EB-5 Financing for the Film Industry
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What Is EB-5 Financing?
EB-5 financing is a way of obtaining funds through a program that was formed in 1990 in order to persuade foreigners to make investments in the U.S. and create jobs for Americans in exchange for a visa. The U.S. visa for immigrant investors was established by the Immigration Act of 1990.
EB-5 Capital Helps Fund Film Projects
Due to the fact that credit markets have become stricter in light of the financial crisis, an increasing number of American businesses and developers have looked to EB-5 financing in order to raise the funds needed for their projects. Among the kinds of companies that have benefited from EB-5 financing are film and media production companies.
There are some federally-approved regional centers through which EB-5 financing is distributed that concentrate on the industries of motion picture and television. One such center is the Hollywood Film Capital (HFC), which received approval to finance film and television projects in Los Angeles and the rest of Southern California. Pursuant to HFC’s job creation economic model, approximately 30% of production expenses in Southern California are funded by EB-5 financing as are 40% of Prints and Advertising expenses. According to HFC, the EB-5 program was responsible for bringing in about $3M in funds in 2013.
Are All Film Projects Guaranteed Federal Approval?No. Not all EB-5 projects receive federal approval from the United States Citizenship and Immigration Services (USCIS).
For instance, in 2009, the Lionsgate Entertainment Corporation did not receive funding from EB-5 investors because it was decided that the studio did not have a legal obligation to accept financing from the investors. This implied that one of the requirements of the statute as well as USCIS would not be met, namely that the EB-5 funds would not be put at risk. Other reasons for denial of funding for film projects are:
- A lack of information regarding the project,
- Inadequate evidence concerning job creation, and
- Doubtful escrow agreements.
Is There Corruption Within the EB-5 Program?There have been accusations of inappropriate preferential treatment by leading participants in the film industry regarding EB-5 projects that were endorsed by the Los Angeles Film Regional Center (LAFRC). As a result, the Department of Homeland Security is conducting an investigation into EB-5 projects that were endorsed by LAFRC. It is alleged that a former director of USCIS had established a hearing process that brought about preferential treatment by Sony Pictures and Time Warner towards LAFRC and its financing of film projects.
The former director of the Los Angeles Film Regional Center is accused of ordering that an EB-5 project denial be reversed. The project was one in which Sony Pictures was under no obligation to accept EB-5 funds from investors, and there was no proof that the funds came from an investor. Nor was there any indication that the funds would be expended in a targeted employment area (TEA), or an area of high unemployment.
How Can I Get Financing For My Project?If you are interested in applying for EB-5 financing, as a foreign national, you are required to make an investment of $500,000 or $1 million in a new business in the U.S.; the amount is dependent on the location of the new project. The investment must create a minimum of 10 U.S. jobs.
One way to secure EB-5 financing is for the developer to try to obtain a designation as a regional center from USCIS. In order to acquire such a designation, you must submit an I-924 application. The application involves a long, drawn-out approval process that may require that you reply to several requests for evidence (RFE) from USCIS, possibly causing the approval process to take years.
Should I Consult an Attorney?Obtaining government approval for EB-5 financing is a complicated, and sometimes long, process. If you have questions or concerns about EB-5 financing, you should consult an immigration attorney.
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Last Modified: 06-03-2015 10:29 AM PDT
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