Immigration policy fails on investment quota

Real Estate Weekly, August 17, 1994 by Lois Weiss

Under U. S. immigration and naturalization rules that took effect in November of 1990, foreigners who create businesses and jobs can apply for permanent resident status.

"It's not widely reported becauase it is not widely used," said Richard S. Goldstein, an immigration practitioner with offices in New York and London.

According to Immigration and Naturalization Service (INS) documents, if a foreigner invests $1 million - or under certain circumstances $500,000 - in a new commercial enterprise and employs ten United States citizens full-time, while managing the business full-time, then the foreigner can apply for permanent resident status.

John H. Kim, a Manhattan immigration attorney, explained the law is designed "to attract the rich people" to come to this country. "So if she gets the immigrant visa, you can get in the family," he said. Kim explained the $500,000 investment pertains to economically depressed areas.

While this law may be on the books to help, for instance, a family of "limited" means to open a restaurant and bring in the wife and children, Goldstein, who deals with wealthier families, said the law does not go far enough to encourage investment and immigration by high-net worth individuals.

"It has an excessive amount of requirements for investors who want to make investments to obtain permanent resident status," he said.

When the rule was created, Goldstein said, the government set aside 3,000 visas per year for use in targeted rural and high-unemployment areas. An INS bulletin indicates another 300 were set aside for regional centers. According to INS documents, as of June 30, 1994, only 1,053 investors have applied for immigration since November of 1990 under this rule. Merely 464 have been approved, while 206 were denied.

For the last 733 petitions that were received many were from Pacific Rim countries, including 161 applying from Taiwan, 47 from Hong Kong, 89 from China, and 45 from Korea, with a scattering from Malaysia and Indonesia. Canadians accounted for 39, Mexicans for 15, the United Kingdom 39, Swiss 10, Germans 29, Netherlanders 10, Lebanese 12, Israelis 15, Pakistanis 11, Indians 25 and Argentineans 12, along with smaller numbers from many other countries.

"The important fact is that the rule has not been widely used, and very few people have made use of it," insisted Goldstein. "We're almost four years in and it hasn't worked. We have not created as flexible a magnet as we would have hoped."

Sometimes, notes Albert I. Berger, president of the investment sales division of the Carlton Group, there is a desire to live in America and an investment gives the family a base. "If you create investments and you create jobs, this counts towards citizenship," he noted, adding that more jobs, for instance would be created by owning a hotel.

Goldstein says he doesn't know of any companies that have bought hotels to buy green cards.

But he also feels the amount of money that needs to be invested is excessive. "They say they don't need to spend $1 million to set up a business, and a $1 million investment is not viewed as sufficient to support ten workers," he observed. "Employing ten workers rules out a number of potential investors. They don't need and can't afford to hire ten workers."

But the Immigration and Naturalization policy was set up to generate jobs, says a spokesperson, and Congress is not likely to change that law any time soon.

Goldstein testified before a Senate committee prior to the law's implementation four years ago and at that time stated that instead of creating a business, or in addition to that, certain substantial charitable donations should be allowed to be made to U.S. charities by wealthy foreigners who wish to get permanent resident status.

"I don't have a problem saying if you buy 25 dialysis machines you can have a green card," added Goldstein.

If the United States was more liberal in bringing in foreign investors as permanent residents, Goldstein says, they would become tax residents of the U. S. and then would be subject to taxes on all their world-wide investments. "You ignore that they then become taxpayers and subject to U.S. taxes," he said. "The U.S. should make it more liberal and ease the rules."

Many Asians, for instance, want to come to the U. S. for political stability but they don't necessarily want to work. "It's crazy to say that unless you want to run a business you can't come here," he said. "I've met people like this who have no interest in working."

Other countries are trying to attract investment through immigration policies.

Darcy A. Stacom, a senior director in the financial services group of Cushman & Wakefield who interacts with investors noted the investment for Canada is $250,000. Goldstein said, "The Canadians and Australians have much more liberal policies for committing foreign investors to make investments and acquire settlement rights." The U.K. has also announced new rules to allow investors to get permanent settlement rights in the U.K. said Goldstein.