Money and structure
Hard costs and soft costs
Also called hard costs, soft costs, construction costs.
The split in a project budget between physical construction spending, the hard costs, and the professional, financing and carrying costs around it, the soft costs. Neither phrase is defined in the EB-5 statute or regulations, but the split decides which dollars enter a job creation model and at which multiplier.
What it decides
Hard costs and soft costs are construction budgeting terms carried into EB-5, not immigration terms. Neither phrase appears in 8 U.S.C. 1153(b)(5), in 8 CFR 204.6, or in any of the seven chapters of USCIS Policy Manual Volume 6 Part G. USCIS has still used both by name in its own economic guidance: the Immigrant Investor Program Office talking points of 4 June 2015, "EB-5 Interactive Series: Expenses that are Includable (or Excludable) for Job Creation", is organised under the headings "Hard Cost Construction Expenditures" and "Soft Cost Construction Expenditures", and the archived question and answer page "EB-5 Economic Methodologies" of 3 July 2012 addresses soft costs. Both predate the EB-5 Reform and Integrity Act of 2022, and neither is binding policy. The split matters because a regional center project proves most of its jobs with an economic input-output model that converts spending into jobs by industry sector, and a dollar moved from construction to architectural fees runs through a different sector, so it carries a different multiplier. USCIS requires the investor to show that the expenditures input is reasonable, using receipts and other financial records for expenditures that have occurred and a detailed pro forma cash flow statement for expenditures that will occur, and it reviews whether the multipliers and the assumptions about geographic impact are reasonable (6 USCIS-PM G.2(D)(5)). A Form I-956F project application must include a credible economic analysis based on economically and statistically valid and transparent methodologies (8 U.S.C. 1153(b)(5)(F)(i)(II); 6 USCIS-PM G.5(B)(3)). Not every budget line is an eligible input. USCIS has said that aggregate hard costs alone will likely be insufficient and that costs should be broken into specific expenditure categories, that real estate acquisition is not in itself a job-creating activity so the purchase price is not generally a reasonable input, that architectural and engineering expenditures are generally permissible, that legal fees for EB-5 compliance are not, and that where the model offers categories specific to soft costs those categories should be used instead of bundling the spending under general construction expenditures. Two limits apply to construction activity lasting less than two years, and both are regional center rules. Indirect jobs from such construction can satisfy only 75 percent of the ten job requirement, against 90 percent for indirect jobs generally (8 U.S.C. 1153(b)(5)(E)(iv)(I) and (II)). Direct construction jobs whose number was determined by an economically and statistically valid methodology count at the fraction of the two year period that the work lasts (8 U.S.C. 1153(b)(5)(E)(v)(II)(cc); 6 USCIS-PM G.5(A)(4)). A standalone investor gets no indirect job credit at all, so the budget split does not carry the same weight outside a regional center (8 CFR 204.6(j)(4)(iii) and (m)).
Where this is explained properly
Pages here that go into hard costs and soft costs rather than mentioning it.
Related terms
- Sources and usesThe table in an EB-5 business plan or offering that lists every source of money for a project against every category it will be spent on, with the two columns totalling the same figure.
Checked against primary sources on . Back to the glossary