EB-5 Financing for the Film Industry

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.

The Film Industry Benefits from EB-5 Loans

Film studios and producers have traditionally used many types of financing to cover the costs of film production, including government grants, pre-sales, debt financing, and private equity. Over the past few years, the film industry has sought funding through the EB-5 program.

Sony Pictures Entertainment, Lionsgate Films, and Warner Brothers have all raised funds for film projects through the EB-5 program since 2009. USCIS approved over 200 EB-5 investor petitions to finance Sony Pictures film projects in 2011. Also, in 2012, Time Warner received an EB-5 loan from 240 investors.

Film and media production companies have also sought EB-5 financing. As an example, Free Mind Films developed its own federally approved regional center, the Free Mind Films Regional Center. Founded in 2007, Free Mind Films produces educational and narrative entertainment films “dedicated to the truth of information.”

One of its films, A Noble Lie, has won numerous awards at film festivals for its documentary exposé of the Oklahoma City bombing in 1995.

Many federally approved regional centers have been established to facilitate investments in the motion picture and television industry under the industry category “Film Making.” HFC (Rosti Capital LLC D/B/A Hollywood Film Capital) is a federally designated EB-5 Regional Center approved to fund film, television, and content creation projects in Los Angeles and throughout southern California. HFC’s federally approved job creation economic model suggests EB-5 capital can account for about 30% of Southern California-based production expenses and about 40% of print and advertising expenses. HFC claims that in 2013, the EB-5 program brought in an estimated $3 billion in committed capital.

Additionally, the Atlanta-based Southern Film Regional Center and the Free Mind Films Regional Center are federally approved regional centers specializing in financing film production. USCIS project approval is not guaranteed as with EB-5 projects in other industries. In 2009, Lionsgate was denied funds from EB-5 investors because it was determined that the studio was not legally required to accept the funds. This meant that the funds would not be at risk in the commercial sense as required by law and USCIS regulations.

Among other reasons, film projects can be turned down due to a lack of specific information about the project, insufficient evidence of job creation, and problematic escrow agreements.

What Are the Job Creation Requirements?

EB-5 Visa investors must create at least ten full-time jobs in the United States as a result of their investment.

Direct and indirect job creation are both acceptable methods to prove that they have met the USCIS requirement in Designated Regional Centers. If the investment is not in a regional center, the jobs must be directly created by the entity that the investor is investing in.

EB-5 Capital Helps Fund Film Projects

Considering the tightening of credit markets following the financial crisis, an increasing number of American businesses and developers have turned to EB-5 financing to raise the funds needed for their projects. Media and film production companies have benefited from EB-5 financing.

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).

EB-5 Visa Benefits

The EB-5 Visa Program offers an excellent opportunity for foreign investors seeking the freedom and flexibility to live and work in the United States:

• A direct path to a Green Card
• No day-to-day management required
• Permanent residency in the United States for you, your partner, and any children under 21 (especially helpful for children planning to attend a US university, allowing them to obtain a
• Green Card while studying)
• Live, work, and retire anywhere in the U.S.
• Become a citizen after five years as a green card holder
• There are no quota backlogs – There are delays and backlogs for the employment and family-based green card categories, but there are none for the EB-5 Investor category.
• No sponsors required – Foreign investors use their own personal funds and do not need sponsorship from an employer or family member.

What Are Funding Sources?

The investor must prove that the $500,000 EB-5 Visa investment capital is legal.
Assets acquired directly or indirectly through unlawful means (such as criminal activity) are prohibited.

The EB-5 Visa investment funds must be legally acquired.

By submitting bank statements or letters confirming the deposit of funds, a petitioner cannot establish the lawful source of funds. Unless the petitioner can prove that the funds are their own, they cannot meet the burden of proving their ownership. For the purpose of meeting the burden of proof, stating without supporting documentation is insufficient.

Investors can also show a “pattern of income” to justify their EB-5 investment. Income tax records should be submitted, preferably for a longer period than the five years required by the regulations. Investors can also provide records of savings and personal investments so that even if the petitioner does not have a significant income, there is a credible claim that they have accumulated the necessary funds.

In the event that an investor receives a gift of funds, the USCIS will require information and track the source of the funds from the giver.

Is There Corruption Within the EB-5 Program?

There have been accusations of preferential treatment by participants in the film industry regarding EB-5 projects endorsed by the Los Angeles Film Regional Center (LAFRC). As a result, the Department of Homeland Security is investigating EB-5 projects that LAFRC endorsed. It is alleged that a former director of USCIS put in place a hearing process that caused Sony Pictures and Time Warner to treat LAFRC and its film financing differently.

An EB-5 project denial was reversed by the former Los Angeles Film Regional Center director. Sony Pictures was under no obligation to accept EB-5 funds from investors, and there was no proof that the funds originated from investors. Also, there was no indication that the funds would be allocated to a targeted employment area (TEA) or an area with high unemployment.

How Can I Get Financing For My Project?

In order to qualify for EB-5 financing, foreign nationals are required to make an investment of $500,000 or $1 million in a new business in the U.S.; the amount depends on where the new business is located. The investment must create a minimum of 10 U.S. jobs.

The developer can try to obtain a designation as a regional center from USCIS to qualify for EB-5 financing. In order to obtain such a designation, you must submit an I-924 application. An application involves a long, drawn-out approval process that may require you to respond to several requests for evidence (RFEs) from USCIS, causing the approval process to take years.

Should I Consult an Attorney?

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 use LegalMatch to consult an immigration attorney.