealth or via the steady flow of new technologies, methods, and out-of-the-box ideas which fuel the growth of any market economy - is part and parcel of the cultural and economic evolution of every nation.

As a "serial disruptor" whose professional career has been defined by my unconventional approach toward investment-based immigration, I appreciate the fact that without such change, stagnation is inevitable.  For Venezuela, the challenge is to channel the disruptions in productive ways which can restore the confidence of its people, trading partners, and neighbors.  It is my sincere hope that as I begin my third decade of helping Venezuelans invest in the United States, said investments will be driven by entrepreneurial zest over the abundant opportunities to be found in the topsy-turvy US economy, and not by the ever-louder squeaking of the wheel which they fear just MIGHT run them over.

The Rise of the Brazillionaire

After over two decades of representing hundreds of Brazilians investment-based  and professional immigrants in the United States, I finally made it to Brazil. My hasty January visit -- more than anything a glimpse into the still-Napoleonic tendencies demonstrated by the occasional US visa officer -- left me with a clear impression of Sao Paolo: a thriving metropolis as dynamic as its population.

Today's Wall Street Journal (page A10) discusses how Brazil's rapid economic recovery is starting to create concerns similar to those the US has had with China: the overheating of what has turned into a colossal industrial machine. The Journal predicts that Brazil's central bank "is likely to start a series of interest rate increases" to cool things down. Today I want to briefly discuss what this all means to wealthy Brazilians "on the fence" about US immigration intentions.

It is no secret the South Florida's Brazilian ex-pat population has thrived in our local economy; it is also not a secret that many Brazilian professionals who entered the US in H1B and L1 visas have overstayed for a variety of reasons. Some of them have started thriving businesses after losing their H1B sponsorship; still others have wound down the Brazilian home company... while still possessing apparently valid L1 visas in their passports, they are acutely aware of the reality that the closure of the foreign company renders their current US immigration status nothing more than an artifice easily discoverable by the US consul or airport DHS officer.

Brazil's economy is expected to expand some 5.5% this year, but some economists are warning of the 7% rate of growth. Like Indiana and China, this type of growth -- particularly in such a squiggly global economy -- means that Brazil will more than likely begin to tighten its money supply in order to avoid the inevitable inflation which have long leg economies like Brazil's. (The Journal reminds us that as recently as the early 90s, inflation was in the four-digit range in Brazil.)

In a powerful, diversified, and commodities-driven economy such as Brazil's, all of this growth means one thing: an increasing number of affluent Brazilians trying to reconcile their country's economic boom with the historical lessons taught by the instability of Latin American politics. For many -- both those remaining in Brazil and those already semi-transplanted into the United States -- this combination of elements opens up the possibility of international relocation... usually to the US.

The main issue, at least as far as the uber-wealthy, is the worldwide tax liability which comes with permanent residency in the United States.  Yesterday, Melissa and I had a dynamic meeting with Steven Cantor and his team.  Steve, whose practice focuses on foreign investors “transplanting” to the U.S., is a distinguished tax attorney with whom we collaborate on a regular basis.  Besides being just plain outstanding in his area of expertise, Steve is the only tax guy I've met who approaches problems creatively, a bona fide "outside the box" thinker in a profession known more for counting beans than seasoning them.  I asked a lot of questions about pre-immigration tax planning and the like, and, as usual, Steve had the answers we needed...and those answers open many doors for our Brazilian clients with one foot in America and one eye on the tax implications of what that second foot will mean.

As we prepare for next series of EB5 investment seminars for Latin America, the white-hot economy of Brazil is squarely within our sights. Like so many others on this planet, many Brazilians with whom we speak simply like the idea of U.S. residency as a Plan B, “just in case”, given the quality of their current lives in Brazil.

There are legal ways to both immigrate to the U.S. AND to minimize tax implications through intelligent pre-immigration compliance structured by the right folks.  Email if you have more questions and we'll get them answered!

NEXT WEEK: Jose's FREE F-1 Seminars in Southern California

Next Tuesday-Thursday I will be at USC, UC Irvine and UCLA presenting our new seminar entitled:

"Life after F-1: Taking Control of Your U.S. Permanent Residence"

...a free seminar on the subject of U.S. immigration options for graduating international students interested in legally remaining in the U.S. The seminar (which is followed by a Q&Asession) covers:

•  tactical planning for seeking employment via Optional Practical Training (OPT)
•  how to present your "internationalness" as a plus and not a minus to prospective employers
  
•  Post-graduation OPT strategies to optimize H-1B employment opportunities
•  making PERM an intelligent investment in the eyes of your U.S. employer
  
•  what to do if your employer's immigration attorney is terrible
•  elimination of the "H-1B entrepreneur" option by USCIS and what you can do about it
  
•  other immigration options for starving graduates

 Dates and time will be posted soon and seating will be limited at USC and UCLA.  At Irvine we'll be outside Peet's in the shopping center, so that one can be Woodstock-size...(-:  Stay tuned!

Econometrics, EB-5 Regional Centers, and Job Creation[VERY POOR AUDIO]

Folks, this second attempt at a video blog was shot in my Miata on the morning commute.  While I'm okay with the video (having come to terms with what I actually look like at 48 as opposed to what I THINK I look like) the audio is horrific.  I still posted it because there are a few points who some might want to hear but trust me, the audio is absolutely horrific and annoying due to the little car's vibration, so skip it unless today's topic is of serious interest.

BTW, thanks to all of you who gave me positive feedback regarding the concept (and not the execution) of the first video blog.  The numbers on the blog tripled yesterday, although it could simply be the result of people emailing links to each other and saying "you have to see how gray Jose has gotten".  Whatever...thanks for the feedback regardless.

Footnote: the Miata overheated (again) as I was waiting for a train to pass in Miami Shores and Melissa rescued me.  More soon and I'm working on the audio as well.

EB-5 Jeebies- Regional Center Investment Misinformation Abounds

Look, I'm TRYING HARD here, guys.  I'm not really interested in naming names or getting people angry but I'll tell you what: if some of the more BALONEY-laden EB-5 Regional Centers and lawyers don't get a grip on the nonsense they spreading, I'm going to start blogging about them.  How's this Miami Herald quote from a developer pitching the EB-5?:

"In the worse case scenario, this project will make a lot of money"

Well....no.  In the worst case scenario, the investor will lose his or her money, not get his/permanent residency, have to leave the U.S, and transplant their families back to their country after being led to believe that there was "no risk".

I first noted this whole thing when we were in Venezuela a few weeks ago.  Turns out a lot of other self-proclaimed EB-5 attorneys are going down there...and other Regional Centers, some approved, some not approved.  By day three in Caracas it was pretty clear to me that the rampant disinformation we were constantly correcting among our prospective clients was not the result of "I read it online so it must be so" Syndrome but, rather, the result of information gathered by folks at our seminar...from OTHER seminars presented by OTHER immigration attorneys and Regional Center marketers.  So let's just cut through the nonsense and clear up a few things:

-The higher the promised return, the higher the risk.  That is a fundamental fact of investing. Anyone who says otherwise is lying.

-Just because an EB-5 Regional Center investment predicts a teensy weensy annual return does not necessarily mean that the investment is "safer".  It could just mean the project managers are taking a big chunk of profits away from the investors.

-Exit strategies matter.  Don't believe otherwise.

-Yes, there are legitimate real estate opportunities in the belly-up U.S. real estate market, but just because prices are low does not necessarily mean it is a "great time to invest".  It depends on the specific property, plan, and investment managers.

-Developers are not investment managers, investment managers are not investors and immigration attorneys are neither.

-Banks make money when they lend on good projects.  While the banking sector has indeed reacted miserably to the credit crisis, that in and of itself does not create an "opportunity" for private capital.  If it was that easy, the banks would be lending.  With reward, put simply, comes risk.

-You CANNOT "cash out" on your EB-5 investment in "two years or less" AND have your green card.  Legally impossible and the people saying this are lying through their teeth.

-Think about it: $500,000 and 10 new jobs.  That's $50,000 per job, right?  Darn near impossible. The intelligently-structured Regional Centers are combining EB-5 funds with private U.S. equity and other non-EB-5 sourcing to insure that the per-investor job numbers materialize.

-Not all Regional Centers are intelligently structured.

-The initial petition I-526 looks at investor eligibility and origin of funds; the I-829 petition which makes the residency  of the EB-5 investor permanent focuses on confirming the job creation and fulfillment of business plans.  Just because a Regional Center is getting the first approved does not guarantee that the removal of conditions will sail through.  In fact, the catastrophic failures of EB-5 visas in the 90's mostly involved approved I-526s with I-829s subsequently denied.

Look, folks: there are some excellent and intelligent EB-5 Regional Programs out there, as well as some excellent attorneys working with the EB-5 category.  But the abundance of pure nonsense being fed to prospective investors both in the U.S. and abroad is making hard for folks to learn the truth.  And so I blog.

Like the guardian Knight of the Templar protecting the Holy Grail said to Indiana Jones:  "Choose wisely".

Not All EB-5 Regional Centers are Created Equal

In the past few months, I've had the opportunity to meet with a lot of folks with approved Regional Centers.  In the process, I've asked a lot of questions and spoken to some of the most sophisticated real estate developers, portfolio managers, and financial minds in the country.  I've learned a few things and I think they might be of interest to those of you who are considering an investment in an EB-5 Regional Center, as well as those of you who represent such potential EB-5 investors in one capacity of another.

For the purposes of today's blog, I won't name names.  I have in the past and I most certainly will in the future.  In fact, the more I learn about EB-5 Regional Centers, the more comfortable I feel with some...and less so with others.  So while I'll expand and get more specific in the coming days and weeks -- and will not doubt make some folks really angry (hey, it's been awhile) -- let's start with a pasty and generic look at three fundamentals I've observed:

1- The Government has approved and is approving a LOT of EB-5 Regional Centers.  In the second half of 2009, the number of approved EB-5 Regional Centers has soared from 40-something to over 70...pretty staggering when you consider that it took about a decade and a half for the first 40-something to be approved.

2- The rapid approvals have caught many of the new EB-5 Regional Centers unprepared.  Whether this is a function of unexpectedly fast processing or simply slow-moving entrepreneurship, a very significant number of the newest centers have nothing specific to offer EB-5 Investors right now.  It works like this: once an EB-5 Regional Center is approved, then and only then can they start offering an investment and comply with all the disclosure requirements relating to securities laws.  These are not prepared overnight and, in an ideal world, the RC team is working on the initial legwork during the pendency of the USCIS adjudication.  My impression (and that's all it is because I have only explored a fraction of the new centers) is that a lot of these newer centers were caught off-guard and are now scrambling to put together projects.  (If you are an investor, would you want your investment team to be hurrying to throw something together?  Not me.)

3- The better newer EB-5 Regional Center models (and some of the veteran ones) are increasingly debt-based vs. equity-based.  This means that in the pooling of the investor funds, the debt-based models operate as lenders to specific projects. Because the loans are often linked to governmental or quasi-governmental borrowers, bond secured, and finite --these structures, although more conservative on returns than the equity-based models, are increasingly appealing to many prospective EB-5 investors.  But don't get me wrong - some of the most successful programs are equity-based).

I guess the most important thing for EB-5 Regional Centers to keep in mind as the momentum continues to build is the trinity of top considerations echoed consistently, in the same order of priority, by the dozens of prospective EB-5 Regional Center investors I've spoken to recently:

1. Assurance of the approval of the permanent residency
2. Security of the underlying $500,000 capital investment and
3. Return on investment

Things are getting complicated and my impression is that very significant distinction exists not only between the fundamental structures of the new EB-5 Regional Centers, but between their underlying philosophical approach to how an EB-5 Regional Center should operate.  Those which understand the aforementioned trinity of priorities will inevitably lead the pack.

 

Taxation Without Representation

I've been representing foreign investors in the U.S. for 18 years.  So have many of my colleagues.  So why is it that the notion of "tax planning" is such a conundrum for most immigration attorneys?  The truth is that we, as immigration counsel, are "programmed" to steer most folks to legal permanent residency.  There are valid reasons, the primary one being that the majority of clients seek such status.  But a significant (and growing) number of foreign investors in the U.S. wish to preserve their foreign residence as primary...and have no desire on becoming subject to taxation in a country in which they do not intend to live permanently!

It seems like on an almost-daily basis I'm approached by a client with substantial offshore assets who is neither interested in U.S. permanent residency nor in abandoning his home country...but is being advised by immigration counsel that getting a green card is their sole option...not so!

I am hardly an expert on international taxation but I know the basics:

• whether you like it or not, the U.S. taxes worldwide income on anyone who is a "tax resident" within the meaning of the Internal Revenue Code
• tax residency is automatic for persons who get permanent residency
• tax residency is triggered by so-called "physical presence" tests which determine tax status based upon the amount of time a foreign national has been physically present in the U.S.
• In addition to worldwide taxation of all income anywhere, U.S. tax residency means estate taxes apply for assets worldwide (unless legal protective mechanisms, such as trust structures, have been established.)

All this adds up to one thing: for high-net-worth foreign nationals, a complete understanding of the income and estate tax implications is essential BEFORE they get their green card...or before they establish tax residency via physical presence.

What are the implications of this for immigration counsel?  Several important considerations:

1. It is critical to insure that the client receives competent tax counsel both in his/her home country AND in the U.S....before U.S. tax residency is manifested and the individual is subject to U.S. tax laws.
2. On many occasions, it is necessary to defer the U.S. permanent residency -- even prolongued presence in the U.S. -- until all of these issues are resolved under a tax planning arrangement most prudent for that individual client.

It's a shame to see the colossal financial damage which can occur to clients who have been given limited options by immigration counsel.  Once you are a U.S.tax resident like the rest of us, you have to cough it up, and that's what the law requires.  Before you are U.S. tax resident, however, you have a number of legal tools and options with which to minimize the financial impact of coming to the U.S.

Perhaps as immigration counsel we should step back and look beyond the next immigration step to consider the client's big picture.