Background and Updates on EB-5 Regional Centers

Congress enacted the EB-5 program in 1990. The program granted lawful permanent resident status to immigrant investors who directly invested in and managed job-creating enterprises. In 1992, Congress implemented the regional center pilot program, which allowed potential immigrant investors the option to invest via EB-5 regional centers. The regional center program is presently authorized through September 30, 2015.

On April 27, 2015, Jeh Johnson, the current Secretary of Homeland Security, sent a letter to Congress proposing multiple changes in connection with the upcoming EB-5 Regional Center reauthorization process.

In Secretary Johnson’s letter, he states his support for the reauthorization of the EB-5 program, but he also requests significant changes and increased police powers. The most problematic suggestion is Johnson’s call to authorize USCS to “sanction regional centers with fines or temporary suspensions where appropriate.” He asks the committee to give USCIS exclusive authority to terminate a regional center’s designation when it suspects criminal activity or national security concerns. It is very concerning that one  branch of the Department of Homeland Security might possess both adjudication and enforcement authority.

Following Secretary Johnson’s letter, on June 3, the committee introduced S. 1501, the “American Job Creation and Investment Promotion Reform Act of 2015.” S. 1501 would make the following changes to the EB-5 program:

EB-5 Regional Center Program Extension

The bill proposes reauthorization of the EB-5 regional center program until September 30, 2020.

Redefined Target Employment Area

Currently, the statue defines a targeted employment area as a rural area or an area that has experienced high unemployment of at least 150 percent of the national average. The statute defines a rural area as an area not within a metropolitan statistical area or the outer boundary of any city or town having a population of 20,000 or more.

Under S. 1501, the statutory definition of a TEA would include a rural area, a closed military base, or an area consisting of a single census tract that has 150 percent of the national average unemployment rate. For TEAs in a metropolitan statistical area, at least fifty percent of a project’s job creation would have to be within that area to qualify. For areas not within the metropolitan statistical area, at least fifty percent of the projected jobs would have to be within the county in which the TEA is located.

The goal, here, is clearly to create more EB-5 projects in rural areas; however, howe will USCIS determine that the project would create fifty percent of indirect jobs in the relevant county.

Required Investment

Under the current statue, EB-5 investors must invest $500,000 if their investment is in a TEA and $1 million if not in a TEA. S. 1501 would increase the required investment to $800,000 for TEA investments and $1.2 million for non-TEA investments. Furthermore, the minimum investment amount would increase automatically, based on the consumer price index, every five years.

As discussed above, we think this investment increase will be problematic for many reasons.

Direct and Indirect Jobs

Currently, the regional center program does not require that the immigrant investor’s enterprise directly employ ten US workers. A regional center project can count both direct and indirect jobs. Under S. 1501, indirect jobs count for no more than ninety percent of all the jobs counted for EB-5 purposes.

Source of Funds

S. 1501 will require the investor to provide at least seven years of tax returns, compared with the five years of return that the law currently requires.

Next, the proposed legislation will limit the use of gifts as the source of EB-5 investments. Gifted funds may only be used if gifted by a spouse, parent, child, sibling, or grandparent.

Concurrent Filing for Adjustment of Status

The bill contemplates concurrent filing of an I-526 petition (for EB-5) and I-485 adjustment of status application of a visa number is immediately available. Also, an EB-5 investor who ha been out of status for less than 180 days would nevertheless be able to adjust status.

Congress has not yet scheduled a hearing to discuss this bill; however, expect one soon because the EB-5 program needs to be extended by September 30. Stay tuned to our blog for updates.