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New Investment Opportunities for Israeli Nationals
NEW INVESTMENT OPPORTUNITIES FOR ISRAELI NATIONALS


MS&K
By John E. Exner IV and Frida P. Glucoft
June 12, 2012

President Obama has just signed into law a bill granting Israeli citizens eligibility for E-2 Treaty Investor visa status in the United States. The E-2 visa is available to citizens of qualifying countries who are actively engaged in the development and direction of a United States enterprise in which they have already invested or for which they are in the process of investing a substantial amount of capital. The E-2 visa allows the foreign investor, as well as foreign managerial, executive, and essential employees of the company, to temporarily live and work in the United States in close proximity to the investment. The passage of this law sends a clear message to Israeli entrepreneurs and businesses that the United States encourages the development of Israeli businesses in America.

The addition of Israel to the list of approved E-2 countries welcomes Israeli investors to the United States and encourages Israeli entrepreneurs and enterprises to expand their business operations in the United States. Speaking on behalf of the Israeli Embassy in Washington, D.C., Israeli Ambassador Michael Oren states, “We applaud the passage of legislation that would allow Israelis to invest more in America. This bill reflects the deep friendship between Israel and the United States and will stimulate mutual economic growth and increase investment opportunities.”

The bill (H.R. 3992) was originally approved by the House Judiciary Committee on March 19, 2012, and thereafter passed by a unanimous vote in the Senate on May 24, 2012. Now signed into law by President Obama, the bill adds Israel to a list of more than 79 other countries whose citizens are eligible for E-2 visas. Since 1954, Israeli nationals have been eligible for a similar visa, the E-1 Treaty Trader visa, which remains available to citizens of Israel who will conduct substantial trade between the United States and Israel. However, until now, Israeli nationals have not been eligible for the more popular E-2 Treaty Investor visa.

Between 2001 and 2010, the State Department issued roughly 27,000 E-2 visas per year to other qualifying countries. Based on information from the Department of State about the number of Israeli citizens who received E-1 visas and the ratio of E-2 to E-1 visas in countries comparable to Israel, the Congressional Budget Office (“CBO”) expects the department to issue at least 500 additional E-2 visas each year to Israeli citizens. These visas stand to significantly strengthen close economic ties between the United States and Israel, while expanding mutual investments in both countries. Additionally, H.R. 3992 contains no intergovernmental or private-sector mandates and would impose no costs on state, local, or tribal governments.

THE E-2 VISA

Like the E-1 visa, the initial period of stay for E-2 visa holders is typically two years. That stay can be extended in two-year increments for as long as the company can establish that it remains operational and financially sustainable. Additionally, spouses and unmarried children under 21 years of age may join E-1 and E-2 visa holders in the United States in a derivative status, regardless of their nationality. Spouses of E visa holders are also eligible to apply for employment authorization in the United States, and children are permitted to attend school.

The addition of Israel to the list of qualifying E-2 countries serves to greatly enhance the flow of Israeli innovation and technology to the United States, while increasing foreign investment into the United States economy and creating thousands of United States jobs. Eligibility for the E-2 visa requires that the qualifying investment is “substantial” and not “marginal.” In other words, the investment must be sufficient to establish an active business and create United States jobs and cannot be merely a minimal investment made to support only the investor’s immediate family. Additionally, the investment must be made in an operating enterprise; the investment cannot be speculative or idle. Therefore, the investments associated with each new Israeli E-2 visa are likely to become significant contributions to the development of a wide range of United States markets and regions.

THE BENEFITS OF ISRAELI INVESTMENT IN THE UNITED STATES

For many years, Israel has been recognized throughout the world for its excellent service sector, as well as for being a world center for diamond cutting, polishing, and trade. In addition, Israel is also a world leader in several major industrial sectors, including software development, “high-technology electronic and biomedical equipment, metal products, processed foods, chemicals, and transport equipment.”* In fact, the State Department reports the following with respect to Israel’s expanding high-tech industry:

Israeli companies, particularly in the high-tech area, have in the past enjoyed considerable success raising money on Wall Street and other world financial markets; Israel has approximately the same number of companies listed on NASDAQ as the next three countries (Canada, Japan, and Ireland) combined. Israel’s tech market is very developed, and in spite of the pause in the industry’s growth, the high-tech sector is likely to be the major driver of the Israeli economy. Almost 45% of Israel’s exports are high tech. Most leading players, including Intel, Motorola, IBM, and Cisco have a presence in Israel.

The United States is also Israel’s largest single trading partner. In 2011, bilateral trade totaled $36.9 billion, with Israeli exports to the United States exceeding $23 billion. Among Israel’s chief exports to the United States were diamonds, pharmaceutical preparations, telecommunications equipment, medicinal equipment, electrical apparatus, and cotton apparel. With the addition of Israel as a qualifying E-2 country, the United States will now also benefit from the export of Israeli innovation and services in key Israeli industries, including energy, technology, electronics, software development, security and safety, telecommunications, electronics, and construction.

California Representative Howard Berman (D-CA), Ranking Member on the House Foreign Affairs Committee, introduced the bill to the House with a clear understanding that California, like many other states throughout the country, may benefit significantly from Israeli investment. Many of Israel’s strongest developing industries mirror the key industries that contribute to the California economy, including computers and electronics, software development, healthcare, transportation, and chemicals. Speaking on behalf of Southern California constituents, Rep. Berman understood that Israeli investors have a natural home in California to create and develop businesses that utilize the region’s educated and experienced American workforce.

CONCLUSION

Israeli nationals who plan to invest and establish businesses in the United States are encouraged to seek counsel from qualified and experienced immigration attorneys who are prepared to assist with the preparation and filing of E-2 visa applications. E-2 applications may be filed for principal investors, company executives and managers, and other essential company personnel, but require specific documentation and a keen eye for detail.

*See U.S. Department of State: Bureau of Near Eastern Affairs, Background Notes: Israel (Feb. 22,2012), available at http://www.state.gov/r/pa/ei/bgn/3581.htm#econ
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