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Capital Contributions were Investment for E-2 Visa Purposes

By:  Santiago J. Padilla, Esq.

In a recent case before the United States District Court for the Southern District of Florida, the court reviewed whether the United States Citizenship and Immigration Services (USCIS) abused its discretion by refusing to classify capital contributions, made by an owner seeking an E-2 Treaty Investor employment visa, as a treaty-qualifying investment.

The E-2 non-immigrant visa was established by Congress to promote capital inflow from foreign investors and create new employment opportunities for United States citizens. Particularly in light of the current economic climate, capital investments that create jobs are needed even more. The United States currently has reciprocal investment treaties with 81 countries that permit foreign nationals to acquire employment-related work visas if they make qualifying investments in the United States. Under the law, E-2 Treaty Investor Visa applicants are required to invest a "substantial" amount of capital in a U.S. enterprise.  However, the regulations do not provide an exact dollar amount of what is a "substantial" amount of capital. In fact, the United States Citizenship and Immigration Services bases its decisions regarding sufficiency of the investment on the type of business in question. In addition, the business must be able to generate sufficient income within five years of the investment.

In All Bright Sanitation of Colorado, Inc. v. U.S. Citizenship and Immigration Services, Case No. 10-cv-21808-SCOLA (S.D. Fla. Sept. 11, 2012), All Bright's owner and sole shareholder invested more than $500 thousand to purchase an established garbage collection business. The investment consisted of gifted garbage collecting equipment, gifted cash, and two loans, one of which was not backed by collateral, but had a signed personal guaranty of payment.

Specifically, Simon Geisler, a citizen of Austria, formed and incorporated All Bright Sanitation, a Colorado corporation of which he was the sole owner and shareholder. The E-2 Visa Application indicated that Geisler, through All Bright, had invested a total of $653,329 in order to purchase an existing garbage collection business, Canyon Waste & Recycling, Inc. ("Canyon"). The claimed investment was comprised of $226,690 in equipment, $375,000 in loans, and the rest in cash. The cash had allegedly been given to Geisler by his father, who owned and operated another waste management company in North Carolina. Geisler's father had also gifted the garbage collection equipment, for $1 directly to All Bright. There were two loans: one from Canyon's owners to All Bright for $175,000; and another from LEAF Funding, Inc., a third party lender, to All Bright for $200,750. Although there was no collateral on the $175,000 loan, Geisler signed a personal guaranty for payment. The garbage collection equipment, gifted by Geisler's father, was pledged as collateral on the $200,750 loan. That loan was also backed by a personal guaranty from Geisler.

The United States Citizenship and Immigration Services denied All Bright's E-2 Treaty Investor Application stating as follows. First, USCIS stated that the equipment did not qualify as an investment because the owner did not possess and control the equipment, since the corporation and the sole shareholder were two separate entities. In other words, the sole shareholder did not personally have actual title or ownership of the equipment at any time. Next, USCIS asserted that the loans could not count as an investment because they were not secured by the personal assets of the owner.

Upon appeal, the Court reversed the denial of All Bright's E-2 Treaty Investor Application by the United States Citizenship and Immigration Services. First, the Court determined that the regulations do not require the owner to have actual title of equipment, just possession and control of them. In this case, All Bright's shareholder had possession and control because he had the keys to the equipment and then pledged it as collateral for a corporate loan. Second, the Court held that the loans did constitute investments because the owner signed personal guaranties for both loans. Finally, the Court dismissed any argument that the owner was acting as a "front," because gifts are permitted to be counted toward the investment as long as they originate from a legitimate source.  On this point, the Court specifically stated as follows:

"The Agency's argument that Geisler was a mere "front" for his father's investment is also unpersuasive because the regulations permit gifts to be counted towards an investment, so long as the gifts come from a legitimate source and are in the "possession" and "control" of the treaty investor. Thus, the fact that the equipment originated with Geisler's father (thereby arguably making him a "front" for the investment) would appear irrelevant, if the equipment was thereafter "possessed" and "controlled" by Geisler and used in his investment with Canyon."

All Bright Sanitation of Colorado, Inc., 2012 U.S. Dist. LEXIS 128825, pg. 33-34. With an unfortunately large number of Requests for Evidence and denials issued by the United States Citizenship and Immigration Services, foreign investors and employers have hope that they will think twice about arbitrarily denying future applications.

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If you have any questions regarding investor visas, real estate investments or any other immigration law issues, please do not hesitate to contact me, Santiago J. Padilla, Esq., either at 800-483-7197, at [email protected], or on the internet.

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